Mr. John Daly:

I will reply to the questions in the order in which they were asked. Some of them are obviously linked, such as on the sustainability of the network. I might take those questions at the end.

Deputy Ó Cuív asked a question about back office functions. We do not actually have that many back office functions in the cities any more. However, we have more people in rural areas than any other organisation, such as the postpersons, the postmasters and their staff. We have companies in Athlone and Kilrush that we deliberately set up outside of Dublin. Post Insurance is based in Athlone and BillPost is based in Kilrush. We do not have that much to outsource from cities any more.

The Chairman asked about postmasters' income. I think he referenced a decline of €15,000. That is very much at the extreme end of the scale. There is a small number of postmasters who have seen reductions of that magnitude. What I would say is that they saw increases of that magnitude a number of years ago, so they have come back to where they had been. Postmasters' income has not moved in any way in line with the decline of business. In fact, the average postmaster now is still being paid 15% more than in 2008. We are on average 2% down from when postmasters' income reached a peak in 2010. We do recognise that postmasters' income is down, but it is not in line with the decline in income. As I mentioned earlier, our mail activity has dropped 38%, Department of Social Protection transactions have dropped 20% and BillPay has dropped 20% since the peak. Postmasters income, albeit declining, is not declining by anything of that magnitude.

This might also answer Deputy Healy Rae's questions. If we look at what has happened in 2016, some 13% of postmasters have seen an increase in pay. Another 23% have seen their remuneration stay the same, but two thirds have seen a reduction. That reduction is in the magnitude of 5%. It is nowhere in line with the reduction in business, although it is obviously a significant issue for the future.

The Chairman asked why we have not pitched to become a full bank. We tried that and set up Postbank in partnership with Fortis just before the banking crisis. Unfortunately, as part of the banking crisis, that collapsed. Our strategy now is to grow our financial services. As I said in my address, we have a very significant financial services business. Our State savings business makes up 17% of the country's savings. We have over 30% of foreign exchange business. We have a very high percentage of the bill payment business, Western Union, etc. We already have an awful lot of financial services that a bank would provide and we intend to grow them. As I said in my address, we intend to bring out a payment account in the first quarter of next year. That, in effect, will bring us into the current account market. We are also in the process of actively looking at loan products for individuals and SMEs. We intend to grow our financial services business over the next couple of years without the need to be a full service bank, which brings enormous costs and enormous obligations upon an organisation in terms of capital, resources, training and all of that. While not pitching to be a bank, we are a very significant player in the financial services industry and we intend to grow in that space.

Deputy Collins mentioned travelling post offices and the 15 km distance. They are just parts of what is being looked at by the group under the Minister of State, Deputy Michael Ring. They are not proposals by any means at this stage. They are very significant in the UK, which has a lot of travelling post offices. The UK is probably the closest comparison of the post office network in Ireland in terms of its size, rural spread, etc. The UK has found that rural post offices do work there. It is merely one of a number of initiatives being looked at by the group under the Minister of State, Deputy Michael Ring.

Deputy Collins also asked why it takes an eternity to sort out some post office contracts. There has been a very small number of those cases. I could count on one hand the number of examples over the past number of years that have taken a long time to sort out. They are down to legal and investigation issues and I am obviously not going to go into that in this forum.

Deputies Heydon and Healy Rae talked about the network. At this point, I might answer a number of questions on the sustainability of the network. Deputies Ó Cuív and Cannon probably outlined better than I ever could the problems of the post office network. It is about customer choice. Anybody who thinks we can force pensioners to come to the post office to collect their pensions is living in fantasy land. We are seeing a big decline in pensioners choosing the post office. We are seeing a big decline in child benefit customers choosing the post office. We hope that the introduction of our payment account might address that somewhat, in that some people might choose to use our bank account rather than one of our competitors. The fact of the matter is that business is seriously in decline. I mentioned Department of Social Protection welfare payments, BillPay, etc. We have to address that.

The network at the moment consists of 1,131 post offices. More than 700 of them are unsustainable in terms of their cost to An Post to operate. The bigger offices subsidise that to some degree. However, even in the bigger offices in urban areas, we are seeing reductions in income. They are becoming less sustainable, although we believe they will continue to be sustainable because they have a significant footfall to serve. We are working with the Government on the whole issue of rural post offices through the group under Mr. Bobby Kerr and the group under the Minister of State, Deputy Michael Ring. I believe that rural post offices can only be dealt with in the context of what is happening in rural Ireland in its entirety. The post office is only one part of it. There are Government services, banking services and credit unions services along with post office services. It has to be looked at in the round.

Nationally, we need to devise a structure that means we can have sustainable rural communities providing services. This does not necessarily mean we will have the same number of outlets as today. We could envisage a scenario in which we would have fewer locations providing many more services, whether they be Government or banking services etc. We are working very closely with the Minister of State, Deputy Michael Ring, on it. An Post is a commercial company. As I said in my address, no commercial company could deal with the business declines we are having to deal with. We have a new CEO and a new chairman and we will be revising the strategy during the coming months. It will have to take on board the issue of unsustainable post offices and we will work with the Government to do so.

Deputy Martin Heydon asked what we had done in the Bobby Kerr group and what we recommended. We have done much work in examining the network as to where the business and the population is. We will recommend a segmented approach whereby more services will be offered by the bigger offices, and we will seek to improve the look and feel of the bigger offices and the services available. However, the smaller offices must be dealt with as part of an overall Government strategy. Person to person business is in decline and nothing we can do will stop it. We have invested much in new services. Deputy Ciaran Cannon mentioned an outmoded model and asked what we have done to introduce new products. We have brought many more people into the post office during recent years for our new services such as our foreign exchange, gift voucher and post mobile business. These services are bringing people into the post office who were not there before. We are investing in new channels, given that we do not believe the physical post office channel can be the only channel for post office services in the future. We have introduced mail services for business people in some of our delivery service units. We have introduced more online services. We are doing all we can to introduce new services, however the magnitude of the business that has been lost is so extreme that there are no business levels out there to replace it.

There were comments on Government services such as driving licences, motor tax and the DSP contract when it expires in 2019. These are all issues for the Government. We are fully open for business and we want to do business. Although we tendered for the driving licence business, it was decided not to give it to us. We are ready to do motor tax and we could do it in the morning. It will come out of the Bobby Kerr group.