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Trade and industry secretary Stephen Byers today unveiled a major ...
Trade and industry secretary Stephen Byers today unveiled a major

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

closures of rural post offices.

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

21st century.'

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.

He added:

'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: 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.



- 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;

- e-commerce;

- 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

post offices.

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

every week.

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 network.

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

less well-off.

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

principle, support.

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

different options.

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

of revenue.

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.

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