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Sub-Post Offices

Volume 403: debated on Tuesday 8 April 2003

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2pm

It is a great charm to discover that I face the Minister, who is a former Financial Secretary with whom I spent many happy hundreds of hours considering Finance Bills.

I begin by putting on record something that I think every Member present already knows, but which particularly affects my constituents in West Dorset and, I suspect, others in rural areas throughout the country: there is no such thing as "the village institution". Villages in their full-blown incarnation have pubs, village halls, shops, post offices and schools. No one of those is critical to the survival of the village as a rural community, but the matter is a question of Sorites' paradox. Members will recall that Sorites raised the paradox that when one takes a pile of stones and removes one, one still has a pile of stones. That continues to be true as one removes stone after stone until, at last, there is only one. Then, alas, it is no longer a pile, but just a stone.

So it is with village institutions: one can lose the shop, the post office, the village hall or the school. Eventually, one loses everything that makes the village a living community and brings the people in it together to create the neighbourly society that we should welcome and treasure, and which still exists in West Dorset villages, by and large. We know the intense and aggravated social problems of inner cities. We know of the heroic efforts of Government after Government of different persuasions to resolve some of those problems, and the costs and difficulties entailed. To fail to reinforce social success, where it exists, in relation to societies that function properly, where they exist, is a tragic waste of resources quite apart from the effect on my constituents.

We ought to take steps to ensure that each part of the village community is sustained. With that in mind, I have sought to add my own voice, and those of my hon. Friends and other Members, to the chorus that has been raised during the past several years about the threat to the rural post office network.

I should declare a semi-interest: for some years, I have been the secretary of the all-party group on sub-post offices. Through its auspices, and some years ago, we worked with the National Federation of Sub-Postmasters to inaugurate and stage in Methodist central hall a large manifestation of feeling among sub-postmasters and sub-postmistresses. On that day, there was a large lobby of Parliament. I think that the ministerial mind was somewhat affected by all that, and it is to the Government's credit that they began to think more seriously about the effect of their actions on the rural post office network, but I fear that the signs are that the steps that have been taken are not yet sufficient to do the trick.

Let me briefly rehearse what Members will already be well aware of: the strange history that has led us to the position in which we now find ourselves. For many years, under the Conservative Administration, officials in the Department of Health and Social Security, later the Department of Social Security, proposed to Ministers a major efficiency saving—that was how they described it. They suggested replacing the old-fashioned system of collecting benefits with automated credit transfers through the banks.

Time after time—last but by no means least when my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) was Secretary of State for Social Security—when officials came forward with such proposals to save taxpayers' money, Conservative Ministers, perhaps because they had an instinctive understanding of the points that I have made on the importance of the rural post office network, said, "No, we will not make that saving. Although we would save money, we would ultimately have to subsidise a rural network to keep it in existence, which would be at least as costly. Otherwise, we would lose an invaluable social resource."

Not until the advent of this Government was that same paper presented—brushed down and word processed, with a few commas and full stops changed—and, perhaps because they lacked that instinctive feeling for rural areas, they said, "Whoopee! If we save money here, we can spend more on useful things such as the health and education services." Because of that decision., the all-party group came into being, sub-postmasters began meeting and lobbying the Government, and the Government had to work out how to solve the problem that their officials had persuaded them to create. The problem is that without the old-fashioned system of benefits collection, post offices in rural locations were bound to suffer appallingly from a reduction not only in the amount of money that they received in direct commission for giving out benefits and pensions, but—indeed, mainly—in footfall.

Estimates of the loss of direct payments to the rural network vary widely, as do estimates across the whole network, rural and urban. The Minister may contradict me if my figures are outdated or wrong, but I believe that the direct losses are some £400 million a year for the 17,500 post offices, of which only some are rural. However, the footfall loss is far more difficult to quantify and, undoubtedly, the larger problem in the long run.

It would be wrong to suggest that the Government have not attempted to resolve the problem that they were persuaded to create, because they have. They started with the concept of a universal bank and engaged in prolonged and intensive negotiations with the banking fraternity.

Before the right hon. Gentleman moves on to what the Government may or may not be doing, is it correct that there was a lot of confusion and delay when the Conservative Government were in power because they could not agree on whether to privatise the Post Office? Perhaps that is a reason for us having the debate today.

I have no doubt that the hon. Gentleman and I profoundly disagree about the privatisation of the Post Office, but, whether he is generally right about that or I am, what is certainly true is that it has nothing at all to do with a debate on the sub-post office network, which is, of course, intrinsically privatised. It is entirely composed of private operators. Indeed, in terms that he may find more attractive than I do, that is the problem. We would not be having this discussion if that network were part of the nationalised service, as it would simply be invisibly subsidised as part of the nationalised arrangements. I do not accept his point.

While we are at it, and before the hon. Gentleman springs to his feet in further and righteous indignation, I entirely accept that, alas, under the Conservative Government there was already a severe financial problem for rural sub-post offices. I do not seek to disguise that and it would be dishonest to do so. There were significant closures—they were running at rather under 200 per year, if I remember correctly, which is a serious rate of decline. Indeed, the closure rate was so alarming that groups and inter-ministerial committees were considering how to staunch the flow. That was without the measure that the Government have now decided to take in relation to automated credit transfer.

It should be said that, the Government having caused an increase in the outflow to, if I remember correctly, rather over 400 closures per year at its peak, they have brought down the figure somewhat through the measures that I will describe. My angst is related to the fact that, for reasons that I shall enumerate, by the time the Government's measures have been fully implemented, we shall probably see the closure rate rise again.

Before my right hon. Friend moves on to his next point, may I inform him that the sub-post office in the village of Rettendon in my constituency closed over a year ago? Despite attempts to find an alternative sub-postmaster to reopen it, Chelmsford borough council, which is controlled by the Liberal Democrats, has made that almost impossible by being inflexible in planning terms. Does he agree that the Liberal Democrats should be careful to practise what they preach?

My hon. Friend is a remarkable and dextrous pugilist, but I am inclined, if possible, to turn this into a most consensual effort to save sub-post offices, so I shall refrain from commenting on what I do not know about—the case in his constituency—and say only that during my efforts to save the tiny post office in Toller Porcorum, which is not one of the great metropolises in our kingdom, but which is in my constituency of West Dorset, I discovered that it is necessary to have just the flexibility in planning that he describes.

We eventually managed to establish a part-time post office in what can best be described as a room on the bottom floor of what can best be described as a tiny cottage on the basis of persuading flexible planners that we were not doing much injustice to the fact that the cottage was a residential establishment. Flexibility is of great importance.

If I may diverge for a moment into that important element of saving sub-post offices, it has to be said that flexibility will also be required in other respects if we are to save the network. I am sure that there will be cases in which sub-post offices need to be located, perhaps with their shops, in village halls and pubs. We all have to be enormously flexible if we are to save such valuable resources.

Is the right hon. Gentleman aware that the Welsh Assembly has tried to learn lessons from the processes that he has described? It has introduced rural community action plans, which can be directed towards any rural community issue, including post offices. They are designed, if used in an integrated way, to create viability in circumstances where it might not otherwise be present.

The hon. Gentleman will not be surprised to know that I know less about Wales than he does, but I welcome all efforts to bring people together and to find funding to sustain the network.

In the long run, savings will be made. There will be financial savings, as a supportive and vibrant community provides enormous intangible support to its members that otherwise has to be funded through elaborate bureaucratic programmes. There will also be direct savings, in the sense of saving the human misery that can all too frequently occur in quite unmelodramatic ways when people who are relatively housebound, or are in relatively rural locations with young children, do not have a means of talking to one another or to their neighbours.

I return to the history of the matter and to its present and immediate future. The Government have taken steps to try to resolve the problem that they created. The universal bank was intended to be such a solution and there were detailed discussions with the banking fraternity on it. Some of us with experience of the banking fraternity were sceptical about whether the Government could persuade the banks to behave in the way that they had first imagined. As it transpired, our scepticism was well founded. The banks participated in a discussion and have come forward with useful devices, but the system is not the universal bank that was originally conceived, nor is it as cost free as was originally intended.

That is not the main cause of my angst at present, because it has to be said that the banks and the Government have between them come up with a system, and there is much to be grateful for in that. There is, however, a terrible problem. I do not know of exactly whose making it is and I am not going to accuse any particular party of being its instigator. I shall say, however, that the Minister and his colleagues need to solve it, and quickly.

The problem is well illustrated by an admirable leaflet that has been widely distributed, which says:
"From April 2003 the Government will begin paying state pensions directly into accounts. But you can still collect your state pension at the Post Office."

My hon. Friend says, "Ho, ho" and to an extent that is exactly what I am going to describe—the "Ho, ho" of the matter.

The leaflet's front cover says that it will describe three items: a current account, a basic bank account and a Post Office card account. So far, so good. What is the current account? It is the current account that we all know and love. We did not need a leaflet to learn about current accounts, because we can walk into any bank and get one, but the leaflet describes them—first, I note—and explains that one can withdraw cash from a post office free of charge using a cheque book.

That is exactly the proposal for automated credit transfer that would have occurred in the first place without any discussions on the universal bank. There is nothing wrong with that, but from the point of view of the rural sub-post office network, there is nothing right with it either. People who choose option 1, the current account, may or may not ever go into a post office to collect their money. There is no particular reason why they should ever do so.

I have never done this, but I think that one can already go into any post office with a cheque book and card to withdraw money from one's current account, although it may not have had benefits paid into it. Is that right?

Yes, I can testify to that. I do it frequently. Sub-post offices in rural Dorset are immensely helpful in cashing my cheques, and I doubt whether that is because they know who I am. It is because I have an account with a card, and I observe many people coming in and doing the same. However, most people with current accounts who want to get cash or make payments do not go to sub-post offices. They go elsewhere, primarily when they go shopping. Almost always these days, people engage in major shopping in places where there are dispensers to obtain money from cards, or tills and other places where they can cash cheques.

I fear that the current account, which is likely to become the norm over time if the Government, the banks and the Post Office continue in their present mode, will not encourage footfall. I am in no position—perhaps the Minister can give us his estimates—to say what the footfall through the sub-post office network will be if the current account does indeed become the norm. I suspect that the Minister will find it difficult to deny that, if some 80 or 90 per cent. of those receiving pensions and benefits collect them through a normal current account, the effect on footfall will be serious.

The performance and innovation unit, no less, published a report entitled "Counter Revolution", which the Government accepted, including conclusion 18, which said that the Post Office should develop a role for post offices as Government general practitioners, and that would improve footfall. However, when I asked the Minister what he had done about that he said that there had been a "Your Guide" pilot that

"highlighted a number of areas in which Government Departments might deliver services through post offices in the future and we are exploring these".—[Official Report, 27 March 2003; Vol. 402, c. 323W.]
Does my right hon. Friend think that that is a vague answer on an issue as important as increasing footfall through the rural post office network?

I fear that I shall have to confirm my hon. Friend's worst fears and go further. I have experience of this Minister: I have asked him many complicated questions in the course of Finance Bills. I hate to tell my hon. Friend that I always received extremely lucid and detailed replies. I do not say that about every member of the Government, but this Minister was noted in the proceedings on Finance Bills for giving us genuine answers to genuine questions, although I hope that I am not ruining his career by saying that. It was an alarming tendency, and we sometimes saw officials in Committee registering shock and horror at the nature of the Minister's responses. If this Minister answered my hon. Friend in those terms, it confirms my suspicions that the Government have not the foggiest idea about how to make the Government general practitioner service system work, about which, as my hon. Friend said, much was said in the original reports.

I am enjoying this part of the right hon. Gentleman's argument. Does he agree with the group of sub-postmasters that I met in Inverness last week that it would be a tremendous opportunity to be able to access at every local post office the current accounts to which he refers? In many areas, not least in the villages in his constituency, there is no bank, so it would be a great boon for the post office network if one could sort out one's business at the post office.

The Minister is right that that would be an improvement for people whose benefits are paid through their current accounts and who cannot access a post office. If such people could access their account at the post office, more of them would be likely to go to the post office than if they had no such option. We are in agreement on that. However, that is not how the question ought to be posed. The question is how many of the people who currently go into sub-post offices will continue to do so if the method in question becomes the norm for receiving benefits and pensions, and if very few people receive them by other means. I think that that is the direction in which we are heading and in which somebody or other wants us to head. I do not know the answer to that question; indeed, nobody could know it. However, I hope that someone from the Department of Trade and Industry or someone else has studied the question quite closely. If they have done so seriously, they will have been forced to conclude that the number of people using sub-post offices will seriously decline.

I am grateful to the right hon. Gentleman and shall not keep on intervening. Does he agree that it is much better for the future of the post office network if people go into post offices because they choose to do so, rather than because they have no other alternative? That has been the position in the past.

First, let me say that I hope that the Minister will not apologise for intervening. Almost the only purpose of such debates in Westminster Hall—if indeed there is any purpose to them—is to engage the ministerial mind. We puny individuals in Opposition parties and on the Back Benches have no effect on such matters whatever. It is Ministers who make an impact, and it is much to be wished that an intelligent Minister will pay attention to the issues. I therefore welcome the Minister's intervention.

However, I do not agree with the Minister. He has exposed precisely the nature of the subliminal disagreement that has been going on for five or six years. I understand the theory that he expounds, and in general terms I am a proponent of it. It is generally better that consumers have choice. The Minister's party is a recent convert to the truth on that point, whereas my party has been converted to it for hundreds of years. Those of us who are long-term adherents to the principle of consumer choice recognise—once in the Labour party's great tradition it specialised in recognising this—the need under certain circumstances to create a basis for social solidarity where it might otherwise be threatened. The surprising thing about the character of British politics, as it manifests itself in this particular example, is that the Labour Government appear to have forgotten that very point.

It is not better to arrange the delivery of benefits so that institutions fall away. In some villages, such institutions sustain communal enterprise, bring people together and create a centre where there is somebody who knows them. Such a person can spot that Mrs. Jones has not come in today and can begin to investigate why. It is not better if those institutions fall away because people have more choice about where they go to collect their money. In the end, we will all suffer: those living in the villages will suffer, and the nation as a whole will suffer, because it will not be oblivious to the social difficulties engendered by such a circumstance. In that case, the Government will respond with bureaucratic measures, and will seek to enlarge social services departments to solve the problem.

It is counter-productive to replace a working dynamic, which involves an age-old procedure whereby people go into a sub-post office, talk to the sub-postmaster or the sub-postmistress and hence have neighbourly, wholly unbureaucratic relations that work well, with a bureaucratic system because one has unwittingly destroyed the nexus that used to exist by celebrating a form of customer choice that is not terribly important to people. That is the fundamental nature of the argument between us, and my purpose this afternoon is to persuade Ministers to think again.

Having exposed that difference, the Minister will almost concede the rest of my remarks. For the record, however, I shall explain what is happening, because the Government have never announced this and people would resist it if it were more widely known. The current account does not bring people into the post office of necessity, and in most cases they will not go there. Why not? Given that the basic account is sandwiched between the current account and the post office card account, I do not think that many people will take one out. A few people may do so, but I would be surprised if the Minister were to tell us that the take-up of the basic account has been or is expected to be large.

That brings us to the post office card account. Those of us who want the rural network to be preserved had placed much faith in the post office card account. Many of us thought that it would turn out to be the saviour of the network, because it is the electronic equivalent of the old system of collecting benefits. It was with dismay that I discovered that the Department for Work and Pensions has recently admitted that just 100,000 of the 1.3 million initial targeted claimants have actually chosen to apply for it. I hope that that figure will turn out to be wrong but, given how it has been presented, I would not be surprised if it were correct.

It is presented third in the list, which is not critical but is important. It is presented as something that people can do, but its write-up suggests that it is not a particularly good thing to do. Although the pamphlet describes the virtues of the other accounts, on page 5 it refers to the post office card account and states:
"No other payments, such as wages, can be paid into this account."
The leaflet specifically draws attention to something that cannot be done. It continues:
"The Post Office card account may be suitable for you if you want a simple account that won't let you go overdrawn or incur any charges."
The terms are calculated to ensure that most readers will think twice before opening such an account. However, it is difficult to write such leaflets, and it does not say that post office card accounts are dangerous or that smoking post office card accounts kill.

If there were an easy method of opening a post office card account that most people who now use post offices to collect their pensions could use, we could ignore the leaflet, but that is not so. It seems to be impossible to obtain a post office card account in any of the 18,000 sub-post offices. I say that with some diffidence because it is astonishing, but I believe it to be true, although I stand to be corrected by the Minister. As far as I can make out, such an account cannot be opened by going into a post office. What could be more calculated to ensure minimal take-up of the provision? There can be no possible explanation for refusing to allow people to open such an account when they collect their pensions and benefits each week, unless someone in Government wants to ensure minimal take-up of the post office card account.

People can open a bank account by going to a bank, and I do not suppose that anyone in Britain is under any illusion about that. The people who can open a bank account can do so by walking into a high street branch and opening it there and then. However, people who cannot open a bank account or do not want a basic bank account but want a post office card account cannot walk into a post office and open one. That is extraordinary and has surely been done with intent.

A system seems to have been created with the intention, or at least the effect, of minimising the number of people who, as a matter of normal practice, go each week into a post office to collect their money. The Minister may defend that—perhaps he will—by saying that it is better for people to have a choice of where they go and to have an ordinary bank account if they want, so let us not worry. My point is precisely that we should worry, because the tendency will be to decrease footfall and the rural network. Before we know where we are, there will be social problems that we did not anticipate.

Those problems could be overcome by subsidy. I know that the Government, subject to state aid clearance, have produced a package of £450 million—£150 million a year over three years. The extent to which that may be new money is not clear and is an interesting question. However, it need not detain us, because the scale of the subsidies that would be required if the whole of the sub-post office network were to be retained even though footfall diminished significantly would dwarf £150 million a year. I fear that there are only two possible outcomes.

The right hon. Member for Birkenhead (Mr. Field) is chairman of the all-party group on sub-post offices and is concerned, for obvious reasons, about the urban network of sub-post offices. If he were here, he could make a much more eloquent speech than I could about that.

No, I am not jesting. The right hon. Member for Birkenhead is passionate about the matter, and has lived with it as a committed constituency MP in an urban area for many years. I fear that either he and his constituents or I and mine will be disadvantaged, because the Minister will be unable to find the money from an increasingly hard-pressed Chancellor with an increasing problem of fiscal arithmetic to subsidise both an urban and a rural sub-post office network in circumstances in which the intrinsic dynamics, because of the failure of the Post Office card account system and the fact that the ordinary bank account has become the norm, has led to decreasing footfall.

My biggest fear for my constituents is that I foresee the day when the pressure from Labour Back Benchers and Members as committed as the right hon. Member for Birkenhead to the preservation of the urban sub-post office network becomes intolerable. As a result, the subsidies will be moved back into the urban network and the closure rate of rural sub-post offices will rise again in areas such as West Dorset. As with the pig industry that used to exist in my constituency and the many pubs, primary schools and village halls that have gone from villages or fallen into disuse, this situation may reach a point at which another critical element in the survival of the British village, in a part of the country that still has a working social community, is disadvantaged and gradually falls into disrepair. If I can, I am determined to persuade Ministers to prevent that.

Order. It may help those who are called to speak to gauge their contributions if I indicate that the first of the three Front-Bench speakers should be called no later than 3 o'clock.

2.36 pm

I thank the right hon. Member for West Dorset (Mr. Letwin) for applying for this important debate, because it is vital that we debate a subject that is of widespread concern throughout the rural parts of Britain.

Last Friday, I was speaking to a sub-postmaster in my constituency, who said that 70 per cent. of his business involved pensions and benefits. He was extremely concerned about what would happen to that when automated credit transfer was introduced. As the right hon. Member for West Dorset pointed out, the loss is not only of the money from processing the pensions but from the sales of other products within the sub-post office. There is great concern that if customers migrate to bank accounts, sub-post offices throughout rural areas will be forced to close. We should bear it in mind that in many villages the only shop is a combined sub-post office, grocery and newsagent. If the loss of the post office business forces the shop to close, the village is left without a shop.

The Government should be promoting the Post Office card account and advocating it as a solution. I have the same leaflet as the right hon. Gentleman, and I drew exactly the same conclusion as him—that the leaflet tries to downplay the Post Office card account as much as possible. It promotes the current account and basic bank account, but makes no effort to promote the card account, listing it as option 3. That is not only in the leaflet about collecting the state pension; exactly the same is stated in the leaflet about collecting benefit at a post office and in a Department for Work and Pensions leaflet on direct payment entitled "Giving It To You Straight".

I am grateful to the Department for Work and Pensions for putting in the House of Commons Library the script that employees of the customer conversion centre—a rather sinister name for the helpline—will use when pensioners or benefit recipients phone up to open a Post Office card account. We should note that the only people who will phone the helpline will have decided from the Government literature that they want to open a Post Office card account. Having phoned up, the first thing that the person in the customer conversion centre will say to them is:
"I know that you have asked for a Post Office card account, but I would like to make sure you know about all of the options. Can I tell you about the other types of accounts that are available?"
The script continues, "If yes", and tells the person what to do, followed by, "If not sure", and again tells the person what to do. There is no box that says, "If no", so the caller is not allowed to say no, only yes or "I'm not sure". If the answer is yes to hearing the other options, the person in the call centre will go through the pluses of the current accounts and basic bank accounts, and give a cursory description of the Post Office card account. If the "not sure" option is taken—I suspect that the "no" option will be included in the "not sure" option—the person says:
"If Post Office access is important to you there are other accounts that let you get your money at the Post Office. Can I tell you about them?"
If the answer is yes, the current accounts and the basic bank accounts are again promoted, although it should be noted that, according to the script, only a handful of banks allow people to take money out of the Post Office, while the vast majority of banks do not.

If the person says no yet again, the call centre outlines the features of the Post Office card account. The outlines, which are given over the phone, run into a page. It is very difficult to take in this information over the phone. It needs to be laid out in front of someone. Having gone through 10 points, and the caller having said about three times that they want to open a Post Office card account, we come to No. 11, which states:
"If any of these features could pose a problem for you, the Post Office card account may not be for you—you could look into getting a current account or basic bank account",
thus steering people that way yet again. The script continues:
"Is this the type of account you would like?"
It is very confusing at this point. Having said that the caller could look into getting a current account or a basic bank account, the person at the call centre asks whether that is the type of account that they would like, whereas the question refers to the Post Office card account. The script must be reconsidered, as it is very confusing.

If, having been told that the Post Office card account could pose a problem, the caller asks for one of the other accounts, the call centre again goes through all the benefits of the other accounts. After the pensioner or benefit recipient has said no about five times to the other accounts and insisted that they want a Post Office card account, they still do not get one. All that happens is that a personal invitation document is sent through the post, which they must take to the Post Office where they have to ask for an application form. Apparently, one can get an application form at the Post Office, but only after having phoned the call centre, said no about five times to the other options, and waited for a personal invitation document to arrive. The person can, eventually, open a Post Office card account, but we have to wonder how many people will be determined enough to go through all the options and negativity.

The Government should take a good, hard look at this matter. Very few people will open a Post Office card account, given all the difficulties. The benefits should be promoted, not criticised, as otherwise there will be severe doubts about the future of our rural post office network.

There is another concern. If an elderly person receives the invitation to phone the call centre, but does not do so and takes no other action, will they suddenly find that they no longer receive their pension? I hope that the Minister lets us know what will happen to people who do not respond to any of the invitations. Will a pension book still arrive, or will pensioners suddenly find that they cannot collect their pension?

ACT is the main threat that rural post offices face, but there are also plenty of other worries. For example, I was concerned to read in Friday's The Herald what the head of the Royal Mail had said at a conference—I believe that it was the same conference in Inverness to which the Minister referred. The newspaper reported:
"The head of the Royal Mail has warned Highlands and Islands customers that their full postal service may be scrapped. Allan Leighton … said a final decision will be taken within the next 12 months to determine whether it will be able to continue filling the same role at the same price as everywhere else in the country."
I hope that the Minister will take the opportunity to rebut what Allan Leighton is saying, bring him into line and make it clear to him that the universal service obligation means exactly that. We should have the same postal service throughout the country.

Another area in which rural sub-post offices do vital business is that of parcels. Again, there is discrimination against the highlands and islands, as Parcelforce charges more than double for deliveries there as for deliveries to the rest of the country. I know that a review has started, but it will take about a year. I hope that the Minister will try to influence that review and tell Parcelforce that there should be a universal price for the whole country.

At Prime Minister's Question Time last week, the Prime Minister said that families would be able to send packets to their loved ones serving in the Gulf entirely free of charge, when the operational situation allowed. As of this morning, the Post Office is still charging £6.89 to send parcels to family members in the Gulf. I hope that the Minister will be able to tell us today when he thinks that the operational situation will allow such parcels to be sent free of charge.

The most important message is that the Government must promote the Post Office card account.

2.46 pm

I start by congratulating my right hon. Friend the Member for West Dorset (Mr. Letwin) on his skill in securing the debate, and on the wisdom of choosing this particular subject.

I followed his philosophical introduction with interest. I agreed with him about the pile of stones, but I am not so sure that he had the right analogy in removing them from the top one by one. Stones in a pile have a relationship with each other, just as a pub has a relationship with a post office, a village store, the church and the village hall. I am reminded of an incident in a store several years ago. The storekeeper had very lovingly piled up tin on tin of baked beans in a conical shape, and it was most attractive. It had a symmetry. A young lad whipping round the corner caught the bottom tin, and suddenly it was reduced to its component parts, which were rolling all over the floor with no shape or symmetry. My worry is that if we lose the village store or post office, we lose the village. That is one of the reasons why I think that the subject is so important.

I shall make only one short statement, and then ask a question of the Minister. The Minister knows that I do not blame him for the shambles that is occurring at the moment. His two predecessors are to blame, and they have moved on. In fact, they have been promoted for their skill and wisdom, and the poor Minister has to come here and make the best of a bad job. The statement I want to make is self-evident, but needs repeating. Unless a sub-post office is profitable, the game is over. Its revenue comes from the commission it makes from distributing benefits, and also from the profit it makes in retailing goods, such as tins of baked beans, loaves of bread, milk, newspapers and so on—in fact, the footfall. With the reduction in the payments of benefit, the footfall is reduced.

I am trying to work out why the system is making it so difficult to get post office card accounts, when that further reduces the footfall and profits, and means that more and more subsidy is needed to keep rural post offices going. It would have seemed logical to encourage people to have post office card accounts so that they would go into rural post offices, increase the footfall, increase the profit to the sub-postmaster and sub-postmistress, and reduce the subsidy that needs to come from the centre. One is a virtuous circle and the other a negative circle. I hope that the Minister will not look surprised and bemused, as he did at the last Department of Trade and Industry questions, at anyone who suggests that it has been made extremely difficult for people to get a post office card account.

The hon. Member for Argyll and Bute (Mr. Reid) mentioned the hurdles that people have to clear to get a post office card account. I can produce many constituents who have told me how difficult it is, and most of them have given up trying. A killer question that hits people straight away is, "Have you got a bank account?" If the answer is yes, they are told that they do not need a post office card account. That is game, set and match against them, and they go away. As my right hon. Friend the Member for West Dorset said, there are 100,000 people with post office card accounts, compared with the original 1.3 million who were targeted. I am surprised at the tenacity of the 100,000 who managed to get through the system to get a card account in order to be able to go into the post office, increase the footfall and help to keep the sub-post office in business.

Why is it being made so difficult to get a post office card account? What finances are so secret that they cannot be released? Why are we trying to drive the post offices out of businesses when we should be trying to keep them going?

2.51 pm

I thank the right hon. Member for West Dorset (Mr. Letwin) for securing this timely debate as we reach D-day. After perhaps four years of debating the matter in the House, we have finally reached the point when the concerns of many hon. Members may prove to be correct.

My hon. Friend the Member for Argyll and Bute (Mr. Reid) graphically described the great difficulty in proceeding with a card account. The opposition that people encounter on the telephone when they try to open such an account would do credit to the Inquisition. It would be difficult for people as robust as my fellow MPs to deal with such an onslaught, let alone those of advanced years who need encouragement and a clear expression of what to do. The hon. Member for South-West Hertfordshire (Mr. Page) added his constituents' experiences to the list of difficulties encountered in getting a card account.

We seem to be in a bit of a mess, because things that we were assured would happen have not happened. The right hon. Member for West Dorset referred to the importance of sub-post offices to communities throughout the country. Local communities are facing the cumulative effect of the closure of sub-post offices and corner shops, and now there are concerns about local pharmacies, which is another ingredient of the community. Hon. Members on both sides of the House have raised our concerns about local pharmacies with the Government. We have had to be robust in putting to the Secretary of State for Trade and Industry and other Ministers our concern that one more building block of the local community may be taken away. There has been a lack of response from this Government in the past. For instance, I went to the appropriate Minister at the time for help with business rates for small village pubs, but the Minister was less than helpful.

My argument about sub-post offices is that it is just one more attack on local communities. Indeed, the recent Licensing Bill was another example. The right hon. Member for West Dorset spoke about village halls. We could also mention churches. The measure will make difficult and restrict the possibility of holding various public events in churches and village halls.

Sub-post offices and many other facilities are absolutely vital to communities. I hope that the Chancellor in his wisdom will tomorrow address an issue that is relevant to sub-post offices. Business rates are a big burden on local shops and small businesses. At present, the business rate system is weighted against smaller businesses and does nothing at all to help them survive. I hope that today the Minister will respond positively to the debate, but also that tomorrow the Chancellor will indicate what he will do to help sub-post offices and other community organisations.

My right hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith) asked me to raise a particular issue. Earlier, there was talk about siting sub-post offices in various places. such as residential buildings and pubs, to keep them going. My right hon. Friend pointed out to me that rural areas are especially badly hit when the Post Office decides to close an office to carry out an investigation. An example is Lowick, where pensioners had to travel six to 10 miles to the nearest post office. Why not use temporary or even mobile facilities for two or three days of the week to deal with the problem while the investigation is carried out?

Of major concern is the take-up of the card account. As has been said, only some 100,000 cards have been taken up so far, although more than 1 million people are eligible for them. Reference has also been made to footfall. It could be increased by several different measures. I wonder whether the Minister will tell us—we have had answers about this before—exactly what happened with the "Your Guide" experiment. As the hon. Member for South-West Hertfordshire said, this poor Minister has been left holding the baby after many Ministers have gone on to, presumably, greater and better things. He has been left to face the fact that various initiatives, "Your Guide" being one of them, have been abandoned. I wonder why it was abandoned. I come from a small-business background. When I had problems with the business and something did not immediately take off, I found other ways to encourage things to happen. It was not good to abandon that particular scheme.

Another issue with regard to sub-post offices is subsidy. It has been a great mantra of the Government that sub-post offices and the system as a whole will receive support—£450 million in three different elements. That has rightly been seen as a help. However, I wonder whether the Government plan to proceed with their announcement, which was made back in December and which was introduced as a fresh announcement. I have a newspaper account from 1 April that states:
"The future of nearly 6,800 rural post offices was thrown into doubt"
by the decision of the European Commission to delay support for the £450 million aid package. The account continues that it seems that
"it needs Commission approval before the cash can be paid."
The account in the paper could be totally incorrect, but if it is correct, and the £450 million is an integral part of keeping post offices going, I would be interested to hear what the Minister has to say about ensuring that the money is made available.

Members will hear increasingly from their constituents about the problems that will be created if sub-post offices are lost and people have great difficulty getting over the various hurdles put in their way when they try to find other means of getting their pensions paid, such as the card account. For example, people in the sub-post office in Hutton say that the information is very difficult to understand. Constituents in Weston-super-Mare have written to me in the same terms about understanding the various options available.

The Post Office in its wisdom—I think otherwise—discouraged a useful leaflet about the card that Age Concern wanted to place in sub-post offices and post offices. It said that the leaflets had to be withdrawn. I wonder if the Minister knows about that. What we are exposing in this debate is the great need for footfalls through sub-post offices, for the subsidy and for everything to be clear and to the point. In that respect, the Government have failed dismally, despite having had such a long time in which to prepare.

Concern exists throughout the country. Along with my hon. Friend the Member for Twickenham (Dr. Cable), I collected a petition with 100,000 signatures from all sorts of communities in England, Scotland and Wales, which was presented to 10 Downing Street as recently as last Friday. That petition shows that there is concern about the issue in communities all over the country.

I hope that the Minister will be able to allay some of our concerns, that we can have more clarity, that it will be easier for people to understand the system, and that we will get support for the sub-post office network through subsidy. I hope that he will also announce some other schemes, similar to the "Your Guide" scheme, which will persuade people to keep on using the sub-post office network.

3.3 pm

May I just say to the hon. Member for Weston-super-Mare (Brian Cotter) that I am delighted to hear that the Liberal Democrat campaign has fulfilled its task? The Minister will remember that the last time we discussed post offices, I read from the Liberal Democrat campaign literature that said that signatures were to go to Downing Street. I am glad to hear that they have done so.

I congratulate my right hon. Friend the Member for West Dorset (Mr. Letwin) on his good fortune in securing the debate and on his measured and comprehensive speech that outlined what is the matter with policy for rural post offices. I might be a little less measured. I have to tell the Minister—he already knows that I think this—that the Government's policy for rural post offices is in tatters. That has been revealed in every speech that we have heard today.

I should like briefly to address three issues: first, the expected increase in the price of stamps; secondly, universal banking, about which we have heard much; and thirdly, the rural post office subsidy. As we have quite a lot of time for this debate, I should also like the Minister to answer the questions that I and other hon. Members put to him.

This is a very small point, and I would never accuse the Minister of being cynical—he knows that I have said before that he basically gives straight answers—but I was rather surprised to discover that the stamp price increases will come in on 8 May. It is an unusual date to choose. I hope that he will tell us that it has nothing to do with the fact that 1 May is witnessing local elections the length and breadth of the country. It would be unfortunate if the date chosen had something to do with the elections, but I am sure that he will be able to reassure me on that point.

My second, and much more substantive, point concerns the universal bank and its effects. It has already started and will continue to be introduced in the next two years. I thank the hon. Member for Argyll and Bute (Mr. Reid) for giving us an interesting and illuminating script from the customer conversion centre. It is as bad as we expected. When universal banking has converted all its customers in the next two years, can the Minister tell us what will happen to the people who have not converted? Some do not have a current account, a base account or a card account. What will happen to them? The answer needs to be given now and not, perhaps, at the beginning of April 2005. Universal banking will reduce the income of postmasters, rural and urban, by approximately 35 to 40 per cent.

My right hon. Friend the Member for West Dorset discussed the card account very lucidly and sensibly. I shall read from a document written last year by Mr. Kuczys of the universal banking policy department of the Secretary of State for Work and Pensions, which is extremely illuminating. It discusses proposed consultation, and says that
"we should be clear that neither body"—
the British Bankers Association and the National Federation of Sub-Postmasters—
"will much like what they see. The emphasis of the letters"
letters to be sent to customers—
"is very much on encouraging people to use existing accounts where possible—in line with Ministers' decision to go for 'actively managed choice'. Both the banks and the subpostmasters would really like a completely free choice."
I should have thought that that was not unreasonable, but the document continues:
"We will have to make it clear that this is not on offer…In discussion with the BBA and the NFSP we might want to concede giving a bit more prominence to the Card Account at Post Offices, once it is available."
Referring to leaflets going out this summer, the document continues that
"the Card Account will not initially be included in the leaflet".
It was entirely clear a year ago that the card account was being put right at the bottom of the list for whatever reason. I think that we all understand the reasons—they are about saving money.

I should like to contrast that with the National Consumer Council document, "Everyday Essentials", which I have here and which, I think, every Member of Parliament has been sent. It says:
"The object of addressing the financial exclusion of some low-income consumers is submerged in a wider agenda to reduce government expenditure."
I have no problem with reducing Government expenditure, but I should like that point to be addressed. Referring to market research on Post Office customers, the document says:
"When asked about their preferred account options, responses were split but the most favoured option was the card account (33 per cent.)"
Recommendation 3 of the document is that the Department for Work and Pensions and the Post Office should ensure that all benefit recipients, including those with current accounts, have easy access to the card account. We know that they do not. Can I ask the Minister what happened to joined-up government and to the holistic approach to the financially excluded? They are being deprived here.

As the Minister will know, a sub-postmaster receives some 13p for paying out a pension in a post office. The average pension payment is £89. Transactions of all benefits make up 40 per cent. of the income of a sub-postmaster. It costs the Department for Work and Pensions£430 million a year.

Sub-postmasters who have spoken to me are concerned that, in communications and discussion with the Post Office, they were offered a take-it-or-leave-it agreement. They would get 14p for dispensing £100 of benefit money—not 14p per transaction or per unit of time taken, but per amount. Each pension averages less than £100, so they would have to carry out two transactions before they received the 14p. Moreover, although I support post office card accounts, they will generate an understandable temptation for people not to take out all their cash at one time, but to take it in dribs and drabs. The average pensioner may therefore make three or four transactions for the £89 of pension that they receive through their post office, but the sub-postmaster will still receive only 14p for the £100 of benefit that he pays.

Will the Minister tell me whether the Post Office threatened to impose that arrangement on the National Federation of Sub-Postmasters? Such an arrangement takes no account of the time that is spent. What assessment has he made of the impact that it may have on sub-postmasters' income?

My next point is specifically about rural post offices, whereas my earlier points applied across the board. A subsidy of £450 million has been allocated as a subsidy for rural post offices over the next three years. My first point, to which the hon. Member for Weston-super-Mare alluded, is that the European Commission, which has to give state aid approval, has deferred its decision by another month, until May. When, if ever, will that much trumpeted £450 million receive permission, and what will happen if the European Commission denies state aid approval? The uncertainty affects every rural post office. My right hon. Friend the Member for West Dorset referred to post offices not closing, but part of the reason for that is that people are waiting to see what the policy will be. The deferral of the decision throws further uncertainty into the pot.

The £450 million will be disbursed at £150 million a year for three years. The announcement was made in November 2002, in a written answer to me, I believe, and the funding was meant to run for three years to the end of 2005. What will happen then? There may be an election in 2005. I do not believe the Minister to be a cynical person, but some might conclude that that amount of subsidy was purely to take us up to the next general election and not beyond. What is the strategy beyond 2005?

I would also like to probe the Minister—I hope that he will answer—on what that money is for. He told me that £66 million a year would go to fund sub-postmasters and staff wages. That is clear, but I understand that, in fact, the money will go to the Post Office, which will then pay sub-postmasters the same amount that it currently pays in a signed office payment, and whatever else it pays for wages. It is not, therefore, extra money for the sub-postmasters.

Those 8,000-plus rural businesses—the sub-post offices across the country—will lose a large part of their income, but will receive no further income from the £450 million. That is what sub-postmasters are telling me and I should be grateful if the Minister could tell us whether that is correct. Small businesses—rural sub-post offices—are losing their income and have nothing with which to replace it. To what possible alternative income can a rural post office turn? I am all for innovations in rural businesses and in any business, but the Government have a responsibility here that they are failing to address.

As my right hon. Friend the Member for West Dorset elucidated, rural post offices provide a great service for communities. They are a part of the rural community. They are essential in many areas for social reasons. I am not a great one for subsidies but, as my hon. Friend the Member for South-West Hertfordshire (Mr. Page) said, if everything in rural Britain closes down one is left with very little. The post office is often the last port of call. We do not want to see them closed. We want to hear what the Government have to say: sub-postmasters across the country will want the Minister to tell them whether they have a future.

3.15 pm

I congratulate the right hon. Member for West Dorset (Mr. Letwin) on securing the debate. I share his nostalgia for our Finance Bill debates. It is a pleasure to be debating with him and other hon. Members this important subject. I want to start by giving him and the House the assurance that the Government regard it as most important that all communities have good access to postal and government services. We are committed to doing all that we can to ensure a viable post office network across the UK in both rural and urban areas. That is why we are investing such large sums in supporting the transformation of the Royal Mail and the post office network, totalling some £2 billion over the next five years.

The right hon. Gentleman was right to draw attention to the dramatic reduction in the number of rural post office closures. As I have told the House on previous occasions, in the quarter for which we have the most recent data—the last quarter of the last calendar year—the net reduction in the number of rural post offices was zero. It is the first time that that has been the case that anyone can remember. The commitment that the Government have made to sustaining and investing in the rural network is leading to a dramatic reduction in rural post office closures. That is quite a dramatic break— which the right hon. Gentleman, to his credit, recognised—with the long period of decline in the number of post offices that was presided over by the previous Government and continued into the early part of the term of this Government. We have taken action to address that decline and we have seen a dramatic turnabout as a result, not least in the right hon. Gentleman's constituency.

West Dorset has 51 post offices in total; most are rural and a few are urban. I was not quite sure whether this was the office to which he referred, but Owermoigne post office was closed for a period and has now been reopened. The Ansty sub-post office in Ansty lane is another post office that was closed for a period but has now reopened. Both benefited from the £2 million capital start-up fund that we have established specifically to support innovative arrangements to reopen sub-post offices or to open up new ones. A network of rural transfer advisers has been set up and we have made a commitment that there should be no avoidable post office closures. We have backed up that commitment with funding. That is why we have seen this dramatic fall in the reduction in the number of rural post offices. The whole House will welcome the success of the steps that we have taken.

The right hon. Gentleman is an accomplished and skilful debater, and I enjoyed listening to the case that he advanced. It is often difficult to spot the flaws in his arguments, but there was a clear flaw in his argument today. In recent years, there has been a dramatic reduction in the number of people going into post offices to do the kinds of things that they have always done. There are still a lot of people, but nothing like as many as there were, who just want to go into the post office to cash a giro. That is the flaw.

The figures for 1996 show that some 42 per cent. of benefit recipients went to the post office to cash a giro in order to obtain their cash. That fraction is now down to about one quarter and is falling steeply. So simply leaving things as they were is not the answer for the post office network. Indeed, that is the road to continued decline, which we want to stop.

I shall quote one further statistic. The number of retirement pensions and widows benefits paid by order books and giros through the Post Office has dropped by more than 1 million from just over 6 million to less than 5 million since 1996, although the total number of recipients has increased by more than 1 million. The background to this discussion is that people are changing the way in which they receive their pensions and other benefits. That is not a surprise, but it is an important part of the background to our changes.

I do not remember seeing the hon. Gentleman in the debate, but I shall nevertheless give way to him.

I apologise to hon. Members for not being here for most of the debate because I was detained elsewhere, but I am glad to be here for the winding-up speeches. Does the Minister accept that, despite the change in the pattern, in some rural communities, some of which are in my Caernarfon constituency, there is no alternative to the post office? Despite the fact that the overall figure for closures is decreasing, the effect on small communities is the same regardless of whether the number of closures is large or small.

The important point is, of course, that rural communities depend on their local post offices. That is why we have been investing in post offices, which have a better future as a result.

When we looked at the network, we had a choice. We could continue to force the dwindling number of people who want only to go and cash giros at their local post offices to carry on doing so or—this is our choice—we could invest to allow the Post Office to attract a new generation of customers into rural post offices, and urban post offices as well. That is why we have committed £500 million, which is entirely unprecedented, to equip every post office in the country for the universal banking services, which became available last week. Every post office in the country has the technology platform to offer a host of new services and to win a new generation of customers for the Post Office.

The network of post offices and sub-post offices has been heavily dependent on people coming in each week to cash their giros. That business is, however, dwindling. Increasingly, people who retire had their wages paid into a bank account. As the rate of employment has increased, more and more people have had their wages paid into bank accounts, and when they retire they choose to have their pensions paid the same way. The services that today's retired people want are different from the services demanded by pensioners a generation ago. That is why it has been necessary for the Post Office to make this change.

The Minister is soundly illustrating what we already know. We know that people such as he and I are unlikely to draw our pensions from a post office. Indeed, my wife takes her child benefit into her bank account rather than through the post office in cash. We want the Minister to tell us about the strategy—if there is one—for maintaining the post office network.

I am trying to make it clear to the House that it is important for the commercial well-being of the post office network that customers such as the hon. Gentleman and his wife should have a reason to go into the local post office, even if they do not have to cash a giro. By using the technology in which we have invested £500 million, the Post Office will be in a position to offer banking services, which will create an attractive opportunity for post offices.

Not at the moment, as I want to make some headway. As I said, I was pleased recently to have a discussion with a group of sub-postmasters in Inverness at the invitation of my hon. Friend the Member for Inverness, East, Nairn and Lochaber (Mr. Stewart). They hit the nail on the head; they told me that the best opportunity for the Post Office is to offer access to bank accounts, because everyone in the country will use that service. That will allow the Post Office to expand its customer base, rather than being locked into a dwindling group of customers, as it has been in the past few years.

With the basic bank accounts, every high street bank in the country, plus the Nationwide building society, will be able to offer an account that is fully accessible at every local post office. The Post Office has the biggest retail network in Europe; that is what we mean by universal banking. The right hon. Member for West Dorset suggested that we had not implemented universal banking, but that is not so; it has been implemented thanks to the co-operation of every high street bank and the Nationwide building society. That is what our investment of £500 million has achieved.

People who live in the countryside where there is no bank branch for miles will in future be able to do their banking at the village post office. A raft of customers who previously did not need to go into the village post office will have good reason to do so. That service is available in respect of a number of banks, although not all of them, for basic bank accounts and for ordinary current accounts, too. The Post Office is aiming to reach similar agreements with other high street banks.

The post office can take on a new role as the convenient place to do banking, which will be a particularly good opportunity in the rural villages on which the debate has focused. It will also help to solve the problem of financial exclusion. A postmaster to whom I spoke last week said that many people on the substantial council estate in her area did not have a bank account, which made life difficult for them. An arrangement for people to open basic bank accounts at their local bank and to have full access to them at their local post office will help to tackle the problem of financial exclusion.

The hon. Member for Blaby (Mr. Robathan) made a point that he has made before—that there will be a 40 per cent. drop in the income of the post office network. That statement is based on the view that all the people who at present go into the post office to cash their giros will no longer go there to obtain their benefit income and thus will not go there at all. That is clearly not the case; people with a card account will certainly go into the post office to obtain their cash, which will offset in full the 40 per cent. figure that the hon. Gentleman quoted.

However, the key opportunity for the Post Office is to attract a new generation of customers by offering services that many more people than those who currently use post offices will want to use, and that is the basis on which a successful commercial future for the Post Office can be built.

Of course the Minister is right to say that part of the 40 per cent. will be replaced by whatever comes along as a reward for obtaining cash through the post office card account. However, he said that the 40 per cent. would be offset in full. Did he mean that?

My point is that all the income that the Post Office earns from servicing post office card accounts will offset the 40 per cent. figure. The hon. Gentleman has said repeatedly that there will be a 40 per cent. fall in income, but that assumes that the Post Office will get no income at all from people receiving benefits. That is not the case, because post offices will get all the income from the post office card accounts; they will also derive an income from payments made at post offices on basic bank accounts.

The opportunity to bring many new customers into rural and urban post offices will provide the Post Office, including all rural post offices, with a big opportunity to build for themselves a much more attractive future than has been open to them for some time. I was particularly pleased in Inverness by the sense that the penny had dropped. Postmasters will have a much more positive perspective as they realise the opportunities made available to them by universal banking services.