I thank the committee for the opportunity to attend this session and to respond to the presentation from the Kilmallock delegation. I would like to say a few words to put the change in the business model in Kilmallock in context. I will then come back to some of the comments made earlier.
An Post is committed to continuing to provide a top class service to the people of Ireland. We operate through various business models which include offices run by company staff and by contractors. It is important to say that the same level of service is provided at both company staffed and automated contractor offices.
An Post, as a commercial semi-State company, has an obligation to operate in a commercial manner. In the late 1990s, we recognised the challenges we faced in our retail business. These arose principally from greater choice being available to customers for many of our traditional services and price pressure from our corporate clients. These included the direct transfer of funds to bank accounts for social welfare payments, the availability of direct debit and on-line channels for bill payments and the advent of on-line banking services. Our task was to ensure the post office business not only remained viable but also that post offices remained relevant to the people both then and in the future.
To address these challenges, we undertook a review of the retail business, the services we offered, the models under which we operated and the cost base of the business. The review outlined a strategy which included targeting new income streams as well as reducing the cost base. Part of reducing the cost base was to reduce the number of company staffed post offices by changing them to the contractor model while ensuring we continued to provide the same services to customers in those offices.
It is important to note that the contractor model has provided the bulk of post office services throughout the history of An Post. Currently, 94% of post offices are operated by contractors rather than company staff. Another important point to note is that the presence of a company staffed post office in a particular location was not necessarily originally down to the business need for such an office but, in many cases, was due to other factors such as a railway station in that location necessary for the mail service at the time. This resulted in some offices being company staffed while offices in other bigger towns were operated by contractors.
In reviewing the company-staffed network we looked at it from a commercial point of view. This led, in 2002, to an agreement with the Communication Workers Union for a change programme in up to 50 offices. The offices selected were to be on a commercial basis with the lowest business volume offices to be changed.
To date the model has changed at 22 locations. These include Midleton, Curragh Camp, Ballinrobe, Lifford, Castleblayney, Belturbet, Muine Bheag, Kinsale, Kildare, Cahir, Roscrea, Athenry, Cootehill, Ballyhaunis, Clifden, Ballymote, Cashel and Kilrush, and four others in Dublin. Two more are planned for this month: Boyle, as was mentioned earlier, and Wicklow which is planned for the end of this month.
The committee will note from the list of locations given that the towns range significantly in size, with populations from approximately 1,000 to over 7,000 in some cases. It is fair to say that the level of service in these towns has been maintained and in many cases an improved service is being provided. We have received little or no adverse comments since the offices changed and in fact have received much positive comment.
Of the 1,250 plus post offices in Ireland today, just 74 are company staffed. Plans are in place to change the business model at another 18 offices this year, including Kilmallock. Kilmallock post office ranks third lowest in terms of business volume among these 74 offices. It may also be of interest to the committee that there are 176 existing contractor-run post offices where business volumes exceed that of Kilmallock post office. While this includes city offices, it also includes towns such as Carrigaline, Tramore, Portalington, Edenderry, Newcastle West and Buncrana. These towns share the same services as company staffed offices.
I outlined the rationale for the change programme but I would reiterate that changing the business model of a post office, as part of this programme, does not impact on the level or variety of services which are available to customers of that location. Continuation of service is of key importance to An Post. All services available before the change remain available after the change. In addition, as I stated earlier, in many cases the premises and facilities available have been improved.
I mentioned earlier that part of our strategy was also to increase the number of services available to our customers and increase our income base. We have seen some success to date in this area. As well as continuing to grow existing businesses such as State-guaranteed savings and bill payments, we have seen the introduction and growth of services such as Western Union, AIB banking services, gift vouchers and payment of Garda fines. Last, but not least, was the significant introduction of Postbank services in the past year. We intend to continue introducing new services but also need to continue with our cost reducing programmes. This will ensure that we continue to be in a viable position to provide post office services on a nationwide basis and, just as importantly, ensure that we remain relevant in an ever changing Ireland.
I want to finish by assuring the people of Kilmallock that the change in business model of their post office will not in any way change our desire to continue to provide them with all post office services. I also want to assure them that the change will not impact on the mail services or staff in their town. We are committed to providing them with the highest level of services for the future.
I will address some of the comments, beginning with those of Mr. Riordan. He mentioned the retention of Kilmallock post office. An Post has no intention of taking the post office out of Killmallock. What we are talking about is changing the business model. We are committed to retaining what he called, and what we agree is, an essential service.
He mentioned that none of the retailers are interested. We have not yet advertised the office. He might be in a position to know the retailers are not interested but as of yet we are not because we have not advertised the position.
On the question of staff, we have not yet received option forms from all of the staff telling us of their options. It is a little early to state that none of the retailers are interested. In all of the other towns — the 22 to date or 24 including Boyle and Wicklow — we have encountered no issues in filling the offices.
I also welcome Mr. Riordan's observations. He wants to highlight the services available locally and in fact Senator O'Reilly also picked up on that. I welcome that. I ask that all communities would promote their post offices. The most important element in maintaining the viability of post offices is getting people to use them. Mr. Riordan mentioned a number of services and I referred to a number of others. We are losing business in the area of social welfare payments because we are not attracting new claimants when they reach pension age or those who have children for the first time and can claim child benefit, as they opt to use banks. This is an area that could be pursued.
Mr. Riordan also put emphasis on the fact that we are not prepared to share profitability or transaction information with his group but that is purely for commercial reasons. The deal was done on the basis of an agreement with the union where all the staff, including those in Kilmallock, would receive a 12.5% allowance and the change programme would provide that pay increase to staff. It is important to note costs are associated with the project and we need to save money to remain viable.
I do not understand where Mr. Riordan is coming from when he stated that Kilmallock was not on the original list. As I stated in my presentation, the agreement with the union was to change the model in up to 50 offices. In phase 1, a list of 14 offices was introduced, which did not include Kilmallock. However, it was on the second list in phase 2, which included the next 16 offices.