Smaller post offices are likely to fade away if postmasters agree a severance package with An Post. Such a development would be highly symbolic, but inevitable, following the Government's refusal last July to subsidise the network.
The talks between An Post and the Irish Postmasters' Union on an exit deal are chaired by Mr Phil Flynn, an industrial relations consultant. If agreed, the package will see postmasters paid a lump sum in return for the adoption of a fee-per-transaction agency system. Such agencies are already being rolled out on a pilot basis. However, whether retiring postmasters choose to adopt the system or abandon the business altogether is probably a moot point.
Senior sources accept that stand-alone businesses will not be transferred to new operators when postmasters retire. Instead, postal agencies are more likely to be transferred to other retailers, ensuring continuation of the post office services. Customers may also choose to migrate to larger post offices.
However, more important than the agency programme itself is that the plan provides a fig leaf for the Government, enabling ministers to say they remain committed to provision of State-wide postal services. Indeed, the talks are also aimed at providing additional State services on the network.
Post office closures have been mooted since 1991, but the immediate backdrop to the severance talks is a report earlier this year by Mr Flynn - which projected an £83 million (€105.4 million) loss by 2005. Urban and rural offices were facing crisis and the "only real option" was for the Government to finance the deficit, he said.
With public finances tightening and hundreds of millions required to improve health services and public transport, the Government balked at providing such a levy.
Aware that more than 90 per cent of post office business is carried out at 10 per cent of outlets, the Department of Finance was said to be opposed to subsidies. It argued that such subsidies would become a black hole, with losses continuing to grow over time.
An Post was also unwilling to shoulder the pain. The company claimed that using its significant cash reserves to keep unviable offices open was akin to putting furniture in the fire.
What paved the way for the severance talks was the Government decision last July which ruled out subsidies. It was a subtle ruling, which left the IPU with few options. The decision also appears to have played into the hands of the State company by leaving it no option but to get its house in order.
What is more, it seems designed to finally shake the yoke of "rural post offices" from the back of politicians. The matter has long been a hot potato, with the IPU emphasising the "social" role of small post offices which appear to be doing less and less business.
First, the Government sanctioned a 12 per cent pay rise for postmasters. The increase was significant, but some postmasters still earn as little as £100-£110 per week. Second, its decision said An Post should expedite the national deployment of the agency programme. Third, it said An Post should implement cost reductions throughout the network.
The fourth element of the decision was the most crucial. It said a "reform package" should be facilitated by a Government injection of additional equity - subject to State aid clearance from the EU.
Intriguingly, a Government press statement said that £10 million in new capital would pay salary increases to postmasters. Three informed people said they understood the equity was provided to pay for the severance deal, which was referred to in the decision as "reform package". This was also outlined in an application to the competition directorate general of the European Commission for State aid approval.
The newly-appointed general secretary of the IPU, Mr John Kane, said "nothing like" 900 postmasters at non-automated offices "will go". But after a decade fighting closures, the entry of the IPU into severance talks is significant.
