Monday, 26 April 2021
Post Office Network: Motion
I thank Senators for their contributions and for giving me the opportunity to address this important motion. I agree with many of the sentiments expressed and recognise many of the positive social and economic benefits provided by the post office network. I also agree that there is enormous potential for the network to provide a better range of financial and e-commerce services.This is set out in the programme for Government, as many colleagues have noted, and it is part of our commitment to a sustainable nationwide post office network, for which I believe there is cross-party support in both Houses of the Oireachtas. I commend the work of Government party Senators who have been working consistently with me and the Government to highlight the challenges facing the network and are helping to inform policy decisions required in the coming weeks and months to ensure the viability of the network. I reiterate the commitment from An Post to have a post office in every community of more than 500 people and that 95% of the population will be within 15 km of at least one post office in rural areas and within 3 km in urban areas. This is very important, particularly for rural communities.
The importance and resilience of the post office network has been clearly demonstrated. As most Senators who contributed to the debate highlighted, throughout the pandemic An Post has kept its network of more than 900 post offices open, ensuring the continued distribution of cash to the economy and playing an important commercial and societal role in the communities in which they operate. An Post has also played a key role in enabling SMEs to trade online during the lockdown periods. Over the past year or so, we have seen a range of initiatives through the post office network which have helped to support local communities, the elderly and the vulnerable. An Post is to be commended on these initiatives and I have no doubt all present share an appreciation of them, as well as a belief there is potential for An Post and the network to make a further contribution across many areas of public, business and community life. The motion before the House recognises this, as does the programme for Government.
Although the financial position of An Post has been stabilised in recent years, underlying challenges remain as the postal sector is evolving rapidly. Mail volumes continue to decline. E-substitution and the move to online payments and online banking continue to have an impact. Similar challenges are being felt across Europe, with many postal operators seeking to diversify their business in recent years and to seek new business opportunities. During Covid-19 in particular, we have seen an acceleration in both e-commerce and the adoption of online banking and card payments. While letter volume decline has created challenges for the sector and continues to drive changes, the growing e-commerce industry creates new opportunities and demands for postal operators to respond to and minimise the negative impact of letter volume decline. These changes are impacting on the revenue being generated by the network and as a whole, with An Post and postmasters facing into their own particular challenges.
There is broad acceptance that the environment in which the post office operates has irreversibly changed and that the network needs to change too if it is to thrive. Even before the pandemic, core mail volumes continued to decline by 6.3% in 2019, resulting in a €25 million decrease in revenue. An Post estimates that the pandemic has probably accelerated this process of volume decline by two to three years. A further difficulty in that regard is that once customer have adapted to digital alternatives, they rarely return to sending mail and, as such, the decline is likely to be permanent.
There is no doubt the pandemic has accelerated and increased the challenges facing the post office network, hitting some of its key business lines. Social welfare payments have declined more quickly than expected, with knock-on effects on footfall and related product lines such as BillPay. Revenue from foreign exchange transactions has also been severely affected. Postmasters have seen an accelerated decline in key revenue and product lines as a direct result of the public health restrictions, which has been coupled with the need to focus on maintaining their day-to-day business in very challenging circumstances.
As with any business, the post office needs to develop commercial strategies to enable it to grow and maintain its relevance for its users. We are working with An Post to investigate the scope to channel additional services through the network. All options are being considered fully and efforts will be redoubled to give effect to our commitment to ensuring a sustainable and viable post office network. The agreement reached between An Post and the Irish Postmasters Union, IPU, in 2018 underpinned significant change and investment to redefine the post office network, including reducing the number of post offices, modernising the postmaster contract and updating the brand.The consolidation of the post office network has assured the widest possible distribution across the State, with an ever-improving network. The key focus continues to be on future-proofing the company and keeping it relevant to its customers with regard to the types of services it provides. This restructuring has seen the development of new areas of business, particularly in parcel delivery but also in new retail areas and in financial services, which has resulted in a return to annual profitability since implementation of the plan first began.
An Post is transforming its retail network by delivering new products and new formats. This includes, among other things, diversifying and growing the financial services product it provides for individuals and SMEs to include loans, credit cards and more foreign exchange products, local banking in association with major banks, and a full range of State savings products. Two new dedicated sub-brands, An Post Money and a new business-to-business brand, An Post Commerce, have been launched. Investment by An Post of €50 million in the network is designed to encourage communities to use the enhanced services in their local post offices.
While many people who use local post offices prefer to use cash for the purposes of weekly budgeting and money management, An Post is increasingly appealing to and attracting a new cohort of customers who transact in a cashless manner and who want what An Post is offering online. An Post aims to serve both these demographics and, in many ways, the pandemic has helped to accelerate An Post's response in driving forward investment in digital.
An Post has also launched its Green Hub, a facility which provides end-to-end project management and money saving advice for all levels of home retrofitting, supported by competitive loan rates. The Green Hub is essentially a one-stop-shop which will cover loan-only or full retrofit services from initial home assessments to completed works and a Sustainable Energy Authority of Ireland, SEAI, grant application and payment process. An Post has partnered with SSE Airtricity to give free home assessments and to fulfil works.
An Post has also invested in the training of staff in all post offices in 2019 and 2020 to better equip postmasters to run their businesses, to manage profit and loss accounts and to promote their businesses locally. All new services and initiatives such as these are geared towards driving footfall through post offices and keeping the network vibrant and relevant to customers.
Growing its financial services business has been a key part of An Post's business strategy, building on the significant savings business it has in partnership with the National Treasury Management Agency, its market leading position in foreign exchange and its existing current account, credit card and consumer lending customer base. In line with its commercial strategy to increase its banking services, An Post announced a new partnership with Bank of Ireland to offer personal and SME withdrawal and lodgement services to Bank of Ireland customers across the An Post network of more than 900 post offices nationwide. This builds on the agency banking service An Post already provides for a number of other leading banks including AIB and Ulster Bank, with more than 4.5 million transactions representing a cash value of almost €1.5 billion annually. This new agreement means that An Post can offer all Bank of Ireland personal and SME customers withdrawal and lodgement services in every one of its post offices nationwide. It is also in line with An Post's strategy to become a leading provider of financial services for personal customers and SMEs.
Approximately 500 post offices are situated in parts of the country which do not have a bank within a 5 km radius. An Post will continue to work to build a sustainable and successful national post office network that is modernised and reinvigorated and which offers new and relevant products and services for the communities on the post offices' doorstep.
It is important to note that An Post is a commercial State body with a mandate to act commercially. It has statutory responsibility for the State's postal service and the post office network. Decisions relating to the network, including those related to the size, distribution and future of that network, are operational matters for the board and management of the company. A lot of work has been done over recent years to develop and this has had a very positive effect for both postmasters and customers. The ongoing transformation in the company aims to ensure the financial viability of An Post and the continued fulfilment of its mandate to deliver a mails delivery service and a viable post office network. This momentum needs to be maintained and, if An Post, the postmasters and Government work together, we can ensure that the network can emerge as a central hub for a wide variety of valuable, community-focused services.We want a sustainable post office network available to all of our citizens, both urban and rural, in the medium and long term. Government efforts have been focused on supporting An Post in the roll-out of new services and the delivery of its strategic plan. Some €30 million in State funding was made available, of which €15 million is to support the renewal of the post office network and a further €15 million is towards the continued fulfilment of a five day per week mail delivery service. This helps secure the future of mail and post office services for local communities in both rural and urban areas.
The Government continues to provide significant business to An Post through the Department of Social Protection's social welfare contract and the National Treasury Management Agency business. The Minister also approved a capital expenditure programme which is part of the company's commitment to the sustainability of its network, designed to develop the newer elements of An Post's financial services business and mitigate decline core mail volumes and revenues on the retail side of the business. An Post has received an investment loan of €40 million from the European Investment Bank to finance innovation and modernisation as part of its strategic plan. The borrowing is being used to help fund capital costs associated with five investment programmes which are part of the transformation plan, including post office renewal.
As Senators will appreciate, developments in information and communications technology have transformed how Government and citizens interact with each other in recent years and have radically reformed the way Government delivers its services. The Covid-19 pandemic has seen an increase in online engagement with Government, and online systems were key in the swift processing of applications for pandemic supports and other Government services. It is recognised, however, that a cohort of the population does not have access to or the capacity to avail of online services, and alternative access through traditional channels will be essential to them and will ensure public service delivery continues to be geared to customers, irrespective of how they wish to engage with Government. I acknowledge many Senators stated the importance of offline services.
It was against this backdrop that the offline services report was recently brought to Government. The report notes the increase in digital service provision will see a corresponding reduction in footfall to offline services. It also recommends a collective and coherent approach to the delivery of offline services, whether through assisted digital or offline channels, should be considered. The report also notes some of the challenges to this approach and there are issues which require further consideration.
In response, Government agreed to the establishment of an interdepartmental group, co-chaired by the Department of the Environment, Climate and Communications and the Department of Public Expenditure and Reform, to explore the potential of a one-stop shop approach, including the identification of suitable services based on the recommendations in the report. The group has now been established and held its first meeting on 20 April. As well as the co-chairing Departments, the Department of the Taoiseach, the Department of Transport, the Department of Foreign Affairs, the Department of Rural and Community Development, the Department of Social Protection, the Department of Housing, Local Government and Heritage and the Revenue Commissioners are represented. These Departments are considered relevant in particular as they have significant operational areas and may also choose to nominate agencies operating under their aegis to attend.
In conducting this work, the group will consider the increased use of the post office network for the delivery of Government services. In advance of the next meeting, scheduled for 11 May, Departments have been asked to provide information on their existing services which would have the potential to benefit from a one-stop shop approach. Three subsequent meetings have been scheduled and the group will report back to Government by the end of July.
The Grant Thornton report, commissioned by the Irish Postmasters Union, is under consideration in my Department. We are looking at all mechanisms to ensure the viability of the network, including the offline services group, which will report back to Government in July. The Government is committed to delivering services using channels geared to the needs of the public and remains committed to a sustainable post office network as a key component of the economic and social infrastructure in both rural and urban areas. All options will be considered fully and every effort made to give effect to the Government commitment to ensuring a sustainable and viable post office network.