Smallest post office gets net

A new network could transform the fortunes of rural post offices. SA Mathieson visits Britain’s tiniest post office to find out more

Visiting the smallest post office in Britain, in a beautiful part of the Highlands, was great fun. This was in the days when Royal Mail was calling itself Consignia, a thankfully brief period in its history.

Powered by article titled “Smallest post office gets net” was written by SA Mathieson, for The Guardian on Thursday 26th July 2001 01.16 UTC

Lily Donald is not your average techie. Sitting in her conservatory on the banks of Loch Ness, she admits that before this year, she used computers for writing letters and solving crossword puzzles. “I wasn’t really into the net,” she says. She is using a CD – as a drinks coaster.

But Lily manages a piece of technology that can help the smallest communities. She is subpostmistress of Dores, a tiny village eight miles south-west of Inverness, and runs the country’s smallest post office – tourists sometimes ignore the beauty and monster-potential of the loch in favour of taking pictures of her house. Lily opens the metre square converted broom cupboard for six hours a week, although customers often call out of hours. “In practice, it’s as long as your ear,” she says of her working week.

As from February this year, this work goes through a Horizon terminal, her end of a £1bn ICL-built network installed in virtually all the UK’s 17,800 post offices. Able to provide existing services, and add new ones with ease, Horizon already handles £120bn of business annually. The remaining 60 branches requiring specialist kit will be polished off by November.

Dores was one such special case: most Horizon terminals look like personal computers, with a bulky monitor, but due to the dimensions of Lily’s office, hers looks more like a large laptop, with a flat screen.

At least Dores has phone lines and mains electricity. One of the last remaining connections to be installed is on Fair Isle, a few square miles of land in the seas between Orkney and Shetland. The erratic power supply and lack of telecoms infrastructure means ICL must install an uninterruptible power supply and a satellite link.

Horizon was born almost six years ago, at a party conference. The then social security minister Peter Lilley brandished a smartcard, a fraud-busting replacement for the benefit book. With the Benefits Agency and ICL, the Post Office would install smartcard reading terminals at every branch, through a private finance initiative (PFI) called Pathway.

Four years and £700m of taxpayers’ money later, the new Labour government stopped Pathway in its tracks. ICL has since criticised the PFI payment criteria: the Fujitsu-owned firm would have been paid partly on how many customers post offices attracted. “Looking back, I think it was over-ambitious,” says Stuart Sweetman, group managing director of customer and banking services for Consignia, the new name for the Post Office. “You can’t export all the risk to a supplier.”

Instead, the post office network and ICL negotiated much simpler terms, and began installing terminals to automate all sales. This non-PFI contract has been completed within schedule (except for the handful of difficult-to-implement branches) and within budget.

Now, everything you buy from a post office goes through Horizon. This makes life easier for staff: the system calculates prices, does the accounts and tells Lily how many Hydro-Electric tokens (the Highland’s electricity meter tokens) she should have left. “It cuts out all the paperwork,” she says. It takes her 20 minutes to do her weekly accounting, compared with two hours before.

The system can be oper ated by touch-screen or keyboard, and offers a choice of large icons. The Serve Customer menu features the most popular 15 services such as the 1st class stamp: the operator enters the number of stamps, and the system works out the rest. “You really can’t go wrong on it,”Lily says.

Although benefits are still paid by stamping books, Pathway also tackles fraud. “For pensions and child benefits, it takes very slightly longer,” says Lily. “Previously you just took the book and stamped it, now you’ve also got to scan its barcode.”

The system automatically checks for books reported stolen or otherwise disallowed, and if someone hasn’t claimed for a few weeks, it adds up the total benefit due, saving staff from doing the sums. “You have more of a chance of making mistakes in a rural post office, because it’s all talk, talk, talk while you’re trying to count out the money,” says Lily.

More vitally, with direct benefit transfers, along with less shopping in rural areas, resulting in a record 547 post office closures in the last financial year, Horizon provides the foundation to build replacement business.

The situation will be exacerbated by the loss of commission on benefits payments, which accounts for a third or more of a small post office’s income. From 2003, the government will send benefits to the 16m claimants through their bank accounts. Although saving money for taxpayers, it will cost post offices £400m a year.

“Now we’ve got the infrastructure everywhere, we’re working on new opportunities,” says Consignia’s Sweetman.

Many post offices already provide services for account-holders of high street banks; Barclays adding a post office service following its unpopular decision to close 171 branches last year. The post office also acts as a virtual branch network for online bank Smile, a subsidiary of Co-operative, and the Abbey National-owned Cahoot. But this is just a start.

In April, the government and 11 financial organisations agreed, after much haggling, to establish universal banking services. These are aimed at millions of UK citizens without bank accounts, who do not have the opportunity to save money paying bills by direct debit. The 10 banks and one building society will pay post offices to operate no-overdraft basic accounts for those with poor financial histories.

As a replacement for benefit books, Post Office Card Accounts (which will not allow direct debits), will allow withdrawals only at post office counters, meaning minimal change for pensioners and others who prefer regular visits to a branch – and continuing custom for sub- postmistresses such as Lily.

Horizon is already expanding post offices’ range in other areas. Branches have started offering Standard Life pensions, and will soon sell local transport smartcards, if a trial in Manchester early next year goes to plan.

The UK has more post offices per square mile than any other industrialised country, bar a few small island states, according to government research. This advantage of number and spread could also provide a boost for e-commerce and long-distance shopping with the launch this month of Local Collect.

If you miss a parcel delivery, it usually winds up with the courier company, meaning you have to rearrange delivery or trek to a depot. However, following a trial in rural Somerset, customers can direct deliveries to any of 16,000 post offices (a couple of thousand have opted out, pleading lack of storage space), or any Royal Mail or Parcelforce depot.

Items can be sent straight to participating offices, or used as the alternative if customers are out.

French firm Redcats, operator of online retailers including, and Parcelforce’s online mall already offer the service.

After paying an annual £300 licence fee to join Consignia’s parcel tracking system, the service doesn’t cost the retailer any extra, as Royal Mail and Parcelforce save having to make repeated attempts at delivery.

But where a retailer does not provide the service, anyone receiving a Royal Mail or Parcelforce “while you were out” card can get parcels redirected to a post office for 50p.

The government also plans to use the network to provide better information on state-provided services. Construction started earlier this month on touch-screen kiosks at 267 post offices in Leicestershire and Rutland, to test a system called Your Guide.

From September, this new information system will provide information on benefits, local government services, community information and job-seeking.

For jobs, it will consolidate information from state organisations such as local job centres and the armed forces, as well as voluntary organisations.

If successful, the scheme could go national next year, using Horizon as its data network. To supplement the kiosks, post offices will provide free phone lines, leaflets, and sometimes experts, with counter staff trained to help.

In Dores, Lily has been asked if she wants to offer parcel-holding and government advice services. But there’s no need to ask about offering advice: she reckons a good postmistress or postmaster does that already.

Lily took over the post office operation in 1994 because mothers and pensioners found it time-consuming and expensive to take one of the three daily buses to Inverness to claim their benefit. By way of illustration of this community role, Lily tells a story about Dores’ first postmistress, Lily Fraser.

“The old lady who used to run the post office here during the war comes in and she had to see a chiropodist,” says Lily. In an echo of her predecessor’s role six decades ago, possessing the village’s only telephone, Lily automatically made an appointment for the 82-year-old. Her predecessor thanked her warmly, but she replied: “Is that not what we’re here for?” © Guardian News & Media Limited 2010

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