Post office closures: Instruction to conduct closed tender process came from govt

Ramsey post office is set to close (Picture: Dave Kneale)

Ramsey post office is set to close (Picture: Dave Kneale)

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The tender process to provide sub post offices in Douglas and Ramsey was run on a closed basis following advice from the Chief Minister and the Treasury Minister.

The tender process to provide sub post offices in Douglas and Ramsey was run on a closed basis following advice from the Chief Minister and the Treasury Minister.

Tynwald’s Public Accounts Committee heard from Post Office chairman Graham Cregeen MHK that although their board had preferred to run an open process, they were dissuaded from doing so in a meeting with Chief Minister Alan Bell and Treasury Minister Eddie Teare.

No minutes were taken during the meeting, which took place on May 1.

At a special hearing of the committee on Tuesday, Mr Cregeen and Post Office chief executive Mike Kelly were questioned over the decision to close the post offices, in Ramsey and Regent Street in Douglas and outsource the service to sub post offices in nearby Spar shops.

Mr Cregeen said that in the meeting on May 1, he was advised that an open tender process would not be in the best interests of post office staff, who would face a prolonged period of uncertainty.

He said: ‘The position was that they would like to see the Post Office come back with a defined programme of conversion, including who was actually going to take over.’

Committee chairman Alfred Cannan suggested that, with hindsight, the Post Office’s initial intention to run an open and transparent process had been correct.

Mr Kelly declined to speculate and said he wasn’t sure if there was a correct route. Mr Cregeen added: ‘Whichever way it had gone, it would have created a very difficult time for the staff.’

He added: ‘The conversion to sub post office status has been a difficult decision, and one that has the full support of the Isle of Man Post Office Board and the Council of Ministers’.

Only one submitted bid

It emerged at the hearing that Mannin Retail, who operate the network of Spar stores and were named as the providers of the sub post offices on November 17, were the only company to submit a bid.

Nine companies were initially contacted by the Post Office and five subsequently expressed some interest.

Mr Kelly outlined the criteria that were used to identify potential bidders, including their locations, the robustness of their businesses, their experience of operating sub post offices and their commitment to the existing post office staff.

Mr Cannan responded by questioning whether any other business would have been suitable. He said: ‘It doesn’t seem to me, knowing the two locations, that there was going to be any other provider who could have met the criteria.’

Mr Cregeen said he was unable to speculate to what extent the other four possible bidders would have met the criteria as they did not submit a bid for their consideration.

Savings ‘paid for by staff’

Each of the affected 19 staff will either be redeployed, accept voluntary redundancy or be forced into compulsory redundancy, but all have been promised employment with Mannin Retail under new terms and conditions.

Mr Cregeen told the hearing that the changes to the service would save over £300,000 in the first year, and were projected to reach £350,000 by 2016.

But under questioning from Brenda Cannell MHK it emerged that the costs of the redundancies have not been factored in to the first year savings figures.

Mr Cregeen went on to agree with committee member Michael Coleman MLC that the majority of the savings would come from a reduction in staff wages under their new contracts of employment with Mannin Retail.

Responding to a question from Mr Coleman about whether the Post Office specified any terms for the treatment of their staff, Mr Kelly said: ‘We believed it would be a matter for them and their new employer to discuss privately’.

‘Ridiculous situation’

Mr Cannan went on to describe the Post Office’s current arrangement with the government, whereby they must pay a fixed dividend of £2 million each year to the Treasury, as a ‘ridiculous situation’.

He said: ‘We have the Treasury demanding £2 million from the Post Office whether or not it actually makes that amount of money. That’s just completely unsustainable.’

Mr Kelly told the committee that the arrangement was ‘effectively imposed’ on the Post Office, but he believed it was a better solution than facing significant budget cuts similar to other government departments.

He said: ‘The board’s view is that we have to trade out of our current situation rather than become a drain on the public purse.’

The arrangement, now in its third year, replaced an earlier deal in which the Post Office shared 50 per cent of its annual profit with the Isle of Man Government.

Mr Cannan said: ‘What I’m trying to get my head around here is the part that the Treasury has insisted the Post Office plays in rebalancing.

‘Would you have closed down the two crown offices [in Ramsey and Regent Street] if you were not required to give this £2 million contribution – for instance, if you had to give the government £1 million?’

Mr Cregeen replied: ‘I think we’d come under a lot more scrutiny from the Public Accounts Committee if we continued to trade at a loss.’

No contracts signed yet

Asked by committee member Brenda Cannell MHK whether he would be willing to defer the closures, Mr Cregeen said that the annual losses of around £500,000 from the two post offices would continue for as long as the decision is delayed and could seriously affect the Post Office’s reserves.

Noting an expected fall in profits this year due to declining volumes, he said: ‘We could be left next year in the situation where we have to withdraw a million pounds from our reserves to make up the dividend required by the Treasury.’

However, Mr Cannan described the Post Office as being in a ‘very healthy’ financial position with ‘substantial reserves’ including £11.7 million in cash at the end of 2014.

No contracts have yet been signed with Mannin Retail, although Mr Kelly said that the terms have been ‘substantially agreed’. Asked whether the decision could be reversed, Mr Cregeen said that they would have to take legal advice.

Having declared an interest as a former chairman of the Post Office, committee member Geoff Corkish MLC did not take part in the hearing.

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