sub post office income and policy docs/2012... · the nfsp undertook a detailed survey of sub post...

Sub Post Office Income

National Federation of SubPostmasters

May 2013

National Federation of SubPostmasters Sub Post Office Income

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Contents Executive summary 4 Introduction 9 Detailed findings 12 1 The survey 12 2 Income 12 3 Net pay 13 4 Post Office Financial Services 14 4.1 Government policy 14 4.2 Key financial services 14 4.2.1 Credit cards and insurance 14 4.2.2 Instant savings account 16 4.2.3 Cash ISA 16 4.3 Future Post Office financial services 16 5 High street banking 18 5.1 Government policy 18 5.2 High street bank accounts 18 5.3 High street banking income 19 5.4 Post Office ATM 19 5.5 Future high street banking services 20 6 Post Office card account and benefits 21 6.1 Government policy 21 6.2 POCA income 21 6.3 Future benefits transactions 22 7 Bill payment 23 7.1 Counter and Paystation services 23 7.2 Future of bill payments 23 8 Government services 24 8.1 Government policy 24 8.2 Identity verification 24 8.3 Processing 25 8.3.1 Passport Check and Send 25 8.3.2 DVLA services 26 8.3.3 AEI services 26 8.4 Payment services 27 8.5 Future of government services 27 9 Mail 29 9.1 Mails services 29


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9.2 Mails income 29 9.3 Special Delivery 29 9.4 Home shopping returns 29 9.5 Mails acceptance 30 9.6 Parcel collection 30 9.7 Future mails income 31 10 Income and expenditure trends 32 10.1 Post Office pay 32 10.2 Overheads 32 10.3 Staff costs 32 10.4 Personal drawings 33 11 Attached businesses 35 11.1 Local retail 35 11.2 Goods and services 35 11.3 Dependence on post office 36 12 Subpostmasters’ overview 37 12.1 Economic downturn 37 12.2 View of the future 37 12.3 Biggest fears 38 12.4 Biggest aspirations 38 12.5 Pay and remuneration levels 39 12.6 Community role 39 13 Conclusions 41 13.1 Dramatic income falls 41 13.2 Threat to post offices and local retail 41 13.3 No significant sources of new income 41 13.4 Existing sources of income 42 13.5 Recommendations 42 Appendix 44


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Executive summary Social and economic changes, a withdrawal of government services and growing competition from alternative service providers have put serious financial pressures on the post office network in recent years. Since 2000, one third of the UK’s post offices have closed. Concerns about the future viability of the post office network led to government proposals for the ‘modernisation’ of the network. Published in November 2010, these plans were designed to make the network more financially secure and prevent further closures. A central part of the government’s proposals for the post office network are to increase revenue for the Post Office through a major expansion of financial and government services offered at post offices. The National Federation of SubPostmasters (NFSP) fully supports the government’s plans for developing these services. But the NFSP is extremely worried that the implementation of the government’s plans has been very limited and subpostmasters are continuing to see their post office incomes fall. When subpostmasters no longer earn enough to run their post offices, post offices close. The NFSP undertook a detailed survey of sub post office income in October 2012, to uncover the current state of subpostmaster pay. We sent out postal questionnaires to a sample of 3,000 randomly selected NFSP members. In total, 743 questionnaires were returned. This research follows on from a series of previous surveys of subpostmaster income, including surveys in 2006 and 2009. Key findings Subpostmasters are receiving an average of £2,719 in monthly net pay. Monthly net pay must cover the running of the post office, including overheads and staff wages, as well as subpostmasters’ own personal drawings. 51% of subpostmasters report their average monthly Post Office pay has decreased over the last 12 months. Only 8% report an increase. i) Financial and banking services No significant new financial services were introduced between the publication of the government’s plans in November 2010 and October 2012. Almost no subpostmasters receive any income at all from many of the existing key Post Office (PO) financial services:

97% of subpostmasters earn £0 for PO Credit Cards 97% of subpostmasters earn £0 for PO Home Insurance 91% of subpostmasters earn £0 for PO Car and Van Insurance


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99% of subpostmasters earn £0 for PO Life Assurance Where income is earned from financial services, it tends to be very low. For example, whilst 60% of subpostmasters earn something from Post Office Instant Saver, average monthly earnings from account openings and balances is only £3.71. Post Office Ltd (POL) is launching a current account this year. The NFSP is keen to welcome an expanded range of Post Office financial services products, which could provide an extremely valuable source of income for subpostmasters if they result in regular, repeat transactions carried out over post office counters. But high value, one-off transaction products are yielding little or no income for subpostmasters. The NFSP is also concerned that if new products are not perceived as sufficiently different from products on offer from the high street banks, public take-up will be low. Subpostmasters earn an average of £55 a month from offering access to high street bank accounts.

These earnings could be much higher if all banks offered access to a comprehensive range of transactions for all accounts; and the service was well-publicised by both POL and the banks themselves. Post Office ATMs are yielding a very significant income for subpostmasters. But only those with sites assessed as commercially viable for this service are able to offer ATMs.

16% of subpostmasters surveyed have a Post Office ATM, yielding an average monthly income of £609.

Income from Post Office card accounts (POCAs), used for receipt of state benefits and pensions, is dropping steadily.

Subpostmasters earn an average of £146 a month for POCA transactions.

POCA earnings are now 5% of average net pay, but in 2006 POCA transactions brought in 10% of average net pay. The future contribution of benefits-related transactions to post office income looks very uncertain. The POCA is due to end in 2015, and a major overhaul of benefits payments begins from 2013, with the introduction of Universal Credit. The NFSP believes there is huge potential for the Post Office to offer Universal Credit-related services, which could include a basic Post Office transactional account or ‘budgeting account’ and credit union access. The NFSP would also like to see a state-backed Postbank developed, offering a comprehensive range of Post Office banking services including a current


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account, accounts for people on low incomes, children’s accounts and small business accounts. ii) Government services The government said the Post Office should become a ‘front office for government’ at both the national and local level. But these plans have not come to fruition. Only a very limited range of government services are available through post offices. The central government services that have been developed tend to be one-off high value transactions available at only a small proportion of post offices. The survey confirms that most subpostmasters are earning little or nothing from these services.

94% of subpostmasters earn £0 from ID checking services. Average earnings from ID checking are less than £10 per month.*

77% of subpostmasters earn £0 from Passport Check and Send. Average earnings for Passport Check and Send are £76 a month.*

59% of subpostmasters earn £0 from DVLA services. Average monthly earnings for DVLA services are £234.*

96% of subpostmasters earn £0 from biometric identity services. Average earnings for biometric identity services are £116 a month.*

87% of subpostmasters earn £0 from Payout services. Average earnings from Payout are £1.24 per month. * For subpostmasters with earnings for these transactions.

The lack of progress with front office for government is a top concern for a great many subpostmasters. Uncertainty around the future of this service is compounded by government action putting new services out to competitive tender. This results in insecurity as to whether contracts will be awarded to the Post Office and undermines the front office for government concept. Contracts that have been won by Post Office Ltd (POL) have been obtained at low and potentially below-cost rates. As a result, subpostmaster remuneration for these transactions can be correspondingly low, which puts further financial pressures on subpostmasters. Development of local government or council services at post offices has been piecemeal and not comprehensive in terms of the services provided or the geographical areas in which they are offered. This offers a confused picture for customers, is more difficult for the Post Office to promote and severely limits the income subpostmasters can earn. iii) Mails services The government says revenues from postal services will continue to be a mainstay. The research confirms mails income for subpostmasters is increasing and remains a major source of revenue for subpostmasters. Subpostmasters earn £876 a month from total mails transactions (33% of average net pay).


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Subpostmasters earn an average of £33 a month for home

shopping returns. Subpostmasters earn an average of £164 a month from letters and

parcels acceptance. Subpostmasters earn an average of £12 a month for parcel

collection services. Other major sources of mails income are Special Delivery and ordinary stamp sales. Some uncertainty around the future of mails services and mails income derives from increasing competition in the sector, including parcelshops and self service parcel lockers, alongside reductions in postal volumes. Expenditure Whilst average net Post Office pay is falling, expenses are rising.

70% of subpostmasters report an increase in overheads. 48% of subpostmasters report an increase in staff costs.

Subpostmasters’ personal drawings, the money they take as salary from their Post Office pay, is falling.

Average personal drawings are £753 a month (equivalent of an employee’s gross annual salary of £9,600)

Average personal drawings have fallen by 36% in six years 24% of subpostmasters take £0 from their Post Office income

Attached businesses Post office closures usually lead to the closure of an attached shop.

89% of sub post offices are the only retailer in the area or one of a small number of local shops.

66% of subpostmasters say their attached business would probably not or definitely not remain open if the post office closed.

Conclusions Subpostmasters are increasingly pessimistic about the future.

Only 17% of subpostmasters say they can see a strong future for their business.

The government must ensure its promises on expanded financial services and a front office for government are realised. Services must deliver regular,


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repeat transactions which bring customers in through the door and pay subpostmasters at decent rates. This action needs to be taken urgently in order to avert a major financial crisis in the post office network, mass post office closures and loss of vital local retail.


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Introduction This report presents the findings of a survey of subpostmaster income, conducted by the National Federation of SubPostmasters (NFSP). The survey was undertaken to inform our knowledge on current pay, pay trends and subpostmasters’ views and attitudes on pay and related issues. It represents an update on previous research undertaken in 2009 and by Ipsos MORI in 2006.1 The NFSP asked subpostmasters about their net pay, pay for a broad range of categories of transactions as POL groups them together on the payslip, and about pay for specific transactions. Subpostmasters recorded their monthly income for many of the transactions that have brought historically a significant proportion of post office income. We also focused on a number of the newer services; particularly the types of service which the government says have the potential to increase Post Office income. Background Sub post offices make up 97% of the national network of post offices and are run by private business people, subpostmasters. Subpostmasters are agents contracted to provide services on behalf of POL. The NFSP is the trade union and independent membership organisation which represents the interests of the UK’s subpostmasters. Since 2000 there have been considerable changes in the post office network. Between 2000 and 2012 the network has reduced in size from over 18,000 to under 12,000 post offices. This period included two closure programmes, designed to cut POL overheads and help the remaining post offices become more financially viable. The mix of business transacted over post office counters has shifted during this time. This is partly due to wider social and economic trends, including the rise in digital communication; increasing numbers of online transactions; and an exponential increase in internet shopping. The government’s withdrawal of services from post office counters, such as TV licence renewals, has also had a significant impact. In particular, a switch to the electronic payment of state pensions and benefits from 2003, and subsequent pressure on claimants to use high street bank accounts for their payments, resulted in a significant loss of business for the post office network. In addition, post offices are being affected by the development of competing operators offering a range of services traditionally provided by post offices, from bill payment to parcel collection. From 2005, POL introduced a number of new products and services to try to try and halt the decline in Post Office business and achieve stability in the

1 Ipsos MORI, Subpostmaster Income 2006, July 2006 NFSP, Subpostmaster Income Survey, July 2009


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post office network. These products included a range of Post Office financial services such as insurance and life assurance products, credit cards and savings accounts. The majority of high street bank accounts have become accessible over post office counters and around 2,000 post offices have Post Office ATMs. However, serious concerns about the future viability of the post office network remained. In November 2010 the Department for Business, Innovation & Skills (BIS) published a range of proposals to ‘modernise’ the post office network, to make it more financially secure and prevent further post office closures.2 The government stated that a network of around 11,500 branches is to be maintained and provided the assurance that there will be no further programme of post office closures. The government allocated £1.34bn funding for the post office network between 2011 and 2015. A significant proportion (48%) of the funding maintains the Social Network Payment, the government’s payment to POL for running otherwise loss-making post offices due to their social value. In addition, £496m (37% of the total) is to be spent on network restructuring, via the Network Transformation programme. Network Transformation is designed to play a vital role in securing the future of the post office network, by reducing its cost base and providing investment funds. The programme involves refurbishing some post offices; and moving thousands of post offices into other retail outlets. The government also recognised that for the Post Office to regain a secure footing, it needs to bring in additional income through new or expanded revenue streams. The government proposed that post offices should become the front office for government, providing face-to-face access at post offices for a full range of central and local government services. The government says the front office for government is one of two areas with the potential to boost significantly Post Office revenues. This proposal builds on the many central and local government services already available at post offices. Services could include identity verification; notifying government of a change in circumstances; assisted applications; and payment services enabling the public to make and receive payments to and from public bodies. The second major area identified by the government as having the potential to significantly increase Post Office revenues is financial services. The government proposes the Post Office expands further into financial services. The government says this should include developing new Post Office financial services products, and making all UK current accounts accessible through the post office network.

2 Department for Business, Innovation & Skills, Securing the Post Office Network in the Digital Age, November 2010


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The government recognises revenues from postal services will continue to be a mainstay of the Post Office. However, fewer letters are being sent and the declining revenue from letters is not sufficiently compensated for from the increasing number of parcels. So, the government concludes postal services will not be a growth area for the Post Office. The NFSP has fully supported the government’s plans for a major expansion of public services available at post offices, as well as the proposal for a significant increase in Post Office financial services. It is clear these proposals urgently need to translate into significant amounts of additional work across post office counters. However, in the two years following the government’s report there has been little evidence of a major service expansion in these two areas. The NFSP is extremely concerned that falling income from traditional services and a failure to introduce significant new sources of revenue leaves a very unstable post office network, risking mass closures or a severe downgrade in service as individual post offices cease to be viable for those who run them.


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Detailed findings 1 The survey A sample of 3,000 randomly selected NFSP members were sent a postal questionnaire. The questionnaires were received and returned in October and November 2012, and focused on subpostmasters’ Post Office payslips for October 2012. These payslips covered transactions from 23/8/12 to 19/9/12. Subpostmasters were asked to record figures directly from their payslips. Unless otherwise stated, all financial data are self-reported monthly figures. A total of 743 questionnaires were returned, a response rate of 25%. 2 Income For the vast majority of subpostmasters, their income is largely made up of two elements. Firstly, a fixed ‘core tier’ payment, which can be varied annually according to the amount of overall business an individual transacts. Smaller post offices receive an ‘assigned office payment’ which is broadly similar. Secondly, subpostmasters also receive payments which depend directly on the products and services sold or transacted over the post office counter during that period. Subpostmasters are paid different rates for different types of transactions. Subpostmasters with new Post Office contracts (Main and Local post offices) were excluded from the sample, as their pay structure is different and at the time of the survey there were very few of these post offices.


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3 Net pay From his or her net pay, the subpostmaster must pay for the running of the post office, including overheads and staff wages, as well as taking their own personal drawings. In October 2012 subpostmasters received an average of £2,719 net pay. This represents an average fall of 6% from net pay in March 2009, when net pay averaged at £2,882 (or 9% in real terms, once RPI is included). A breakdown of net pay rates shows nearly a quarter (24%) of subpostmasters are receiving net pay of less than £1,000 a month (see chart 1). The drop in average pay rates over the past three years is particularly worrying, as many subpostmasters were reporting major financial problems in 2009. Any further drop in revenue for individual post offices will inevitably put extreme pressure on many subpostmasters’ ability to pay their post office’s day-to-day running costs, staff wages, personal drawings, let alone future investment in their businesses.

Net Pay

24%

22%

16%

15%

8%

5%

9%

£1-£1,000

£1,001-£2,000

£2,001-£3,000

£3,001-£4,000

£4,001-£5,000

£5,001-£6,000

Over £6,000

Chart 1. Base: subpostmasters supplying this data (628) Net pay is largely made up from the fixed core tier payment and pay from the range of transactions carried out in the post office. In October 2012, average transactional income formed 74% of net pay. However, the ratio of fixed payment to transactional income varies enormously between post offices. Large post offices tend to have lower proportions of fixed pay; smaller offices are more dependent on the fixed element of pay.


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4 Post Office Financial Services 4.1 Government policy The government has clearly and repeatedly stated that financial services are one of the two areas of potential revenue growth for the Post Office. POL has provided a range of Post Office branded financial services products in partnership with the Bank of Ireland since 2004. In the 2010 policy statement, the government said that the expansion of Post Office financial services should include the development of new products with the Bank of Ireland, such as a children’s savings account, which was due to be introduced in early 2011.3 The NFSP has long been concerned that the Bank of Ireland financial services products - including vehicle insurance, life assurance and credit cards – are not directly helping the vast majority of subpostmasters. Subpostmasters need services which result in frequent repeat transactions bringing customers in to post offices and providing a regular source of income. We are also concerned these products offer little different from existing high street financial services in an already very competitive market, and therefore that take up by the public is limited. Between the publication of the government’s proposals in 2010 and the date the survey was undertaken, no significant new Post Office financial services were launched. 4.2 Key financial services In our research we investigate the income yielded for subpostmasters from a number of Post Office financial services products. Whilst the Post Office provides a wide range of financial products, we focus on a number of key services to illustrate overall trends. 4.2.1 Credit cards and insurance Key financial services products include Post Office Credit Cards, Home Insurance and Car and Van Insurance; each of which attracts a payment of £25 for subpostmasters, if the sale is related to a subpostmaster ‘introducing’ the product to the customer. Life Assurance attracts a payment of £35 on the same basis. Analysis of subpostmasters’ pay reveals that the vast majority of subpostmasters are earning nothing at all from many of POL’s own financial service products. Subpostmasters who did earn more than £0 in October 2012 for Post Office Financial Services products, generally received very little. Monthly income from key Post Office financial services products:

97% of subpostmasters earned £0 for PO Credit Cards.

3 Department for Business, Innovation & Skills, Securing the Post Office Network in the Digital Age, November 2010


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97% of subpostmasters earned £0 for PO Home Insurance. 91% of subpostmasters earned £0 for PO Car and Van Insurance. 99% of subpostmasters earned £0 for PO Life Assurance.

Subpostmaster income from key financial services products has reduced since 2009 when slightly more subpostmasters received some revenue from these products. The higher levels seen in 2009 are likely to be due to greater take up following initial publicity; and because by 2012 most potential customers will have already made their purchase. The earnings breakdown for each of these products in October 2012 and March 2009 is shown below. This confirms the complete failure of key Post Office financial services products to provide an income for subpostmasters. Credit Card: Income % subpostmasters, 2012 % subpostmasters, 2009 £0 97% 92% £25 2% 6% £50 <1% 1% Over £50 <1% <1% Base: subpostmasters supplying this data (718 in 2012, 746 in 2009) Home Insurance: Income % subpostmasters, 2012 % subpostmasters, 2009 £0 97% 92% £25 3% 6% £50 <1% <1% Over £50 <1% <1% Base: subpostmasters supplying this data (729 in 2012, 745 in 2009) Car and Van Insurance: Income % subpostmasters, 2012 % subpostmasters, 2009 £0 91% 86% £25 7% 9% £50 1% 3% Over £50 1% 1% Base: subpostmasters supplying this data (728 in 2012, 746 in 2009) Life Assurance: Income % subpostmasters, 2012 % subpostmasters, 2009 £0 99% 99% £1-50 1% 1% Over £50 0% <1% Base: subpostmasters supplying this data (731 in 2012, 739 in 2009) Percentages may not total 100, due to rounding


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4.2.2 Instant savings account POL offers a Post Office instant savings account, Instant Saver. Instant Saver has a minimum £500 initial investment and is accessible in post offices, online, by telephone, ATM or post. Subpostmasters are paid £2.50 for each account opening related to the subpostmaster ‘introducing’ the product to the customer. Subpostmasters are also paid 10p per £100 invested in accounts with balances between £2,500 and £10,000, which are linked with them. This account is more successful for subpostmasters than the financial services listed above, as Instant Saver earned investment-related income for 60% of subpostmasters. However, the amounts earned by subpostmasters from Instant Saver were extremely low. Average monthly earnings from Instant Saver account openings and account balances were £3.71 in October 2012. 4.2.3 Cash ISA Post Office Cash ISAs also have the potential bring in income for subpostmasters. Subpostmasters are paid 12p per £100 invested in Cash ISAs linked to their ‘introduction’. But again, the actual income levels for subpostmasters are negligible. Almost nine in ten (88%) subpostmasters earned nothing at all from Cash ISAs; and average monthly earnings were 80p in October 2012. 4.3 Future Post Office financial services The research confirms Post Office financial services are not currently a success story for subpostmasters. Key financial services are bringing the vast majority of subpostmasters little or no income. The financial services identified by POL as ‘focus financial services’ – including Credit Cards, Home Insurance, Car and Van Insurance, Life Assurance, Cash ISAs, as well as high street bank account withdrawals and over a dozen other services – in total yielded an average of only 9% of subpostmaster pay in October 2012. This is a very worrying find two years after the government’s policy statement which sets out financial services as one of two growth areas for Post Office income. Subpostmasters widely express their concerns about the ability of the much-trumpeted Post Office financial services products to bring income to the post office network:

“I believe the Post Office has lost its way as a high street retailer. Too much now is centred on financial (one off) purchases which do nothing to help footfall.” “My post office is in a deprived area serving people on benefits and lots of OAPs. But the things I am asked to sell them are beyond their means.”


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POL is piloting a Post Office branded current account in 2013. The NFSP welcomes this long awaited account, which could provide an extremely valuable source of income for subpostmasters if it has a high take-up resulting in regular, repeat transactions at post offices. Other accounts such as a children’s savings account may also be developed in the future. However, we are concerned that if these accounts are not perceived to be sufficiently different from products on offer from the high street banks, public take-up may be low. In addition, it is crucial that accounts are well publicised and transactions provide adequate levels of remuneration for subpostmasters. New financial products yielding subpostmaster income levels similar to those of existing Post Office financial services products will do nothing to improve the viability of the vast majority of post offices.


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5 High street banking 5.1 Government policy In the 2010 policy statement, the government said the other element to the Post Office’s financial services expansion would involve “pushing forward our ambition that all UK current accounts will be accessible through the post office network, making post offices the convenient place for people to access their cash.”4 5.2 High street bank accounts Over the past decade an increasing number of high street banks have allowed customers to access their current accounts at post office counters. By 2012 around 80% of high street current account holders could access their accounts at post offices. At the time of the research only two major high street banks, HSBC and Santander did not allow access. Although Santander does offer post office access to former Alliance and Leicester accounts (Santander acquired Alliance & Leicester in 2010). However, few banks offer access to all transaction types at post offices. For example, some banks allow cash withdrawals, but not balance enquiries or cash or cheque deposits. Others allow cash withdrawals and some of the other types of transactions. This patchwork availability makes it more difficult for POL to promote the service. Critically, in general the banks themselves do not promote the service. Research by Consumer Focus shows public awareness of post office access to current accounts is very low, but where people are aware of the facility they do undertake banking transactions at post offices.5 In addition to current accounts, the high street banks’ basic accounts – aimed at people on lower incomes or with chequered credit histories – are accessible at post offices. As with the current accounts, the range of transactions available at post office counters varies from bank to bank, with many banks not offering cheque or cash deposits and some not offering balance enquiries. A small number of high street banks provide post office access to their small business banking services. Bank of Ireland, Santander and Clydesdale bank provide a reasonably comprehensive service and a handful of others offer a limited range of transactions at post offices. Again, these services are not well promoted either by POL or the banks themselves. The NFSP is extremely concerned that this patchwork availability and lack of publicity is severely restricting the number of banking transactions undertaken at post offices; and as a result limiting the banking-related income earned by subpostmasters.

4 Department for Business, Innovation & Skills, Securing the Post Office Network in the Digital Age, November 2010 5 Consumer Focus, Counter Measures – delivering access to current accounts for all at the post office, August 2011


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5.3 High street banking income Subpostmasters are paid 17.5p per transaction for bank card withdrawals from high street bank accounts. The survey finds subpostmasters are receiving an average of £55 a month from high street bank account withdrawals. The £55 average income for October 2012 represents an increase from the banking income 2009, when high street bank account withdrawals brought subpostmasters an average of £32. This is likely to be partly due to an increase in transaction pay from 12p withdrawal in 2009 to the 17.5p rate in 2012. In addition, during the intervening period more banks made their accounts available at post office counters. However, the overall income levels for banking are still relatively low, with only around 10% of subpostmasters earning more than £100 a month from these transactions, and around one in five subpostmasters earning nothing at all from banking. A small number of subpostmasters (13%) earn over £100 a month from high street bank account withdrawals. The maximum any subpostmaster in our survey earned was nearly £700. The earnings breakdown below compares income in 2012 with 2009: High street bank account card withdrawals: Income % subpostmasters, 2012 % subpostmasters, 2009 £0 20% 19% £1-50 38% 63% £51-£100 29% 16% Over £100 13% 3% Base: subpostmasters supplying this data (729 in 2012, 748 in 2009) Percentages may not total 100, due to rounding 5.4 Post Office ATM POL provides around 2,000 Post Office ATMs, or bank machines, at post offices throughout the UK. Post Office ATMs are only available at post offices with sites that are most commercially viable for this service. The ATMs are owned and operated by the Bank of Ireland and are all free to use for customers. Of the subpostmasters surveyed 16% had a Post Office ATM. Most subpostmasters receive fixed monthly payments for their Post Office ATMs, as well as transaction payments. In October 2012, of the surveyed subpostmasters with ATMs, the majority received £300 in fixed monthly payments. The average earned in monthly transaction payments was £360 in October 2012. This is a considerable increase on the 2009 average of £166.


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Post Office ATM transactions: Income % subpostmasters £0 9% £1-£100 16% £101-£200 14% £201-£500 40% Over £500 21% Base: subpostmasters with Post Office ATMs supplying transaction data (114) On average a total of £609 was earned from Post Office ATMs, including monthly fixed payments and transaction income. This is nearly double the average total in 2009 (£336). This is likely to be due to a switch from internal ATMs (located inside the post office) to external ATMs (outside the post office) which attract more income. 5.5 Future high street banking services HSBC started offering post office access to their current accounts in May 2013, leaving Santander as the only major high street bank not providing current account services at post offices. Whilst the addition of HSBC to the range of banks offering post office services is welcome, the NFSP is sceptical of the impact this will have on subpostmaster income. The NFSP believes that high street banking services could be a very significant source of income and footfall for post offices. However, this seems unlikely to ever occur unless the banks offer a comprehensive range of services which are well-promoted both by the Post Office and the banks themselves. In addition, the NFSP would like to see a state-backed Postbank developed, offering a comprehensive range of Post Office banking services including a current account, accounts for people on low incomes, children’s accounts and small business accounts. We believe a state-backed Postbank could be a significant source of revenue for the UK’s post office network, mirroring the success of many state-owned Postbanks such as Japan Post Bank and Kiwibank in New Zealand. Subpostmasters are keen to see a Postbank:

“We need a bank of our own. We have fewer products which are of use to most people. I cannot sell mortgages etc.”


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6 Post Office card account and benefits 6.1 Government policy Post Office card accounts (POCA) are simple electronic accounts, available only through post offices, designed to receive state pension and benefits payments. Card accounts were introduced in 2003, when the Department for Work and Pensions (DWP) switched to electronic payment of benefits, replacing the previous order book and girocheque system. Order books and girocheques were typically encashed at post offices and these transactions made up a very significant proportion of sub post office income. However, despite the development of the POCA, the DWP encouraged pension and benefit recipients to use high street bank accounts to receive their payments, rather than the post office-based POCA. In 2013 the DWP is making major changes to the benefits system which include the introduction of Universal Credit. Most current benefits for working age people will be subsumed into Universal Credit. The DWP is encouraging claimants to have their Universal Credit paid monthly into bank accounts. In contrast, POCA’s functionality is limited and the housing element of Universal Credit will not be payable into POCAs. 6.2 POCA income Subpostmasters are paid transaction payments of 12.5p per £100 withdrawn. Subpostmasters are also paid a one-off payment of £2.30 for each card account opened. Subpostmasters earn negligible amounts for POCA openings, 73% earn nothing at all, and the average was £1.06 in October 2012. POCA transactions are a larger source of income. In October 2012, subpostmasters earned an average of £146 for POCA transactions (5% of average net pay). Some subpostmasters earn considerably more, with 2% earning over £600 per month. Income from POCA transactions has been dropping steadily (see Chart 2). In 2009, subpostmasters were earning an average of £202 per month for POCA transactions (7% of net pay).6 In 2006, POCA transactions brought in an average of 10% of a subpostmaster’s pay.7 This may be partly due to the reduction in payment rates – in March 2009 subpostmasters were paid 15p for every £100 withdrawn for a POCA. But it is also likely to be due to lack of publicity for the account.

6 NFSP, Subpostmaster Income Survey, July 2009 7 Ipsos MORI, Subpostmaster Income 2006, July 2006


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POCA Transactions

33%

20%

20%

20%

4%

2%

21%

18%

23%

23%

10%

5%

£0

£1-£100

£101-£200

£201-£400

£401-£600

Over £600 2009

2012

Chart 2. Base: subpostmasters supplying this data (722 in 2012, 745 in 2009) 6.3 Future of benefits transactions The future contribution of benefits-related transactions to subpostmasters’ income looks very uncertain. The encashment of benefits payments has been historically a major source of income for post offices, both directly by providing subpostmasters with transaction payments and indirectly by bringing customers in through the door. But since 2003, the reduction in subpostmaster income from benefits transactions has been dramatic. The NFSP is very concerned about how changes in the benefits system, including the introduction of Universal Credit, will impact on post offices. In addition, POL’s contract for POCA is due to expire in 2015, although an extension to 2017 is allowable. The NFSP believes there is huge potential for the Post Office to offer Universal Credit-related services, which could include a basic Post Office transactional account or ‘budgeting account’ and credit union access for Universal Credit claimants. However, it is currently unclear what future role the post office network will take in providing services to people claiming state benefits.


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7 Bill payment 7.1 Counter and Paystation services Subpostmasters receive income from customers paying utility bills and pre-paying for utility and communication services. Services offered include mobile e top-ups, mobile e-vouchers, electricity keys, gas cards, bar coded bills and budget cards. Payments can be made over the post office counter or at a Post Office Paystation terminal in the post office. Subpostmasters receive 0.6p per £1 sales for pre-pay transactions and 8.5p per post-pay transaction. Subpostmasters earned an average of £51 for bill payment transactions in October 2012 (2% of net pay). The bulk of the income came from over the counter post-pay transactions. Average income from over the counter bill payment was £39 in October 2012. Average income from Paystation transactions was £12. Subpostmaster income from bill payment has changed very little from March 2009, when subpostmasters earned an average of £49 from all bill payment transactions. 7.2 Future of bill payments Traditionally bill payment processing was an important source of revenue for subpostmasters. In 1998/99 bill payment produced 15% of the post office network’s revenue.8 However, by January 2006 bill payment represented 5% of subpostmasters’ net pay, and since then it has fallen to 2%.9 The main reason for this dramatic fall in post office bill payment is likely to be the increasing numbers of people paying their utility bills online or by direct debit. The proposed development of new budgeting bank accounts with direct debit facilities may further reduce the number of bill payments undertaken at post offices. These accounts are currently under discussion in the context of the introduction of Universal Credit. In addition, the Post Office faces direct competition from alternative payment services such as PayPoint and Payzone whose services have been expanding in recent years. However, there is likely to be a continued need for the post office network to continue to provide cash and bank card based bill payment services for people who are unable to use automated alternatives or simply prefer to pay for their utilities at a post office counter. Whilst the NFSP believes post offices should offer a comprehensive range of bill payment services to the public, utility bill payments are unlikely to be a major source of post office revenue in the future.

8 Performance and Innovation Unit, Counter Revolution – modernising the post office network, June 2000 9 Ipsos MORI, Subpostmaster Income 2006, July 2006


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8 Government services 8.1 Government policy Government services is the other area for “real growth potential” identified by the government in the 2010 policy statement, alongside financial services. The government said “We want to see the Post Office become a genuine front office for government at both the national and local level.” Under the front office for government the Post Office would act as “natural home for the delivery of face-to-face government services and helping citizens interact with Government online.”10 The NFSP is very supportive of the proposal, the success of which is crucial to the future of the post office network. We have long called for a comprehensive range of central and local government services to be made available at post offices. However, the NFSP is extremely concerned these plans have not been realised and that only a very limited range of government services are available through post offices. The central government services that have been developed tend to be one-off high value transactions available at only a small proportion of post offices. These services do nothing to improve the viability of the vast majority of post offices. Both subpostmasters and POL have been very concerned that the government has put a number of new services, such as the recent DVLA contract for road tax renewals, out to competitive tender. This has resulted in uncertainty as to whether contracts will be awarded to the Post Office has and undermined the front office for government concept. Contracts that have been won by POL have been obtained at low and potentially below-cost rates. As a result, subpostmaster remuneration for these transactions can be correspondingly low, which puts further financial pressures on subpostmasters. In addition, development of local government or council services at post offices has been piecemeal and not comprehensive in terms of the services provided or the geographical areas in which they are offered. This offers a confused picture for customers, is more difficult for the Post Office to promote and severely limits the income subpostmasters can earn. 8.2 Identity verification The government says identity checking is one of the major opportunities for the Post Office to expand the government services offered. As the state increasingly interacts with citizens through online channels there will be more of a need to check people’s identity. The government suggests this could be through document verification and scanning, photos or signature recognition. The government also says this could develop into services for helping 10 Department for Business, Innovation & Skills, Securing the Post Office Network in the Digital Age, November 2010


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government manage information on changes of circumstances more efficiently, with the Post Office acting as a trusted channel for data collection and dissemination. The Post Office currently provides identity checking services for people who need to have photocopies of identity documents certified, for example when applying for a mortgage, bank account, or new job. Customers can get passports, birth certificates, driving licences, recent utility bills, marriage certificates and bank statements checked. Original documents are checked against photocopies and certified as a true likeness. This service is only available in around 700 post offices. Subpostmasters’ payments for these transactions are £1 per transaction (ID Verification Service) or £1.75 (Verify), depending on the agency for whom the checking service is carried out. In October 2012, 94% of subpostmasters earned nothing at all from ID checking services. The vast majority of subpostmasters who earned anything from ID checking, earned less than £10. 8.3 Processing The government says there is scope to substantially increase the number of assisted applications that the Post Office carries out, building on the current ‘check and send’ services. 8.3.1 Passport Check and Send The UK Passport Check and Send service enables customers to take their passport applications to a post office where the application form and documentation are checked to ensure that everything is correct. The application is then sent to the Identity and Passport Service by Special Delivery. In October 2012, the Passport Check and Send service was available in around 2,500 post offices. This was reflected in our findings which show 77% of subpostmasters earned £0 for Passport Check and Send. Average Passport Check and Send earnings were £76 for subpostmasters who had an income from this service. A small number of subpostmasters (7%) earned over £100 in October 2012. Average subpostmaster earnings from Passport Check and Send very slightly increased between 2009 and 2012. Whilst the service was available at a similar number of post offices over the period, transaction payments rose from £1.86 per transaction in 2009 to £2.20 per transaction in 2012.


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Passport Check and Send: Income % subpostmasters, 2012 % subpostmasters, 2009 £0 77% 84% £1-£50 9% 7% £51-£100 7% 4% £101-£200 6% 4% Over £200 1% 1% Base: subpostmasters supplying this data (732 in 2012, 746 in 2009) 8.3.2 DVLA services Post offices offer a range of Driver Vehicle Licensing Agency (DVLA) services. The main DVLA services available at post offices are road tax renewals and a UK driving photo licence application check and send service. Road tax renewals are available in around 4,600 post offices; but only approximately 750 post offices offer the photocard renewals service. Subpostmasters are paid 60p or 70p for the majority of DVLA transactions and £1.86 for photocard renewals. The survey found 59% of subpostmasters earned nothing at all from DVLA services. But for the 41% of subpostmasters who received an income from this source average earnings were £234 from the main DVLA services for October 2012. Very few subpostmasters earn anything at all from driving licence photocard renewals, as the majority of photocard transactions are undertaken in Crown post offices. Only 1% of subpostmasters in the survey earned anything at all from photo licence renewals. 8.3.3 AEI service Around 750 post offices offer the Application Enrolment Identification (AEI) service. The AEI service processes biometric information for applications by capturing information such as fingerprints, photographs and digital signatures. The AEI service is designed to serve a range of different agencies and is currently being used by the DVLA and the UK Border Agency. The service was introduced from early 2010. The DVLA uses the AEI service to allow drivers to renew their driver’s licence, a process that occurs every ten years. The UK Border Agency requires non-European Economic Area and Swiss nationals planning to remain in the UK for more than six months to have their biometric information collected as part of the application process. Post offices providing this service have booths containing a machine which captures the relevant information. Subpostmasters are paid £2.50 per transaction for this service. The vast majority of subpostmasters surveyed (96%) earned nothing from the AEI service. This is likely to be because around half of the 750 AEI machines are sited in Crown post offices, and few subpostmasters provide


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this service. However, for those subpostmasters who reported earnings, average AEI earnings were £116 in October 2012. 8.4 Payment services The third element to the front office for government proposal involves extending the payment services offered at post offices. The government says there is the potential to increase the number of cashless payments that people can make at the Post Office (for example parents making payments for school trips or meals), and use of the Post Office’s Payout service. The Post Office Payout service has been available since 2007 and enables agencies to send refunds and cashbacks to customers and users. Agencies send a unique reference code to their customer by text, email or post. The customer takes the barcode to a post office where it is scanned and the customer receives the cash. Payout is currently used by local government and utility companies. The service is available at all post offices. Subpostmasters earn between 9p and 15p per transaction, depending upon the transaction.

The survey finds 87% of subpostmasters earned nothing at all from Payout services in October 2012. Average subpostmaster earnings from Payout were £1.24.

8.5 Future of government services The NFSP is extremely concerned that the proposed expansion to Post Office government services has not been achieved. The government put front office for government forward as a central part of their plans for stabilising the post office network, and this is clearly an element that is under direct government control. We fear the failure to develop the front office for government seriously risks the future of the post office network. No new services producing a significant income for the majority of post offices have been introduced since the 2010 government policy statement. Most subpostmasters are earning nothing at all from the major central government services in the categories identified by the government as presenting the biggest opportunities for service expansion. From April 2013, selected post offices are offering a wider range of DVLA services. However, due to the competitive nature of the procurement (tendering) process, there is expected to be a very significant drop in the remuneration POL receives from the DVLA, and therefore the income received by subpostmasters from POL for providing these services. This is an extremely worrying precedent, as falling rates of pay for transactions directly threaten the viability of post offices. Subpostmasters are very concerned that new revenue from providing government services is not materialising:


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“Increased government business does not seem to be happening. Only the larger post offices are getting new business.” “When will the promised government services arrive and make a difference?”

Many subpostmasters earn some income from providing local government services, such as travel cards and leisure passes. But there are a large number of separate transactions which are very local and difficult to analyse as they are not recorded as a discrete category on payslips. Some local authorities, such as Sheffield City Council, are providing a wide range of services through post offices. However, to-date there has been no effective central co-ordination of local authority service provision through post offices, leading to a significant increase in local government services available at post offices across the country. This piecemeal approach means the government’s plans for the provision of a comprehensive range of local government services are very far from being fulfilled. It is essential that the promised comprehensive range of central and local government services is made available through post offices. Without this work the post office network will struggle to survive.


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9 Mail 9.1 Mails services The government says revenues from postal services “will remain a mainstay of the Post Office.”11 Mails have always been central to the Post Office’s services, but as fewer letters are being sent and parcel and packet post is increasing, the type of mails transacted over post office counters may be expected to change. Subpostmasters are paid varying rates for a range of transactions which include postage sales and handling mail that has already been paid for. In addition, an estimated £100m of subpostmasters’ total fixed pay, which allows them to provide bricks and mortar access points, comes from POL’s contract with Royal Mail. 9.2 Mails income The research shows mails income for subpostmasters is increasing and continues to be a major source of revenue for subpostmasters. In October 2012, subpostmasters earned £876 from mails transactions on average, 33% of average net pay. This is higher than in March 2009, when subpostmasters earned £809 for mails transactions (28% of net pay). Subpostmasters are clear about their reliance on postal services:

“The post office is very dependent on mails work. That keeps the footfall coming through the door.”

9.3 Special Delivery The overall increase in mails income seems to be largely due to a rise in the number of Special Delivery transactions. Subpostmaster pay in POL’s ‘focus mails’ category rose from an average of £156 in 2009 to £208 in 2012. The vast majority of transactions in this category are Special Delivery services. However, the picture is complicated by the fact that a greater range of services are included under this category by POL in 2012, than were included in 2009. The increase in Special Delivery transactions is likely to be partly due to the greater focus on this service by POL. In addition, a growth in the number of items sent by Special Delivery may arise from the expanding parcels market, including small businesses providing mail order services and eBay. 9.4 Home shopping returns Subpostmasters are paid 44p per transaction for handling home shopping returns. 11 Department for Business, Innovation & Skills, Securing the Post Office Network in the Digital Age, November 2010


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In October 2012, subpostmasters earned an average of £33 for home shopping returns. However, 31% of subpostmasters earned £0 for this service. Subpostmaster earnings from home shopping returns have increased since 2009, when the average was £24. This increase reflects the rise in online retail. 9.5 Mails acceptance Subpostmasters are paid a fee for checking letters and parcels and putting them into the postal system. This payment was introduced to reflect the changing nature of the postal market, as the postage for an increasing number of letters and parcels brought into post offices has been paid for elsewhere, for example online. Subpostmasters earned an average of £164 from mails acceptance in October 2012. Earnings varied widely from one in five (21%) subpostmasters earning £0 from mails acceptance services to a maximum income of £850 for these transactions. Figures recorded in the research refer to the main mails acceptance services available at post offices:

Royal Mail Parcel Accept (which pays subpostmasters 42p per transaction), average earned £19.

Inland Items Accept 100g+ (15p per transaction), average earned £111.

Overseas Items Accept 20g+ (23p per transaction), average earned £34.

9.6 Parcel collection Post offices provide collection services for customers with Parcelforce and Royal Mail parcels. Parcelforce Convenient Delivery allows customers to collect an undelivered Parcelforce parcel from a local post office. Local Collect allows customers to collect a missed Royal Mail parcel delivery; or alternatively at the time of making an online order, customers can opt to pick up from a post office. These services are available from the majority of post offices. Subpostmasters earn 35p per transaction for both parcel collection services. Subpostmasters earned an average of £12 for parcel collection services in October 2012. However, one third (32%) earned nothing at all from these services. Only a very small number (3%) earned over £50 for the month. Average earnings from Parcelforce Convenient Delivery were slightly higher (£8 average) than those for Local Collect (£3 average). Nearly two thirds of subpostmasters earned nothing at all from Local Collect.


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Parcelforce Convenient Delivery: Income % subpostmasters £0 36% £1-£50 63% Over £50 1% Base: subpostmasters supplying this data (727) Local Collect: Income % subpostmasters £0 64% £1-£50 34% Over £50 2% Base: subpostmasters supplying this data (731) 9.7 Future mails income Mails transactions form a very significant proportion, around one third, of subpostmaster income. Special Delivery and parcels acceptance services are significant sources of revenue for subpostmasters. Parcel collection services bring in little income for subpostmasters. Subpostmasters also undertake a very large number of other mails transactions which contribute to their total mails income – from stamp sales to redirection services. However, this survey does not analyse these other services individually. Whilst POL secured a long term contract with Royal Mail in January 2012 which ensures Royal Mail services will continue to be available over post office counters, the mails sector is currently undergoing major change. Competing services are entering the sector including alternative parcel services outlets such as CollectPlus, Local Letterbox and Hermes’s ParcelShops; and self service parcel lockers provided by companies such as InPost. Royal Mail offers online postage services, the availability of which will inevitably reduce the number of postal transactions undertaken at post offices. In addition, Royal Mail offers services directly to small businesses with significant mailings. The development of these rival services take place in a context where letters are being replaced by digital communications. In addition, the government is planning to privatise Royal Mail, which separated from POL in April 2012. These considerable changes in the mails sector combine to spell uncertainty for mails services at post offices in terms of the proportion of the nation’s mail which is processed at post offices, the types of mails transactions undertaken and the remuneration paid to subpostmasters for processing these transactions.


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10 Income and expenditure trends 10.1 Post Office pay Average Post Office pay (net pay) in October 2012 is £2,719. To provide us with further information about how Post Office pay is changing over time, we asked subpostmasters about how their Post Office pay has changed over the past 12 months:

51% of subpostmasters report their Post Office pay decreased. 41% of subpostmasters said their Post Office pay is the same. 8% of subpostmasters report an increase in Post Office pay.

These findings indicate a dramatic rise in the number of subpostmasters whose pay is decreasing. Twice as many subpostmasters are now reporting a decrease in Post Office pay in 2012, compared with 2009. In 2009, 26% reported a decrease, 38% said pay had not changed, 36% said pay had increased in the past 12 months. 10.2 Overheads Subpostmasters were also asked about their monthly overheads (excluding staff costs) just associated with the running of the post office. This includes rent, utility bills, mortgage, business loan, rates, building maintenance, cleaning and money re-invested in the post office business. Average monthly overheads were £1,093 in October 2012. Subpostmasters have seen a very significant rise in overheads. In 2009 average overheads were £901 (an increase of 21%); and in 2006 overheads averaged at £750. This is an increase of 21% over three years; and a 46% increase in overheads in the past six years. Subpostmasters confirm this alarming increase in overheads. Over the past 12 months:

70% of subpostmasters report an increase in overheads. 29% of subpostmasters say their overheads are the same. 1% of subpostmasters say their overheads have decreased.

10.3 Staff costs Subpostmasters who employ staff were also asked about their staff costs solely associated with the running of the post office, including wages, employer National Insurance and any pension contributions. Average monthly staff costs were £1,616. Nearly half of subpostmasters with staff reported an increase in costs over the past 12 months:

48% of subpostmasters say their staff costs increased.


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46% of subpostmasters say their staff costs are the same. 6% of subpostmasters say their staff costs decreased.

10.4 Personal drawings Subpostmasters’ personal drawings are the money subpostmasters take as a salary from their net Post Office pay. This excludes money paid to staff, overheads or money which was reinvested in the post office business. The amount a subpostmaster takes as his or her personal drawings is at their own discretion. Personal drawings are highly significant in terms of subpostmaster income and the viability of the post office network. Whilst a great many subpostmasters are motivated by other than purely monetary factors; post offices that do not generate sufficient personal income for those who run them cannot be regarded as viable businesses. Average personal drawings were £753 per month (26% of average net pay). This is the equivalent of an employee’s yearly gross income of approximately £9,600. Personal drawings have dropped considerably in recent years. In 2009 average personal drawings were £866; and in 2006 personal drawings averaged at £941. This indicates a 20% or a 36% real terms drop in personal drawings in the past six years. Nearly a quarter (24%) of subpostmasters take no personal drawings from their Post Office income. This proportion has increased massively since 2009, when 14% of subpostmasters took nothing at all. These subpostmasters are drawing income from other sources such as pensions, savings or income from their retail business.


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Monthly Personal Drawings

24%

7%

8%

10%

9%

12%

8%

7%

9%

5%

14%

3%

10%

14%

11%

16%

9%

10%

8%

5%

£0

£1-£200

£201-£400

£401-£600

£601-£800

£801-£1000

£1001-£1200

£1201-£1500

£1501-£2000

Over £2000

2009

2012

Chart 3. Base: subpostmasters supplying this data (519 in 2012, 451 in 2009) Subpostmasters are very clear about the impact of their Post Office income on their personal financial situation:

"The salary is dropping so much that I will just not be able to continue. I already do not earn enough each month to pay my household bills and must rely on savings.” “My post office is closing. I can no longer survive on such a low income. I was earning more in 2003. I will earn more working as a cleaner.” “As my wife is not living in the UK at present there is no other income. As such I am spending my savings and borrowing money from others to run the business.” “I am working harder and harder for POL but earning less and less money. Shop/post office made a loss for the last two years.” “I only stay because I love the locality and the people I service. I feel very poor now because of rising living costs generally.”


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11 Attached businesses 11.1 Local retail The majority of sub post offices are run alongside another business, usually a shop. These businesses frequently play crucial roles in local communities providing much-needed local access to essential goods and services. Often a post office is the sole retailer in the area. Sometimes the post office is vital as one of a small number of outlets in a community. Post offices located in a row of shops, or as one of a small number in the locality, help bring shoppers into the area and provide them with a source of cash which they can spend locally helping to sustain the other shops and businesses in the neighbourhood. Nearly nine in ten sub post offices (89%) are either the only retailer in the area or one of a small number of local shops. The survey found:

31% of sub post offices are the only retail outlet in the area. 58% of sub post offices are one of a small number of local shops. 11% of sub post offices are based in high streets or shopping

centres. 11.2 Goods and services Nearly three quarters of subpostmasters (73%) identified themselves as running a separate business alongside their post office. However, it is clear that a higher proportion of subpostmasters offer some retail alongside their Post Office services. Stationery and greetings cards are the goods most commonly provided at post offices. Groceries, household goods, fresh food and bakery products are also very frequently sold.

Attached Business Goods

26%

28%

39%

39%

59%

85%

Bakery

Fresh food

New spapers

Groceries and householdgoods

Confectionary

Stationery and greetingscards

Chart 4. Base: subpostmasters surveyed (747)


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A wide range of other products are also sold including alcohol and cigarettes. Other widely reported products and services include gifts, toys, photography services, solid fuel and gas, toiletries and medicines. 11.3 Dependence on post office Post offices and their attached retail businesses are often highly inter-dependent. Customers visiting one part of the business frequently also use the other part. Income from one side of the business supports the running of the other. Overheads are shared. The impact of this inter-dependency is that financial problems affecting the post office side of the business often has a knock-on impact on the viability of the attached business. Post office closures can lead to the only local retail disappearing or threaten the viability of other nearby businesses. Two-thirds (66%) of subpostmasters say their attached business would probably not or definitely not remain open if the post office closed. Only 13% agreed that the attached business would definitely remain open if the post office closed.

Attached Businesses Remaining Open If Post Office Closed

49%

17%

11%

10%

13%

Definitely not

Probably not

Uncertain

Probably

Yes definitely

Chart 5. Base: subpostmasters with attached businesses and supplying this data (660) This finding indicates that post office closures frequently have an impact far beyond that of just losing local postal services; but also often directly lead to the end of essential community shopping facilities. Residents may well find they can no longer buy everyday items such as fresh food and groceries locally.


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12 Subpostmasters’ overview 12.1 Economic turndown In addition to issues directly affecting the Post Office sector, subpostmaster income is also being affected by the wider economic environment. Seven in ten (70%) subpostmasters report that the current economic downturn is resulting in reduced business for both their post office and attached business. 77% of subpostmasters said their post office was experiencing reduced business because of the economic downturn. 80% said their attached business was experiencing reduced business.

Impact of Economic Downturn

77%

22%

2%

80%

18%

2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Reduced business No impact Increased business

Post Off ice Attached business

Chart 6. Base: subpostmasters supplying this data (729 post office, 632 attached business) The impact of the economic downturn appears to be affecting more subpostmasters than in 2009 when only 43% of subpostmasters reported that the economic downturn was resulting in reduced business for both their post office and attached business. 12.2 View of the future Subpostmasters are increasingly pessimistic about the future. The number of subpostmasters who say they can see a strong future for their business has halved since 2009. Only 17% of subpostmasters say they can see a strong future for their business. In June 2009, 33% said they could see a strong future. Over half of subpostmasters (54%) said they tend to disagree or strongly disagree that their businesses have a strong future. This view is hardly surprising given decreasing net pay, dropping personal drawings and the dire lack of new sources of revenue.


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"I can see a strong future for my business"

4%

13%

29%

31%

23%

Strongly agree

Tend to agree

Neither agree nor disagree

Tend to disagree

Strongly disagree

Chart 7. Base: subpostmasters giving an opinion (720) 12.3 Biggest fears Subpostmasters were asked about their single biggest fear for the future of their post office. The biggest concern, spontaneously mentioned, was that their post office would close. Subpostmasters are also worried about losing business and failing to secure new business, in particular government services. A number simply wish to sell their own post office and leave the sector, but were concerned that no one would want to buy it. Top 10 biggest fears: 1 Closure 2 Loss of/failure to increase government contracts 3 Loss of business (unspecified) 4 Insufficient/reduced income 5 Abolition/reduction of fixed income (core tier payment) 6 Loss of business to online transactions 7 Reduction in mails business 8 Loss of customers 9 Lack of new business (unspecified) 10 Unable to sell own post office 12.4 Biggest aspirations Subpostmasters were asked to give their single biggest aspiration for the future of their post office. Most of all subpostmasters want more business and services to offer at their post offices. More government business is the top aspiration, but subpostmasters would also particularly like to see more banking services and a Postbank.


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The fact that all post offices are not permitted to offer the same services is an ongoing concern for many subpostmasters. Top 10 biggest aspirations: 1 More government business 2 More services/business (unspecified) 3 Own post office to remain open 4 To offer the full range of Post Office services in own post office 5 More financial/banking services 6 Sell or close own post office 7 Increased pay 8 Postbank 9 Become a Main post office 10 Remain at the heart of the community 12.5 Pay and remuneration levels Underlying most of these fears and aspirations is a concern that sub post office remuneration should increase to level that secures the future of the service. This is not only about increasing the number and range of suitable products and transactions available at post offices, but ensuring that subpostmasters are paid at a reasonable rate for transacting these services.

“Our small office is very busy but not earning enough. I would like to be able to pay my staff a fair wage and I just want to keep the branch open for business.” “My biggest fear is that we will have more work for clients for decreasing pay; that we will be expected to undertake time consuming transactions for very little remuneration.”

12.6 Community role The importance of the subpostmasters’ social and economic role in local communities is highlighted in many spontaneous comments. Many subpostmasters are hugely motivated by the community service they provide, but many are anxious that, despite this, falling pay may lead to post office closures and the loss of this critical service.

“If the post office closes there will be another village without anything. No bank, post office, shop – only houses!” “My biggest fear is that the office will close when I retire because it cannot pay its way. This would be disastrous for our village.” “My biggest aspiration is that we are recognised as a constant on our country’s high streets. With further backing from the government, we could be the glue that holds our diminishing society together. This is especially important for the elderly who do not have their families around as much for support.”


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“In rural communities the post office provides services and is a lifeline for all sorts of people. There should be more help and support to sustain it.” “I am a caretaker for the post office in this community. I want to be able to pass it on to the next generation intact and even improved.”


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13 Conclusions 13.1 Dramatic income falls The survey reveals a picture of a network of subpostmasters committed to providing Post Office and retail services at the heart of local communities. But the vast majority of subpostmasters are deeply worried that falling incomes and increasing overheads mean these services are threatened as they may not be able to keep their post offices open. Over half (51%) of subpostmasters have seen their Post Office income decrease in the past year. But at the same time overheads have increased for 70% of subpostmasters and staff costs have increased for 48% of subpostmasters. Overheads have increased by 21% since 2009, whilst average Post Office income (net pay) has reduced by 9% in real terms. Subpostmasters’ personal drawings from their Post Office income are now only £753 per month on average, a drop of 36% in the last six years. Nearly a quarter (24%) take no personal drawings from their Post Office income. 13.2 Threat to post offices and local retail This disastrous financial situation threatens the future of a large number of post offices, as well as a significant number of crucial local retail outlets. Only 17% of subpostmasters said they could see a strong future for their business. Two thirds (66%) of subpostmasters with shops say their attached business would probably not or definitely not remain open if their post office closed. Yet these shops are often vitally important to local communities, as most (89%) are the only retail outlet in the area or one of a small number of local shops. 13.3 No significant sources of new income In November 2010, the government said that an expansion of Post Office financial services and the introduction of a comprehensive range of government services at post offices, should help address the financial problems facing the network. However, few new services have been introduced since this date and most of those much-trumpeted financial and government services are yielding little or no income for the vast majority of subpostmasters. Almost no subpostmasters receive any income at all from many of the key financial services. In fact, subpostmasters are earning less from these Post Office financial services than they were three years ago. Subpostmasters earn more from offering access to high street bank accounts, but these earnings could be much higher if all banks offered access to a


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comprehensive range of transactions for all accounts; and the service was well-publicised by both POL and the banks themselves. Similar issues arise with government services. Despite the government’s proposal that post offices should become the ‘front office for government’, few new government services have been introduced since November 2010. Most subpostmasters are earning nothing at all from the major central government services identified by the government as presenting the biggest opportunities for service expansion. The shocking failure of both Post Office financial services and government services to bring in any material increase in revenue for the vast majority of sub post offices, leaves many post offices with an extremely uncertain future. 13.4 Existing sources of income The money is still coming in from many of the more traditional sources of revenue for subpostmasters. On average, subpostmasters receive around a quarter (26%) of their net pay from fixed payments. Around one third (33%) of average net pay comes from mails transactions, which are providing an increasing proportion of post office revenue. This includes Special Delivery, parcel acceptance and stamp sales. Home shopping returns and parcel collection services also yield a modest income for many subpostmasters. Traditionally, benefits transactions brought in a high proportion of revenue for subpostmasters. POCA transactions currently earn subpostmasters 5% of net pay. But the introduction of Universal Credit and the likely end of the POCA from 2015, leaves future benefits-related earnings uncertain. Bill payments income, which was also formerly an important source of revenue, has now fallen to 2% of net pay. 13.5 Recommendations The NFSP believes urgent action needs to be taken to avert a major financial crisis in the post office network, and mass post office closures. The vast majority of subpostmasters will never earn a significant income from introducing customers to one-off high value services, whether government or financial services. The government must ensure its promises on expanded financial services and a front office for government come to fruition. Banking and financial services which lead to frequent repeat transactions in post offices, must be introduced. The NFSP believes these should include comprehensive access to all high street bank accounts, including current


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accounts, basic bank accounts and small business accounts. The high street banks and POL need to promote this service vigorously. The Post Office should develop services, which could include a budgeting account and/or credit union access, for Universal Credit claimants. A state-backed Postbank offering distinctive high quality services to all sections of society, including small businesses, should also be developed. A truly comprehensive range of central and local government services, complementing online provision, must be provided at post offices. It is vital that many of these services result in frequent repeat transactions at post offices. Subpostmasters must be paid reasonable rates for providing the transactions for government services. Competitive tendering exercises in which contracts are awarded at rock bottom prices, will not keep a national network of post offices open.


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Appendix Further details of the survey sample: A sample of 3,000 randomly selected NFSP members were sent a postal questionnaire for this research; and a total of 743 questionnaires were returned, a response rate of 25%. Region The research surveyed subpostmasters across the UK. Region No. subpostmasters % England 601 81% Scotland 93 13% Wales 28 4% Northern Ireland 21 3% Base: subpostmasters supplying this data (743) Geographical area Subpostmasters were asked to indicate whether their offices were based in rural, deprived urban or (non-deprived) urban areas. Area No. subpostmasters % Non-deprived urban 167 23% Deprived urban 92 13% Rural 454 64% Base: subpostmasters supplying this data (713) Counter positions Subpostmasters were asked to give the number of counters in their post office. No. counters No. subpostmasters % One 282 44% Two 196 31% Three 109 17% Four 34 5% Five or more 21 3% Base: subpostmasters supplying this data (642)


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Staff Subpostmasters were asked about the number of full-time and part-time staff, excluding themselves, working in the post office and attached business (if any). Average total no. staff 2.8 Average full-time staff 0.8 Average part-time staff 2.1 Base: subpostmasters supplying this data (643)

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