CWU SUBMISSION TO POSTCOMM CONSULTATION DOCUMENT:
"PRESERVING ACCESS TO POST OFFICES IN RURAL AREAS"


INTRODUCTION

The Communication Workers Union (CWU) represents almost 300,000 staff working in the postal, telecommunications and related industries. This includes some 180,000 in the Post Office itself covering all the non-management grades including the functions of collection, sorting and delivery of mail, as well as directly employed staff responsible for running the Post Office Network.

The CWU has long experience of regulation, through 16 years interaction with Oftel and, as long ago as 1997, we ourselves proposed the establishment of a regulatory authority for postal services. Therefore we welcomed the creation of Postcomm and appreciate open and transparent manner in which it has so far operated.

In this submission, we wish to comment on the Postcomm consultation document of December 2000 entitled "Preserving Access to Post Offices in Rural Areas". However we have deliberately not restricted our comments to the preservation of the network in these specific areas, as we believe it is artificial to consider the question of funding for rural offices without also considering the impact on the network as a whole, including those offices in urban areas. We believe it is vital that Postcomm understands that a failure to provide sufficient Government funding to sustain the rural network will inevitably mean the Post Office business (and the Post Office Network (PON) unit in particular) will be required to provide additional expenditure. This will clearly place greater pressure across the network as a whole, including urban offices.

The submission does not attempt to address all of the individual questions raised by the consultation document, but it does deal with what we consider to be the most important matters, and the issues most relevant to our members. The structure of this document is as follows :

  1. SUPPORTING THE POST OFFICE BUSINESS
  2. ADMINISTERING FINANCIAL ASSISTANCE
  3. PRESERVING ACCESS TO QUALITY POST OFFICE SERVICES


1. SUPPORTING PO BUSINESSES

Postcomm will be well aware of the huge levels of investment in computerising the Post Office (PO) network and installing the "Horizon" system. However this new infrastructure will not in itself safeguard the future of the network, either in rural or urban areas, given the migration of benefit payments to Automatic Credit Transfer (ACT) from 2003 – a decision which could reduce revenue in PO branches by 30%, or more in some areas.

Clearly the Government are aware of the threat that this decision poses, and CWU supported the introduction of the power to provide subsidies (should they be necessary to maintain the network during this difficult period) in the Postal Services Act 2000.

Nevertheless, it would be far preferable to ensure that the network secured substantial new revenue streams by expanding current areas of business and moving swiftly and decisively into new areas. The Government acknowledged this when it commissioned the Cabinet Office Performance and Innovation Unit (PIU) to examine the potential of post offices, and provide options for exploiting this potential and proposing ways in which it could be used to help Government deliver its objectives.

The key recommendations made by the PIU are necessarily the principal elements of any realistic strategy for supporting the network in future, and ensuring that post office branches are viable businesses which can make a positive contribution to the community. The priority must be to implement these recommendations quickly and effectively as possible, and secure further meaningful assurances of Government work in order to make much of this strategy viable. There should also be no further delays, such as those encountered regarding funding of the universal banking facilities (see below).

Postcomm will be aware that the main recommendations are a mixture of traditional business and new areas, including:

Financial Services/Universal Banking

Banking at post offices, and specifically the development of a "Universal Bank", will be essential in providing a future for the network. The PIU report highlights the contribution that the PO network could make in extending financial services and ensuring greater financial inclusion. The CWU has supported this initiative, as well as the work of Social Exclusion Unit Policy Action Team (PAT) 14 on financial exclusion, and the findings Cruickshank Report into banking on this matter.

The Post Office already acts as banking agent for Alliance and Leicester, the Co-op Bank, Lloyds TSB and Barclays, but these arrangements generally rely on slow and expensive paper-based transactions, which constrain the scope for any major expansion of banking activities. The Horizon platform offers the promise of removing that constraint and leading to the PO to moving further into the area, which it intends to do in two ways.

Government Services/ Government General Practitioner (GGP)

A second important area of potential opportunity which the Horizon platform can open up is the electronic delivery of Modern Government or Government Gateway applications on behalf of central, regional and local government, with staff acting as Government General Practitioners (GGPs) – a term coined by the PIU.

The Post Office network already provides an existing, proven channel which citizens freely choose to use in their interactions with Government. Indeed, half of the work that post offices do at present is of this nature (albeit on an unautomated basis). Now the Prime Minister has given a commitment that 50% of dealings with Government should be capable of being conducted by the public electronically by 2002, and that subject to certain exceptions, 100% of dealings should be capable of electronic delivery by 2005. The post office network can make a crucial contribution to this.

In addition as part of the Government's wider strategy (for rural areas in particular) it is expected that customers will be able to access to the "UK Online" (www.ukonline.gov.uk) website from internet learning access points (ILAPs) at post offices. This could allow sub-postmasters and staff to provide help with a range of Government services as well as benefits, job vacancies, education, health and transport – and provide advice and assistance on these matters to the disadvantaged who may otherwise be excluded Moreover, there may be the potential for extending these services to people at home, as in the French example provided – but much more will need to be explored regarding the funding of such an additional service.

Therefore, while the potential here would appear to be enormous the value of the revenue streams that the PO might generate from such work is unclear, and uncertainties remain as to the timing, and the share of such work that post offices might be expected to attract – particularly given the competition with a multiplicity of alternative delivery channels (PCs, digital TV, mobile phones, games consoles).

The pilot scheme recently launched in Leicestershire to trial the GGP concept may be useful in assessing the viability of this proposition, and how it could be improved. For example there may be scope to offer a wider range of services to small businesses, and develop greater expertise in this area. This, and many of the services offered by the network, should be supported by the greater back up that is available through better use of call-centres.

E-Commerce

The accessibility of offices, the increasing number of electronic services available and the links they provide to the services offered by Royal Mail and Parcelforce, make post offices an ideal centre for the ordering and delivery of products generated through the expansion of electronic commerce.

The Post Office may want to develop further relationships with e-commerce operators in order to facilitate this, and become the key point for the ordering, delivery and pick-up of goods ordered across the internet. In addition there may be opportunities to discuss flexibility of opening hours to enhance such a role.

However we would be opposed to any suggestion that the role of sub-postmaster and/ or branch employee should be combined with that of delivery postman. Staff are already being expected to acquire further skills in banking, government services and internet learning in addition to the multiplicity of transactions they already process (around 170 different types).

Furthermore we are not suggesting that other postal operators should have access to the post office network to sell their services as part of any expansion into e-commerce. There is a clear synergy between Royal Mail and Post Office Network which is vital to the Post Office business. It would be detrimental to the business to allow competitors just to latch on to the network – particularly in this period of great transition, when it needs to begin to realise its potential as a strong and successful global company. It could also lead to the kind of confusion in buying the relevant service from the relevant company that has been experienced due to the multiplicity of train operating companies in the rail industry.


2. ADMINISTERING FINANCIAL ASSISTANCE

There is little doubt that some form of financial assistance from Government will be necessary to prevent a large number of branch closures in the post office network. Whether this will be able to do more than prevent "avoidable" closures is unclear – particularly as any other sort of closure would, by definition, be "unavoidable" in any case.

The PIU report proposes three options for providing this financial assistance to the network:

We would not be opposed to any of these methods of additional funding, and in fact would support a strategy which incorporated all of these proposed elements to varying degrees. This complementary approach would offer the greatest assurance that access to post offices could be maintained. However there would need to be a balance in how these different options would operate, and the criteria which would be used to target the financial contribution.

For example, initial funding may be needed at a high level to ensure that the new services proposed by the PIU (in banking, GGP, e-commerce) are implemented successfully – particularly as we understand that it will at least 2003-2004 before these new services are expected to provide the levels of income necessary given the loss of benefit payment work. Therefore it may be necessary for the Government to provide further short-term assistance directly to Post Office Network to establish these services, in addition to the £270m to be provided over the next three years following the Comprehensive Spending Review (which was highlighted in the Government's recent Rural White Paper).

This financial assistance at high (or "macro") level could also be complimented by a strategy that targeted assistance at a more local (or "micro") level. We believe that Postcomm would probably be best placed to provide this, although that would not rule out the involvement of local authorities in administering support to offices if they could make a case. There may also be a role for local government to assist in the actual assessment of the value of individual post office branches to the community, and evaluation of the financial position. Otherwise it is difficult to envisage how the varying needs of a community could be assessed accurately.

However, in administering any further financial assistance Postcomm, and the other relevant agencies, will need to decide the criteria to be used. We would suggest that the key elements in this assessment (other than the financial position) should be:


3. PRESERVING ACCESS TO QUALITY POST OFFICE SERVICES

The strategy outlined above should provide the best opportunity for preserving access to post offices in rural (and other) areas in future. However, even taking these initiatives into account, there are still other fundamental issues that Postcomm refers to in the consultation document that also need to be addressed. In particular there is an increasing problem of confidence in the network, which is primarily due to the uncertainty precipitated by the future loss of income from processing benefits.

This has led to a situation where sub-postmasters are leaving the business now, and not being replaced, then as Postcomm states, "an office closes because no one wants to take it on". Moreover, evidence from the PIU and Postcomm suggests that the level of interest has continued to decline and currently remains flat.

In order to deal with this problem and fill these vacancies we believe that the Post Office needs to be more creative and innovative in coming up with solutions. In particular we believe that, in certain instances, the business should consider opening directly run Branch Offices where sub-offices have been closed, and there are no other post offices to serve a particular community.

Indeed, Stephen Byers, the Secretary of State for Trade and Industry, has said that although "we have agreed arrangements with the Post Office for maintaining a network of Crown Offices, which will handle at least 15 percent of total counters business. Where appropriate, new Crown Offices may be opened" (our emphasis). Therefore where no individual or franchisee wishes to take on the responsibility of running a post office, then Post Office Network should be able to do so.

Clearly we would not advocate a foolhardy approach whereby Crown Offices were opened if they were not financially viable and only replicated services already available to the community – but equally we would hope that political dogma would not obstruct selected instances where the Post Office could make going concerns of office where no other buyers were available.

There could also be further ways in which the business could explore the possibility of locating Crown Offices in other premises (e.g. in supermarkets, other retailers) where they would be easily accessible to the community and be able to offer a full range of services.

This greater consideration of opening more Crown Offices where it is appropriate should also be carried out in conjunction with a further review of the code of practice on consultation regarding relocation, closure and conversion of post offices – whether it is a Sub or Crown Office, or in a rural or urban area. In particular we believe that the recently revised process of consultation still provides a very limited opportunity for constructive input from the local community – including employees, customers, local businesses, residents, local councillors and Members of Parliament.

This Code of Practice is in urgent need of review, in order to enable such views and opinions to be taken into account, and to allow Postcomm and the Consumer Council for Postal Services (CCPS/POUNC) to illustrate that these views are incorporated in the decision making process. Otherwise they will only be seen to serve the commercial interest of the Post Office, and not the interests of the user.

Overall, this approach would have the advantage of complementing the strategy outlined in section 1 and 2, and help further in maintaining a larger network with a larger capacity for transactions and a range of services not always offered in sub-offices.

There is no doubt that this would be preferable to some of the suggestions put forward for preserving access in the consultation document, such as establishing post offices on a voluntary basis (which would presumably mean no wages for staff, and involve circumventing legislation on the National Minimum Wage).


CONCLUSION

The CWU believes that there will undoubtedly be further post office closures in the next few years, and that this will have a particularly adverse effect on rural areas and outlying urban areas. However we were pleased to see that the Government recognised the seriousness of the problem, and acted to implement the key proposals of the PIU report, and furthermore charged Postcomm with responsibility for exploring the best way to channel further financial assistance.

This financial assistance may well be most crucial over the next three years while the business is still in the process of establishing new lines of business, and losing substantial amount of revenue as more benefits are paid by ACT. Therefore we would not wish to understate the importance of Postcomm’s role in securing a large scale network of post offices in the future – particularly as we have stated that we consider it appropriate the regulator should have a considerable part to play in determining the process of targeting the necessary finance.

The CWU does not expect (or consider it to be desirable) for Postcomm or any other agency to be administering subsidies to the network long into the future, especially as post offices could then become dependent on the extra funds. Such a situation would then make withdrawal of finance even more devastating - as happened in New Zealand in 1988, where 600 post offices were identified as uneconomic and swiftly closed or downgraded.

However, the Government must ensure that the network is given the necessary backing to survive on a large enough scale, and for long enough, to establish the new business it needs. If it does this in a co-ordinated way, involving all of the relevant agencies as well as the key stakeholders, then it may still be possible to sustain a nation-wide network of post offices that is accessible to all, both now and in the future.

Any enquiries concerning this submission should be directed to:

Derek Hodgson
General Secretary
Communication Workers Union
150 The Broadway
Wimbledon
London SW19 1RX

Tel: 020 8971 7200
Fax: 020 8971 7300
E-mail: dhodgson@cwu.org


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