Society baffled by crazy economics of post office closures

During the campaigns against local post office closures, there must have been many of us, whilst standing for up to 20 minutes in a queue at our local post office, (as is the norm in Muswell Hill, Archway or East Finchley, to cite just three examples), wh

During the campaigns against local post office closures, there must have been many of us, whilst standing for up to 20 minutes in a queue at our local post office, (as is the norm in Muswell Hill, Archway or East Finchley, to cite just three examples), who have speculated on how it can be possible for an organisation, which is patently incapable of coping with the level of demand for its services, manages to sustain such staggeringly large losses as the post office claims to do.

The Ham&High will be well aware of the vigorous anti-post office closure campaign waged by the Highgate community in March, led by the Highgate Society.

The laws of economics state quite unambiguously that if a provider cannot meet current demand, then prices will go up, new branches will be opened and/or new competitors will enter the market until supply and demand are in equilibrium.

It is for this reason that many of us have suspected that if local post offices do not make a 'profit', however much business they handle, then this is because of cross-charging mechanisms which deliberately siphon off their actual profits so that 'unprofitability' can be cited as a justification for local closures - even where, on any reasonable accounting basis, branches are run efficiently and profitably.


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We stumbled on how this practice may happen when we enquired of the post office how it could support a local trader who might be willing to service some of the latent demand for postal services in our own community now that our local post office is scheduled for closure.

Apparently Post Office Ltd can offer an arrangement which will allow a trader to meet the needs of local residents who want to know the correct postage for an oversize letter to Oxford, airmail a standard letter to Seattle or post a packet to Portsmouth.

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These are some of the most common requirements of customers, as we discovered when monitoring the Highgate post office 'traffic'. To meet this demand the trader can pre-purchase stamps from the Post Office at a discount (for these examples) of five per cent.

Where else on the high street is a trader offered such a derisory margin? To show how unprofitable this is for the trader, we worked out what income would be achieved by a trader who had the benefit of a continuous day-long flow of customers, each of whom wanted to post an oversize letter, an overseas airmail or a 100 gram inland packet. On the basis of an average 20 seconds per customer (which is a third of the average Post Office transaction time) and an eight-hour day, the trader would achieve a net daily profit of only £52.08.

In practice the trader's net profit will be far lower since our prediction assumes a 100 per cent flow of customers and non-stop round the clock working as well as no contribution towards rent, heat, light, business rates, National Insurance payments and cleaning costs, for example.

Compare the £52.08 with an eight-hour national minimum wage of £44.16 and it is evident that this arrangement bears no correspondence whatsoever with the true cost of delivering the services to the consumer.

These may or may not be the terms under which cross charges are actually made by the Post Office to local branches.A major justification for a judicial review of the closure process is that those consulted have been persistently denied access to this information.

From the evidence about how the Post Office operates the independent trader scheme, it would not be unreasonable to question whether the apparent 'unprofitability' of Post Office branches is merely the result of misleading accounting practices.

Meanwhile Highgate Post Office is set to close on June 23, unless a judicial review provides a stay of execution. We also understand that the local post office has been required to destroy records - what have they got to hide?

Liz Morris

Vice Chairman, Highgate Society

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