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Post Office Network

Volume 454: debated on Thursday 14 December 2006

With your permission, Mr. Speaker, I should like to make a statement on the Post Office. I am today publishing the Government’s proposals in a consultation document, copies of which will be available in the Vote Office in the usual way.

First, let me set out the background to the proposals that we make. There are 14,300 post offices in the UK, of which 480 are Crown post offices owned by the Post Office and 13,820 post offices are operated by postmasters and mistresses as private businesses. Historically, branches have been located where the sub-postmaster has chosen to set up business, rather than as a result of a strategic decision by the Post Office. The result is that in some places many branches are competing for the same customers, which is why the Post Office will take a more active role in ensuring that the right post office is in the right place—something the National Federation of Sub-Postmasters supports.

But the big problem is that people are simply not using post offices as they once did. Some 4 million fewer people are using post offices each week, compared with just two years ago. [Interruption.] The market in which the post office network operates has changed beyond recognition in the past 10 to 15 years. Traditionally, the post office was the place—[Interruption.]

Order. The best advice I can give the hon. Member for Beverley and Holderness (Mr. Stuart) is to let the Secretary of State make his statement and let a rebuttal go from the Opposition Benches. We will then take questions. There is no point interrupting a Minister while he is making a statement.

Traditionally, the post office was the place where people went to post a letter, to pay their utility bills and to collect their benefits. Many still do, but increasingly people choose to send an e-mail or text, they pay bills by direct debit or internet banking, and they pay for their tax disc online and have pensions or benefits paid into their bank accounts. Of the 11 million pensioners in this country, 8.5 million have their pensions paid into a bank account. In fact, most people making a new state pension claim choose to do so in this way.

Inevitably, that has taken its toll on the Post Office. Last year the Post Office lost £2 million a week. This year the figure is £4 million. It is not surprising that both the National Federation of Sub-Postmasters and the Select Committee on Trade and Industry have recognised that the present situation is, to use their word, “unsustainable”. So change is needed. Of the 14,300 businesses, only about 4,000 are commercially viable. Many never can be, nor should we, realistically, expect them to be.

The post office has a vital social and economic role. That is why we will continue to support a national network of post offices, and we are able to back them with the money that they need. The Government have invested more than £2 billion since 1999 to support the network. That has included £500 million for the Horizon programme, which provided computerised banking to all post office branches. I can tell the House that the Government will provide up to £1.7 billion until 2011 to support the Post Office, to support the network and to pay for restructuring to provide a firm basis for the future. The annual subsidy will remain in place.

Let me now turn to my proposals. We propose to introduce new access criteria for the postal services to ensure a national network. The access criteria will include provisions to protect customers in deprived urban areas and remoter rural areas. Details of the criteria covering rural and urban areas are set out in the consultation document, but I can tell the House that nationally, 99 per cent. of the population will be within 3 miles of a post office. This will mean the restructuring of the network of Crown and other post offices. The Post Office will consult widely before taking a decision on its proposals.

The Post Office will also provide services in different and more imaginative ways better to serve its customers’ needs. The way in which postal services are provided will also change. Government support will enable the Post Office to open at least 500 new Outreach locations to provide access to services for smaller and more remote communities, using mobile post offices and post offices within other locations such as in shops, village halls, community centres, or in travelling mobile vans. In some cases they will be able to deliver services directly to people’s homes. The Post Office is also determined to provide new services for its customers, particularly financial services. It is, for example, now the market leader in foreign exchange provision.

As a result of these changes, we expect that about 2,500 post office branches will close. However, the remaining network of around 12,000 will still have more branches than the entire UK banking network. After discussion with the National Federation of Sub-Postmasters, the Government have decided to provide compensation to those leaving the Post Office, based on a 28-month remuneration package.

The Government want to devolve greater responsibility for local decisions and to provide greater flexibility for local funding decisions. We will therefore consider what role local authorities in England and the devolved Administrations in Scotland, Wales and Northern Ireland might play in influencing how the postal services are best delivered in the future.

The Government intend to consult on these proposals, and the consultation will end in March. It is intended that the restructuring proposals will be implemented over an 18-month period starting in the summer of next year. The Post Office will ensure that it puts in place procedures to consult on restructuring proposals as widely as possible, providing people, including right hon. and hon. Members, with an opportunity to make representations and suggestions—in relation to outreach provision, for example.

The Government introduced the Post Office card account in 2003 to enable people to get their pensions and other benefits in cash at the post office. The Government remain committed to allowing people to get their pension or benefit in cash at the post office if they choose to do so, and a range of accounts available at the post office make that possible. The current Post Office card account contract ends in March 2010. I can tell the House that the Government have decided that they will continue with a new account after 2010. It will be available nationally and customers will be eligible for the account on the same basis as they are now.

European Union procurement rules leave us with no option but to tender competitively for this product, and we must ensure that best value for money for the taxpayer is achieved, but the Post Office is well placed to put in a strong bid given the size of the network and the access criteria that we are now introducing. In addition, cash will be available at the post office through some 4,000 free-to-use ATMs, which are being introduced across the network, as well as a range of interest accounts. Those will be attractive to the general public as well as those Post Office card account users who choose to build up balances on their card account.

The proposals that we make today will put the post office network on a stable footing and ensure that there is a national network across the country. I commend the statement to the House.

I thank the Secretary of State for advance sight of his statement, initially in the weekend’s papers, then consistently through the media during the course of this week, and finally with the hard text this morning. I apologise to the House on behalf of my hon. Friend the shadow Secretary of State, who is unable to be here today because he has been overseas.

The statement is both disappointing and wrong. It will cause fear and anxiety to people, often the most vulnerable, in every part of the country. It will destroy many good businesses simply because the Government do not have a long-term vision for the future of the post office network. Does not the Secretary of State recognise that if the local post office closes, often the last shop in the village closes as well, and that a van visiting for a couple of hours a week is no replacement for a post office that is open full-time? Of course, the Government have form on this issue. About 4,000 post offices have already closed under this Government; taken with today’s statement, that means that in 10 years of Labour Government we will be losing more than one third of the post office network.

The Government’s decision on the Post Office card account is welcome. Indeed, it is what Conservative Members have been calling for since the Government announced their intention to scrap it. I am glad that the Government have yet again responded to ideas put forward by Conservative Members and changed their mind on this issue. It is important that the new Post Office card account scheme is genuinely available to existing customers and that the application process should not be unnecessarily complex. However, the Secretary of State said that the contract for the new account may not go to the Post Office. Can he tell the House how many more post offices will have to close if the Post Office does not win this vital contract?

We all owe a huge debt of gratitude to our sub-postmasters and sub-postmistresses, who provide such a fantastic service to their local communities. They tell us that they do not want to depend on subsidy but want to have the opportunity to do more business and to serve their customers—yet that is exactly what the Government are denying them in today’s statement, which is based on how many post office closures the Secretary of State thinks that he can get away with, not a real business case or an understanding of what consumers, especially the most vulnerable in our society, want and need. His vision is to have fewer post offices providing fewer services to fewer people.

The statement leaves many questions unanswered. When does the Secretary of State expect to publish a full list of the branches that are to close? Does he expect closures to be made disproportionately in rural areas? How will the process of selecting branches to be closed be carried out? Will the Post Office identify the branches to close, or will it allow sub-postmasters to volunteer for closure? How has the number of 2,500 been reached? Is it true, as reported in the press, that the Post Office wanted to close 7,000 of the 14,000 sub-post office branches? Allan Leighton and Adam Crozier are doing a remarkable job in trying to turn around the Royal Mail, but the Government appear to be determined to make them the fall guys for their own lack of vision.

The Secretary of State says that compensation will be paid where a post office closes. Can he confirm media reports that a sum of up to £70,000 is being considered? Does he anticipate continuing uncompensated closures? Will there be local consultation about possible closures? What will a local community have to prove to avert a closure? Indeed, will it have any say at all? What will the situation be if someone wants to reopen a post office that has been closed as part of this process or wants to open up a new one nearby? Would they be allowed to do so? He says that the annual subsidy will remain in place. Will that be at the same level as now for every year until 2011? Does the figure of £1.7 billion that he announced include compensation to those postmasters who close their post offices, and if not, how much extra will be made available for the compensation package?

We accept that Government and business must deliver their services in the most cost-efficient way, but the Government seem content merely to manage the decline of the post office network when they should be trying to bring new business opportunities to it. They should be announcing that they will allow post offices full access to working with carriers other than the Royal Mail. They should be announcing that they will work with local councils to encourage them to offer more council services through post offices. They should be doing more to give post offices the flexibility to offer a much wider range of business services than they envisage. They should be acting to prevent the Royal Mail from poaching businesses away from sub-post offices by undercutting the prices that they can charge for postage.

While the Government fail to come forward with policies to give post offices a better future, the Prime Minister blames it all on the customer. How can he say that, when it is his Government who have taken away £168 million of business from post offices this year?

The statement is a missed opportunity for the post office network, but worse than that, it is a tragedy for those who depend on it and the communities that will lose a vital piece of their economic and social structure. It brings us no closer to a sustainable post office network; as a result, we are destined to more years of uncertainty, decline and dissatisfaction.

If the hon. Gentleman has been reading about these matters for the past week, he seems singularly unprepared for today. I am bound to say that I am confused. He seems to be saying at one and the same time that no post offices should close and that 7,000 should close, which is what he says the Royal Mail wanted. He must be aware that post offices have been closing for years. During the time that his party was in office, 3,500 post offices closed in a completely haphazard way with no help being given to enable them to restructure.

Let me deal with one fundamental point. It is a matter of fact that, for various reasons, people’s shopping habits and banking habits have changed—for example, they are using the internet more—and that is affecting every single business in the land. It is completely irresponsible simply to ignore that and hope that it will go away. People had the option of paying their benefits or pensions into a bank account during the Tory Government years as much as they have had that option during the years that we have been in power. As more and more people get bank accounts, they are asking that their money be paid into them. It is our job to respond to that and to support the Post Office.

Let me make another point to the Tories. I said today that we are ready to put £1.7 billion into the Post Office. If the hon. Gentleman’s position is that there should be no closures, he has to tell us where he would find the additional money to go into the network, especially given that his party is committed to £20 billion-worth of tax cuts, as well as unfunded, uncosted spending commitments across the board.

The hon. Gentleman raised several specific matters, which I shall tackle. I agree that we, along with the Post Office, must do our best to get more business into the Post Office. That is why the new chief executive is doing more to get additional financial services business into the Post Office. I have already mentioned foreign exchange, which is extremely important business. I agree—and said in my statement—that we should encourage local councils to do more business through post offices if they can. Our commitment today to continue with the Post Office card account will go a long way towards encouraging people to use post offices.

The hon. Gentleman asked about consultation. There will be a consultation for three months on the principles that I set out. After that, assuming that we decide to proceed, the Post Office will determine the post offices that need to be in the network. It must be for the management of the Post Office to decide about the appropriate network.

The hon. Gentleman asked about those who volunteer to go. We believe that many postmasters and mistresses want to go. The consultation document makes it clear that the Post Office will try to match those who want to leave the service with its rationalisation of the network.

Let me emphasise to hon. Members that the Post Office has a problem and it is up to the Government of the day to try to help manage it. We are willing to do that and we have the means to do it. That is the difference between us and the Opposition.

It is a pity that the Secretary of State did not mention that the Government are taking away business from the Post Office. Will he give us a commitment today that he will work with all Departments as well as local authorities to put back some of the business that has been taken away or at least make it easier for people to use the post office? He also knows that the consultation will be perceived by the 4 million people who signed the petition—and the many millions who did not, but want to keep their post offices open—as nothing more than something that will be listened to but ignored. If many thousands of people throughout the country are prepared literally to go out on the streets to support as well as to use their post offices, will he agree that the sustainable Post Office must continue and that the Government will go back on today’s statement?

On my hon. Friend’s last point, of course the Government will listen to representations made in the consultation. However, I emphasise that nobody—well, I cannot say “nobody” because my hon. Friend disagrees—but most people, including the National Federation of Sub-Postmasters, recognise that the problem needs to be tackled. Ignoring it, hoping that it will go away or that something will turn up will not do.

My hon. Friend mentioned Government business. If I said at the Dispatch Box, “From now on, people will not be allowed to have their money paid directly into their bank accounts”, people would justifiably complain. The problem that the Post Office faces is that many people who used to go to the post office to cash their giros, get their pensions and so on are choosing to do things differently. Another example is renewing tax discs on cars. People can choose to do it in the post office or online. Choice is right but the fact that the Government are making £1.7 billion to support the network shows our determination to maintain a national network, which will have 12,000 branches—more than the total of all the bank branches in the country.

May I thank the Secretary of State for his statement but tell him how angry he has made millions of people throughout the country, including pensioners, whom the Government bullied into moving their pensions into bank accounts? Does he realise that he is sounding the death knell for thousands of local shops, rural businesses and communities?

The Government are trying to blame the public for post office losses but will the Secretary of State tell us the value of Government business withdrawn by Ministers from post offices since 1997? Post offices used to get 60 per cent. of their income from Government business; soon it will be only 10 per cent. Surely that proves that post offices losses were made in Whitehall.

The Secretary of State told us how generous the Government were to keep a subsidy for the Post Office. Will he confirm the results of a Treasury study that shows that, for every pound of subsidy for post offices, the rural economy benefits from between £2 and £4? Has any new study been undertaken of the high economic and social returns from the subsidy? Will he publish those studies?

The Secretary of State waxed lyrical about his proposed innovations to keep some limited postal services in remoter places. Why are his ideas so weak? How can we be sure that the policy will bring the new services and products that the Post Office needs? Why is he keeping Post Office Ltd under the control of the Royal Mail Group? He says that there are plans for new parcel pick-up services linked to mail order companies. That is great if it happens. However, does he not realise that Royal Mail Group puts restrictions in its contracts with post offices that are designed to benefit Royal Mail at the expense of sub-postmasters? Will he stop that?

There is a huge hole in the heart of the statement—the Secretary of State’s failure to say anything about the future of Royal Mail. Will he confirm that its financial future is grim and that, on top of a massive pensions deficit, Royal Mail is losing huge amounts of business to private competitors? Will he therefore explain why he has failed yet again to make a final decision on the draft Royal Mail package that was produced more than seven months ago? Is not the truth that he will not stand up to pressure from the unions and Labour Back Benchers, and that he rejected the idea of an employee share ownership trust, which Liberal Democrats and Royal Mail management proposed, because of how it would look for the Chancellor when he needs some votes? Is not his failure to make the tough decision to sell shares in Royal Mail the genuine reason why he cannot offer the freedoms and the £2 billion investment fund for post offices that we propose, for which there is a hard-nosed economic and social case?

The statement and the Government give us the worst of all possible worlds. The Government are betraying our post offices, the Royal Mail and local communities throughout the country.

I suspect that many postmasters listening to the hon. Gentleman will despair of any coherent policies from the Liberal Democrats. His proposal appears to be to break up the Royal Mail Group. He complains about competition, yet under Liberal Democrat proposals for privatisation, there would presumably be more competition. He is completely inconsistent. His party would not have the money to support the post office network because Liberal Democrat spending commitments do not add up.

The hon. Gentleman asked about the annual subsidy to support the network. It will remain in place throughout the next spending period and it will be needed beyond that. We are prepared to maintain it, yet the hon. Gentleman reverts to the point about the Government taking away business. Most of the business that has gone stems from the decreasing number of people who get their benefits or pensions from the post office. People have been choosing not to do that for the past20 years—it has not happened recently.

The hon. Gentleman mentioned the ability to use the internet to renew tax discs. Is he saying that people should not be allowed to do that? It would be astonishing if he told his constituents who use that facility that they cannot do so. Surely all hon. Members, whatever our party, must recognise that changes are taking place in society. People are doing things differently but we want to maintain a national post office network and we need to support it. That means that the Government of the day must find the money to do it. We are willing to do that and to support the Post Office to make the changes that it wants to make.

As for the Royal Mail, the hon. Gentleman must have missed a rather big statement—one of the first that I made as Secretary of State for Trade and Industry—in which we announced a major package of financial support for the Royal Mail Group in May.

Order. Many hon. Members wish to catch my eye and the main business of today is still to follow. I remind hon. Members of Mr. Speaker’s ruling that Back Benchers are limited to one supplementary question.

What will be the criteria for the Post Office account card when it is retendered? Will a minimum number of outlets need to be part of the network, and will that minimum number allow more than one organisation, in addition to the Post Office, to bid for it?

I shall be brief, too, Madam Deputy Speaker, in the spirit of your remarks. It is intended that the new card account will be subject to same criteria and access arrangements as at present.

My constituency stretches over 900 square miles of the most remote part of the Pennine dales. The National Audit Office report on tackling pensioner poverty showed that pensioners’ take-up of benefits is lowest in precisely such deeply rural communities. When the Secretary of State considers which post offices will remain, and the configuration of such outreach services, will he bear in mind the crucial importance of safeguarding the interests of those most vulnerable members of the community? Will he also bear it in mind that that stable base for local services cannot be replaced by a fleeting weekly visit by a van?

I agree with the right hon. Gentleman that a stable network is important, especially in rural areas, and that is precisely what I want to achieve. If we did not take the action that I propose today, we would not have the stability that the Post Office itself wants. He also makes a fair point about pensioners, and we want to make sure that those who are entitled to the pension credit or to any other such help should be able to get it.

I thank my right hon. Friend for continuing the subsidy for rural post offices after 2008 and announcing the successor to the Post Office card account after 2010. Under the urban reinvention programme, residents of Doxey near Stafford found that their post office was closed because the operator was willing to take the leaving package. Will he ensure this time that the willingness of an operator to take the money will not of itself be the reason to close a post office?

My hon. Friend makes a good point. I want to make sure that the Post Office has a coherent national network. While a number of postmasters and mistresses want to go, it might not always be possible to align that wish with the operational needs of the Post Office. It is therefore important that the Post Office manages the scheme. Undoubtedly, therefore, some people who want to go might not be able to do so, as it is important to have a national network.

Does the Secretary of State recall that I warned him, when he began the policy of requiring pensioners and other recipients of Department for Work and Pensions’ benefits to receive their benefits in their bank accounts, that the savings that he hoped to make of some £300 million or more a year on the payment previously made by the Department of Social Security to post offices would largely be absorbed by the subsidy required to keep the post office system going? He has just confirmed that by saying that the annual subsidy will be more than £300 million. Does he consider it a good deal effectively to close down a network and make no net saving?

The annual subsidy is actually £150 million. As I said earlier, that will continue. The £1.7 billion will go to the overall losses of the Post Office but also to restructuring. I am sure that the right hon. Gentleman remembers that when he was Secretary of State for Social Security, as I was, the policy was to provide people with a choice, which they increasingly exercised. I think that I am right that when he was Secretary of State many people started to use bank accounts simply because their working life had changed and they found it more convenient to do so. That is a fact of life, and we must deal with that, as many other businesses have had to do.

I welcome the announcement of the continuation of the Post Office card account as well as the recognition that customers in deprived urban areas should also be protected. Within the consultation, will my right hon. Friend provide more information about new access criteria in relation to deprived urban areas and rural areas, so that we can have informed debate?

Yes, I can give that commitment. The consultation document contains the criteria both for rural and deprived urban areas. My hon. Friend is right to make that point because many recent post office closures have been in urban areas, not rural areas. We need to strike the right balance to ensure a coherent national network That is what we, and postmasters and mistresses, want to achieve.

May I seek an assurance from the Secretary of State that in a constituency such as mine, which has an above-average number of pensioners, the access criteria to which he has just referred will be finely tuned to meet the needs and characteristics of individual communities?

The whole point of having a consultation is to seek views on our proposals on the access criteria. If there are special considerations, we need to take those into account. Our considerations will include geographical distance, natural boundaries and so on, which I am not sure affect the right hon. Gentleman’s constituency, but our colleagues who represent the north-west of Scotland, for example, might have a good point to make about access looking all right on a map but not being all right in practice. We will take such matters into account as far as we can do so.

Does my right hon. Friend agree that nothing would have helped the Post Office more than allowing national Giro to build up its publicly owned banking business within the unrivalled post office network. It ill behoves the party that sold the Giro to blame this Government for the loss that ensued.

It is probably asking too much to expect the new-look Conservative party to change that much. Indeed, listening to the hon. Member for Wealden (Charles Hendry), he more resembles a Liberal Democrat than we would normally expect.

The Secretary of State’s statement will be the source of great concern to people in the Northern Isles. The provision of post offices in island communities presents special challenges, to which I hope that he will be sensitive. When the next Post Office card account contract is awarded, will he assure me that lessons will be learned from the TV licensing contract given to PayPoint? Will he assure me that, unlike in that case, the contract will not be given to any company that is unable to provide services to all our island communities?

I understand the hon. Gentleman’s point, and I think that I am right that there are many more post offices than PayPoint facilities in his constituency. The decision on PayPoint and licence fees was taken by the BBC—[Interruption.] I am sure that the hon. Member for Wealden is not proposing that, in addition to everything else, we should now seek to run the BBC on a daily basis. As the hon. Member for Orkney and Shetland (Mr. Carmichael) is well aware, however, I am extremely sympathetic to his point in relation to islands to the north and west of Scotland.

I welcome the announcement on the Post Office card account following a petition that I submitted on behalf of thousands of my constituents. Does the Secretary of State accept, however, that in rural areas such as my constituency, the local post office is often also the only local shop, and that both sides of the equation are necessary for the business to be viable and to serve the local community? Will he take that into account during the consultation process?

First, I am grateful to my hon. Friend for her comment about the Post Office card account. It is important that that should continue, as it will help post offices. That was one of the biggest requests of the petition delivered by the National Federation of Sub-Postmasters. I am aware that the post office might be only a part, and sometimes a small part, of what such local businesses provide. Obviously, we will do as much as we can to help the post office, but people’s use of local shops is a wider problem. I referred to that earlier, and part of the problem with many post offices is that people simply do not go to the high street or the village store as much as they used to do; they go to the bigger supermarkets. I cannot really offer to sort out that wider problem in the context of the consultation.

The Secretary of State talks about choice, and he is entirely right. He must enable the Post Office to provide the goods and services that the public want to use. That means reviewing the policies of all public sector agencies and authorities to see whether they can reinstate some of the services that they have withdrawn and at the same time introduce new business.

If people want to get their cash from the post office, they are able to do so. We cannot, however, say to people who have decided, for whatever reason, to get money paid into a bank account, “Sorry, you’ve got to go and get it at the post office.” I believe strongly in choice. In relation to the policy on driving licences, for example, which I introduced when I was Secretary of State for Transport, I was keen to ensure that people could have a choice: either to go to a post office or to use the online service. Choice is a good thing, and I thought that the Conservative party used to believe in it.

Does my right hon. Friend recognise that the Post Office is not always seen as being very good at consultation? In that light, when he says that there will be a role for local authorities in areas such as mine, where major regeneration of the retail trades is taking place, will he guarantee that the Post Office and the local authority will work together to make sure that, following any closures, the surviving network will fit the shopping needs of those communities?

My hon. Friend is right that we need to learn from previous consultations. Some improvements could be made. I know that Postwatch is extremely anxious to be actively involved, and it will be, to make sure that we try to improve. My hon. Friend is right that local authorities and post offices working together is important, which is why I said specifically in my statement that we need to explore that further.

I agree with the Secretary of State; he said that the post office has a vital social and economic role, holding communities together and providing a lifeline for pensioners. I do not understand how, in 2,500 areas where post offices are to close—not to mention the 4,000 areas where post offices have already closed under the Government—that role somehow becomes less vital.

The role remains vital and the access criteria that I set out, which are spelt out in detail in the consultation document, are entirely reasonable. But as the right hon. Gentleman would recognise, since the 1960s there has been a steady decline in the number of branches; we know that. However, even if all the proposals were implemented, there would still be about 12,000 branches—more than all the bank branches in this country put together.

Does my right hon. Friend accept that this is a very disappointing statement and that some of us have little or no confidence in the management of the Royal Mail, given that it is also rolling out a campaign of massive closures of sorting offices? He might like to consider something for which some of us called when the Bill was being discussed: that the universal service obligation be made the responsibility of all major carriers, not just the Post Office. Does he agree with that?

Given that post offices are the economic and social heart of many rural communities, does the Secretary of State accept that these proposals do not align with the Department for Communities and Local Government’s stated priority, which is to make our rural communities more economically, social and more environmentally sustainable? Does he also accept that vulnerable people—

I think that I have the gist of what the hon. Lady was saying. I do not agree with her. I am told that she is the great future hope of the Liberal Democrats, but is she saying that there should be no change in the network ever?

I am very pleased that the Secretary of State has said that the Post Office card account will continue, which will be a huge relief to the postmasters and mistresses in Wales; that was one of their major requirements. Has he made any assessment of how the proposals will affect Wales? When the last round of urban closures took place, the branches that closed in Cardiff were the ones where the postmasters or mistresses volunteered, which did leave a patchy provision.

On the last point, as I said a few moments ago, it is important that we do not end up with areas without postal provision because somebody wanted to go. Indeed, the whole point of having national access criteria is to make sure that there is a network, and that branches are within a reasonable distance of where people live. On the card account, I am grateful for what my hon. Friend said because I know that this is one of the things about which the federation and many of those who signed the petition were very concerned.

The Secretary of State will have understood the dismay in rural England that will be caused by his statement. Will he clarify what he meant when he said that he would look at what role local authorities might play in influencing how postal services are best delivered in the future? Is it the Government’s policy to pass on to local authorities responsibility for keeping open post offices that they plan to close?

No. If the proposals go ahead, the closures would take place in an 18-month period from the summer of next year. The consultation document—I appreciate that the right hon. Gentleman has not yet had a chance to read it—says that the possible transfer or share of responsibility with local authorities would not happen before 2011. On his general point, I can understand the concern of anyone who uses a post office when there is a proposal to close it. Although I am not surprised by this, the Conservative party has to face up to the fact that saying that it will maintain the present network when it knows that it cannot fund it because of other commitments it has made on tax and spending is not being straightforward with the public.

Most rational observers would accept that some closures are required to make the remaining network more resilient and the previous urban programme has demonstrated that as well. Will my right hon. Friend include access to public transport among the points that need to be taken into account in deciding on closure? In a rural area such as mine, that is a critical issue in terms of whether people will be able to reach a post office, even if it is within three miles.

The whole point of having a consultation is to enable people to reflect those concerns. I said that there are some areas where something that looks reasonable is not reasonable at all on the ground; I can think of at least one instance in my constituency during the last round of closures where that was the case.

The Secretary of State told the House that the Government were going to continue with the Post Office card account and that the card account would be put out to tender. We could end up with a continuing Post Office card account that is not run by the Post Office. Will the Secretary of State please explain that, because I fear that a deceit is being played on rural communities and others—[Interruption.]

If the hon. Gentleman cares to read my statement, he will see that I said that it is the Government’s intention to continue the account. I also said that because of European Union rules, it is necessary for the matter be tendered. That is a legal requirement. Is he seriously suggesting that we ignore it? That would not surprise me in his case, but I think many of his colleagues might not share his view.

Is the Secretary of State confident that the more strategic approach that he is announcing today will stop the piecemeal erosion of the network that has occurred for many, many years and produce a stable and sustainable network of about 12,000 branches?

That is precisely what I want to achieve. As I said in reply to the hon. Member for Wealden (Charles Hendry), over many years—including the years that the Conservative party was in government—post offices were closing at the rate of 200, 300 or 400 a year without any plans or support to put things right.

The hon. Gentleman says “No.” It is a matter of fact—the Conservatives closed 3,500 post offices.

It is disingenuous of the Secretary of State to say that post offices are uneconomic because people are not using them. People are not using them as a direct result of Government policy. Many of my constituents felt forced to give up having their benefits paid into post offices. He says that, historically, branches were located where the sub-postmasters chose to set up in business. Does he accept that much of the problem with the current network stems from the Post Office urban regeneration programme, where the Post Office went out and appeared to say, “We have a shedload of money. Who wants to give up?” If under the new scheme—

Let me deal with the point that the hon. Gentleman raised that would benefit from a reply, on compensation. We are offering compensation because the National Federation of Sub-Postmasters feels quite strongly that under a compulsory scheme it is reasonable to have compensation. Yes, that means inevitably, and by definition, that postmasters and mistresses concerned will get a payment, but that is the right thing to do in these circumstances. As I understand it, the hon. Gentleman seems to think that is wrong.

I welcome what my right hon. Friend said about the continuity of the POCA, which will be greatly welcomed in deprived areas of my constituency. I will work with my local councillors and local authority in looking at the access criteria for deprived areas, but will he also welcome our views on how we can help maintain post offices’ sustainability in sustainable communities?

I agree with my hon. Friend that it is necessary for local authorities and post offices to work together and that they can often do so to their mutual advantage. They must look into how they can do that as constructively as possible. I am sure that that will happen in many areas, including my hon. Friend’s area.

The House has to take some responsibility for what is being decided. I have a straightforward question for the Secretary of State: will he assure me that senior representatives of Royal Mail-Post Office will talk to every Member representing a constituency where closures are to take place?

I can give the hon. Gentleman the commitment that if the programme starts next year the intention of the Post Office will be to look at particular areas and then to make its proposals, and that it will consult Members.

In my constituency, it is already possible to obtain postal services on a part-time basis from a pub in Rowarth, a church in Dove Holes and a community enterprise in Litton. Given my right hon. Friend’s statement, is it fair to say that although the future for stand-alone dedicated post office branches is bleak, there will be opportunities for community enterprises and social enterprises to deliver post office services and for other innovative and diverse ways of delivering them in rural areas?

First, I do not agree that the outlook for branches is as my hon. Friend describes. Provided that we can get the Post Office on a stable and firm financial footing, there is every reason to be confident. However, I do strongly agree with him on new and innovative ways of doing business. That has been piloted and trialled around the country, and it works. I can understand the opportunism—if I may use that word—of Opposition Members in dismissing that out of hand, but I find it astonishing. The Conservatives used to pride themselves on encouraging businesses to be innovative. We should be encouraging the Post Office to be innovative, rather than running it down.

Can the Secretary of State contemplate a situation under his new access criteria where a community-run post office might be compulsorily closed? As he knows, communities across the countryside have often responded by setting up community-run post offices in villages.

Yes, and that has been extremely valuable. They have not worked in every case, but they have worked in some. That is an example of how we can do things differently—and if there is community buy-in, it is likely that more people will come in through the front door.

I listened with interest to the statement and to comments on the changes to the delivery of post office services, as well as to the remarks of my hon. Friend the Member for High Peak (Tom Levitt). I have a concern, however. In my past experience in Greenwich, the Post Office generally paid only lip service to ideas that were brought forward. We had a brilliant idea about putting post office services in local authority housing offices and that was dismissed out of hand. Will my right hon. Friend reassure me and my constituents in Plymouth that where genuinely imaginative proposals are brought forward, they will be fully considered and not dismissed just to seek to meet numbers targets?

The Post Office has new management, and a new chief executive who very much wants to make a go of the Post Office. I have met him and he is full of ideas that will help the Post Office, particularly in relation to financial services and the provision of advice to people. Obviously, the Post Office has to reach commercial decisions so it cannot take every idea on board, but I hope and think that my hon. Friend will find that the Post Office is far more open to such new proposals than it might have been in the past.

Roughly what proportion of the 2,500 closures will be in urban areas? Under urban reinvention, many such constituencies have already lost a third of their post offices and the remainder were required to invest in new facilities.

The Post Office will have to decide what is appropriate, but it is clear that after the three or four years since urban reinvention was last looked into there are still problems in some areas. For example, it is quite common in urban areas for there to be two post offices when one might be a viable proposition but two are not. I am not alone in saying that; the postmasters themselves are saying that, too.

The Post Office will be looking at those post offices that are not well used and asking what the problem is and whether there is a better way of providing service, as well as at those that continue to make very high losses. We have to look at them, but once the consultation has finished and assuming that we proceed at the end of it, the Post Office will consider how best to proceed and its priority must be to produce a national network that is consistent with the criteria set out in the consultation document.

Is my right hon. Friend given any pause for thought by the fact that other European nations such as France, Germany and Greece have managed to maintain much more extensive networks of post offices than we will be left with, largely because of a greater willingness to recognise the social benefits?

Of course we look at what goes on in other countries, but I find that when we do so we find that the grass is not always greener on the other side of the fence. I always pause for thought on such matters, but I like to think that I then make a rational decision on what is best for this country.

I am sorry that the Secretary of State said that he thought that post offices were a problem. [Interruption.] The right hon. Gentleman did say that. For a great many people post offices are not a problem but an important public service. Does he understand the concern of my constituents in West Sussex who have had to face the proposed downgrading of local hospitals and a reduction in police community support officers and for whom this announcement will come as a further blow in terms of the delivery of public services?

I do not know whether the hon. Gentleman was present when I delivered my statement. [Interruption.] No wonder he is laughing now, as I do not think that he believes half of what he said. I said that the Post Office had the problem that over many years post offices have had to face the difficulty of fewer and fewer people coming through the front door. We need to try to address that problem. Let me also say to the hon. Gentleman that we are spending more on services such as hospitals, the Post Office and the police, and every single penny was opposed by the Conservative party.

I understand that the consultation will close before the end of May. Will the Secretary of State undertake to publish the conclusions of the consultation and the Government responses to that, so that people taking part in local elections and devolved-nation elections can decide how to cast their votes on the basis of the information made available to them?

Knowing the Liberal Democrats, I have not the slightest doubt that no matter what the consultation concludes, what is said and what the facts are, that will not stop them claiming that every single post office in the world will be closed. I said that the consultation period will end in March—I think that the date is 8 March—and I imagine that March comes before May even in Liberal Democratland.

Is the Secretary of State aware that eight post offices have closed in Chelmsford in the past four years, two of which were in the most socially deprived areas of the constituency? The problem, however, has been that the consultations that the Post Office had with the local communities following the announcement and before implementation were a joke. The Post Office paid no attention whatsoever to what local people told them. Can the Secretary of State give an assurance that the consultation process between now and 8 March will be a genuine consultation process—that the problem I have described will be addressed in order to beef up the consultation before an announcement is made so that it is meaningful, and possibly so that proposed closures can be halted as a result of the information from representations?

The consultation is in two stages. First, as I have announced today, there will be a consultation on the proposals I have set out, which I confirm will end on 8 March. If the Government then proceed, there will be a consultation in relation to particular areas. The hon. Gentleman asked us to ensure that the consultation at that stage is adequate. I would certainly like that to be the case, although I think that he will accept that it is inevitable that in consultations it is difficult to guarantee that we will please everybody all the time. But I do think that when people have got representations to make, they should be listened to carefully because sometimes the initial proposals are not right.

The Secretary of State said that 99 per cent. of the population will be within three miles of a post office. I suspect that many of the 1 per cent. will be in my constituency, which runs to 3,400 square miles. What specific criteria will the Government propose in relation to remote rural areas to ensure that post offices, which are a highly valued resource and much needed by the inhabitants of such areas, do not simply vanish?

In the consultation document, we set out the criteria not only in a national context. As I said, the figure that I gave is a national one, and I also said that the detailed figures for rural and urban areas have been set out. In rural areas, 95 per cent. of the population will be within three miles of a post office. What the hon. Gentleman says is absolutely right in respect of some areas, and I understand that that has been the situation for many years. The Post Office looks at postal districts, and I am pretty sure that the hon. Gentleman’s constituency is but one of them. He will know better than I do—it is some time since I last visited Caithness—that many small communities there are some distance from a post office. That is perhaps inevitable when there are communities of perhaps half a dozen people; however, we are trying to take that into account in the consultation document, which specifically states that natural boundaries such a lochs and mountains—and even excellent salmon rivers—are taken into account.

Thank you, Madam Deputy Speaker; I was beginning to think that the “stop Jim” campaign applied to me. This statement is another stage in the decline in rural services that we have witnessed in the past 10 years. The Secretary of State has got this the wrong way round. He rightly talked in his statement about the need for more services and access to more business in post offices, but he couches that in terms of the Post Office dealing with such matters centrally. Should he not be setting individual postmasters and postmistresses free through a much freer contract, so that they themselves can use the entrepreneurial spirit that he rightly espouses to get more business, in order to make their businesses viable? Only then should he make any necessary closures. Announcing closures before he gives postmasters and postmistresses that freedom is completely the wrong approach.

I did make the point that the vast majority of post offices are private businesses, and many postmasters and postmistresses are extremely entrepreneurial. They offer a wide range of services—not just postal or financial—and I want to encourage that.

I have just carried out a survey of the post offices in my constituency, and I was told of one immediate closure and two post offices that are about to close. Other postmasters and postmistresses told me that they have no confidence in the future, and there are also those who wish to retire. Will the Secretary of State ensure that, where a postmaster or postmistress wants to retire and the post office in question is vital to the community, measures will be put in place to enable them to retire and new owners to take over and keep the service going?

I am not sure whether the right hon. Gentleman was here earlier, but I have been asked that question twice already and the answer is the same. Yes, in order to ensure a national network, in some cases somebody who wants to retire under the scheme will not be able to do so because we need to keep the post office in question open.

Given that the Government have decided how many post offices are going to close, what exactly is the Secretary of State consulting on between now and 8 March? Or is this a cynical exercise to kick the exact closures following 8 March beyond the local government elections, so that people will not know which post offices are going to close when they go to the polls next May?

Even the hon. Gentleman must accept that it is not possible to consult without having a proposition on which to consult. The Government have published their proposition and we are now asking for views; even he can see that.

Will the Secretary of State assure the House that when the Post Office card account is replaced by a new account in 2010, people who currently collect their pensions through POCA will be able to transfer easily to the new account without all the bullying and badgering from the customer conversion centre that occurred when pension books were replaced with POCA, and people were bullied into using banks? Will he also assure us that all new pensioners will be offered—

I did say in my statement that the Government want to continue with that account. However, the Post Office is undoubtedly now offering interest-bearing accounts and, frankly, some people would be better off putting their money into them, rather than having an account that pays no interest. As I said earlier, we want to continue with the current system.

The Government have made it as difficult as possible for benefit recipients to carry on with the card account, putting more than 20 obstacles in the way. As a result, £300 million of income was taken away, which put the whole network in jeopardy. For example, the BBC confirmed this week that it switched to PayPoint because

“the Post Office has a declining network and could not offer…any guarantees as to the number of branches likely to remain open”.

This is a catalogue of cack-handed incompetence on the part of a Government who have not co-ordinated at the centre. What steps is the Secretary of State taking to ensure that he works with other Government Departments to make sure that fresh Government products will be offered to the post office network?

It is my recollection that when the BBC made the announcement—it was the BBC that made it—it cited the savings that it was making, rather than anything to do with the branch network. The post office branch network is very extensive. I happened to check the availability of PayPoints within the city of Edinburgh, where I live, compared with the number of post offices, and the latter are far more convenient. There are more post offices than there are PayPoints.

The Secretary of State has admitted that the Government will force sub-post offices that are profitable private businesses to close because they are not profitable for the central Post Office. Will he publish details of the localised costs and the methodology used to calculate them, so that we can be sure that the mistake that was made in the “Counter Revolution” report has not been made in these calculations?

I did not say anything of the sort. The job of the Post Office is to ensure a coherent national network. As I said at the beginning of my statement and as the hon. Gentleman has to realise, most post offices—apart from Crown ones—are private businesses operated by private individuals, and if they are profitable they will remain profitable.

Practical access is key to my constituents. Not all mail can be put through a letter box; sometimes, one has to go to a sorting office to collect a parcel or sign for a letter. Earlier this year, the Olney sorting office was closed and some of my constituents now face a 25-mile round trip to the brand new Newport Pagnell sorting office, which is completely inaccessible by local transport. What advice can the Secretary of State give to pensioners in my constituency who now face that journey?

As I said earlier, we need to ensure that there is a coherent network, and we also need to ensure that existing post offices have the facilities to hold parcels. I understand perfectly well the point that the hon. Gentleman makes, and the whole thrust of my argument is that the Post Office has to recognise that it may need to change some of the things that it did in the past, so that it can provide a service that people can use.

The Secretary of State will know that the closure of one in six post offices is still a very substantial number of closures. Can he reassure my constituents that the particular needs of remote and rural highland communities, including those where post offices have recently been closed, will be taken into account when the next round of closures is planned, and that active steps will be taken to encourage my constituents to take up the new and very welcome Post Office card account?

Of course we will take into account the needs of rural areas. I am well aware that the hon. Gentleman’s constituency stretches over a very wide area, and that there are particular difficulties there. I hope that we can take all these factors into account, and that the Post Office card account will help the Post Office to attract new business, as well as to maintain its existing business.

This is a very bleak day for west Norfolk. The heart is going to be ripped out of a lot of small communities, and many vulnerable people will suffer as a result. What discussions did the Secretary of State have with the BBC about the Post Office retaining the television licensing business?

I personally had none, because the decision was taken before I became Secretary of State. If the hon. Gentleman wants to know what discussions the BBC had with the Department of Trade and Industry before then and he cares to write to me, I will deal with that point. As I understand it, the decision was taken by the BBC. It decided that it wanted to do this, because it stood to gain considerably financially as a result.

Penultimately, will the Secretary of State draw up for the Royal Mail revised consultation guidelines, so that we can avoid the current situation whereby the views of 98 per cent. of the public and of Postwatch have been ignored, and so that simple requests for information such as whether a Crown post office is in profit or in loss can be answered?

As I have said on several occasions, we need to ensure that the consultative process, as and when we get into it, is adequate so that people may make informed decisions. However, as I said earlier, it is inevitable in many cases that there will not be unanimity of views and some people will feel that their views have not been taken into account.

Under the ludicrously titled previous Post Office urban reinvention programme, there were reports that Post Office executives were receiving substantial financial bonuses if they met or exceeded their targets for number of post offices closed. Does the Secretary of State support such incentivisation this time round?