Oireachtas Joint and Select Committees
Wednesday, 9 June 2021
Joint Oireachtas Committee on Transport, Tourism and Sport
The Viability of and Opportunities for the Post Office Network: An Post
Today we will continue our consideration of the viability of and opportunities for An Post and the post office network. On behalf of the committee I welcome to the meeting Mr. David McRedmond, CEO of An Post, and Ms Debbie Byrne, managing director of An Post retail. You are both very welcome and I thank you for coming along today.
Witnesses are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person or entity by name or in such a way as to make the person or the entity identifiable, or to otherwise engage in speech that might be regarded as damaging to the good name to the person or entity. If the witnesses' statements are potentially defamatory in relation to an identified person or entity, they will be directed to discontinue their remarks. It is imperative that they comply with any such direction.
For witnesses attending the meeting remotely outside of the Leinster House campus, there are some limitations to parliamentary privilege and as such they may not benefit from the same level of immunity from legal proceedings as if they were physically present. Witnesses participating in this committee session from a jurisdiction outside the State are advised that they should also be mindful of how their domestic law might apply to the evidence they give.
Members are also 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 House, or an official, by name or in such a way as to make him or her identifiable. I remind members of their constitutional requirement that members must be physically present within the confines of the place which Parliament has chosen to sit, namely, Leinster House and the Convention Centre Dublin, in order to participate in public meetings. I will not permit a member, regrettably, to participate where he or she is not adhering to this constitutional requirement. Any member who attempts to participate from outside the precincts will, reluctantly, be asked to leave the meeting. In this regard, I ask that prior to making his or her contribution to the meeting, any member who is participating by Teams would confirm that he or she is on the grounds of Leinster House campus.
For anybody watching this meeting online, Oireachtas Members and witnesses are accessing this meeting remotely. Only I as the Chair and the necessary staff essential to running the meeting are physically present in the room, and these are the two committee clerks. Due to these unprecedented circumstances, and the large number of people attending the meeting remotely, I ask for everyone's forbearance should any technical issues arise.
I now call on Mr. McRedmond to make his opening statement.
Mr. David McRedmond:
I thank the Chair and the committee members, Deputies and Senators. I am very pleased to be with the committee this morning. I will give a brief overview of where An Post is right now and what we see as our challenges. Ms Byrne will then take the committee through where the post office network is, and its challenges.
As an overview of 2021 our annual report says that through the pandemic An Post in many ways discovered its soul, the soul of a public service. We showed social solidarity, we were imaginative in responding to citizens’ needs, and we were empathetic in every community. We were resourceful in self-sufficiency and we were industrious to scale the seismic logistical challenges we faced.
The transformation of An Post from 2017 to 2020 was the key for us in the pandemic. It meant that we built up our balance sheet to be strong enough to be able to invest the €50 million it cost us to get through Covid. This meant that unlike almost any other postal service in Europe, we managed to keep our post office network and our delivery networks open all the time.
We calculate that was the case for 99% of routes and 99% of post offices. That is a considerable of achievement by the people in the company I am lucky to lead.
Our infrastructure was invested in just in time to be able to deliver. Of course, none of us could have anticipated the surge in parcels as we kept Ireland trading. The only way to get anything other than groceries during the lockdowns was to have it delivered and most of that was delivered by An Post. We opened our parcel hub in October 2019. There are two major machines and the second only opened in October 2020. I am delighted that we managed to achieve that just in time to allow us to deliver over Christmas.
We showed solidarity with citizens. We stood up, in particular, for older and vulnerable customers in both of our networks. We supported SMEs with grants and discounts on parcels, postage and stamps, and with direct mail and expert advice. We also ensured the health and well-being of our employees.
Our transformation has accelerated all the time. The switch from an old letters business to a modern e-commerce and logistics business massively accelerated. The volume of parcels we had in 2020 was not anticipated until 2024 or 2025. The post office network had to show dexterity to get through this period. Sustainability was at our core and it will be something both Ms Byrne and I will emphasise in terms of how we build for the future. Sustainability is at the core of Government strategy.
Finally on this point, we were commercially successfully and self-sufficient. We had no access to, or call on, State subsidies, nor had we call on furlough payments or the pandemic unemployment, PUP, for any of our staff. We are proud that we managed to get through that.
There has been transformation in recent years and our revenue has increased by €90 million over the past five years. The reality is that there has been a decline in letter volumes of 30% and €120 million in real terms. With that in mind, we have added revenue of €210 million in five years, adding approximately 25% to our base. That is a massive turnaround for a company, particularly one as old as An Post.
We delivered revenue of €916 million before depreciation, which for us is the key metric as it is the closest proxy to earnings before interest, taxes, depreciation and amortisation, EBITDA, in 2020. There was a loss after depreciation of €10 million but that will turn around this year, as we will see. We have cash on our balance sheet. Our pension scheme is fully funded. In fact, it is over-funded at 102%. As I said, 99% of post office routes were open. Our financial performance was strong and would have been stronger if we had not decided to set aside €50 million as a response to Covid-19. That money included €10 million for personal protective equipment, PPE, and €8 million for staff cover because we had complicated arrangements with social distancing. We forfeited a price increase, and only introduced it in the past two weeks, because we did not want citizens to be hit with price increases when they were in lockdown. The impact of Covid on post offices, which Ms Byrne will cover, was quite severe because of a change in social welfare scheduling and the general effects of the pandemic, including, in particular, no foreign exchange, which is a big business line for us.
The good news is we have started 2021 very well. Trading has been very strong and our revenues are up 11% compared with the same period in 2020 on a like-for-like basis. Our operating profit is €4 million ahead. We are performing strongly in profit and growth. As the business normalises and price increases are reinstated, we expect this year to return to pre-pandemic levels of profitability. The strategy has been accelerated, with the switch to e-commerce, more banking services through post offices and the rapid development of digital infrastructure.
The second part of our submission related to our strategy, going forward. We outlined six big moves. We will increase profitability through a remodelled logistics network. We will provide an advanced digital platform. Digital is, in many ways, the key to the future of both of our networks because it provides a seamless way to have physical transactions with customers and conduct business online. The growth of An Post commerce, which is our delivery business for Irish businesses and consumers, and its expansion into international supply chains, will be important. Small businesses, in particular, now realise what an essential infrastructure An Post is. Ms Byrne will take the committee through the transformed and sustainable post office network and the expanded range of services under the better banking with An Post initiative. We will also have an expert, lean corporate centre for a post-Covid world.
The delivery service of the business will provide more choice and value for customers with future-proofed services. We will have the best delivery manager. If someone is getting a parcel delivered, and the same will soon apply to letters, he or she will be able to know when it is being delivered, when a delivery has been collected and will be able to choose a delivery time, etc. Some of that can be done now but we aim to have the best system available anywhere in the market.
We are going to rebuild our network for e-commerce. All committee members have delivery units in their constituencies, most of those which are sub-scale or in the wrong place for a parcel service because they were built out for letters. There will be a massive change in property. We will have to exit a number of properties, enter new ones and create a network that is future proof.
We will help businesses to thrive with integrated products. An Post commerce will launch in the next few weeks to deliver those. Our business bundle will allow us to clean small businesses's data, print and deliver letters, etc. We will then connect Irish businesses with the world, helping them scale up and connect with trade around the globe.
I will stop there and ask Ms Byrne to take the committee briefly through the post office network. I will then conclude with a few remarks before handing over to the committee.
Ms Debbie Byrne:
As Mr. McRedmond said, we recognise that the post office is a vital national infrastructure. We are committed to maintaining a strong network of co-located post offices. That is the strategy in every community of more than 500 people. We will also ensure there is at least one post office within 15 km of every such community in rural areas and within 3 km in an urban area. There will be areas such as the islands and other remote areas that will not have a population of 500 but will have a post office because those two parameters are working together.
Since 2018, we have been working on a transformation of the post office which involves significant investment and much work on new products and services, as well as assisting postmasters moving to co-location. We do not see the future of the network as small, stand-alone post offices because that is not a viable business. Some 63% of the network is now co-located. The pandemic got in the way of that expansion because we would have expected that figure to reach 70% last year. We are working to catch up. When we most recently analysed co-location, co-located offices were performing 11% better than their stand-alone counterparts. That shows co-location is working.
What is the post office of the future? It is a co-located post office with a new range of services. It will be focused around social welfare, which remains the raison d'être for post offices. We want to be that backbone. There have been many changes in social welfare, the bulk of which have been outside our control. Consumers have opted to have payments, whether the old age pension or children's allowance, paid into their bank accounts. That is a trend we cannot change. The PUP that was introduced during the pandemic has adversely affected footfall into post offices because the payment goes into people's bank accounts.
That has adversely affected footfall in post offices because the payment goes into people's bank accounts. There will come a time when there is a return to jobseeker's benefit, whatever the amount is. That will be scaled back from August. We need those recipients back in post offices. That is good for the State because it safeguards against fraud as recipients have to present and check that they are not working or residing abroad. It is a key change we need to reintroduce in order to increase footfall in post offices.
As Mr. McRedmond said, Covid has interrupted our transformation. One of the three things that have sadly been hit during Covid was social welfare. Last year double payments were introduced for a good reason in terms of the safety of citizens. We managed to get that reverted to single payments in November, but we now need to work with the Department of Employment Affairs and Social Protection on the PUP and get that footfall back into post offices.
Another key business line that has been hit is BillPay. That is very much the social welfare customer who comes into a post office and pays €10 off a utility bill. There have been two business lines affected by Covid, but there is a fix for that. The other major hit has been foreign exchange which, as we all know, has been pretty much decimated. We are the largest provider of foreign exchange cash in the country and would have seen that as a key business line that would grow with the banks getting out of cash services. It can take time for that to return.
We are working closely with the Government at the moment to put in place a Covid pandemic fund for postmasters. That would benefit all offices. We put the proposal to Government. It should be approved any day now. It will be based on the individual mix of an individual post office, such as a post office with a high level of social welfare, foreign exchange, etc. It will be worked out based on the individual product mix of a business.
When the current transformation payments run out at the end of June, which has been the subject of a bit of press coverage, the idea would be that the pandemic fund would kick in for 18 months, allow businesses to normalise and, more importantly, allow postmasters to avail of the considerable supports that we have put in place over the past 18 months to two years. We have invested very heavily in the infrastructure of post offices around co-location with the capital investment fund. We need to accelerate that again.
We have also invested significantly in commercial training for postmasters. That has not been ideal. We have done it in a virtual world, but it is not the same thing. We need to equip postmasters with the commercial skills and tools and marketing supports so that they can promote their businesses. Post offices are businesses, no more than running a café or Spar shop. We need to equip postmasters with the right tools.
We also have a responsibility to introduce new products and services, which we have done with An Post Money. Our credit card and loan products have gone from success to success. Our current account figures increased by 40% last year, with those accounts largely being opened in post offices. We launched a new current account app last week with a €17 million investment. That will encourage new customers into our current account product, in particular given the consolidation due to Ulster Bank and KBC leaving the market. We are very actively targeting that customer base.
We are also looking at new products and services in the areas of mortgages and SME lending, a process which is continuing. Community banking is a major issue. There has been a lot of press coverage around the Bank of Ireland deal we have done. That will launch in August and all of that IT integration and investment is ongoing at the moment. We will also work with AIB and Ulster Bank to expand the business that we do with them.
An important point to note is that as pillar banks consolidate, we have done some mapping which shows that there are 500 post offices which do not have a bank within a 5 km radius. An Post can be the backbone of community banking in Ireland, whether that involves offering services for pillar banks or our own An Post Money brand, and let us not forget State savings. Covid has helped with that for postmasters. The fund now stands at €23 billion. While Covid has definitely adversely hit us in terms of social welfare payments and foreign exchange, we have seen a big influx of savings into the post office. That is a new customer base, along with strong growth in mail and parcels during Covid.
Postmasters have told us younger cohorts are coming into post offices to buy stamps, send parcels and pick up online shopping. That is good news in terms of a broader demographic of customers outside of a social welfare customer now coming into post offices. We need to cross-sell such customers Postmobile, a lottery ticket, One4All gift vouchers and all of the other products and services that we offer.
I will wrap up by returning to Mr. McRedmond's point on sustainability. We have big ambitions for e-commerce in terms of the post office network being the backbone of online shopping. We will all return to work and we want the post office to be the place where people pick up online shopping or return a parcel. Co-located post offices will allow customers to do that through the opening hours of a shop.
The green hub launched last year puts the post office network and postmasters at the heart of the Government strategy on the green economy. Our partnership with SSE Airtricity in the area of home upgrades and the best green loan rate in the market, at 4.9%, equips postmasters to go out into communities and sell that product. I know they were very enthusiastic about that until Covid hit. Our new children's account, Money Mate, launched last year.
Ms Debbie Byrne:
That will allow postmasters to go into schools and promote that. I want to conclude by saying that while Covid has very much interrupted the transformation payment, we will provide that for postmasters over the next 18 months and continue to invest in the network and new products and services.
Mr. David McRedmond:
I appreciate that. Transformation has created the platform. In 2020 we lived up to our promise. Our strategy is accelerating and as our business normalises post-pandemic we expect a return to profitability. The green light strategy, which is what we call our strategy for the next five years, will see a €200 million to €300 million investment in physical networks and digital infrastructure, a revenue target in excess of €1 billion and a net margin of 7% to 10%. That programme will secure a sustainable future for our networks and a world-class sustainable infrastructure for Ireland. I thank the Chairman and am happy to take questions.
We have quite a number of members wishing to contribute. Witnesses and members have six minutes each. I ask people be conscious of that because we want to get answers on a range of issues regarding An Post, postmasters and all other queries from the public.
I thank Mr. McRedmond and Ms Byrne. I thank members of An Post, including the Irish Postmasters Union and staff, for the work they have done during the pandemic. Ms Byrne mentioned scale payments in her contribution. There is a significant concern that postmasters will lose income. She might explain to me how they will not lose income because I have been told that they could face a cut of between 20% and 25% in their income from the end of this month.
In the context of the sustainability of the model into the future, Ms Byrne mentioned, in terms of co-location, rural post offices within a 15 km radius. That is a significant amount of distance for a post office and I believe it is far too much. I hope that is reconsidered.
As the witnesses will know, the Irish Postmasters Union came before the committee. We have had a lot of engagement with it. Does Mr. McRedmond share the view that our post office network is on the brink and at the edge of the cliff, in that 200 post offices could be closed? I refer to the Grant Thornton report. What has the board done in the context of Government around engaging in new services? I will come back in again after the replies.
Mr. David McRedmond:
I thank the Senator. On the post office network, I have been in An Post for four and a half years.
I have not seen a brighter future for the network than I see now, in two areas in particular. One is the banking services, which Ms Byrne outlined. The other is the out-of-home e-commerce. In Finland, for example, 90% of its e-commerce parcels are delivered out of home, that is, not to people's houses. It has been easy to deliver parcels during the pandemic because everybody is at home, but that will change. People's patterns of life will change. We cannot predict exactly what that will be. However, I believe they are two big growth areas. They are in the future. Emerging from the pandemic is difficult. We feel for postmasters and the difficult time they have had during the Covid-19 pandemic. That is why, as Ms Byrne outlined, we have been working with the Government on a post-Covid payment to help during this period. We cannot go into the details of that yet because it is still under discussion, but we are working hard and actively on that.
As regards whether there is a future for the post office network, there is. Will 200 post offices close? Inevitably, some will close because there are approximately 200 outside of those communities of 500 people or more and some of them are just not viable. The truth is that if there are three post offices in an area and the three are not viable, but if one closes and that means the other two become viable, that is about us having a really strong network for the future. Co-location has been a key part of this strategy. An Post has shown a real commitment to the network, to the brand and to ensuring those products and services are available.
I will hand over to Ms Byrne.
Ms Debbie Byrne:
I have nothing further to add to that. On the point about the scale payments and the income falling at the end of June, we have covered that through the 18-month pandemic fund that will be in place.
As regards the 15 km, that is a minimum. When there are post office consolidations, there tends to be three post offices within a 10 km radius. The 15 km is really the outer limit. Looking at some of the closures over the last two years, the vast majority are 10 km and quite a few are under 5 km and 6 km, so it is the outer limit. Very few fall into that category.
I have two final questions in the context of the presentations. The post office cannot cross-sell lottery products as was mentioned. As regards An Post, consolidation means closure in many cases. From talking to postmasters at local level and An Post staff, many do not share Mr. McRedmond's optimism about the future. They are concerned about the change. I hope that his vision is different from what I am hearing. I am hearing from people who have spent 30 to 40 years working in An Post, who have been postmasters for 20 to 25 years and people who have worked as postmen and postwomen. They are concerned. For example, there is the issue of district sorting offices, DSOs. Why has there been a concentration of the larger DSOs, with the withdrawal of postmen and postwomen from what are now termed small local post offices to large regional operations, thus further reducing the income of the local post offices and making them unviable?
Mr. David McRedmond:
One of the interesting things is that when I came to An Post four and a half years ago I was told it was a dying company, like many postal companies. This is not a criticism of previous management, which did a very fine job of ensuring we had the highest quality service. However, all postal services were in decline because letter volumes were switching to email and electronic. That was the decline of An Post. Likewise, post offices were seen to be in decline, both with regard to whether rural Ireland was in decline or whether certain services were in decline. In fact, we have seen a reversal. We have worked very hard to do that.
It is my fault if those people do not see a future. It is my fault if they are not realising there are long-term prospects. I have to sell that, and the Senator is quite right to raise it. I and Ms Byrne have to sell that, and we must be clear that there is a really good future. However, it is hard work. It is hard work for every business. It is hard work if someone is the manager of the Spar or is a butcher. We have great postmasters who have seen an increase in incomes and are growing their businesses. We must now support and strengthen that. We will support it in every way we can. I look to this committee for positivity about that future, which is important, while I respect the views the committee is getting from postmasters. We have to sell that.
There is a difficult period. Undoubtedly, the next year or 18 months are going to be a difficult period. However, as the services we have worked hard to bring in proceed, we will see a change. If the committee looks at our delivery network, it will see that the change to parcels has been quite dramatic. We have grown our revenues every year for the past four years, so there is a future.
I am working off the telephone because the climate committee is also sitting and I am between two meetings on a busy sitting day for committees.
I thank the An Post workers who have done such great work during the pandemic and more generally. I also thank the witnesses for the number of initiatives they took, some of which were captured in their presentation. The postcards reflected very well on the organisation.
I want to raise the concerns about the viability of the network. We heard from the postmasters' union about their legitimate concerns. They said there is a risk of up to 200 post offices closing across the country. They said the bigger, busier post offices might be the most vulnerable. Has Mr. McRedmond heard that concern? Does he share it? Does he envisage a spate of post office closures across the country, and to what extent?
I have a question about the triennial reviews. We have been focused on the transition payment, but I was contacted by a local post office in my constituency of Meath East about its triennial review. Counter remuneration being reduced had the impact of reducing its income by €30,000 per year. It is a busy post office in an urban setting. Is that similar to experiences elsewhere throughout the country? To what degree has counter remuneration reduced across the post office network as part of the triennial reviews? What funding has been taken out of the post office network relating to counter transactions and counter remuneration? That is a significant point relating to the viability of the network.
Ms Debbie Byrne:
Several questions have been asked. One was on postmaster remuneration and another on the size of the network. I will deal with the size of the network first. For want of a better phrase, we have a two-tier network. We have approximately 300 postmasters on the old contract, which is where they have this triennial review. The rest of the offices are on the new contract, which came into effect in 2018 and was voted for by a 70:30 majority of Irish Postmasters Union members. The old contract reviews postmasters' income every three years. These postmasters have not been affected by the pandemic because their incomes are cushioned for three years. The plan with the pandemic recovery fund is that if somebody was up for review this year they would avail of the pandemic fund so that the hit to social welfare transactions would not reduce their income.
We then come to the new commercial contract, whereby postmasters are paid per transaction for the business they do every week and every month. No postmaster on this has seen his or her income reduced because the three-year deal had a top-up mechanism that guaranteed people's income to 2019 levels. It is true to say the top-up has reduced to 50%. During Covid, postmasters saw a bit of a drop off. The 50% top-up would have been fine because of the new services but the decrease in social welfare and foreign exchange transactions meant there was a Covid hit.
The idea is that from the end of June the pandemic fund will cushion postmasters for another 18 months. I would love to see the detail of this but we cannot get into individual post offices. There is no way an urban post office has seen a decline of €30,000 because they have been cushioned by the top-up mechanism, unless it was a very busy social welfare office that was badly hit last year because of the move to double payments. The idea with the pandemic fund is to normalise it for 18 months.
When postmasters in urban areas tender their resignations, for whatever reason, the posts are advertised and we tend to have two to three applications. In a minority of cases we may not get a suitable applicant because there is no Spar or Centra with the space. We work very hard to fill these vacancies. Having two, three or four applications for a post office shows people see a viable future in them. There are 110 postmasters on the new contract who were not in receipt of transformation payments because they came on after the agreement. They have been making a viable living.
Post offices vary from town to town based on the demographics of the area and the skill of the postmasters. It is our job to work with postmasters. Some are more commercial and are taking on and managing three or four post offices because they see it as a viable business but others are not and perhaps need more help. We help them to work on selling skills and on how to manage and run a business. We are there to give this support and local marketing tools. For example, with our new money mate accounts for children we give the post offices tools and flyers to use in their local communities to promote their business. We have also supplied them with direct mail so they can market to small businesses when they return to their offices. We enable them to sell labels at a discount to those with an advantage card and mail media with publicity posts. Postmasters can now offer a local clothes shop tools to promote the business and the post office gets a commission.
I confirm I am in Leinster House. I thank Mr. McRedmond and Ms Byrne for joining us. I join others in saying we have truly seen the very best of our postmen and postwomen over the past 15 months as they have crisscrossed the country. Many of their calls more than delivered something through the letterbox as there were very strong social and caring aspects to them.
I have some quick questions for Ms Byrne and I would then like to follow up with substantive issues. How many post offices closed without reopening during the past 15 months?
I can. My questions are leading to something. The Grant Thornton report on the future viability of the post office network was commissioned by the Irish Postmasters Union. Did An Post contribute to financing this report?
Ms Debbie Byrne:
Over the past 18 months, 59 postmasters resigned and we had ten closures. Some of the positions are still in the advertising process to be filled and the rest were filled. Of the ten that closed, we had no suitable applicants for six and four were in the rural consolidation areas and the business has transferred to a nearby post office. Those nearby post offices are very happy to get the business and it will ensure they survive.
I will home in on these four, which are the net loss of post offices in the country over the Covid period. The committee has asked this question repeatedly, and I want to ask it directly today. There has been a 15 month period of unprecedented challenge and difficulty for the entire country. Is the organisation prepared to look at these four post offices, in particular Broadford post office in my constituency, which closed after 190 years. Is An Post willing to re-examine these four post offices? They need to be looked at in a different light. During the Covid pandemic we have seen many businesses close their doors but An Post needs to see these in a different light. Are the witnesses willing to look at these four specific cases and the post office in Broadford with regard to reopening them?
Mr. David McRedmond:
The short answer is "No". This sounds very harsh but there is a reason for it. Four years ago, we did a deal with the Irish Postmasters Union. We agreed a protocol. It took three months to negotiate. It was mediated by a senior counsel. It was a protocol for the future of the post office network. It set down criteria for this, and these are the criteria that Ms Byrne took the committee through, including the distances between post offices and that they serve communities of 500 or more. The reason we have to be so strict about this is because there are 931 post offices and 931 communities and we have to be fair. We have to break this dynamic. Members appreciate the pressure they themselves are under and what they want to do for their communities. As soon as we reopen one post office we will have to go through all of the cases.
We will have to go through, not just the ten that Ms Byrne talked about but the 192 that have closed since July 2018. We would have to go through each of them and answer for each of them so we have to stick by that criteria. That was a solemn agreement with postmasters which was registered through mediation. That is why we have to do it, to make sure we have a functioning network.
Mr. McRedmond talks about business plans, green light strategies and viability but there is a jigsaw element to this in terms of the 15 km rule that both witnesses have spoken about. Ireland is like a jigsaw and if one takes one piece out, it has an effect on the adjoining piece. That is what happened in Clare. One can talk about business viability and all of that but the reality in the Broadford case was that An Post had a contract and was willing to stay with it and keep it operational. However, a person became unwell and decided to retire from the position and An Post seized on the opportunity to close the branch permanently. There is something wrong in that. If one looks at the 15 km rule, if that misfortune had befallen another family in the neighbouring village, An Post would have closed that post office and then Broadford would have survived. There is a bit of cherry picking going on here because 15 km works in a radius format - close one and it saves the other or vice versa. That is totally unviable. I do not think anyone would enter the profession of postmaster or postmistress knowing that the network is subject to constant review and that if one closes, the other survives. It is a survival of the fittest model and is not a business model in the true sense. It is the survival of the fittest and if a postmaster or postmistress experiences personal misfortune or if, owing to age, he or she needs to retire, the opportunity is seized upon, that jigsaw piece is taken out and the neighbouring office survives.
Did An Post fund in part, or in full, the Grant Thornton report on the future viability of the post office network?
Ms Debbie Byrne:
What I am saying is that we give a sum of money to the IPU every year to fund its union activity. I believe the money we paid last year was partly used to fund the Grant Thornton report but we will be paying the union an amount of money again this year, as we have done in previous years, as a contribution towards the organisation.
It is important to establish that because the report is being touted as an independent report. It cost somewhere in the region of €60,000 and my understanding is that around half of that came from An Post. I am almost finished-----
Ms Debbie Byrne:
The new contract that was introduced in 2018 was voted on by the IPU and was passed by ratio of around 70:30 in the ballot. It was up to individual postmasters to decide whether to sign the contract. In the letter we sent to them, we urged them to seek separate legal advice themselves and many did so. A small cohort of approximately 70 postmasters who were offered the new contract did not sign it. They are independent contractors and we would have been very clear that it was up to them to seek their own advice. We did, through the IPU, provide some tax advice. We helped the IPU with regard to tax matters and that advice was supplied to all postmasters but each one made his or her own decision in signing the contract.
I will conclude with one final point on PostPoint, which both witnesses have said is the way of the future, whereby the local Spar or local Centra could host An Post. If one takes Broadford again and one considers that PostPoint is worth around €1,500 per annum, then that is unviable. Having three-year review cycles is unviable. Having a pandemic fund being introduced when we are coming out of the pandemic and other pandemic funds are dropping off is also unviable. I am concerned about this. An Post has a great business and a great network of post offices across the country but-----
-----I am very concerned about the direction in which this is going. In particular, An Post needs to go back and look at the four offices that have closed during the pandemic and see them in light of what has happened during that pandemic. They need to be given a new chance. I thank Ms Byrne and Mr. McRedmond.
I will move on to my own questioning. The big issue at the moment is that postmasters all over the country are facing a cliff edge on 1 July. Ms Byrne made reference to the busier post offices. I have had interaction with them and many had non-core activities that were giving them additional income which disappeared completely during the pandemic. Many of them have struggled. The payment model is an arrears model. An Post has made a submission to the Government. Is Mr. McRedmond at liberty to give an indication of the contents of that submission? What has been the interaction with Government on that? Reference was made to a pandemic payment. What exactly is that?
There is concern about 1 July among postmasters in both rural and urban areas. I am a Deputy living in an urban area in the city of Limerick but I represent a sizeable rural area as well so I see this from every perspective. On 1 July, what is the payment model going to be for post offices? People can go to their local post office to post their letters, collect their pensions or other social welfare payments and so on. I appreciate what Ms Byrne is saying about the PUP. The witnesses also spoke about co-location but that is more expensive because many postmasters would be renting units within shopping centres. It is different model.
In summary, has An Post made a submission to Government? What is in that submission? What is An Post asking for? Is the €17 million referenced in the Grant Thornton report wide of the mark? What will be in place on 1 July for postmasters all over the country? How will it differ from what is there at the moment or will it be the same? Will An Post defer any decisions on a new payment model pending the outcome of the review currently being carried out by the Government?
Mr. David McRedmond:
I am not at liberty to disclose the terms that we have proposed but I can make a few comments about it. First, we have engaged extensively with the Government and with senior officials in the Department of Environment, Climate and Communications. We have also engaged with the Minister of State, Deputy Naughton, who is responsible for An Post. We have been working on this for some time now. We have been invited to appear before this committee previously and it is always difficult to come before a committee when one is in the middle of deliberative discussions. I think committee members will understand that we cannot get into answers while we are in deliberative discussions. It is particularly important that we get the opportunity to discuss this first with the postmasters and the IPU, which we hope to do very shortly. We will be doing that almost imminently. There is no relevance or relation-----
Mr. David McRedmond:
We do not see money coming from the Government. We think An Post will be looking at its own funds, at what we can afford to do and what we consider to be reasonable. We have to do this in a way that is fair within the context of the structure we had before in terms of contracts and top-up payments.
The more immediate issue is the 1 July cliff edge.
We have been told there will be a cliff edge by postmasters up and down the country who represent approximately 875 post offices, while many in the cities feel likewise. What payment model will be in place from 1 July and how long will it last? I acknowledge that there is a review.
Ms Debbie Byrne:
Of the 888 postmaster offices, approximately 300 are on the old contract of a fixed income for three years and is reviewed triennially. The balance are on the new commercial contract of being paid per transaction. The postmasters have received transformation top-up payments over the past three years and that runs out at the end of June, which is the cliff edge that has been painted at 1 July. The idea is that the pandemic fund will kick in on 1 July.
Ms Debbie Byrne:
It is funded by An Post. We have had to put our proposal to the Government to get permission but the fund is funded by An Post in the same way as the transformation payments were. The idea is that the fund kicks in on 1 July. Every office will avail of it and it will be paid on the mixed business.
I ask the witnesses to drill down into the figures. How large is the pandemic fund? What impact will the fund have on the payments that the 588 postmasters receive from An Post? Will the amount that they receive be the same as they receive today? Negotiations on the fund will take place with the IPU. Please elaborate because I have outlined the nub of the matter.
Mr. David McRedmond:
This debate is almost like negotiating with the IPU. We must sit down with the representatives of the union out of fairness to them and discuss the fund. We have pushed very hard to get our initiative through so that we can have something in time for the beginning of July. That is where we are and I am not at liberty to disclose what the amounts are or the size of the fund. We are very close to a resolution, and we will sit down and engage with the union.
Ms Debbie Byrne:
We have been in discussions with the IPU. Basically, there will be a tailored payment for each post office to reflect the forecasted business loss, which refers to the products that have been affected during Covid. For example, there has been a decline in foreign exchange transactions. There is also a payment related to the loss of social welfare. Finally, there is an incentive linked payment of 10% on all services that excludes social welfare, which is to incentivise commercial efforts. There is a structured deal and a proposal that we have discussed, in outline, with the IPU executive, and that is ultimately covered.
Based on the average current activity of a standard post office, which is the 588 post offices that have a postmaster and are owner managed, does Ms Byrne expect that the amount they receive from An Post will be higher or lower than what they receive at the moment?
Ms Debbie Byrne:
I expect that the amount will be the same. There is a 10% incentive link so that means it is up to the postmasters to grow their business and they have an opportunity to do more. The idea is that we plug the gap generated by the lost business in welfare payments and foreign exchange transactions.
Where is An Post at with the products it provides with AIB and Ulster Bank? Where does An Post see that business going?
Many years ago the rail network covered the length and breadth of Ireland. Subsequently, many of those rail lines were taken up and we are now looking to restore them to their original places. We cannot allow An Post to do the same thing to the post office network and for links to be broken. That is why it is important that we have an incremental business model. I feel that the future of An Post is very bright because of that business model and because an ever increasing number of people work remotely from home, particularly in rural Ireland.
Finally, where is An Post at with AIB and Bank of Ireland in terms of enhancing products?
Ms Debbie Byrne:
We have a business model with Ulster Bank at the moment. We are looking to enhance the range of services with its withdrawal from the marketplace and there is an active renegotiation of the contract. It is important for Ulster Bank that there is an enhanced range of services through post offices for a good period. Similarly, we are having discussions with AIB. We offer both personal customers and expect more business with them.
I thank the witnesses for giving us clarity concerning payments on 1 July. I wish An Post well in its negotiations with the IPU. I emphasise that we want a viable network.
We will now move on to a Sinn Féin slot. Deputy Ó Murchú has six minutes.
I wish to add my voice to the thanks given to the post office network for the excellent front-line work that has been done throughout the pandemic.
I want to hone in on something that was said. Obviously we are talking about closures because the IPU has told us that 200 post offices are in danger of closing. The Cathaoirleach, like many others, has dealt with the fact that the transformation will end and talked about the pandemic fund.
Let us deal with the revenue that post offices no longer receive from handling welfare and foreign exchange transactions, which have not occurred for more than a year. Will the fund give postmasters in each individual post office operation the same moneys that they would have received from the transformation payment?
That is positive and allows for a period to deal with other issues.
It has been said to me that the two types of contracts are based on transactions and that is accepting that there was a mechanism for top-ups and whatever. To a degree, postmasters would claim that they have not secured great deals down the years and now their workload has increased. On a regular straightforward transaction when people pay their bill, postmasters get 10 cent. On the likes of an insurance referral, postmasters get the cost of a cup of tea. Like everybody, postmasters have increased costs. We can all talk about co-location but individual operators must ensure that they can cover their rates, pay, insurance and other costs. How can postmasters deal with that? A major part of this will be the fact that services will be online.
The individual postmasters are not going to get the detail on negotiations with the banks but those services are to be welcomed. Has An Post spoken to the Government about any other extra services? What is the likely pay-off for postmasters? I am just talking about ensuring sustainability because we have already talked about the closures that have happened. Mr. McRedmond said there have been 192 since July 2018. How many post offices does he foresee closing into the future? People are going to retire and so on. The witnesses are aware of the criteria and I assume they have been taken into account in the game plan. I am just afraid of what the outworkings are going to be.
Mr. David McRedmond:
As regards Government services, we are constantly working with the Government. I have been before this committee several times talking about the importance of emphasising the use of the post office and that people should use their own post office network. It is a national network. There is a harp above the door and it is there for a reason. I am grateful to Deputy Ó Murchú for raising the issue of Government services because it is a very important pillar of the post office network. Sometimes the post office network is seen as something that is just used for so-called offline services or physical services. We prefer to use the term "omnichannel", which reflects how people lead their lives nowadays. They might order something online and pick it up from somewhere. There is a mixture of the physical and the digital. In An Post, we have invested massively in our digital infrastructure. We have a first-class digital team and one of the best digital officers. I ask any members who are involved with any Department, if there is a need for digital and physical infrastructure, An Post is there and we are ready to provide that. We have been in discussions with the Government around a framework. I ask Ms Byrne to take us through that.
Ms Debbie Byrne:
As regards our stated strategy, we see a bright future for the post office in the growth of mail and parcels. We have talked about banking services and e-commerce. The missing part of the strategy is the delivery of Government services. A new departmental working group or committee was recently set up, which is chaired by Barry Lowry, the chief information officer in the Department of Public Expenditure and Reform, and includes the new assistant secretary in the Department. That group brought in a number of experts over the last number of months. We have not had the opportunity to meet with the group ourselves but we wold love to do so and are working on that. It is due to deliberate in July. That is important. Everybody talks about new services in the post offices but there have not been any. An Post has delivered lot of new products and services but we need to be an arm of the Government, deliver more services and provide a better service to citizens. If I wanted to get a new driving licence, there are 60-odd offices across the country where I could do that. Would it not be better if people could go to one of 300 post offices? Granted, we are not going to put photo capture kit into 930 offices but there are many other services they could provide, like dealing with planning applications. With the hybrid working model we have now, there will be a lot of Government and local offices across the country where full services will not be available because their staff will be working from home for whatever the designated period of time is. There is an opportunity there for post offices to offer a wider range of services. The technical infrastructure is there and it is robust because of our interactions with social welfare and the major banks. This is a real opportunity to better serve communities. We welcome the Deputy's support on this matter.
I assume the witnesses cannot go into detail on An Post's negotiations with the Government but are they positive? Will these services be delivered in a considerable number of post offices and will a payment and a reasonable deal be provided for postmasters?
I welcome that conversation. It needs to happen. Whatever services can be provided should be, as well as the stuff that is happening with the one-stop shops and green hubs and so on. An issue that has been put to me is that there needs to be an element of audit, whether by the Labour Court or otherwise, on the rates of pay in post offices. We are talking about sustainability. Some transactions are being conducted multiple times but the postmasters get very little money for them. Can that be looked at and renegotiated from a point of view of delivering a sustainable service? Does Mr. McRedmond have a number as regards the closures we could be looking at in the long term, on the basis of how things are and the criteria as set out?
Mr. David McRedmond:
On remuneration, these are individual businesses so it is not a matter for the Labour Court. We have worked very closely with the unions in An Post, as I am sure the Deputy is aware, in relation to the staff in the 60 post offices that are our own and the 9,700 staff across An Post. We have worked hard to have good relations there and I appreciate the work of the unions in that regard.
Ms Debbie Byrne:
I think the Deputy is referring to the rates that are paid in the commercial contract. Those rates are based on the length of time a transaction takes. If somebody comes in to pay a bill that is one rate because it is a quick handover at the counter but if that person is opening a State savings account or doing a Brexit completion form, that rate will be higher because it is calculated, as best we can, based on the length of time it takes to do that. We have an arbitration clause within the commercial contract so if postmasters are unhappy with the rate for agency banking, for example, the provision is there to trigger arbitration and we will make the contracts available to an arbitrator to arbitrate on that. We are very happy to do that.
It is a matter of delivering a service for which other financial institutions pay a fair rate. That is all I am talking about. What kind of figure might we be looking at as regards closures, given the criteria as set out, the fact that a number of post offices do not believe they are viable into the future and that people will be retiring? Does An Post have a game plan for that?
I thank Mr. McRedmond and Ms Byrne for their presentation. I join with others in expressing my thanks to the staff across the country, both at the head office and working in post offices and on the ground, who did a sterling job during the pandemic. I also recognise the role of Mr. McRedmond and his staff in stabilising the company over the last number of years. I recall when the company had reached a point where its future viability was very uncertain. Well done on that. That is not to say I do not have some criticisms. Maybe that was the pat on the back before the kick in the ass but I have always had concerns about the network and I have expressed them to both the witnesses at different stages. While the profitability of the company is important as regards the proper structures and business model being in place, I have always seen the network as being on the hind tit of the organisation.
That is unfortunate. Reference was made to the pandemic payment for another 16 or 18 months. We have had that previously. It is an interim measure and it does not show confidence in the size, scale or breadth of the network. It would not give confidence to me if I was a postmaster. I would like to get an understanding from the witnesses about what size of a network they are aiming towards. This might take some of the mystery out of all this.
Mr. McRedmond identified, rightly, how An Post found its soul with regard to public service and its solidarity with the older and more vulnerable in our communities. I have no doubt that this is Mr. McRedmond's vision for the company, but if you overlay that vision on the post office network and on the village of Broadford, which was mentioned already, I must wonder where is the public service and the solidarity with the older and vulnerable people in and around Broadford. These people, who are known to me for a generation, now must travel much farther and seek the assistance of others to gain access to the service. I would like Mr. McRedmond to reflect on that. Broadford would fit the bill for co-location. There is a shop there that would readily accept the post office service. I fail to understand why, in An Post's necessity to consolidate operations and which we recognise, the consolidation should be on the ground in each of the villages. It should be about getting an appropriate co-location in each of the villages where An Post believes there is not a viable operation. When they are co-located with another business, a financial support mechanism could be put in place under a public service obligation.
An Post cannot have it all. It cannot have a public service model that is built around solidarity with older and vulnerable people and have a highly profit-driven company on the other end. An Post must find a means to marry the two. For sure, there are locations around the country that will readily have a post office service that will be profitable with enough of a population. There are, however, many villages like Broadford. There will be many more such Broadfords as the payment structure changes that close the post offices. It is not necessarily Government money that is required, although it requires Government support. An Post must find a way to reinvest the profits through a public service obligation model that sees some of the profit reinvested to support smaller more rural villages that are seeing a potential future due to what the pandemic has delivered for them. People can work from home and people will use services. While I recognise the effort that has been made with the Irish Postmasters Union, I appeal to Mr. McRedmond to look again at the network, at Broadford, and at the possibility of retaining the network in its current strength in a more imaginative way than would have been done prior to the pandemic.
Mr. David McRedmond:
I thank the Senator for his kind comments and for the kicking. The Senator has always been a very vocal and engaged supporter of An Post. We welcome this from the Senator and from everyone else on the committee.
When I talk about An Post and about us being profitable, the word "profit" can come across wrong. It really means us being sustainable. We have a low capital cost because the State owns us. All we aim to do is to make sure we are making enough money to be sustainable for the long term and to be sustainable without recourse to Government funding. When I came into the company, we had to get a Government loan because of risks to the company's funding. We do not want to be in that position again. We have committed to the Government to maintain a level of return so we can be sustainable. When the Covid pandemic came, it really played well for us that we had some cash on our balance sheet, but we are not making super profits. The post office network especially is not making super profits. All we are trying to do is maintain enough money so we can invest in new infrastructure and invest in capital budgets. We are looking at investing €80 million in the post office network over the next five years in a number of areas, including in new products and services, in the digital and physical network, and in sustainability. We must make that money to be able to make this investment.
I absolutely hear what the Senator is saying about us being a public service. We are a public service, but we are not a service that has access to subsidies. With regard to the post office network and to the Senator's constituents, this means we make sure we deliver the best possible service we can within some of those constraints. The worst thing would be not to have a post office network or a good delivery network in five years or ten years from now. I believe that the future is strong and is bright, but there are difficult issues.
On the issue of looking at individual post offices, that was a very difficult agreement, negotiated by Ms Debbie Byrne and which we agreed. We have to stick by that agreement to be able to make sure the network is viable for the long term.
While I accept what Mr. McRedmond has said about it being hard fought for, there is a necessity for An Post to look at its network again in light of the learnings from Covid. Consider a village such as Broadford. We are working very hard to get a sewerage scheme into the village and builders are again seeing opportunities to build homes for people in and around the village. It is on the cusp of a rebirth. It would be a shame to see a service like the post office go. Mr. McRedmond referred to the harp over the post office door. This has a very important meaning, which has the potential to encourage others to have faith in a village. Rather than see a village falling to complete rack and ruin and effectively becoming dilapidated with nobody wanting to be there, as we have seen in many locations, Broadford is not that village and it need not be. It needs the post office.
Maybe it needs another look at the kind of structure or office that is put in place in a co-located area. At one time there was the sub-office business model. I have spoken about this previously. I believe now is the time to look again at that kind of model of service. It might be greater than the Post Point and may not be the full bells and whistles of a full post office, but it could give enough to maintain that presence in a co-located fashion, to give the local community an acceptance that the service is there for them, especially the older and vulnerable. Would An Post look again at the sub-office model?
Mr. David McRedmond:
We absolutely do. I will ask Debbie Byrne to describe what we are doing in that area as we are developing our technology, our Post Points and something that would get close to that. I absolutely hear what the Senator is saying. We review constantly where we are and what we can do. Ms Byrne will add to that.
Ms Debbie Byrne:
We will have new Post Point technology deployed this July which will allow a retailer to give more post office services. Currently they cannot sell national or international stamps, but they will now have a weighing scales to be able to send parcels, they will be able to top up foreign exchange cards, and do other transactions. We are expanding the scope of Post Point. While I hear back when communities use the post office and when that service is gone from an individual community, we come back to the viability and sustainability of the network. We now have very good data that show that of the post offices that closed in 2019 and 2020 as a result of the agreement, which was about 152 post offices, the business transferred to 128 neighbouring post offices. The average increase in business for all of those offices was 9.8%, but a lot of those businesses were up 20% and 30%.
That created viability for that next tier of post offices. There are some exceptions but in most cases the nearest post office was 5 km or 6 km away. We must look at the size of the population. We are trying to generate new products and services all the time but if we divide the cake too small, it does not create a viable opportunity.
I accept that point but there can be a domino effect. I am concentrating on Broadford because it is right next door to me and I know it well. If the people getting their social welfare in Broadford go to any of the other locations, they take with them their bit of business as well. It can have an impact on shops so it is not just about the postmaster but the businesses around that post office. It is also about the older and more vulnerable people who would find this a bigger task. In Broadford people might drive a mile or two into the village. They might not want to drive to Tulla or Kilkishen because there would be more cars and it might be considered more daunting. Although I use the term in a jocular way, An Post is robbing from these people the opportunity to live an active and self-fulfilling life and affecting the viability of the local shop.
Will the witnesses look again at the sub-post office model and the potential to enhance the service with PostPoint, as has been mentioned? Will An Post find a way to include the payment of pensions and social welfare? In a place like Broadford that may not be a huge chunk of money; quite frankly, it was not and if it had been, the post office would have been more sustainable and viable. It is not beyond the realms of a local shop to manage those transactions. An Post has very good financial models and methods of ensuring that all of this is appropriately audited.
I ask the witnesses to look again at locations below the model of populations of 500 and the idea of an enhanced PostPoint service or maybe a post office with reduced bells and whistles. This could deliver social welfare payments. Some of that may come from some of the profits we all hope the company can continue to make in the years ahead. That would bring sustainability and support for less than viable businesses. It would really enhance An Post's reputation and provide future viability and sustainability for many villages that we are all working so hard trying to protect and maintain.
I thank Mr. McRedmond and Ms Byrne for the presentations. I am relatively new to the committee so I thank An Post. I came through a Seanad by-election conducted through registered post and I spent much time on the An Post website tracking and tracing envelopes to ensure they got to Leinster House in time for the deadline. It was a very efficient process and the result worked out okay. I thank all those postmasters around the country who took the envelopes and provided receipts. I appreciate that work.
I was never sure of the balance between company-owned post offices, if one likes, versus those operated by postmasters. If I have it correct, there are approximately 60 company-owned post offices and approximately 880 post offices operated by postmasters, with approximately 300 on the old contract and approximately 580 on the new contract. Could Ms Byrne confirm that figures just so I can get my head around them?
Grand. I am looking at the presentation sent to us in advance and the figures therein. There is a good gloss on them, which is great. I was in the Seanad in 2016 - perhaps in the Chair - when a different Deputy Naughten was the Minister responsible for An Post delivering news of a price increase from 70 cent to a euro, which was an enormous increase per letter at the time. It was delivered on the basis of it being the only way of keeping the post office working. It has certainly saved it from many of the problems that might have been there otherwise.
The 2019 profit before net finance and income costs was a positive €66 million and last year that figure was a negative €32 million. In the first quarter of this year, the company still lost nearly €10 million after depreciation. It is not as bad as it might be but it is not necessarily where we want it to be. I presume the witnesses would prefer a bottom line figure adding to the reserves rather than reducing them.
There are some questions that were not asked. Social welfare is great but I presume much of the pension and children's allowance payments are now going to bank accounts. There was a point about the pandemic unemployment payment being transitioned to a jobseeker's payment so people having to appear in order to sign on would be good. It makes sense and gives additional transaction volumes to the post office while providing security to the State that people claiming are genuinely entitled to do so. I am sure the vast bulk of them are.
Are there any figures on the age profile of An Post's customers. I have occasionally brought an older person in my neighbourhood to collect a pension and that person would usually spend it all on the other side of the shop. Such people buy most of their groceries in the same place from where they got their pension. It tends to be older people in those queues. There is new technology and I am not terribly familiar with it, such as Revolut, and An Post seems to have a model based on social welfare, where many of those payments may go directly to accounts. There is a bill payment service and many companies are trying to get people to pay bills more directly such as by direct debit and so on. People going abroad do not need foreign exchange services as much either, especially with the euro. We may not have as much travel in future and even when we do, people will use credit cards and tap technology. Cash is becoming less important. There is an opportunity with State savings and people are still very happy to see this as the safest place to put their money.
Do the witnesses have data on the age profile of customers and how An Post might try to attract younger people to use post offices? They are not using them in the same way older people are.
Mr. David McRedmond:
I will ask Ms Byrne to comment on that in a moment. The Senator mentioned the financial performance of An Post and it has been strong. Over the past four years, we have moved from losses to increased profit each year, and this level of profitability will maintain the long-term viability of the network. It is not super-profit.
We consciously and deliberately took a hit last year. We calculated that Covid-19 would cost us €50 million and we have outlined in some detail what that is. We said that would happen. It is why in 2020 we made a loss after depreciation. We made a profit before depreciation and if An Post was a private sector company, it would have earnings before interest, taxes, depreciation and amortisation, EBITDA. It is analogous.
Like many companies we make most of our money in the final quarter of the year because of Christmas trading. We are forecasting a profit this year before and after depreciation. We will still have the pandemic for half this year, which means we will not be quite back to the levels of profitability that we had beforehand but we fully expect to be there in 2022. We are robust in our performance and delivering those numbers. I will argue that strongly.
The Senator mentioned our products and how An Post is doing. There is no doubt that every company must find a new revenue stream. The key for us is whether the company is growing or declining. The truth is we are growing. The post office did not grow last year for many reasons outlined that relate to Covid-19. Even still, as a company we managed to grow our revenues by 3%.
As the committee saw, in the first quarter of this year we grew them by 11%. That growth is all the sign of the future viability, strength and success of An Post. I am clear that An Post is moving in a strong, positive direction. As I said in my opening comments, I am also confident that the post office network is, but it will take longer to get there.
Ms Byrne might be able to answer also on the demographics around the post office network.
Ms Debbie Byrne:
When I took over this job three years ago, I said recruiting new people in that their job is to make the post office more relevant. The post office, as we know it, for exactly all the reasons outlined here, is changing. That social welfare business will continue to decline. No more than in the letters business that is declining, the bucket needs to be topped back up with parcels. We have got to find a way of topping up that footfall.
I will pick a few issues. Stamps, obviously, are the lifeblood of the post office. It has been a declining business. During Covid, we are one of the few posts in Europe that successfully stimulated stamp sales. I am talking about consumers now. Obviously, some of the businessmen would have been down with businesses not being in the office.
When I joined, we launched what I called the "sexy stamp" programme. We introduced stamps such as Father Ted, U2 and, a number of years ago, the Rugby World Cup. All of that is in a bid to make sending mail more relevant. We have the big schools programme at the moment where we are working with schools sending postcards, writing to people in nursing homes and re-engendering that whole activity of sending mail. That is important. We will be a case study for Europe in terms of stimulating that consumer spending on mail.
Financial services are really important. On our current account, the latest analysis that we have done shows we have successfully brought in a younger customer demographic. It is the same on our credit card. We have the best balance transfer on our credit in the marketplace. If you have a balance on your credit card, you can transfer to An Post credit card and there is 15 months 0% interest. We are bringing out a new credit card later in the year that will appeal to people who do not have a balance on theirs. With loans, it is the same. We have the best rates in the market on a number of key lines.
The Green Hub that we launched last year is all about targeting homeowners who want to renovate their home and bring in a new customer demographic.
We have just launched our new children's account, Money Mate. This is a big opportunity for postmasters who know families, have that link with schools and will give it to the children to go out into their community and talk. Unfortunately, there are no communions this year. We were launching that in time for the communions. There is the big opportunity there.
It is all about trying to broaden the base beyond that social welfare base which is really important to the post office for example, to stamps and parcels. As Mr. McRedmond said earlier in terms of e-commerce, we want people who bought their free dresses on Boohoo and then go and return too. They will come in and return that parcel in the post office. That is a new demographic, and then we have the financial services.
It is positive to hear. I was not so aware of some of it, such as the children's account and maybe the amount of current account business. It is good we have these kind of meetings. We can also let people know about them.
The brand is incredibly positive. People are so happy to put money into the post office knowing that it is the safest place in Ireland as far as they are concerned. Throughout the banking crisis and everything else, the people were putting their money in the post office knowing that it was safer than safe. The witnesses might touch on the negative interest rates that the banks are talking about applying and whether An Post has any proposals to do that or otherwise.
I would also make the point - this is something that I have been aware of for years as a councillor and maybe more recently - that with the leaflet-dropping service that every councillor and every local authority candidate in the country would want to have, particularly during local elections but even between elections, there never seemed to be a way to get An Post to have its delivery areas coincide with the electoral areas in the local authorities, with the electoral districts within those areas and even by Dáil constituencies. The post office was not necessarily aware of the boundaries. They would deliver but you would have leaflets from Dún Laoghaire arriving in Rathdown and vice versa. Might An Post manage to have a system that it could offer to candidates, councillors, TDs, aspiring TDs, etc., stating that it has the exact boundaries of Dún Laoghaire-Rathdown and it would deliver to every house because so many houses are "No junk mail" now? I certainly do not regard political literature as junk mail. People sometimes say they do not hear from you and when they get the stuff, they think it is junk mail.
I will conclude now. There is a market there for An Post. There is a potentially large number of people who say that they would love to be able to give it to An Post and know that it has the guarantee of being dropped to every house in their constituency, electoral area or part thereof. There is business there for An Post if it was willing to look for it.
Mr. David McRedmond:
Certainly, it is a good suggestion. We have a really advanced model now to select by demographic and by different groups in terms of direct mail, which is not junk mail. The Senator is correct. Once it has got an address on it, it is not junk mail. We can certainly do that.
I am a little aware of the constituency boundaries issue. We should see if we can get that resolved.
To conclude, I am not necessarily looking for them to have, and there may not be the possibility of having, the address. If An Post knew the size and shape of Stillorgan, it could deliver without an address to every house in that area as the postman is doing his deliveries anyway. That would give many people comfort and they would be willing to pay. They would be happy to pay for a good service, particularly as it would most likely form part of their expenses.
Thank you, Chair, for the opportunity of taking part in the meeting today. I welcome Mr. McRedmond and Ms Byrne. I suppose I should point out at the beginning that I am a sub-postmaster and I am also a member of the Irish Postmasters Union, IPU.
I, too, go along with what colleagues have said. I recognise the work that was done throughout the network via mail, counters and clerks, all through the pandemic. The service was kept going. Every office was kept open. In my local area, even on a Saturday, I saw post people using their private cars to bring shopping to elderly people who lived alone. Compliments went above and beyond. I compliment both witnesses on the work done by the company.
The brand name of An Post is up there at the top with the work. The schemes that were brought in through the pandemic, be it the postcard scheme for people in nursing homes or the free posting of packets to people, were excellent initiatives. I want to put that on the record and compliment them both.
I will not ask too many questions. I do not think I should. I have just a few comments.
Deputy Cathal Crowe mentioned something earlier on and I just want to go back to the negotiations in 2018 with regard to the transformation payment. I was one of those postmasters who was at those public meetings. Everything was put on the table to us to make a decision in a democratic fashion and that is what everyone did. The vast majority voted. I think over 80% were in favour. I would like to clarify that issue. I thought it was implied that we were not being given information at the time with regard to that decision. That is not correct; from my point of view as one of those postmasters, I want to put that on record. I have every confidence in the IPU to represent me and to work on our behalf with An Post.
I welcome the fact that a pandemic payment scheme is being put in place. Personally, I would like to see it for longer than 18 months but I can understand why it is there. The Grant Thornton report is with New Economy and Recovery Authority, NewERA. We need to be looking at a retained earnings model to support the network for a longer period of possibly three to five years. Mr. McRedmond mentioned earlier that this is about 931 communities as well as the jobs that are affected throughout that area. It is about communities and the knock-on effect of those offices in those communities with footfall, etc., and the ancillary business that it drives in all of those communities. There was a figure in the Grant Thornton report with regard to the social value of the network to the Irish economy and the average figure was €550 million.
That is what the network gives to the Irish economy and that is why it must be supported. There is an ideal opportunity to do that now. We have a large number of banks closing and there will be many towns left without a main financial institution so it is important the network is supported to be able to provide that service. One only needs to go back to 2010 when we had Postbank which had around 200,000 customers and no debt. It was actually the only bank in the country which was not supported at that time. It had to close and repay moneys while the State supported all the other banking institutions. There is now an opportunity for the Government to support the An Post network to keep it surviving, to be honest. That also fits in with our whole initiative for town centres. If we are to get people to move back into towns to live, we must have services available to people in those towns.
I welcome the interdepartmental group and I am aware it is due to report in early July. I am hoping it will look at areas such as motor tax and requiring all local authorities to allow council rent to be paid in post offices. At the minute, not all do and that is an issue.
Driving licences were mentioned by Ms Byrne. When that contract went out a number of years ago it was framed in such a way that we could not properly tender for it. That is a point that must be made. Sixty new offices for driving licence applications were set up around the country, some of them upstairs in shopping centres, etc., and all the while we had a network with the capability to deliver the service. We were not given the opportunity to do so, however. When that contract comes up again we should be given the opportunity to tender for it on a fair playing field.
I agree also with the comments made about the PUP. In the short term, when switching back to jobseeker's allowance, it should be put through the post offices.
The age profile of postmasters was mentioned. I am probably one of the younger ones. Has further consideration been given to offering another retirement package at some stage in the near future?
As I said, there are huge opportunities for the company. An Post has a very strong brand name. The Money Mate account offers an opportunity to get kids to turn the Cyril the Squirrel stamps, which are very popular with schools, into bank accounts. An Post could then build a suite of financial products that would keep those customers throughout their lives.
Once again I compliment the company on the work done over the past 15 months. As I said, we have a very strong brand name. I saw a report recently which was done last year, I think by Red C. It showed almost 90% support for financial supports or services being put through the An Post Network.
Mr. David McRedmond:
I thank the Senator very much for those comments. I deeply appreciate them. I thank him also for his own work as a postmaster. Being in a leadership position in An Post is quite humbling because it is our fantastic front-line workers, our postmen and postwomen in every community, and our post offices in every community that make the brand. We do our professional work. Ms Byrne has done great work and she and I are part of a team of eight who do a fantastic job as well. We have fantastic teams working with us and they all do good work. Fundamentally, I am so struck by the affection for An Post that is there at the front line and it is because of our front-line workers. I have not a shred of doubt that that is what does it and we are lucky to be able to be in a position to try to steer things in a certain way. We are very grateful to the Senator and all his colleagues.
I thank the An Post officials. I want to return to one or two points. The level of cash An Post has at the moment as an institution is about €80 million. Am I correct? I had a look at the accounts and at the end of 2020 they showed about €80 million. The company has eaten into its cash reserve due to the €50 million cost of Covid. Can An Post operate a self-funding model? It received Government support on the transformation at the time of that. Am I correct that €20 million was made available? Can An Post exist without State support? That is my first question.
As committee members have said, we deal with the staff and postmasters of post offices on a daily basis. In addition to Mr. McRedmond's staff who work in the An Post office, in Limerick we have the general post office on Cecil Street and a centre on the Dock Road. All the staff do phenomenal work and we acknowledge that. However, in terms of a viable model, can the company operate without State supports? What State services, in addition to those it currently provides and which are currently provided by other service providers, could the company provide? Lastly, if we are looking at the post office network, 18 months is not long enough. It is an interim measure as the company probably needs five years of a forward plan. What does Mr. McRedmond see if he looks at the post office network in five years' time. What is the model he will be looking at?
Mr. David McRedmond:
I thank the Cathaoirleach. As regards our balance sheet, our net assets at the end of 2020 were €278 million. Within that is the €80 million we referred to which is cash that is available to us. That is about the level we have set for ourselves as being the threshold we need to be at. That is obviously after we had that €50 million impact from the pandemic. That was not all cash; some was cash and some was not.
Mr. David McRedmond:
The Chairman asked is An Post viable. It absolutely is. Without question An Post is viable. It is a strong company with a growing revenue line and it is up to us therefore to manage it to ensure we are making the level of profitability that ensures the long-term sustainable future. That is why I put some emphasis on that in my introductory remarks. The Chairman is correct the State put in €30 million as a loan. That was in 2017.
Mr. David McRedmond:
We had requested that. It was before the price increase because we were at a point where cash was very low. That price increase was referred to by one of the members earlier. While it was a large increase, we said that if this increase was put in place, we would do the work to develop a long-term strategy and introduce new products and services. We did that, particularly around parcels and e-commerce, and that is what made us viable.
The question I am asking is a very hard one. Can An Post, providing a public service the length and breadth of the country, survive and be viable without annual State supports? The Grant Thornton report states there is a gap of around €17 million per annum. Mr. McRedmond has come back to the committee and it looks like the pandemic payment An Post is bringing will be funded from internal resources.
It is a hard question but it is the question that has to be asked. We are here as a committee to support and enhance the post office network. Senator Carrigy made reference to An Post having a bank. In my view, the company should be in the banking sector. It should be in that space as well.
I am asking Mr. McRedmond a difficult question. Can it function? It was allocated €30 million, but €15 million of that was to do with the network.
Mr. David McRedmond:
I am clear that we are not seeking and do not need State support. This is a stand-alone commercial semi-State company and we operate it, including the post office network, as a stand-alone commercial semi-State. There is an intractability between the post office network and our delivery network, for example, around stamps and parcels and how they integrate and work with each other. While we are talking today about the post office network, we see it as one company, which it is. We are clear that we can do that.
The question of a PSO, which was raised earlier by Deputy Ó Murchú and the Chairman, is not an issue for An Post. We do not designate PSOs. Governments designate PSOs.
We are clear about the commitment that we make. Ms Byrne was taking the committee through that commitment in respect of the distances between post offices, the spread of post offices and being in every community with a population in excess of 500. We make that commitment knowing that we can fund and support that and that we believe that that is fine.
That is An Post's business point. If those parameters are changed, its operating model is not as viable. Its current model is based on those parameters. If those parameters change, things change. I accept that. Deputy Ó Murchú has a minute because we have to be out of here.
In fairness, Chairman, you dealt with some of the questions around the PSO. It needs to be part of the conversation.
We also probably need to have a conversation post the review, and when the details of the banking contracts are in play. Then we will have a better general conversation on that.
Given the opportunity, I thank Ms Byrne and Mr. McRedmond and I thank the post office network. Like many other elected representatives, I sometimes have to deal with individual issues. One I had to deal with was particularly tragic and, in fairness, the communication and the answers back from An Post were excellent and I was able to deal with some of the specifics of those issues. I thank them for that service.
There are significant questions to be answers regarding viability but, in fairness to Mr. McRedmond and Ms Byrne, some of that one will only be able to do at a later stage. We are probably talking about September or so, when we see the outworkings of both the review and the contracts with the banking institutions and we see if there are any more State services on offer.
Certainly, it is a matter we will come back to. Mr. McRedmond made reference to An Post's parcel delivery business. It would be fair of anyone who has teenage daughters to say that the first person one normally meets when one is going out the door in the morning is the delivery man from An Post bringing in that parcel. I commend An Post on that effort. I have got to know them very well because they are frequent callers to my home. That has been a great success during Covid for An Post.
It is a matter we will come back to. We look forward to having Mr. McRedmond and Ms Byrne back before the committee in the not-too-distant future. We are all working in the same direction to have a viable and strong An Post. There is a public element remit and we appreciate that. That brings its own difficulties for a commercial operation such as An Post. Our role is to support An Post. I thank Mr. McRedmond and Ms Byrne for attending today's engagement with the committee.
We will now suspend until 12.30 p.m. when we meet to discuss rapid antigen testing for aviation and travel.