Future of the Post Office

Statement

The following Statement was made in the House of Commons on Wednesday 13 November.

“With permission, I will make a Statement on the Post Office. Frankly, the Government inherited a Post Office that is simply not fit for purpose, following disinterest from the previous Government, a toxic culture in head office and years of underinvestment.

Our top priority remains delivering redress to those affected by the Horizon scandal. We have already taken significant steps to increase the payment of redress, which has nearly doubled under this Government. Let me be clear with the House, though. There are still complex cases to resolve, and we have identified gaps in the compensation process, but we are beginning to make progress. As of 31 October, £438 million has been paid to over 3,100 claimants. In July, we launched the new Horizon convictions redress scheme for victims whose convictions were overturned by legislation, and we have announced our intention to set up an appeals system for the much-criticised Horizon shortfall scheme.

We were clear in our manifesto that we will work to strengthen the post office network in consultation with postmasters, trade unions and customers. The post office network provides critical services that are valued by communities across the whole of the UK. Their essential services go beyond post; they provide access to cash, banking and other financial services too. This Government recognise that access to cash remains particularly important to millions of people across the UK. Through its network of 11,500 branches across the UK, the Post Office continues to provide vital banking services to communities and businesses alike through the banking framework, and to protect access to cash.

I know how highly this House rightly values postmasters and what they provide day in and day out to the communities they serve, but we have to recognise that the Post Office is far from perfect. We have seen this from the evidence given at the inquiry. It is clear that there needs to be a significant cultural change at the Post Office to ensure that it genuinely prioritises the needs of postmasters and delivers customers’ needs far into the future. It is also clear that more needs to be done to rebuild trust within the business and with the public who depend on its services. It is also no secret that the business is facing commercial challenges. Nearly half of its branches are not profitable or only make a small profit from the Post Office business, postmaster pay has not increased materially for a decade, and the company has a high cost base and needs to transform its IT system.

Earlier today, Nigel Railton set out his ambition for the future of the Post Office, in his role as its chair. Postmasters have to be placed front and centre of the Post Office, and we agree that the culture of Post Office headquarters, in particular, needs to change fundamentally to deliver that. As part of this, the Post Office plans to reduce central costs and look seriously at other ways to deliver efficiencies, which should enable real-terms increases in postmaster pay.

Mr Railton’s ambitions are a new deal for postmasters that puts postmasters at the heart of the Post Office. There will be stronger postmaster engagement in the running of the business. As part of this, a new postmaster panel will be established to enable current postmasters to work with the company to improve the support and training provided to postmasters. The Post Office will also set up a new consultative council that will work with the Post Office’s senior management on how these new plans are taken forward, to provide genuine challenge and maintain focus on the needs of postmasters. Mr Railton’s plan seeks to make changes to the business, with the ambition of significantly increasing postmaster remuneration, and it sets out an intention to transform the service and support that postmasters receive from the Post Office.

No decisions to close any or all the remaining directly managed branches have been taken. The Post Office will continue to deliver on the 11,500 minimum branches requirement set by government. We have made it clear to the Post Office that we expect it to consult postmasters, trade unions and other stakeholders before any individual decisions are taken. Aspects of the plans are also subject to government funding and the outcomes of the upcoming spending review.

Lastly, we have already set out our plan to publish a Green Paper to consult the public on the long-term future of the Post Office, not least on how it should be governed after a decade of decline. Doing nothing at the Post Office is simply not an option. There is more work to be done, but there has to be change. I commend this Statement to the House”.

My Lords, I thank the Minister for the Statement. Like my honourable friend Andrew Griffith in the other place, I am pleased that the Government are building on the work of my right honourable friend Kevin Hollinrake to hasten the payments to the victims of the Horizon IT scandal. I am grateful to the Minister for this important update. Will she commit to regular updates going forward?

We learned with regret last week that the Post Office feels that it has no choice but to make radical decisions, announced by the chairman in the transformation plan, to reduce costs. We are told that this potentially threatens 115 branches and 1,000 jobs. This news prompts a variety of questions to the Minister. First, the Statement makes it clear that the Government expect the Post Office to consult postmasters, trade unions and other stakeholders. How disappointing that the communities that rely on these services have not been specifically mentioned. Surely the Minister agrees that the Post Office’s customers are an important group that should be consulted. Can the Minister therefore reassure the House that where closures are threatened, local communities are fully involved in the consultation process? Can she also assure the House that this will not herald another front in the Government’s current assault on rural communities, as epitomised by the family farm tax, and that the Government will review the family farm tax and other measures that affect rural communities to see how we can better support them?

In announcing these plans, the chairman of the Post Office said that the changes to national insurance in the Budget have made business more difficult for post offices. Can the Minister tell the House whether an impact assessment on the changes announced in the Budget for the Post Office was prepared and, if not, why not?

Business rates and national insurance contributions are going up. The threshold for paying them is going down, and obligations around the minimum wage are going up. It is impossible to conceive that, taken individually, these measures have not had some impact on all small businesses, but collectively they are devastating. As I do not believe that the Government would have been irresponsible enough to make these changes without assessing their likely impact, can the Minister commit to publishing all impact assessments?

My Lords, I welcome the noble Lord, Lord Sharpe, to his new Front-Bench role. The Post Office organisation is another problem area left by the previous Government. The Horizon compensation payments are still moving too slowly; there is confusion over the new IT systems in the Post Office; and the Post Office has been suffering from a lack of leadership for an organisation dealing with severe competitive pressures. Now we face, in recognition of high overhead costs, the announcement of the possible closure of 115 Crown post offices, with further damage to our high streets.

I have two initial questions. First, are the Government looking at simplifying the Horizon compensation process and speeding up decision-making? Secondly, is the expectation that many of the Crown post offices will be replaced by sub-post offices and franchise operations? On high streets and in rural areas, long-term sustainability of the post office network is vital to many communities, not least for those who cannot currently use digital alternatives to the post office services for cash, banking and financial services. Liberal Democrats have put forward proposals for the mutualisation of the Post Office. This would also give sub-postmasters more independence and control. It is welcome that the Government have announced broader reforms for the organisation and will publish a Green Paper next year. Can the Minister assure the House that this will include consideration of how mutualisation could ensure that the Post Office is fit for the future?

Will the Government also take this opportunity seriously to consider how to strengthen the role that post offices play in our communities so that they can offer more local services, from community banking to government services?

During many of the Horizon debates, when the Government were on the Opposition Benches, speakers often reminded us that then Ministers were the owners of the Post Office. The Secretary of State has levers to pull, so the fundamental question is how the Government choose to use this leverage now. Can the Minister confirm that the Government will use this ownership to ensure that, whatever happens, local communities will continue to have long-term access to Post Office offerings—all the services, including DVLA and passport services, that currently are on offer?

My Lords, I also welcome the noble Lord, Lord Sharpe, to his new role. I look forward to working with him on the many issues that we will no doubt discuss. I am pleased to have this opportunity to keep the House updated on the future of the Post Office, but before I start it is worth reiterating the point made in the Statement:

“the Government inherited a Post Office that is simply not fit for purpose, following”,

frankly,

“disinterest from the previous Government, a toxic culture in head office and years of under-investment”.—[Official Report, Commons, 13/11/24; col. 806.]

That is the legacy we are now grappling with.

I would like to keep the House updated on the need very urgently to ensure that all postmasters who have been victims of the Horizon scandal get full and fair redress. Anyone who has heard some of the individual stories will know how difficult it has been for affected postmasters. It is important that the Government deliver on this commitment to speed up the delivery of redress. This issue is occupying us, and we are determined to resolve it.

Noble Lords will know that the number of cases settled with full and fair compensation has nearly doubled in the past four months since the Government came to power, compared with the four months prior to that. We have also taken steps to make it easier for postmasters who were victims in this scandal to get full and fair redress quickly, not least by fixing some payments for those applying under the Horizon shortfall scheme and for those applying under the Horizon convictions redress scheme, which was launched in July. Nevertheless, we need to do more, and I assure noble Lords that we have our foot on the accelerator.

My Lords, like the Minister, I believe in the Post Office. I see its future as a network of essential hubs spread throughout the country, holding communities together and giving people the chance to do their banking, to meet on a social basis, and to interact with the Government, other agencies and more services, including healthcare. That future would build up the country’s resilience. If that is right, should we not be expanding the network rather than reducing it?

First, I pay tribute to the noble Lord for all the work he has done on this over the years. Nobody knows the challenges better than he does, and I absolutely agree: there is potentially a rosy future for post offices in exactly the way he described—as a network of basic service provision hubs, in addition to the banking hubs that we also see expanding. We need to ensure that we get the finances of this right, but we can all see the potential of the Post Office network to provide far more than it already does. It can provide a community hub, in the way that we were just talking about, but also a public service hub. Particularly as we move towards a lot of services being digital and online, post offices will have a role to provide for people who are digitally excluded in some way, so that they have that point of contact and a person can help them access those services, face to face. They have an essential role in the future, in the way that the noble Lord talked of.

My Lords, I declare my interest as a member of the Post Office Horizon Compensation Advisory Board. Along with my good friend the noble Lord, Lord Arbuthnot, I have been campaigning on this for over 15 years, and the toxic culture of the Post Office is very clear to me. It goes very deep. From the Post Office inquiry, it is clear that individual investigators pursued individual sub-postmasters in a vicious way.

What has been done to ensure that those individuals no longer work for the Post Office? Separately, what role have the Government taken regarding Fujitsu? Have they approached Fujitsu to ensure that it pays proper compensation for its role in this national scandal?

I pay tribute to my noble friend for his considerable work campaigning on this issue. We all owe him a debt of gratitude for that. He is right that there is a toxic culture from the top down. I, and my department, believe that the new leadership at the Post Office will address that issue from the top down. That is partly to do with some of the individuals who are still there, and we are waiting for the result of the inquiry before we can potentially take any action against them. There are issues too about the senior pay of too many people at the Post Office. Quite frankly, we need to rationalise it and make it fit for the 21st century from the top down. That is the way we are approaching this issue.

With regard to Fujitsu, again, my noble friend will know that we are trying to find a way to embed a new system that will replace Horizon. Work is ongoing to make sure that this is happening; it is not happening as quickly as we would like. Fujitsu is, in a sense, still providing some of the services because we do not have an alternative to provide them at the moment. The sooner we can get a modern IT system that is fit for purpose into the Post Office the better. We are working towards being able to do that.