HC Deb 14 October 2003 vol 411 cc53-60WH

1 pm

Mr. Nigel Waterson (Eastbourne)

I am delighted to have this very timely opportunity to raise the subject.

Although the title of the debate refers to Eastbourne, this is a national issue. Government policy has been a direct cause of anything up to half the post office network being rendered non-viable at a stroke. The introduction of direct payments—leaving aside all the other difficulties such as PIN pad design and the problems caused to elderly, disabled and housebound people—has dramatically reduced business and the footfall in many of our local post offices.

The Government accept that 3,000 branches will close. I suspect that that figure is the minimum rather than the maximum. That is set against the background of the Post Office losing upwards of £1 million a day despite still having close to a monopoly in its own business.

Record numbers of post offices have closed under this Government. More recently, the rate of closure has slowed. There are two reasons why, neither of which has much to do with Government benevolence. First, a lot of people who would like to sell their businesses as sub-post offices cannot give them away; they certainly cannot find any buyers because of the gloomy prospects for many sub-post offices. Secondly, a large number of people have been hanging on in the hope of receiving compensation for closing their businesses.

The Government and the Post Office have produced their so-called network reinvention policy, which involves a large bag filled with money to dole out to sub-postmasters and sub-postmistresses who are willing to close their businesses. Rumour has it—I do not know whether the Minister will confirm or deny this—that when there was an initial trawl through sub-post offices who might be interested in funding, the Post Office was appalled at how many of them put their hands up to ask for a share of the fund simply to go out of business. There must, therefore, have been a rethink.

The Post Office has now come up with the area plans system, which I raise on behalf of my constituents. I do not know why we were singled out for this particular honour, but we are the first place in the country to go through that process—we are the guinea pigs. Instead of a programme of piecemeal closures, the Post Office has now decided—I concede that there is some logic behind this—to consider each parliamentary constituency as a unit to try to determine logically whether there are too many post offices and whether they are too close together. At the end of the day, the system will produce closure proposals that have some internal logic.

Sadly, Eastbourne has been on the cusp of those new arrangements, which, until fairly recently, have verged on the shambolic. First, the Whitley road sub-post office was marked for closure, which has now closed. Secondly, out of the blue—I mean that, because it was announced in early August when many people were on holiday—the Post Office announced that it was proposing to close the Upperton road post office, which for most people is the main post office in Eastbourne. It is in the centre of the business district, and it is one that I often use. Incidentally, if it is to be closed because of a lack of business, I should point out that I must queue for quite some time to get served every time I go in. The proposal was announced by the Post Office, because Upperton road post office is directly administered as a Crown post office.

Just as the hoo-hah was beginning to die down about that proposal, another Post Office department announced independently that it was going to close three more sub-post offices in my constituency—in Compton street, Church street and Avard crescent. Those closures involved different departments of the Post Office and different consultation exercises that ended on different dates and were conducted by different people.

I am pleased to see that, in part due to my representations, the Post Office has taken a grip of the situation and brought together all the consultations, extending them to the same closing date, which happens to be this Thursday, 16 October. It has also agreed to my request to send representatives to a public meeting in my constituency, which will take place in Eastbourne town hall at 7.30 pm on Thursday. If the Minister has nothing better to do, he is welcome to join us. I shall be at that meeting, as will representatives of the local council. I want to pay tribute to the efforts of Postwatch, the consumer watchdog, which has been proactive in helping the consultation, supporting my efforts to ensure a rational approach from the Post Office and organising and chairing the meeting.

All sorts of petitions have been flying around. Earlier this year, I presented a petition with 8,000 signatures to No. 10 Downing street, but many have signed others, too. I have also been inundated with letters, e-mails and phone calls, so I can assure the Minister that there is strong feeling locally on the subject.

I have already conceded that it makes sense for the Post Office to consider an area as one whole. To use current jargon, it should examine the area and its needs holistically rather than just with regard to individual post offices. However, leaving aside the massive concern of those who want to continue to use the post offices, there are several points to be considered. The first is the question whether the Post Office will take any notice of the strength of local feeling, which runs across the board, including all parties on the local council. The chamber of commerce and the Federation of Small Businesses have also both been involved in lobbying.

The proposed closures, especially that of the Upperton road post office, will directly affect not only elderly people who live nearby and regard the post offices as a convenient place to make purchases and so on, but local businesses. The post office is slap bang in the middle of the town and surrounded by businesses, many of which have written to me to describe how they use the office for bulk mail and other services. Indeed, one of the main reasons why the local borough council previously shut its cash office was that the main post office was available just down the road for at least some transactions.

Another major concern is whether anything can be reversed. The Upperton road office is dealt with differently as a Crown post office, and the Whitley Road post office has already shut, which is very sad. However, the Post Office has not only identified the three other post offices that should close, but has already struck a deal with the sub-postmasters. That has not encouraged me to put my posters or petitions on their premises, as they are looking forward to being paid substantial compensation for closing down.

When I met representatives of the Post Office here in Westminster, I asked them whether in principle any of the decisions could be reversed. They assured me that they could, but from the point of view of commercial reality I wonder how right that is. I intend to test the theory to destruction, because one of my constituents is ready, willing and able to take over one of the post offices as a going concern. He has made an offer to the Post Office, but as far as I am aware he has not had any response as of today. I intend to pursue it on his behalf.

Another issue is the need to test the Post Office's business case for closure, especially in respect of Upperton road. It has made broad assertions about losing money. It has quoted and bandied around in the local paper figures that range from £65,000 to £100,000 in losses a year, but it will not give chapter and verse, as it regards the figures as commercially sensitive. However, my information from a mole in the Upperton road post office suggests that the staff are well ahead of their targets for reducing costs and increasing revenues, so much so that they are about to receive a bonus.

Presumably, the decisions have been made without taking any account of the recent announcement that was all over the press in the past week or so that the Post Office had struck a deal with, I believe, the Bank of Ireland, with £100 million being injected into the post office system to provide banking services. The Minister may tell us more about that. Is it really sensible for the Post Office to contemplate closure of so many retail outlets when it is doing its best to reinvent itself as a properly run commercial business?

I should also say in passing that the Post Office seems to believe that most of the business currently done by the Upperton road post office will easily migrate to the Terminus road post office, our other so-called main post office in Eastbourne. That is quite unlikely. In any event, Terminus road is already extremely busy. It has long queues and a great deal of its own business. Again, that issue will be gone into in even more detail at the meeting on Thursday.

There is another major concern. The Post Office said that the great advantage of the new approach—the area plan approach—is, as was put to me in my meeting with the Post Office, that it will not be coming back to Eastbourne. As far as it is concerned, that will be the end of the matter and all the pain will happen at once. The problem is that other local sub-postmasters and sub-postmistresses wanted to take the money but were not offered that particular deal. Their business may already be losing money, or they may be reaching retirement. The Post Office accepts that it cannot guarantee against what it terms force majeure closures. The closures have nothing to do with an act of God but are a direct result of the Government policies that I described earlier.

The situation is that already five of the 19 post offices in the town are set to close—more than one quarter—with no guarantee whatever that other post offices outside the area plan will not be forced to close in due course or feel that they have no alternative. In fact, the situation could be much worse. Could one third or one half of all the post offices in the town close?

When the smoke clears and the dust settles, the Post Office's stated aim of providing a post office within one mile of 95 per cent. of the urban population in a place such as Eastbourne could be shot to pieces—partly due to decisions of the Post Office itself and partly due to the Government policy that lies behind all this, but also partly due to the decisions of individual postmasters and postmistresses. I cannot emphasise too strongly to the Minister the consequences, particularly for the very elderly population in parts of my constituency but also for the business community, of such vandalism to a post office system that has served the local community extremely well for a long period. I hope that the Minister will have some words of comfort that I can take to the public meeting in Eastbourne town hall on Thursday.

1.14 pm
The Minister for Energy, E-Commerce and Postal Services (Mr. Stephen Timms)

I congratulate the hon. Member for Eastbourne (Mr. Waterson) on securing the debate and on the very close interest that he has taken in the lively discussion in Eastbourne in recent weeks.

I must say that I was sorry to hear the hon. Gentleman run down the post office network in the way that he did when he spoke about it becoming unviable. He is quite wrong about that. The post office network has a very promising commercial future. I want to reassure sub-postmasters in Eastbourne and elsewhere of the Government's commitment to a viable future for the post office network. Of course they recognise, as the National Federation of Sub-Postmasters has, that in urban areas where there have been large numbers of post offices in a small area there is simply no longer the business to sustain so dense a network. For example, more than 1,000 sub-post offices have more than 10 other branches within 1 mile of them. That density can no longer be supported, so we need a rational process to decide which branches should continue and which ought to close.

I am disappointed that the hon. Gentleman has talked about half the post offices or more closing. This process is about ensuring that there is a commercially strong and viable future for the branches that remain. That is why we have invested £500 million in technology to ensure that banking transactions can be carried out at every single post office branch in the country. I join the hon. Gentleman in welcoming the announcement of the joint venture with the Bank of Ireland to allow, within a few months, every post office branch in the country to sell financial services and new products further to develop commercial viability.

I was pleased to hear the hon. Gentleman's comments on the role of Postwatch. I am glad that what he has seen in Eastbourne confirms what Postwatch has told me of the effectiveness of its role in monitoring this process in urban areas. I am also glad that he gave a welcome, if a rather grudging one, for the area-based approach that the Post Office has now introduced. As he rightly said, we are seeing the first example of that in Eastbourne.

At the beginning of his remarks, the hon. Gentleman wondered why the number of post office closures had sharply reduced, especially in rural areas. That has been [...]case in the past couple of years, and is precisely[...]ause the Government imposed a requirement on the[...]ffice that there should be no avoidable rural post of[...] closures. That has been very effective, and is a direct[...] consequence of the Government's approach. At the same time, we recognised the need for a sensible rationalisation of the urban network, given the issues about density in urban areas that I mentioned earlier.

The policy goes back to the recommendations of the performance and innovation unit in 2000, which recommended that if the Post Office decided that fewer offices were needed in some urban areas, the Government should consider providing funding to ensure that the sub-postmasters affected could be adequately compensated for the loss of their business. That report was widely welcomed. We accepted all the recommendations made, and following parliamentary approval of the funding last November, Post Office Ltd. initiated the programme that we are debating today.

The network of post offices includes nearly 17,000 branches, which is more than all the banks and building societies in the country put together. The Post Office is ensuring that, in a properly managed way, the post office network will meet the needs of the communities that it serves and fit the business passing through it. There have been reductions in post office usage for all sorts of reasons, past under-investment being one of the most important, but some two thirds of the urban population live within half a mile of two or more post offices, many of which have been struggling to survive. Rationalisation of parts of the network will improve its viability and allow the development of better services, from brighter offices, for customers.

The great danger of not having such a process would be unmanaged decline in which individual sub-postmasters simply decided to shut down and leave. That is what the hon. Gentleman feared might happen in his constituency. I hope that, on reflection, he will agree that the process we have put in place is a much better alternative and that it will avoid the unmanaged decline that he feared. It is important that all of us express confidence in the future of the post office network because it is such a valued feature of our lives in every part of the country, in urban and rural areas.

Mr. Waterson

Of course I agree with the Minister's point about unmanaged decline, but would he like to deal with my central point? No matter how much the Post Office organises an area plan—I see that there is some logic to that approach—it cannot cauterise the situation. It could shut those five offices and still end up with more offices closing in the next year or two.

Mr. Timms

I hope that as a result of the process, which has been designed to achieve this goal, we will achieve a viable network in the future. I have talked about the investment in technology for banking. It is now the case that any customer of Lloyds TSB, Barclays or Alliance and Leicester can withdraw cash from any post office in the country with their cash card. That is a new service, and we have seen rapidly increasing numbers of people taking advantage of it. I use it myself at my local post office; it is an excellent service. We have talked about the new products that the Bank of Ireland joint venture will produce.

There are no cast-iron guarantees that one can give about the future of any commercial business, but we can look forward with some confidence to a viable network in urban areas as a result of the admittedly rather painful and difficult process we are going through at the moment. I think that the hon. Gentleman will agree that completing that rather difficult exercise now stands us in better stead for having a successful and viable network in the future. I take his point about there not being cast-iron guarantees but there is a high level of confidence in my mind, and among those who work in the Post Office network, that at the end of the process we will have a financially sound network that will continue to serve all our urban and rural areas.

The hon. Gentleman made some points about the rate of closure of offices and the sales of sub-post office branches. I can tell him that in 2002–03 there were nearly 1,500 sales of post offices. The previous year there were about 1.600 such sales. I do not think that there is as significant a depression in the market as he suggested. The hon. Gentleman has talked about the branch at Whitley road in Eastbourne, which has already closed under the terms of the programme. Although nobody is pleased about the closure of any post office, the way in which that was handled meant that the postmaster could inform customers of what was happening, and of alternative offices such as Terminus road, Marine parade and Seaside, all of which are less than a mile from the closing branch.

I am glad that the hon. Gentleman acknowledged that the Post Office has now pulled together the various proposals relating to its operations in Eastbourne. It has produced three proposals for compensated closures under the urban reinvention programme for Avard crescent, Church street, and Grand Hotel buildings. It is also proposing to close its directly operated Eastbourne Crown office and will consider that proposal in conjunction with its wider plan for the area. I should say that I am advised that all those changes, including the Whitley road closure, would amount to five closures out of 22 post offices in the hon. Gentleman's constituency. I think that he referred to a figure of 19.

Mr. Waterson

There is no reason why the Minister should know this off the top of his head, but he will find that there are 19 in the town of Eastbourne. My constituency extends to places such as Willingdon and East Dean where, I am delighted to say, the post offices will remain untouched as long as they remain viable. Out of 19 post offices in the town itself, five will have closed if the plan goes through.

Mr. Timms

I bow to the hon. Gentleman's knowledge of the boundaries of the town. I think that only one post office in his constituency was classified as rural; no doubt he will correct me if I am mistaken on that as well.

There has been a lot of debate and I am glad that the Post Office has extended the consultation period for the Eastbourne Crown post office following the meeting with the hon. Gentleman on 8 September. That is an example of the attention that the Post Office will pay to local opinion and need before reaching its decision. Postwatch and I are satisfied that good processes exist to express local community concerns through Postwatch, and that those concerns can be effective in influencing the final decision of the Post Office on individual closures. Under the programme, several closures have been proposed, which, following representations from Postwatch, have been amended or withdrawn.

In Eastbourne there is the issue of the Crown post office as well as the sub-post offices. Crown offices are generally the largest post office outlets in an area and the Crown office network makes substantial losses of around £50 million a year. I think that Eastbourne is unusual in having two Crown offices operating. In the financial year 2002–03, losses for Post Office Ltd. increased to £194 million, before exceptional items. Eastbourne Crown office is making an operational loss of around £65,000 a year, and that figure would increase if all the overheads were added. That illustrates the need for urgent action to maintain the viability of the network.

Consultation on the proposals for the hon. Gentleman's constituency remains open until Thursday and he referred to the public meting being chaired by representatives of Postwatch on that day. He has been influential in securing that meeting and I hope that it will allow further, fruitful discussion of the proposals and give the company the opportunity to consider comments that are raised. Importantly, once decisions on the current proposals have been reached, Post Office Ltd. has no intention to return to Eastbourne with further proposals. The company's view is that, should the proposed changes go ahead, it will have fulfilled its objectives of ensuring that there is the right service in the area for the custom, and that the network can continue to serve Eastbourne on that sound basis.

An additional element of the programme is the £30 million that the Government have provided for modernising and adapting the offices that remain in the network. The key to improving standards in those offices will be the increased volume of expected business. The grants of up to £10,000—a figure to be matched by the proprietor—for each office expecting to take on a significant number of additional customers will also be an important boost. The Post Office will generally require the receiving offices to improve facilities and increase opening hours so that sub-post offices will maintain the same hours as the associated retail businesses alongside them and improve the service to customers in contrast with the hours being kept in the past.

The proposal is the first ever programme of Government investment in urban sub-post offices. It is a welcome, additional measure to those recommended in the performance and innovation unit report. The Post Office is assessing applications totalling more than £12,000 from branches in Eastbourne that would expect to receive additional custom should proposed closures go ahead. I am sure that the hon. Gentleman will welcome that and agree that it is important that sub-postmasters are given the encouragement to improve and develop their offices.

I am going to leave Westminster Hall immediately to attend the award for this year's best post office, a competition that has prompted enormous enthusiasm on the part of members of the public supporting their post offices. There is an immense commitment to the post office network and the changes that we are making provide a high-level assurance about the prospects of the business going forward.