Move to downgrade rural post offices

An post has proposed the "voluntary downgrading" of several hundred rural post offices to stem growing losses in its post offices…

An post has proposed the "voluntary downgrading" of several hundred rural post offices to stem growing losses in its post offices division, expected to amount to £3 million in 1999.

The voluntary downgrading would mean that existing sub-post offices would become "postal agencies", opening for limited hours and offering a limited range of services. The postmasters who opt into the new arrangement would be be given a severance payment by An Post and in future would be paid only for business conducted rather than a salary.

Amid growing political controversy over the future of hundreds of rural post offices, it has emerged that An Post's confidential assessment of their viability is very bleak.

In a confidential letter to the Department of Public Enterprise the chief executive of An Post, Mr John Hynes, warned: "The viability of the post offices network and its business is now at stake".

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Mr Hynes sent his letter last January, after the Minister for Public Enterprise, Ms O'Rourke, had ordered the company last December to close no more rural post offices. In the letter, which has been seen by The Irish Times, Mr Hynes confirmed that the company would comply with this instruction, but went on to outline a resulting financial crisis that would face the company's post offices division.

The threat to the economic viability of rural post offices has been dramatically increased by the prospect that the £35 million contract to provide social welfare payments, currently held by An Post, may shortly be put out to tender. Last Tuesday the Cabinet postponed a decision to start the tendering process.

The Government says it is seeking legal advice to see if the contract can be exempted from an EU Directive requiring large state contracts be subject to competition. It is claimed that loss of the social welfare contract could lead to the closure of up to 1,500 of the 1,911 post offices.

In his letter, Mr Hynes said that this year would see the first ever fall in post office revenue. A profit of £2 million last year for the post offices division would become a £3 million loss in 1999, he predicted.

He warned that under EU rules, "it will not be possible to cross-subsidise the rural post office network from the profits earned in the letter monopoly. This means that the financing of the rural post office network must be resolved by the post offices division itself, without recourse to the rest of An Post."

The 911 smallest post offices - almost 50 per cent of the total - generated just 5.5 per cent of total post office business, he said. Around 90 per cent of the external revenue earned by the post offices division came from four major customers, all of whom had relatively short-term contracts with An Post.

The revenue from these customers had fallen to the extent that the money received was "incapable of financing the deficit on the rural network".

Mr Hynes told the department that the customer base of the 911 small rural sub-offices "is so low that even the most optimistic assessment of their growth prospects will make little impact on the deficit issue".