Post offices in shops and pubs 'may shut'MPs say funding is inadequate

25 July 2008

A pile of letters

Post offices in pubs and shops may be at risk because of inadequate funding, a committee of MPs said today.

The Business and Enterprise Select Committee called on the National Audit Office to investigate the financial arrangements for so-called 'outreach' services after hearing concerns from providers around the country.

And they also urged close examination of the relationship between Post Office Ltd and its parent company Royal Mail Group after finding that money provided by Royal Mail was not enough for the Post Office to run its services.

Postwatch

The concerns were raised in a report on Post Office finance, which heard evidence from Post Office Ltd and postal services watchdog Postwatch.

In it, the MPs said: 'We remain concerned that the funding provided for outreach services may be inadequate. If this is the case, outreach services will fail and the network be diminished.

'We note that the adequacy of outreach funding has been raised by witnesses from several different parts of the country. However, we are not the appropriate body to look at the detailed financial arrangements for outreach, which will involve many different contracts.

'A significant amount of public funding is provided to sustain the network; we need to be confident the public receives the services this is meant to secure.

'We recommend that the National Audit Office investigate the financial arrangements for outreach services.'

Royal Mail

The report also said Royal Mail and the Post Office should provide 'clear information' on what services Royal Mail expects to be provided, how it works out what to pay for them, and how much they actually cost to deliver.

It came after Post Office Ltd's managing director Alan Cook told the MPs that the money provided was not enough to run the services required.

This led MPs to question whether Royal Mail was using the Post Office to 'cross-subsidise' some of its mail services.

Funding

Committee chairman Peter Luff (Conservative, Mid Worcestershire) said: 'In 2007-08 Post Office Ltd received £358m for providing mail services to the Royal Mail Group.

'We heard from the managing director of Post Office Ltd that this was not enough cover the cost of those services.

'It is possible that this is down to inefficiency at Post Office Ltd, but it is also possible that it is because Royal Mail Group is inappropriately using Post Office Ltd, which receives some state support, to cross-subsidise its mail services.

'We urge the independent review of mail services and Postcomm to look closely at the relationship between the two bodies.'

Post offices shut

In June, the same committee raised concerns that thousands more post offices could shut after the current 2,500 closure programme ends.

In today's report, the MPs said: 'Mail services are currently the subject of two reviews, one run by Postcomm and the second by an independent panel, chaired by Richard Hooper.

'We made the unusual decision to take oral evidence from Post Office Ltd and Postwatch between publishing a report and receiving the Government response. This evidence has confirmed two of our concerns: the costs to Post Office Ltd of delivering Royal Mail Group services; and the financial support to sub-postmasters for providing outreach services.

'We believe it should be drawn to the attention of the House and the wider public.'

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