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Post Bank Coalition event

Pat McFadden MP,  Minister for Business, Innovation and Skills
London,  17 March 2009

Thank you very much.

I'm very pleased to be here today sharing the panel with such an illustrious group and sharing this meeting with all of you.

And we're here because we want to see a secure and sustainable future for the Post Office.

We know that the Post Office is close to the nation's heart. It has an unrivalled presence in every community.

Nationally some 99 per cent of the population lives within three miles of the post office and about 93 per cent of the population are living within a mile of a post office.

So the Post Office has a reach well beyond banks, well beyond supermarkets. It has a presence in every community in rural areas and in urban areas.

And on top of that reach the Post Office is also a trusted institution, it's a trusted organisation.

Now that trust, I think, gives the Post Office a great potential to develop new services. The amount of pensions and benefits paid out by the Post Office has of course declined in recent years as people have changed their habits.

Nine out of ten new pensioners now choose to get their pension or benefit paid directly into the bank and those numbers are unlikely to change because the internet and direct debit have changed the way that we do things.

And the impact of that is partly because we live in a world where time is a precious currency for people and the capacity to do things outside normal hours is appealing and attractive.

So all of this means that, for Government and the Post Office, the future can't be about pressing the rewind button.

It can't be about taking online services away.

Nostalgia is not a currency that the post office can survive on.

It has to survive on new ways of business and that's what we're here to talk about today.

Now in government we're playing our part.

We have recently, as people will know, renewed the contract for the Post Office card account for the next few years and that offers the Post Office a very important and valuable sense of stability for that part of its income.

And that isn't just a valuable service for the four million people who hold a card account.

It also brings very valuable custom into the shops which then benefits the retail side of the Post Office or the sub post master.

So that's very important.

And I don't believe a potential for further government work stops there.

For example we've got a new savings gateway scheme for people on low incomes where the Government will try to help people save – even if it's only a few pounds – and we want that service to be available through the Post Office network.

And also, as the new generation of passports, driving licenses and potentially identity cards in the future become available, the Post Office is well placed to do a lot of the work in the provision of that service and that's something that I know Post Office Limited are very interested in.

Government also plays a direct role through subsidising and supporting the Post Office network directly.

We provide a subsidy of around 150 million pounds a year without which many thousands of post offices would not be able to survive and that's part of an overall package worth 1.7 billion pounds between 2006 and 2011.

We do that because we don't believe that the Post Office is purely a commercial service.

We understand its role in financial inclusion. We understand that it's often the only cash outlet in local communities.

So Government takes this seriously. Ministers across Government have to think about potential new areas of government work for the Post Office. And the all party BERR select committee in the House of Commons has also been asked to work on this.

And that brings me to the other area that today's pamphlet discusses – financial services.

This has been a growing area of success for post offices in recent years.

An MP came to see me last year about the Post Office closures in his constituency and he said: “I'm trying to think of new areas for the post office to work in and I think I've got it!” And I lent forward expectantly and said “what should we be doing?” He said: “Foreign currency, I think we need to get into foreign currency.”

And I said to him: “The Post Office is already the UK market leader in foreign currency.”

I don't think enough people know that you get a great service from the Post Office – not only in foreign currency but also in insurance, in credit cards and in many other products.

We know the importance of free to use cash machines in local communities. The Post Office is in the middle of a programme to role out 4,000 of those over the coming period and that is also very important.

So I believe there is great potential for the banking services to grow. This has the potential to be a really important part of the Post Office's work in the years to come.

Post Office management are very firmly focused on this and I think it could be a significant part of attracting more people to come and use the Post Office.

Now of course we can debate precisely how that is done. But I think the important thing is the opportunity that this area represents for the Post Office.

It has to branch into new areas if we want to see a secure stable and prosperous future for the network that everybody in this room wants to see.

And let me just end by saying a word about how this relates to debates about the Royal Mail.

As you can see, I am very keen to see the Post Office expand its banking role. But I'm also clear that, given the Post Office survives on government subsidy, given the size of the Post Office in relation to the overall Royal Mail network, this would not be enough on its own to deal with the challenges that Royal Mail faces.

A greater banking role can certainly help us secure the future of the Post Office network but it cannot, on its own, deal with problems like falling volume of mail or the pension deficit or other wider issues in Royal Mail.

Now our plans would see the Post Office having its own board, having greater freedom to pursue new services within the overall Royal Mail family of companies, and they also might make innovation easier for the Post Office than is the case under the current structure.

So, in conclusion, I think there is great potential for the Post Office in more banking and financial services.

And I think it's got to look to the future rather than the past in terms of the services that it provides.

We know there's a big opportunity in banking, we know the Post Office is a trusted brand, we know it has a reach greater than many other institutions in local communities.

That is what has brought us here today, that's what unites us and that's what we should concentrate on in this debate today.

Thank you very much.