State subsidy option for rural post offices

A Government subsidy is among the options being considered to avoid the closure of rural post offices.

Any attempt to close down the network would be considered a political timebomb by the Government, although An Post has made no secret that it regards the business as unsustainable.

It is unclear how much money would be required, but such payments could not be used to cross-subsidise elements of An Post's business which are open to competition.

The Government has committed itself to keep rural post offices open but An Post faces mounting pressure on the tight profit margins achieved by many of its smaller sub-post offices.

Urgent talks between An Post and the Irish Postmasters' Union on the "sustainable development" of the rural network concluded in recent weeks, it is understood.

Elements of those talks concerned a demand for higher pay by Irish Postmasters' Union members, many of whom do not earn the national minimum wage.

Sources said the industrial relations specialist who chaired the talks, Mr Phil Flynn, is currently writing a report which will be submitted shortly to the Minister for Public Enterprise, Ms O'Rourke.

According to one informed source, the post office network made a profit last year of just £10,000 (€12,697) on revenues of £78.9 million. So increasing the volume of post office business at an economic price is seen as a crucial challenge.

The alternatives could involve the closure of some branches - rationalising the network but delivering the same services to the same community.

This, however, has been ruled out on several occasions by Ms O'Rourke. In the Dail on June 20th, she said the Government would need to look at the position - "and put its money where its mouth is".

Is thought Mr Flynn may choose to make a series of recommendations - or to outline options involved when a number of case-by-case scenarios are considered.

It is understood early drafts of this report make it clear the business faces a number of serious pressures, which could render it unviable.

An Post said in its latest annual report that its underlying margins are insufficient to withstand the inevitable pressures of increased competition.

It is understood one of the threats outlined in the draft report concerns An Post's contract to process and deliver social welfare payments, which is worth £35 million.

A Government decision not to put this to tender is the subject of the complaint taken by a US firm, Transaction National Services, with the competition and procurement authorities in Europe.

Given this uncertainty, it is understood An Post's current contract to process such payments is an ad-hoc one.