Rural Post Offices (Lincolnshire) (Hansard, 21 July 2000)

§ Mr. Edward Leigh (Gainsborough)

Yesterday was my birthday, and as a present I was given that very interesting book by Simon Jenkins on England's 1, 000 best churches. It contained the usual comment about Lincolnshire, which one reads so often, to the effect that the county is full of gems but is too little visited. I hope that after this debate Lincolnshire will no longer be a forgotten county, at least as far as rural post offices are concerned.

The Minister and the House need not rely on my inadequate efforts to explain what is going on in Lincolnshire post offices. Important as they are, they are perhaps not as fine architecturally as Lincolnshire's churches, but they are as vital a resource in the local community. I am very fortunate—indeed, honoured—that the key document in this debate is a Cabinet Office report entitled, "Counter Revolution" and subtitled, "Modernising the Post Office Network". One of the very few case studies mentioned in the report is a trip that the Cabinet Office researchers made from the villages of Saxilby to Corringham in my constituency. That is a very pleasant trip, which I recommend to the Minister. I would be delighted to accompany him, introduce him to the local sub-postmasters and give him an opportunity to find out for himself what is going on.

In a few well chosen words, the performance and innovation unit report describes the 10 villages and settlements along the seven-mile route, which have no less than five post offices. The report says: Looking at these offices confirms the ubiquity of the Post Office network in rural areas.

It goes on: Two of the five post offices co-exist with the last grocery shop. And one other helps keep open a general store in a village with only one other shop. One post office sells stationery rather than groceries and another is a stand-alone post office. Only the post offices at Saxilby and Sturton-by-Stow are busy—the others each do relatively few transactions. Villages without a post office tend to be hamlets—four of the five villages without a post office have less than 100 residents. Willingham is the only village with a significant population without a post office—almost 500 people. But here the post office closed when it proved impossible to find a replacement sub-postmaster. The five post offices and the mobile bank which visits Saxilby three times a week are the only places to take out cash along this route. This small stretch of road represents only a tiny part of rural Britain, and the five post offices only a tiny part of the rural post office network. But this part of Lincolnshire is typical of most parts of rural Britain. What is most striking is the way that post offices remain in villages which have very few other services, giving post offices a special place in the hearts of villagers. That is not me talking: it is the Government's own report. I give credit to those who went to rural areas to find out what was going on.

735 I was slightly alarmed, however, when we talked to the sub-postmaster at Sturton this morning, to find that he had no knowledge that the Cabinet Office had visited his post office. He knew of it only when the Lincolnshire Echo alerted him to the fact. The mind boggles: mighty panjandrums from central Government have descended on a small part of Lincolnshire, and a photograph of the interior of Sturton post office appears in the report, but the sub-postmaster was not even aware that they had visited. No one talked to him, but I make no complaint about that as there was, no doubt, some reason for it. Perhaps the Minister will tell us the reason later if there is time for that information to reach him.

I have spoken to sub-postmasters along the route and others in order to get a feel of what is happening on the ground. We have had many debates about the post office network and rural post offices. It is useful, as the report makes clear, however, to try to find out more detail. Yesterday, I talked at length with Mr. Wright, the Lincolnshire secretary of the National Federation of Sub-postmasters, who made many interesting remarks. Knowing that the debate would occur, he had spoken to his members. He was pleased to have received the PIU report, but was desperate for more information on exactly how the £270 million subsidy would be spent. The money could be spread very thin if it goes evenly across the whole country.

Mr. Wright was delighted to hear of the proposal to set up a universal bank, but too few facts and figures are percolating down to sub-postmasters about how that will work. He made the point that someone receiving £60 or £70 a week on income support or other benefits can cope only with an extremely user-friendly bank. How will that make a profit for the Post Office? Some 3.5 million people have no bank accounts. I welcome the initiative to try to bring them within the banking system, but the concerns of local sub-postmasters are understandable.

Rural post offices are barely profitable, and village shops even less so. As Mr. Wright made clear, there is the question of footfall through the shops. Take benefits away from the post office and the post office will fail. Take away the post office and the village shop will fail.

In all our many debates, we have not often heard mention of the mechanics of how postmasters are paid. Typically, they might receive 13p for each pension transaction. There may be only 200 of those in a week. The amount of money coming in would not, therefore, be much. The Government constantly tell us that it costs 49p to deliver a benefit through the post office or a giro, and only 1p through a bank. One can immediately grasp what concerns sub-postmasters in Lincolnshire—what will happen once the 49p is converted to 1p? It will mean that the 200 pensions transactions worth 1p each will not keep a rural sub-post office in business.

The sub-post master at Saxilby, a village on the route taken by the Cabinet Office researchers, said: Even if the Post Office is still involved the payment to individual post masters will be considerably less—about one third of that for existing benefits payments. This will inevitably reduce the profitability of rural shops that rely on the post office network to cross-subsidise other activities. More proprietors of village shops will call it a day and the Post Office will not be able to find replacements. The business as a whole will close completely. Another sub-postmaster on the route taken by the Cabinet Office report compilers was Chris Cope, of Sturton. He said that the Post Office was like the BBC, and that it 736 needed to relax restrictions a lot more. He would have liked to have a cash point in his sub-post office, but was not allowed to have one. He said: The Post Office have had their way too long. There's too much sentimentality. The local post office needs to be on the ball in providing new services. The sub-postmaster at Saxilby was also quoted in the local newspaper as saying: The Government seems to be using its weight to take business away with one hand and then try to make the banks put business our way with another. The village of Upton is also on the route taken by the Cabinet Office investigators. The sub-postmaster there said: At the end of the day the Government might not want to close post offices down, but the owners will have to if they are not making enough money to pay the bills. A comment to the local newspaper about the sub-post office in Stow is revealing: It would be awful if the post office had to close because a lot of the old people can't get into town and others are frightened of bank accounts. I got a computer from the Post Office just three weeks ago. I know it's a thing of the future but it's jolly hard to get into when you have done everything by hand before and used your brain. The other day a customer came in and bought a one penny stamp and I even had to tap that into my computer. It seems like a waste of time. The locals like to come here for a chat and to pay their bills, but nowadays there are a lot of new people in the village and a lot of new houses. Those people work in the city and leave home before I open and return after I've closed. That vox pop survey of a rural area gives some idea of what the people who run the vital social network of the sub-post offices are saying, and it shows that they are concerned and frightened.

The Government's proposals for sub-post offices leave the job very far from done. I am not trying to make party political capital, but I have some serious questions about a matter in which I have long taken an interest. I was a junior Minister in the Department of Trade and Industry under my right hon. Friend the Member for Henley (Mr. Heseltine) and we wrestled with the same problem. Contrary to folklore, our plans were not heartless and they did not undermine the social role of post offices.

We made no secret about the fact that we preferred proper privatisation of the mail delivery service, but we made a conscious decision to continue the subsidy to which paying benefit through sub-post offices amounts. We recognised that the rural network was sustained by cross-subsidy from the urban network.

The Minister for Competitiveness has said, very unfairly, that my right hon. Friend the Member for Henley wanted to privatise the Post Office lock, stock and barrel. We must slay that dragon, and establish that there was no such intention. We always realised, as do the Government, that the social role of what is a unique network is vital.

The Post Office provides 170 different postal, Government and commercial services. Staff in rural offices provide intimate contact for customers, and they offer help and advice with regard to filling in forms. The network offers the potential for first-name relationships. Most people will have used a post office, but their most frequent customers are older and poorer people. That personal, intimate, first-name contact, and the help and advice on offer can be very important, especially to older people, and beyond monetary value. Who provides this 737 essential community service in Lincolnshire, and elsewhere? Only 600 outlets—some 3 per cent. of the total—are run by people directly employed by the Post Office. About 17, 000 outlets—or 97 per cent. of the total—are run by private business people. There are about 17, 000 sub-postmasters, who, in turn, employ 40, 000 sub-postmaster assistants. Many sub-postmasters run their post office business under the same roof as another retail outlet. Most important, a sub-postmaster's wife is likely to be employed as an assistant. More than half of all sub-postmasters are aged over 50.

In Lincolnshire, there are more than 300 post offices—more than 250 in rural areas. Sixty have closed during the past 10 years and the pace is accelerating—10 closed last year. A typical comment was made by the sub-postmistress at Welbourn. She said: I've owned Welbourn post office for 16 years and have worked hard to build up the business, which is now at the heart of the community. I hope that the Minister will agree that we should be committed to the survival of all such businesses.

Rural post offices, by the nature of the communities they service, tread a fine line between profitability and bankruptcy. According to the Post Office, 45 per cent. of all post offices in Great Britain or 7, 890 from a total of about 17, 635 depend on benefits agencies for at least 40 per cent. of their work. As a result, an estimated 8, 000 rural post offices could become non-viable from 2003, when automated credit transfer comes on stream.

The chief executive of the Post Office, John Roberts, was reported as saying that he has grave concerns as to the future of Britain's 19, 000 post offices because of Government plans. He said: No business can replace that in two years…You are either looking at slowing the process down, subsidising the sub post office network or seeing up to 8,000 of them close. The risks of removing benefit payments from the post office without significant new and established income streams is considerable. Equally serious is the danger that people losing 35 per cent. of their incomes will find themselves unemployed in their 50s and unable, because of their locality, to find employment.

Furthermore, the majority of sub-post offices are owned by independent small business men. The PIU report states: Typically the amount they will have paid for the post office business is around two and two and a half times the annual payment that they would get from the Post Office for running the office. They will also have paid for any other business and property. The value of the allied retail business is partly dependent on the existence of the post office business. The sub-postmaster is responsible for paying for any refit. Even more importantly, on retirement, a sub-postmaster will typically sell the business and his investment and use the proceeds to fund a pension.

If the new income streams do not come on line as quickly as the Government predict, not only is the rural sub-postmaster in danger of losing a large chunk of his income, which he cannot easily absorb, there is also the danger that the resale value of the business will be damaged. Consequently, sub-postmasters in their 50s—as many of them are—who are planning their retirement may find that their pension is underfunded.

738 If the Government are determined to speed up the move to ACT ahead of the natural evolutionary development of the Post Office, they must accept responsibility for the reduction not only in the income of sub-postmasters but of their pension expectations.

The risks to the community are equally great. The post office may be the only amenity left in a village and may well be coupled with a retail outlet. The loss of the post office could lead to the loss of that outlet, so rural communities could face the removal of all village amenities.

The Government's constant refrain is that the Post Office must modernise. We all accept that. It is clear that the post office network is already under considerable pressure to modernise. Currently, about 200 post offices are closing—1 per cent. of the network—every year, and have been doing so for the past 20 years.

Like many people who are directly and indirectly involved with the Post Office, I welcome—to a degree—the recommendations of the PIU report. However, the report and the Government's response are significant not for the breadth of ideas proposed—although some of them are fine—but for the significant questions that are unanswered. It is clear that the Government are attempting to speed up the course of evolution in the postal services by withdrawing benefit payments. They have put their faith in a considerable number of maybes, possibles, and perhapses regarding future income streams. That is what concerns sub-postmasters.

The Government think that the use of post offices as village banks will provide suitable replacement income as well as introducing increased IT services—turning post offices into one-stop-shop advice centres. However, they have put no figures to the levels of income that that might generate nor have they put a figure to the level of financial support in the form of subsidies from the Government to be handed out to those post offices that are not in the short term viable. One of the most common words bandied about by the Government is "billion", but it is conspicuously absent in discussions on this problem. The Government's report mentioned the figure of £50 million and that is way short of the £400 million needed to fill the gap.

I have a few questions for the Minister. The Village Retail Service Association is a charitable trust dedicated to helping rural communities to keep their village shop and post office. Like many vested interests, it is concerned about this issue and it has asked some particularly good questions. It asks whether the time available to set up the alternative income streams is too short because the call on IT-based transactions by rural residents during the next six years may never be sufficient to produce significant income. How are the training standards, IT proficiency, financial expertise and marketing requirements to be installed? Where will the subsidies for the sub-post offices fall—on council tax payers? Are the Government really saving money on the one hand to give it away with another? The impact of Government policy is seriously affecting market conditions for rural retailers at present, and no one perceives any change in that as 2003 approaches. It is essential that wider banking provisions are introduced into the Post Office system as soon as possible and it is true that the universal bank will, to some extent, fill a void. However, where will the costs fall for the banking provision?

739 The sub-postmasters and sub-postmistresses of Lincolnshire have expressed to me and to others similar concerns. The Minister must remember that we are dealing with genuinely frightened people. In a message to the No. 10 website, the sub-postmistress for Welbourn says: first of all you say that post offices will become "universal banks". What you fail to say is when this will happen, how this will happen and will it cost us anything? Mr. Wright says: The report guidelines are good news…But it's all pie in the sky at the moment. By refusing to give solid figures to such people and not providing them with hope, the Government are doing something that will threaten the survival of their businesses. The Government want to get their hands on the £400 million saving, but, as someone told me, they have shot themselves in the foot. The changes were coming anyway; they only had to wait. They have speeded up natural evolution causing a crisis and they know that they may have to embark on a programme of subsidies to maintain their commitment of access to a nationwide network.

I ask the Government to give postmasters what they are crying out for: not subsidies, but guarantees of business so that they can make their own business viable in the long term and can continue to provide the unique community service that should be the prime concern in any alteration to the arrangements for sub-post offices. We are dealing with frightened people who provide an essential service. The Government need to answer their concerns.

§ The Minister for Trade (Mr. Richard Caborn)

I congratulate the hon. Member for Gainsborough (Mr. Leigh) on securing this debate on the future and provision of post offices in Lincolnshire, including his constituency. I listened carefully to his remarks and welcome the opportunity to respond to the points that he raised.

The concerns voiced by the hon. Gentleman centre around the future of the rural post office network and the current and future provisions of the Post Office in predominantly rural areas and counties such as Lincolnshire. I listened with interest to the anecdotal evidence, as he called it, that has been provided.

However, I am sure that the hon. Gentleman remembers that, when I was the Chairman of the Select Committee on Trade and Industry and he had a ministerial portfolio, we spent many hours considering the Post Office. The right hon. Member for Henley (Mr. Heseltine) was then the President of the Board of Trade. I do not know whether the hon. Gentleman recalls giving evidence to the Select Committee when we were pressing hard to enable post offices to issue fishing rod licences. Over many months, about 27 letters passed between the Department of Trade and Industry and the Treasury before it was concluded that post offices could sell fishing rod licences.

740 Contrast that with the statements made by the organisations to which the hon. Gentleman has just referred in response to the PIU report and its 24 recommendations. Stuart Sweetman of the Post Office said: We are delighted that the Government recognises the network's strength and is determined—as the Post Office is—to harness the full potential of the network. Mr. Peter Jones of the Village Retail Services Association said: It is not only a well composed comprehensive report but also very positive. I am pleased that the Government has accepted the recommendation without reservation. Helen Carey of the Women's Institute said: We congratulate the Government on commissioning the PIU report and on not only agreeing to implement its recommendations in full but also promising to back this up with funding. An ex-chairman of the Post Office who is known to the House, Lord Dearing, said: I congratulate the Government on their immediate and positive response to the PIU report. It is such an excellent report in its recommendations on rural sub post offices that it would be well to see the Government's wishes incorporated into legislation. That contrasts just a little with the anecdotal evidence that the hon. Gentleman has given the House this afternoon. I am sure that he will repeat those comments to Mr. Chris Cope, whom he quoted on the subject of giving the Post Office freedom. I am sure that when he next discusses the PIU report with Mr. Cope, he will tell him about his experience as a Minister, when he had the power to liberalise the Post Office effectively. He will probably remind Mr. Cope about the fishing rod licence escapade, which is well documented in evidence given to the Select Committee a few years ago.

I turn now to the PIU recommendations, to which the hon. Gentleman paid credit. I do not know whether members of the Cabinet Office went incognito to his beautiful constituency, but I had the privilege of visiting it, as I have done many times, when I had responsibility for regeneration. I went to Saxilby. A number of schemes that we have introduced in rural areas, particularly on transport, will have helped the constituency considerably.

The PIU report on the future of the post office network, "Counter Revolution—Modernising the Post Office Network", published on 28 June, set out 24 proposals and measures to modernise and maintain the network, to protect the rural network in particular and to maintain convenient access and improve the quality of urban post offices. Unlike the hon. Gentleman's party when it was in office—I have referred to some of that Government's inaction—this Government are taking positive steps. We have been commended for that, almost universally, with the obvious exception of the official Opposition.

In accepting all of the report's 24 conclusions and recommendations, the Government have clearly demonstrated our continuing commitment to maintaining a nationwide network of post offices. Among the key elements, to which the hon. Gentleman has referred, is the proposal that a formal requirement will be placed by the Government on the Post Office to maintain the rural network and to prevent any avoidable closures of rural offices for a period of six years in the first instance. That will protect nearly 10, 000 post offices in all communities of fewer than 10, 000 inhabitants.

741 Today, my Department has issued a press release to explain how we are making positive moves to modernise the post office network. Half the network has been equipped to meet the challenges of the 21st century in line with the Government's schedule for full network automation by spring 2001. This week, the number of post offices to have Horizon installed reached slightly more than 9, 100. As the hon. Gentleman indicated, there are about 18, 000 post offices altogether.

Subject to evaluation of detailed business cases, financial support will be made available for a range of measures. As the first stage of our programme of modernising the post office network, we have ring-fenced funding for new investment of £270 million over the next three years to start the implementation of the PIU recommendations. I am sure that the hon. Gentleman took note of that when my right hon. Friend the Chancellor announced it in the spending review earlier this week.

We have also made it clear that we are prepared to add significantly to this investment over the next few years through support for the development of the --universal bank and the extension of the Government's general practitioner and internet learning and access programmes, following satisfactory evaluation of the pilot trials. The amount of new financial support will be determined once viable proposals have been drawn up and approved.

The hon. Gentleman has been in a position of responsibility, so he will understand that bringing the various parties together to deliver some of the 742 recommendations cannot be done overnight. In many instances, commercial negotiations are going on as well, and they take time to feed through. However, one thing is absolutely clear: the direction laid out by the 24 recommendations in the PIU report give a firm future to all our post offices. These measures will help to develop the new business opportunities identified in the PIU report: the universal bank facilities; facilitation of e-commerce services; access to Government general practitioner and internet learning; and access services. The Post Office, too, must seek out and develop new commercial opportunities, as the previous Government also tried to encourage it to do.

These new and improved services will utilise and build on the Horizon automation platform, to which the Government are contributing almost £500 million, being installed in every post office throughout the country. Installations have now been made in some 50 per cent. of post offices.

Ring-fenced funding has been set aside in the spending review for new investment of £270 million over the next three years to start the implementation of the PIU recommendations. That was universally welcomed this week. EvenOpposition Members welcomed the further investment in the post office network. Subject to validation by robust business cases—