Rural Post Offices on the Brink?

The NFSP have recently started sounding out their activists (some of their stuff never gets past a poorly attended branch meeting) about POL’s alleged threat to the fixed pay element of Community Branches.   These are the ones that were meant to be safe from the effects of NT thanks to a residual requirement for State Aid funding.

Add to that the recently announced removal of fixed pay for the rest of the network whether they engage with NT or not then things indeed look bleak for the Rural Post Office network which is not entirely made up of Community style post offices.

A long time ago I had an exchange of emails with the then Chairman of RMG, Alan Leighton.   We discussed my ‘controversial’ assertion that it was the Rural Shop itself that deserved a subsidy, whether or not it had a post office.   My own experience was that I did very little work for the income I received from the Post Office yet without that income the shop itself would not be viable.

Losing the last shop in the village is not just an emotionally charged event for the community it serves, it is an economic disaster.  The value of property will fall overnight.   Estate agents I have contacted claim anything up to 10% depending on the remoteness of the location and distance to alternative shops.  I continue to believe that local communities must acknowledge this effect more and be prepared to contribute directly, not just by shopping there, but through some form of local taxation.

The Post Office State Subsidy requires EU approval.  To gain EU approval the Subsidy must be seen to support services of general economic interest which includes banking and postal services.   The amount of subsidy allowed by the EU, to cut a long story short, is derived from the value of the products supplied through the network to branches that would be uneconomic to run without the subsidy.   Certain products, of no general economic interest are therefore not included in the calculation.

At the moment POL use this subsidy to underwrite the fixed element of pay that all small offices receive.   These small offices receive additional pay based on transactional pay for only a small number of products they actually provide.  For instance they receive no additional pay for each stamp they sell.

So why might POL be looking to change the way they pay these community offices?

Well first of all they are in big big trouble with delivering on the promised savings that NT would accomplish.   I have written about this before, but it seems to me the majority of offices that have converted to NT actually fall within the 3,600 offices that were already profitable and therefore not used in the state aid calculations.   Couple that with falling income to the remainder as services such as DVLA are lost means that the state aid calculation would probably come up with an even higher level of subsidy required than at present!   POL desperately need a way to prevent this occurring.

There is more to this than meets the eye.   Most community offices work on a restricted hours basis – for instance they may only open three days a week (in practice though most open all shop hours).   The fixed element of their pay is related to this number of opening hours – seemingly ensuring that SPMRs receive NMW.   In order to cut costs then in these branches the only avenue open to POL at the moment is to reduce the number of opening hours.   (Note that State subsidy rules do not require a Post Office outlet to be open for any defined period a week – just that the outlet is available to be added to the network total) POL have done this over the years, most often when the branch is sold – which in my case nearly resulted in the sale falling through until a very kind Danny Alexander stepped in!

Reducing opening hours of rural branches in this way though will take years to effect a reduction in the cost structure of the Rural network.  It also flies in the face of one of the aims of NT to increase opening hours and make Post Office more convenient for customers.

The alternative then for POL is to change the payment structure for these offices to one that is totally transaction related.   Therefore any future drop in sales will be reflected in lower costs to the entire network (apart from Outreach services which I may blog about another time)  At the moment Main Post Office get paid more per transaction than Locals for most products.   I would suggest that given the much lower sales going through a rural post office that POL could structure the TRP payments for these offices to be even higher than Mains.  This would have several advantages – encouraging SPMRs to sell more as well as encouraging them to keep their post office open even longer hours.

Best just remind you all that the above is conjecture on my part.  All I know at this stage is that POL are considering dropping fixed pay from community offices according to the NFSP – but history tells us that what gets said at Branch Meetings is not entirely what has been discussed at their EC meetings.

If I am right, then it spells disaster for many rural shops.   They are already struggling to survive and as I keep repeating – a sustainable network depends entirely on the business owner being able to sell their business to a willing buyer who can finance the purchase.

However – disaster often brings change.   I do see the need for politicians to stop repeating the oft quoted line about how important a “post office” is to the community it supports and change it to how important the “last shop in the village” is to the local community. Refocus on ensuring the shop’s survival then the Post Office can be part of that and POL can be relieved of the need to calculate and distribute a state subsidy to the rural network.    A local tax on property sales would be my preferred method to raise the funds required to provide this support.

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3 thoughts on “Rural Post Offices on the Brink?

  1. “At the moment Main Post Office get paid more per transaction than Locals for most products. I would suggest that given the much lower sales going through a rural post office that POL could structure the TRP payments for these offices to be even higher than Mains. ”

    Yes, it was noticeable that the success stories in the BBCs Signed Sealed Delivered were all Mains. Mains also benefit from residual income on some products they sell, so over time can build a monthly income that is entirely unrelated to transaction levels. There are NO products available for Locals that actually guarantee an income, theyre all transaction related

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    • Sorry, machine crashed mid comment – so not only are Locals vulnerable to the vagaries of transaction levels, they are also expected to offer these services for 60 – 70 hours a week, whereas most Mains I know have either stuck to custom and practice hours, or have slipped back to them when Saturday/Sunday/evening opening has proved unviable.

      Only POL could have devised a system where you get paid less for doing more hours and at a lower rate too, so I think Tims point about an enhanced rate for Locals is perfectly valid.

      Throughout NT, POL have lied; lied in the “workload” figures they produced to try and show how PO activity could slot in, lied about the stream of new products they had in sight, lied about the long term financial viability, lied about the “entirely voluntary” nature of NT, even as they are now unilaterally changing contracts, and lied about the “investment” they would put in – did ANY converting (not new) Local get anything close to £10,000????

      They even lied about not recognising the CWU – how can they exclude an organsiation with 100s of members, when their inhouse patsy, sorry Independent Member Organisation NFSP (proprietor POL), has a membership in the 10s

      My guess is PV and crew will move onto their next victim company fairly sharpish, leaving POL and NT to come crashing around the ears of her successors, and those 11,000+ small businesses she has so badly betrayed.

      And yes, I am bitter and angry that they have squandered so much money in delivering such a feeble and fragile network with no long term future.

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  2. The other aspect of all this that I would find amusing in any other context is politicians “fight” to save Post Offices.

    During earlier rounds of cuts, councillors, MPs and MEPs would all wrap themselves in the PO flag to show their support and try and garner a few votes.

    And yet, many of the woes of POL can be traced back to Govts of all stripes allowing/encouraging utilities, councils and government agencies to give their business to the lowest bidder.

    So over the years, TV Licensing, DVLA and councils etc may have shaved their individual budgets by a few million £ (£17m for DVLA alone at the last contract change) but these individual savings have been dwarfed by the increasing subsidy, and now NT £bns, needed to TRY and maintain POL on an even keel. One of the ironies of the excellent Signed, Sealed, Delivered was a BBC programme portraying the struggles of POL, partly caused by the BBC moving TV Licensing to AN Other to save ???

    My own council uses TNT for its mail including council tax demands (obviously with RM doing the unprofitable final mile) , yet they whinge and moan about RM sorting office/depot closures where a direct causal relationship can be established.

    It would be interesting to chart the alleged savings of all these councils and government bodies and compare it with the increased subsidy by HMG on POL. Rather like with the banks, “government” money (in its widest sense) is being privatised, whilst POL losses stay with the taxpayer.

    This sort of “right pocket, left pocket” accounting which we also see with NHS bed blocking due to council budget cuts is, and always will be, INSANE.

    IMHO, there is a strong case for a simple piece of legislation, Private Members Bill perhaps which, like in Switzerland, decrees that all Government business be transacted through Post Offices where the loss of such business would require an increase in Government subsidy greater than the money saved..

    I believe any such policy would be defensible in EU law as a mecanism to actually reduce subsidies

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