Rural Post Office Network (Hansard, 2 December 2002)

§ Mr. Timms

The Government are fully committed to supporting a rural network. As recommended by the Performance and Innovation Unit (in their report in June 2000: "Counter Revolution, Modernising the Post Office Network) we have asked the company to maintain the rural network and to prevent avoidable closures, in the first instance to 2006. This has been underpinned by the appointment of Rural Transfer Advisers by POL and a £2 million fund to support community post office initiatives.

As recommended by PIU the Postal Services Commission has advised us on options for supporting the rural network from 2003. Following detailed consideration of this advice and discussion with the company the Government are now committed to making a substantial financial contribution to the rural network.

£450 million will be made available (from 2003 to 2006) to help the rural post office network through the transition of benefit payment to ACT. The package will be funded from Royal Mail Holdings accumulated surpluses, as part of a package to put Royal Mail and Post Office Ltd. on a commercial footing.

This funding is designed to help Britain's rural post offices through the changes in the network's business over the next few years. It provides direct support to rural post offices, maintaining front line services in local communities. It will also give Post Office Ltd. the financial freedom to pilot new and innovative ways of providing post office services in rural areas.

The funding will be administered by Post Office Ltd. under contract to the Government. In return for this investment Post Office Ltd. will be required to maintain the rural network and prevent all avoidable closures, working through their Code of Practice for doing so in the first instance to 2006; and to provide reasonable access for all citizens to "over the counter" services in rural areas.

These services include:

Access to payment of the state pensions, tax credits and benefits
Access to cash through banking services.
Dispatch points for letters and parcels;
Postage stamp sales;
Renewal of licences (eg television);
Bill payments to utilities; Government information and services specified in service contracts between POL and individual Government Departments.

A total of £150 million will be invested in each of the next three years, all of it ring-fenced for the support of the rural network.

519W

There will be three elements to the funding: £66 million a year to maintain sub-postmasters income levels (by maintaining the AOP (assigned Office Payment) for rural sub-postmasters); £79 million in the first year, and £74 million in years two and three, to fund the front line services that allow post offices to operate, including IT systems, cash delivery and direct marketing material; A £25 million flexible fund (£5 million in the first year, rising to £10 million in the second and third years), to develop innovative, modern methods of delivering of services.

The flexible fund will enable Post Office Ltd. to: Promote and finance innovative ways of delivering services, including compensation for the closure of offices replaced by pilots for these new ways of delivering services; Make additional payments to sub-postmasters on a case by case basis to modernise and improve the individual business.

Our expectation is that POL will work closely with the National Federation of Sub-postmasters and other stakeholders to make best use of this fund.

We remain in dialogue with the European Commission on matters relating to Post Office Ltd., and we expect to submit a formal notification to the Commission this week. Subject to state aid clearance, funding will be in place in April 2003.