Skip to main content

Automated Credit Transfer

Volume 408: debated on Wednesday 9 July 2003

The text on this page has been created from Hansard archive content, it may contain typographical errors.

3.58 pm

I congratulate the new Minister on his appointment, on what I believe is his first outing in Westminster Hall. I also congratulate the hon. Member for Greenock and Inverclyde (David Cairns), my near neighbour, on taking his first step on the Government ladder.

Half the pensioners in Britain have chosen to use a pension book to collect their pension from the post office. However, the Government have decided to remove that choice from the 4.5 million pensioners who have chosen to use that method. Over the next two years, the Government plan to write to all pensioners who have a pension book, telling them that they must choose one of three accounts into which their pension will be paid. Keeping the pension book appears not to be an option. The three sorts of permitted accounts are: a current or savings account at a bank or building society, a basic bank account, or a Post Office card account.

The Government's advertising claims that people will still be able to collect their pension at the post office. That is true, but there is a catch for many people in Scotland: the three main Scottish banks—the Royal Bank, the Bank of Scotland and the Clydesdale—do not have an arrangement with the Post Office whereby people who hold current or savings accounts with them can withdraw money at the post office. Customers of those banks who do not read the Government's leaflets very carefully could easily choose to have their pensions paid into their current or savings accounts but find, much to their disappointment, that they cannot collect their money at a post office.

The three main Scottish banks account for the vast majority of personal banking in Scotland. In my constituency, the only bank that allows customers to withdraw money from current or savings accounts at a post office is Lloyds TSB, which has only four branches in one constituency—many fewer than the three main Scottish banks. The three main Scottish banks do allow customers to withdraw money from a basic bank account at the post office, but such an account has very limited facilities.

In a rural constituency such as mine, being able to collect their pension from the post office rather than a bank is an important option for many pensioners. There are far more post offices than bank branches. For people living outside towns, the nearest bank might be many miles away. On many of the smaller islands, there is no bank, but there is certainly a post office.

I explained the drawbacks of the bank account option for many pensioners, and will now talk about the Post Office card account. The account had tremendous potential, but the Government failed miserably to market it properly or to provide it with the facilities that such an account should have. It is option No. 3 in all the Government's literature. It is option No. 3 on every leaflet, on every form to be filled in, and in every letter sent to customers, but the letters quite clearly direct people towards bank accounts. I have spoken to several child benefit customers who thought that they had no option other than to nominate a bank account for their child benefit. That is the typical impression that the letters and forms give. The Post Office card account option is there if one knows what one is looking for and is searching for it, but the user who is not searching for it and who receives the leaflet without knowing the background assumes that they must use a bank account. The marketing of the account has been so poor that it is unsurprising that people have that impression.

The Government decided to start the process by targeting child benefit customers rather than pensioners. Of the 2.5 million child benefit customers who have been contacted so far, more than 2 million have responded. Of those 2 million, 86 per cent. have opted for a bank account, which is not surprising given what I said about the poor marketing of the Post Office card account. It is, however, very worrying for the survival of the rural post office network.

Many sub-postmasters in my constituency have told me that one has to be very determined to open a Post Office card account, which is certainly true. I will take hon. Members through the process. First, the pensioner receives a letter from the Government telling them about the changes. The pensioner has to hunt through the letter to find the Post Office card account option. Next, they have to phone the so-called helpline, which goes through to what is called the customer conversion centre, but I have no idea why it was given such a sinister-sounding name. That was certainly a marketing failure. It is clear from correspondence and conversations that I have had with people who have phoned this so-called helpline that it would be hard to find a more unhelpful line.

A copy of the script used by the Department for Work and Pensions call centre was placed in the Library a few months ago, and I have a copy of it. I would have expected it to start with a friendly response from the call centre operator, for example, "Hello, my name's Alan. I'm so pleased that you have chosen to open a Post Office card account. I'm here to guide you through the process." Unfortunately, that is not what happens. The first line of the script is, 'I know you have asked for a Post Office card account, but—". That ominous start sets the scene. The customer conversion centre operator then tries to persuade the pensioner to choose the bank account option instead.

I quote from a letter from a sub-postmaster on one of the islands in my constituency telling me what happened when one of his customers telephoned the helpline. The letter states:
"We know of one customer who came to open a Post Office Card Account and, when we advised her we could not do this because she did not have the correct forms, she went off to phone the Helpline. Two hours later she phoned us up to tell us that she had been treated like an idiot on the phone and that if this was the attitude of the Post Office, she was going to have her pension paid into her Bank Account as it was so much easier. It turned out this Helpline she phoned was actually the DWP and not the Post Office, so what hope have we got of keeping customers if this is the attitude they are being met with on the phone."
I can only agree with the sub-postmaster.

If the pensioner is determined that they want a Post Office card account and resist all the call centre's attempts to talk them out of it, they are sent a pack. One of the forms in the pack is called the personal invitation document, which the pensioner has to take to the Post Office, together with proof of identity. The Post Office then sends the application back to the Department for Work and Pensions. The pensioner has to keep one of the forms—a letter notifying the Government of their Post Office account number, which of course they do not know yet because the first letter is only an application to get a Post Office card account, not a form to enable them to have their pension paid into it; that comes later. According to the procedures, the DWP should then send the pensioner another pack with their Post Office card account number and PIN number.

At that stage, one of my constituents received a letter, which states:
"Thank you for your recent contact requesting a Post Office card account. We have noted this on your records. We will contact you at a future date. Please continue cashing your benefit in the usual way until you hear from us. In the meantime, if you change your mind and want your benefit to be paid into a bank or building society account please contact us".
The DWP does not give up; at every stage it tries to persuade people to change their mind and go for a bank account.

Presumably, the pensioner will eventually receive the second pack. They will then have to fill in the original form that they had to keep from the first pack and return it to the Post Office with the new Post Office card account number. Eventually the determined pensioner has made it to the end of the process and gets their pension paid into the Post Office card account, but I am still puzzled about why the Government make it so difficult.

I have another letter from a child benefit customer from Benderloch in north Argyll, who writes:
'I am a reasonably well educated person but have found it necessary to visit the post office on three occasions where a very helpful employee has tried to guide me through the system. Although she has done everything her training taught her there are aspects of this changeover which are complete news to her. With every piece of correspondence received I have been asked if I wish to change my mind and have my child benefit paid into a bank account instead. There then follows instructions on how to do this.
I first received the invitation to change my method of receiving payment over 6 months ago, and have only now received my card and pin number and have completed yet another form to send off to have the card activated. I would be grateful if you could find out for me who is responsible for setting up this system of changeover and what is their training?"
Perhaps the Minister will respond to that later.

By 27 June, the DWP had written to 272,000 pensioners but only just over half of them had responded. Of those, half nominated a bank account and the others responded requesting a Post Office card account. We do not know how many such requests succeeded, as there is clearly a difference between requesting an account and actually getting one. I tabled a written question to the Minister asking how many have succeeded in getting a Post Office card account, and it would help the debate if he could answer my question today.

It must be of concern to everyone that almost half the pensioners to whom the Department for Work and Pensions have written have not yet responded. How will those pensioners be paid in future? If a frail, elderly pensioner does not respond to the letter from the Department for Work and Pensions, what will happen when their current pension book expires? I hope that they will be sent another book. Will the Minister answer that question?

Another question I should like the Minister to answer is what pensioners who cannot use the telephone for health reasons should do? There is a text phone for people with hearing difficulties, but stroke victims, for example, might not be able to speak properly on the telephone, or people in poor health might not have the strength to argue with the customer conversion centre. What system is available to people who cannot telephone the customer conversion centre, but still want a Post Office card account?

Even after the determined pensioner has managed to open a Post Office card account and get their payments paid into it, some problems will still arise. We all fall ill at some point. Under the current pension book system, a pensioner is allowed to nominate someone else to collect their pension, in any particular week, by signing the counterfoil on the pension book. A different person can be nominated each time.

Under the new system, a pensioner can nominate only one other person to collect the pension on their behalf, and that nominee will be sent an additional card and PIN number. However, there is no emergency provision for a pensioner who falls ill to nominate someone else, if the nominated person is not available. That means that the pensioner would not be able to collect their pension from the post office.

Such a situation could easily arise. For example, some pensioners rely on several different carers or, even if a pensioner has only one regular carer, that carer will sometimes go on holiday. In either case, the pensioner is left with no option. Moreover, when the carer changes, the new carer will have to go through the process of being nominated and sent an account number and PIN. During that period, the pensioner will not be able to get their pension.

There is also concern about pensioners who forget their PIN numbers, because there is no way to access the money without the PIN. We are discussing frail, elderly people and, for some, the illnesses of old age will result in a failing memory.

We all know what will happen. Pensioners will become desperate and will give their card and their PIN number to other people. On some occasions, that is the only way in which they will be able to collect their pension. That is a far greater security risk than the current pension book system. The Government are presenting the new system as a security improvement, but I fear that security will get worse, because pensioners will be forced to reveal their PIN and give away their card.

The Government should give freedom of choice and allow pensioners to keep their pension book if that is what they want. The Post Office card account should be viewed as an additional option for those who want it, not as a replacement for the pension book. I fear that the Government have missed a great opportunity with the Post Office card account. The Post Office has a first-class reputation—a far better reputation than the banks. It also has a network throughout the country in rural areas and islands where there are no banks.

The Government should use that opportunity—they should promote the Post Office card account positively, and should give it more facilities, such as paying interest on it and making cheque books available. However, the tremendous opportunity to extend banking facilities into rural areas and small islands via the Post Office card account has been lost. Instead, the reverse will occur, and the difficulties that people face in opening a Post Office card account will lead to post offices losing a large proportion of their business, which in turn will inevitably lead to the closure of many small rural post offices that are already struggling to survive.

Many rural post offices are attached to the only shop in the village, and the shop is dependent on the custom of those who come into the post office. The loss of post office business will mean the loss of the shop, and also the loss of skilled employment in the village post office. The village post office network also has an important social function—the staff know all their customers personally, and if a pensioner does not come in on their regular day to collect their pension, they can get in touch to see whether that pensioner is all right. All that will be lost. Unless the Government act now to promote the Post Office card account, we will see widespread closure of the rural post office network and subsequent rural depopulation. The west highlands and the islands have suffered population decline for centuries. The post office network is an integral part of the infrastructure, and unless the Government alter their approach towards it, they will go down in history as yet another Government whose policies failed the west highlands and contributed to population decline.

Finally, I quote from another letter that I received:
"Dear Mr. Reid,
I have come to the conclusion that there is a room full of civil servants inventing ways to make opening a post office card account very difficult."
The lady then goes on to explain all the difficulties that she had. I ask the Minister to address the concerns that I have raised. He is new to the job and does not carry the baggage of the decisions of the past, so I hope that he will encourage his Department to take a positive approach towards rural post offices. For a start, he could allow pensioners to keep their pension books if they want to do so, and could start a campaign to promote the Post Office card account positively. I look forward to his reply.

4.15 pm

I congratulate the hon. Member for Argyll and Bute (Mr. Reid) on having secured the debate on such an important subject. We share his desire to ensure a vibrant and sustainable post office network, serving communities throughout the country. That is why we are investing £2 billion in the network, including £450 million to protect the rural post offices to which he referred.

We also share his view that pensioners and others who wish to continue to receive their payments weekly in cash at the post office should be able to do so. That is why we are working with the post office to ensure that customers have a range of choices as to how they are paid their pensions or benefits, and changing the way in which we pay benefits and pensions. I know that change can be unsettling, even frightening, so let us be clear why we are doing it. We are making the way in which we pay our customers more modern, more efficient and more secure. We are increasing customer choice, providing better value for the taxpayer and, perhaps most importantly, challenging the financial exclusion that deprives many people of the opportunities to share as fully as they might in growing prosperity.

We are also seeking to devise a method of payment that is safer and less prone to fraud—order books are stolen from 100 pensioners each week—and that is why our proposals for direct payment have been welcomed by the Association of Chief Police Officers. My hon. Friend who recently became the Minister for Pensions issued a press release pointing out that it is an anti-mugging proposal. I would add that it will save the taxpayer an estimated £80 million a year in order book and giro fraud.

Direct payment fits with what people want. The number of customers paid in that way increased by nearly 1 million last year, not as part of a process of persuading them into having Post Office card accounts or bank accounts but because that was their choice. It is not a trend that we could stop even should we wish to do so. People want choice, privacy and the opportunity to benefit from the range of banking and a financial service that is taken for granted by most of us and our constituents.

Direct payment will provide customers with more choice about where to collect their money from, including the post office if they wish. They will be able to use a current account, a basic bank account or a Post Office card account, as has been pointed out. Many pensioners will have no difficulty with the change. Over half of all pensioners are currently paid directly into an account and have no problems, and some 90 per cent. of pensioners already have a bank account.

On Monday, I placed in the Library the latest figures on take-up of direct payment options by our customers. So far, more than 450,000 people, including more than 74,000 pensioners, have requested a Post Office card account. Earlier this afternoon, I met David Mills, chief executive of the Post Office, and his new chair, Mike Hodgkinson. He shares our vision that high-quality banking services—and financial services generally—are a key part of the future of the Post Office. The widespread public trust invested in the Post Office, to which the hon. Gentleman referred, gives it an opportunity to be a main vehicle for the extension of banking services to its customers. The Post Office, as he also pointed out, has 50 per cent. more branches than all the banks and the building societies put together. That is why my right hon. Friend the Secretary of State for Trade and Industry and I were pleased to launch universal banking services officially, earlier this week. It is a tremendous achievement that that service is now in place, because it offers real choice to our customers.

As the hon. Gentleman has pointed out, there are a number of options for customers: the general, standard bank account, the basic bank account and the Post Office card account. Over the two years, as he is aware, we shall contact all our customers in a phased programme to make them aware of the ways in which they can switch to one of those options. I must emphasis that only the way in which we pay benefits and pensions is being affected—customers will still get their money as regularly as they do now, including weekly payments for pensioners, if they wish to receive them in that way.

The hon. Gentleman expressed his concerns about the process of opening a Post Office card account. He has explained the mechanisms that a person must go through. First, they must phone the customer conversion centre to discuss the options. He was concerned that the customer conversion centre tends to emphasise options other than the Post Office card account; however, we are trying through the process and through the script that has been placed in the Library to ensure that people are aware of the full range of options available. The fact that the Post Office card account is No. 3 in those options in the script that he has seen is merely a way of trying to ensure that customers also consider the other options available to them, which may be more appropriate for some of them. The three-step process that he set out is similar to the process that one would have to go through for opening an ordinary bank account, with the possible exception that the first two stages might be carried out in a single visit to a bank branch.

We want people to choose the account that suits them best—we are not trying to push people towards a particular type of account. Some people will feel most comfortable with the Post Office card account, which is simply an account into which we will pay benefits and pensions and from which a person can draw cash at a post office, during opening hours, in any amount they wish. Others will want something more. The Post Office card account will not be able to receive payments of wages or occupational pensions, so it may not be suitable for someone who is anticipating moving off benefits and into a job. It has no direct debit facility, so it cannot be used to access some of the available savings that the rest of us take for granted with, for instance, some utility bills. For some people, therefore, a Post Office card account will be too limited. We want to ensure that they know what their choices and options are. Although still using their post office to get access to their cash, people may want to do so via a current account or basic bank account.

That view is shared by Age Concern. In a recent memorandum to the Trade and Industry Committee, it said:
"Although we are aware that a number of organisations and individual sub-postmasters are promoting the Post Office card account on the basis that this is the way to save the post office network, Age Concern does not subscribe to this view. Apart from wanting people to be able to choose the type of account that suits their needs, we do not think that too much reliance on Post Office card accounts would be in the long term interests of the commercial future of the network."

Since the Minister quoted Age Concern, I draw his attention to a letter from Age Concern Scotland, urging MPs to sign the early-day motion that supports allowing pensioners the option of retaining pension books. Age Concern therefore also wants pensioners to have the right to keep the pension books.

I will come back to the situation in Scotland in just a moment. The hon. Gentleman raises some important points. I understand his concerns.

For some people, the Post Office card account could be the right choice and they will perhaps later make the transition to a basic bank account or a current account. We must remember that 90 per cent. of our customers, including pensioners, already have a bank account, although they may not use it at present for receiving benefits.

The provision of banking services at the post office is a matter for Post Office Ltd. However, the Government are keen that as many accounts as possible should be accessible at post office branches. That touches on the hon. Gentleman's concern about the situation in Scotland. For some time, Post Office Ltd. has had arrangements in place with some banks to allow their customers to access funds from their current accounts over the counter at post office branches. At present, the following account providers have such an arrangement: Alliance and Leicester, Barclays, the Co-op bank, First Direct, although only in Scotland, Lloyds TSB and the internet banks cahoot and smile.

The chairman and chief executive of the Post Office tell me that Post Office Ltd. is keen to see more banks join these arrangements and is currently in negotiation with a number of banks. Following the introduction of universal banking services, HSBC, the Royal Bank of Scotland, Bank of Scotland, the Clydesdale and many other providers have all made their basic bank accounts accessible at post office branches.

The hon. Gentleman made the important point that a full range of services is not available for customers in Scotland at present. Basic bank accounts are provided through some of these banks and there is the provision of the Post Office card account. However, there is no provision of services through post offices of normal current accounts. The Post Office is concerned about that, as are the Government. I am planning to have further discussions with some of those banks to see whether we can extend to customers in Scotland the facilities that are available elsewhere in the United Kingdom. The banks will decide whether they want to respond positively to those suggestions. We will make the case that given the trust and the network available to Post Office Ltd., this is a commercial opportunity that they would be wise to consider seriously.

As well as being concerned about the difficulties of going through the customer conversion centre, the hon. Gentleman asked about the training that is available to staff. All customer conversion centre staff are fully trained, and calls are monitored to ensure that customers are presented with sufficient information to enable them to make an informed choice. These safeguards are in place to ensure that customers do not receive biased information, as he suggested might be the case at present. A high-quality service is provided and few customer complaints have been received. There were only 16 in the week of 21 to 27 June, out of more than 225,000 direct payment invitations issued. If he has examples of complaints, I would be pleased to receive them.

The hon. Gentleman was worried about whether those people who cannot access a bank account would have access to their payments. Where people are unable to access their payments through a bank account or through the Post Office card account, perhaps owing to infirmity or disability or because they rely on a changing pattern of carers, we will devise an exception service to ensure that they receive the payments to which they are entitled. We have not yet worked out the details of that exception service, because we first want to see how many people are unable to access their payments through bank accounts or Post Office card accounts, and also because we want to see what the appropriate measures would be.

We are making sensible changes. We are addressing some of the concerns that the hon. Gentleman raises, including those of people who forget their PIN numbers. There will be an opportunity to change a PIN to a more memorable one. We are looking at these issues to ensure that we can provide direct banking services and a real choice to all our customers. The fact that at present 450,000 people have chosen a Post Office card account suggests that it is feasible to pursue that option. Not only will this provide people with more dignity and independence in the way that they receive their benefits, it will enable us to secure the future of the post office network.

Question put and agreed to.

Adjourned accordingly at half-past Four o'clock.