We have representatives from An Post with us today to inform us about the future it envisages for the post office network. I welcome Mr. Donal Connell, chief executive, and Mr. John Daly, retail operations director, An Post. I draw attention to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by it to cease giving evidence on a particular matter and continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against a person, persons or an entity by name or in such a way as to make him, her or it identifiable. I wish to advise that the opening statements submitted to the committee will be published on its website after the meeting. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable. I call on Mr. Connell to make his presentation.
Post Office Network: Discussion with An Post and Irish Postmasters' Union
Mr. Donal Connell
I thank the committee for the invitation to address it today. My name is Donal Connell and I am chief executive of An Post. I am accompanied by John Daly, our retail operations director. I have been asked to discuss the future role of the post office network as well as the development of a postcode system. I will address the latter issue first.
The Department of Communications, Energy and Natural Resources is currently managing a tender process to evaluate proposals for the implementation of a postcode system. An Post is actively participating in this process. Consequently, the committee will appreciate that I am not in a position to elaborate further on this matter, as the process is ongoing.
During my address to the committee last April, I described the business environment in which we operate as tough, particularly given the decline in mail volume. Today this continues to be the case. However, our subsidiaries and retail businesses are performing well despite significant pricing pressure in the market. I also detailed the make-up of our retail revenue stream illustrating the importance of Government business to us and I mentioned that we continue to provide new products and services to our customers. The size of the post office network is crucial for our commercial agenda. Its very scale allows us to service our customers' needs across the country. The reach of our network has attracted business as diverse as bill payment and banking services for major organisations, the provision of social welfare payments and foreign exchange. In fact, our analysis, using our geo-directory data, shows that over 99% of addresses in the country are within 10 km of a post office and 93% are within 5 km of a post office.
It would be useful at this stage to point out that our post office network is made up of 57 company-owned outlets and the balance are owned and run by independent retailers who carry out their business under contract to An Post. They are highly reliant on the volume of customers and transactions to maintain a viable business. Together, this group employs approximately 3,000 people in communities the length and breadth of the country.
The discussion in April also focused on the manner in which post offices close. I hope all the members have seen our subsequent response. We listened to what was said and took note of the issues raised. We have subsequently adjusted the way we will deal with a post office where the circumstances of tenure have changed, by which I mean where a postmaster decides to retire, terminating the contract I mentioned early, or where a postmaster dies or in the rare circumstance where there may have been some irregularities. In these cases, we may be of the view that service should continue in that location and if so, we will advertise the contract as usual. In cases where we feel we can service our customers just as effectively at other offices, we will advertise this within one week of becoming aware, we will seek comments from interested parties over the following three weeks and we will then consider any input before making a decision.
During this process we will take into account the following parameters - national network coverage, because we need to maintain geographic national network spread; business levels; customer access; the requirements of our mail delivery service; and the capacity of neighbouring offices to satisfactorily handle the business that would be transferred to them. We will, of course, also review the suitability and financial stability of anyone who applies to take on a new contract. I wish to stress once more that it is the viability of the overall network which is important to us.
I will now focus on the make-up of our retail revenue stream. Our own mail business accounts for 17% of post office revenue and, unfortunately, this is declining in line with mail volumes. The provision of service to the Department of Social Protection, DSP, amounts to 29%, the very successful State savings products amount to 28%, bill payments amount to 10%, licence services are 6%, money transmission is 4%, with banking and others accounting for the remaining 6%. It is obvious, therefore, that Government services are a core part of our retail business and their provision is part of our core competence.
We continue to introduce new products and services such as PostFone and foreign exchange as well as expanding our financial service offerings to customers. At this point I wish to recognise the fact that our postmasters and staff have shown their ability to adapt and to provide an increasing number of service offerings over recent years. It is also testament to the power and reliability of our transaction technology and the people who ensure its continued functionality.
We also own 80% of the National Lottery Company with the Department of Public Enterprise and Reform owning the balance. The Minister, Deputy Brendan Howlin, has announced that the licence will be put out to tender in the near future and we intend to participate actively in that process, more than likely in a partnership arrangement, and the company is examining a variety of options as we develop our approach to the forthcoming competition.
Indeed, since I addressed the committee in April, we have announced that we will be taking over the personal and motor insurance business of Aviva as it closes its offices around the country. The members may also be aware of the recently announced programme of branch closures which AIB will implement in the near future and we look forward to serving the bank's customers at nearby post offices into the months to come. The two major DSP and National Treasury Management Agency, NTMA, contracts which make up 57% of An Post revenue each year, expire in late 2013. The retention of these two contracts is vital to the maintenance of a self-financing nationwide post office network. We have been in discussion with various Government Departments over many years about the provision of more services through our network. We have identified transaction-based activities which we can provide seamlessly on their behalf.
Having successfully integrated our counter automation system with online engines, An Post can now offer an extensive retail network while maintaining many of the efficiencies of the online offering. We can also offer Government access to a variable cost model which can react flexibly as more transactions migrate online. Our service to AIB and NIB are good examples of this approach. We welcome the recent report produced by Grant Thornton and commissioned by the Irish Postmasters' Union. In fact, we were already working on the bulk of the initiatives highlighted in it and we welcome its support in this regard. This report has also identified the scale of the potential savings for Government. I realise that any such specific service requirements will normally be subject to tender, but it is important that the committee is aware of the innovative solutions, technology based and otherwise, which An Post is providing and can provide efficiently and competitively across a range of Government services.
The Minister for Communications, Energy and Natural Resources, Deputy Pat Rabbitte, is fully supportive of An Post and its activities and wishes to see the company prosper. I have recently written to him with details of ten contracts which we could deliver including: motor tax renewals; driving licence renewals; HSE patient charges; household charge and property tax payments; second home payments; water charge payments; Courts Service fines; registration and payment for septic tanks; rail ticket sales; and the production of the electoral roll. We know we can provide these services efficiently and at the same time help generate savings for the Government Departments concerned. We also know that these contracts would have a favourable impact on the sustainability of the post office network.
As I mentioned earlier it is the scale and penetration of the post office network which is attractive to the general public as well as to our corporate customers. Our network density is greater than the European average per capita so our customers are well catered for. The programme for Government calls for the maintenance of the network of post offices. We believe this can continue to be achieved by a combination of cost reduction, innovation and new product development, of which further Government services will be an important element. We see our role as maintaining the largest possible retail network which overall is commercially sustainable without becoming a burden to the Exchequer.
Our view of the scale and extent of the network is governed by the parameters I outlined earlier, namely, geographic coverage, business levels, customer access, the requirements of our mails business and also the capacity of nearby offices to handle the business which would transfer to them. Equally, our strategy for the future of the network is informed by these same principles. At present, based on current business activity, we will hold the network at around its current size. However, we must maintain some flexibility in recognising the realities of doing business in modern Ireland. As population and shopping patterns change, so too will the shape of the network. This could mean the permanent closure of a small number of post offices but it could also mean the opening of new offices, such as in Citywest, Dublin, and Johnstown, County Meath, and a change of location in other cases.
In summary, we aim to develop additional revenue streams from all sectors, including the Government sector. We will continue to do an excellent job with current products and services. We intend to maintain the network at around its current size. In doing so, we will continue to focus on cost reduction and efficiency and the ongoing use of technology, as well as investment in capability and training. Above all, we will conduct our business in a safe and secure environment. That is our strategy. That is our vision for the future of our post office network located within easy reach of customers across the length and breadth of the country, and a network which is relevant and satisfies our customers' needs today and will do so into the future. I would welcome any assistance the committee can provide in achieving this common objective.
I thank Mr. Connell for his informed overview. It will lead to many questions from committee members.
I thank Mr. Connell for appearing before the committee. This is not the first time we have discussed post offices. Post offices are very important to people. I am interested in the breakdown of where the business now lies. There is a danger for Ireland to want nostalgically to maintain the services people are walking away from. I was at a meeting one day and the local postmistress was in attendance. All the people in the meeting wanted was an ATM in the village because young people prefer ATMs to going to the post office to get their money. Mr. Connell has outlined a new role for the post office and maybe we should not call them post offices. We may be moving towards general service offices that provide a range of private and public services, including postal services. Mail represents 17% of revenue, meaning 83% is something else. Of the remainder, the private sector services are competitive. I presume the main selling point in doing so is good technology and a wide geographic base. I understand a map was made available to the secretariat but the format it came in meant it was too large to send to Members. It would be useful if we could get a copy of the map. There is nothing like a map to show us what we have.
Regarding public services, if we ask any Minister about whether the service will administer car tax, the Minister will reply that it is not his function. I am interested in the view of Mr. Connell on this point. We need a clear Government policy that, in the interests of services to the citizens, as many services as possible should be available through post offices. Each Minister can make an individual decision rather than the collective position that we have an intensive network of local offices. Where possible, it should be sought to ensure the services are available to people through a local public service office, which is currently called the post office. We need a clear Government policy on this issue so that we do not get the debacle of the household charge. I am not referring to the point of whether to pay it but that those who wanted to pay should have been able to do so at the local post office.
The social welfare contract is of vital importance to the consumer of social welfare services and to post offices. I hope the Department of Social Protection insists that, when it goes out to tender, it provides for offices that are open every day and that this includes offshore islands where there is a viable population. If that was to be removed from the viable service An Post can provide, it would be detrimental to the service. Also, it would challenge the viability of the post offices providing other services.
Many people can write e-mails but are not happy to fill out complicated forms online. With the introduction of the public services card and its PIN, the post office should be a place where people can get departmental forms filled online rather than filling out paper forms. It would save money and time in Departments and State agencies. It would also provide for the services of social welfare and publicjobs.ie. The staff could fill in the forms once the person had produced the public service number and authenticated it with the PIN. We could do many things with the post office. I welcome the comments of Mr. Connell. Working together, I hope we can ensure the post office network is developed in a modern way because depending on e-mails will ensure its demise.
With the agreement of the committee, we will take groups of three questions. Members should make their contributions as brief as possible, to give everyone a chance.
I thank Mr. Connell for his presentation and acknowledge the fantastic social and economic service to the people of Ireland, particularly those in rural Ireland, and the importance of maintaining the service and the network. I have concerns that certain post offices will close and be lost to the communities they serve. That is a worry for rural Deputies, who are extremely grateful for the benefits the service provides as a social service as well as a service in itself.
Are earnings from the National Lottery Company kept completely separate? Does Mr. Connell envisage mail business continuing to decline in the coming years due to the increase in online communications? Can Mr. Connell enlighten the committee on the extent of concerns about the decline in mail and the consequences for the post office? We are very concerned, particularly about the consequences of the decline in isolated areas. Are the jobs of the workers employed in the network secure?
I welcome the witnesses. An Post has provided an excellent service throughout the years. It continues to do so and there is scope for it to continue. Like Deputy Ó Cuív, I agree that we must adapt to changing times but we cannot throw out the baby with the bathwater. We must blend new services, thinking and needs with current needs and services. Has An Post sat down with the Irish Postmasters' Union, IPU?
Can someone turn off that mobile telephone? It is Deputy Mattie McGrath's telephone.
Modern technology. Post office networks have modern technology. They are all online.
Somebody is trying to get through to Deputy McGrath.
Has An Post sat down with the IPU and discussed the strategy for closure or upgrading of post offices and the transfer of contract or enhancement of services? In my area, Bansha, and in Kill, County Waterford, what happened was ham-fisted and unclear. Mr. Connell outlined the way it should be advertised. While that is down on paper, it was not adhered to in the case of Bansha. The position had to be re-advertised. The current system of advertising is not reaching the audience and people are not aware of it. The message was blunt. Is it true that the contracts have been changed unilaterally? Heretofore, when a postmaster retired or passed, the post office could pass on to a family member. I understand that Mr. Connell will want to set up a new contract, whether the postmaster is in situ or passing it on for five years. It is very hard for a person to make a long-term commitment for a five-year contract, when one considers the investment and maintenance involved in keeping up the standards of a post office.
Is there a strategic plan for the next five to ten years? Has it been discussed with the stakeholders? In my view, if there is a strategic plan, it makes no sense to break a contract after five years. It is a case of going back to the drawing board so that both sides work in tandem. It is important to have a plan for ten years. I acknowledge that either side has a right to break a contract, but there needs to be continuity of tenure for a person to make an investment and to embrace new technology and all the changes. Is it true that a postmaster no longer has the right to transfer the post office business to a family member?
I have a number of further questions. In the Dáil last week, the Tánaiste replied to a colleague of mine, Deputy Thomas Pringle, on the question of the banking pilot project and working with AIB. While we welcome that An Post is working with AIB, the Tánaiste indicated, following some whispered advice from the Minister for Communications, Energy and Natural Resources, that An Post was included in the pilot project. I do not believe that to be the case. Will Mr. Connell clarify whether An Post will have that role? We can see that the banks are removing their branches from rural areas and there is clearly scope for An Post in this regard. It sends out a bad message to An Post if it is not involved in the pilot project. Surely An Post should be involved in the pilot project. Can this point be clarified?
I hope to get a further opportunity to put questions.
Will Mr. Connell respond to the questions from those three Deputies?
Mr. Donal Connell
I will answer the questions in order. I thank all the Deputies for their statements of support for An Post. I will respond to the points Deputy Ó Cuív made. The post office has changed and will change in terms of the services it will provide in the years ahead. The mail business accounts for 17% of revenue at present. Regrettably, mail is in structural decline. We must develop alternative revenue streams. I understand the point about renaming the post office, but there is high value in the brand name An Post. People trust the reputation of An Post, and the post office. I am not entirely sure if I am quite ready to take that step. There will definitely be a change in the service offering. With regard to the Department of Social Protection tender, which we think is a crucial aspect of what we can do with our nationwide network of more than 1,150 post offices and other outlets, it will be difficult. The tender should include the ability of people to access the service. It is an expensive service to maintain and we must recognise that cost.
I did not realise that committee members had not seen the map. We will arrange for a hard copy to be distributed in the mail, which may be a more effective way of disseminating that information.
An Post will make it up on the postage.
Mr. Donal Connell
That is right. I will now respond to Deputy Ferris's question on earnings from the national lottery. An Post as a corporate entity receives a management fee of approximately €2.8 million per year for running the national lottery. However, the post office network in general - that is, the postmasters and our retail outlets - gets a commission based on sales which is in addition to the payment to An Post.
The decline in the volume of mail is the major issue An Post must deal with. It is the same for all other postal operators internationally. Compared to our peak, which occurred in 2007, we are down approximately 30% in core mail volumes. That represents a revenue loss of about €150 million a year that An Post must deal with. We have been able to compensate for that loss through growth in other areas. Our top-line revenue of €800 million has remained more or less unchanged. We must adjust our cost base. Within the mail area, there are some areas of growth that are relatively small. For example, as a result of Internet shopping, there is growth in packages and parcels. This represents a substantial growth opportunity for us.
In response to the decline in mail we have reduced our full-time equivalent head count by approximately 1,200 in the past three years. In our plan, we intend to reduce our numbers by the same again in the next few years. This is a response to the volume decline and is the result of different initiatives to improve productivity, efficiency and the use of new technology. We are working with our staff representatives, unions and employees to effect this on a voluntary basis, which we have been able to do so far.
I will now respond to Deputy McGrath's questions. We have sat down with the IPU and we constantly met them on all the major issues. In our view the postmaster contract needs to be adjusted to reflect current realities. It was never formally enshrined in the contract that it could be passed on by the holder to a family member but that was a practice. We believe that practice needs to change, as do other aspects of the contract. We are in discussions with the IPU on that matter. I would expect that we could jointly make progress over the course of the year.
We have a strategic five-year plan for the company which covers the retail side as well as the mail business and our subsidiary businesses. I think a five-year contract is the way to go. It is important that we have performance elements in the contract. The previous practice of a contract of indefinite length does not necessarily enable the company to get the performance from particular outlets. That is our view but we will work through with the IPU.
May I clarify a matter? In response to Deputy McGrath's question about the IPU, Mr. Connell referred to sitting down with them. Has he discussed the Grant Thornton report that the IPU commissioned with them?
Mr. Donal Connell
Yes, we have seen the report.
What is Mr. Connell's response to it?
Mr. Donal Connell
I mentioned in my remarks that An Post is supportive of the Grant Thornton report and the initiatives it raises are ones that we are pushing in terms of securing additional business. There is nothing in the Grant Thornton report to which we would object.
In response to Deputy McGrath's question, there are two aspects to our relationship with AIB. We have a long-standing arrangement with AIB, dating from 2002 or 2003, whereby we offer certain banking services through the network. This is about to be significantly enhanced in the areas in which AIB closes branches. We have agreed at a strategic level with AIB that the post office will offer enhanced banking services in those outlets. The issue of the standard bank account is separate from that. It is correct that we are not involved in the pilot project. That was for reasons of roll-out and timing. We may potentially, at this relatively late stage, get involved with AIB in that regard. The banking systems linkage work that needs to take place is relatively small for us in the case of AIB, because we already have a long-standing business relationship with it. For the other banks involved in the pilot process, it would require a great deal of extensive IT work which could not be completed on time for the pilot project. There is a clear commitment from the Minister for Finance regarding the involvement of An Post in the standard bank account. We welcome that because it is very important. We see the provision of banking services of this nature, along with AIB and National Irish Bank and potentially with other banks, as the way forward for us. We believe our involvement with Aviva will also be significant.
I thank Mr. Connell and Mr. Daly for coming to this meeting. It is appropriate that they are in attendance at a time when the sands are shifting under the whole post office network and following the AIB branch reduction that was announced in recent weeks. To do nothing is not an option for An Post and the Government. If we do nothing, the post office network will continue to contract. An Post has a strong and trusted brand name. It is important that we avail of the forthcoming window that will be available to us to act on this. I do not want to take up too much time. I will concentrate on a few issues.
In recent months, I have learned a great deal about post office closures, which were mentioned by Mr. Connell. I was interested to hear him say that An Post has adjusted its model for closing post offices. It seems that notification of a closure or retirement will be advertised within a week and that there will be consultation before any decision is made. Any adjustment to the existing system is welcome because it is simply not working. However, I suggest it will be too late to get the views of those affected even at that stage. Under the system that is in place at the moment, the business of a post office might be going into decline while we wait for the postmaster to retire. In such cases, the relevant community is not made aware well in advance that the business of the post office is declining. I suggest that targets need to be set and that a "use it or lose it" choice should be offered to the community. Having observed this process closely, I suggest that many communities are not aware of the services that are available in their local post offices. That message needs to be transmitted globally. An Post needs to sell the product that is offered by its network. Not only should that product survive these bank closures, but it should grow and be enhanced. There will be a huge opportunity if everybody works together. However, I do not feel the changes which have been proposed by An Post today will solve the problem. I will push for greater changes.
Mr. Connell mentioned that An Post will target the national lottery again, in conjunction with a partner. What would be the implications if An Post's contract were not continued? He also spoke about the business with Aviva, which is very welcome. It should represent the start of a new trend. He also spoke about AIB and National Irish Bank. Has An Post had any discussion with Bank of Ireland about providing some of its services? At a time when people are having to spend a great deal of time queueing in banks, I suggest the post offices should be made available to do much of that business in a more consumer-friendly way. An Post has a huge opportunity in that regard. Mr. Connell expressed confidence that An Post will get the Department of Social Protection and NTMA contracts. What is An Post actually doing to target them? Can Mr. Connell comment on the matter? Finally, I would like him to comment on the court case that ComReg took against An Post. It seems ludicrous that such a case could be taken. Maybe he can give his opinion on it.
I welcome the representatives of An Post. I thank Mr. Connell for his presentation. I am particularly interested in the ten new businesses that An Post believes it could deliver. I welcome the fact that it is looking for new business. Since Dublin City Council changed its bin collection system earlier this year, the service has been delivered by Greyhound, which used to have an arrangement with An Post whereby people could pay the bin charge at a post office as long as they brought their ID cards. That was particularly useful for people who did not use online banking and saw the post office as an alternative to the banking system. It is obvious that people who pay other bills through the post office have a sense of trust in the post office. If that system had been used for the household charge, the level of compliance with the charge would have been much higher and the embarrassing delays would not have happened. I notice that An Post is looking for that business as well. Does it have a national household database? One of the difficulties with the household charge was that no definitive database could be used by those who were looking for the charge to be paid. Are such records available to An Post through its mail delivery system? I notice that An Post is also willing to take responsibility for the production of the electoral roll. It would need a database to do that. I would be interested to hear more about An Post's existing information technology system.
I appreciate that mail delivery accounts for just 17% of An Post's business and that the figure in question is dwindling. I have to say the late delivery of mail is an issue. If one posts a letter to somebody on a Friday, he or she might not receive it until the following Tuesday or Wednesday. I frequently hear about people who did not receive letters informing them of hospital appointments or job interviews on time. When I was a member of Dublin City Council, for whatever reason I sometimes received notices telling me about meetings after the event. This problem needs to be examined by An Post. Someone could lose business because of delays in the delivery system. When does An Post intend to roll out the proposed postcode system? If each household had a clearly identified postcode, perhaps it would improve An Post's delivery system and there might not be as many delays.
I should declare at the outset that I am a contractor with An Post. I have run a small sub-post office for 21 or 22 years. Like people in communities across the country, over that time I have seen many changes in how our post offices are run as An Post has got involved in businesses like banking, financial services and retail in addition to mail. The biggest challenges that have been faced include deregulation and some of the policies we have had to deal with during this Dáil. I would like to ask some specific questions, the first of which relates to the deregulation of the mail network, particularly the letter post service. How will this be factored into the company's future financial plans in light of the danger that companies will cherry-pick the most lucrative mail business in urban areas? Such a scenario would have an impact not only on An Post's operations, but also on communities, especially more challenged communities in rural areas where An Post has a universal service obligation in respect of daily mail deliveries. How will this issue be factored into An Post's plans in a declining mail market?
I am pleased to note An Post sees opportunities to develop online business in packages and parcels. Does it plan to enter into strategic alliances with major players in online shopping, for example, eBay and Amazon? An Post could become the portal for accessing products supplied by these companies. In many cases, goods are advertised at a low price and it is the post and packaging costs that create a stumbling block for potential purchasers. An Post could assume a role in this area.
Sometimes we must examine what has or has not been done by our friends in the United Kingdom. Following the closure of a large number of post offices, the British appeared to have a change of heart and many post offices are reopening. In recent weeks, it has come to light that they will reopen using the PostPoint or agency type models under which reduced or limited services are offered. It has also emerged that Tesco was not offered 600 contracts to provide post office businesses. It would be a mistake for An Post to go to down this route. Will the delegation elaborate on the future design of the post office network? For example, will pensioners be able to collect their pensions at filling stations? This is the type of business model being considered in the United Kingdom.
Approximately 100,000 people do not have bank accounts, which is a significant figure given the trend towards a cashless society. Recent problems in Ulster Bank and elsewhere in the banking system are causing people to rethink how they deal with banks. This problem of trust presents An Post with an opportunity. I note the attendance of representatives of the Irish Postmasters' Union. The company is also located in most communities. As such, everyone is batting for the same team, so to speak, as An Post seeks to attract new business.
For the past 21 years, I have seen issues come and go. The only tumbler in the lock which has not yet fallen is political in nature and members must meet this political challenge. In fairness to Mr. Connell, he stated An Post is seeking new business to provide a sustainable network. Much of the business he refers to is government and public service business and much of what we have discussed has been trotted out ad nauseam. Since the foundation of the State, we have heard that the post office network was to be a point of business for carrying out government transactions but we have seen little evidence of that. People in the UK can get their motor taxation discs in post offices. Sometimes members give witnesses a grilling. In this case, however, we must ask questions of ourselves. Arising from today’s meeting and previous discussions with representatives of An Post, the Irish Postmasters’ Union and local communities, for example, the community in County Mayo which was referred to, I propose that the political system kicks into action.
On that very point, following this meeting we will have obtained the views of all relevant stakeholders. It is intended that the joint committee will then prepare a report to be presented to the Minister. This matter is in hand. It is timely to hear the contributions of the delegation.
The committee's role must not be limited to listening to or recording the testimony of stakeholders but must involve producing a body of work. If we want to sustain a post office network and ensure post offices survive in our communities, we must set out what needs to be done. If we have a different plan, that will be fair enough but the onus is on us to take action.
We all agree on that matter.
Mr. Donal Connell
We will take on board Deputy O'Mahony's comments on the new process An Post has introduced, which we believe will work successfully.
On the implications of failing to secure the licence for the national lottery, we believe An Post will be a serious contender for the licence and we will make a strong effort in that regard. If we do not win the lottery licence, the direct financial impact for An Post would be of the order of €3 million per annum. As this is the management fee we receive, it would be the approximate size of the hit the company would take. Separate from that, it is likely that our retail network would, in its own right, continue to be a big seller of lottery tickets and so forth and would still receive this retail commission, as would any other major retail outlet.
On discussions with Bank of Ireland, without straying into areas of commercial confidentiality, we are in discussions with all major banks, some of which are at a more advanced stage than others, on using our network. An Post has a good offering that fits very well with the banking model. While Allied Irish Banks is our major client in that respect, we are interested in extending our service to other parties.
On An Post's strategy for the renewal of contracts with the National Treasury Management Agency and Department of Social Protection, the obvious point is for us to ensure we do a good job with the contracts we have. The combined State savings products which form part of the contract with the NTMA, for example, have grown from €6 billion at the end of 2007 to close to €15 billion at present. A range of new offerings, for example, web services, has been launched. On the contract with the Department of Social Protection, in recent years An Post has handled a substantial increase in the volume of activity, the reasons for which are apparent to all of us. An Post will work in both these areas to improve service, for example, in terms of new technology offerings. We are not resting on our laurels and we expect to compete for the Department's business when the tender arises, as it must do, and win it on our merits.
There are two cases involving ComReg before the courts, one of which involves an addressing issue and is before the High Court, while the second relates to quality. Unfortunately, as both cases are sub judice, I cannot comment further on them at this point.
On Deputy Seán Kenny's comments on the Greyhound payments system, An Post has a highly effective bill payments system which is widely used. Some comment was made with regard to the number of people who do not have bank accounts. We think approximately 17% of the adult population in Ireland does not have a bank account, a substantial number. These people represent an opportunity as many of them are post office customers and use services like bill payment facilities and so on. That is the reason all of the major utilities work with the post office payment facilities.
With regard to address databases, we have an address database called a GeoDirectory and we use this to drive our automated mail sorting system. The difficulty with regard to using this is legalistic. We have an address database and have names for delivering mail, but the difficulty with the regard to the household charge is identifying who are property owners. We have no database of property owners, but we have an address database that covers the country and contains the GPS co-ordinates.
I was disappointed to hear the Deputy's comments on the late delivery of mail. We have improved the quality of service dramatically by over 90% in recent times and have made a major investment in this area. I will be happy to follow up on any examples the Deputy cares to mention. He is right. High-quality mail delivery is core to our business and to maintaining the mail business in the future.
On the availability of postcodes, this is part of a tender process currently. However, I am limited as to the comments I can make as An Post is a potential bidder for the position of postcode management licenceholder. The Department is running that process and I cannot comment further as a result. We will participate very actively in the process.
Deputy Harrington asked about the deregulation of the mail business. The biggest issue with the mail business is the declining volume, which is caused by both the difficult economic situation, e-substitution and changes in how people live and work. Our position is that a similar issue is faced by all postal operators in Europe and internationally. We have discussed this previously at this committee and it is the biggest single challenge with which we must deal. The decline in mail volume seen today, from the peak - 30% since 2007 - represents €150 million per year less revenue to An Post and is a huge issue for us. We have compensated with revenue growth from our subsidiaries and in our retail space and are dealing with it by addressing our cost base through substantial reductions in full-time equivalent employee levels and investment in automation and there is more of this to come. However, it is difficult to predict precisely the level the service will settle at. This is a question with which many postal operators internationally are grappling and trying to understand. There is no exact answer to the question, but it is a serious challenge.
There are growth areas, such as Internet delivery. We have a number of strategic lines or big contracts with some of the major international players mentioned and others. We have also a partnership with some parcel delivery companies, like DHL, which have access to international markets we do not have. Other activities are ongoing. In the past few weeks, for example, we rolled out new scanning devices to all of our delivery staff nationwide and every one of our delivery people now has a mobile scanning device that will enable us to track, on behalf of our customers, exactly where parcels are and so on. Our response to the issues is innovation, the development of alternative revenue streams and continued work on efficiency. We also recognise the reality that we must deal with the situation as there is no point in trying to convince people to use a service that may no longer be fully relevant for them.
I accept the point with regard to the UK model and a range of PostPoint type outlets. There are pluses and minuses for that kind of approach. However, I believe our commitment to maintaining the maximum number of fully serviced and fully functional outlets is the best and most desirable position.
I thank Mr. Connell for his presentation. An Post and post offices in general have been the lifeblood of communities, both urban and rural. I am aware from experience in my area that when post offices close, the shops around them suffer as there is a significant social spin-off from the post offices. A number of questions arise in regard to An Post. We have not been given any real figure on its profitability or turnover. Mr. Connell mentioned a figure, but will he elaborate on the figures? He is the CEO of An Post, so can he tell us whether An Post remains within the Government guidelines in terms of pay caps?
The creation of extra business was mentioned. I know from my experience in Ballymun and Finglas that the post offices there have queues a mile long outside them on certain days. We need to change that and spread payments out. Are there plans to deal with that issue and how will An Post deal with taking on more business, for example, Aviva insurance, motor taxation and licences? There is competition with regard to some business. I am aware, for example, that the Government was considering appointing the RSA to deal with licences. Is An Post in competition with the RSA and has there been significant toing and froing in terms of trying to win that business? I am aware there has been competition in certain areas, and Mr. Connell has said there is a tender process in the case of the postcode. What are the advantages of a postcode system? What will that system give us and will it add any extra business? Have we any figure on that?
Security costs are another issue. Does An Post take on the burden of security costs and is there any estimate available of these costs? There are a lot of post office and bank robberies and raids. What is the cost of these to An Post?
On foreign exchange, I am aware from talking to postmasters in Ballymun and other places that there appears to be some argument going on about foreign exchange. Post offices claim they are getting good business in this area, but there seems to be some argument going on in that regard. Will Mr. Connell elaborate on that issue? It is better for people if they can get foreign exchange locally. On savings, post offices used to have a greater proportion of this market, but Mr. Connell has said An Post has 28% of this market. People used to have savings booklets and used to save regularly. This was big business. Has An Post looked at encouraging people to save more? There is no doubt but that people are holding more money at home, particularly older people. We should try to enhance saving to cut this out.
I apologise for being late and please correct me if someone else has already asked the question on the production of the electoral register. What is An Post's role with regard to that? I see a synergy between An Post and the production of the register but, if An Post wins the contract, does it see itself providing the backup required? As Mr. Connell knows, it is not just about compiling the register. There are many issues regarding the production of the electoral register and much backup and support is provided by the local authority in that area.
Does An Post see itself having a role in school transport? We will experience difficulties because families who qualified for free school transport in the past will no longer qualify. Could An Post have a role in this, providing the same saving mechanisms as for television licences?
I am impressed with the post office network and with the manner in which An Post has adapted to modern challenging conditions. My local post office in Drumshanbo, County Leitrim, which is managed by an independent contractor, constantly follows the old slogan, "use it or lose it".
Does An Post need to highlight the expanding services it provides? In a world of 24-7 rolling news and with people overdosing on communication, sometimes what may seem obvious from the inside of An Post may not be obvious to the general public. Could the general public be made more aware of the range and continuing expansion of An Post services, through clever advertising and promotion? Other agencies and commercial bodies do this but I rarely see An Post trumpeting itself or its services on national radio or television, with messages telling us we could get this or that in our local post office. We can get everything from a passport to a bank account and foreign currency in the post office. Does An Post feel it has an obligation to do that? Does the fact that most post offices are managed by independent contractors inhibit such promotion? In the overall scheme of things this would benefit both the company and the independent retailers who manage post offices.
I am glad to hear that An Post sees its post office network being maintained at, more or less, its current size. That is different from what I see. What An Post is really saying, however, is that more post offices will be opening in urban areas. I do not have a problem with that, but I hope it will not be done at the expense of rural post offices.
Deputy Noel Harrington mentioned post points. What are the criteria for providing a post point? A post point would be different from a post office agency which might replace a post office that has closed down. Will post points be given out freely and would they undermine the existing post office network? That is something we should be wary of.
Is An Post's relationship with the Irish Postmasters' Union one of consultation and co-operation or does An Post simply communicate decisions that have been made? I will be interested to hear the reply to that question.
Mr. Donal Connell
In reply to Deputy Ellis, I did not quote specific financial numbers, although I had them in a previous presentation. Off the top of my head, however, our last results for 2011 showed a revenue of about €800 million and an operating profit of approximately €2 million. I mentioned the major trends, but within those numbers one sees a significant reduction in mail revenue, for the reasons I have outlined. That is compensated for by growth in some of our subsidiary businesses, such as our business in the United Kingdom and on the retail side, as well as ongoing cost reduction. I mentioned the reduction in employee numbers. Trading conditions are primarily influenced by the reduction in mail volumes. The two drivers there are the economy and e-substitution.
With regard to pay caps, the Minister asked me to take a salary reduction of 15%, which I did. I believe we are in accordance with policy in that and other respects.
The issue of queues is one we grapple with. Unfortunately, some Department of Social Protection, DSP, payments tend to peak so that we have queues at certain times and spare capacity at other times. Our new products, such as banking arrangements, are not likely to cause an increase in queues because I do not expect to see a peak in demand on any given day. At some of our offices one sees people queuing outside at 9 a.m. on certain days. The banking products are not likely to cause that to arise. We are conscious of queues. In some areas we have had to extend the number of counter positions and even open one or two additional outlets. It is an issue we are constantly concerned with. We have tried to work with the DSP in particular to achieve a more even phasing of payments throughout the week, which will help us considerably.
A member asked if postcodes would improve volumes of mail. I do not think so. The main issues driving mail use are, predominantly, the economy and e-substitution. We counteract that, to a certain extent, by working on areas such as direct mail, where we sell the benefit of mail as a marketing tool to major companies. We are seeing growth in that area. The other big growth areas is Internet delivery, to people purchasing on the Internet. Those are the big ways forward for us.
We have made an investment of over €15 million in the last few years in upgrading security equipment, such as alarms at counter positions in our branches throughout the country. Our cash delivery is done by a security firm. I cannot cite the cost of that contract off the top of my head, but it is a substantial cost. We handle large amounts of cash and we have more than 1,150 outlets. We must maintain that to a certain security level. As members will know from recent incidents, we have to get that right. Despite our investment in these precautions, our staff can be subject to some of the most awful attacks, as we saw recently in Walkinstown.
I am not sure about difficulties with foreign exchange in Ballymun. We introduced this product a little over a year ago and we have gone from having no position to a market share of over 30%. It is a very successful product for us. I am not aware of any particular difficulty in Ballymun.
It may be a local problem. I will take the matter up elsewhere.
Mr. Donal Connell
Deputy Ellis's other question was about the Road Safety Authority and driving licence renewal. The tender for this service went out recently and we are evaluating it at present. We would like to be able to participate but we need to check its suitability for An Post.
Deputy Phelan asked about the electoral register. My colleague, Mr. John Daly, may like to talk about that.
Mr. John Daly
Our role in producing the electoral register will be in registration. We are in the very early stages. Over the years, we have had discussions with various Departments on this matter. We expect to be able to play a major role. Mr. Donal Connell mentioned our GeoDirectory address database. It is very early days and we do not know what our role could be, but we would expect to play a major role, if the project ever goes to tender.
Mr. Donal Connell
Moving to Senator Mooney's questions, we definitely want to highlight our services. I take the Senator's point. Our company is competing in the marketplace and we do spend money on marketing. I am sorry the Senator has not seen much of it.
I have not, actually.
Mr. Donal Connell
We do a range of advertisements to explain what our products and services are and we monitor their effectiveness in the market. One cannot do too much of that. We also have a nationwide presence. About 1.7 million customers use our services every week. They are, by and large, happy with the service we provide. That, in itself, is a good way of getting across our message. We also have advertising campaigns on television and radio and in the print media. We monitor the effectiveness and we check the messages. However, I take on board the Deputy's comments.
In reply to Deputy O'Mahony's question there is no master plan nor is there a policy of urban versus rural in our service. We intend to keep to our current business plan. As regards our relationship with the IPU, we meet the IPU all the time on business issues. I believe we have a good positive and co-operative relationship with the union. We share the same goal of business success for the post office. The IPU is well aware that our success is its success. I regard the IPU as partners in the business as well as being contractors in the provision of service.
I asked about PostPoint.
Mr. Donal Connell
PostPoint is competing in the open marketplace with another company called Payzone. The principal business of Payzone is mobile top-up. I do not believe that opening more PostPoint locations will undermine the post offices. The PostPoint services are principally mobile top-up with a very small level of bill payment business. PostPoint cannot handle welfare payments or savings. PostPoint is an individual company which is a subsidiary of An Post and it is competing in the market place with Payzone. If it is not a PostPoint outlet it is likely to be a Payzone outlet and this, in my view, does not undermine post offices.
I ask Mr. Connell to furnish me with details of the type of promotional and marketing campaign because I believe it is at the main at point of sale rather than on radio and television. I would be grateful if he could give us an idea of the campaign.
Mr. Donal Connell
Yes, I will do so.
I thank Mr. Connell and Mr. Daly for their attendance. This has been a worthwhile meeting from the point of view of the committee. The committee will draw up a report to be presented to the Minister and this report will include many of the points raised by the delegation.
The meeting will suspend for a few moments to allow the next group of witnesses to take their seats.
The Irish Postmasters' Union will inform the committee on how it believes the future viability of the post office network can be best guaranteed. I welcome Mr. Seán Maher, president; Mr. Brian McGann, general secretary; Mr. Simon Murphy, vice president and Ms Breid Gallagher, executive committee member.
By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of the evidence they are to give this committee. If a witness is directed by the committee to cease giving evidence in relation to a particular matter and the witness continues to so do, the witness is entitled thereafter only to a qualified privilege in respect of his or her evidence. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and witnesses are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise nor make charges against any person or persons or entity by name or in such a way as to make him, her or it identifiable.
Members are reminded of the long-standing parliamentary practice that they should not comment on, criticise or make charges against a person outside the House or an official by name in such a way as to make him or her identifiable.
The opening statement which the delegation has submitted to the committee will be published on the committee website after this meeting.
Mr. Brian McGann
I may cover some of the ground already covered so my apologies if this is the case. I also apologise for the delay in submitting this statement to the committee but the notice was a little short from my point of view and I had been away for a number of days. I listened to the chief executive of An Post and I note his recognition of the union's role in the development of the Grant Thornton report and I thank him for his kind words. I also thank him for welcoming the report and this is greatly appreciated.
I thank the committee for allowing the Irish Postmasters' Union the opportunity to make this presentation. I am the general secretary of the union and I am accompanied by the president of the union, Mr. Seán Maher, Mr. Simon Murphy, vice president and Ms Breid Gallagher. They are all serving postmasters.
The Irish Postmasters' Union represents the vast majority of self-employed postmasters who, on behalf of An Post, run the country's network of 1100 post offices and who in turn, employ approximately 3,000 people in local jobs within their community. Postmasters, many of whom come from generations of postmasters, are deeply rooted in the communities they serve.
The post office serves 1.7 million customers every week over five and half days, including Saturdays. Every post office is fully automated and is capable of providing any of An Post's services in any part of the country. The post office is trusted, flexible and accessible. When customers walk through the door of a post office they know that they are dealing with people they can rely on and trust and that the sensitive information they provide, in order to do their business, will be safe, secure and treated in confidence.
The post office provides banking transactions services for Allied Irish Bank and National Irish Bank, while savings and investment products, many tax and DIRT free, are also available at post offices counters. Post offices provide welfare payment services to 800,000 people and the provision of this face-to-face service plays a significant role in fraud deterrence. A total of 18% of people in Ireland are unbanked and we believe this figure is rising. For this group of people, the post office is the supplier of first choice. The post office is their only point of access to financial services. The post office is the institution that allows people, in these hard times, to make part-payments on their bills and, for those in straitened circumstances, it provides a household budgeting service.
However, the post office is about much more than the services it provides. Many people turn to the post office to access departmental application forms, seek advice on a range of citizen information issues and, in some parts of the country, post offices provide a valuable source of tourist information and local knowledge of the area's heritage. Indeed, the value of the post office goes even further than that. In many cases across the country, the post office is a focal point of the community, giving citizens an opportunity to exchange information on events within their area and to keep connected with their community. The post office plays a vital role, even in this age of technology, in creating a sense of connectedness and belonging.
In the banking area, given that the major banks are trying to reduce infrastructure costs, the post office can become the provider of banking transactions services for all major banks such as Bank of Ireland and Permanent TSB. Apart from helping the banks manage their cost base, making banking services available through the post office will make these services much more accessible to many communities, especially in rural areas. Studies in the United Kingdom show that small and medium-sized enterprises regularly use the post office for banking services. Local availability helps local businesses to keep costs down.
Motor tax renewal is another service that could ideally be offered through the post office network. Large numbers of motorists do not renew their motor tax online but opt instead to renew by post or by submitting their form in person at their local authority office. Among the other services that we could provide are driver licence renewals based on a passport express-type model, the new household charge payment, water charges, rates, rents and other local authority payments, lodgements and withdrawal services for credit unions, and value-added services for the Department of Social Protection such as signing on, identity validation, electronic form filling and so on.
The union has a number of key concerns regarding the issue of financial exclusion. Under the strategy on financial inclusion published by the Department of Finance last year, persons who do not have a bank account would be given access to a "basic" facility. The strategy envisages that the "unbanked", who are mainly welfare recipients, would be paid their welfare payments through this bank account. The strategy is flawed in that the provision of a bank account will not in itself lead to financial inclusion. Last year alone, 100,000 credit card accounts were closed as people moved away from the mainstream banking services and toward more direct forms of controlling their finances. Many people, especially the "unbanked", do not trust the financial institutions and are reluctant to be forced into a relationship with them for fear they will take control of the small amount of money they have. If financial inclusion is to be achieved, the post office network must be at the centre of any initiative to introduce basic bank accounts. People trust facilities such as the local post office and credit union. Only the post office network, however, has a unified, coherent and accessible infrastructure which can deliver a banking solution that will help to achieve financial inclusion. The experience in other countries such as Brazil, for example, shows that financial inclusion measures work best when the post office network is the vehicle for the provision of basic banking services.
We are taking this opportunity to highlight the importance of the welfare payment business to the long-term sustainability of the post office network, as aspect of our service in which a significant investment has been made in terms of computerisation and so on. Given that our contract with the Department of Social Protection is due to expire in 2013, the union is concerned that any procurement process will not sufficiently take into account all of the relevant factors, such as ensuring that face-to-face, over-the-counter services are maintained on a nationwide basis. People should be free to choose the post office for the processing of their welfare payments. In the aftermath of recent banking systems failures, more and more people, particularly those on low incomes, are seeking the certainty of a cash payment option. If the welfare payments business is removed from the post office network, up to 600 offices throughout the State will face closure. The effect of this, particularly in rural areas, would be catastrophic.
We need a clear vision and strategy to ensure post offices are part of this country's future. Our network plays a vital part in the economic and social life of communities across the length and breadth of the State. By adopting our ideas, the Government can ensure greater access to services such as banking and local authority services, especially in rural areas; free up limited public resources and thus achieve efficiencies; and enhance the viability of the post office network. The union has commissioned Grant Thornton to produce a report on the future of the post office network in Ireland, with a focus on growing the business to make it more sustainable. It will serve everyone's interest if resources are focused on sustaining a single infrastructure for the delivery of over-the-counter services. Such an approach will allow Departments, banks, credit unions and major utilities the opportunity to reduce their infrastructure costs while maintaining services to citizens and underpinning the viability of the country's largest retail infrastructure.
As a consequence of the large number of staff reductions in the public sector, there is growing pressure on those who remain to maintain services to the public. Staff cannot be expected to do the same amount of work with such a reduction in staff numbers. In that context, it makes sense to transfer non-core, transaction-type services to the post office. This will allow remaining staff to concentrate on delivering essential front line services. Under our plan, the public will have greater access to services through our network while, at the same time, the delivery of our services will become more cost effective. This approach represents a win-win for everybody.
While the post office network is a key strategic asset for the State, one of the greatest challenges it faces is the cost of providing a physical, over-the-counter infrastructure to deliver the range of services our customers enjoy. There are cheaper alternatives such as electronic substitution, but they cannot replace the value and worth of providing a human presence, especially for those in our society who are vulnerable. The cost of not having the type of service that the post office network provides has not been considered or measured, but we are arguing strongly that it would, as Grant Thornton has pointed out, have many unintended economic and social consequences. In economic terms, the post office plays a vital role within communities, both urban and rural. Small businesses depend on the post office for many services, including banking and mails, while older people and the unemployed rely on it for access to payment and budgeting services. In many communities, especially in rural areas, post offices coexist with the only shop in the area and each business entity supports the other. Studies in Britain have found that in the majority of cases, if the post office is lost, so too is the local shop. The effect of such closures on communities is devastating, affecting not just the elderly but small businesses, the unemployed and parents with young children. The loss of a post office can lead to increased business costs, additional travelling time and expense and an increase in social isolation.
Apart from the many economic arguments that can be made in support of the post office network, there is a myriad of social reasons that we should maintain access to a network of local offices. The post office is at the heart of many communities, both rural and urban. In a growing number of instances, it is the last remaining piece of physical infrastructure capable of delivering services to the citizens of this State. The question we must ask is whether we want to let this important facility wither on the vine. Or do we wish to ensure that our own and future generations will have access to a modern, vibrant and sustainable post office network that can provide communities with a focal point around which to prosper and thrive? The alternative would be to lose our unique sense of community and allow people to become disengaged, resulting in social breakdown and degeneration into a society where people do not care about one another.
The Irish Postmasters' Union is proposing a number of ways in which we can maintain a network of post offices for the future. First, we must have a clear statement by the Minister and the Government that the post office network is a key State asset which will be maintained in the future. What is then needed is a clear decision that the work of maintaining a sustainable network will be a priority for Government and all stakeholders. Stating that the future of the post office network is a matter for An Post is nothing other than a political abdication of the responsibility that we all have to deal with this issue. It is everybody's responsibility to find the best way to ensure the future survival of the post office network in Ireland.
There are many factors to be considered in deciding which specific measures will best ensure the survival of the network. While costs must be tightly managed, more business, from both the Government and private sector, must be driven through the network to maximise its cost effectiveness. In addition, it is important to place a value on the social dimension of the post office. We must decide on the future shape and size of the network and, if it is significantly different from what we have today, we will have to decide how to manage that transition. We also need to look at the experience of other countries which may be further down the road in their efforts in this area. In the United Kingdom, for instance, the post office network has undergone a significant transition. A number of models have been employed to deliver services and a consultation process is in place to engage communities in the discussion. Mutualisation is also actively being considered, while the British Government has underpinned the future of the network with capital investment and by way of the "front office for Government" concept.
With all that requires to be done, members may well ask where we should begin. It is the union's considered view that several actions should be taken now in order to set us on the path towards ensuring the survival of the post office network. First, we recommend that the committee ask the Minister for Communications, Energy and Natural Resources to set up an interdepartmental group to implement the proposals assessed by Grant Thornton, especially the facility to renew motor tax at post offices. This measure alone could save the taxpayer €46 million. The interdepartmental group should also examine the other proposals put forward by the union and have them assessed by way of a cost-benefit analysis. In addition, the group should assess the key issues affecting the post office network and report back within an agreed timeframe with a recommended strategy that will ensure, to the maximum extent possible, that the network will be sustained into the future. The second recommendation is that the committee do all in its power to ensure that the post office is placed at the centre of any scheme to achieve financial inclusion and that any basic payment account be delivered through the network, as it is trusted by, and familiar to, many of those who are "unbanked".
There is a great deal of work to be done and it is important that we begin straight away. We must have a mechanism that will allow all stakeholders to have their say about what type of post office they want for the future and how that can be delivered in the most sustainable way possible. What is needed now is the political vision to take on board our ideas and create a roadmap that will ensure the survival of the post office network into the future. We must ensure that the local post office survives as a focal point for communities and that Irish citizens continue to have an institution serving their needs in which they can place their trust and which is accessible to them within those communities. We believe that the post office can play a part in Ireland's economic recovery. The Government can achieve substantial cost savings by outsourcing transaction type services to post offices. Removing non-core activities will allow those who remain in the public service to be redeployed to do essential services. Post offices will become more economically viable by driving more business through the network and the public will have greater accessibility to services within their communities.
We believe in taking a positive approach to securing the future of local post offices and we believe that our ideas are practical, realistic and achievable. I thank the committee for inviting us to come before it today. If any member has any questions, I would be happy to answer them as best I can.
I thank Mr. McGann for an informative presentation in which he expressed some strongly held views. We will now take questions from members.
I welcome our guests. There is a theme running through the submission which seems to suggest a certain degree of nervousness and uncertainty about the future. However, the evidence on the ground appears to suggest that the post office network continues to expand. In the presentation they made earlier, the representatives from An Post highlighted the many services that the company provides. Following questions from a number of members, they made it clear that An Post is not in the business of shutting down the network to any appreciable extent. They outlined the reasons why - if it proved necessary to do so - the company would shut down offices. Furthermore, they referred to small rural areas in which it will be providing the PayPoint system and other services rather than having actual physical post offices in place.
The Grant Thornton report is an excellent document and it provides a blueprint for the future. I know that Mr. McGann and the Union have fully endorsed it. My party is certainly supportive of the report. The IPU appears to hold a certain opinion with regard to the expansion of services. Mr. McGann referred to the fact that the contract with the Department of Social Protection is due to end next year. Where will that contract go if An Post loses it? Perhaps Mr. McGann might indicate his views on that matter. He also placed great emphasis on the fact that people renew their motor tax at post offices. Will he expand a little on the figure he provided in this regard? When figures are plucked out of the sky, people are usually asked to explain where they see the relevant savings being made.
I cannot see the committee having any difficulty with regard to the second recommendation. In that context, I refer to what Mr. McGann said in respect of ensuring "that the post office is placed at the centre of any scheme to achieve financial inclusion". Speaking as an outsider, it appears to me that An Post is very much at the forefront of ensuring that any financial transactions will be routed through the post office network. It is already handling business from AIB in this regard.
As already stated, I seem to perceive a certain nervousness on the part of the IPU. In other words, despite the success of the post office network and its sustainability within local communities, the IPU is somewhat concerned that everything could be taken away.
If members agree, I will take the questions in blocs of three. Is that agreed? Agreed.
I thank Mr. McGann for his presentation. As far as I am concerned, in most instances our guests are pushing an open door. I would imagine that most members from rural constituencies would be very sympathetic in respect of everything Mr. McGann had to say. The survival of the post office network is extremely important for economic, social and many other reasons. From the point of view of maintaining community connections, it is invaluable. We will do anything in our power to ensure the network does survive.
Mr. McGann referred to an interdepartmental approach. Which Departments does he have in mind in this regard? He also referred to the fact that there will be up to 600 closures if the NTMA and Department of Social Protection contracts are not renewed in 2013. Such an eventuality would be almost fatal in the context of the network's ability to survive. It is extremely important that the contracts to which I refer be maintained.
In the context of the expansion of the number of services available through the network, there is no reason why people could not renew their driving licences at post offices - on the basis of a Passport Express-type model - or pay the new household charge, water charges, rates, etc., there. Making such services available to people would make great sense. What steps is the IPU taking to trying to bring about such an expansion of services? There are many people - those who use their services and those who do not - who do not trust the banks and for very good reason. Having a banking system available within the post office network is, therefore, extremely important. What Mr. McGann said about small and medium-sized enterprises in the UK using post offices for banking services made perfect sense. Making such services available to the many small businesses that operate in rural areas would be very important. Will it be possible to ensure that the services to which I refer will be provided? How does the IPU intend to proceed in this regard?
Mr. McGann stated that there are 1,100 post offices throughout the country and that these serve 1.7 million customers every week. If the post office network is not maintained and if its value to communities is not increased, then there is a danger that people could lose a great service. I wish our guests well.
I welcome Mr. McGann and thank him for his contribution. I also welcome the recommendations that have been put forward by the IPU. On a personal basis, I have no difficulty with any of them. The Chairman referred to the committee's intention to consult the various stakeholders and evaluate the recommendations before compiling its own report. That process will, to an extent, facilitate the IPU in the context of what it is seeking. Deputy Harrington already outlined the position in respect of ministerial and political responsibility in this area. In light of our discussions with the Minister, I am of the view that we are pushing an open door in many respects. As I informed the representatives from An Post, this matter must be progressed. We cannot afford to do nothing.
Mr. McGann's warning about the loss of the NTMA and Department of Social Protection contracts is stark. Clearly, the loss of these contracts would be catastrophic. They must be won on a competitive basis and it is important that An Post is successful in this regard.
Earlier in the meeting I discussed with the representatives from An Post the closure of rural post offices. Mr. McGann also referred to this matter in his presentation. What role does Mr. McGann envisage the union playing in helping to minimise the closure of post offices? I am thinking of the age profile of postmasters throughout the country. Do they have any idea what that is? I am not suggesting that is a factor but if the age profile is very high, does that sometimes lead to a decline in business and result in our ending up with the model that we have had up to now? When a postmaster is quite elderly he or she may have let things drift. I am not suggesting that is the reason we have this model but that could be the case. I would interested to hear Mr. McGann's view on this. It is in the interests of An Post, the postmasters' union and the politicians to get this right and to get it solved. It is with that view that I am asking that question.
I asked An Post questions about its relationship with the postmasters' union. What is Mr. McGann's evaluation of the union's relationship with An Post? There is nothing mischievous in my asking that question. Politicians have come under the spotlight here today as well. We all need to knock heads together. There is a prize there for all of us to win.
What is Mr. McGann's view on the comments made about PostPoint?
Mr. Brian McGann
If I forget to answer any questions, I ask that members remind me of them and I will deal with them in the order in which they were asked. Senator Mooney was right in what he said regarding the proposal on motor tax. If somebody says he or she can save €46 million, he or she has to be able to stand over it. When we came up with these ideas and proposals, we decided that we needed somebody to examine them in that it is great to have all these ideas but we need to examine if they make any sense. It was on that basis that we approached Grant Thornton and we asked it to take a number of these proposals and put them through the wringer to determine if they make sense. It came back with the view that the savings to the taxpayer over a five-year period would equate to €46 million. I have brought a full copy of the report, which is not generally available as it contains information which would not be in our interests or those of the company that it be widely distributed. Appendix 1 on page 48 of the report details how those savings are calculated and broken down. That was done by Grant Thornton as it is not our area of expertise. We did not want to find ourselves in the position where we would say that great savings could be made and the first question we would be asked was how do we know we could save money or how much do we believe we could save without something to back it up. With the Grant Thornton report, we have had these proposals assessed independently. That purpose of the union's intention in respect of the report was to make sure that what we were saying stood up in commercial and economic terms. We brought the full report with us today because we want the members to be able to have confidence that those savings are achievable.
On the issue of PostPoint, Mr. Daly from An Post referred to the fact that PostPoint is effectively competing with other players in that market and that is true because An Post has to compete like any other company in the market. A concern of the union is that the business would not cannibalise one part of it through its promotion of another. Our function and role are to represent postmasters and the An Post retail network. I would have seen during my time with An Post that the business might have tended in previous times to allow one part of it to cannibalise another. Whatever about competing with external competition it makes very little sense in business terms to compete with oneself. That would tend to be our concern as opposed to a concern that PostPoint should not be there at all.
We have started to examine the development of different models of service for customers, and this is related to the PostPoint issue. A number of such models have been developed in the UK. It is early days yet in that these new models are being deployed and rolled out, but a number of concerns have arisen. An organisation in the UK, Consumer Focus, which has a quasi-statutory role, has produced a report that highlights a number of concerns and issues around using such different models including issues of privacy, staff training and people's confidence in terms of the business they want to transact and the information they may have to give. When one walks into a post office, one has in mind a different contract than if one walks into another commercial premises. The reason for that is that one has trust and confidence and that comes down to the postmaster. One knows that when one goes into a post office, one can give sensitive information about one's financial affairs, bill payments or whatever it may be and know that it will be treated with sensitivity and in a way that will not comprise one. One has that relationship which is unique and important and that relationship marks out the post office network. One does not get that with a PostPoint service or a lower grade of service. The postmaster and his or her staff have a particular expertise and level of credibility that one may not find in other areas.
A question was asked about the welfare payments contract and where it might go. A view put forward in recent years was that if all recipients were given a bank account the payments could be transferred to their accounts by the pressing of a button every Thursday or Friday. We would have a concern about such a change and would consider there to be a great deal of difficulty with that. We would say that the face to face transaction in regard to the social payments provides quite a significant level of fraud deterrence. If payments were made by way of faceless electronic transactions, who would know where the recipient would be or what he or she would be doing, but if the recipient has to collect the payment, he or she has to go to the premises and meet an official to do that.
There are social issues around welfare payments. If one loses one's job, one does not only lose 40 hours work a week but a huge part of one's social contact and a person could become quite isolated. The last thing we would want is to increase such social isolation and to have people sitting at home not going out, getting their welfare payments paid electronically, doing their shopping online and never walking out the door. That level of social isolation is not good for people. The post office is important in retaining and maintaining that sense of community. That applies not only to rural areas but urban areas. My mother lives in Dublin and for her the post office is an incredibly important part of her social community. She goes to the post office and meets people. The post office service in that respect is vital in urban as well as in rural areas.
In terms of financial inclusion, Brazil is a good example of where the post office network has been involved in the provision of basic payment accounts for approximately ten years and it has achieved high levels of financial inclusion. It is important that if one wants to bring people who do not have a bank account into a banking structure, they trust the organisations with which they are engaging. As Deputy Ferris said, people do not trust banks. People who do not have much money would have a concern that if they had a direct debit payment arrangement in place for a bill and had to choose between its payment and the buying of groceries, the bank might pay the bill and the person might not have anything to eat for the rest of the week or to feed his or her family. That is the reason people who do not have much money manage their money in cash. It would have been common when I was young growing up in Dublin to see jars on the sideboard in people's houses with the breadman's money, the milkman's money and so on. That is how people manage when they have small amounts of cash. The post office helps people to do that at the moment. If one wants to bring people who are not in banks into a banking system we believe one has to do it through the post office because that is the institution with which people are comfortable and familiar and that they trust. There are a number of ways in which one can do it but we believe the post office should be at the centre of that.
In terms of what steps we are taking to bring the proposals forward, what we have done to date is come up with lots of ideas. We have been in discussion with An Post, as Mr. Connell has said, and we have had much discussion about this. There would be little point in us as a union coming up with business ideas to find that An Post was not interested in them or did not think they would work. We have had ongoing discussions with An Post in that regard. We have moved it on in terms of the Grant Thornton report because we believe we have proved the concept. What we want to do today is get some action at political level to make sure that this is implemented. That is why we are here today. We need to do something with the report. It is not that the committee needs to do something about it; we all need to do something. We believe the intervention of the committee would be very helpful at this time. As Deputy O'Mahony said, the Minister is supportive in principle of many of the ideas. When we met him in May he was very encouraging from our point of view. We believe that if we take the opportunity now to make sure that we deal with the issues then we can ensure that we have a sustainable post office for the future.
Our concern on post office closures is that we all see it happening on the ground. It has happened in Knockmore, Cloone, Kill and all over the place. What happens when a post office is closed is that everyone ends up at public meetings and says it is terrible. Communities, politicians, An Post officials and the Irish Postmasters' Union spend huge amounts of time and energy having a discussion every time it happens. Would we not be better off to make some strategic decisions at this point and say this is what we want and how we think we would like it to look and then say to An Post, having made those decisions, that is what we want to deliver and this is how we believe it could be delivered?
That is a strategic step which we believe needs to be made now. I welcome the fact that An Post has begun a consultation process. Deputy O'Mahony has expressed the view that it might not be sufficient but at least it is a good start. There is a robust consultation process in the United Kingdom. It is important on an ongoing basis to be able to manage change in the network so that people know and understand it.
In terms of our relationship with An Post, in the past year and a half what we have done is taken a lot of time to think about what the relationship with An Post should be, and in the first year since I joined the union we spent a lot of time developing the strategic plan. The plan is based on working collaboratively with the company. As Mr. Connell said earlier, it is in all of our interests to make sure that this business is successful and that we work together for the benefit of the business. That is not to say that we do not have difficulties with An Post and that we do not have concerns. Reference was made by Deputy McGrath to some of them such as the five-year contract. To clarify the union's position- we have had some interaction with the company and we expect it to bring forward a contract in the autumn. The change to a five-year contract was done without consultation or agreement. When we sought negotiation on it we were told that the company would be happy to discuss the contract but would not negotiate on the five-year term. We have no difficulty in discussing a different contract or terms of contract but we do believe that as the representative body for postmasters in this country we have a right to be consulted and to be able to negotiate on behalf of our members.
Reference was made to transfers. We have had discussions with the company in regard to it but apart from the principle of whether one should have that system – Mr. Connell is correct in saying it is not a guarantee but it was a facility that was there – one of the difficulties we have encountered on the ground is that a group of people in their 60s or 70s had an expectation that they could do it.
We need to speed things up.
Mr. Brian McGann
Concerning that, a group of people were effectively caught in limbo who wanted to transfer it on. Whatever the final outcome of the transfer issue, we would like to see something done for the group that is caught in between the fences.
I must declare my interest. I hope I am a paid member of the union. I welcome the submission from the Irish Postmasters' Union on the process. There is a job of work to be done together with An Post and the public representatives in the committee.
Speaking as a public representative, we must ask questions. We propose to take the matter further and that is the way it should be. We must treat the issue seriously not in the way it has been handled for the past generation. Part of the process is to ask questions. An Post has outlined to us what it believes is its roadmap. We must take that further. We must also recognise that 95% of the An Post network, by and large, is based on self-employed contractors, each of them in different offices and different situations with different profiles and priorities. If we are going to take the next step we must be fully sure that the post office network will come along with us in terms of providing the service.
For example, there might well be offices that will baulk at having extra services put onto them. They might say they are in a comfort zone and they are doing quite well, that their costs are fixed and they do not need to get involved in providing a motor taxation service or extra banking. They might not want to take on extra staff, expand the business or renovate a premises. We must be sure that if we are going to take the next step and bring the issue to an interdepartmental group that the Irish Postmasters' Union and every single community in this country, urban or rural, are going to buy into it.
I am a postmaster but I must ask the question as a public representative. We must have a serious dialogue and ask the questions of the network whether what is envisaged can be delivered. A significant amount of business might come along in motor taxation, banking, Government business or data input, as Deputy Ó Cuív suggested but when it is all in place the 300 postmasters around the country might say, "No thanks, that is not for me, I am quite happy with what I am doing." We must examine whether it can be done in a cost-effective way. During the debate on the household charge one of the points made was that postmasters were looking for too much to process the applications. I do not believe that but the point was left hanging in the ether.
Perhaps we could we get clarification on that.
The union has a key role in delivering. I am not asking the union to fold up and walk away. I am asking it for an extra degree of flexibility through its members and the various communities and to think in a more business-like fashion about delivering Government services and public services in a corporate environment to sustain the network. If we are serious about the discussion and taking the next step the testimony will reflect that. I want to give the union the opportunity to say that various post offices and members are open and willing to take on this business and to do what is necessary to provide those services in each of the urban and rural communities they serve. That is our remit, and that must be reflected here. I agree with the recommendations. No one would disagree with them but if we are to have a common purpose we must be on the same boat, so to speak. We have to have trust in what the union, the company and each of us as public representatives are doing. We can then talk about interdepartmental groups and decide this is the way forward but we have to treat the issue very seriously.
Mr. Brian McGann
I agree with Deputy Harrington. What members have heard this morning from An Post and ourselves is similar. In terms of any difference we might have, there are far more areas where our thinking and our interests converge. In the past year and a half we have been working more collaboratively and focusing on solving the business issues, and that has borne a lot of fruit.
The Deputy is right regarding the discussion about the capacity and future of the network. It is important to have some sort of strategic review through an interdepartmental group to ensure that all the issues can be examined and discussed, and all the difficult questions asked. Obviously, the union would bring its own perspective to that, as would An Post, but other stakeholders would want to bring their perspectives to it. The benefit of having a strategic discussion and some output from that in terms of recommendations would be that everybody would have the opportunity to express their view about what might or might not happen. That is the reason our union believes there is a need for a broader debate and that it is not simply a matter for An Post to sort out. It is a much wider debate and we must examine the ramifications in terms of bringing in new business or new business going out, and the way that might be addressed.
In terms of the union's view of working collaboratively with the company, 98% of our members approved of doing that. There is overwhelming acceptance for the approach. There is also an overwhelming endorsement of the proposals in the Grant Thornton report because postmasters are practical people. They are the people who open their doors every day and experience life on the ground. They realise that to survive and be sustainable in the future they need to bring in more business because the business environment is changing and will continue to change. From the union's point of view there is a recognition of that and an appetite to embrace that change. I hope that answers the Deputy's question.
I thank the witnesses for attending today. The entire exercise was worthwhile. At our next meeting we will set up a working group to progress this and we will take all the views given into account. That working group will invite the rural and other organisations that have an input to come in. We want to take everything into account.
Mr. Brian McGann
Perhaps later in the year as the committee has made some progress it might consider inviting us to come before the committee again for a further discussion. I would be anxious to have the opportunity to meet again with the committee-----
We have to do our deliberation first and if we need to speak to Mr. McGann, we will ask him to come back in but we are open to doing that.
Mr. Brian McGann
I thank the Chairman.
I thank the witnesses. They are excused.
If there is no further business we will adjourn until 19 September when the working group will be on the agenda for that meeting. I thank all the members and hope they have a good holiday.