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As a result of DTIs financial support and involvement, through its role as shareholder, Post Office Limited is now on a sounder financial footing, Sir John Bourn, head of the NAO, reported today. But the future of post offices remains uncertain and the DTI will need to be alert to falling volumes of business that could threaten the viability of sub-post offices.

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The DTI has put in sound arrangements for monitoring the performance of Post Office Limited. But its analysis would be better if it had more detailed information from Post Office Limited on the different segments of the network.

There has been an over-supply of post offices in urban areas with many operating on low margins, leading to under-investment, and incurring losses for the company. Post Office Limited is on course to close around 2,500 urban branches under its Urban Reinvention Programme. But there is some uncertainty as to whether the programme, for which the DTI has provided up to 210 million, will achieve its aim in the long term of producing a network that represents a viable business for individual sub-postmasters and Post Office Limited.

A significant number of rural post offices are not viable businesses and the rural network is heavily loss-making for Post Office Limited. The government is giving extra funding of up to 150 million a year, until 2007-08, to keep rural post offices open. The company has made slow progress in piloting alternative methods for providing post office services in rural areas; in 2003-04 only 777,000 was spent out of a potential budget of 5 million. If the Department is to have a sound assessment of the outcomes from the various pilot activities by the end of 2005, when it needs to start considering the future of the network beyond 2008, it needs to ensure that Post Office Limited adopts a more robust approach.

"Since 1983 the number of post offices has dropped by 7,000 to around 15,000. The Government faces some difficult decisions if it is to maintain a viable network of post offices. Although the rationalisation programme has put the remaining urban post offices on a firmer footing, their future is not guaranteed and the DTI must stay alert to this. It must also co-ordinate Government policy decisions on the future of rural post offices based on a sound understanding and assessment of the options."

Sir John Bourn


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