By Marcus Leach

The future of post offices up and down the country has been secured by Government action, funding and a new agreement between Royal Mail and the Post Office, Postal Affairs Minister Edward Davey announced today (Tuesday).

As part of a progress update on Post Office policy, Edward Davey informed Parliament that pledges given during the passage of the Postal Services Act that a new long-term deal between the Post Office and the Royal Mail would be reached before they separated, have now been delivered with the signing of a ten year deal this month.

The deal between the two companies gives additional certainty to subpostmasters across the UK and covers the full range of Royal Mail products available at post offices such as first and second class post, parcels, air mail, recorded and special deliveries. The deal adds to other recent progress for the Post Office, with extra Government cash kicking in, new national and local government contracts won, successful piloting of new models to transform many local post offices and improvements in financial services offered.

“On coming to office, we found a demoralised Post Office, still losing substantial sums despite years of cutbacks and closures," Postal Affairs Minister Edward Davey said.

"So a year ago I set out a radical plan to transform Post Office’s future, with £1.34 billion of Government support and investment but without any closure programmes. Since then the Post Office has made good progress to become more competitive, building on its strengths.

“While it will take several years to turn round the Post Office’s finances, it’s increasingly clear the reforms are beginning to work. Concerns people had about the Post Office becoming independent from Royal Mail were always misplaced as that separation is part of our cure, but the ten year deal struck between Royal Mail and the Post Office will give subpostmasters and others greater confidence.

"Coupled with winning new contracts such as those with UKBA and Westminster Borough and the successful pilots of new operating models, the signs are extremely encouraging for the future of the Post Office.”

In November 2010 the Government published a statement of its plans to secure the future of the Post Office. In recognition of the key role post offices play in their communities, the Government has committed to maintain a network of at least 11,500 branches, and to build a long term future for those branches.

Over the past year Ministers and Post Office Ltd have been working hard to make good these commitments. A new Board has been appointed to oversee the Post Office as an independent business. Significant progress has also been made in developing the Post Office’s financial services business, with September’s extension of access to RBS accounts over Post Office counters, and the introduction of new products like the Junior ISA, launched on 14 November.

Post Office Ltd has also worked hard on its ambition to develop new and innovative Government services. The most recent example of success is its appointment as UKBA’s delivery partner for Biometric Residency Permits. Other examples include providing identity checks for London taxi drivers and a range of ‘front office’ transactions for Westminster Council.

Moya Greene, Royal Mail Group’s Chief Executive, today warmly welcomed the new, commercial agreement between the Royal Mail Group and Post Office Ltd.

“I am delighted with this agreement. It provides a firm foundation for the Post Office’s long-term, sustainable future and ensures Royal Mail’s customers continue to get access to postal services in Post Office branches nationwide, the UK’s biggest retail network," she said.

“Royal Mail and the Post Office have reached an agreement that is in the best interests of our customers and both businesses. The Post Office will continue to benefit from the sale of stamps and other delivery services. For Royal Mail, the business retains the current, unrivalled, UK-wide, retail distribution network for its products and services aimed at consumers and small businesses. We look forward to a new chapter in our continuing, close relationship.”

Paula Vennells, Managing Director of Post office Ltd, said that this was a great agreement for the post office.

“This is a good agreement for the Post Office, for the millions of customers a day who visit our branches and for our subpostmasters," she said.

"We are the number one mails’ retailer in the UK and postal business accounts for a third of our income. A long term relationship with Royal Mail ensures we continue to provide the unrivalled access and great customer service in mails and parcels services, which individuals and business customers want from the Post Office.

“This vital agreement, along with our ambitious plans for growth in government services, our branch investment and modernisation programme, and our development of digital services will all help to build a long term and sustainable Post Office.”

During the passage of the Postal Services Act 2011 there were repeated calls for the Government to legislate for a service agreement between the two businesses. Ministers were clear at the time that the two companies would need to work together in the future. The commercially negotiated agreement announced today confirms this, and is a further crucial step in securing the long term future of the network.

The deal paves the way for the separation of the two companies under the provisions of the Postal Services Act 2011, which put in place powers for the Government to privatise the Royal Mail. Post Office Ltd remains in 100% public ownership, and the deal means that it can now focus on continuing to improve its financial sustainability as an independent business with certainty about its future.

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