Post Office calls for ID contract to cut closures (UK)

Ministers are being urged by the Post Office to give it valuable contracts to take over the distribution of ID cards, biometric data, and e-passports, in a bid to save it from a further round of politically-damaging closures, and loss of customers.

The organisation is arguing in private talks with ministers that it is best placed to take on some of these contracts since it is already responsible for checking passport applications and has an existing national network to draw upon. Ministers in both the Department for Business, Enterprise and Regulatory Reform and the Home Office are stressing that they cannot hand out the contract without open commercial competition, but see both political and business advantages to a deal.

Ministers have met top figures in the Post Office to discuss the contracts, and other ways in which government can provide customers, after the Post Office was criticised for a sweeping closure plan.

Post Office retention of such contracts of national necessity is vital if ministers are to persuade the European Union that government subsidies remain lawful under EU law. Brussels has approved a subsidy of GBP 150m a year to enable the parent company Royal Mail, wholly government-owned, to run a network of 11,500 post offices by keeping loss-making branches open.

The government has sanctioned the closure of 2,500 post offices by the end of the year in a programme that has met fierce resistance across the country, but is designed to cut post office losses. The network lost GBP 200m in 2006-7, while Royal Mail is handling 3m fewer letters a day than last year. Ministers are being urged by the Post Office to give it valuable contracts to take over the distribution of ID cards, biometric data, and e-passports, in a bid to save it from a further round of politically-damaging closures, and loss of customers.

The organisation is arguing in private talks with ministers that it is best placed to take on some of these contracts since it is already responsible for checking passport applications and has an existing national network to draw upon. Ministers in both the Department for Business, Enterprise and Regulatory Reform and the Home Office are stressing that they cannot hand out the contract without open commercial competition, but see both political and business advantages to a deal.

Ministers have met top figures in the Post Office to discuss the contracts, and other ways in which government can provide customers, after the Post Office was criticised for a sweeping closure plan.

Post Office retention of such contracts of national necessity is vital if ministers are to persuade the European Union that government subsidies remain lawful under EU law. Brussels has approved a subsidy of GBP 150m a year to enable the parent company Royal Mail, wholly government-owned, to run a network of 11,500 post offices by keeping loss-making branches open.

The government has sanctioned the closure of 2,500 post offices by the end of the year in a programme that has met fierce resistance across the country, but is designed to cut post office losses. The network lost GBP 200m in 2006-7, while Royal Mail is handling 3m fewer letters a day than last year.

Identity cards will be introduced for foreigners from November, and the government will be extending the scheme to 200,000 British workers in high security jobs such as airports next year. Latest thinking suggests that the scheme will be extended to UK passport applicants from 2010. ID applicants could, under the proposals, be expected to give fingerprints in a post office. The contract value for distributing ID cards, and checking the applications forms is likely to be in the region of more than GBP 200m a year judging by information given to parliament by the Home Office. The contract is likely to be awarded next year. The bulk of the GBP 4bn plus costs of ID cards over 10 years goes in the development of the biometric system and the information storage.

The Post Office has said that it "strongly desires" to maintain a network of 11,500 post offices plus 500 new outreach access points, or part-time offices, and it should be able to do this until 2011 when the current subsidy expires. Some local authorities, led by Essex county council, are bidding to take over local post offices earmarked for closure, offering them a council tax subsidy to keep them open as a service.

The Post Office already offers insurance and foreign exchange and is also looking at payment of the London congestion charge, retention of the Department for Work and Pensions card account, and the distribution of council tax benefit as other ways of raising revenue.

Increasing use of the internet for renewing car tax discs and the loss of the contract for TV licence renewals to the rival PayPoint network have already hit the Post Office.

The government's current criteria on public access to a local post office can be met by retaining 7,500 offices. It remains sceptical that councils will be a long term means of keeping many offices open even though between 50 and 100 councils have shown interest in taking over offices earmarked for closure.