Future of the Post Office

Statement

The following Statement was made in the House of Commons on Wednesday 13 November.

“With permission, I will make a Statement on the Post Office. Frankly, the Government inherited a Post Office that is simply not fit for purpose, following disinterest from the previous Government, a toxic culture in head office and years of underinvestment.

Our top priority remains delivering redress to those affected by the Horizon scandal. We have already taken significant steps to increase the payment of redress, which has nearly doubled under this Government. Let me be clear with the House, though. There are still complex cases to resolve, and we have identified gaps in the compensation process, but we are beginning to make progress. As of 31 October, £438 million has been paid to over 3,100 claimants. In July, we launched the new Horizon convictions redress scheme for victims whose convictions were overturned by legislation, and we have announced our intention to set up an appeals system for the much-criticised Horizon shortfall scheme.

We were clear in our manifesto that we will work to strengthen the post office network in consultation with postmasters, trade unions and customers. The post office network provides critical services that are valued by communities across the whole of the UK. Their essential services go beyond post; they provide access to cash, banking and other financial services too. This Government recognise that access to cash remains particularly important to millions of people across the UK. Through its network of 11,500 branches across the UK, the Post Office continues to provide vital banking services to communities and businesses alike through the banking framework, and to protect access to cash.

I know how highly this House rightly values postmasters and what they provide day in and day out to the communities they serve, but we have to recognise that the Post Office is far from perfect. We have seen this from the evidence given at the inquiry. It is clear that there needs to be a significant cultural change at the Post Office to ensure that it genuinely prioritises the needs of postmasters and delivers customers’ needs far into the future. It is also clear that more needs to be done to rebuild trust within the business and with the public who depend on its services. It is also no secret that the business is facing commercial challenges. Nearly half of its branches are not profitable or only make a small profit from the Post Office business, postmaster pay has not increased materially for a decade, and the company has a high cost base and needs to transform its IT system.

Earlier today, Nigel Railton set out his ambition for the future of the Post Office, in his role as its chair. Postmasters have to be placed front and centre of the Post Office, and we agree that the culture of Post Office headquarters, in particular, needs to change fundamentally to deliver that. As part of this, the Post Office plans to reduce central costs and look seriously at other ways to deliver efficiencies, which should enable real-terms increases in postmaster pay.

Mr Railton’s ambitions are a new deal for postmasters that puts postmasters at the heart of the Post Office. There will be stronger postmaster engagement in the running of the business. As part of this, a new postmaster panel will be established to enable current postmasters to work with the company to improve the support and training provided to postmasters. The Post Office will also set up a new consultative council that will work with the Post Office’s senior management on how these new plans are taken forward, to provide genuine challenge and maintain focus on the needs of postmasters. Mr Railton’s plan seeks to make changes to the business, with the ambition of significantly increasing postmaster remuneration, and it sets out an intention to transform the service and support that postmasters receive from the Post Office.

No decisions to close any or all the remaining directly managed branches have been taken. The Post Office will continue to deliver on the 11,500 minimum branches requirement set by government. We have made it clear to the Post Office that we expect it to consult postmasters, trade unions and other stakeholders before any individual decisions are taken. Aspects of the plans are also subject to government funding and the outcomes of the upcoming spending review.

Lastly, we have already set out our plan to publish a Green Paper to consult the public on the long-term future of the Post Office, not least on how it should be governed after a decade of decline. Doing nothing at the Post Office is simply not an option. There is more work to be done, but there has to be change. I commend this Statement to the House”.

15:39:00

My Lords, I thank the Minister for the Statement. Like my honourable friend Andrew Griffith in the other place, I am pleased that the Government are building on the work of my right honourable friend Kevin Hollinrake to hasten the payments to the victims of the Horizon IT scandal. I am grateful to the Minister for this important update. Will she commit to regular updates going forward? We learned with regret last week that the Post Office feels that it has no choice but to make radical decisions, announced by the chairman in the transformation plan, to reduce costs. We are told that this potentially threatens 115 branches and 1,000 jobs. This news prompts a variety of questions to the Minister. First, the Statement makes it clear that the Government expect the Post Office to consult postmasters, trade unions and other stakeholders. How disappointing that the communities that rely on these services have not been specifically mentioned. Surely the Minister agrees that the Post Office’s customers are an important group that should be consulted. Can the Minister therefore reassure the House that where closures are threatened, local communities are fully involved in the consultation process? Can she also assure the House that this will not herald another front in the Government’s current assault on rural communities, as epitomised by the family farm tax, and that the Government will review the family farm tax and other measures that affect rural communities to see how we can better support them? In announcing these plans, the chairman of the Post Office said that the changes to national insurance in the Budget have made business more difficult for post offices. Can the Minister tell the House whether an impact assessment on the changes announced in the Budget for the Post Office was prepared and, if not, why not? Business rates and national insurance contributions are going up. The threshold for paying them is going down, and obligations around the minimum wage are going up. It is impossible to conceive that, taken individually, these measures have not had some impact on all small businesses, but collectively they are devastating. As I do not believe that the Government would have been irresponsible enough to make these changes without assessing their likely impact, can the Minister commit to publishing all impact assessments? The Post Office chairman made clear that his plans are subject to government funding. Can the Minister make a commitment that such funding will be forthcoming? Business rightly hates uncertainty. Finally, it is welcome that the chairman has committed to increasing the number of banking hubs to 500 by 2030. We welcome that but, as my honourable friend in the other place noted, the devil is in the detail. I will repeat his question: has the Minister engaged with colleagues in the Treasury to discuss the impact of last week’s news on the banking framework negotiations, which are essential to underwrite this rollout of hubs?

My Lords, I welcome the noble Lord, Lord Sharpe, to his new Front-Bench role. The Post Office organisation is another problem area left by the previous Government. The Horizon compensation payments are still moving too slowly; there is confusion over the new IT systems in the Post Office; and the Post Office has been suffering from a lack of leadership for an organisation dealing with severe competitive pressures. Now we face, in recognition of high overhead costs, the announcement of the possible closure of 115 Crown post offices, with further damage to our high streets. I have two initial questions. First, are the Government looking at simplifying the Horizon compensation process and speeding up decision-making? Secondly, is the expectation that many of the Crown post offices will be replaced by sub-post offices and franchise operations? On high streets and in rural areas, long-term sustainability of the post office network is vital to many communities, not least for those who cannot currently use digital alternatives to the post office services for cash, banking and financial services. Liberal Democrats have put forward proposals for the mutualisation of the Post Office. This would also give sub-postmasters more independence and control. It is welcome that the Government have announced broader reforms for the organisation and will publish a Green Paper next year. Can the Minister assure the House that this will include consideration of how mutualisation could ensure that the Post Office is fit for the future? Will the Government also take this opportunity seriously to consider how to strengthen the role that post offices play in our communities so that they can offer more local services, from community banking to government services? During many of the Horizon debates, when the Government were on the Opposition Benches, speakers often reminded us that then Ministers were the owners of the Post Office. The Secretary of State has levers to pull, so the fundamental question is how the Government choose to use this leverage now. Can the Minister confirm that the Government will use this ownership to ensure that, whatever happens, local communities will continue to have long-term access to Post Office offerings—all the services, including DVLA and passport services, that currently are on offer?

My Lords, I also welcome the noble Lord, Lord Sharpe, to his new role. I look forward to working with him on the many issues that we will no doubt discuss. I am pleased to have this opportunity to keep the House updated on the future of the Post Office, but before I start it is worth reiterating the point made in the Statement: “the Government inherited a Post Office that is simply not fit for purpose, following”, frankly, “disinterest from the previous Government, a toxic culture in head office and years of under-investment”.—[Official Report, Commons, 13/11/24; col. 806.] That is the legacy we are now grappling with. I would like to keep the House updated on the need very urgently to ensure that all postmasters who have been victims of the Horizon scandal get full and fair redress. Anyone who has heard some of the individual stories will know how difficult it has been for affected postmasters. It is important that the Government deliver on this commitment to speed up the delivery of redress. This issue is occupying us, and we are determined to resolve it. Noble Lords will know that the number of cases settled with full and fair compensation has nearly doubled in the past four months since the Government came to power, compared with the four months prior to that. We have also taken steps to make it easier for postmasters who were victims in this scandal to get full and fair redress quickly, not least by fixing some payments for those applying under the Horizon shortfall scheme and for those applying under the Horizon convictions redress scheme, which was launched in July. Nevertheless, we need to do more, and I assure noble Lords that we have our foot on the accelerator. The noble Lord, Lord Sharpe, asked about the Budget. Clearly, we had to make tough choices in the Budget to fix the foundations of our economy and restore economic stability. We make no apology for that. The alternative to taking action was more economic instability, more austerity and more decline. There are mitigations in place to protect small businesses. These include an increase in and expansion of the employment allowance to simplify and reform employer national insurance contributions. There is also a permanent reduction of 40% of business rates relief for eligible retail properties. On who was consulted and whether the Government engaged with the Post Office on its strategic review, Ministers have of course been kept informed and have met with Nigel Railton, the new chair. His announcement clearly sets a useful ambition for the future of the Post Office, but these changes depend on funding, which will be discussed through the spending review. The noble Lord, Lord Sharpe, asked who will be consulted. As we have made clear, it will be all stakeholders. That will include any of the communities that might be affected, but no decision has been made on any of those potential closures. We very much hope that alternative activities can be found for all those post offices so that they can remain in business, but the noble Lord will know the difficulties in all that because they are currently making a considerable loss. Nevertheless, we will consult. The Government have a manifesto commitment to look for ways to strengthen the Post Office network, in consultation with sub-postmasters, trade unions and customers. The Post Office is required by government to maintain a network of 11,500 branches; the Post Office has confirmed that its transformation plan will not impact that commitment. On the long-term future of the Post Office, the Government are clear that there is more that can be done and we will be considering what customers, communities and postmasters would like to see from a modern Post Office network. The noble Lord rightly said that there is a future; we see a good future for post offices, not only increasingly as banking hubs, potentially, but in providing a means for people to access all the public services the noble Lord mentioned. So there is a good, strong future if we can get the Post Office’s finances on an even keel. The Post Office’s directly managed branches, which are the loss-making element, need to be addressed. The Post Office is in dialogue with the unions and postmaster representation bodies about future options for those branches. As I say, no decision has been taken by the Post Office on any specific locations and, whatever the outcome, the Post Office will continue to deliver a network of at least 11,500 branches, as required by the Government. The need for rural provision is a point well understood by the Government. We recognise the important role that post offices play in their communities, and it is clear that branches in some rural areas often play a particular role as community hubs. Mr Railton’s announcement is not about changing the access criteria that the Government set for the Post Office, which would ensure a network of branches across the country, including in rural areas. Finally, the noble Lord raised the issue of mutualisation. The Government have made it clear in our manifesto that we will look for ways to strengthen the Post Office network in consultation with sub-postmasters, trade unions and customers. Our department is working on this at an early stage, and a wide number of options are being explored, including long-term structural options such as mutualisation. I stress again to noble Lords that we see a positive future for the Post Office network. This is not a question of managed decline; it is a positive vision for the future. We just need to get the nuts and bolts right at this stage.

15:52:00

My Lords, like the Minister, I believe in the Post Office. I see its future as a network of essential hubs spread throughout the country, holding communities together and giving people the chance to do their banking, to meet on a social basis, and to interact with the Government, other agencies and more services, including healthcare. That future would build up the country’s resilience. If that is right, should we not be expanding the network rather than reducing it?

First, I pay tribute to the noble Lord for all the work he has done on this over the years. Nobody knows the challenges better than he does, and I absolutely agree: there is potentially a rosy future for post offices in exactly the way he described—as a network of basic service provision hubs, in addition to the banking hubs that we also see expanding. We need to ensure that we get the finances of this right, but we can all see the potential of the Post Office network to provide far more than it already does. It can provide a community hub, in the way that we were just talking about, but also a public service hub. Particularly as we move towards a lot of services being digital and online, post offices will have a role to provide for people who are digitally excluded in some way, so that they have that point of contact and a person can help them access those services, face to face. They have an essential role in the future, in the way that the noble Lord talked of.

My Lords, I declare my interest as a member of the Post Office Horizon Compensation Advisory Board. Along with my good friend the noble Lord, Lord Arbuthnot, I have been campaigning on this for over 15 years, and the toxic culture of the Post Office is very clear to me. It goes very deep. From the Post Office inquiry, it is clear that individual investigators pursued individual sub-postmasters in a vicious way. What has been done to ensure that those individuals no longer work for the Post Office? Separately, what role have the Government taken regarding Fujitsu? Have they approached Fujitsu to ensure that it pays proper compensation for its role in this national scandal?

I pay tribute to my noble friend for his considerable work campaigning on this issue. We all owe him a debt of gratitude for that. He is right that there is a toxic culture from the top down. I, and my department, believe that the new leadership at the Post Office will address that issue from the top down. That is partly to do with some of the individuals who are still there, and we are waiting for the result of the inquiry before we can potentially take any action against them. There are issues too about the senior pay of too many people at the Post Office. Quite frankly, we need to rationalise it and make it fit for the 21st century from the top down. That is the way we are approaching this issue. With regard to Fujitsu, again, my noble friend will know that we are trying to find a way to embed a new system that will replace Horizon. Work is ongoing to make sure that this is happening; it is not happening as quickly as we would like. Fujitsu is, in a sense, still providing some of the services because we do not have an alternative to provide them at the moment. The sooner we can get a modern IT system that is fit for purpose into the Post Office the better. We are working towards being able to do that.

My Lords, the Minister appears quite optimistic, but does she not accept that the withdrawal of some of these post offices through closures hits the most vulnerable people in rural communities? It is no good saying that this will be coped with; withdrawal means that many people will not have these services available. I was on an inquiry to do with financial services a few years ago. When bank branches were closing, we were assured that post offices would be able to do the banking job for small businesses. Nobody really knew what was going on at the time but they were told that they would have to cope. We are, however, now closing post offices. Talking of consultation, we asked every bank whether they had consulted and they said yes. We could not find one branch that was not closed as a result of consultation yet there is simply nobody who will say that local financial services should be closed. The Minister talks about the ambitions of the Post Office. What about the ambitions of the clients and the public? This is very serious, because the banks and the Post Office are bouncing off each other and reducing services one by one. It is unacceptable.

I reiterate that we are ambitious for the Post Office. No decision has been taken about any potential closures of any post offices. There is a consultation taking place and we are trying to find a way to keep those post offices open in whatever way we can, whether that is providing different services or under different management. There is a guarantee that in both rural and urban areas a minimum provision of post offices must be provided, and the Post Office has confirmed to us that it will maintain that agreement, so it is a mistake to assume that they will close. I do not think there is any evidence of that at the moment. We are trying to find an alternative way to keep them open.

In an earlier answer the Minister used the words “including rural areas”, but I ask her to think in terms of “especially rural areas”. The reality is that in many rural areas the banks have closed down; this is certainly true in rural Wales. Some of the most vulnerable people in the community need access to post offices with a whole range of services, not just those available in shops. Will she please give a special place to rural areas in her consideration?

I hear what the noble Lord says. I reiterate that we absolutely understand the important role that post offices play in their communities in rural areas. We are aware of the role that they play as community hubs, if nothing else. The Post Office’s proposals are not about changing the access criteria that the Government have set for the Post Office, so those criteria will continue. That will ensure a network of branches across the country, particularly in rural areas.

My Lords, the way that services are to be provided is changing, from banking services to remote GP diagnostics, so the Post Office and its invaluable network should change and adapt as well. Will the Government look at some innovative ways where we can, for instance, co-locate post offices in shops or pubs and do much more, rather than looking at them as some kind of rather outdated form of delivery, particularly for rural communities?

The noble Lord is right that we need to look at innovative ways where post offices can be co-located. A lot are already co-located in other retail shops. Those the ones that are more profitable, as far as I understand it, so that may well be the future, but there is probably more that we can do to expand that innovation, bearing in mind the community role that we see for them for the future and how important that will be. We have an open mind. The Green Paper that we are launching next year will allow all that debate to take place. We do not want to rush a solution. However, I reiterate that we see a positive role for the Post Office in the future, but let us make sure that we consider all the proposals, get them on the table and work with consumers and the unions, and then everyone can sign up to the proposals for the future.

My Lords, last week there was a long, well-researched report on the “News at Ten” that some of the managers who were there at the height of the Horizon problems are still there and still bullying some of the sub-postmasters, which is quite sad. Are the Government aware of that?

As I say, it is true that some of the individuals are still there. We await the outcome of the inquiry—it is about to come to an end—before we consider whether any further action needs to be taken against any individuals. In the meantime, a restructuring is taking place at the head office. Obviously some jobs may need to go as a result of all that, but we need to make the head office fit for the 21st century. It needs to be a leaner organisation at that point.

My Lords, given the structure of the Post Office at the moment as an arm’s-length body and the acceptance of it as an important part of the community and the country, is the Minister convinced that this arm’s-length structure, which failed so dismally in the past, is appropriate for the future?

The Green Paper will enable us to look at all those issues. As I said, we said in our manifesto that one of the options we are considering is mutualisation, which may be a way forward, so nothing is off the table at this point. We will consider any option for a more efficient way of organising the Post Office, to make sure that the guarantees we think are essential for its long-term future are built into it but that it can be profitable.

My Lords, following the question from my noble friend Lord Arbuthnot, I declare an interest as a former MP representing a number of sub-postmasters. Some of them were unfairly accused and investigated of wrongdoing but, rather than fighting their corner, gave up the lease and paid out money that, with hindsight, they never owed. Is there a way of trying to identify that cohort and including them in the compensation scheme?

I will need to double check that. One of the complications is that there are already four schemes running on different principles. I will need to double check the definitions of the groups the noble Lord is talking about, but I believe that they are included. If I am mistaken, I am sorry, but I believe they are included in one of the schemes. I understand that people who left before the Horizon scandal came to light—I apologise if I have got this wrong—will be included in one of the schemes.

My Lords, I add my voice to others speaking up for the rural network. Could the noble Baroness examine the model currently on the table, which seems defective? The price of stamps has gone up incrementally over the past two years, yet the service has gone down. Saturday deliveries have been taken away and I understand that posties, who are the heroes on the ground delivering the post in all weathers, have been told they can have no overtime this autumn. Could she use her good offices to examine that and make sure that we have a rural network that is fit for purpose?

The noble Baroness is talking about the Royal Mail service, rather than the Post Office. I know that there are separate discussions with the Royal Mail about the future delivery programme. I do not have the details in front of me, but if I can find details, I will write to the noble Baroness.

Could the noble Baroness make sure that, for villages where there is no post office, there will be a mobile service at least twice a week? That would help residents to have some access to postal services.

The noble Lord makes a very good point and I hope that that can be included in the Green Paper as one aspect of this. I reiterate that we see a future for community hubs. It may be that we need fixed premises for that to work in practice, rather than for it to be something that just visits. For more isolated communities, that may well be a solution. Whatever happens, we want to guarantee to all communities in the UK that they will be able to access a post office to do the business that they need to do in order to access public services, driving licences and all the things we were talking about earlier. They will need to have some form of post office within easy reach. That is certainly one way of looking at it.

My Lords, I declare my financial services and technology interests, as set out in the register. Would the Minister agree that the country is suffering from an epidemic of financial exclusion and digital exclusion, with the two often walking painfully hand in hand? Would not the golden principles of financial inclusion and digital inclusion be two excellent elements on which to fund the Post Office going forward? Would she also agree that a significant part of the difficulties experienced by sub-postmasters and sub-postmistresses was that computer evidence was taken almost on the nod? Would she agree that it is high time we reversed the burden of proof with computer evidence to what it was pre changing it to this iniquitous position?

My Lords, I think we have all learned the lesson from the Horizon scandal that you cannot assume that the computer is always right. I absolutely agree with the noble Lord that we need to be much more sceptical when presented with that kind of evidence in future. On digital exclusion, the noble Lord is absolutely right. It is a huge issue for the Government and we are taking it very seriously. A huge piece of work is going on around this. Obviously, our ambition is to make sure that everybody has the skills and capacity to go online and access services, because it is to their benefit; it makes their life easier. The proposals we have—for example, the Government’s One Login service, will always have the option for individuals to go in person to a post office to access those services as an alternative. We will make sure that people are not excluded. But the real challenge relates to the discussion we were having earlier with the noble Baroness, Lady Smith, about education and skills; it is our intention to make sure that people have the skills, education, capacity and equipment to go online and have all the advantages that the digital world will offer them.

My Lords, I understand that no joined-up assessment has been made of the impact of potential closures on local economies. Could the noble Baroness correct me if I am wrong? I ask her to commit to making an impact assessment of the Budget adding £25 billion to employers’ employment costs, which will drive down confidence, especially in small businesses, for either awarding pay rises or hiring staff. This will have a great impact on local post offices—added to this new question of insecurity. Could the noble Baroness commit the Government to making an impact assessment of local employment prospects should these closures go ahead, and to bringing that impact assessment to this House?

My Lords, this is a matter for the Post Office and the strategic review it has carried out. It will have to make the decisions about the cost-effectiveness of its proposals. We are talking and liaising with them, and I reiterate the point I made earlier: no decision has been taken yet. A full consultation is taking place with, among others, the unions about the future of these properties that are potentially on the line. We are looking for alternative ways to keep those post offices open. On the issue of the Budget, as I said earlier, we had to make some difficult choices, but we have increased the employment allowance to simplify and reform employers’ national insurance contributions, and we have delivered a permanent reduction of 40% in business rates relief for eligible retail properties, which will include a lot of high street post offices as well.

My Lords, have any discussions taken place on the future of the post office in Parliament? This is a very valuable service to all of us who work in the Palace.

I agree with the noble Baroness. I think we would all agree with her that that post office provides a very valuable service. I hope it is on the list of the 11,500 we have been promised that we can keep. I will certainly join with the noble Baroness to make sure it is included.