House of Commons Scottish Affairs Committee Postal Services in Scotland First Report of Session 2010–11 Volume I: Report, together with formal minutes, published on 30 December 2010. Volume II: Oral and written evidence, published on 9 January 2011. Ordered by the House of Commons to be printed 21 December 2010 HC 669 (-I and –II) Published on 9 January 2011 by authority of the House of Commons London: The Stationery Office Limited £17.50 The Scottish Affairs Committee The Scottish Affairs Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Scotland Office (including (i) relations with the Scottish Parliament and (ii) administration and expenditure of the offices of the Advocate General for Scotland (but excluding individual cases and advice given within government by the Advocate General)). Current membership Mr Ian Davidson (Labour/Co-op, Glasgow South West) (Chair) Fiona Bruce (Conservative, Congleton) Mike Freer (Conservative, Finchley and Golders Green) Cathy Jamieson (Labour/Co-op, Kilmarnock and Loudoun) Jim McGovern (Labour, Dundee West) David Mowat (Conservative, Warrington South) Fiona O’Donnell (Labour, East Lothian) Simon Reevell (Conservative, Dewsbury) Mr Alan Reid (Liberal Democrat, Argyll and Bute) Lindsay Roy (Labour, Glenrothes) Dr Eilidh Whiteford (Scottish National Party, Banff and Buchan) The following members were also members of the committee during the Parliament: Mark Menzies (Conservative, Fylde) Julian Smith (Conservative, Skipton and Ripon) Powers The committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No. 152. These are available on the Internet via www.parliament.uk. Publications The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the Internet at www.parliament.uk/scotaffcom. Committee staff The current staff of the Committee are Dr Rebecca Davies (Clerk), Alison Groves (Second Clerk), Duma Langton (Inquiry Manager), James Bowman (Senior Committee Assistant), Karen Watling (Committee Assistant), Tes Stranger (Committee Assistant), and Ravi Abhayaratne (Committee Support Assistant) Contacts All correspondence should be addressed to the Clerk of the Scottish Affairs Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 6123; the Committee’s email address is [email protected]. Postal Services in Scotland 1 Contents Report Page Summary 3 1 Introduction 5 2 Background 7 The Post Office in Scotland 7 The necessity for legislation: the Hooper Review 8 The Postal Services Bill 2010–11 9 The Comprehensive Spending Review and Post Office Funding 10 3 Universal Postal Service 12 Universal Service Obligation 12 Ofcom Review 18 Access to the network 19 Separation of Royal Mail and the Post Office 20 The Inter Business Agreement (IBA) 20 4 A Sustainable Post Office Network? 23 The Network in Scotland 23 Access Criteria 24 Outreach Services 26 Post Office Local 27 Post Office and Postal Services 29 Small businesses 29 Parcel Delivery 31 New Services 32 Mutualisation and the future of the Post Office? 36 Conclusions and recommendations 38 The Comprehensive Spending Review and Post Office Funding 38 Universal Service Obligation 38 Separation of Royal Mail and the Post Office 39 The Network in Scotland 39 Post Office and Postal Services 41 New Services 41 Mutualisation and the future of the Post Office 42 Formal Minutes 43 Witnesses 44 List of printed written evidence 44 Postal Services in Scotland 3 Summary The Government published the Postal Services Bill 2010–11 on 13 October 2010. The Bill received its second reading on 27 October and the proceedings in Public Bill Committee concluded on 9 December. The remaining stages of the Bill in the Commons will be taken on the floor of the House on Wednesday 12 January 2011. We launched our inquiry into Postal Services in Scotland on 28 October 2010. The purpose of our inquiry was not to comment on the broad parameters of the Bill, but to consider the potential impact and consequences of the provisions in the Bill for postal services in Scotland. Postal services and the postal network are the life blood of many rural, remote and island communities throughout Scotland. There are 1,446 Post Offices in Scotland (12% of the UK wide network), making the Post Office Limited Scotland’s largest retail chain. 70% of Post Office branches are located in rural areas, and 171 branches are in the 20% most deprived wards in Scotland. Many rural branches are not financially viable, and receive a subsidy from other parts of the network. Despite a proposed increase in funding for the network during the Comprehensive Spending Review 2010 period, the Post Office network in Scotland is in a precarious position. Many Post Offices in Scotland remain vulnerable to closure and customers face the threat of a demise in the provision of postal services. It is not clear at present how the Bill will protect consumers in deprived urban, rural and remote areas of Scotland. This Report makes a series of recommendations based on two key issues: (i) the maintenance of a universal service and, (ii) the continuation of a sustainable Post Office network across Scotland. We welcome the Ministers assurances in relation to the protections in the Bill for the Universal Service Obligation (USO). The Minister assured us that the Bill would not allow Scotland to be made exempt, as a geographic exemption, from the USO. We also recommend that further clarification is needed in relation to clause 34, which, the Minister assures us, would only allow for more than one universal service provider in the most extreme of circumstances. We support a long and robust Inter Business Agreement between the Post Office Limited and the Royal Mail in the provision of a universal service. In undertaking its review of the level of universal service, we recommend that the Bill should include a requirement for Ofcom to consult with consumers, small business and vulnerable users in remote, rural and island communities in Scotland. We also recommend that Royal Mail are enabled to negotiate sustainable terms for last mile delivery of private mail and parcels. In terms of ensuring a sustainable Post Office network, we are concerned that the Bill neither makes provision for the number of Post Offices nor sets out the access criteria. This is of particular concern given that the Government could meet the access criteria with a network of 7,500 rather than the existing 11,500 branches — thereby presenting a potential threat to some branches in Scotland. We express concern that elements of Outreach services are not sufficiently robust or reliable to provide an adequate service, and fear the new Post Office Local risks downgrading the service further. We welcome the Government’s commitment to the provision of both government and financial services though the Post Office as a key measure to safeguard the network and create a 4 Postal Services in Scotland reliable revenue stream for the Post Office. We are concerned that there appears to be a lack of joined up thinking across Government departments in this respect and recommend a number of practical steps that the Government must take as a matter of urgency to ensure the effective delivery of this policy. Postal Services in Scotland 5 1 Introduction 1. The coalition Government published the Postal Services Bill 2010–11 on 13 October 2010. The Bill received its second reading on 27 October and the proceedings in Public Bill Committee concluded on 9 December. The remaining stages of the Bill in the Commons will be taken on the floor of the House on Wednesday 12 January 2011. 2. We launched our inquiry into Postal Services in Scotland on 28 October 2010, with a view to publishing our Report before the Bill completes its passage through the House. The purpose of our inquiry is to consider the potential impact and consequences of the provisions in the Bill on postal services in Scotland. We are particularly concerned with two key issues: (i) the maintenance of a universal service and; (ii) the continuation of a sustainable Post Office network across Scotland, as it has “a critical role to play in supporting sustainable communities in Scotland”.1 The purpose of our inquiry is not to comment on the broad parameters of the Bill. The major issues of privatisation and the pension deficit, for example, are UK wide issues, and the merits and pitfalls of these proposals have been considered widely elsewhere. 3. Scotland has a third of the landmass of the United Kingdom, but less than 9% of its population.2 Scotland is large and overwhelmingly rural. Some of the issues highlighted in this Report would apply to other parts of the United Kingdom, in particular to rural and remote communities. However, much of Scotland is remote, difficult to access and, importantly, not on a transport route to somewhere else—in particular the Highlands and Islands. These factors complicate the provision of postal services in Scotland and the provisions in the Bill may therefore have specific and far reaching consequences for Scotland. In this Report, we highlight some of those issues, and, where possible, make recommendations as to how the Bill could be changed, or future action be taken, to safeguard the provision of a universal service and maintain a sustainable Post Office network throughout Scotland. 4. We took oral evidence from: Consumer Focus Scotland and the National Federation of SubPostmasters; from Mutuo; the Communication Workers Union and Unite; from Post Office Limited and the Royal Mail Group; Postcomm; Ofcom and from Edward Davey MP, Parliamentary Under–Secretary of State, Department of Business, Innovation and Skills.