Iain Duncan Smith calls on the Post Office to reconsider proposals to close the Crown branch in South Woodford which has served the local community incredibly well for many years. He decries the lack of consultation of the local community on the proposed closure and calls for the Post Office to look at other opportunities for extra revenue which could turn it into an organisation that was flexible, sensible and highly profitable as has been done in other countries.
I beg to move,
That this House has considered the proposed closure of South Woodford post office.
It is a privilege, as ever, to serve under your chairmanship, Mr Evans. I will try to take interventions from colleagues who also have a direct interest in the subject of this debate: the proposed closure and removal of South Woodford Crown post office in my constituency. In 2016, the Post Office announced the closure of 31 Crown post office branches. In January this year, a further 37 Crown post offices were identified for closure, putting approximately 300 jobs at risk, including at the South Woodford Crown post office. That has caused huge and legitimate concern among many of my constituents.
I want to go back to 2008—
Order. Before the right hon. Gentleman warms up, I suspend the session for 15 minutes while a Division takes place in the House.
Sitting suspended for Divisions in the House.
It is a privilege to take so long to read about 35 words—that would normally be called a filibuster, I think, worthy only of my great hon. Friend the Member for Stone (Sir William Cash)—but I will now endeavour to proceed.
The debate is about the closure of the Crown post office in South Woodford. I want to go back to 2008, when I opposed the closure of Woodford post office on the High Road, a small sub-post office. At the time, the Post Office promised me that the Crown branch in George Lane could take the extra trade and it would not be a problem. I argued that it was still a bit of a walk and so on for some of the older residents, but none the less, there was at least the Crown post office there. Now, less than 10 years later, it has reneged completely on that guarantee and will leave the whole area without a post office. I find myself yet again campaigning—only this time I am campaigning against the reassurances and assurance that the Post Office gave me, to show that it cannot be trusted at any time on these issues in any community.
With the latest round of closures and franchising, the Crown post office network will have just 214 branches, a fall of more than 40% since the start of 2014, when it stood at 373. The Post Office has looked for a franchise partner—another high street retailer that would be willing to incorporate a post office counter into its premises—but there is evidence that fewer people use such outlets. I put that point to members of the management, who came to see me a few days ago. They said that they did not recognise my figures, but I maintain that most of the evidence from colleagues suggests that fewer people use such outlets. For example, a post office was closed in Maidenhead, and when the service was relocated to a WHSmith unit, it saw a 40% drop in business.
On the issue of footfall, does the right hon. Gentleman agree that if we remove the Crown post office, which a lot of my constituents use, it will affect the surrounding businesses? Therefore, the Post Office’s figures could be proved wrong.
The hon. Gentleman is correct. Such figures are often used to justify things, but they are never returned to after the event and it is never recognised that they did not stack up. I know for a fact that many elderly people will not use a post office in a store—I think the Post Office wants to use an electrical retail store—because they feel intimidated and pressured to buy goods. It is unfair to do that, and it will only create further problems for those who have grown used to the services.
Following the announcement, I met Clive Tickner and Peter Meech—local representatives of the Communication Workers Union, whom I congratulate on their steadfast determination to work with anyone, regardless of their political party, to try to save the post office. They explained that the staff at the George Lane branch are worried about their jobs, and there is good evidence why they should be. Despite the Post Office’s assurances, until an agreement is made with a franchise partner, the staff will not know whether they have a future with the Post Office. They also informed me last year that when branches are moved, most staff—many of whom have years of knowledge about post office service provision—leave the service altogether. They explained to me that, in 2014-15, only 10 out of 400 staff from the Crown offices that were closed were TUPE-ed over to a new retailer, and only six staff out of more than 200 were TUPE-ed over in 2006. There is a genuine concern. In fact, when I talked to the Post Office management, it became clear that the Crown post office is being shut for that very reason: they will employ people on lower rates with less understanding of the service. I found that peculiar for anybody who wants to provide a good service.
I give way to my constituency neighbour.
I am grateful to the right hon. Gentleman for securing this really important debate. I join him in congratulating the Communication Workers Union on its campaign to save Crown post offices. He correctly described the impact on staff, but I warn him, from our experience of the closure of the Crown post office on Barkingside High Street, that the Post Office often closes Crown post offices with no care or consideration for what will follow. That premise remains vacant and is an eyesore on Barkingside High Street. Many of my Barkingside residents are concerned, and my constituents who use the post office on George Lane are also concerned about what the future holds for that part of the high street.
I have been looking at that issue, and the hon. Gentleman is absolutely right. He backs up everything I have been saying about the likely consequences for the Crown post office we are debating.
As previously suggested by my hon. Friend the Member for East Worthing and Shoreham (Tim Loughton) in his debate on the Post Office, which many people took part in, the Post Office should use its premises better. I know of no business that goes around reducing its outlets solely as a way of lowering its costs to the point at which it somehow breaks even. Why is it in business at all if its sole purpose is to make sure it has as few premises to do business from so that it can say it has managed to meet the challenge?
As an illustration of the point that the Post Office does not use its outlets properly, its financial services, which should be a key generator of revenue for the business, are diminishing. Earlier this year, 150 financial specialists were made redundant. The Post Office is locked into its partnership for financial services provision with the Bank of Ireland until 2023, which prevents it from creating a more profitable arrangement. The Cass business school at City, University of London produced a report for the Communication Workers Union entitled “Making the Case for a Post Bank”. I want to share some of the points it raises, because I think it is relevant to the reason why the Post Office is embarked on the wrong route.
If the Post Office were to establish a post bank, it could ensure its long-term profitability by expanding its services and increasing its revenues. In addition, a post bank would probably offer other benefits to users, such as better access to finance for small and medium-sized enterprises, and improved financial inclusion for those who struggle to access services with the traditional banks. It would also align the Post Office with the successful strategy of other postal operators around the world. We seem to be almost unique in not using that concept to drive revenue and not having qualified staff. The Cass business school states that the amount of initial capital needed to create a post bank is equal to the investment that the Government have put into the Post Office in the past seven years. Interestingly, it also estimates that the profits that a post bank would generate would eliminate the need for an ongoing annual subsidy, putting the Post Office on a sustainable footing for the future.
It is worth reminding the Minister, who I know will respond to this point, of the figures for the Metro Bank. The way it has succeeded is really quite startling. The banking authorisation process to set up that challenger bank began in 2009, and in 2010 it launched its first branch. What is interesting is that its asset growth is 64% year on year and its revenues are up 62% year on year. It has strong common equity tier 1 capital ratio of 18.1%, and has seen a record 260,000 increase in customer accounts to a total of 915,000. While that is going on, it is also increasing its representation in the community and has opened about 41 stores in the past six years. On the one hand we have an organisation opening up in and serving the community, and on the other we have a well-established organisation retreating from the community and determined not to serve it in the way it could and should.
The Cass business school report also points out that the Post Office is currently suffering from a weak financial performance and lacks a clear plan to ensure long-term sustainability, which is true. The partnership with the Bank of Ireland has not delivered the expected results—I think it is a bad deal. One of the main drawbacks of the current partnership model, in terms of revenue generation, is the strong dependence on the partner’s will and ability to expand the business. As we know, the Bank of Ireland has struggled since the crash of 2007 and is not really interested in expanding its business. Being locked to it is a bad deal for the Post Office, and yet it shows no determination to try to change that.
The Post Office’s overall commercial revenue has therefore been virtually stagnant for the past few years. Compared with what overseas post offices are doing, it is really poor and verging on the pathetic. Even in places such as Italy, revenues in the postal area are predominantly driven by financial sector, which secures post offices in high streets. Other countries do the same, but here in the UK the proportion of revenues that the financial sector is likely to drive is next to nil.
The Post Office possesses a positive public perception, compared with traditional financial institutions. Creating a post bank is one way of helping it to increase its revenues. My question to the Minister, therefore, is, why is the Post Office not making more of banking, financial services and other areas—particularly given that it is a trusted presence on the high street while most conventional banks have sunk in the public’s estimation?
It is also worth reminding the Minister, the Post Office and the Government that post offices are not just meant to sit there; they are an integral element of high streets, which, bit by bit, are being removed. The banks have disappeared, and in many areas, including my own, there is real pressure to get rid of small industrial estates and start building on them. Those industrial estates, however, are vital to the life of communities, because people who work on the high street during the day or use it to shop for food and so on and so forth would otherwise be out of work and not in that area. That post office is like that, an integral element.
The absence of any sense of innovation in the Post Office is remarkable, given that it owns prime sites that could be used flexibly. When I was at the Department for Work and Pensions, I wanted to persuade the Government to allow post offices to be used for outreach, for identification. The Post Office was utterly negative about the idea and made no effort to entertain it, but I hope that the Government will press it again. Post offices with terminals where people, the elderly in particular, could receive good, reasonable advice about benefit claims might easily be utilised for further Government activity, beyond all the other existing work, especially with identity checks becoming more necessary and vital for the Home Office, and with the roll-out of universal credit. People might feel more comfortable going to a post office than to a jobcentre, so that is a perfect role for post offices and one that would enhance Government programmes. The Post Office has a unique and highly identifiable position as a high street brand, and I cannot understand why it is insisting on backing away from it, as with my Crown post office on the corner of the very road that leads 300 yards down to the tube station, which daily has big footfall because many people are going to the station and coming back past the post office.
In summary, local residents want the Crown branch in South Woodford to remain open. I ask the Post Office, through the Minister, to think again. We have spoken to a number of residents and local businesses and none of them, not one single one, wanted the post office to move. The complete unanimity was interesting. The response that we gave to the Post Office’s public consultation consisted of just under 2,000 signatures, which took us no time at all to gather—people were queuing up to sign our petition to keep the post office where it should be.
I have my concerns about the Post Office consultation process, however, because when we handed in the petition I realised that it was not in the slightest bit interested in consulting us on whether the branch should close. The consultation was solely about where the post office should move to, which in itself was a breach of trust of the local community. After all, the post office is a community asset; the Post Office management at least needs to put forward proposals and ask the community whether they agree that it needs to move. It was not until I badgered the Post Office again, writing twice to ask, “I hope this petition is being taken into consideration and that you are prepared to look at whether this post office should move again”, that it said that it had not at that point closed the door to further considerations. I therefore urge the Post Office to use this opportunity to ensure that the branch does not close.
I hope that the Minister will recognise that, as a political party and a Government, we have a responsibility beyond just letting organisations be run by people who have the sole idea that they need to break even. In reality, we have an investment and a vested interest in a post office system that works. More importantly, it should work not only as a stand-alone financial organisation but in support of the community. That is the most important part. We bleat a lot about high streets, but we do nothing when things such as local post offices disappear.
I have to say that this is the one thing that unites political parties on the Back Benches, the absence of that asset on the high street. It is high time for—I hope—the Minister to be very hard on the Post Office management. I do not understand why it has been so hopeless at finding ways to use post offices so that other services can be delivered at the same time, which would bring the Post Office extra revenue. Instead of being an organisation that seems to think that its job is to get rid of all its main customer-facing areas on the high street, it would turn into an organisation that was flexible, sensible and highly profitable. Furthermore, we have seen post offices in other countries do that. I therefore urge the Minister to do her level best to drive the Post Office management to common sense and allow us at least to retain our excellent Crown post office, which has served my community incredibly well for all these years.
I congratulate my right hon. Friend the Member for Chingford and Woodford Green (Mr Duncan Smith) on securing this important debate about the Post Office’s proposal to franchise its South Woodford branch. He clearly set out his concerns about the plans and about the local consultation process that the Post Office follows. He rightly recognises the crucial community role that post offices play throughout the country.
Between 2010 and 2018, the Government will have provided nearly £2 billion of taxpayers’ money to maintain, modernise and protect a network of at least 11,500 branches across the country. Contrary to the impression that I gained from my right hon. Friend’s remarks, far from closing branches and retreating the Post Office is acting in line with the manifesto commitments given in both 2015 and 2017: to protect the post office network in terms of the loss-making branches in rural and some poorer urban areas.
Today there are more than 11,600 post office branches across the country, and the network is at its most stable for decades. That is because the Post Office is transforming and modernising its network, thanks to investment from the taxpayer and to the hard work and dedication of Post Office staff throughout the country.
Government support has enabled the modernisation and transformation of more than 7,000 branches; more than 4,400 branches are now open on Sundays; and nearly 1 million additional opening hours per month have been added to the network through the modernisation programme. Financial losses reduced from more than £120 million to £24 million by 2015-16, which allowed the Government subsidy to be reduced by more than 60% from its peak in 2012.
That the network is at its most stable in a generation might be one of the reasons why customer satisfaction has remained consistently high. I understand that in my right hon. Friend’s constituency people have benefited from more than 200 additional opening hours per month, and at least one of their branches is now open on a Sunday.
I do not mean to take up much time, but I want to make the point that I made to the management: although they say that only by franchising can they have longer opening hours, there was never any reason why that could not happen in the existing post offices and Crown post offices. Longer opening hours is an illustration of something working right, but it could always have been done through the existing post office network—there was nothing to stop that.
One of the reasons why it is difficult to extend the opening hours in some Crown post office operations is that those branches are already making losses. Extending the hours has an additional cost—even if doing so was possible given existing staff working arrangements in the Crown post offices. There would without doubt have been additional costs, which might have worsened the losses of most of the Crown post offices, including the one we are discussing. Additional hours are open to question.
The Post Office is offering more to customers by having operations in retail premises that are used to working to a model of longer opening hours, including Sundays. That is more efficient for the taxpayer and ensures that post office services remain on our high streets throughout the country.
I fully appreciate that there can be disappointment and uncertainty in communities where a change to post office services is proposed. Those communities can hold strong views and concerns regarding any planned change, as witnessed by the petition mentioned by my right hon. Friend—[Interruption.]
Order. There is another Division, but this will be the final one.
Sitting suspended for a Division in the House.
By looking for a franchise partner in South Woodford, the Post Office seeks to ensure continued access to post office services for customers in the area in a way that is sustainable for the long term, keeping post offices on our high streets and in our communities.
My right hon. Friend’s community is not losing its post office service; it will be relocated to the convenience store operated by the proposed new partner, approximately 85 metres from the current location. I understand that the new partner plans to refurbish the premises, and that the Post Office will install a new modern post office in the convenience store. The Post Office recognises the importance of providing good access for all customers, including wide aisles and low-level counters for people with disabilities. It has high standards to ensure that, and that will remain the case in the new branch.
Working with a retail partner really is a sensible response to the challenges facing high street retailers. It has the benefit that overheads, including property and staff costs, can be shared across the combined post office and retail business. The host retailer also benefits from increased footfall and income from Post Office products. The vast majority—more than 97%—of post offices across the UK are operated by independent businesses and retail partners. Moving directly managed Crown post offices to retail partners has proved successful elsewhere and has helped to reduce losses in that part of the network from £45 million of taxpayers’ money per year as recently as four years ago to near break-even today.
Of course, the Post Office needs to continue to take steps to ensure that the network remains sustainable for the future, as it is doing in South Woodford. It does not propose such changes if it does not consider them necessary to secure the long-term sustainability of post office services in communities in my right hon. Friend’s constituency and across the country.
I know that my right hon. Friend has been disappointed by the consultation exercise. The Post Office welcomes and values feedback from customers, which is why it runs local consultation processes. He is absolutely right that such consultations are not designed to elicit views about whether Crown post offices should be franchised, but they generate a lot of data about how they should be franchised and about what services customers are particularly interested in, and the Post Office organises local customers’ forums when proposing relocation, as it did in his constituency.
I know that my right hon. Friend considers that the Post Office should consult on the decision to franchise the current branch before it consults on any potential new location, but it must be for the business to take such commercial decisions, within the parameters set by the Government, to ensure that we protect our valued national network. Post offices operate in a competitive retail environment, and we should allow the business to assess how best to respond to the challenges it faces and to secure post office services for communities for the future.
The Post Office consults, in line with its code of practice, on changes to the network, and that has been agreed with the consumer body. Citizens Advice recently reported that that process has become increasingly effective, and that in most cases improvements are agreed or reassurances provided in response to customer feedback received during the consultation process. That has happened after nine out of 10 of the Post Office’s similar consultations in the past year, demonstrating that the process is effective.
My right hon. Friend rightly mentioned the need for post offices to focus not just on reducing cost but on improving footfall by improving the quality and range of their services. He drew attention to the Cass Business School report commissioned by the Communication Workers Union, which I commend for its efforts to assist Post Office to broaden its service offer. The state-backed post bank explored in that paper was actually assessed back in 2010, when the cost of instituting such a bank was put at approximately £2 billion. It was felt at the time that that money would be better invested in badly needed transformation and modernisation of the network, and that was the decision made.
The good news is that banking is now an increasing part of the Post Office’s offer. I am delighted to say that the Post Office announced today that it has secured a deal with Lloyds bank that will enable it to offer a banking service to small and medium-sized enterprises across the country. That service will meet 95% of SMEs’ banking requirements and 99% of retail banking requirements. That really is a step change. The Post Office is also a market leader in identity services; it now has a 40% share of that growing market.
I reassure my right hon. Friend that the Post Office is absolutely not resting on its laurels or just focusing on managing its cost base; it is actively seeking growth in the products and services that it offers. I commend Post Office’s management, and its workers and staff, on the great progress that they are making.