Funding problems hitting post offices

Inadequate funding is threatening the future of post office branches located in pubs and shops, MPs have warned.

The Commons business and enterprise committee raised concerns over the level of funds afforded to the Post Office by Royal Mail, suggesting that closer scrutiny of the relationship between Post Office Ltd and Royal Mail Group was needed.

And the National Audit Office should look into the financial arrangements put in place for 'outreach' services, the committee recommended.

The committee's report explained that “a significant amount of public funding is provided to sustain the network", and therefore public confidence needs to be reinforced.

It also called for there to be "clear information" released by Royal Mail and the Post Office regarding the level of services provided.

Committee chairman Peter Luff said: "In 2007-08, Post Office Ltd received £358m for providing mail services to the Royal Mail Group.

"We heard from the managing director of Post Office Ltd that this was not enough to cover the cost of those services.

"It is possible that this is down to inefficiency at Post Office Ltd, but it is also possible that it is because Royal Mail Group is inappropriately using Post Office Ltd, which receives some state support, to cross-subsidise its mail services.

Commenting on the report, shadow postal affairs minister Charles Hendry said: "People have always been concerned that outreach branches would last only a few years and then slowly disappear.

"The onus is therefore on Post Office Ltd to prove that this will not happen."