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How the Post Office lost its way

02 Jun 2020, 10:53 ... st-its-way

One of the many gems in the vast archives of the Post Office is a six-volume collection of letters from a Colonel Whitley in Head Office to the men (and not a few women) working across the country as postmasters. A former private secretary to King Charles II, Whitley effectively ran the nascent General Post Office for five years with conspicuous success. Those under his charge found him, as we might say, firm but fair.

In a letter of November 1672, Whitley sternly advised one Mr Watts to crack down hard on a slipshod junior whom he had been foolish to employ on the mails. As the Colonel pointed out, there could be no room for incompetence in His Majesty’s Service – ‘however I am not for Severity, when there is unavoydable accident in ye case … [and] soe far as I can, I will excuse you, and Remaine Your very loving Friend’.

Today’s Post Office should have taken a leaf out of Colonel Whitley’s book in managing its network. The latest storm of bad publicity buffeting its management – courtesy of a startling BBC Radio 4 series running daily, this week and last – follows a series of damning judgments in the High Court which culminated late last year in an out-of-court settlement costing the Post Office a cool £58 million.

The successful claimants were several hundred aggrieved sub-postmasters and mistresses, many of them hounded out of business (or worse). Cracking down over the years on those it believed guilty of fiddling the books, it turns out that the Post Office all too often scorned the notion of ‘unavoydable accident’ and was all for Severity. Now a further 900 cases are apparently suspected of involving serious miscarriages of justice.

Critical to each and every case was a clash over the reliability of a computerised accounting system called Horizon. After three years of constant setbacks, the system was finally rolled out across the Post Office’s network around the turn of the millennium. Random sub-postmasters soon began to encounter mysterious cash shortfalls: they reported one balance in the till, Horizon calculated another. After sub-postmasters began to be charged with negligent or false accounting, fraud or outright theft, some of the bolder spirits began to fight back and blamed the discrepancies on bugs in the software. The Post Office was adamant that no such bugs existed. A protracted battle followed, and many lives were ruined. Horizon was defended as a system that could do no wrong.

After several reviews, investigations and rulings from the bench, the Post Office was forced at the end of last year to accept an entirely different view of Horizon: it was judged to be not so much deeply flawed, as prone to an infinite list of flaws, all capable of springing nasty surprises on barely trained sub-postmasters struggling conscientiously to balance their books.

Some will view the whole episode as a cautionary tale about the wickedness of privatising the postal service. The harsh treatment of the sub-postmasters may indeed have owed much to a newly aggressive style of management, concerned as never before with performance goals, quasi-commercial disciplines and the wholly novel aim of achieving financial autonomy. True, the Post Office was excluded from the privatisation of 2013 that saw its sister organisation, the Royal Mail, leave the public sector. But these two arms of the postal service – formally separated from each other in 1986 – were run in close proximity for the 20 years that followed Michael Heseltine’s ill-fated privatisation campaign of 1993-4. What was managerial sauce for the goose seems to have been dished out as good for the gander too.

A strong case can be made for regarding the Post Office network – what used to be called the Counters business – as a public-sector service that ought never to have been exposed to the kind of tactics and targets introduced at the Royal Mail. To have denied these to the Royal Mail itself, on the other hand, might have seen it wither away. The difference between the two organisations is worth remembering now.

The Counters operation enjoyed a period of unusual growth and innovation in the 1980s – but with (at best) tiny profit margins, it never remotely looked like becoming a properly commercial enterprise. It worked far better as a public utility, with many small post offices serving a vital social role but individually making little if any direct contribution to the central coffers. As Heseltine came to agree in 1994, dressing it up for the private sector was a waste of time.

Besides, in a sense it was already there. Most of the network’s 20,000 post offices comprised modest operations run for well over a century by self-employed folk, working on a commission basis. In effect, the network had already been privatised – by the Victorians, who realised that the breakneck expansion of their postal system in the railway era was totally unaffordable unless most of its operations were franchised out to non-employees. (Paid per transaction, they would cost the centre nothing if they sat all afternoon with nothing to do.)

The role of privatisation in Royal Mail’s story is very different indeed. The Group has struggled in a tough business environment in recent years – its shares have fallen by 50 per cent from their 330p flotation price – as letter volumes have declined remorselessly and competitors have scrapped for every bit of parcel and courier business. But anyone who believes that the state-owned service could have coped better with today’s dog-eat-dog collection-and-delivery marketplace needs to recall how disastrously the old service failed under New Labour.

It was evident by the late 1990s, with emails and the online world sweeping away the postal past, that an entirely new business model was needed. Led by former civil servants, shackled by awful industrial relations and starved of capital for years by the Treasury, the Royal Mail tried to adapt – and fell flat on its face. It was insolvent as a business by 2002, riddled with half-baked plans and crocked by a disastrously inept regulatory regime. Blair’s ministers tried to sell it – concealing the sale as a merger with the Dutch Post Office – but discovered to their dismay that they couldn’t even give it away. Only a bracing change of management culture saved the Royal Mail, engineered with the promise of future privatisation.

So was it inevitable that Royal Mail’s reconfiguration as a private company should have led the Post Office to stray so far away from the public-service ethos of the traditional Counters business? Surely not. Other European postal operators have managed to run service-oriented, and virtually non-profit, office networks in parallel with competitive mail-delivery businesses – some of them, like Germany’s Deutsche Post DHL and Holland’s PostNL as wholly privatised companies since the 1990s.

Public or private, and whatever the state of its IT systems, the Post Office anyway faces the same essential task as ever: to combine keeping a beady eye on the money with a sensitive handling of those behind the tills. Come back, Colonel Whitley.

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