Committee of Public Accounts


Publication of the Committee's 53rd Report, Session 2008-09

Edward Leigh MP, Chairman of the Committee of Public Accounts, today said:

"The closure of the local post office can be a real blow to the community. So the inadequate assessment by the Department of the social and economic costs of its programme to close some 2,500 post offices showed a real lack of concern for the citizens affected.

"The consultation process appeared to the public as little more than a piece of window dressing for a decision which to all intents and purposes had already been taken. The consultations to which Post Office Ltd has committed itself on any future proposals for permanent closure of branches must allow the public to have a real influence on the outcomes.

"What the Department has so far not made clear is what a sustainable post office network would look like. It should set out its expectations concerning the size, spread and composition of the network it is striving to achieve. It should also clarify what it intends to do regarding any of the outreach services closed in the light of reviews of their first year of operation.

"In view of the distress and upheaval caused to rural and urban communities by the closure programme and the less than impressive financial benefits - a forecast saving of £45 million a year from 2011-12, following a loss of £17 million in total over the five preceding years - compulsory closures of post offices should in future be a last resort, not a first."

Mr Leigh was speaking as the Committee published its 53rd Report of this Session which, on the basis of evidence from the Department for Business, Innovation and Skills (the Department), Post Office Ltd, and Consumer Focus, examined planning the Network Change Programme, the undertaking to protect users and performance against them, and monitoring the progress and impact of the programme.

The post office network has been in decline since 1965 and, since 2000, Post Office Ltd has been making operating losses. In 2007, the Department and Post Office Ltd agreed a £1.7 billion strategy to make the network financially sustainable, including a £150 million annual subsidy. One element of this plan was the Network Change Programme, whereby up to 2,500 post office branches were to be closed.

The Network Change Programme was expected to initially cost £176 million, mainly in compensation to sub-postmasters. Annual savings of £45 million were forecast, but the Programme was expected to generate a £17 million loss in the 2006-07 to 2010-11 period of the strategic plan. The formulation of the programme and the decision as to the number of post offices to be closed focused principally on the size and spread of the network that could be obtained for a particular level of funding. The Department had access to earlier research on the social value of the rural post office network, which informed its subsequent decision that the £150 million annual subsidy represented value for money.

The series of undertakings designed to protect post office users during the closure programme were largely met. But there was criticism of the local consultation phase of the programme from some of those taking part. Complaints included that too little time had been allowed for consultation, that the decisions had already been made and that the public were not being listened to properly.

A large proportion of the benefits of the programme and the annual savings are not being separately monitored. Even if the forecast savings are achieved, there is still a need for Post Office Ltd to expand its government-related revenue if the network is to become financially sustainable. There have been positive developments in this area and the company is planning to extend further its range of local and central government business. The Department is also taking action to monitor the service delivered by the post office network, which is important in ensuring that the network provides value for money and informing future strategic decisions. However, there are presently some gaps in this monitoring, particularly around the impacts of closures and setting national standards of quality of service.