Counter attacks: Public Finance

Posted on June 6, 2008 · Posted in Public Finance

Counter attacks, by Paul Gosling

The Post Office is trying to slash its local branch network but residents are up in arms and councils are rushing to the rescue. So it’s no surprise then that the closures have become a hot election issue. Paul Gosling reports

Local authorities are used to finding themselves between a rock and a hard place. But the post office closure programme has squeezed them into a very uncomfortable position. On one side are angry residents demanding the protection of community services and, on the other, a determined Post Office, committed to closing one in six of its branches.

The fight to retain local post offices – not just in rural Britain, but also across much of suburban London – has moved to the heart of next month’s mayoral and other local elections.

The Post Office’s ‘network change programme’ is a euphemism for the closure of up to 2,500 branches from an existing network of 14,300. Many villages will lose their local post offices, forcing some residents to travel several miles to the nearest branch.

About 500 of the offices proposed for closure will be replaced by ‘outreach’ facilities – buses visiting at agreed times, a home delivery service, or new facilities located in other commercial outlets, including pubs.

Essex County Council reacted angrily and vocally when the proposals for closures were announced. The council argues that not only are vital services being lost, but also that many elderly people risk losing their independence. Most branches are co-located with shops or other facilities and in half of the closures, these go as well as the post offices. Nearby shops are also jeopardised. Elderly people who cannot travel to shops or a post office might have to rely more on expensive council social care.

Essex intends to spend £1.5m over three years to protect some of the 31 branches scheduled for closure in the county. According to Post Office and Royal Mail minister Pat McFadden, branches receive an average subsidy of £18,000. On this basis, the council hopes to save about 15 branches, at least while it takes a longer and more strategic view of what should happen.

One option it wants to investigate is possible co-location of post offices with county and district council services and community facilities. It quotes the example of a branch that closed last year and reopened in a church, under community leadership and with financial support from the council. Elsewhere, the services might be moved into schools or libraries.

‘There is no “one size fits all” solution,’ says spokeswoman Eleri Roberts. The council is now involved in protracted and complex negotiations with the Post Office to finalise the arrangements.

Council leader Lord Hanningfield says: ‘It’s important to keep local communities thriving. If you strip everything out of a community, you kill it. We spend £500m a year on services to the elderly, much of which, increasingly, is preventative. Helping keep people in their own home is cost-effective, and keeping post offices open is part of that. Unfortunately, rural communities are dying.

‘We also want to do what people want. This is one of the most popular things I have ever been involved in, in the time I have been in local government. People do like post offices. I can see the post office becoming a local government service. I think more and more local authorities will see them as their responsibility.’

All councils are at the centre of the closure debate, whether they want to be or not, as they are named consultees in the closure programme, which affects every area in the UK. And Business Secretary John Hutton last month gave the nod for authorities to try to save local branches when he wrote to the Post Office, telling it to co-operate with councils.

‘In terms of the potential for local funding arrangements, we have encouraged you to engage with local authorities (or community groups) that wish to step in and fund some continuing service provision where branches are scheduled for closure and where no outreach service is being provided,’ he said.

Peter Luff, chair of the Commons business, enterprise and regulatory reform select committee, says that local authorities should take seriously the opportunity to be involved with the consultation, but be very careful about committing resources. ‘Get involved early,’ he advises. ‘Don’t just provide the minimum factual information to Post Office Ltd, get stuck in proactively. Get involved with community groups. But be careful – it’s one [branch] in, one out. Be very cautious about providing financing, because this would be a long-term commitment.’

The Post Office similarly warns about protecting vulnerable branches, which might lead simply to branches in neighbouring villages closing. Its spokesman Nick Martens says: ‘We are talking with local authorities, but we have to ensure that other areas are not detrimentally affected. Keeping open one branch can take away footfall elsewhere. It’s about protecting the viability of the network.’

However, the Post Office is providing just six weeks for councils and communities to respond to the draft closure plans. In some areas, the consultation has in effect been extended because it is subject to a break in the middle to cover the ‘purdah’ period in the run-up to the local government elections. Martens says the consultation period was ‘laid down by the government and agreed with Postwatch [the postal services watchdog]. We are just implementing it.’

But the decision not to consult during the election has drawn fire from political parties. Mark Hunter, the Liberal Democrat MP for Cheadle, describes it as ‘scandalous and unacceptable’.

‘The government is demanding Royal Mail postpone the consultation period and decisions on closures of post offices in our area for purely political reasons,’ he says. ‘Local residents have a right to know what is happening with their local post office and a right to have their say on the possible closures during local elections.’

The Scottish National Party’s postal affairs spokesman, Mike Weir MP, makes a similar point. ‘To explicitly demand a freeze on the consultation process in England and Wales shows Labour are concerned only about the ballot box, not the post box,’ he says. ‘Local communities and authorities must have a fair chance to challenge the proposals over the future of this essential local service.’

And the future of branches is already a hot local election issue, particularly in London – where there are 169 scheduled closures. London Mayor Ken Livingstone, who is standing for re-election, has begun legal proceedings over the decision and short consultation period.

He says: ‘I took the decision to take legal action and seek a judicial review because I believe post offices are a vital part of the communities they serve. We need more post offices in the capital, not cuts and closures.’ It has been reported that he has pledged to prevent all the closures, promising to provide subsidies where necessary to keep them open. However Public Finance was unable to get this confirmed by his election office.

Conservative candidate Boris Johnson is not proposing a subsidy, a spokeswoman says. ‘We are currently looking at all the options including costings. The mayor has mentioned a few times that he is promising this but has not enlightened us as to the costs. We will not make uncosted pledges.’

Kent County Council is also taking the closure proposals very seriously and has held a series of public meetings to debate its response. Roger Gough, Cabinet member for regeneration and supporting independence, points out that Kent was given a head start over other councils because plans for its area were announced first.

‘What we are seeking to do is to ameliorate the impact,’ he says. ‘We are already working with Business Link in Kent to give advice to retailers and to talk with community groups. For example, we have brought in the community council from Oxfordshire.’

The work with Business Link to set up an emergency programme of advice will cost £15,000, while the council has allocated another £350,000 over the next three years to support rural access to services. Other extra spending will also probably be necessary, says Gough. Kent believes that its response has been made more difficult because the Post Office failed to provide adequate notice of its plans and has not supplied sufficient financial information on individual branches to allow the council to properly consider taking them over.

David Drew, Labour MP for Stroud, has been a leading advocate of local authority involvement in protecting existing post offices and warned in the Commons last year that large-scale closures were coming.

He has called for an imaginative approach, in which branches enter into partnerships with credit unions and town or parish councils to provide community services and facilities, possibly converted into not-for-profit social enterprises. His conviction that this approach is viable, at least in places, is reinforced by its success in his constituency.

‘I have got a social enterprise that works with the Post Office at North Nibley,’ he says. ‘The village shop cum post office was going down the swanny five years ago. Local residents approached the Village Shop Association to help them buy the shop from the existing owners. It’s a trust: people in the village buy shares in it. I had friends who moved there and the first thing they had was a letter which said: “Thank you for moving into our lovely village and the least you can do is shop at the local shop and by the way it’s yours”.

‘It’s a classic case of a rural solution which, if we thought about it, could be applied to other shops which are going down. You could even have a common management for some of them.’ But he adds caustically: ‘The six-week process [for consultation] is nuts.’

There are now probably a couple of dozen community-run post offices – typically operating as not-for-profit social enterprises – many of them supported by the Village Shop Association, now called the Village Retail Services Association (Virsa).

One of the most successful is in the village of Nenthead, in rural Cumbria, which has a small population, but a thriving tourism sector in summer. Following the closure of the post office at Easter last year, a group of villagers got together, with support from Cumbria County Council and Eden District Council, and reopened the village shop in November, with the post office counter reopening in December.

Angela Green, a member of Nenthead’s steering group, says: ‘It’s going quite well, though winter is always the worst time of year. The community owns the shop and the villagers own shares in it, so they have a vested interest and they use it well.’ In addition to finance from the two councils, the group also got money from Virsa and two specialist social enterprise funds. Green says the Post Office was ‘really helpful’ in the process.

But Drew warns that ‘most of the postmasters and mistresses are only too willing to go’, so fighting closure plans can be difficult. The worst challenge, though, is the underlying position of the Post Office’s parent, Royal Mail Group. Last year, its deficit stood at £2.2bn, with a pension scheme deficit of £5bn. The counters business lost £99m last year, on a turnover of £868m. It has faced increased competition across most of its activities as European Union rules forced it to become subject to open markets.

One group of campaigners blames the immediate crisis on the government for contracting much of its postal services to competitors of Royal Mail. But the most devastating factor in the decline of branches has been the decision of the Department for Work and Pensions to move benefits from cheques payable at the post office to electronic transfers.

These pressures will not be resolved simply by closing 2,500 branches. According to the select committee, the government has admitted that in the longer term it sees the viable size of the branch network as about 7,500 offices. So, whatever councils do now, it seems likely that another 4,300 branches will be scheduled for closure in the coming years. Councils can expect to feel the squeeze over post offices for a long time yet.

 

Article Date: 25-Apr-2008