The Post Office network is crumbling. Over the last two decades, post offices have been closing at a rate of over 300 a year. Under the last Conservative Government, 3,500 local post offices closed, and under Labour another 4,000 have closed, hitting communities across the country.

And, with the news of another 2,500 closures, things are set to get even worse.

The Government's policy to avoid “unnecessary” rural Post Office branch closures came to an end in March 2006. This policy has previously slowed down the rate of closure in rural areas.

And the Government has announced that it will not extend its contract beyond 2010 for pension and benefit payments using the Post Office Card Account, worth £1 billion of income for post offices between 2003 and 2010. A replacement will be put in place but the competitive tender process means that the Post Office could lose this work altogether.

The likelihood is that, while the Government ducks the long term decisions necessary to secure the future of Post Offices, 12,000 post office branches (urban and rural) will close.

Why this matters

Post offices are the lifeblood of communities in both rural and urban areas, particularly when they are combined with other services, such as the local shop. When the local post office closes other services often follow suit, which can be devastating for the community.

It is vital that the true social value of this network is included as well as its economic value when looking at the long-term future of this valuable network.

Post Offices in rural areas play a particularly crucial role. They have an ‘existence value’ similar to the local school or village pub. They also provide vital face-to-face access to government, postal and commercial services for communities which may not have, for example, a local bank branch.

Research for Postwatch in 2004 showed that:

• 75% of those surveyed felt their local post office was ‘extremely important’

• 59% thought it was ‘essential to their way of life’
• 91% agreed it played an ‘important role in their local community’
• 86% felt that losing a Post Office means ‘a lot of people lose their independence’
• 27% found it difficult to get to another post office when their local one closed

These figures increased among the elderly or those with disabilities affecting their mobility.

Action is needed by the Government now to prevent the mass closure of post offices occurring.

Only the Liberal Democrats have a plan which can save the post office network.

The Liberal Democrat plan

Following the passing of the new policy at Harrogate Conference in March 2006, we are the only party to have a costed and credible set of proposals to keep post offices open and, where necessary, to open others. Our opponents have no such policy.

Our plan keeps the Post Office Ltd in the public sector and enables Royal Mail employees to get a share in their company through a radical employee share ownership Trust, similar to the John Lewis Partnership. Royal Mail will take a new ownership model, with the sale of some of its shares providing the investment needed by our post offices.

The Liberal Democrat plan would enable us to:

• Open new post office branches where they are needed

• Keep the Post Office in the public sector
• Make the Royal Mail into a successful company, with new investment freedoms
• Give Royal Mail staff a guaranteed stake in their company through employee share holding and participation
• Protect and improve the service to customers that provides a daily delivery at a uniform price across the country

You can find out about the proposals in more details by reading our background paper on the policy.

Why the Lib Dem plan is the right thing for Royal Mail as well as the Post Office

The Royal Mail has been starved of investment by successive governments and needs at least £2 billion to invest in automation to remain competitive. Royal Mail now faces full competition as its centuries old monopoly on the delivery of mail was ended on 1st January 2006. It is facing massive competition from well financed competitors. Doing nothing would see the Royal Mail wither on the vine, putting at risk many services, including the Universal Service Obligation (the guaranteed daily delivery at a uniform price throughout the country) which so many communities rely on.

Our proposals would create a new ownership model for Royal Mail which would allow it to borrow to invest without it having to compete with schools and hospitals as it is no longer wholly owned by the public sector. (This is because publicly owned bodies have to have government permission to borrow.) Our proposals will enable Royal Mail to become a great British company free to improve its own business services, fight off foreign competition and win markets abroad.

The employee shareholding scheme would benefit future Royal Mail employees not just current ones. It would not be a one off hand out to people who happen to be working for Royal Mail at the time of change of ownership. Rather the employees' shares would go into a trust for the benefit of those working for Royal Mail. When an employee leaves the company, that person will no longer be entitled to any dividend. A new employee, however, would become a partner in the company and would be entitled to receive a dividend from the trust. The model is similar to that operated by the John Lewis Partnership. In addition to the trust, we would establish a system of employee participation so that staff are involved in the running of the company. Again, this would be similar to the John Lewis Partnership model.