UK’s Post Office could be mutual organisation by 2015

The UK’s post office network could move to become a mutual organisation or co-operative before the next general election, the government stated yesterday. The Post Office Ltd, which oversees nearly 12,000 post office branches across the UK, is set to remain in public ownership when the Royal Mail Group is broken up, with the Royal Mail destined for privatisation.

But under the government’s plans, the Post Office Ltd could only be owned by the government or a mutual organisation.

The government is currently awaiting recommendations from co-operatives trade group Co-Operatives UK on a potential options for the design of a mutual post office network.

But speaking in Parliament yesterday as the House of Lords continued to probe proposals within the Postal Services Bill, minister Baroness Wilcox said the government was “very keen” to see Post Office Ltd staff and franchisees involved in running the business.

“The government believe that mutualisation of the Post Office could be ideally suited to the particular economic and social role it plays up and down the country,” she said.

Anticipating the results of the government’s £1.34bn investment programme, launched last November to modernize the post office network, the government’s junior minister in the Lords said the organization could be ready for mutualisation before voters return to the polls in May 2015.

She said: “We believe that the Post Office could be in a financial position that would allow for the possibility of mutualisation by the end of this Parliament.”

Mutual

The exact shape of a mutual Post Office Ltd is yet to be decided, but the minister said it would not see shares in the company that could be sold by members, while the organisation would be required to submit its annual accounts to Parliament.

A member-owned mutual Post Office could take a similar form to the John Lewis Partnership, a chain of 32 department stores in which all permanent employees are partners and receive a share of profits.

But although peers praised the success of the John Lewis chain, the Labour peer Lord Stevenson suggested that a profit-share system might not appeal in an organization that still relies on a “significant” subsidy from the government, particularly if a partner-based system meant employees sacrificing their collective bargaining rights.

He said: “Perhaps in this case a more attractive mutualisation model will be one that extends the participation of the workforce in the day-to-day running of the business beyond being simply the passive recipients of profit share schemes.”

Co-operatives UK has already been consulting with stakeholders on the options for mutualisation, but while the ultimate decision on mutualisation would be for the UK’s business secretary to make, Baroness Wilcox said a full public consultation would be required before any changes are made.

Branch closures

The Post Office Ltd currently has about 11,900 post offices, most of which are run by franchisees, with 373 directly managed by the company itself.

Some 2,500 branches have closed since 2007 and 6,000 since 1997, but last November the government pledged not to require any more branches to close.

Yesterday saw Baroness Wilcox repeating that pledge, but fending off attempts to set such a promise in stone with an inclusion in the Postal Services Bill.

Peers expressed concern that under the government’s current criteria for the location of post office branches, the network size could shrink to as few as 7,000 to 8,000 branches – with closures particularly likely in rural areas not best served by broadband internet providers.

But the minister said there should not be a legal requirement for the current network size to be maintained, stating that proposals to “press the metaphorical pause button” on the current situation were “unrealistic”, particularly given the large number of branches owned by franchisees.

The Baroness said: “To ensure the Post Office has a vibrant future, it must be allowed to develop, to modernize and to evolve.

“It must focus on its customers, reaching out to new customers and winning back those who have drifted away. Major modernization is needed in order to address the underlying economics of the network.”

The government is aiming to see areas that cannot support full-service post offices provided with branches or counters providing only core services.

“We cannot, and should not, expect the Post Office to provide all its 170 services at all branches across the entire network,” the minister said yesterday. “It makes far better commercial sense for sub-postmasters and sub-postmistresses to focus on the key services that most people need to use most of the time.”