PAC Meeting | May 28, 2015
Dept of Social Protection called and examined
Deputy John Deasy: Ms O'Donoghue and her officials are welcome. I will start with the post office network and the Department's interactions and relationship with it.
This has received some media attention recently, specifically because the Department has begun writing to recipients of social welfare inviting them to consider a transfer directly to their bank accounts.
As Ms O'Donoghue is aware, there is a current political issue with regard to the post office network and the estimate of how many post offices will be shut down within the coming years. As more social welfare payments are made electronically, the throughput reduces for post offices as does the associated financial bottom line.
Those of us on the committee are in a funny position. I am asking Ms O'Donoghue about this, but it is really a balance. Those of us on the committee are in a situation where we must ask and expect Departments to find cost cutting or savings within their budgets and value for money for all citizens.
At the same time, there is considerable political rhetoric when it comes to saving post offices, particularly in rural Ireland. On the one hand, we are constantly trying to save money in an environment where there is not as much money going around as there was five or six years ago, but, at the same time, there is a constant campaign to preserve post offices throughout the country.
Having said all that, I have looked at the figures when it comes to cash payment versus the electronic payment. The ratio is approximately 10:1. I can understand why the Department would go down that route if it was simply based on finances alone and the cost savings involved.
Is there not a balance to be met, however, when it comes to Government, on the one hand, looking for those savings but, at the same time, having a responsibility to ensure that post offices are maintained and the network is maintained as much as possible, for obvious reasons? I will start with that.
Ms Niamh O'Donoghue [Secretary General, Department of Social Protection]: There is a balance to be struck. The balance is to be struck in looking at the interests of all participants in the transaction. This includes customer preference, the agencies through which we provide the service and the service delivery itself. The Department has a long-standing relationship with An Post and the post office network. It is a valued relationship and works remarkably well.
We signed a new contract with An Post at the beginning of 2014. However, that contract had been tendered for and was advertised in the context of a Government and departmental payment strategy that very much reflected the tendency in customer preference and the need for greater efficiency in the economy of moving towards electronic payments.
In fact, the contract we have with An Post is predicated on envisaging a move towards electronic service delivery. However, in a context where that also meets customer preference it has been our experience that, certainly for new entrants to schemes right across the board, where the customer has an option in respect of how to be paid, that option is predominantly exercised in favour of electronic payments rather than payments through An Post.
Of the payments we make, a sizeable proportion are made to a group of people who actually do not have an option. In other words, for other purposes we demand that they exercise their payments receipt through the post office. That is to do with control reasons as much as anything else.
That relates to a decision we made in 2009. There was a windfall benefit to the post office system in terms of delivering that level of service on a mandatory basis. However, in respect of any other payments we make it is very much on the basis of customer preference.
It is in a context where Government has recognised that there is security aspect, a safety aspect and a customer trend moving towards electronic payments, and we have to recognise that as well.
Deputy John Deasy: All that makes sense. Again, it is logical from the cost savings. However, someone from a post office or the Irish Postmasters Union might make the case that we all believe in choice but that an active campaign or system is under way within the Department to contact people on these schemes to remind them that there is this option.
The postmasters are asking whether we can slow it down until they can work something out with a new system they have proposed, because it is having quite an effect on the bottom line of post offices.
I understand where the Department is coming from as far as choice is concerned, but there is an active system within the Department to contact people. I have before me a news report from March stating that 7,000 letters were sent out reminding people or pointing out that this new system of payment was available to them. The spokesman said the Department would send out hundreds more letters. This is going to continue.
Ms O'Donoghue has outlined the policy but I am unsure whether it deals with the public interest balance that we are trying to meet. There is political rhetoric about saving a post office network while, understandably, at the same time there is a cost savings imperative on the part of the Department and the question of giving people a choice. At the same time, it is concerning when it comes to the post office network.
Niamh O'Donoghue: There are two points I can make on the matter. The letters Deputy Deasy referred to were part of a small pilot. Actually, only 2,800 letters were issued.
Deputy John Deasy: Okay.
Niamh O'Donoghue: The pilot was to try to establish what might be a better communication system with our customers. Different forms of letters were used to see how customers would engage or would not engage with us.
It was very much about trying to inform our approach in a context where, as Deputy Deasy has said, An Post has gone to the market for a different type of payment solution. That will be coming on-stream later in the year.
That, coupled with other measures we are taking, potentially gives us an opportunity to look again at offering options to people to whom, historically, we have not offered options. It was very much to inform our communication strategy with our customer base and it was very limited. There were 2,800 letters. The actual response was low enough, in fairness.
Deputy John Deasy: That is interesting. Of the 2,800 letters, what was the take-up?
Niamh O'Donoghue: I can give the committee the actual figures. The response to the trial was low, 14% responded to us. Of the 14%, a total of 31% indicated a preference to migrate to electronic funds transfer.
We are talking about small numbers. It was more to see what kind of communication would generate a response. The critical aspect of this exercise is that nothing would happen to anyone who did not respond. In other words, it was an entirely voluntary engagement with us.
John Deasy: That is fine. A total of 14% responded and of that figure 31% opted for the electronic payment system.
Niamh O'Donoghue: Yes. The second point I would make is that even in a context of Government having a payment strategy which rather looked at moving into the digital economy the Department went to the market for cash-based service delivery in 2013. We contracted with An Post, recognising that there is an issue around retaining services of that type and meeting customer preference in that area.
John Deasy: The Department has done the modelling exercise with 2,800 people. Are there plans within the Department to expand on that at present?
Niamh O'Donoghue: Not at the moment. It is in a context of when we have a look again at the service offerings available to us post the An Post developments. I would say it is part of the An Post contract that we are moving in that direction and An Post is working with us to do that.
John Deasy: Fair enough. Is there any other area in which the Department could potentially work with An Post in the future to give it more business? The Department is the big spend. An Post was relying on those transfers. Is the Department talking to An Post about anything else that is potentially coming out of the Department or is that it?
Niamh O'Donoghue: We talk to An Post all the time about a whole range of different things, but, obviously, if we have a service offering on which we want a face-to-face engagement, which is what An Post could potentially deliver for us, we would have to go to the market and go through a tender process to offer that.
Deputy John Deasy: If not, the Department would have the Comptroller and Auditor General down its back.
Niamh O'Donoghue: Indeed.
Seamus McCarthy: Or worse, the Department could have a claim against it.