Public benefit in mutualising Post Office, say UK ministers

The UK government has concluded that Post Office Ltd employees should become owners of the organisation under a mutualised structure. Reporting back after a public consultation, ministers said stakeholders’ views suggested clear public benefit in the network of 11,800 post offices moving to the kind of structure that has worked well for retail groups like John Lewis and the Co-Operative Group.

The change in ownership of Post Office Ltd now requires Parliament’s approval.

The government’s Department of Business, Innovation and Skills said before any change in ownership can occur, a “mutual culture” needs to be created within the business of nearly 8,000 staff and more than 8,000 sub-postmasters. A new Stakeholder Forum has now been set up to develop this culture.

And, the ongoing GBP 1.34bn modernisation programme must continue so that the network attains financial stability, ministers said. The programme involves modernising 6,000 post offices, creating “main” branches and streamlined “local” branches.

Although no fixed timetable has been set for mutualisation, Norman Lamb, the postal affairs minister, said he now wants to begin the move towards a mutualised structure by the autumn.

“I want clear progress to have been made towards mutualisation of the Post Office by the end of this Parliament,” Lamb said.

“This will entail building a mutual culture within the business. And, of course, the Post Office must move to a position of greater financial stability, which is why we are investing in network transformation.”

Last year the Post Office grew its revenues for the first time in six years, but while revenues increased by GBP 25m compared to 2010-11, GBP 30m came from an increase in the government’s network subsidy payment. Not including modernisation costs, the network saw its operating profit increase from GBP 21m to GBP 59m year-on-year in the year to the end of March.

In April 2012 the company separated from Royal Mail, becoming a sister company under government ownership, rather than a Royal Mail subsidiary.

Enthusiasm

Publishing its response today to the consultation carried out at the end of 2011, the government said there was enthusiasm amongst sub-postmasters and Post Office staff as well as the wider public for a stake in the organisation.

The government said mutual businesses have shown a higher quality of service, better staff conditions, reduced absenteeism and better productivity.

Ministers concluded that ownership of Post Office Ltd should include representatives of both employees, sub-postmasters and retail partners, and that there should be some way to include the consumer as a voice within the organisation, with the board and executives running the day-to-day operations.

Post Office Ltd chief executive Paula Vennells welcomed the government’s findings and said she would be leading the Stakeholder Forum seeking to develop a mutual culture in the business.

“Alongside this, we continue to build on the good progress we have made in improving our financial sustainability and in employee and stakeholder engagement, both important for a successful transition to mutualisation,” she said.

The National Federation of SubPostmasters (NFSP) said mutualisation was “essential” for Post Office Ltd, but warned that it could only be successful if the business is profitable.

The NFSP general secretary George Thomson said: “All stakeholders agree that Post Office Ltd can only become a mutual if and when it is on a secure financial footing.

Many stakeholders see achieving profitability of the currently subsidised Post Office network as key to mutualisation actually going ahead

“This can only be achieved if the government makes good on its promise and begins to deliver substantial new work through post offices, and if Post Office Ltd can make real headway in tackling its central costs.”

“Best hope”

Co-operatives UK, the trade body for mutual organisations, which helped develop the government’s proposals for mutualising Post Office Ltd, said it believed the UK post office network would now be mutualised “within a few years”.

Ed Mayo, the group’s secretary general, said of the government’s proposals: “While a strong degree of risk clearly remains on the commercial side, this is now the best hope for a sustainable post office network in the UK.”

National consumer watchdog Consumer Focus said it would be a “long journey” to mutualise the Post Office, but that the move was a “great opportunity”.

Andy Burrows, the Consumer Focus head of post offices, said for the new system to work there would have to be strong representation from consumers.

“The acid test for designing a mutual is that it delivers benefits on the areas that matter most to those that use them,” Burrows said.

“Post Office Ltd needs to adopt the principles of mutualism now – working together, being responsive, listening to customers – as it begins to implement its Network Transformation programme.”

Union concerns

The Communication Workers Union said it had concerns about the mutualisation, stating that future financial sustainability at the Post Office was “far from assured”.

The union, which expects to participate in the new Stakeholder Forum on mutualisation, said the suitability of a mutual model was “still unclear”. The CWU also suggested there was a “lack of clear support for mutualisation”.

“We’re in favour of a successful operating model for the Post Office which delivers high quality services to communities across the UK, and if mutualisation can do that then that’s great,” said Billy Hayes, the CWU general secretary.

“However, in our view, ownership hasn’t been the problem for the Post Office. Sustainability is ultimately about business success and funding and we find it hard to see a loss-making organisation being mutualised.”