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Saving the Cornish Post Office Network
A Liberal Democrat Report
Post Offices have been central to local communities across the country for over 300 years. Cornwall housed its first in 1704, when four were opened in Bodmin, Camelford, Launceston and St Columb.
Nationally, an estimated 24 million people make 41 million visits to the Post Office every week, benefiting from the +170 services available. In rural areas particularly, the Post Office may provide access to the only shop left in the village and, for many, plays a crucial role in everyday life.
In spite of their contribution, recent times have witnessed Post Offices come under attack. Under the last Conservative Government, 3,500 local Post Offices closed, and since Labour came into power more than 4,500 have followed.
Despite their alleged commitment to this institution, the current government is responsible for the “triple-whammy” currently facing Post Offices:
The government has withdrawn its protection against avoidable closures of rural branches.
The government is failing to pledge a guarantee to continue financial support for rural Post Offices beyond March 2008, in spite of the inevitable closures that this will bring.
The government has announced that the Post Office Card Account (POCA), worth £1 billion to Post Offices between 2003 - 2010, will not be used for pension and benefit payments from 2010.
Rural Post Offices are often amongst the most vulnerable, yet also the most vital, meaning that Cornwall will suffer disproportionately from further closures. Within this lies a second imbalance, as in rural areas pensioners, citizens with disabilities, carers, and others with less access to transport will be hit worst.
This report is based on recent Cornish experiences. We have conducted a variety of interviews and surveys in order to establish local concerns and the way in which Cornwall wants the Government to proceed. Our findings present the two most immediate issues in the present Post Office debate: Post Office closures and the abolition of the Post Office Card Account.
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2. Post Office Closures 4
2.2 Government Subsidies Beyond March 2008? 5
3. Abolition of the Post Office Card Account 7
3.1 Government Scaremongering 7
Scrapping the POCA: Implications 8
Post Offices or banks? Undermining the right to choose 8
Disproportionate suffering of those already financially 9 excluded
Loss of Post Office revenue and inevitable closures 10
5. Acknowledgements & Notes 13
3 out of 4 Cornish SubPost Masters and Mistresses fear that an end to subsidies may cause them to close.
1 in 10 Cornish Post Offices have already closed since 1999.
Almost two thirds of Cornish closures have been in rural areas, where the population often rely heavily on the services provided by the Post Office. Within this, pensioners, citizens with disabilities, carers, and others with poor access to transport suffer most.
97% of customers visit their local Post Office at least once a week. Almost a third of these customers visit daily.
Aside from providing numerous services, Post Offices frequently act as a social hub, and are felt by most customers to be a central and invaluable element of the community.
98% of customers support the continuation of government subsidies to the rural postal network beyond the March 2008 deadline.
Abolition of the Post Office Card Account
Surveyed SubPost Masters and Mistresses unanimously oppose plans to scrap the POCA, and believe its abolition will cause more Post Offices to close.
9 out of 10 people surveyed already have a bank account, yet over half continue to choose the Post Office Card Account as their preferred way of collecting their pensions and benefits.
Those already financially excluded on some level will suffer most from withdrawal of the POCA.
Cornish pensioners are being targeted by Department of Work & Pensions scaremongering to frighten them into having their pensions paid into bank accounts rather than Post Office Card Accounts.
On the basis of our findings we advocate a three-pronged plan: Protection, Choice and Modernisation: funded by selling 49% of shares in Royal Mail, half of which would be sold directly to staff and small investors and the remaining shares being offered for sale to the market generally.
Protect the rural network from avoidable closures and continue vital financial support.
Maintain the choice to use the Post Office Card Account, safeguarding Cornwall's right to manage its own finances.
Modernise the network through new services so as to maximise its relevance to local communities, thereby enhancing its viability and reducing its financial dependence.
Since the last Conservative government came into power in 1979 over 8000 Post Offices have closed across the UK, leaving just 14 000 - less than 65%. This figure continues to rise at an accelerated rate under the current Government.
The popularity of the Post Office among Cornish citizens is indisputable. 97% of those surveyed visit their local Post Office every week, and almost a third of these visit daily.
“If Post Offices closed a lot of elderly people will lose social contact in this country of machine contact rather than personal contact, which is very necessary and important.” - Newquay Pensioner
Given that Cornwall has a population of over half a million, on average there is one Post Office for every 1900 people, reflecting the needs of a widely dispersed rural community for local services.
Post Office Closures 1999-2005
Source: House of Commons Library, March 2006
Figures for April 2006 will be available from late summer 2006
*Although St Ives' Oct 1999 and Apr 2005 figures match, 2 Post Offices still closed in this period, whilst two opened.
Over 87% of Cornwall's Post Offices are rural, and beyond the provision of a huge variety of public services, many told us that they view their local Post Office as central to rural life, providing a place to meet fellow residents and feel the support of both neighbours and Post Office staff. While conducting our research, the sense of the cohesion and identity derived from the Post Office became clear.
“It is the focal hub of the village; it is a community centre where messages can be collected and left; it is a meeting point; it is the first port of call for strangers seeking direction; it is the first place people can go for help and advice, talking to real people and not a voice on the telephone. A village without a Post Office is simply not a village.” - Truro Resident
However, almost two thirds of Cornish closures have occurred within the rural
Urban/Rural Cornish Post Office Closures 2001-2005
Source: Post Office Ltd, March 2006
“The Post Office must stay open. It will be yet another nail in the coffin of the rural lifestyle should it close.” - Tregony Pensioner
Ironically, it is in these areas that village populations often rely heavily on the services available at their local Post Office. 96% of those people we asked stated convenience of location as a major reason for using the Post Office over other service providers. The next nearest shop, or urban postal outlet, is frequently situated in the next town, often requiring a costly, time consuming, and environmentally unfriendly journey. One resident also reminded us of the particular importance village branches have for rural businesses.
Not only are rural areas suffering many more closures than elsewhere, but within this appears a second injustice, as it is the already vulnerable sections of society that feel the brunt of the closures. We asked which sections of local communities are likely to suffer most when Post Offices close, and were met with overwhelming agreement that it is the elderly, the disabled, those providing their care, and those without their own transport, who are most burdened by the need to travel further to replace Post Office services.
“The Post Office is essential for the elderly, youngster and single mothers alike. These are the people who could ill afford to lose this essential service!” - Bodmin Resident
Government Subsidies Beyond March 2008?
Unfortunately, the reality is that the majority of rural Post Offices are financially unviable without continued Government support and Government business such as benefit payments. However, profits do not provide an accurate measure of the worth of the rural Post Office network, and this financial dependence is in no way indicative of any lack of enthusiasm and commitment for SubPost Offices. It is rather the unavoidable result of the low profits ensured by small customer bases in sparsely populated areas. This is why without a SubPost Office, there is often no local shop at all.
“Without the PO the shop would probably not be viable. The PO is the centre of the parish.” - Newquay area Resident
Rural Post Offices presently survive through the “Social Network Payment Programme”. But, despite the clear need to preserve the rural network, this yearly £150 million subsidy will cease in less than two years, and the government is failing to pledge continued financial support after March 2008. According to our surveys, three quarters of SubPost Masters and Mistresses fear that an end to support will cause them to close. In addition, a third of all citizens we spoke to were not aware of these plans, and a whopping 98% of those surveyed declared their support for continued government aid for Post Offices beyond March 2008.
Given that many local Post Offices currently cannot survive without some financial support, would you support continued government subsidies after March 2008?
“The way the Government are going the network will collapse. They are making businesses unviable by talking away vital products, such as TV licenses, at the Post Office counter.” - Post Master, South East Cornwall.
ABOLITION OF THE POST OFFICE CARD ACCOUNT
Traditional payment of state pensions and benefits by orderbook or girocheque over the Post Office counter was phased out between 2002-5. Deeming the paper-based system inefficient and outdated, the Government implemented its “Direct Payment” programme, introducing electronic payment of state pensions, benefits and tax credits - including the option of payment into accounts similar to bank accounts but held at Post Offices (POCAS). The change was defended on the basis that it would encourage “financial inclusion”.
The move from orderbooks and girocheques to POCAs was not without challenges. Facing some initial hostility, “Direct Payment” incurred significant financial losses for SubPost Masters and Mistresses, and provoked anxiety and uncertainty for a number of those unfamiliar with electronic, card-based systems. However, in spite of initial problems, many have celebrated the transition as a success. According to the Governments own findings, published only a year after the introduction of Direct Payment, 93% of customers were satisfied with the process of having payments paid into a POCA.
However, the Government has now said that the POCA contract will not be extended after 2010. In February this year the DWP began a number of pilot schemes, encouraging existing POCA users to switch to bank accounts, and withholding the option completely from a number of new benefit claimants.
In place of the POCA the government is proposing bank accounts for all. The rhetoric surrounding this new policy is replete with the insistence that POCAs were only ever meant as a temporary measure, and that this has always been clear - a claim vehemently refuted by the National Federation for Sub-postmasters (NFSP), who, up until the announcement that the contract will be terminated, were under the impression that it would be renewed.
“The Post Office has to have sufficient footfall. The card account and benefit payments is currently the biggest generator of footfall in our Post Office.” - SubPost Office Mistress, North Cornwall
Government Scaremongering
Whilst conducting the research for this report, it came to our attention that the Government have been sending intimidating letters to pensioners in order to frighten them out of using their POCAs.
We received a letter, dated February 17 2006, sent from the Swansea Branch of the Pension Service to a Cornish pensioner, alleging that:
If pensioners carry large amounts of cash they are vulnerable and over 100 are mugged a week for their benefit. Most of the Post Offices pay customers all the benefit and therefore if the customer only wanted part of it they cannot pay it back into the account.
What is more, by The Pension Service's own admission, the “facts” being used to scare pensioners are false. When we enquired about the source of the 100-muggings-per-week statistic, we were told by Swansea Pension Service themselves that, bizarrely, the source for this claim is a November 2004 communication about the benefits of “Direct Payment”. The original fact stated that, in the past, every week 100 pension orderbooks were stolen for fraud. The “100 a week” statistic, originally meant to push through POCAs, has now, ironically, been recycled and re-written to achieve the opposite!
The number of Cornish pensioners being targeted by these tactics is unknown - but certainly it is a very frightening letter for any pensioner to receive. In reality, they are being `mugged' by their own Government's inaccurate allegations.
Another letter, sent from the same Pension Service branch, alleges:
…some Post Masters are making [customers] draw all the Benefit from their Post Office Card Account
We spoke to a number of Cornish Sub-Postmasters who told us that, on the contrary, they make pains to ensure that pensioners draw the most appropriate amount. These Sub-postmasters feel let down by the unsupported allegation that they are compromising the safety of their customers.
The Government intention is clear; to save costs, they want to frighten and intimidate people to stop them using the Post Office accounts - and never mind if this closes down even more Post Offices.
“Many elderly people only manage to get out once a week to collect their pension. What's going to happen to them? When is Tony Blair going to realise what he's doing?” - Newquay Resident
Scrapping the POCA: Implications
Scrapping the POCA will have three primary consequences:
The requirement on everyone to have a bank account is in direct contravention of the popular will. Not only does it undermine our ability to choose how to manage our finances, but it also reinforces unhelpful stereotypes of the Post Offices, and the citizens who use them, as “outdated”.
Those who are already experience some level of financial exclusion will suffer disproportionately. Pensioners, carers and individuals who unable to open accounts will bit hit hardest - especially if it leads to their local Post Office closing.
The postal network, and particularly rural branches, will experience a devastating loss of revenue. The POCA is worth £1 billion between 2003-2010. The impending blow to Post Office profits will inevitably lead to more closures.
“If the PO Card Account ceased the number of people visiting the PO would drop, therefore having a negative impact on the retail side. It would be a bleak future for us if this balance was disrupted.” - SubPost Mistress, North Cornwall
Post Offices or Banks? Undermining the Right to Choose
Replacing POCAs with bank-accounts-for-all is based on the idea that the POCA is a redundant means of personal financial management. The argument goes that as a simple account, which allows only the receipt of benefit, state pension and tax credit payments, the POCA does not provide the extra services and opportunities available with bank accounts. The opportunity to save money by paying bills by direct debit is a frequently cited example.
However, the demonstrated popularity of the POCA flies in the face of these criticisms. By the beginning of this year over 5 million applications for POCAs had been made, greatly exceeding the Government's anticipated uptake, and over 46,000 benefit and pension payments are being made into POCAs across Cornwall.
Contrary to the assumption that people continue to collect their pensions and benefits through the POCA because they do not have bank accounts and are unfamiliar with the banking system, our surveys showed that 9 out of 10 people have bank accounts, yet over half of those surveyed continue to use the POCA. The chart below shows the most popular reasons given by those who choose their POCA over a bank account.
If you choose to collect your pension and benefit through a POCA, rather than a bank, why?
Scrapping the POCA represents an assault on choice. Discontinuing the POCA after 2010 is in direct conflict with Cornish preferences, and constitutes a patronising attempt to eradicate this option. Individuals who continue to use their POCA are made to feel as though they need to “catch-up” with the rest of society. A stereotype of the Post Office as outdated and irrelevant is perpetuated, exposing the flimsiness of this Government's claim to be committed to protecting and modernising the Post Office network.
Disproportionate Suffering of the Already Financially Excluded
The resounding consensus amongst those surveyed is that pensioners and benefit claimants will suffer most once the POCA goes. This is in keeping with nationwide findings that amongst the financially excluded the POCA is often the preferred account option.
For the elderly, disabled, and others reliant on public transport, travelling to the nearest bank can often cause great discomfort, inconvenience, and incur a considerable cost. Indeed 70% of those surveyed have to travel more than 3 miles to get to their nearest bank.
“If the rural network closes everybody will have to drive ten miles to purchase a stamp or buy a bag of sugar, damaging the environment.” - Post Master, Falmouth and Camborne Constituency
Abolishing the POCA further undermines financial inclusion as it leaves little option for those who cannot get a bank account. 10% of people we surveyed who rely on the POCA to collect their pensions and benefits would be lost without it as they are in this position. One Cornish citizen told us her story of being taken to court by the bank after her husband had become ill and they had found it difficult to make repayments on a loan. No bank has since accepted their custom
It is also important to remember that the POCA helps combat the increasing problem of debt in the UK as it remains the only type of account with which it is impossible to get
into debt, as it does not offer an overdraft facility.
“The Post Office here in Crantock is invaluable: a reason we chose to live here as opposed to a village with no Post Office. It provides a terrific service and I would strongly object to paying a bus fare into Newquay each day if this Post Office was to go.” - Crantock Resident
Loss of Post Office Revenue and Inevitable Closures
Payments received from The Benefits Agency for the pension and benefits transactions through POCAs have long been recognised as a major source of revenue for Post Offices. The SubPost Masters and Mistresses we surveyed expressed extreme concern over the loss of income that will follow the abolition of the POCA, and unanimously reject of this policy.
Advocates of the abolition of the POCA insist that pension and benefit collection will remain a central function of the Post Office, as recipients will be able to draw their money from their bank accounts over the Post Office counter. Indeed, Post Offices currently offer banking services, including free cash withdrawal, for current account users of over 20 major banks. However, three major banking groups are excluded from the list - HSBC, Halifax Bank of Scotland, and Royal Bank of Scotland Group. Furthermore, `seven in ten basic bank accounts are also unavailable at the counter'.
“We are the only facility on our island for customers to withdraw money. The Government should encourage all banks to be partner banks with the Post Offices.” - Post Master and Mistress, Isles of Scilly
Unfortunately, the worries imparted to us are well founded. Post Office Ltd has predicted that the withdrawal of the POCA could cost the network up to £200 million a year in income. This figure does not include the loss of the additional income generated by the many POCA users who take advantage of other Post Office services when collecting their benefits and pensions.
In addition, this loss must be considered in the context of the major loss of income already incurred by the network through the introduction of Direct Payment of pensions and benefits. Through our interviews it also becomes obvious that the introduction of the POCA significantly increased the Sub-postmaster workload, whilst cutting their income. Steering customers through the adjustments to the card-based electronic system involved time-consuming teething-problems, and we discovered some resentment towards the Government for the lack of compensation for the mammoth dent in income that accompanied this increased workload.
“It is vital that village Post Offices are kept open. Like the school, church, shop and pub, they make a community.” - Post Master, St Ives Constituency
Given the inevitable losses, the reassurances of The Pension Service to Cornish customers that abolition of the POCA will not result in closures is totally unconvincing.
“The Government must realise they are putting people out of business.” - Post Mistress, South East Cornwall
Treating the Post Office as an outdated, archaic institution, unworthy of investment, devalues the preferences of a huge number of people and depicts Post Offices and Post Office customers as needing to “catch up” with the rest of society. For those reliant on access to a local Post Office for pension or benefits, especially those without access to a car, closure will often be a personal catastrophe.
What is needed is investment into the Post Office network on the basis of its continued relevance. The point is not to argue on the basis of tradition or nostalgia, but rather to recognise the vital role that the Post Office network can play in modern life, given the appropriate attention and resources.
Thus, on the basis of the findings of this study, our three-pronged recommendations are as follows (funded by the Liberal Democrats' proposal to sell 49% of shares in Royal Mail):
The no-avoidable-closures programme should be continued to ensure the provision of services to rural populations.
The government should pledge its commitment to the continued financial support of the rural network.
Scaremongering tactics being implemented by the government to pressurise pensioners into closing their POCAs must stop immediately.
The POCA should be maintained to reflect the wishes and needs of both customers and SubPost Masters and Mistresses. The POCA should be developed to offer a greater variety of benefits to its customers, such as receipt of other payments and a direct debit facility to allow savings on bills. However, its straightforward character should not be lost; as it is from this that much of its appeal is derived.
Coordinated modernisation programmes that extend and update the services provided by rural branches, so that they may maximise their own viability through a greater relevance to customer needs, must complement support.
Modernisation programmes must be population-relevant. The only way to ensure this is to ask Cornish customers and Sub-postmasters and mistresses how best to improve the service. We did this, and found both groups to be very forthcoming with ideas. The chart below show the responses we received to some of the suggestions recently offered by Post Office Ltd and Postwatch, an independent body set up to ensure good quality delivery of postal services.
We propose that these findings act as a starting point for further research into the specific needs of different areas in order to create a modernisation programme tailored to lives of Cornish residents and capacities of Cornish Post Offices. This will enhance the ability of Post Offices to protect their customers and themselves, and reduce their reliance on government.
“The village Post Offices are the heart and soul of the community. It would be a travesty if they were closed.” - Crantock Resident
Jane Fulle (Kenwyn Post Office, Truro)
Jenny Clarke (Stoke Post Office, Plymouth)
Local Intelligence Network Cornwall, Cornwall County Council
National Federation of SubPost Masters
The House of Commons Library
The Office of Danny Alexander MP
Surveys were sent to all Post Offices and SubPost Offices in Cornwall. Post Office Masters and Mistress responded to their survey, and they also distributed the customers' survey. To date, 55 Post Office Masters and Mistress, and over 850 customers, have responded to the surveys.
Saving the Cornish Post Office Network
A Liberal Democrat Report
