· Urges joint approach between postmasters and Credit Union movement to deliver on standard bank account
· Announces “all of Government exercise to see what business can be driven through the post office network”.
Dáil Éireann, Private Members’ Business
Tuesday, 25th February 2014
A Cheann Comhairle, I very much welcome this debate on the future of the post office network and I am glad of the opportunity to contribute. The post office has a unique standing in Irish life and is an institution that is trusted and highly respected by the people. Apart entirely from its significant economic contribution, over the years the post office network has evolved a social role, in the widest meaning of the term, which is highly valued by local communities. Perhaps that social role is most valued in rural Ireland, where 64% of the post office network serves 38% of the population. Notwithstanding the changes wrought over the decades, the post office network has stood firm, as is testified to by the 1,147 post offices doing business today.
Obviously I have been disappointed to read headlines in recent days asserting that 557 post offices are to close. The impression is given that somewhere, somehow, the Government has announced that there is a plan to shut down post offices. There is no such plan. Unless there is a compelling case, the Government doesn’t want to see a single post office closed. And the Government welcomes the fact that, although 197 post offices were closed between 2006 and 2010, only 17 closures have occurred since 2010.
Of course An Post, like everyone else, has not escaped the challenging economic environment since the economic collapse in 2008. More challenging still is the diminishing mail volume, which is due to technological advances. These hugely influential factors are appreciated at every level of the postal network and ignored by nobody except the authors of this motion. The economic collapse and the onset of the digital economy must be factored into any serious assessment of the future of the post office network.
Some Deputies may be wondering – and certainly some callers to my office are querying –where did the headlines about post office closures come from? The answer is from a consultancy report that presumes the loss of the social welfare contract (worth €50 million to An Post) and calculates that such a loss would in worst case scenario lead to the closure of 557 post offices.
But the point is that An Post didn’t lose the social welfare contract. In fact they won it in a tender process as recently as last year. So the Irish Postmasters Union is prudently asking what might happen into the future.
Therefore, I believe tonight’s motion gives all sides of the House a useful opportunity to have a full and frank debate on the future sustainability of the post office network. While the motion as proposed leans towards a more pessimistic view of future changes, I believe that there is every reason to be more optimistic about the new opportunities that lie ahead for the post office network in the digital age.
I say this because, looking at the overall results of An Post, I see that the retail network business has actually grown over the past five years, even as the mails business has been contracting very sharply. Some may say that this is due to unique factors such as Social Protection payments and demands for NTMA products. I disagree. I see a post office over-the-counter business that today is offering very different services from what it offered in the past, including foreign exchange, passport services, bank agency services and tax payment services. These services are provided in a competitive environment to customers who can choose to do business in other ways. The fact that so many of the Irish public use these services bears testament to the quality of front line staff and the capability of management teams working to support those staff.
For that reason, I cannot accept the motion as proposed but I do wish to acknowledge some of the important issues and challenges raised by it.
The post office network is a unique social, cultural and financial institution that makes a vital contribution to the Irish economy. The post office is the provider of choice to a vast number of the public, who regard it as a dependable, trustworthy and friendly service.
The professionalism of the postmasters, the unions and the Board and management of An Post has served the network well down through the years and I do not see any reason why this should not continue to be so in the years ahead.
An Post is a trusted brand, viewed as a local reliable service in both urban and rural areas of the country. An Post has the largest retail presence in the country with over 1,100 outlets nationwide reaching almost 1.7 million customers. Its accessibility to virtually everyone in the country is one of the company’s main strengths.
In recent times, An Post, like everyone else, has faced up to a challenging economic climate. Also, the company has had to tackle diminishing mail volumes and seek alternative avenues of income.
The reality is that the core mail business of An Post has suffered a major fall and this has impacted seriously on the company’s revenue flow. In response, the company is proactively seeking to keep costs down and to diversify its business.
As Minister for Communications, I am keen to see the development of a digital economy and to further progress the digital agenda. E-substitution affects every aspect of our lives and undoubtedly has an impact on the traditional over-the-counter services offered by the post office network. Increasing use of newer technologies is a simple fact of life, but this should be viewed as an opportunity to grasp rather than a problem to eradicate.
An Post has undertaken a programme of capital investment, particularly in computerising and automating the post office network, introducing new products and greater market investment. As a result, post offices now stand well placed to provide electronic as well as the more traditional financial services. Indeed, while the move toward further electronic transactions is inevitable, there are still many people who are not comfortable dealing with machines and who prefer a face to face service. An Post stand in a unique position to offer electronic services to such customers while not losing the personal engagement that the customer requires.
An Post face the same challenges faced by all commercial organisations in developing new strategies to adapt to the greater role of e-commerce in the economy. In the face of these challenges, An Post has made great efforts to expand their business and I have been supportive of its attempts to diversify income streams and to win a wider range of commercial contracts offering higher profit margins.
Indeed, I believe that Postmasters and An Post can go further to develop new business. I am thinking for example of the potential to roll out a Standard Bank Account – perhaps this is an area where a post offices might come together with the league of Credit Unions to offer a solution.
The Irish Postmasters’ Union commissioned Grant Thornton to review the post office network’s range of contract services and their two reports, one published in 2012 and the latest one this month, outline options for new commercial business arrangements. I should also reference the report of the Joint Oireachtas Committee on Transport and Communications published last year, which highlights a range of opportunities that could be pursued and acknowledges the high regard in which the network is held and the confidence that people have in the post office.
The fact that 64% of the post office network is located in rural areas brings in another factor, in relation to rural sustainability and future development. There are wide range of issues to be tackled to ensure the economic continuity of businesses and communities in rural areas.
While operational matters and the development of commercial strategies in relation to the post office network are a matter for An Post, it is true to say that I, as a shareholder, have a strong interest and concern regarding the future sustainability of the company.
This is backed up by the commitment in the Programme for Government in relation to ensuring the sustainability of the post office network and indeed the cross-party acknowledgement that the network provides a vital national strategic asset.
For these reasons, I am pleased to announce that Government has agreed a whole-of-government consideration, encompassing central and local government and the wider public service, of the nature and extent of services that can be provided to the public using the post office network as a “front office of government”.
This whole-of-government analysis will be undertaken in the first instance by the Cabinet Committee on Social Policy with a view to a report to Government by that Committee.
This will afford an opportunity for a holistic review of the range of services which could be provided by the post office network and could perhaps yield synergies among the various agencies.
I have to stress one point, however. An Post is a commercial State company that earns its own keep and receives no
Exchequer subsidy. I and my colleagues cannot arrange a hidden subsidy for it by dictating that all or even any Government business is automatically given to An Post. These are commercial contracts that must, under EU and Irish public procurement law, go out to competitive public tender between all interested parties.
The Department of Social Protection is in the course of making significant changes in relation to the delivery of its services on a nationwide basis. Notwithstanding this, it will remain for the foreseeable future the most significant corporate customer of the post office network. The winning by An Post of the tender for the over-the-counter cash payments for social welfare during 2013 will have an important stabilising effect on the company in the short to medium term.
However, technological change, consumer choice and expectations and the actions of An Post’s competitors will give rise to substantial new challenges in the years ahead. The priority for Government is that An Post is in a position to compete for and win contracts for payment services independent of the technology platform.
An Post may be the best known and most successful indigenous brand we have. But this will not suffice if it is not able to provide the services demanded by its customers in the way that those services are required and in the location where those services are needed.
The nature of the post office counters business and the traditions embodied by it do not make it easy to transition when change is required. I believe it is fundamentally wrong for the State as shareholder to constrain the capacity of the company to provide competing services where these are demanded by its customers.
I think it’s important to reflect briefly on the experience of the Irish retail sector as a whole over the past decade. Deputies will be aware of the enormous changes wrought on the sector by a number of key structural forces.
The first is the scale of the recession and pre-existing credit bubble which has, more than any other single factor, led to retail shut-downs. The evidence is that post offices – particularly larger offices – have been protected from the worst impact of economic decline because their business is social in nature, relying on a high volume of transactions conducted on behalf of the Department of Social Protection. But the smaller offices have been affected by movements in trade resulting from the closure of adjacent business.
Post offices have traditionally been based on the High Street. This is fine so long as the bulk of retail activity takes place there. But when activity moves to a nearby shopping centre, consumers show a preference for on-site provision of service, rather than walking to a separate location to conduct their business. An Post might regret the fact that this physical transfer of business is taking place, but it will ignore it at its peril. It is certainly not ignored by An Post’s competitors. This is where they are establishing their points of presence.
The second factor I would list is the scale of youth emigration, particularly in the regions, which has sharpened the impact of recession.
The third is the extent of e-substitution, which is rapidly changing the shape of bricks-and-mortar retailing – most notably in the whole area of over-the-counter business and services. Companies and business that do not have an electronic channel to market will suffer. The Government’s digital strategy recognises this reality and seeks to accelerate the move forward by SMEs. There really isn’t much point in expecting the world to stand still while An Post remains committed to over-the-counter business. The reality is that An Post’s competitors are moving quickly into the space of electronic transactions. An Post is obliged to respond to this if it is to retain its pre-eminent position in the market place. If competitors can offer electronic services at a cost much lower than over-the-counter transactions, it is unreasonable for us to impede An Post from also providing these electronic services.
Fourth, there is the phenomenon of retail concentration. Commercial and trading businesses are moving out of small rural towns into supermarkets based in larger county and provincial centres. An Post’s competitors are establishing a point-of-sale presence in the larger retail outlets, where the bulk of the population conduct the bulk of their weekly shopping. That presence represents a significant threat to the company if it does not respond.
The Government’s counter motion is based on three principles:
· It builds on the core strengths of the existing post office network
· It addresses the need for future sustainability by focussing on competing for and winning new business
· It engages all key public sector stakeholders in a whole of government consideration of the scope for service provision.
The long-term health of the post office network requires focussed, long-term company action, in cooperation with Government, and not an approach that may be based on the best of intentions but is not based on an enduring capacity to deliver competitive services, freely chosen and locally provided.
There is no doubt that further challenges will present themselves in the years ahead. Prevailing against these challenges will require dedication and hard work. I am convinced that An Post possesses the capacity and drive to adapt to the changing needs of customers, as well as the necessary commitment and resolution to continue to develop the post office network. In doing so, they will have my active support and that of the Government.