package of measures to modernise the post office network, allowing it
to thrive in the 21st century.
The measures also included a commitment to prevent all avoidable
Announcing the government's response to a report by the Performance
and Innovation Unit - 'Counter Revolution - Modernising the Post
Office Network' - he said the moves would:
- protect and modernise both the rural and urban post office network
- ensure that benefits and pensions can still be paid in full, in
cash at the local post office
- set up a special fund to improve local offices in deprived urban
- provide help for those on low incomes
- provide people with new opportunities to use the internet
- encourage post offices to act as Government one-stop shops
- provide support for a universal bank
The report was commissioned by the prime minister. Mr Blair said:
'I welcome this report which the government fully accepts. Its
conclusions set out a programme of action both for the government and
the post office.
'I am confident that by working together with sub-postmasters and the
private sector we can deliver a network of post offices fit for the
21st century. A network which continues to occupy the special place
it has in Britain - in all our lives.'
Stephen Byers said:
'Post offices are a vital part of the fabric of our country,
performing an important role in both rural and urban communities.
'But the post office also faces challenges. It needs to respond to
the changing needs of customers, changes in society and to the
opportunities from new technology.
'We are committed to enabling the post office to meet these
challenges - to help it manage change and to ensure a vibrant post
office network which meets customers needs - in all parts of the
'We want a network which can thrive rather than just survive in the
He said the government will:
- Ensure that benefits and pensions can still be received in full, in
cash at the local post office
- require the post office to maintain the rural network and to
prevent any avoidable closures of rural post offices
- provide financial support to modernise the rural network
- provide funds to improve offices in deprived urban areas where they
can be used for shops for the local community - funds could be used
to install security measures and modernise the premises
- support the development of the proposed 'Universal bank' - giving
banking facilities for up to 3.5 million extra people and allowing
customers, including pensioners to get cash out of the post office
and set up direct debit arrangements, enabling them to benefit from
discounts on gas, electricity and telephone bills
- support pilot projects - backed by Government funding - to develop
plans for internet learning and access points in post offices
- also support pilot projects so post offices can become one-stop
shops - or general government practitioners - for advice and
information on government services
- help the post office reverse the years of under investment and
develop an urban network of bigger, brighter post offices, providing
better services alongside thriving retail businesses.
Mr Byers said the government accepted all the report's 24
recommendations which will be fully implemented with the post office,
the National Federation of Sub Postmasters and other key partners.
The government will back the recommendations with financial support
to be announced as part of the spending review in July.
'At present the post office is a neglected resource, running across
the country. Now is the time to harness its full potential - to
ensure it supports the needs of local communities.
'This government is introducing the biggest reforms to the post
office since the 1840s. We are giving the post office greater
commercial freedom to enable it to compete in the global economy.
'We are enabling it to adapt to market forces. But we also recognise
the role of the post office at the heart of our society - an approach
where economic efficiency and social justice go hand in hand.
'The measures underline our commitment to providing opportunity for
everyone - increasing opportunities to access computers and to
benefit from banking services. And to ensure that everyone - in rural
communities and in our cities and towns, has convenient access to a
post office providing quality services.
'I believe the package of measures I am announcing today, together,
with existing commitments to modernise and invest in the post office
network, will provide the certainty the Post Office needs to face the
future with confidence.'
1. Copies of the Report can be obtained from the Performance and
Innovation Unit tel: 020 7270 5286/6950; e-mail:
firstname.lastname@example.org It is also available on the PIU
2. The Performance and Innovation Unit is based in the Cabinet
Office, reporting to the prime minister. The cabinet secretary,
Richard Wilson, set it up in 1998 as part of changes following a
review of the effectiveness of the centre of government. Its aim is
to improve the capacity of the government to address strategic,
cross-cutting issues and promote innovation in the development of
policy and the delivery of the government's objectives. Further
information about the PIU can be found on the website:
3. In October 1999, the prime minister commissioned the PIU to
prepare a report on the future of the post office network. The report
was prepared by a multi-disciplinary team, from the public and
private sectors and guided by a ministerial sponsor and an advisory
group with government and non-government representation. The report
will be fed into the government's Rural White Paper.
1. EXECUTIVE SUMMARY
- Post offices contribute a great deal to their communities over and
above their role as a place to conduct transactions.
- The Post Office has been slow to modernise the network in the face
of a rapidly changing business environment. There are opportunities
to diversify into new lines of business, including:
- a new Post Office-based Universal Bank to tackle financial
exclusion, and other banking opportunities;
- one-stop shops for Government information and transactions; and
- internet learning and access.
- The Post Office needs to improve the efficient running of the
network - for example, to minimise the losses of Crown or branch
- The Post Office needs to take advantage of the renaissance in
neighbourhood retailing in urban areas to build a network of bigger
and brighter post offices. This provides an opportunity to transform
the quality of service offered to customers.
- A fund should be established to help sustain and improve post
offices and retail facilities in deprived urban areas.
- Rural post offices should be protected. The Government should
require the Post Office to maintain the rural network and to prevent
any avoidable closures of rural post offices.
- This should apply - in the first instance - until 2006. The
Government may need to provide financial support for a period to the
rural network. There is a power in the Postal Services Bill to do
- The Postal Services Commission should:
- monitor trends in the size and shape of the network;
- advise the Government on the appropriate framework to ensure
continued convenient access to post offices after 2006;
- and carry out a review of the best way to channel any support
necessary to sustain the rural network before then.
The Post Office network is a unique and trusted British institution
The Post Office has the largest retail network in Europe. It has
enormous reach, with over 18,000 post offices throughout the United
Kingdom. 94% of the population lives within one mile of a post
office. In urban areas, people are on average a quarter of a mile
from their nearest post office.
Two thirds of urban residents live within half a mile of two or more
The network represents a particularly early example of a Public
Private Partnership in the UK. 97% of post offices, accounting for
80% of Post Office turnover, are run by private business people -
sub-postmasters - often alongside another retail business.
Post offices offer a range of 170 different postal, government and
commercial services. And they are used by nearly everyone in the
country. 28 million customers make 45 million visits to post offices
These customers hold the network in high esteem - surveys show that
sub-postmasters and the Post Office brand enjoy high levels of public
Post offices are valued not only for the business they do but for the
wider social role they play
In rural areas and some deprived urban areas, post offices play a
crucial role in sustaining local communities. In many areas, they
help to keep open the only village shop or other retail outlets. They
regularly provide support and advice to vulnerable people. Indeed,
post offices can often act as a focal point for the whole community.
The importance of this social role of post offices - alongside their
commercial function - is emphasised by many local communities across
the country. Appreciating it is crucial to developing policies for
The Post Office has been slow to modernise the network in the face of
a rapidly changing business environment
The Post Office network, like other industries, needs to adapt to its
rapidly changing business environment. The lifestyles and preferences
of its customers have changed enormously in recent years and will
continue to do so. Consumers expect high standards of service and
modern facilities. And technological and other innovations (ranging
from direct debit to telephone call centres to the internet) are
opening up completely new ways of doing business and leading to a
further transformation in lifestyles and customer preferences.
The Post Office has been slow to modernise the network in the face of
this changing business environment and to reduce its dependence on
declining traditional lines of business.
The network has become increasingly reliant on relatively few lines
of business for the majority of its revenues - for example, the
payment of social security benefits accounts for 35% of network
income. The people who most use post offices tend to be older and
The Post Office's Government clients are modernising the way they
provide services to their clients. This is why the Benefits Agency
has decided to shift to the direct payment of social security
benefits into bank accounts from 2003 and why, for example, the
Driver and Vehicle Licence Agency is looking at innovative ways of
allowing people to renew their vehicle licence tax.
Such change is inevitable. Increasing numbers of people have, for
example, been opting, voluntarily, to have their benefits paid
directly into their bank accounts for many years.
Now is the time to modernise
The Post Office has recently been given new commercial freedoms which
it has lacked in the past.
This opens up new opportunities. Many of these are made possible by
the Horizon project, which will ensure that every post office in the
country is fully automated by Summer 2001. This project - of around
#1 billion - represents a major commitment to modernise the network.
Now is the time for the Post Office to grasp every opportunity to
maximise the potential of the network, whilst at the same time
ensuring that the network operates as efficiently as possible.
The Post Office needs to maximise the potential of the network,
seizing opportunities for new lines of business ...
Working in partnership with sub-postmasters and the private sector,
the Post Office needs urgently to seize opportunities for new lines
of business, including:
A Universal Bank
Over 15% of the adult population do not have a bank account. Such
financial exclusion denies people access to other financial services;
causes difficulties where employers insist on paying salaries into
bank accounts; and denies people discounts offered by utilities and
others when they pay their bills by direct debit.
A new Post Office-based bank, which specialised in providing banking
services to those on low incomes, could be highly effective in
tackling such financial exclusion.
It would also offer a cost-effective means of ensuring all benefit
claimants continued to be able to access benefits in cash at post
offices after the change in the way benefits are paid from 2003.
Such a bank - possibly to be called the Universal Bank - would be
jointly owned by the Post Office, the High Street banks and other
financial institutions. Feasibility work on this proposition is
already being undertaken by the Post Office and it needs to take
forward rapidly more detailed work. But the concept has enormous
potential and the Government should indicate its strong, in
Other banking opportunities
The Post Office has agreements with a number of High Street banks to
provide banking services on their behalf. The advent of Horizon will
allow the Post Office to strengthen these relationships further.
The e-commerce revolution opens up a host of other new possibilities,
exploiting the unique nationwide reach and trusted brand of the Post
Office network. As the sale of goods bought over the internet grows,
new distribution systems are going to be needed to get goods to
consumers. The Post Office has been slow to react to this new
Post offices would be extremely well placed to act as e-commerce
distribution centres and pick-up points for goods purchased over the
internet. The Post Office needs to make rapid progress in exploiting
these opportunities with private sector partners, as part of the
modernisation of the network.
One-stop shops for Government information and transactions
Post offices offer tremendous scope to play a role as one-stop shops
for central and local Government information and transactions. Most
sub-postmasters already provide many of their customers with
information and advice of different kinds.
Working with partners in central and local government and the private
sector, the Post Office needs to bring forward early plans to pilot
Internet learning and access
Post offices are also well placed to help their customers by acting
as internet learning and access points. Sub-postmasters could help
those unfamiliar with the new technology to use the internet and/or
to carry out internet transactions on their behalf, including
Such a role would require investment in new technology, building on
the Horizon infrastructure currently being installed, and in the
training of sub-postmasters. The Post Office needs to work up a
business case, in partnership with the private sector, for piloting
this idea as soon as possible.
...Modernising the network...
Many local post offices are in poor premises, face declining
traditional lines of business and show the signs of years of
In urban areas, the renaissance in neighbourhood retailing offers the
Post Office and sub-postmasters the opportunity to transform the
quality of service offered to customers and to generate new sources
In many cases this would involve actively re-locating post offices
with other convenience stores. In other cases it would involve
modernising existing outlets. These larger and better quality offices
would offer a broader range of both post office and other retail
products and services; could be open longer hours and thus attract a
broader range of customers.
As well as helping to secure the commercial viability of the network,
these new offices might reduce the need for such a large number of
outlets in urban areas. The responsibility for modernising the
network clearly rests with the Post Office. But the Government may
have a role to play in ensuring that the Post Office has the
necessary resources to carry through the changes.
... and improving the efficient running of the network
As well as maximising revenues from new business opportunities, the
Post Office needs to improve the efficient running of the network.
In particular it needs to address the poor profitability of branch
offices, which currently lose around #50 million annually.
The Post Office needs to proceed with further conversions to
franchise offices in line with last year's White Paper commitment. It
must also drive up the efficiency of the remaining branch offices.
Convenient access for all to post offices should be maintained
While it is essential that the Post Office places the network on the
strongest possible commercial footing, it is also essential that
everyone in Britain continues to enjoy convenient access to a post
In urban areas, placing the network on a sound commercial footing as
outlined above, would improve the quality of service provided to
customers whilst still providing convenient access to post offices.
Post offices contribute most to their communities in rural and some
deprived urban areas. A purely commercial Post Office would probably
seek to close down many of these outlets. The Government therefore
needs to set a framework which recognises and protects the social
role played by these post offices.
Rural post offices must be protected
The social role of post offices is most important in rural areas. In
many rural areas, while other services have been withdrawn, post
offices have remained.
The Government should require the Post Office to maintain the rural
network and to prevent any avoidable closures of rural post offices.
Historically, this has been possible because the rural network has
been cross-subsidised by the urban network.
Declining traditional lines of business might make it more difficult
to provide these cross-subsidies in future, though ultimately new
lines of business should replace most if not all of the lost
The Government may, therefore, need to provide financial support for
a period if the rural network is to be maintained. The Postal
Services Bill provides the power for such support should it be
Special measures are also required for deprived urban areas
In general, in urban areas, there will be no divergence between the
commercial aims of the Post Office and the social role played by post
offices. The modernisation of the network will benefit local
communities by creating higher quality offices offering better
services. These bigger, brighter offices should ensure convenient
access for all in urban areas to post offices.
There is therefore no case for constraining the Post Office's
commercial freedom in urban areas. On the contrary, such constraints
could hold back the essential modernisation the network needs.
However, in some cases, there may be adverse consequences - for
example, where the closure of the post office leads to the closure of
the only decent shop in an area.
This situation is only likely to occur in a few isolated and deprived
estates. To deal with this, there is a case for establishing a small
fund for deprived urban areas to help sustain and improve post
offices and retail facilities.
The Postal Services Commission should advise the Government on
developments affecting the network
The framework proposed in this report should apply, in the first
instance, until 2006. During this period, and beyond, the Government
will need a sound source of advice on developments affecting the
The Postal Services Commission should be responsible for:
- monitoring what is happening to the size and shape of the network
and with what impact on local communities;
- advising the Government on the appropriate framework after 2006;
- advising the Government on the best way to channel any support that
has to be provided to sustain the network before then.