1

CWU Submission to BEIS Committee on the Post Office Network Introduction 1. The Communication Workers Union (CWU) is the largest union in the communications sector

in the UK, representing approximately 192,000 members in the postal, telecoms, financial services and related industries. We are the recognised union for all non-management employee grades in Post Office Ltd (POL) and we have members in all sections of the business, including subpostmasters.

2. The CWU welcomes the BEIS Committee inquiry into the Post Office network. We believe the Post Office is in crisis due to closures, privatisation, mismanagement, underfunding and a failure to plan for the future. We appeal to the BEIS Committee to use all its powers and influence to persuade the Government to change course and rescue this vital public service from systematic decline and the threat of collapse. Given the seriousness of the issues the Post Office faces, we regret that we have been unable to remain within the Committee’s 3,000 word guideline for written submissions and we would also call on the Committee to consider extending the inquiry over a longer period to enable it to undertake a comprehensive investigation of all of the relevant matters.

3. The CWU is running a national campaign – “Save Our Post Office” - against the closure and

franchising of Post Offices and the heavy cuts in government subsidies that have led to a severe decline in the quality and accessibility of Post Office services.1 We are calling for a new strategy for the future based on investment, innovation, growth and decent employment standards. This includes the creation of a national Post Bank through the Post Office network; a re-commitment to making the Post Office a “genuine Front Office for Government”; and a fair deal for subpostmasters.

4. There is strong public support for the CWU’s campaign, which is clearly demonstrated by the

many protests against Post Office closures that are being held in local communities all around the country. In March this year the CWU delivered a petition with 92,000 signatures calling for an end to the franchising programme and the introduction of a Post Bank.

5. We particularly welcome the Select Committee’s inquiry because there has been a complete

lack of accountability for, and public say over, the way the Post Office has been run. To take the franchising programme, for instance, there has been significant public opposition to this

1 CWU Save Our Post Office campaign page, accessible at: https://www.cwu.org/campaign/save-our-post-office/

7th May 2019

2

whenever a Crown is closed down, yet the Post Office refuses to take this into account (insisting that it only consults on how the change is to be made). At the same time as this, while there have been tens if not hundreds of millions of pounds of public money spent on the programme (with ‘transformation’ funding being allocated to the Post Office by BEIS) Ministers have repeatedly told Parliament “decisions on franchising are commercial ones for the Post Office to take.”

6. In debate after debate in Westminster Hall, MPs from all parties have described how the Post Office has simply ploughed on with a Crown closure and franchise regardless of public opposition, outlining how in their view the Post Office has misled local communities; advertised jobs in the proposed franchise branches while the supposed consultation was taking place; refused to allow MPs into branches to speak to staff; failed to attend public meetings arranged by the union; refused requests from MPs to meet with the Chief Executive; failed to provide basic information on things like footfall or profitability of the branch (supposedly the driving factor behind the change), and more. For a public service this is completely inadequate and we believe this points to real problems in accountability and culture within the Post Office.

7. There has never been any meaningful account given of how money has been spent on this

programme – we know through Parliamentary questions that tens of millions of pounds have been paid on staff compromise agreements (so franchise partners can bring in new employees on the minimum wage) and refurbishing the premises of shops like WHSmiths – and the public has never been given an opportunity to have a meaningful say over it. The idea that this is purely a commercial decision for the Post Office, when it has been funded by the government which has a seat on the board, and when the Post Office itself is supposed to be a public service, is simply not acceptable.

8. The problems in culture and governance are underlined by the Horizon scandal. The Select Committee will not consider issues that are currently before the courts, but without getting into the substantive matters we do not believe it is possible to ignore the seriousness of what has emerged so far with accusations of the Post Office improperly using its powers to prosecute individuals; directors being accused of misleading the court by the judge and of being unable to accept the Post Office is wrong; and the judge stating the Post Office’s approach to the litigation could be construed as “threatening” and “oppressive”.

9. It is clear to us that there are serious problems of culture within the Post Office and with the

former Chief Executive now having left, we are calling for an independent commission to be established to make recommendations on governance and accountability going forward. We would urge the Select Committee to consider this as part of its inquiry.

10. As we set out in more detail in response to the questions below, the CWU is extremely

concerned about the current state of the network, which we believe has been put on a path of managed decline by a programme of cost-cutting. While the Post Office made a profit before the £70m government subsidy in 2018 this has been delivered through a relentless programme of cuts that has downgraded services for customers, left postmasters struggling to get by and replaced decent jobs with part-time minimum wage roles in hundreds of franchises. With a 50% increase in temporary or mobile branches as post offices have closed

3

in the past five years; with as many as a fifth of postmasters preparing to hand back the keys over the next year; and with the plan to increase financial and government revenues having completely failed, it is hard not to conclude the Post Office is approaching crisis point. We set out a series of recommendations here that we believe are now necessary.

Recommendations

1. The Government must urgently take a more interventionist approach to secure the

sustainability of the Post Office network. 2. There must be an overhaul of governance and accountability in the Post Office, with

new rights for workers through their unions to have more involvement and influence over how the Post Office is run, and a more rigorous process of accountability for POL.

3. An independent commission should be established to make recommendations on governance and accountability going forward.

4. There should be a review of whether the Government has fully exercised its oversight functions in relation to the Post Office, or whether those powers need to be significantly strengthened.

5. There should be an immediate moratorium on Post Office closures and franchising and a guarantee on the future of the Crown Office Network.

6. The Government and the Post Office should abandon the current Crown Office closure and franchising programme, the low cost PO Locals model and the ‘white space’ programme.

7. There must be a new strategy for the future based on investment, innovation, growth and decent employment standards. This includes the creation of a national Post Bank through the Post Office network and a re-commitment to making the Post Office a “genuine Front Office for Government”.

8. The Government must publish where the money is coming from to fund POL legal costs and how potential liabilities, that could total hundreds of millions, will be met.

9. Subpostmasters should be granted worker status to reflect the reality of their employment relationship and to help address their current exploitation and lack of rights.

10. The CWU should be recognised by the Post Office for collective bargaining purposes on behalf of subpostmasters and Post Office employees who TUPE transfer to WH Smith under a franchising agreement.

11. Where franchising takes place, the Government should put measures in place to ensure that staff terms and conditions are preserved and that pay is not cut or skills lost and jobs downgraded.

12. If the private sector takes on Post Office services, there should be a contractual obligation on the private sector to meet the costs of ensuring that staff are treated fairly and that their terms and conditions are preserved.

4

The Post Office Network

Question 1: Is the Post Office currently delivering services to the necessary standard across the

UK?

11. No, we do not consider that Post Offices are meeting the required standard of service across

the UK. Crown Offices delivering high quality, accessible services are being franchised out to WH Smith, which has been consistently rated the worst or second worst retailer on the high street over the last eight years.2 Meanwhile, traditional sub-Post offices are being closed and moved into the back of convenience stores, where they offer a more restricted range of services and poorer service standards.

12. On 11th October 2018 it was announced that 74 Crown Post Offices across the UK will be

franchised to WH Smith. Taken together, successive franchise announcements over the last few years mean the loss of 60% of the Crown Office network since the separation of the Post Office and Royal Mail in 2013.

13. The franchising out of Post Offices has resulted in well trained Post Office staff with a wealth

of experience leaving the business and being replaced by low paid, inexperienced staff at WH Smith. It has also led to the loss of quality premises able to host the machinery needed to deliver many Post Office services.

14. Service standards have been seriously damaged as a consequence of these changes. Research

by Consumer Focus in 20123 and Citizens Advice (the consumer Watchdog for Post Office services) in 20164 and 20175 shows that WH Smith franchises result in longer queues and service times, inferior customer service and advice, poor disabled access, and fewer counter positions.

15. For example, Citizens Advice found in 2017 that:

The majority of post office counters were located on the ground floor (90%), but 8% of branches had counters on the first floor or higher (including 37% of WH Smith branches) and 2% had counters in the basement (including 7% of WH Smith branches). In branches where the post office counters were on a different floor, only 75% had an internal lift.

49% of shoppers had to wait or queue (increasing to 80% in WH Smith) with an average waiting time of 3.21 minutes (increasing to 4.44 minutes in WH Smith branches).

2 WH Smith voted UK’s worst high street shop in Which? Survey, BBC News, 28

th May 2018, accessed on 29

th April

2019 at: https://www.bbc.co.uk/news/business-44274654 3 Are you being served? Consumer Focus 2012

4 The future of consumer needs for postal services, Breaking Blue, Research report for Citizens Advice, June 2016,

accessible at: https://www.citizensadvice.org.uk/about-us/policy/policy-research-topics/post-policy-research-and-consultation-responses/post-policy-research/the-future-of-consumer-needs-for-postal-services/ 5 Research into the quality and consistency of service standards and product knowledge across the Post Office

network, GfK Mystery Shopping for Citizens Advice, June 2017, accessible at: https://www.citizensadvice.org.uk/about-us/policy/policy-research-topics/post-policy-research-and-consultation-responses/post-policy-research/the-state-of-the-post-office-network/

5

14% of shoppers said their wait was not acceptable (increasing to 27% in WH Smith). Of 7 shoppers who waited over 20 minutes, 5 were in WH Smith, and one shopper waited almost one hour in total at a WH Smith.6

16. Despite knowing that there are issues with reduced accessibility and quality of service in

WHSmith franchised post offices, neither BEIS nor the DWP have conducted an Equality Impact Assessment into the latest round of franchises to the retailer. Given that the Post Office is publicly owned and funded and there are 1.2 million people who use Post Office Card Accounts7 to receive and access their welfare, we believe the Government has a responsibility to ensure its services are accessible for everyone – we do not believe the ‘consultations’ that the Post Office does run, with no guarantee of input from any protected characteristic groups, or from other equality and access specialists, are in any way adequate for this purpose.

17. Alongside closing and franchising Crown Offices, the Post Office transformation programme

involves moving sub-Post offices onto new lower cost operating models, known as Post Office Local branches. Major failings have been highlighted with this strategy by Citizens Advice in relation to service standards at PO Locals, saying that staff knowledge and accuracy of products, pricing and services is insufficient.8 This is supported by the Federation of Small Businesses (FSB), which has found that the range of services available under the PO Local model tends to be more restricted than the traditional sub-Post Office model.9

18. The CWU rejects the Post Office’s claim that its franchising and new PO Local model strategy has improved services by adding over 200,000 additional opening hours a week, as the evidence suggests this is not the case.10 For example, CWU members have reported that while a convenience store may advertise that postal services are available from opening to close, in reality they are too often delivered only during core business hours or when a trained member of staff is on shift. Research from Citizens Advice in 2017 also raises serious doubts about whether these additional opening hours are actually benefiting customers, reporting that:

“Our research shows the public generally don’t realise post offices are open longer.

6 GfK Mystery Shopping, ibid

7 https://www.parliament.uk/business/publications/written-questions-answers-statements/written-

question/Commons/2018-12-04/198724/ 8 Fixing the Foundations: Branch and Service Standards in Post Office Locals, Citizens Advice, September 2015,

accessed at: https://www.citizensadvice.org.uk/Global/Public/Policy%20research/Documents/Policy%20publications/Post%20policy%20research/Fixing_the_Foundations%20180915%20final.pdf 9 Locked out, the impact of bank branch closures on small businesses, Federation of Small Businesses, October 2016,

accessed at: http://www.fsb.org.uk/docs/default-source/fsb-org-uk/fsb-bank-branch-closures-(final).pdf?sfvrsn=0 10

Post Office to expand number of branches in WH Smith stores, Post Office, 11th

October 2018, accessed on 29th

April 2019 at: https://www.onepostoffice.co.uk/secure/latest-news/our-branches/post-office-to-expand-number-of-branches-in-WH Smith-stores/

6

“Service standards are generally lower during extended hours. Our mystery shopping research shows that outside core hours, staff are less likely to ask appropriate questions and offer customers a clear, correct recommendation.

“Post Offices report that they have issues with the quality of service outside core hours and difficulties retaining new staff, often because staff are not confident about their training and knowledge of Post Office transactions. This may explain why we’ve found a drop in the quality of service during these times.”11

19. The CWU is concerned that the Government is not exercising its oversight function or

showing any interest in investigating the franchising of Crown offices or the move to a lower operating cost model, given the strength of evidence relating to the adverse impact of this strategy on service standards.

Question 2: What concerns do you have, if any, about the long-term resilience of the Post

Office network across the UK?

20. The CWU has a number of serious concerns about the long-term resilience of the UK Post

Office network under the current strategy of network transformation and funding cuts. These relate in particular to the closure of traditional sub-Post Offices, the closure and franchising out of Crown Offices, the growth of inferior ‘white space’ Post Offices that undermine existing branches, the growth of ‘outreach’ branches, and the Horizon IT scandal which could potentially cost hundreds of millions in compensation.

The closure of traditional sub-Post Offices 21. The UK’s Post Office network of 11,500 branches is half the size it was 30 years ago, and it

looks set to decline further with reports that an alarming number of subpostmasters intend to close their business in the next year. A recent survey by the National Federation of SubPostmasters (NFSP) found that 22% of Post Offices are planning to close, pass on their business, or downsize amid falling demand and wages, as subpostmasters can no longer make a decent living.12

22. Subpostmasters are paid a fixed payment and a supplement depending on how many

transactions pass over their counter, but transactions are falling resulting in lower earnings. The NFSP’s survey found that 76% of respondents are making less than the statutory minimum wage, 61% are taking home less income over time, and one in three did not take a single day’s holiday last year.

23. We believe these challenges pose a major threat to the Post Office, risking the potential loss

of 3,000 to 4,000 Post Offices within the next two or three years. This would be hugely damaging to the network in itself, but it would also affect Royal Mail’s business and its

11

Post Offices Transformed? Lessons from Citizens Advice research, 17th

February 2017, accessed on 29th

April 2019 at: https://wearecitizensadvice.org.uk/post-offices-transformed-lessons-from-citizens-advice-research-b1b7cf6b46b2 12

UK Subpostmasters feel disenfranchised says NFSP, 16th

April 2019, Post & Parcel, accessed on 29th

April 2019 at: https://postandparcel.info/104274/news/social-value-of-the-uk-post-office-network-estimated-to-be-9-billion-says-nfsp/

7

contractual relationship with the Post Office, forcing Royal Mail to look elsewhere for a commercial partner in areas where Post Offices close. This would exacerbate the Post Office’s predicament, further contributing to a vicious cycle of decline in the network.

‘White space’ Post Offices 24. Another factor that threatens the long term resilience of the Post Office network, is the

strategy of locating new Post Offices with inferior service offerings in retail outlets and other private spaces very near to existing Crown Offices and traditional sub-Post Offices. Known as ‘white space’ (new) Post Offices, the business is advertising opportunities to establish these around the country. The CWU wants to see the network grow, but what is evidently a cost cutting and efficiency exercise will have the opposite effect, because it is damaging business for existing Post Office branches and making them less viable. In some cases, such as in Camden, the white space Post Office is situated just a few doors down from the existing branch. The NFSP has argued that the impacts of this strategy are far greater than PO modelling suggests and they are gathering evidence to show the true effect on existing branches.13

The growth of ‘outreach’ branches 25. We are also concerned about not just the overall decline of Post Office branches, but the

increase in the number of ‘outreach’ branches. Outreach services are typically small, part-time Post Offices, many of which are mobile branches or ‘hosted’ branches in village halls, pubs and people’s front rooms. Mobile branches are particularly limited, with some providing a service for just one hour a week.14 The most recent Post Office network report shows that the total number of Post Office branches fell by 2.3% from 11,818 in 2012 to 11,547 in 2018, whilst outreach services rose by 49% from 1,017 in 2012 to 1,517 in 2018 (as shown in Chart 1). This means outreach services now make up 13% of all Post Office branches in 2018, compared with 8.6% in 2012.

Source: Post Office Network Report 2013 and 2018

13

The Subpostmaster, November 2017, page 4, accessed at: https://www.nfsp.org.uk/write/MediaUploads/The%20Subpostmaster/SPM_Nov2017_.pdf 14

Bangor Post Office closure is unacceptable, North Wales Chronicle, 1st

May 2018, accessed at: https://www.northwaleschronicle.co.uk/news/16196743.bangor-post-office-closure-is-unacceptable/

8

The loss of traditional banking services 26. It is also important to consider that local communities are at risk of losing their post offices at

a time when they are already being hit by thousands of bank closures and a cash machine crisis. Recent government statistics show that nearly 6,000 bank and building society branches have closed across the UK since 2010, a fall of one third.15 Meanwhile, 3,200 free to use LINK cash machines closed in the year to February 2019, representing 5.8% of the network.16 These closures are more likely to happen in isolated or deprived areas where services are more expensive to run. The trend is having a serious adverse impact, putting pressure on local businesses, damaging local economies and leading to greater financial exclusion amongst the many people who still rely on traditional banking services. With the right strategy and leadership from government, the Post Office could step in to replace these lost services, providing a lifeline to local communities and strengthening its own commercial viability. We expand further on this under Question 5, calling for a Post Bank to provide a full range of banking services through the Post Office.

Crown Office closures and franchising 27. With respect to Crown Offices, protests against closures are taking place around the country

but there is no evidence that the Post Office is taking any notice, indicating that the consultation process is nothing but a sham. One of the latest casualties is in York, where the Crown Office was transferred to a WH Smith despite an opposition campaign run by local residents and politicians.17 Not only this, but it is deplorable that the Post Office is willing to close these down completely where they cannot find a franchise partner. We understand there are also cases of the Post Office using the expiry of a lease, or a change to the building by the landlord as an excuse to close a Crown Office as was the case with Trafalgar Square, South Kensington and Mount Street Manchester. This has also happened in Laindon and in Abbey Wood, where the lease was due to expire and the PO subsequently advertised for a new franchise partner but one could not be found. Unless the Government and the Post Office take some responsibility and some action, these local communities will be left without any Post Office service at all.

28. Furthermore, it is a serious concern that the consultation period for the closure and

franchising of Crown Offices has been recently halved to just six weeks, denying local communities any realistic hope of mobilising a strong enough campaign to challenge the decision. This is a contemptuous and shameful exercise in driving changes through with impunity and no meaningful engagement, making a mockery of the Post Office claim that ‘We are committed to engaging and supporting our customers and their representatives as we make changes to the Post Office network’.18 The consultation guidance for Post Office network changes has also been seriously modified with considerably less information to

15

Banks closures: 13 million people have lost half of local branches, BBC News, 19th

October 2018, accessed on 29th

April 2019 at: https://www.bbc.co.uk/news/uk-england-45641217 16

Monthly ATM footprint, Link, accessed on 29th

April 2019 at: https://www.link.co.uk/initiatives/financial-inclusion-monthly-report/ 17

York’s main Post Office closes despite protests, ITV News online, 4th

April 2019, accessed on 1st

May 2019 at: https://www.itv.com/news/calendar/2019-04-04/yorks-main-post-office-closes-despite-protests/ 18

Principles of community engagement on changes to the Post Office network, Post Office Ltd, June 2018, accessed on 1

st May 2019 at:

http://corporate.postoffice.co.uk/sites/default/files/Principles%20of%20Community%20Engagement_June%202018.pdf

9

support respondents through the process, down from 16 pages to just 3 pages.19 Furthermore, these changes were not well publicised by the Post Office or Citizens Advice to the point that the CWU was not aware of them until some months after they were introduced.

The Horizon scandal 29. The Committee will be aware of the high profile Horizon scandal, which involves a legal claim

by a group of 557 subpostmasters against the Post Office after they were accused of financial shortfalls. POL used their Horizon accounting system as evidence to pursue subpostmasters for what they claimed was theft. Consequently, many subpostmasters were fined, bankrupted, and even imprisoned. However, the subpostmasters say these irregularities were in fact due to faults with Horizon. The subpostmasters recently won their first case in a series of trials, in what has been described as a ‘stunning victory’ over the Post Office.20

30. The CWU is calling for transparency about the funding of POL legal costs and potential

liabilities that could total hundreds of millions of pounds, and an Independent Commission to review and make recommendations about the culture, governance and power of POL to prosecute without independent scrutiny.

31. We understand that the Government has also raised concerns about the legal costs, and that

the Department for Business Energy and Industrial Strategy has sought an assurance from the Post Office’s CEO that departmental funds meant for transformation and business investment will not be used on the Horizon litigation.21

32. Ultimately we are concerned about the impact on the future sustainability if the Post Office

loses the high court litigation. The first trial is considered crucial in influencing how the case against the Post Office proceeds, and if the direction of travel continues the Post Office will be liable for a vast compensation claim. Unfortunately there is no sign of any kind of contingency plan from the Post Office or Government if the Post Office does indeed lose the case. Indeed, the Post Office appears to be in denial about the whole situation. Summarising the company’s approach following the first trial, Mr Justice Fraser said “They give me the impression that they simply cannot allow themselves to consider the possibility that the Post Office may be wrong, as the consequences of doing so are too significant to contemplate.”22

33. Against this backdrop, the CWU believes the Government must publish where the money is

coming from to fund POL legal costs and how potential liabilities, that could total hundreds of millions, will be met.

19

The original more detailed document is titled: Code of Practice on Public Consultation and Communication with respect to change in the Post Office network, accessed on 1

st May 2019 at the following link:

http://corporate.postoffice.co.uk/sites/default/files/Code%20of%20Practice_080216.pdf 20

Subpostmasters achieve stunning victory against Post Office in Horizon case, Computer Weekly, 15th

March 2019, accessed on 1

st May 2019 at: https://www.computerweekly.com/news/252459564/Subpostmasters-achieve-

stunning-victory-against-Post-Office-in-Horizon-case 21

Could MPs hold Post Office directors to account for Horizon IT trial costs, Campaign 4 change, accessed on 1st

May 2019 at: https://ukcampaign4change.com/2019/03/22/could-mps-hold-post-office-directors-to-account-for-horizon-it-trial-costs-after-they-have-left/ 22

Alan Bates and others v Post Office Ltd, Judgement No.3. ‘Common Issues’, para 547, accessed on 3rd

May 2019 at: https://www.judiciary.uk/wp-content/uploads/2019/03/bates-v-post-office-judgment-no3-15-mar-19.pdf

10

Question 3: Is the current framework for sub-Post Offices sustainable for sub-Postmasters and

the communities they serve?

34. No, we believe that the ongoing programme of network subsidy cuts and the absence of a

plan for innovation and growth will make sub-Post Offices unsustainable. Communities will suffer as a result, by being denied access to the Post Office and banking services they need.

Subpostmasters remuneration 35. We find it unacceptable that subpostmasters have been forced to take a pay cut or face

closure.23 Subpostmasters have been told to turn their traditional Post Office branches into a PO Local, where they share the same counter as a shop. As a result, they receive less commission on Post Office sales, and have lost in the region of £10,000 a year as a result. If they refuse to adapt, the Post Office simply goes ahead with converting the branch to a Local, forcing the subpostmaster to close their business. Again, this means the loss of experienced postmasters and staff and will do nothing to support the provision of high quality Post Office services to local communities.

36. While there has been a recent announcement by the Post Office that it will make a modest

increase in the payments to subpostmasters for bank transactions, this is too little too late for the many who have already had to close their doors, or the one in five who plan to do so within the next 12 months.

37. As shown in Chart 2 below, subpostmasters’ fees have declined from nearly 46% of total Post

Office turnover (excluding network subsidy payment) in 2014 to 38.6% of turnover in 2018 (falling from £448m in 2014 to £371m in 2018). Meanwhile, total turnover has fallen from £979m to £961m, whilst trading profit has increased from a loss of £93m to a profit of £35m. It is clear from the data that Post Office profits are being made not as a result of revenue growth, but of cost cutting, including subpostmasters’ remuneration costs. More generally, profits are being made at a cost of inferior quality of service, worse terms and conditions of Post Office staff, lack of investment in innovation and new services, and a weakening of the future sustainability of the network.

23

Post Office network in crisis as five-year cash injection from the Government runs out soon, This is Money, 24th

May 2015, accessed at: http://www.thisismoney.co.uk/money/news/article-3094011/Post-Office-s-demands-putting-axe-head-Mark-Baker-believes-company-trying-shut-down.html

11

Source: Post Office Reports and Accounts 2014 – 2018

Subpostmasters employment status 38. The employment status of subpostmasters is also an important issue that needs addressing.

Subpostmasters are treated as self-employed by the Post Office, which means they have no right to the minimum wage, sick pay, paid holiday or a workplace pension. The CWU has reasonable grounds to believe that subpostmasters have worker status while providing services to the Post Office. Last year we submitted a group Employment Tribunal claim on this basis, with the first procedural hearing set for June 2019. Subpostmasters are in the same status category as victims of the growing ‘gig economy’, which is being largely fuelled by unscrupulous private sector employers, but in this case we are witnessing the state sponsored exploitation of public sector workers delivering a vital public service. This categorisation of subpostmasters means that the majority of the 50,000 or so workers in privately run Post Offices are likely to be on very low pay and insecure contracts of employment.

39. Before the Government’s attack on sub-Post Offices through funding cuts and cheaper

operating models, subpostmasters could rely on selling their Post Office on to serve as a pension. But this has changed because the new business model is far less attractive, and subpostmasters are struggling to find buyers when they reach retirement age.

Workplace representation for subpostmasters 40. The other challenge facing subpostmasters is that they do not currently have independent

representation in the workplace, and this undermines their ability to get a fair deal. As Mr Justice Fraser highlighted in his recent judgment on the Horizon trial, the NFSP is not independent of the Post Office.

12

41. In the ruling on 15th March 2019, Mr Justice Fraser reported on evidence gained via a Freedom of Information request, of a secretive multimillion pound deal between the NFSP and POL, whereby money was paid to the NFSP on condition that it ‘… not take any action or engage in any commercial activities which brings, or is likely to bring, POL's name or reputation into disrepute.’24 Mr Justice Fraser said, ‘in my judgment,… the NFSP is not remotely independent of the Post Office, nor does it appear to put its members’ interests above its own separate commercial interests… The Post Office effectively controls the NFSP.’25

42. Subpostmasters were clearly, and seriously let down by POL and the NFSP in this deal which

meant that the representation they thought they had, was effectively bought by POL, with serious consequences in the case of Horizon. The judgment is specific about POL witnesses misleading the court, managers being unable to accept that POL is ever wrong and the Company not believing itself to be accountable to the public.

43. The CWU believes the Post Office should not be using public money to pay for the

subpostmasters representative body. We understand that POL has guaranteed around £25m in funding for the NFSP over the next few years. We are calling for an investigation into the appropriateness of using a Public Authority Grant to fund the NFSP.

44. The CWU is also calling on the Post Office to remove their opposition to the CWU

representing subpostmasters. And on a separate but similar issue, we are calling for the right of the CWU to continued recognition following the transfer of Post Office employees to WH Smith under a franchising agreement. The CWU’s legal representatives maintain that the CWU is entitled to continued recognition, given the transfer of an organised grouping of employees and the continuation of services provided, and we are currently in dispute with the Post Office and WH Smith on this. We believe the Post Office’s position on these issues is flagrantly anti trade union, and that the BEIS Committee should be asking the Post Office why they are opposed to CWU representation for subpostmasters and Post Office employees who TUPE transfer over to WH Smith.

45. We also believe that the lack of accountability raised by the Mr Justice Fraser speaks to the need for proper scrutiny and a root and branch review of the Company, along with an assessment of the Government’s oversight and representation of the public interest. We therefore call for an overhaul of POL governance and a review of whether the Government has fully exercised its oversight functions, or whether those powers need to be significantly strengthened.

46. The CWU calls on the Government and POL to give postmasters a fair deal so that running a

post office returns once again to being a viable, rewarding career option in return for delivering a valued public service.

24

Alan Bates and others v Post Office Ltd, Judgement No.3. ‘Common Issues’, para 590 and 592 25

Alan Bates and others v Post Office Ltd, Judgement No.3, ‘Common Issues’ para’s 368 and 596

13

Question 4: Does the increasing role Post Offices play in providing basic banking services provide them with an opportunity or a threat? 47. The increasing role of Post Offices in providing basic banking services is potentially an

opportunity, but only if the Post Office can build on its existing offering for financial services. 48. Currently, the restricted nature of the Post Office’s offering for banking services is a threat to

the future sustainability of the Post Office network. This is because it lacks the scope to diversify and provide the higher value services that will support the revenue growth needed for the Post Office to survive and thrive.

Question 5: What new services, if any, could the Post Office provide to customers? Financial services 49. In line with Labour’s recent report: A New Public Banking Ecosystem, the CWU supports the

creation of a Post Bank to provide a full range of retail banking services through the Post Office network.26

50. Currently the Post Office delivers the bulk of its financial services through its joint venture with the Bank of Ireland. However, it is widely acknowledged that the partnership with the Bank of Ireland UK is no longer fit for purpose. The Bank of Ireland is in the process of winding down its business and corporate banking services. Furthermore, it is not taking proactive steps to devise innovative new products to stage off competition from new challenger banks. On the contrary, the Post Office announced in March 2019 that following a review by the Bank of Ireland, it would be closing down all of its Post Office Money current accounts and withdrawing this product completely.27

51. We support the recommendations of Labour’s report in relation to the services the Post Bank

should provide, as follows:

The Post Bank should be given a public service mandate to provide financial services according to clear principles set out in primary legislation. This should include a requirement to provide access to basic retail banking services to all citizens regardless of income, wealth, or social status, and to contribute positively to the financial sustainability of the Post Office network.

The Post Bank should seek to grow and expand its market share in the current account, savings, travel, insurance and personal loan markets, and establish a new business division focused on SME lending and business current accounts, which should be made a strategic priority. At present there are no business loan or bank account products offered under the Post Office brand, but this is an area that is currently underserved by the present banking landscape.

26

A New Public Banking Ecosystem, a report to the Labour Party commission by the Communication Workers Union and the Democracy Collaborative, Berry and Macfarlane, Labour Party, accessed on 29

th April 2019 at:

http://labour.org.uk/wp-content/uploads/2019/03/Building-a-new-public-banking-ecosystem.pdf 27

Labour, ibid, p.28

14

The Post Bank should make its products and services available through Post Office branches, over the phone, online, and via mobile banking. The Post Bank should position itself at the forefront of the fintech revolution.28

Government services 52. The CWU is also calling on the Government to rethink its approach and commit to making the

Post Office a genuine front office for government as planned in 2010. At that time, the Government recognised that post offices are a natural place for citizens to access face-to-face government services and proposed a number of areas for potential growth. These included identity verification, the processing of assisted applications and cashless payment services.29

53. Unfortunately, the Government has shown little interest in pursuing this agenda and is actively undermining it in certain areas. For example, the Department for Work and Pensions (DWP) has been writing to Post Office Card Account users since 2015 saying they expect claimants to use a bank, building society or credit union account to receive benefits or tax credits.30 Whilst the DWP has publicly committed to maintain POCAs until 202131, its actions appear designed to undermine the POCA and to begin the dismantling of a key service for vulnerable pensioners and other benefit claimants. Consequently, DWP related Post Office turnover decreased by £15m to £46m in the year to March 2018 due to the decline in the number of active Post Office card accounts.32

54. Some progress has been made in generating some revenue from identity related services, although with the Post Office reporting income of £10m from ‘Other Government Services’ in the year to March 2018 this remains modest. Growth from passport check and send, biometric enrolment services and the Cabinet Office’s Verify online identity service should all be built on. However, in another act of Government indifference to these aims, the Home Office has recently decided not to renew the contract with Post Office Limited (POL) for biometric machines to be hosted in their premises.33 Revenues here remain a long way from off-setting the structural decline the Post Office has seen to its traditional services, with overall revenues from government services down by 40% since 2013 to £99m in March 2018.34

55. We believe there is enormous potential for the government to make use of the national Post

Office network as a delivery platform for government services, and that this would be

28

A New Public Banking Ecosystem, 2019, ibid 29

Securing the Network in the Digital Age (BIS, November 2010) 30

DWP response to freedom of information request, ref: 2616, 4th

August 2016, accessed at: https://www.whatdotheyknow.com/request/345218/response/889465/attach/html/3/reply%202616.pdf.html and Stop bullying us into a bank account, this is Money, 9

th October 2018, accessed on 1

st May 2019 at:

https://www.thisismoney.co.uk/money/pensions/article-6258041/Stop-bullying-having-bank-account-Post-Office-card-holders-fury.html 31

Post Office service for pensioners and benefit claimants to be safeguarded with new government contract, 16 December 2014, DWP, accessed at: https://www.gov.uk/government/news/post-office-service-for-pensioners-and-benefit-claimants-to-be-safeguarded-with-new-government-contract 32

Post Office Annual Report 2017/18, p.12 33

North east settlers face crazy 200 mile round trip to get fingerprints taken, the Press and Journal, 20th

October 2018, accessed on 29

th April 2019 at: https://www.pressandjournal.co.uk/fp/news/inverness/1589570/north-east-

settlers-face-crazy-200-mile-round-trip-to-get-fingerprints-taken/ 34

Post Office Annual Reports 2012/13 and 2017/18

15

mutually beneficial for the government, the Post Office, and wider society. The Post Office is ideally placed to support this objective by offering internet access in its branches. This would bring the combined benefits of assisting the delivery of government services, increasing footfall and custom, and providing a valuable service for nearly 3 million households still without an online connection at home.35

Crown Post Offices

Question 6: Do you have confidence that franchises can maintain and improve current service levels in the Crown Post Offices they take over?

56. No, we believe the evidence is clear that there is no possibility of franchises being in a

position to maintain and improve service levels in the Crown Offices they take over. 57. The inferior terms and conditions of employment, combined with the predominantly

insecure, low skilled and inexperienced nature of the workforce in franchises are key factors holding service levels back.

58. The quality of the franchise premises also places considerable limitations on the ability of

franchises to meet the same standards as Crown Offices. Franchises in WH Smith outlets have less space to operate and accommodate equipment for services, such as biometric machines for Passports and driving licences.

59. The headline number of post offices says nothing about the breadth of services available and

there must be a question mark over how attractive the PO network is for contracts as the quality of the premises available is reduced. For example, the biometric service offered by the Post Office cannot be automatically transferred to a franchise. This will no doubt have played some part in the decision of the Home Office not to renew this contract.36

Question 7: What contingencies should the Government have in place in case franchises fail? 60. We consider that the franchise programme has already failed, because it results in more

limited services, a poorer standard of service, and restricted accessibility for customers. Therefore, we believe the Government should immediately end the franchising of Post Offices and should bring all franchised Post Offices back under the direct control of POL.

61. Where franchises fail individually to the point where they can no longer operate, we also

consider that they must be brought back under the control of POL.

62. The evidence indicates that there is a very real danger of franchises failing on a large scale, due to the heavy reliance on WH Smith and the fragility of WH Smith’s retail business. WH Smith’s latest financial results show that high street revenue fell by 3.3% to £590m in March 2018, down from £610m in 2017. Profit fell by 3.2% to £60m in 2018 from £62m in 2017.

35

In 2018, 4.5 million adults in the UK had never used the internet (ONS, Internet Users in the UK 2018), and 10% of UK households (2.7 million households) had no internet access (ONS, Internet Access - Households and Individuals: 2018) 36

Press and Journal, 20th

October 2018, ibid

16

High street revenue has been falling consistently over the last 5 years, and is down by 19% (from £726m) since 2013.37 WH Smith’s future on the high street is being seriously questioned as a result, with an opinion in the Financial Times recently concluding that: ‘Once a high street without a WH Smith seemed unimaginable. Now it seems almost inevitable’.38

63. We also understand that WH Smith has not committed to host Post Offices for any significant

period of time. This is a serious concern, because it means there is little incentive for WH Smith to plan for long term growth and little obligation on WH Smith to rescue franchises when they fail. It will fall on the Post Office, which has already spent millions on franchising its services, to pick up the costs of re-establishing these branches.

Question 8: Should the Government seek to ensure that staff terms and conditions are preserved when a franchise takes over a Crown Post Office? 64. We are opposed to the franchising of Post Offices in principle, because it means a vital public

service being transferred out to the private sector where not only are staff pay and conditions inferior, but service standards are lower, services are more limited, and accessibility is compromised. Post Office employees with permanent jobs earning £12.40 per hour are being replaced by minimum wage jobs at WH Smith earning between £6.15 and £8.21 per hour.39 Many of these will be on zero hour contracts with no job security and little in the way of employment rights.

65. Where franchising takes place, we believe the Government should put measures in place to

ensure that staff terms and conditions are preserved and that pay is not cut or skills lost and jobs downgraded.

66. However, we do not agree that taxpayers’ money should be used to preserve terms and

conditions where services are franchised out to private operators. It is not in the interests of taxpayers to top up pay for private sector workers to deliver a more limited, poorer quality service. If the private sector takes on Post Office services, there should be a contractual obligation on the private sector to meet the costs of ensuring that staff are treated fairly and that their terms and conditions are preserved. On that basis, we oppose any indemnity that the Post Office provides to a franchise partner for staff costs where they do TUPE over. This is something that we understand currently exists, although the Post Office refuses to comment on it publicly.

67. The Government could also help to ensure that employment standards are not eroded in Post

Office franchises over the longer term by scrapping anti-trade union laws that make it more difficult for trade unions to organise and bargain collectively with employers on behalf of working people.

37

WH Smith plc, annual report and accounts 2018, accessed on 30th

April 2019 at: http://www.WH Smithplc.co.uk/docs/WH Smith_AR18_WEB_FINAL.pdf 38

The Slow Death of WH Smith, Financial Times, Robert Shrimsley, 1st

June 2018, accessed on 29th

April 2019 at: https://www.ft.com/content/39d509de-639d-11e8-90c2-9563a0613e56 39

These are the National Minimum Wage rates for workers aged 18-20 and Over 25 from April 2019

17

68. Not only do we believe it is unacceptable for the Government to use taxpayers’ money to finance the cost of preserving pay and conditions in franchises, but the same goes for the costs of the closure and franchising more generally. Everything from compromise agreements to get rid of existing staff (£13 million in 2014-15 alone), to refurbishments on stores it then franchises, and installing post office counters in franchisees’ premises, are met by the public. The Post Office recently informed the CWU following a Freedom of Information Request that £4.17m has been spent to date on the franchising of Crown Offices, and that future works are budgeted at £85k per branch.40 Therefore the costs for the 74 Crown Offices most recently announced for franchise will amount to £6.3m. We have also calculated based on past expenditure that the cost of settlement agreements for all employees at 74 Crown Post Offices would be in the region of £30m. This is a considerable sum of taxpayers’ money that is likely to be spent in order to avoid the TUPE transfer of Post Office staff to WH Smith. Yet, in return, the public will receive a reduced, inadequate service.

For further information on the view of the CWU contact: Dave Ward General Secretary Communication Workers Union 150 The Broadway London SW19 1RX Email: dward@cwu.org Telephone: (+44) 0208 971 7251

Date: 7th May 2019

40

Letter from Post Office Information Rights Team to CWU under the terms of the FOIA, FOI2019/00121, 22nd

March 2019