What assessment she has made of the effectiveness of her poverty reduction strategy in reducing poverty. [54737]

The Government's strategy for reducing global poverty is set out in the 1997 and 2000 White Papers on international development. Our commitment is to mobilise the international system to meet the international development targets and to work to make globalisation work for the poor by making international governance more equitable. These are massive challenges but progress is being made.

The Secretary of State will know that education plays a very important part in the reduction of poverty. What discussions has she had with the International Monetary Fund with a view to including within public spending targets the freeing up of any charges for primary education, so that we can have universal primary education by 2015?

The hon. Gentleman is absolutely right. In the countries where we have driven forward and supported local efforts to get progress towards universal primary education—Uganda, Malawi, Tanzania and Rwanda, for example, have made significant progress in recent years—dropping all charges is absolutely key. In very poor countries, when there are charges, poor children are excluded from school. At the recent spring meetings of the World Bank and the IMF, there was an agreement for 10 major countries to work together in the international system to fast-track progress. Our recommendations also included no charging, so we are moving forward.

Is my right hon. Friend aware that, recently, the interim chemical review committee of the United Nations Environment Programme recommended that there should be strict international controls on asbestos because of the risk associated with that material? Will she therefore, at the Monterrey conference on financing development, and at the world summit in Johannesburg on sustainable development, press for a ban on the use of asbestos in projects in the developing world as part of a strategy to tackle poverty? The use of asbestos causes ill health, deprivation and poverty.

I confess that I was not aware of that ruling by the United Nations body to which my hon. Friend refers. The Monterrey conference has taken place, but I take very seriously what he said. I went to Sverdlovsk in Russia, where asbestos is still being mined and its extraction and export is still being promoted. I tried to tell its mayor that that is not approved of in our country, and he had never heard of the argument that asbestos is damaging to health. Clearly, therefore, a great deal remains to be done to strengthen international controls. I shall look into the proposals that my hon. Friend has made to see what can be done.

Would the Secretary of State agree that those who suffer most in a corrupt society are the poor, and that her poverty reduction strategies are torpedoed by the poor governance, ineffectiveness and corruption of Governments in the developing world? Will she underline to the House her determination, which I know is strong, to ensure that developing countries' Governments take responsibility for their actions, and that they do not always blame donor countries for their poor actions?

The hon. Gentleman is right that corruption corrodes economic growth, means that resources are misused, and leads to debt problems. The poor pay the price in terms of poverty, suffering and lack of public facilities. Corruption is a two-way street: companies from countries like ours have corrupted, bribed and helped to bring about some of the imploded and corrupt state institutions that exist in some countries. The Organisation for Economic Co-operation and Development convention now makes it a crime to offer a bribe to a public official abroad, and bribes are ceasing to be tax deductible in those OECD countries where, to our disgrace, that used to be the case. Under the poverty reduction strategy, we are giving financial support to Governments to help them with development if they tighten up procurement and management of the public finances. We are therefore putting much more focus on that, and we are getting progress. I agree that that is crucial.

I welcome the way in which the Secretary of State has focused the Department's attention on poverty reduction, and particularly the role that country strategy papers have played in that. With particular reference to the Cameroon country strategy paper, which has focused on forestry as a key way of bringing people out of poverty in that country, will she comment on the importance of assessing natural resources such as the forest, and the bush meat that it contains, when considering how best to bring some of the poorest communities in west and central Africa out of poverty?

My hon. Friend is right. Forests are crucial to Cameroon. The country has a long history of terrible corruption, but we have been working on the issue of forestry for some time. Some types of tree are unique to Cameroon and they are of value to the whole international community. We have made progress recently. We have learned from what has happened in Nepal, Cameroon, Indonesia and other places where we support forestry that the way in which to protect the future of the forest is to empower the people who live in the forest and on its resources. In most parts of the world, criminal and corrupt groups misuse the forests. However, when one changes ownership and control of the trees and the animals, people live better and conserve the future of the forest. That is what we are trying to achieve in Cameroon.

Will the Secretary of State outline what can be done in post-conflict countries? Some of the poorest people live in countries where it is most difficult to get aid through to the most needy.

Yes, indeed—although it has to be said that people living under conditions of conflict are even more oppressed and in trouble. We have to do better at resolving conflict. Some 20 per cent. of the population of Africa live under conditions of conflict. Often that conflict is not a war in the classic sense, but reflects the problems found in weak states with rebels and semi-criminal groups. We have to bring such conflicts to an end and start building the institutions of a state so that the economy can be properly managed and that people have a better future. We are doing that in Sierra Leone, where elections took place right across the territory and the conflict is over. However, there is much more to do in Sierra Leone.

I agree with the hon. Gentleman. If we work only in countries where there is an orderly Government to carry out development, the wretched of the earth will not be helped. We must be better at ending conflict and helping build decent institutions in post-conflict failed states, so that the poor of the world have a better chance in life.

If she will make a statement on progress towards the goal of universal primary education. [54738]

Recent World Bank analysis indicates that 67 developing countries have achieved universal primary education or are making sound progress. However, 88 countries—34 of them in sub-Saharan Africa—are not on track to achieve this goal. We agreed at the spring meeting of the World Bank in April that 10 countries would be selected for an international effort to fast-track progress. I am very concerned to try to ensure that we should select countries where we face a major challenge, such as Ethiopia, Nigeria, Pakistan and India, and not, as has been suggested, countries such as Uganda, Malawi, Rwanda and Tanzania where we are already making progress.

My right hon. Friend has half answered the question that I was about to ask, so I shall push her further on the issue. It is estimated that Africa will have 75 per cent. of the world's out-of-school children in the next decade so how will she consult the less-favoured countries there that have not made progress until now? How will she involve them in the 10 fast-track programmes? Ensuring that those countries become involved and can construct education plans is the best way to get universal primary education in Africa, which is where it is most needed.

My hon. Friend is right. One in five children of the world and half the children in Africa are not in school. Africa is in deep poverty, and the future will be poor if children cannot get to school and improve their lives. It is often said that the only problem is a lack of aid, but there is a lack of will in many countries to prioritise universal primary education. Education resources are spent on higher education for the elite, and there is no primary education for poor children.

We must not only provide money for the reformers—that is the easy part—but push the countries that are not reforming and that are not leading to make progress. For example, Ethiopia, which is terribly poor and very populous, is just beginning to make such progress, and we must back its efforts. Nigeria is the big worry: one in five of all Africans are not making progress, and we certainly need a big effort in Nigeria

The Secretary of State knows that the 2015 goal of universal primary education is unlikely to be achieved unless finance for development increases rapidly and substantially. Although I welcome the assurance that the United Kingdom's development assistance will rise from 0.33 per cent. of GNP by 2004, does she not agree that the figure is misleading because it includes all debt relief for heavily indebted poor countries, including the Export Credits Guarantee Department debt that currently stands at £1.1 billion? The actual increase in aid will be much smaller than it seems. Is that not another example of double counting by the Government?

The hon. Lady is half right. There is no subterfuge on the part of the United Kingdom Government. She is aware of the budget increase of £2.2 billion to £3.6 billion, which I hope will rise significantly as a result of the comprehensive spending review. All that money is under my control: it is disbursed by my Department, and there is no double counting. But the OECD development committee is responsible for keeping the international statistics on aid, including what counts as overseas development assistance and how much each country deploys. It has decided that when debt is written off, and half of the debt of the heavily indebted poor countries is ECGD debt or the equivalent, that counts towards overseas development assistance. So the figures for all countries are growing as debt is written off without extra money being spent on aid. There is no subterfuge in the UK, hut the figures look better than the income for disbursal.

Will my right hon. Friend join me in congratulating the many schools in this country on calling to the attention of students—this country's future electors—the importance of the drive to ensure that there is universal primary education by 2015? In particular, will she join me in congratulating children from St. George community college in my constituency who came to the House a fortnight ago and met me and my hon. Friend the Under-Secretary of State for International Development to press the importance of the drive to educate all the children of the world by 2015?

I join my hon. Friend in congratulating the children from St. George community college in her constituency. When I visit schools, I find that our children are globalising themselves. They are looking at the world not in terms of nation states, but in terms of the planet and the interdependence of people, both morally and for the good of the poor. They are aware that if we do not do better on poverty, the future is dangerous for them all.

We have incorporated in the national curriculum the idea of global citizenship because children are entitled to understand the world that they are inheriting and to take some control over its future. We also have twinning schemes between schools in the UK and overseas which are enormously popular. It is moving to see the generosity and curiosity of our children, and their determination to have a more equitable and safe world for the future.

How confident can the Secretary of State be that British Government aid that is allocated to assist with the provision of primary education, especially in Africa, is not syphoned off improperly as a result of corruption so that it never gets to the children who need educating? She will be aware of the estimate that 75 million Commonwealth children lack basic education. The Government announced a Commonwealth education fund to assist with the aim of educating those children. That is fine in theory, but only £10 million is involved, which works out at 15p per child. Is that anything more than a political gimmick?

The hon. Gentleman is so graceless, and always wrong. First, we have tight systems in place and do not put funding into the budgets of countries to support their primary education systems without helping them with procurement and public sector financial management. The prize of that is that our money is secure and they have better systems for their own resources. I assure the hon. Gentleman that we take enormous care.

Secondly, as ever, the hon. Gentleman has not read his facts properly. Since 1997, the UK Government have committed £650 million to driving forward universal primary education, and we will do more. The Chancellor announced a £10 million scheme to mark the Queen's jubilee—graceless, again, to attack that—to back British non-governmental organisations that work in countries where there is a lack of progress so that we help marginalised children and increase the demand for progress in universal primary education. That is what the £10 million is for.

I am sure my right hon. Friend is aware of the importance of the G8 summit in Canada later this year. Will she ensure that she backs the calls by the Canadian Finance Minister for a review of the HIPC initiative so that poverty reduction and educational programmes are put in place, which will free up more money? She is of course aware that, post-11 September, the fall in commodity prices, for example, has made a big difference to debt sustainability in the poorest countries. Will she throw her weight behind the calls to review the HIPC initiative to make it work for the world's poorest?

Those calls come not just from the Canadian Government; the World Bank, the IMF and all of us have been saying not that HIPC should be reviewed but that we must ensure that it is properly funded. It has a formula for debt sustainability which takes account of what a country earns in exports to pay its foreign currency debt. Because of the falling commodity prices, Uganda, for example, has exited because the process is not sustainable and the old formulas do not work. We need an extra £1 billion of resources to get sustainability, and we are working hard on that.

I hope that the argument about the replenishment of the International Development Association facility, the concessional lending arm of the World Bank, results in a grant being allocated which will solve the problem. I am hopeful that that will be done by the time the G8 meets, but I cannot be certain.

If she will make a statement on the IMF and World Bank assessments of the contributions to Tanzania's development of air traffic control equipment supplied from the UK. [54739]

It is clear that Tanzania needs a civilian air traffic control system to ensure safety in the country's air space. The issue is whether the proposed system meets Tanzania's needs, and represents value for money. The Government of Tanzania and the World Bank await the report of the International Civil Aviation Organisation on whether the BAE system best meets Tanzania's needs.

First, may I acknowledge the Secretary of State's role in resisting pressure from the defence industry and from her own colleagues on that project? Will she confirm that at present £80 million of aid to Tanzania is being withheld because of her reservations about the project? Will she explain how the financial promoters, Barclays and BAE Systems, managed to circumvent very strict IMF rules on commercial lending to seriously indebted countries?

I have been looking at the figures for total UK arms sales to Africa. In 1999, the value of those sales was some £60 million, and in 2000 it was £120 million, out of total British arms sales of about £6 billion. We could afford to tighten up our scrutiny of arms sales to some of the poorest countries, and I hope that as a consequence of the discussions about Tanzania that will happen.

The aid that I have withheld from Tanzania is £10 million. I hope that once we have the report from the International Civil Aviation Organisation, and assuming that Tanzania responds to it in the best way and in the interests of the country and of poor people, we will be able to give it more help to solve its problem.

The hon. Gentleman is right: under the HIPC initiative, countries cannot borrow unless the loan is concessional. Somehow a loan from Barclays Bank, which is funding the project—there is no way that Barclays can provide concessional funding—has been reported to the IMF as being concessional, so the project squeaked through, which is very odd.

Will my right hon. Friend give the House an assurance—so squashing some of the rumours—that the civil aviation air traffic control system will not be used for the control and movement of military aircraft?

We have not seen the new International Civil Aviation Organisation report, but an interim report suggested that the system is dual use. Much of the expense on it is military, and the system does not cover the whole country. Tanzania does not have many military aeroplanes, and that is part of the problem.

Is the Secretary of State optimistic that aid to Tanzania will be resumed relatively soon? Looking forward, does she agree with Dr. Janet Hemingway, the director of the Liverpool school of tropical medicine, who came to speak to the all-party Tanzania group on Monday, that the biggest blight on the people of Tanzania, malaria and HIV/AIDS, is best dealt with by channelling that aid into building many local diagnostic centres and training doctors? For every three doctors trained, only one lives to be in practice because the other two die of AIDS in the meantime.

Tanzania is doing very well. It really is reforming; inflation is down and economic growth is up. It is beginning to move forward on universal primary education and to make schooling free so that many poor children can enter school. Apart from the blight of the BAE system, then, Tanzania is making progress. We are the biggest provider of aid to the country, and we have provided large funds this year. We are holding back the £10 million so that we get a decent outcome once we have the report from the International Civil Aviation Organisation.

I agree with the hon. Gentleman—more children die of malaria in Africa than of any other illness. There is a great deal that we could do. If people slept under impregnated bed nets, that would save a lot of lives and prevent a lot of ill health. We have to build up local systems to deal with malaria and HIV/AIDS, and we must train people to work locally, rather than inciting doctors to leave their country when it has too few of them.

We have just heard a relatively rosy assessment of Tanzania's economic potential, but I am sure that the Secretary of State accepts that depriving a poor country of £10 million is bound to have an impact. Does she accept that a question hangs over the logic of her decision to withhold aid and thus punish the Tanzanian people for a decision that was sanctioned not only by the Government of Tanzania, but by her own Government?

No, I am afraid the hon. Lady does not yet properly understand development. If countries have weak procurement systems and they purchase projects that do not give value for money and are not beneficial to their country, they undermine their economic development.

One of the consequences and benefits of the argument is that Tanzania has tightened up its procurement systems. When it completed its debt-relief process, Tanzania gave an undertaking to the World Bank board that it would review the contract, but the Government of Tanzania came under pressure to break that undertaking. We have said that we will hold back the £l0 million and that when we have the report and if we can get a good outcome for Tanzania, we will assist Tanzania to take forward the process. That is the right thing to do. We do not give aid unconditionally where there are bad procurement and bad contracts and so end up using aid money to subsidise a bad contract that is damaging a country.

When she next expects to meet Commissioner Patten to discuss the proportion of the external affairs budget which is allocated to poor countries. [54740]

I meet Commissioner Patten and his colleagues regularly. He and Commissioner Nielson are committed to reforming the EC development systems to increase their effectiveness, but they are not convinced that budget funds should be allocated to reduce poverty. EC spending in Asia, where two thirds of the poor live, is therefore very small.

Does the Secretary of State agree that if EU aid were properly focused it could be an enormous power for good, but that a system in which more money is given to Poland than to the whole of Asia is simply unsustainable? We have a collective responsibility to persuade political colleagues in Europe, whether they are Christian Democrats, Liberals or Socialists, that EU development aid must now be poverty-focused. We all know the problem; it is time that we all collectively shared responsibility for work to find a solution.

I agree completely. The EC spends 3.38 euros per head in the Mediterranean, but only 0.15 in Asia. That is a disgraceful misallocation of resources, but we need co-operation across the EU and across all parties to put it right. I agree also that if Europe, which is the world's largest single market and the biggest destination for developing countries' exports, and which accounts for 60 per cent. of the world's development assistance, could focus its aid well, it could be an enormous force for good in the world. We must try to achieve that.

The Secretary of State knows that 15 per cent. of the EU's money goes to the middle east even though only 1 per cent. of the world's poorest people live there. None the less, when working on reform of the system, will she bear in mind the fact that some of that money is vital to rebuild the Palestinian Authority and repair the damage done to Palestinian refugee camps? Will she state the Government's ongoing commitment to ensuring that EU aid continues to be received by the Palestinian Authority and that the money is used to rebuild and to further peace in the area?

Yes, I can give the hon. Gentleman that absolute undertaking in respect of both my Department's budget and that of the EU. We must help the Palestinian people to survive and provide the humanitarian relief that is needed, but how much better it would be to direct those resources to building the new Palestinian state—a competent state that cares for its people, manages its resources well and is a good neighbour to Israel. That is the work that we all want to undertake.

When my right hon. Friend meets Commissioner Patten, might she not find that he is a little envious, given that, although he was a Minister responsible for international development, he was never appointed to the Cabinet because the then Prime Minister did not regard the matter as seriously as today's Prime Minister rightly does? However, as Commissioner Patten is a fair man, will my right hon. Friend encourage him to encourage European nations and those who seek membership of the EU to set a date for the achievement of the 0.7 per cent. of GDP UN aid target?

Mr. Patten was later appointed to the Cabinet, but not in his role as Minister for Overseas Development, which he said was the best the job that he had ever had in politics. I should not be telling the House that, but it is a fine job. We can do a lot and it matters enormously. I am sure that my right hon. Friend the Chancellor has heard what my right hon. Friend just said about UK resources for development.

The Select Committee report is intensely critical of the European overseas aid programme, and the Secretary of State shares in the criticism about the priorities upon which the money is spent, yet her Department is set to increase the amount that we spend through Europe to more than £l billion by 2003–04. Does the right hon. Lady agree that although the Council disposes decisions in Europe, the decisions are made by the member states? If the Secretary of State maintains that she has a strong voice in Europe, it appears that Europe is simply not listening.

No, I would not agree. There has been agreement in the EU that present practices are inefficient and that there has to be major reform, and a major reform agenda has been set in place. At the last review of the amount of EU development assistance, we kept the rise to 1 per cent. Under the Conservative Government the increase was 180 per cent., and unfortunately there was no reform effort. I am trying to clean up the mess.

If he will list his official engagements for Wednesday 15 May.

This morning, I had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall have further such meetings later today.

Five days ago, we learned that the Secretary of State for Defence wrote to the Foreign Secretary saying that a "clear majority" of the people of Gibraltar were "opposed to the negotiations" being carried out by his Government and the Government of Spain. Will he therefore now seriously consider the request made by my right hon. Friend the shadow Foreign Secretary that those negotiations should be suspended forthwith?

No, we will carry on negotiating in the way that we have described, as set out under the Brussels process that began in 1984, initiated by the Conservative Government.

Will the Prime Minister join me in congratulating the staff, volunteers, parents and children of Westy sure start, which has just celebrated its first anniversary? I have been privileged to join them in the past 12 months and it has been a lot of fun, but it is fun that underpins a serious aim—to promote the physical, social and intellectual well-being of babies and young children in a disadvantaged part of my constituency. It is breaking the cycle of disadvantage and giving them opportunities to flourish at home and at school. [Interruption.] Will my right hon. Friend make sure that many more children have the opportunity to have a sure start in life? [Interruption.]

I am sorry that Conservative Members do not approve, but sure start is now helping 400,000 children throughout the country. The Conservatives may scorn such measures, but sure start, investment in education and the new deal for the unemployed are important measures; if we are taking strong and tough anti-crime measures, which we should do, measures that tackle the causes of crime are important too.

Why are there now more managers than beds in the NHS?

We have increased the number of beds. The number rose in the last year for the first time. I totally disagree with the right hon. Gentleman if he is saying that good management in the NHS is not important. It is important, and one reason why last Friday's figures show not just every single section of in-patient waiting lists down, but out-patient waiting lists down below the levels that we inherited, is good management within the health service.

The Prime Minister should remember what he actually said. In his 1997 manifesto, he said:

"And a greater proportion of every pound spent will go on patient care not bureaucracy."

The NHS now has 210,000 managers, but fewer than 200,000 beds, so he has failed. It is small wonder that if looks at his own Office for National Statistics report, he will see that it tells us today that productivity in the health service has been declining since he took over. Will he now confirm that half the extra money that he has put into health care has not gone into improved treatment for patients?

The report to which the right hon. Gentleman refers—I think that it is the ONS report about which there were newspaper reports this morning—deals with the position up to 1999. It also makes it clear that it does not take into account improvement in the quality of health care. I believe, as the recent NHS Modernisation Board report showed, that the quality of health care is indeed improving. That is why, although the right hon. Gentleman used to be able to say to me that waiting lists were up for this month or that month, or that out-patient lists were above the inherited level, virtually every single indicator is now moving in the right direction, precisely because of the extra investment that we are putting into the health service, which he opposes.

After all that nonsense, no wonder the Prime Minister is being sponsored by the owner of the Fantasy Channel; it is absolutely idiotic. He knows that the public do not believe any longer that there will be any significant increase or improvement in health care. What they want to see is guaranteed treatment within four weeks, as in Denmark, no waiting lists, as in Germany, and the ability to choose their hospital, as in France. Will the Prime Minister answer this very simple question: will he tell us now whether we will get European standards of health care for European levels of spending by the next election? A simple yes or no.

We have set out precisely the targets that we will reach by the next election and we have set out when we will hit, and, indeed, exceed the European Union spending average. However, when the right hon. Gentleman talks about bed numbers and waiting in the health service, let us remember that the Conservative Government cut beds by 60,000 and saw waiting lists increase by 400,000. They ask what we have been doing for five years; I will tell them. We have half a million more operations and 1.3 million more out-patient appointments, and waiting times as well as lists are falling against every indicator. But I agree with the right hon. Gentleman: we have to do far more to get our health care standards up. That is why we are prepared to put additional investment into the national health service. Can we have a response from him on this question: is he in favour of that additional investment in the national health service or not? If he is not, all his protestations about his concern for health care are just hot air.

In Wrexham and north-east Wales there are 400 retired miners who have registered compensation claims for emphysema and are still waiting to be medically examined. They are elderly and vulnerable, and some of them are very ill. Will the Prime Minister, as head of the Labour movement, give me his assurance today that until all those men are seen, their local fixed-site testing centre in Wrexham will remain open?

I understand the sensitivity of that issue in my hon. Friends constituency. Of course, it is only as a result of our introduction of compensation for miners in such a position that the issue arises at all. I have heard exactly what he has said, and if he will allow me, I shall look into the matter and correspond with him.

In his television interview last night, the Prime Minister acknowledged that the state of the railways today is worse than when he became Prime Minister. Will he address the obvious question: why is it that, five years after the shambles of privatisation, a Labour Government have not done more to redress the situation?

I also explained why we did not take Railtrack back into public ownership in 1997. I explained, too, that the main issue that has arisen since 1997 has been what Hatfield revealed—that is, the need to restructure and re-engineer virtually entire parts of the track on British railways. It is precisely for that reason that it is important that we move away from the old Railtrack situation, whereby it was looking after its shareholders before its passengers. That is precisely why it is in administration at the moment. In addition, we must ensure that we get the investment into the railways for the future. That investment will deliver results, but it will take time.

Obviously, none of us would want to prejudge the outcome of the inquiry that will take place into last week's terrible accident. Nevertheless, the Prime Minister will acknowledge, as will the whole House, that the public want, expect and deserve safe, reliable and affordable rail services. Given that the timetable for implementing the recommendations for greater safety has been delayed, will the Prime Minister take this opportunity to say that he will put fresh pressure on Railtrack to bring forward those recommendations sooner rather than later?

First, the whole House would want to express its sympathy to the families who lost loved ones in the Potters Bar accident. Our thoughts are with them today in particular, as some of the first funerals of the victims of that accident are being held.

Secondly, without in any way minimising what took place at Potters Bar or the need urgently to make sure that we understand the lessons from it, it is important to stress—as, indeed, people from within the industry have been stressing—that, looking back over the past 20 years, overall safety on the railways is improving, not declining. Over the past few years, for example, collisions are down by some 12 per cent. and derailments are down by more than 20 per cent. The number of signals passed at danger—SPADs—is the lowest ever recorded. None of that detracts in any shape or form from what has happened, but it would be wrong to say that the whole railway system is in a state that means we need to fear for its safety.

Thirdly, in relation to the Cullen recommendations, the majority are either being introduced or have been introduced—or, where particular problems have arisen, we are working with the industry to introduce them. Of course, I certainly accept that they have to be introduced.

Will my right hon. Friend join me in welcoming the first sailing, later this week, of the super-fast Rosyth-Zeebrugge ferry from my constituency? Does he agree that that will be a real boost to the Scottish economy and tourist industry? Does he further agree that Rosyth's redevelopment would not have happened without partnership between the UK Government and the Scottish and European Parliaments, which, along with Fife council, Forth Ports and Scottish Enterprise Fife, have in five years transformed an area that had been left devastated?

I very much welcome the initiative that my hon. Friend describes. I understand that the existence of the ferry as a means of transport will relieve something in the region of 2.4 million lorry miles, so it has a beneficial environmental impact as well. My hon. Friend is of course right to congratulate all those who brought about the initiative. In particular, I know that she would want to point out that as a result of the measures taken by all the bodies that she mentioned, unemployment has halved in her area in the past five years.

Will the Prime Minister at last recognise the need for a full public inquiry into the foot and mouth epidemic, especially as foreign travel has now resumed, not least between Britain and South Korea, where this week there was an outbreak of that disease?

No, I do not agree with the hon. Gentleman, for the reasons that I have explained many times before. I believe that the inquiries that are under way will provide the lessons that we need to learn.

Has my right hon. Friend read articles in the newspapers this week and last week about European Commission proposals to vet eurozone member countries' budgets before they are put to their Parliaments, and to reinterpret the Maastricht treaty more strictly in future? United Kingdom deficits arising from the Chancellor's recent increased spending on health will be well outside current eurozone limits. Does that not make a strong case for remaining outside the eurozone for the foreseeable future?

Hear, hear.

Plenty of support over there—but I am afraid that I cannot agree. Only yesterday, the Commission congratulated the Chancellor on his exceptional, prudent and brilliant management of our economy.

The Prime Minister talks a lot about using the benefits system; recently he suggested using it to punish criminals. Last year he launched a scheme to cut benefits for criminals who breached their community service orders. Can he tell us how many criminals have had their benefit cut?

I cannot tell the right hon. Gentleman how many criminals overall have had their benefit cut. However, I can tell him that the combination of orders, not only those to which he refers but antisocial behaviour orders, reparation orders and action orders for young people, too, run into many thousands.

The answer is only 39. The Prime Minister said, as he is fond of saying, that the scheme would make criminals serve the sentences that they were given. How many criminals have completed their community service orders?

What I can tell the right hon. Gentleman is that as a result of our measures, crime has fallen whereas it doubled under the Conservatives. [Interruption.] Oh yes, it doubled. Not only the community service orders but the new supervision penalties for those serving community sentences, halving the time it takes juvenile offenders to get to court, the Proceeds of Crime Bill and our other measures to toughen up the criminal justice system are making a difference. The Conservative party opposed them all. The orders to which the right hon. Gentleman referred are an important part of magistrates' and courts' powers.

The Prime Minister should try telling that to the British people, who know that violent crime is rising, not falling. The answer to my question, according to his latest figures, is that 40,000 criminals have failed to serve their sentences—yet only 39 have had their benefits docked. So that was just another gimmick. The public know that violent crime is increasing. Instead of gimmicks, would not it be better to do what they want, and put real police back on the streets, not confine them to their police stations?

The right hon. Gentleman talks about police numbers, but in the few years before we came to office, they were falling, not rising. The Government have increased police numbers to the largest ever. I agree that there is a genuine problem with street and violent crime.

Do something about it.

The right hon. Gentleman says, "Do something about it." That is precisely what we are doing. I shall tell him what we are doing, and find out whether he supports it. We are increasing the number of police officers; he opposed the necessary investment. We say that persistent offenders should not be bailed if they are on drugs; he opposed that. We say that the proceeds of drug dealers' crimes should be taken from them; the Conservatives also opposed that measure. We say that there should be more community safety officers to help the police; the right hon. Gentleman opposes that. He also opposed the measure to halve the time that it takes to get juvenile offenders to court. There is a problem, but the difference between us is that we are dealing with it, and he is simply exploiting it.

Has my right hon. Friend had the opportunity to see, hear or read reports of the happy and peaceful scenes in Sierra Leone yesterday when many people voted in their parliamentary and presidential elections? After 10 years of bloody civil war, does not Sierra Leone's return to peace and democracy in four short months show that Britain's decisive military intervention, backed up by United Nations peacekeepers and democracy-building organisations such as our Westminster Foundation for Democracy, can give hope and encouragement to other countries in Africa and elsewhere that are currently riven by conflict?

I agree with my hon. Friend, and pay tribute to his work in helping people in Sierra Leone. It is moving that as a result of work by this country, and by our armed forces in particular, Sierra Leone was returned to democracy. People there value their democracy. I agree that that sends the right signal across the world about the prospects for Africa, and that is as important as anything else. I hope that, as part of the partnership initiative that we take to the G8 this year, we can get stronger measures to deal with some of the outstanding conflicts in Africa that blight the lives of people, notably in the Democratic Republic of Congo, Angola and Sudan.

I entirely agree with the Prime Minister—[Hon. MEMBERS: "Hear, hear."] I agree with him that fuel poverty, which results when people have to spend more than 10 per cent. of their income on heating, is unacceptable and should be eliminated. Does he agree that council tax poverty is equally unacceptable? Under his Government, why do more than 1 million pensioners have to spend more than 10 per cent. of their income on council tax? What is he going to do about that?

What we have done is to increase the amount of money going to councils by some 20 per cent., whereas the hon. Gentleman's Government were cutting it. As for fuel poverty, most people remember that the Government of whom he was a member introduced VAT on fuel. I do not think that pensioners liked that. What is more, the Conservatives opposed the £200 winter allowance and the additional sums of money going to pensioners, so I am afraid that I cannot take his protestations very seriously—although I thank him for agreeing with me.

The Prime Minister will be aware that yesterday the House debated the modernisation of its procedures, and in particular, the replacement of the Committee of Selection with a Committee that would not consist wholly of party Whips. The Prime Minister did not record a vote yesterday. May I ask for his views on the issue?

I support the proposals put forward by my right hon. Friend the Leader of the House, but there was a free vote—as the House would expect on such issues—and the House has spoken.

Faced with overwhelming evidence of IRA involvement in the promotion of terrorism in Colombia, what action does the Prime Minister propose to take against the IRA as part of his war against terrorism?

I agree that that is a serious issue, and that is why we are making it quite clear to Sinn Fein, and to any paramilitary organisations, that such behaviour is unacceptable. However—[Interruption.] I ask Conservative Members to reflect a little—when they oppose every single stage of what happens in Northern Ireland—on how much the last five years have brought Northern Ireland, and on how totally irresponsible it would have been if we had broken the bipartisanship that we used to offer the Conservatives on this issue. That included not criticising the Conservative Government when it was revealed that they were in secret talks with Sinn Fein and the IRA. I would have hoped that the same responsibility that characterised our relations with them when they were in office would characterise their relations with us, but I am afraid that I am disappointed.

Following his reply to my hon. Friend the Member for Luton, North (Mr. Hopkins), does my right hon. Friend agree that, given that there is a common monetary policy in the euro area while budgetary policy is, in the main, still in the hands of the 12 nation states, it is not unreasonable for the Commission to argue for more of a common budgetary policy? Otherwise, economic convergence in the euro area will not continue, and the currency will not be stable on the international markets.

I agree with the position that is presently being taken in Europe about the degree of co-ordination, but I would point out to my right hon. Friend—as I did to my hon. Friend the Member for Luton, North a moment ago—that the Commission has supported this Government's Budget. I have to say to my right hon. Friend that we obviously differ on the issue of the single currency. The Government have an established position on that issue, and it is important that we recognise that the single currency is a reality today, and that we deal with that reality.

What reply would the Prime Minister suggest that my colleagues and I give to the dozens of our constituents who complain that each of them must be one of the only two whom he claims are unfortunate enough to have been waiting more than 15 months for an operation?

In the hon. Gentleman's constituency, as in others, health service spending has been increased hugely, far beyond anything that people thought of before. The waiting list figures are drawn up on precisely the same basis as they were under the Conservative Government, and they are now below the levels that we inherited in 1997.

I would say first to people in the hon. Gentleman's constituency, as I say to people elsewhere, let us not exaggerate the number who have to wait. In fact, 75 per cent. of operations are now performed within three months, and the health service has much to be proud of. Secondly, I would say that we agree that there is still a problem with access. The only answer is to increase capacity in the health service. We are doing that with the investment that we are making, which is far in excess of anything that the Liberal Democrats ever wanted us to invest.

The Prime Minister will know that this is Christian Aid week, and that all over the country people are uniting in support of the Trade for Life campaign to help developing countries. As part of that campaign, I am due to present the Prime Minister with thousands of postcards from my constituents. Will he tell them today that he supports their campaign, and—because it is both morally and economically right—will he do all he can to persuade other world leaders that we must cut a fairer trade deal for people in the developing nations?

I entirely agree. I hope very much that as part of the agreement on Africa at the G8, we can secure better provision for access to western markets—to wealthier countries' markets. I also strongly support the work that is being done during Christian Aid week. As the Chancellor has pointed out to me, because of the tax relief available under gift aid the money now goes much further. I am very proud of the work we are doing on aid and development, and I know that it has huge support in the country.

Does the Prime Minister agree with the Leader of the House that there is now a centre of gravity in favour of reform of the House of Lords? Will the Government put a proposal in respect of the elected component of the reformed Upper Chamber to the Joint Committee? However, when there is a free vote in this House, will it be like the free vote that took place last night?

There will certainly be a free vote, because there are hugely different views across the House. It would be very foolish of anyone to say that there was unanimity in any political party—either in this House or in the other place. We have chosen this way of proceeding because it is what was put to us during consultation by both the Conservative party and the Liberal Democrats. We listened, we have engaged with the process, and there will be a free vote at the end of the day—but I ask Members to realise that we will be deciding on the basis of what happens not just for this generation, but for future generations. I think we should act responsibly.

Will my right hon. Friend give us some idea of when the dossier, which I believe that he says he has, on the situation relating to weapons of mass destruction in Iraq, will be published? I think it very important for us to have full information before a decision is—we hope—made in the House of Commons.

It would certainly be right to publish the dossier before any action was taken. We have not decided when to publish it, but if my hon. Friend or any other Member wants to know what Saddam Hussein has been up to—not the full details, which we can provide in due course if necessary, but the basic case against Saddam—he can already read the published information from the weapons inspectors who were in Iraq, which covers vast amounts of chemical and biological weapons as well as attempts to establish nuclear capability. As I always say, how we deal with the issue is open, but it is without doubt an issue, and there is enough published information to convince anyone of that.

The Prime Minister is a "vision" sort of guy. What is his vision for Welsh manufacturing industry?

The vision is one of stability, and investment in skills and education. I think that despite the problems that manufacturing has experienced in Wales and elsewhere, for obvious reasons to do with the strength of the pound and the weakness of the euro, the single worst thing we could do is either lose control of Government finance or return to the old days of boom and bust—with 15 per cent. interest rates, and 10 per cent. interest rates for a year—or to the days when vast numbers of jobs and a vast amount of output were lost in manufacturing during the two recessions that we experienced under the Conservative Government. My vision is also of continued Labour government in Wales.

Will my right hon. Friend join me and other hon. Members who represent seaside and coastal towns in welcoming the decision of the English Tourism Council to renew a marketing role? Will he go further and renew his focus on tourism so that by the time he comes to Blackpool for the Labour party conference in the autumn some of the anomalies in the standard spending assessment that discriminate against seaside towns will have been dealt with?

We shall deal with the issues concerning the SSA in due course, as my hon. Friend knows. He is right about tourism, and that is why English local authorities have been given some £90 million to improve their ability to attract tourists. I am delighted to say that despite all the difficulties of last year and the year before, we have a thriving tourism industry and we shall do all we can to support it.

Is the Prime Minister aware that in recent years my home town of Kendal in Cumbria has not only suffered the impact of the foot and mouth crisis, which devastated tourism, to which he has just referred, but lost 352 jobs at AXA, 289 jobs at K Shoes—including 64 last month—and just yesterday 210 jobs at Scottish Provident? Will he ask his ministerial colleagues to consider the case for urgent extra help for that town?

At least the hon. Gentleman did not ask for a public inquiry. The loss of jobs in his and other constituencies is terrible for the people concerned. I understand that. It is precisely why we have taken so many additional measures in the Employment Service and the new deal to make sure that people who lose their jobs are given the chance of finding new ones. I do not think that we or any future Government will be able to tell people, "There is no way you can lose your job. We can protect you." We cannot say that, but we can say, "If you lose your job we will give you the best chance of getting a new one." That is what we are doing in the hon. Gentleman's constituency and other constituencies up and down the country, and that is why today there are about 1.5 million more jobs in the economy than there were five years ago.

I inform the House that I have selected the amendment in the name of the Prime Minister.

I beg to move,

That this House is deeply concerned that, with 10 months left for the transition to automatic credit transfer for the Post Office's 16 million benefit and pension customers, there is great uncertainty and confusion hanging over the network; believes that, in the absence of new sources of income to replace the lost £400 million, many post offices will close, including a third of all urban post offices; is alarmed by reports that new initiatives promised under the PIU Report are failing, in particular that the Your Guide programme is being downgraded and that planning of the Post Office Card Account is well behind schedule; has little confidence that the commercial banks have the ability or motivation to meet the financial needs of many of those Post Office customers expected to migrate to the use of bank accounts; notes that the network's problems coincide with growing losses in Consignia and the threat to its mail services and to the universal service obligation; and calls on the, Government to set out a clear policy and timetable for heading off a potentially disastrous collapse of the rural and urban network.

There have been several debates and statements in the House in the past few months on the state of the Post Office, Consignia's losses, job losses, the impact on the universal service obligation, and competition. However, I want today's debate to focus on something that, arguably, is as important, or more so: the future of the network, which comprises 18,000 sub-post offices and their 28 million customers, 16 million of whom depend on the benefit system that operates through sub-post offices.

A big national project is looming—in 10 months, there will be a changeover to the automated credit system. I do not want to be melodramatic, but the project is very big. The technical and commercial challenge is probably on the scale of metrication, or of the millennium bug. It is appropriate for the House to take stock of where the Government have got to with their planning, and of what the consequences will be.

In my business career I was taught never to predict the future but to think in terms of scenarios. I do not know whether the project will be a success or not. It could be a brilliant success, but we need to think of alternatives.

The optimistic view was set out in the performance and innovation unit report at the end of 2000. I supported it, as did most other hon. Members. It was ambitious and forward looking, and dedicated to finding alternative sources of income to make up for the £400 million that will be lost to the network as a result of the introduction of ACT. If the PIU report is implemented in full, or something approaching that, the changeover will have a relatively positive outcome.

According to a different scenario, however, that £400 million in income to the network will not be replaced. Hon. Members who are new to the House might be interested to learn that the consequences of that were set out most graphically in a parliamentary answer three years ago to the former hon. Member for Birmingham, Erdington, now Lord Corbett. He achieved what no one else, before or after, has been able to achieve: he secured a constituency breakdown of the number of post office branches, and got the Post Office—and the Government, I guess—to analyse the implications of a loss of income from the post office network of £400 million.

The overall conclusion was that there would be 40 per cent. fewer branches, but results were very skewed. Constituencies such as mine would lose very few branches, but rural constituencies—especially in Wales, Scotland, Devon and Cornwall—would lose a great many. The biggest casualties would be the urban post offices in areas predominantly represented by Labour Members. In some cases, such areas would lose between 70 and 80 per cent. of their post offices.

That was the bleak, doomsday scenario, but a lot has happened since. The PIU report has been published, and we need to take stock of where we have reached.

A problem with the PIU report, and its follow-up, is that it is rather unclear about what is happening. When the Select Committee on Trade and Industry evaluated the PIU report, it gave the rather pithy summary that "much remains unclear". Almost everything that the Select Committee found unclear—the amount of income that the Post Office will get, the way in which the Post Office card account system will be phased in, and the nature of the contract and of the technology—remains unclear and uncertain today. I shall take the Ministers present today through the various steps indicated by the PIU report, and I hope to be able to ask them questions about the matter.

The first point concerns the most interesting, ambitious and forward-looking idea—the "your guide" scheme. Under the scheme, postmasters and postmistresses would become general practitioners dispensing advice and help to customers. They would have the advantage of advanced technology. They would be properly trained and have access to a computer system that would give them local and national data, and they would help people with their transactions.

The system was tested, quite properly, by means of a pilot scheme centred on the constituency of the Secretary of State for Trade and Industry, among others. The feedback has been rather positive, and shows that some 130,000 people have used the system over the six months during which the pilot has been in operation.

In the past few days, however, I have heard a report that the "your guide" scheme is being ditched because the Treasury has pulled the plug on it. I am anxious to hear the Government's reaction to that.

indicated dissent.

I see that the Secretary of State is looking both mystified and negative. I hope that she will be able to reassure the House that the report to which I referred is completely wrong. However, the version given to me by people close to the project is that the Government propose to introduce a system called UK Online. I am not a computer buff—other Members may be more familiar with the significance of this—but UK Online is the Government portal for accessing Government information. It does not have the GP service, the advisory service or the transaction work. If the Secretary of State does not accept this version—judging by her body language, she does not—I hope that she will reassure us that it is completely wrong. As a result of talking to people close to the project, many post office employees and people in the network have been persuaded that it will happen. I sincerely hope that they are wrong and, from a sedentary position, Ministers seem to suggest that that is the case.

The other, very important, part of the package is the idea of the universal bank and the use of alternative facilities by which people could be paid cash at the post office—a combination of the post office card account, agency facilities for people who have bank accounts and the basic bank account. The importance of this has always been to honour the Government's promise that people should be paid in cash. Whether that would provide a large amount of replacement income was never clear, but perhaps we shall receive clarification on that point today.

Information is available about what the new system could mean for customers. A very good academic study has been carried out by the Department for Work and Pensions. Elaine Kempson and Claire Whyley have performed a detailed analysis of post office customers, what they can cope with and what they expect.

To summarise a complicated study, there are essentially three groups of people who use the network. About 40 per cent. will have no problem with automated credit transfer. They are fully familiar with banking—they use banks, they will not be greatly inconvenienced by the new system and the money will be paid into their normal bank account. These are mainly people who receive child benefit and who are mobile. ACT will not present them with a problem, but it will present the post office with a problem, because those people will, in all probability, stop using their post office branch. That figure of 40 per cent. represents a lot of people—about 8 million.

Another 30 per cent. of people have no problems coping with the ACT idea—they know about banking and have bank accounts—but are very attached to the post office. These are the younger pensioners who may be rather conservative in their habits. They find it convenient to use the post office and want to continue to do so. They want the choice of using the post office, even though they would be perfectly able to use a banking arrangement. If those people are to be accommodated within the new system, there needs to be an efficient arrangement whereby the agency banking, which I believe has been worked out, operates in full. Will the Minister explain how people who want to use the post office as a bank to cash their money will be able to do so?

The technology involved is complex: it means marrying the Horizon technology, which the Government inherited some years ago, with the new technology of the banks. How will that mesh? We are talking about 10 months, which is a short time away. We need reassurance that the system will work and that that 30 per cent. of customers will continue to be able to use the post office as a banking facility without being steered away from it.

In his researches, did the hon. Gentleman stumble across the civil service phrase "actively managed choice"? I gather that that is now the Government's policy for ensuring that, rather than having a level playing field, people will be channelled into choosing a particular bank account. Does he agree that that makes a complete nonsense of the Government's removal of the so-called cap on the number of post office accounts?

It does. I have heard that phrase, which is beginning to percolate through the post office network. The scripts being prepared for customers, which some people have seen, make it clear that unless there are strongly extenuating circumstances, people will be expected to move to a banking service. The hon. Gentleman is absolutely right about that.

The policy affects the people to whom I referred, but the effects would be even greater for the remaining 30 per cent: people who really need the post office. They do not have bank accounts, or they may have a savings account that they do not use for cash transactions. They are often extremely old and frail and are, in the words of the DWP report, "difficult to move".

The DWP study suggests that the number of people in that category is about 5 million. They cannot realistically be expected to move over to a banking system. The concept of the post office card account—a simple alternative—was developed with such people in mind. However, the problem is that the Government have set a target of 3 million such accounts to serve about 5 million people. That may answer the hon. Gentleman's intervention about active management.

What will happen to the 2 million people who want to continue using the post office much as they have always done and who do not want to use banks? How will they cope in the new environment? I think that "active management" means that many of those people will be steered or encouraged to open a bank account, even if it is only the PAT 14, the basic account developed by the banks in recent years.

I agree completely with the hon. Gentleman's analysis. Does he agree that many of our most elderly and vulnerable pensioners find it extremely difficult to deal with any type of officialdom at any time? Does he share my anxiety that money will be spent on trying to force those people to change over and stop collecting their pension in cash every week? It is a form of coercion. Does he agree that it would be wrong for a penny of Government or Consignia money to be spent on making people—especially the elderly—give up that choice?

The hon. Lady is right. I can add nothing to her comments. We are talking about choice on a level playing field. We need reassurance from Ministers that the undertaking given two years ago by the then Under-Secretary of State for Trade and Industry—the current Minister for Employment Relations, Industry and the Regions—will be honoured. There are grave doubts about that.

I agree with everything that the hon. Gentleman says. What happens if the pendulum swings a little further and a vast number of people—more than 3 million—realise that the basic account would be cheaper to run than their normal account and decide to open one? Who will pay the extra costs involved? Will that not worsen the situation and result in even more expense for the Government?

The hon. Gentleman touches on a real dilemma. The assumption is that the banks will contribute to that process. However, there is much evidence to show that they are not enthusiastic about that—to say the least. It costs them between £60 and £70 a year—that is not the customer service charge—to run such an account. An account is viable for the banks only when it contains a minimum of £1,300, and they have made it clear that they are not really interested in running those basic accounts.

If the Government have any doubts about that point, they should consult the useful blind study carried out a couple of weeks ago by the consumer panel of the Financial Services Authority. It investigated how people shop around between banks and found that only one of the 10 banks even mentioned a basic bank account. Four in 10 people who tried to open a bank account were turned down with no reference to the fact that the basic bank account was on offer. The banks are not interested in the scheme; they do not want to undertake it but the are being pushed into it—that is where the scheme will fail.

Why should the banks be involved? Why have they undertaken to give that service, even though they are reluctant to provide it and their customers are reluctant to take it up? I suspect that it has something to do with some of the points under discussion yesterday in the Select Committee on the Treasury. A group of bankers were interviewed about the Cruickshank report and so-called excess profits in the banking system.

I suspect that the banking community was very worried two years ago that the Government would propose tough regulation through Paycom and perhaps even a windfall tax on the banks. The Government promised to do that, but it never happened and the pressure is now off the banks, as was reflected in the somewhat arrogant tone that their representatives adopted during yesterday's Treasury Committee sitting. The banks are now in a much stronger position in dealing with the Government, but that explains why that process was once encouraged. However, it is difficult to understand how the basic bank account system can accommodate the needs of that substantial group of people.

Does my hon. Friend accept that there is another indirect way in which people are being coerced to change their accounts? For example, just a mile away from here the Elephant and Castle branch office was said to be closing about three years ago. The decision was then deferred, but the closure was announced again. Those involved consulted wrongly, so they had to do it again. The staff were telling people all the time that the branch may not be open in the future, so people were being persuaded to move their accounts elsewhere. Of course, that is self-fulfilling. At the end of an exercise in which an urban post office is threatened with closure, the number of people using it decreases significantly so the case for its staying open is significantly reduced. That is another example of death by 1,000 cuts, which is surely exactly why we need to have clear policy, clear commitment and a belief that people, particularly those without other accounts, should be encouraged to use the Post Office if they wish to do so, not discouraged from doing so.

That was a very helpful intervention. I shall come a little later to what is now rather euphemistically called the urban renewal process—the urban closure process would be a more accurate description—and my hon. Friend's comments are highly germane to that.

Let us stick for the moment to the problem of banks. If large numbers of people at the bottom of the income scale move into the banking system with varying degrees of coercion, or voluntary acceptance, a lot of problems will confront them. We know from the work of the FSA and others that there are all kinds of hidden charges—for example, when people are late with direct debits. Vulnerable members of the community can confront all sorts of practical problems if they use banks, but not if they use the Post Office.

Let me take an example from my constituency experience. Two or three years ago, I dealt with a very elderly lady—she was 93 and blind—who was used to using the Post Office for most of her transactions, but who had an account with the Halifax. She sent her carer to a branch of the Halifax to collect some money for an irregular and unusual transaction. The bank staff said, "Sorry. We will only dispense money to people in person. If you are a carer, that is not satisfactory. If you produce a letter from a lawyer, we will release the money to you. Under no circumstance will we release it on any other basis."

Those letters cost £75. I fought the case with the company. I eventually dragged the Halifax through the Daily Mail and, with some reluctance and ill-grace, the chief executive gave up. There is no tradition in the banking system of helping vulnerable customers, carers and people who genuinely need help. Very large numbers of people who have been pushed—I think that the phrase is "actively managed"—into the banking system will encounter that problem over and again.

Pulling the threads together, we have been largely considering the affects on the customers, but we have to go back to the fundamental issue: income. How much income will post offices derive from the universal bank and from "your guide"? I have never heard a figure cited for how much money will come in. It could be as little as £50 million, which is the fee paid for the post office card account, but it may be more. Will the Minister tell us, at the end of the negotiations that we have had for 18 months, how much of the £400 million income will be replaced?

If the income is not replaced, or even if it is replaced in part, there will be substantial post office closures. So we now need to consider what is happening in terms of those closures. The fact is that closures have been taking place. In 2000–01, there was a record number of closures—547. The figure fell substantially last year, and the Government drew a lot of encouragement from that, although the sub-postmasters to whom I talk say, "Yeah, sure, we are not selling." They are not selling because they are expecting compensation and because they cannot find buyers. None the less, the Government may well feel justified in the short run in drawing some consolation from the promise of the PIU programme.

What is happening in terms of closures? First, the Government have given an undertaking that they will prevent rural closures, beyond those described as unavoidable. The Labour party manifesto says:

"the Post Office is now obliged to prevent closure of rural post offices except in unavoidable circumstances, with £270 million to help achieve this and recruit sub-postmasters."

The problem is that closures are still happening. Despite the Government's assurance, in the last two years, 80 per cent. of all closures have been in rural areas. There is a programme providing £2 million of help to rural post offices, and several of my colleagues have asked parliamentary questions about that. At the last count, only seven projects had been approved—perhaps the Minister will update us on that—which accounts for a tiny fraction of the £2 million sum.

On the law of statistical averages, my constituency is clearly a blip. We have had 5 closures in the last 12 months. In every case, the Post Office said that they were not permanent, and that it would do everything that it could to replace them. None of those post offices has reopened, and nobody believes that they will. That is the reality—nobody will take them on because it is not worth the money.

That is what unavoidable closures means—the process of closures is continuing, will continue, and once the emptiness of the follow-up to the performance and innovation unit report has been demonstrated, the process of closures will accelerate on a very large scale, and it will happen in rural areas. I hope that the Minister will clarify one aspect of the Labour manifesto statement that I do not understand. It says that £270 million was set aside in the comprehensive spending round for rural post office development. My understanding—which I hope will be corrected—is that £180 million of that has now been siphoned off to compensate postmasters in urban areas. Is that right? Is that money, as was pledged in the Labour party election manifesto, going to sustain the rural network? That is a very important question, as in many cases the rural network is teetering on the brink of collapse. If there is money to sustain it, there is hope, but if there is Enron-type accounting, and the money is being shifted somewhere else, large numbers will collapse. I hope that, at the very least. clarification of that basic point will be given today.

Will the hon. Gentleman accept that, as an extension of what he is saying, we are seeing uncertainty blight on the ground? Postmasters wishing to retire simply cannot sell. This is not just a rural problem; it is now becoming a suburban problem. Corner shops and the post offices that have sustained them are disappearing left, right and centre. That is due entirely to the uncertainty generated by this lack of policy.

That is absolutely right. The uncertainty is spreading into the suburbs and the towns.

I am sure that the hon. Gentleman agrees that it is vital that we retain post offices, whether in rural areas or in the inner cities, for some of the reasons that he has outlined. Many pensioners and disability groups rely on the local post office, particularly in villages where it can be the focal point of village life.

I think that the hon. Gentleman agrees with me, and I take his intervention as constructive. I want to mention one small problem in reference to my hon. Friend the Member for Guildford (Sue Doughty), who has pointed out that one of the sources of uncertainty is that it is not always terribly clear whether the post office being talked about is urban or rural. She has a village in her constituency called Shalford, which I think has been reclassified as urban to permit a closure to proceed. There may be a conspiracy theory at work, but anyway the post office, which would have been protected under the rural programme, is now being exposed to closure. That kind of device is being used everywhere.

In towns, the Government have an urban renewal programme, which, when it was announced, seemed attractive. We now know, however, as many postmasters have had letters in the last week, that 3,000 of those 9,000 post offices are likely to be closed. In some cases, there may be commercial logic to that. Some post offices are close together, but many of them are not. In Twickenham two years ago, a post office closed for six months after a problem of dishonesty had been discovered. No bus service was available and that meant that many pensioners had to walk a mile in one direction or a mile in another direction to reach another branch. That problem will be repeated many times in urban areas when a third of all branches close.

We now know that the label for the Government's urban renewal programme is desperately misleading. The programme is about closures, and who will decide whether a branch should shut? There will be an arbitration process that will be looked after by Postwatch, but how will that organisation evaluate 3,000 appeals in two years? It does not have the resources, so it cannot be expected to handle that number. Many branches will close willy-nilly.

I would like Ministers to address, in particular, the issue of funding. Under the comprehensive spending review, £270 million has been pledged to the network, so will they explain exactly where that money has gone and where it is going? There is enormous confusion among the beneficiaries about that.

On the general strategy, we are dealing with a big project that could go well—I do not wish to prejudge matters—but it could be a disaster. Let us therefore have a proper system of planning and of targeting objectives. At the moment, there is an enormous lack of clarity about fundamental issues—the technology used in the universal bank and the fees that will be paid. All that should be spelled out much more clearly.

If, as we gather from inside the problem, the problems are as serious as they seem, are the Government giving any thought to spreading the plans for automated credit transfer over a longer period? The Horizon project, which the previous Government introduced, is a precedent. It had to be abandoned at short notice six months before it was due to come in even though the then Secretary of State, the right hon. Member for Hartlepool (Mr. Mandelson) still endorsed the project. The technology did not work. That could very well happen again. Would it not be sensible and would it not help if the Government adopted a much more measured and deliberate approach to the introduction of the programme to ease much of the uncertainty and pain that is now felt by postmasters and postmistresses?

I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:

`applauds the Government's decision to accept all 24 of the PIU recommendations in its June 2000 report "Counter Revolution—Modernising the Post Office Network"; notes that Consignia is committed to preventing avoidable closures of rural post offices and has drawn up a code of conduct on how this is to be implemented in conjunction with the consumer watchdog, Postwatch; further applauds the decision of the Government to grant the greater commercial freedom to Consignia that management and unions had long called for; welcomes the action of the Government in appointing a new chairman of Consignia and a new chief executive of Post Office Ltd. and to enshrine in legislation the primary duty of the regulator to preserve the universal service; further applauds the commitment of the Government to a national network of post offices; and further notes the commitment by Post Office Ltd. to ensure that 95 per cent. of people in urban areas will live within a mile of a post office, and the majority within half a mile.'.

The hon. Member for Twickenham (Dr. Cable) has reminded the House that the Post Office and the post office network, in particular, are venerable institutions that have long played a central role in communities the length and breadth of the country. In that, at least, he is in agreement with the Government. The Post Office touches lives like no other industry. It has a turnover of more than £8 billion, it delivers 80 million items of post every day and, every week, 28 million customers visit their post office to take advantage of more than 170 different products and services.

I pay tribute to the men and women who work for the Post Office and the post office network. It is no exaggeration to say that the Post Office is one of the strands that helps to bind together our communities, whether urban or rural, across the United Kingdom.

The hon. Gentleman raised several points, and I shall endeavour to address them in my response. I shall try to cover the major issues that he raised in the order in which he raised them. I shall first focus on the network and touch on management, in particular, before addressing the implementation of the performance and innovation unit report. I shall then discuss "your guide", the universal bank and the urban network in particular.

No one doubts that the Post Office faces major challenges. Its tradition of work needs to respond to the challenging and changing requirements of customers, to changes in society and to the opportunities arising from new technology. The hon. Gentleman focused his remarks on the post office network so I shall try to set in context the programme of work that has been taken forward on that.

The Post Office is the largest retail network in Europe and more than nine out of 10 people in this country live within a mile of a post office. It has unrivalled coverage, with more than 17,500 branches the length and breadth of the country. Two thirds of people live within half a mile of two or more post offices. Yet although local post offices are still important to many people, as customers, they are not using them as often. In recent years, there has been a steady decline in the volume of transactions undertaken at post offices as a result of changing habits and lifestyles, changes in customer preferences and new ways of doing business. I have two examples of that. First, the number of telephone bills paid at the post office is down from 39 million in 1996–97 to 32 million in 2000–01. Secondly, the number of postal orders issued is down from 37 million in 1996–97 to 32 million in 2000–01.

I note the Minister's comments on the decline in business. However, he will recall that that decline, especially in rural areas, spreads beyond the post office, particularly to banks. He may also recall that, a year or so ago, a strong attempt was made—and partly carried out—to get banks that were closing local branches to transfer over-the-counter services to local post offices. That was a great idea that we all applauded and encouraged. Does the Minister realise, however, that the charges made to local post offices for installing, supporting and filling automated teller machines are prohibitive, so that the arrangement costs them money and is falling apart? I asked questions on that in the House and received bland replies about the information being commercially confidential, but post offices are the business of us all, and not just a commercial interest of the Post Office.

I am grateful to the hon. Gentleman for that. I am reminded of his contribution to the debate on the Postal Services Act 2000 in which he made it clear that he had long argued from Liberal Democrat Benches

"for greater commercial freedom for the Post Office, and at last such a policy is being set out by the Government".—(Official Report, 7 December 1998; Vol. 322, c. 28.]

It ill behoves the hon. Gentleman to suggest that it is inappropriate for Post Office Counters Ltd. and independent banks to engage in commercial negotiations on decisions about ATMs. I have some sympathy with his point, however.

More than 3,000 post offices closed between 1978 and 1997. During the 1990s, the number of post offices declined by 10 per cent. By way of comparison, banks and building societies declined in the same 10-year period by 25 per cent. and the number of petrol stations declined by 30 per cent. It was therefore vital after those decades when the Post Office was a neglected national resource to develop a strategy and an action plan to secure the future of the post office network, which I believe we all want to see. That is why, in October 1999, my right hon. Friend the Prime Minister asked the Cabinet Office performance and innovation unit to develop the strategy that we are discussing. The specific challenge for the report was to consider how best to harness the full potential of the network to ensure a viable and vibrant future for the network.

In response to the statement to the House on 28 June 2000 that marked the publication of the PIU report, the hon. Member for Twickenham was kind enough to welcome it, and he acknowledged:

"A similarly comprehensive approach adopted 20 years ago at the beginning of Conservative rule might have prevented the closure of many of the 4,000 branches which have closed."—[Official Report, 28 June 2000; Vol. 352, c. 912.1

The report made 24 recommendations and the Government accepted each of them. Working closely with the Post Office and the National Federation of Sub-Postmasters, we are implementing those measures as we advance our goal of ensuring the future of the national network.

I have an advantage because I have a Labour party briefing prepared by the Secretary of State for Trade and Industry, which says that it is the Government's desire to create bigger, better post offices. Does the Minister agree that there is some confusion in that statement? Bigger is not necessarily better because it may be more remote and anonymous with longer queues.

The no doubt well-written briefing was making a serious point. Some urban post offices face a challenge fundamentally different from that facing rural post offices. The nature of the challenge in a rural community where the post office is perhaps the last retail outlet in a village is fundamentally different from the plethora of retail outlets available on an urban high street. It is therefore particularly important that we ensure that the retailing experience of people who visit post offices in the urban network is outstanding. Frankly, judging from many of our own constituency experiences, it would he fair to say that the urban network has not kept pace with many other retail networks in ensuring exactly such an experience.

I accept what the Minister says, and that is the experience of many of us and of our constituents. Will he therefore, after the debate, consider the example that I cited to my hon. Friend the Member for Twickenham (Dr. Cable)? The local community has proposed making a branch office into a sub-office, with a local business leading. Another community, the Latin American community, and other retail businesses would be involved. However, the Post Office will not tell the proponent and the community on what grounds it is rejecting her proposal to run the business. It would be an innovative business, it stems from a desire to regenerate, and it would be a flagship for the Post Office. Yet we are told that it is unacceptable, for no published reason. Will the Minister consider that matter, because the Post Office really must do better?

Certainly I am concerned by the example that the hon. Gentleman cites. I will be more than happy to make representations directly to the Post Office management, if information that rightfully should be shared with the community is not being shared. Only yesterday, my right hon. Friend the Secretary of State made clear in a newspaper article our ambition to see exactly that kind of innovative solution being devised to address the needs of the modern network.

Perhaps I could focus the debate by moving it on from the issue of spending, which I shall return to when I deal with the specific points raised. Alongside the commitment of resources, £270 million, we have in recent months moved decisively to strengthen the management of Consignia. As is well known, in March, the Secretary of State announced that Allan Leighton had been appointed the new chair of Consignia. He is now responsible for driving forward the management strategy to meet the challenges of stemming the company's losses, reforming its industrial relations and developing its strategy to strengthen and sustain the network. As a former chief executive of Asda, Allan Leighton has the proven track record of success in business that I think will find favour with the Post Office. He has the determination, drive and energy needed to transform the management of the Post Office. As the interim chair and a non-executive director of the company, he has seen at first hand many of the challenges that it faces.

In addition, last month we appointed David Mills to the newly created post of CEO of Post Office Counters Ltd., with a seat on the board of Consignia Holdings. He joins the network from HSBC, where he was general manager of personal banking. For far too long, the network's management failed fully to realise the commercial and retailing opportunities offered by the reach of the country's largest retail network.

The Minister has named the gentlemen from Asda and HSBC who joined the board of Consignia, but does he accept that much of the post office network is made up of small sub-post offices, and those gentlemen do not necessarily have the business experience to get them up and running and keep them going?

I shall try to answer that general question with a specific answer. In one of my first conversations with David Mills after his appointment as CEO of Post Office Counters Ltd., he drew a clear parallel between the present availability and range of products in sub-post offices and those in an equivalent banking facility. To sustain the margin for sub-postmasters in rural communities, which often have small outlets, we must ensure that the margin is appropriate for the number of products stocked in the institution. To that extent, exactly the expertise and leadership that David Mills has brought to bear within the bank could be of direct relevance to some of the individual sub-post offices about which the hon. Gentleman expresses concern.

I would make a further point, however. It is a matter of regret that, over time, relations between individual sub-postmasters and the management of Post Office Counters Ltd. have not been as fruitful and co-operative as they might have been. Among other things, I hope that David Mills will rise to the challenge of ensuring that there is confidence throughout the network of sub-post offices that someone in Consignia is batting for them and arguing the case for the network. That is why the Secretary of State ensured not only that, for the first time, we appointed a chief executive to the network, but that he had a place on the main board of Consignia.

My hon. Friend rightly holds strong views on the management of the Post Office, and he wants to ensure that it is very good. Does he have any views on the postal regulator, Postcomm? Have the Government responded to Postcomm's consultation, or do they feel that the consultation has nothing to do with them?

When I was before the Select Committee on Trade and Industry recently, I narrated precisely the arrangements that were established as a result of the Postal Services Act 2000. One of the elements of that package, which, I remind the House, was supported by the Liberal Democrats and the Conservatives as well as Labour Members, and recommended by the Trade and Industry Committee in a previous report, was that greater commercial freedom be given to the Post Office. Consistent with that greater commercial freedom was the recognition of the need for a regulator to balance the new public policy framework that was set down.

I note in passing that at the time of the passage of the 2000 Act, the Communication Workers Union urged the Government to establish "as independent as possible"

a regulator at the time that the new framework for postal services markets was established. It is therefore entirely appropriate that, consistent with my responsibilities in e-commerce where I have an informal but continuous dialogue with Oftel and its director general, David Edmonds, I meet the chairman of Postcomm regularly and informally.

On the other hand, it would be unwise of the Government to get themselves into the position of trying to second-guess the challenge that Postcomm faces. Let me make that challenge clear. In the Postal Services Act, we set down two principal responsibilities for the regulator: first, to maintain the universal service obligation, and thereafter to introduce competition to assist consumers, cognisant of that primary duty to uphold the universal service obligation.

Will my hon. Friend give way?

If my hon. Friend will allow me to answer her question in my own terms, I will give way to her afterwards, if she thinks that that will be helpful.

I emphasise the fact that in my discussions with the regulator I have made it clear that the Government consider the regulator to be obliged to uphold its responsibilities, in particular in connection with the universal service obligation. On the other hand, Postcomm's deliberations are based on a wide range of information: representations have been received from the CWU and from Consignia itself. It is therefore essential that a clear evidential basis be established for the decisions that Postcomm ultimately reaches, and we have been keen to communicate to Postcomm the importance of a fruitful dialogue between itself and the company from which many of its figures are drawn. On that basis, there are grounds to be optimistic that a fruitful dialogue is now taking place between Consignia, not least about the volume of market that Postcomm is contemplating opening up, and that Postcomm is fully cognisant of its responsibilities, consistent with its duties set down in the Postal Services Act.

I emphasise that the proposals outlined by Postcomm at the end of January were precisely that—proposals—and that further discussions have since taken place between all of the interested parties.

All the universal service obligation demands of the postal service is that there is one delivery and one collection each day. Will the Minister make it clear that he expects the service provided by the Post Office to be far greater than that? Currently, there are several collections a day from urban post offices, and two deliveries a day in urban areas. Is the basic one delivery and one collection a day all that the Minister is demanding through the universal service obligation?

The obligation under which Consignia operates is set down in the licence granted by the regulator Postcomm. However, in my conversations with Consignia I have consistently made it clear that, given that competition is starting to come to its business, it is vital that it offer outstanding service to its customers. It is precisely the sort of innovation in services to customers that is now being discussed that will give Consignia advantages. Based on the universal service that is currently enjoyed, there is considerable scope—given appropriate management who have the capacity to recognise the opportunity—to tailor services to the needs of individual customers. That is why it is essential that in the network and in Consignia itself there is leadership that is capable of driving forward that agenda and realising the full potential of the company that I described at the beginning of my speech.

Will the Minister give way?

Will the Minister give way?

I have been generous in giving way so far, and consistent with my obligations to the hon. Member for Twickenham, I should make some progress.

The hon. Gentleman specifically mentioned the "your guide" pilot. As he said, the Post Office has been piloting the concept of post offices as government general practitioners in Leicester and Rutland. The aim is to test the concept of the post office acting as a one-stop, first-shop facility providing advice and access to transactions within a range of public and voluntary sector organisations. The Government invested £25 million in that major pilot, which ran from July last year until March this year.

During the pilot, the post offices concentrated on a number of limited key services to their core customers, which included advice, information, transactions in broad areas of retirement, seeking work and local information. The service includes advice and information on pensions, other benefits, job vacancies, local transport, interface with local government and many more services besides.

The Leicester and Rutland pilot takes forward the recommendation in the performance and innovation unit report. The outcome of the pilot is now being fully evaluated by the Post Office with those organisations participating in the pilot and by the Government. The evaluation is examining the extent to which the "your guide" concept can deliver services that citizens really want and need, and the extent to which "your guide" can provide value for money for Government Departments and other organisations using it as a channel to offer their services directly to the public. That includes examining the extent to which those organisations achieve efficiency savings and the extent to which "your guide" services can improve the ability of Government Departments to meet their service objectives.

The evaluation process has included gathering data, manually and electronically, the conduct of surveys within and beyond the pilot area, and the gathering of qualitative data via focus groups, discussion groups and feedback sessions involving the public, sub-postmasters and stakeholder organisations, including central and local government.

All the evidence has been drawn together by a central evaluation team, which includes members of the office of the e-envoy. As the Minister responsible, along with my right hon. Friend the Secretary of State, for UK Online, I fear that there may be some confusion in the mind of the hon. Member for Twickenham as to the role that those services can provide. We are confident that there is at least potential to draw on the expertise of the e-envoy's office in exactly this type of service provision online in evaluating the "your guide" pilot. I simply do not recognise the kind of conspiracy that the hon. Gentleman seems to be suggesting in drawing from within Government exactly the expertise that we need to make effective the evaluation that is being carried out.

I agree that we should put conspiracies behind us. Do I take the Minister's endorsement as an indication that the Leicester pilot study will now be rolled out across the country?

I make it clear to the House that, consistent with remarks I made in the Adjournment debate on 18 December 2001, the evaluation will be completed by June. Given all the complaints that I have heard from Liberal Democrats today about the need for effective project management, it would be irresponsible to prejudge exactly the kind of evaluation that was absent from the horizon project for all those years, causing such profound and real problems. A full and robust evaluation of the pilot outcomes is necessary to inform future planning for the network. Given that a range of departments and organisations are involved, and that they would pay for the national service, the decision must, by definition, be made collectively. Unlike the Liberal Democrats, I would argue that full evaluation in line with best practice, project management and public procurement cannot be rushed. There are rules to which we must adhere for any major project of this kind.

Let me deal now with the points raised by the hon. Member for Twickenham and set out how the management of Post Office Ltd. will drive forward innovations necessary for the network. The hon. Gentleman spoke at some length about banking. Universal banking services, together with the Post Office's plans for an expansion of network banking—the provision of counter services for ordinary current accounts—should lead to a substantial increase in the range and volume of banking at post offices, tapping into a much larger customer base than benefit recipients alone. David Mills' long experience in the banking sector equips him well to lead those developments.

The trend for existing network banking already shows strong growth. Excluding Alliance and Leicester's post office business, the average daily number of transactions grew from under 20,000 in April 2000 to more than 40,000 at the end of 2001–02.

Will the Minister give way?

I am keen to make some progress.

Management is also keen to provide new financial services, such as household insurance, which proved a huge success in a recent pilot project. The Post Office management sees this as only the start and is in discussions with all the major banks to expand and improve the network banking services.

On the specific issue of universal banking services, progress is being made and the work is being taken forward for their introduction next year when the migration of benefit payments to ACT is scheduled to begin. The Department for Work and Pensions, given its key role in delivering pensions and benefits, is co-ordinating the work to modernise the payment of pensions and benefits along with the introduction of banking services through post offices. The Department of Trade and Industry continues to be responsible for progressing the universal bank project in relation to the post office network and the DWP for the benefits being paid efficiently.

The Department for Work and Pensions, together with the Inland Revenue and the Northern Ireland Social Security Agency, is now finalising contractual terms with the Post Office for provision of the post office card account. All the major banks have agreed to make their own basic bank accounts accessible at post offices. Of course, that agreement is now subject to detailed commercial negotiations between the Post Office Ltd. and the banks about wider access to their bank accounts.

The hon. Member for Twickenham mentioned yesterday's Treasury Committee hearing. It is at least worthy of note that the chief executives of the big four banks—Matthew Barratt of Barclays, Bill Doulton of HSBC, Peter Ellwood of Lloyds TSB and Fred Goodwin of the Royal Bank of Scotland, who hails from my part of the world in Paisley—gave evidence to the Committee. According to press reports, their evidence affirmed those banks' commitment to offering basic bank accounts and providing funding for universal banking services. With respect, I suggest that the hon. Gentleman read the transcript when it becomes available, given the anxiety that he has expressed about the banks' commitment to the project.

I thank the Minister for giving way; he has been generous in doing so. Will he confirm that his Department now has a policy of so-called actively managed choice? What does that mean?

The hon. Gentleman anticipates the point that I was about to make. Simultaneously with the commercial negotiations that are being taken forward with the major banks, the Government are now developing a detailed migration and marketing strategy for the transition to ACT. The emphasis of the ACT migration and marketing strategy will be to ensure that each customer has the best account for his or her circumstances. Conventional and basic bank accounts offer more services and do not have the limitations of a post office card account, so they are likely to be the best option for certain people.

Our operational assumption as we progress universal banking services—the hon. Member for Twickenham alluded to this point—is that about 3 million benefit and tax credit recipients will open a post office card account, but I reiterate that there will be no cap on numbers or eligibility criteria for such an account. The choice of 3 million people as our operating assumption reflects the fact that that is broadly the number of current benefit claimants who are without a bank account that is capable of receiving payments by ACT. I know that a number of points have been made about that issue, but it is worth pointing out that, in accordance with our desire to advance social inclusion, we are keen for people to move from a sector that is unbanked and into the banking sector so that they can enjoy the other benefits that currently fall only to people in that sector.

I regret that the hon. Member for Twickenham talked down the urban post office network. In preparing for this debate, I noted that he was quoted on 17 December in

The Birmingham Post as asserting without any apparent evidence that there was a serious threat to basic services such as house-to-house delivery, the uniform tariff throughout the UK and the network of sub-post offices. Those remarks strike a very clear contrast with the words of Colin Baker, general secretary of the National Federation of Sub-Postmasters, who dismissed as "rubbish" recent newspaper reports of mass post office closures. Regrettably, such newspaper reports appear to be precisely those on which the hon. Gentleman relied for his speech.

A terrible smell is emanating from the Labour Front Bench this afternoon—that of hypocrisy. Back in 1997, the Minister and I campaigned to prevent the Tories' proposed privatisation from going ahead. Some 4,000 post offices had closed. Under Labour, 1,405 post offices have already closed in five years and there are 3,000 more to go. How on earth can he justify that? He should intercede and start to bat for rural communities and the post offices that are closing all the time.

As the hon. Gentleman's Front-Bench colleague was generous enough to recognise, we took specific steps that were consistent with the PIU report to advance the sustainability of the rural network. That is why rural transfer advisers are working throughout the country where there is a threat to such a post office. It is also exactly why we have established the £2 million fund that I shall happily talk about later and strengthened the management as necessary to provide exactly the retailing opportunities that we need. I give greater credence to the further remarks of Colin Baker, who said:

"Talk of mass closures is scaremongering and wide of the mark".

He went on to say:

"It is wrong to criticize the industry for being out of date and in decline and then create panic when we are doing something about it"

I fear that that is exactly the sort of panic that the Liberals seek to stimulate. There may he mergers or relocations of branches as a result of the progress that is being made—that will allow sub-postmasters to invest in exactly the kind of improved services for urban areas that I mentioned—but only in urban and suburban areas that are densely populated with post offices and are experiencing duplication of services. In fact, as a serious contribution to the debate, the PIU strategy identified particular needs of the network in both rural and urban areas.

The rural post office network had been slowly contracting for the previous 20 years. The Government are committed to ensuring that it is maintained. The importance of rural post offices cannot be underestimated. Often, they are the last remaining local shop, providing a vital service and acting as a focal point for the local community, as I said in response to the remarks made by the hon. Member for Southwark, North and Bermondsey (Simon Hughes). To protect rural post offices, the Government placed a formal requirement on the Post Office to maintain the rural network and to prevent any avoidable closures of rural post offices. However, despite their best endeavours—it is important to be clear about this with the House—neither the Government nor the Post Office can guarantee that no post offices will ever close. Even the Liberal Democrats would think twice before making such a commitment. It very much depends on the local community that is using the facility and the willingness of a sub-postmaster to continue to run the business or to achieve its sale on the basis of its being a going concern.

The hon. Member for Twickenham asked about the £2 million fund to support volunteer or community initiatives, and I am happy to give him the information he seeks. I have to say that the thinking behind that scheme gave me concern, on the basis of the point raised by the hon. Member for Southwark, North and Bermondsey. The fund was established to maintain or reopen rural post office facilities. Let me give the latest figures. At the end of April this year, 88 applications had been submitted. Of those, 46 grants to a total value of £390,000 have been approved. The fund is expected to provide the impetus for maintaining or reopening up to 200 offices nationwide over a two-year period.

I point out to hon. Members that, in direct contrast to the uniformly bleak picture painted by the Liberal Democrats, over the last financial year from March 2001–02 there has been a significant and welcome reduction in the number of closures. In the year to the end of March 2002, there were 262 net closures, compared with 547 in the previous year.

The Government recognise that it is not just in rural areas that post offices play an important community role. We want to maintain convenient access and to improve the quality of post offices in our towns and cities, as well as in the countryside. Under pressure from the changes in the pattern of retailing that I described, the quality of many post offices and associated retail businesses has declined in urban areas over recent years. I am sure that that point will be well taken by many hon. Members in relation to their experience in their constituencies. We believe that the best way to address that is for the Post Office to work closely with the National Federation of Sub-Postmasters to reverse the years of underinvestment, as the PIU recommended.

The hon. Member for Twickenham asked about the urban reinvention programme. The purpose of that programme is to ensure that there are post offices equipped to offer the quality of services that customers need in the right locations to serve urban communities, where at present some two thirds of the population live within half a mile of two or more post offices. Indeed, in some areas there can be up to eight to 10 post offices within a single square mile, some located within a few hundred yards of each other.

I first inform the hon. Gentleman that the programme has not yet started. Decisions on individual offices will be based on detailed, local studies, the preferences of the sub-postmasters concerned and the outcome of consultation with Postwatch and those sub-postmasters. I should add that the programme will be carefully tailored to the circumstances of each locality to ensure that post offices meet the high expectations of customers and that they are in the right locations for their communities. Special provision to sustain and improve vulnerable offices in deprived urban areas is being made under a separate fund operated by the Department for Transport, Local Government and the Regions. Funding for the programme is subject to approval under European state aid rules and scrutiny by Parliament. Indeed, before the programme starts there will be the opportunity for Parliament to debate it.

Can the Minister clarify the specific point about the funding arrangements? Will the £180 million compensation package come out of the £280 million that was pledged for the renewal and sustenance of the network, or is an additional sum?

The £270 million that was allocated in the previous comprehensive spending review was to implement the recommendations of the PIU report. They included a range of working programmes. One was urban reinvention, and another was the pilot that I mentioned. It is worth £25 million in terms of "your guide". Further work to support the rural network will be done, and we are determined to ensure that, if additional support is necessary, there will be a process whereby it can be considered as and when it is required.

There is no dispute about the fact that, in every part of the operation, the Post Office needs to adapt to new challenges. The public want it to provide world-class postal services and a thriving post office network fit for the 21st century. The Government want a universal service on which everyone can rely, with faster, more reliable mail deliveries, a strong network of modern post offices, and an effective partnership between management and the unions. We want a better Post Office for people to work in.

Standing still, as some suggest, is not an option. The business must move forward, tackle its shortcomings, and tailor its services to changing customer demands. The Government are implementing the terms of the PIU report and underpinning that by committing resources and strengthening management.

We cannot turn the clock back, but, with the right management, proper investment, the right support and the backing of customers and communities, we can realise the full potential of the Post Office in future. I urge the House to support the amendment.

So we have yet another debate on the Post Office, or Consignia, as we have come to know it. I congratulate the hon. Member for Twickenham (Dr. Cable) on securing the discussion. It is unusual to hold regular debates about a company in the private sector; it is even more unusual when that company is doing well. However, despite the hot air about commercial freedom, the Post Office remains mired in the public sector and its attitudes to innovation and service.

The Independent got it right when it stated:

"The problem is that this Government has spent too much of its time trying to make public entities like the Post Office behave like private companies and private companies such as Railtrack behave like the old nationalised industries. Such contortions suggest at the very least that, for all their unhealthy closeness to businessmen and wealth entrepreneurs, New Labour does not really understand business and enterprise."

I am sorry to see that the Post Office's sole shareholder has left us, doubtless for something that she considers more important.

Another reason for continually holding such debates is that the Post Office is, sadly, in deep trouble. It is a failing company. That was not always so: the Post Office made a profit in every year of Conservative government. As The Guardian stated:

"Less than 10 years ago, the Post Office was perceived as the best of its kind in the world. Unlike its European competitors it was profitable, its delivery performance was top of the international league table and its then Chief Executive boasted of the workforce as his '200,000 in-house consultants' and 'ambassadors to the public', for whom the 'postie' was trusted and respected."

The postie continues to be trusted and respected, but the Post Office is in deep trouble.

The Post Office loses £1.5 million a day and plans to shed at least 30,000 jobs. It has endured dreadful industrial relations and continues to miss its delivery targets. Some parts of the country go for days on end without a delivery. The Post Office is scrapping the second delivery and the early collection. If that were not bad enough, it is losing I million items of mail a week, according to the watchdog. It has been suggested that only one delivery a day should be made to private addresses at or around lunch time. That will affect hundreds of thousands of small businesses especially badly.

One of the most worrying aspects is the deterioration in the network of sub-post offices, which have been closing at an ever increasing rate with a record number of closures—547—last year. An average post office branch could lose 40 per cent. of its turnover overnight when benefits payments cease next April. The closure rate has decreased in the year to April 2002, and that is welcome, but the Government should not take too much comfort from that because there are problems of disposal and sale, and people are hanging on in the hope of receiving compensation. Of the 262 post offices that closed, 194 were rural sub-post offices. This is therefore a network in decline.

What has the Government's reaction been? They have set up a programme of so-called reinvention of the urban network. They have not, of course, fulfilled conclusion 6 in the PIU report, which proposed the production of a report by autumn 2001 about the future of the rural sub-post office network. I would like the Minister to tell us when we can expect those proposals to be brought forward.

The sad truth is that most of the money that has already been earmarked, particularly for the urban network, is actually being used to close it down, rather than to keep it open or even to expand it. The most serious problem, however, is that the Government have, as yet, no clear strategy to deal with the future of that network.

I am having difficulty following the thread of what the hon. Gentleman is saying. He began strongly by saying that he thought the flaw in Consignia was that it was not acting sufficiently like a private company, and that it was too wedded to a public service ethos. If it is going to act exactly like a private sector company, should it not be released from the burden of a universal service obligation—private companies do not have such obligations—and left free to close what branches it wishes, if it is to work as a commercial operation? We would argue that neither of those things should happen, but the hon. Gentleman does not seem to be capable of arguing that.

I do not think that the hon. Gentleman has been following my speech closely enough. He seems

to be confusing two things. Overwhelmingly, the network of sub-post offices has nothing to do with Consignia; most of them are owned by private individuals who have opened them up using their own savings, perhaps from redundancy payments or whatever, collected over some years. Those are the people we are talking about.

The hon. Gentleman made a rather more important point on the universal service obligation, but he must remember that, at the moment, the Post Office is not meeting that obligation in some parts of the country. It is certainly not meeting its obligation on next-day delivery of first-class mail. Under the Postcomm proposals, any new private company entering the post office market would, I am sure, be equally obliged to fulfil the universal service obligation.

rose—

rose—

I give way to the hon. Gentleman.

To whom are you giving way, Sir?

Let me see. I shall give way to the hon. Member for Orkney and Shetland (Mr. Carmichael).

Perhaps the hon. Gentleman would be kind enough to answer a question that I asked him when this matter was last debated in Westminster Hall. Is the Conservative party in favour of the deregulation proposals that Postcomm currently has out for consultation?

The hon. Gentleman has indeed asked me that before, and he will get almost exactly the same answer—I hope—which is that we think that the Postcomm proposals contain a lot of interesting issues. It is for the Government to form a view on them, but most importantly, it is a matter for the regulator.

What is your view?

I shall deal with Postcomm's proposals in some detail, so if—unlike some hon. Members—the hon. Gentleman can stay for most of the debate, I may be able to assist him. The reality is that we do not know what kind of shambles we shall inherit after the next election. It is clear, however, that by then Postcomm's proposals will long since have been implemented in the postal system.

Will the hon. Gentleman give way?

I want to make a little more progress, then I shall be happy to give way again.

The Government seem to be involved in managing the decline of the network, and this process is being supervised by Postwatch, the consumer watchdog. I would like the Minister to deal with an issue raised, I think, by the hon. Member for Twickenham. Does he think that Postwatch is being properly resourced to carry out that task?

We have 10 months in which to complete the transition to automated credit transfer. Most people in the industry are very dubious as to whether that will be possible, from a technical point of view, within that time scale. The reality is that an awful lot of sub-postmasters and sub-postmistresses have to be trained, and their customers have to be put in a position to be able to use the new equipment. At the same time, however, despite the Minister's repeating the promise that there is to be no cap on the number of people holding post office accounts, we have now discovered that the Government have a working figure of 3 million, by contrast with the 16 million potential customers, on existing figures.

We also know that the Government are now pursuing a policy of actively managing choice. That is a wonderful civil service phrase, but to me it sounds a hit like persuading people—possibly elderly or vulnerable—that they need one sort of account rather than another. If the Government are successful in their policy of actively managed choice, that means that, on any view, the footfall for the average post office will not return to anything like the levels of the recent past.

I think there are serious concerns here, and so does the National Federation of Sub-Postmasters. The Minister enjoyed quoting some things said by Mr. Colin Baker of that organisation, but in its briefing for the debate the organisation also says this:

"We shall campaign vigorously against proposals to influence people's choice or make pensioners and child beneficiaries justify why they want a post office card account".

It goes on to say:

"We share the concern of many parliamentarians that the Universal Bank may not be in place by April 2003, in time for the introduction of ACT".

Those are very worrying statements.

The NFSP also says:

"Twenty-eight million customers currently make 45 million visits to post offices every week."

The briefing concludes:

"The UK's 18,000 SubPostmasters remain extremely worried about their future and their continuing ability to provide their services to 18 million customers."

I can only assume that the Minister was quoting a different Colin Baker.

Earlier in the debate, the Minister for E-Commerce and Competitiveness mentioned yesterday's Select Committee meeting. When questioned, the big four banks admitted that doing business through the post offices and universal bank, and new basic bank accounts, was very good for them and would extend much further a banking system that had been retrenched in recent years. Would that not help the post offices?

I think it would if that were genuinely the case, but I have formed the same impression as the hon. Member for Twickenham—that this is not the sort of business the banks really want, or would seek if they were not being put under intense pressure to help the Government out. Once they get wind of the fact that the Government are trying to cajole people into going for the bank rather than the post office option, the matter may well be reopened by the banks themselves.

We should remember that the regulator was established by this very Government, as an independent regulator. We should also remember that two aims featured in all the detail of the Postcomm proposals. The first is improving services for consumers. As I said earlier, in many respects Consignia—the Post Office as it currently is—is not fulfilling even its current service requirements. The second, although it does not seem to be seen in this way, is safeguarding the future of the Post Office, or Consignia.

In its briefing, Consignia says:

"We accept that greater competition will spur us on to be innovative, improve our customer service and become more efficient."

The only issue between it and the regulator seems to be the pace at which the market is to be opened. The regulator takes the view that competition will encourage efficiency and innovation. That has certainly been true in other countries where postal services have been opened up, and in other parts of our own national life and economy.

Now that the hon. Gentleman has returned to the subject of the Postcomm proposals, and given his signal failure to answer the question posed by the hon. Member for Orkney and Shetland (Mr. Carmichael), may I put the question in another way? I accept that, as a member of an Opposition party, he is entitled to say, "We do not answer questions now; we will wait until we are in government". In the case of these proposals, however, he can do something. He, like anyone else, can put his views to Postcomm. Has the Conservative party put its views on the proposals to the regulator, and if so, what was the content of its representations?

If I thought about it, I would be rather flattered by the desire of hon. Members on both sides—albeit with similar accents; hence my initial difficulty in identifying the hon. Gentleman—to know our policy. It cannot have escaped his attention that barely a year ago we lost a general election, but let me remind him that we are firmly on record as saying that we are in favour of competition, although for better or worse the Ministers here today will have to deal with Postcomm's recommendations. I should add that many of the submissions from Consignia and from the union that oppose the Postcomm proposals seem pretty threadbare intellectually.

Despite all the problems, the Post Office had one priceless asset that could not be destroyed even by inept management, bolshie unions or interfering Ministers—the brand. The names of the Post Office and the Royal Mail were recognised throughout the country and the world. They were up there with Coca-Cola and Microsoft. So the Post Office decided to destroy the brand at a stroke by renaming itself Consignia—at a cost of £2 million, to boot. Now even the chairman of Consignia and the Secretary of State admit that it was a mistake. In an article in the Daily Express only yesterday, the Secretary of State made the same point again. It is inconceivable that Ministers did not give their approval to the name change.

We have heard pious words of concern from the Secretary of State, who seems finally to have woken up to the dire problems facing the Post Office. As she said in yesterday's Daily Express:

"The Post Office has simply failed to adapt to modern life… more changes will be needed, affecting the consumer as well as staff."

I am sorry to upset the hon. Member for Morecambe and Lunesdale (Geraldine Smith), but the Secretary of State also said:

"I think consumers would accept it if it guaranteed one reliable delivery every day."

She also mentioned the possibility of a pay rise, and her great new idea to save the Post Office from its losses of £1.5 million a day:

"postmen could collect and deliver cash…and sell stamps"

on the doorstep. That should make all the difference.

Little did Post Office managers or workers or the British public realise that while the Secretary of State was uttering pious sentiments about improving the Post Office, she was secretly planning to flog it off to the highest bidder.

Earlier this year, my noble Friend Baroness Miller pressed DTI Ministers in another place. In reply to her question on 21 March about whether there were negotiations on selling Consignia to TPG, which operates the Dutch post office, Lord Sainsbury said:

"I have heard of no such suggestion."

In answer to a subsequent question from Lady Blatch he said:

"I know of no negotiations which are taking place to sell the post office network, which I assume is the point of the question. I have no indication that any negotiations have ever taken place on that"— [Official Report, House of Lords, 21 March 2002; Vol. 632, c. 1471–73.]

The following week, reports surfaced about the TPG group's interest in Consignia, and on 26 March the Secretary of State replied to a written question from my hon. Friend the Member for Maldon and East Chelmsford (Mr. Whittingdale) as follows:

"There are no proposals to sell Consignia Holdings, its mails business, Parcelforce or the network of post offices."—[Official Report, 26 March 2002; Vol. 382, c. 800W.]

She could not have been clearer.

Unfortunately it emerged later that that answer was not strictly accurate and that Lord Sainsbury had been even less accurate. He had to admit to the Lords on 30 April:

"I believe that the answer now is 'Yes, there were merger discussions. However, as I explained then, I was not aware of those discussions at the time."— [Official Report, House of Lords, 30 April 2002; Vol. 634, c. 569.]

Of course, we must give Lord Sainsbury the benefit of the doubt and assume that he is right to say that he knew nothing about those negotiations. However, it is equally clear that detailed talks on selling Consignia—our Post Office—to the Dutch post office took place for some eight months.

My hon. Friend seems to be making a very serious allegation. Is he saying that the Secretary of State for Trade and Industry gave a less than full answer to his question, which could be described as misleading and economical with the truth?

I am sure that my hon. Friend is not trying to put words in my mouth, but the phrase

"There are no proposals to sell Consignia"

is pretty uncompromising. As I said, we now know that serious and detailed discussions took place for some eight months. Even if the Dutch post office is now out of the frame, one wonders about other negotiations that might involve selling Consignia to Deutsche Post or to any number of other interested organisations.

The sad truth is that the Government cannot find a buyer for our Post Office. The ultimate humiliation is that, under their stewardship, no one wants to buy it. As the Post Office staggers from crisis to crisis under this Government, it will not be long before it cannot even be given away.

I welcome the opportunity to speak in this debate, and I commend the Liberal Democrats for bringing these matters before the House. I have no doubt that the provision of postal services and the long-term viability and survival of Consignia hang in the balance. Having examined the Liberal Democrats' proposal, I can find nothing wrong with it, so I will join them in the Lobby.

The postal industry faces ever-increasing competition from various forms of electronic document transmission, a slowdown in the growth of traffic and the impending liberalisation of postal services throughout Europe, and it needs to undertake a radical review of its entire operation to meet those challenges. All who work in the industry are aware that change is inevitable; indeed, they have grown accustomed to it, given that the postal industry has been changing continuously for the past two decades. The industry would have faced such changes and challenges regardless of whether the Post Office had remained a publicly owned corporation, rather than a publicly owned plc.

The restructuring of the loss-making parcels business and the transfer of the universal parcel service back to Royal Mail is long overdue. I have every sympathy for the staff who will be affected by that change, but the initiative is nevertheless welcome. Parcelforce was split from Royal Mail under the previous Conservative Government simply in order to be sold off, and it was right to bring the two back together. Much has been said today about the radical review and restructuring of the counters network, which is being developed in close co-operation with the National Federation of Sub-Postmasters. It is critical to the prosperity and sustainability of the network, and although some of the changes will prove difficult, they are necessary.

Those are just two brief examples of the changes and challenges that the postal business has undergone for many years, and which would have occurred regardless of the operating company's status. It is important to remind ourselves that, despite the difficulties and continual changes that postal workers have faced, in terms of cost, range of services and reliability, they have literally delivered for us the best value-for-money service in Europe. Since 1993, the cost of a first-class stamp has risen by just 7 per cent. and the price of a second-class stamp has not risen at all. Given that the retail prices index has risen by 25 per cent. over the same period, that is a remarkable achievement, and a credit to British postal workers.

I understand that Consignia is currently contemplating asking for an increase of ¹p in both first and second-class postage, although it has not made a formal application. I hope that my hon. Friend the Minister for E-Commerce and Competitiveness will clarify the matter. However, I urge Consignia to apply for the increase without further delay.

The company should use the additional revenue to improve the terms and conditions of British postal workers, who are very poorly paid and work extremely unsocial hours. Hon. Members may work late into the evening, but not many of us would relish getting up at 3 o'clock in the morning to start work, six days a week.

I have been at pains to point out that many of the challenges facing Consignia have nothing to do with its move from public corporation to public limited company, but it faces a number of challenges that are a direct consequence of that change. Beyond a doubt, those are the challenges that cause me the greatest concern.

I refer, of course, to the competition proposals made by Postcomm, the postal regulator. I am not opposed to the principle that competition should be introduced into the reserved postal sector, but I certainly oppose the introduction of any competition that threatens Consignia's universal service obligation or its financial viability.

Consignia has made it clear that it would welcome the introduction of increased competition, provided that the approach adopted was the gradual and controlled approach evident across the rest of Europe, where there has been a progressive reduction in weight and price limits in the reserved or licensed sector. Consignia believes that, under that model, the impact of each successive step in the process on the system's ability to maintain the universal service can be assessed before the next step is embarked on.

My hon. Friend has said that she is worried about the recommendations from Postcomm. She and I served on the Standing Committee considering the Bill that became the Postal Services Act 2000, which established the Post Office regulation system. She supported the measure, as did I. In retrospect, however, does she now think that there is something wrong with the regulator? If she is not in favour of the current system for dealing with Post Office regulation, would she prefer the regulator's role to be amended or changed?

I certainly believe that it is important to have a Post Office regulator, and I supported the Postal Services Act. However, the regulator has to be accountable to someone. I cannot sit back, say nothing and allow the regulator to make proposals that could jeopardise the future of the postal industry, just because I believe in the principle of having a regulator. That would be quite wrong.

As I said, Consignia has made it clear that it would welcome the gradual introduction of more competition. The impact of each step in the process on the ability to provide a universal service must be assessed before the next step is undertaken. I fully support that.

The gradual approach is acclaimed across Europe and was supported by the Government at the Council of Ministers in autumn 2001. I believe that it is the appropriate model for the UK too, especially as the Government have determined that the achievement of essential social obligations such as the universal service and the uniform tariff structure should override the introduction of a fully competitive market.

Although other companies should be allowed to collect, sort and transport mail for delivery over "the final mile" by Royal Mail's nationwide network of delivery offices, Consignia should be adequately compensated. The price that Consignia gets for such access should be in line with the principles set out by the European Commission in its draft postal directive, which is supported by all postal operators throughout the European Union and all member state Governments. That approach recognises that the access price should be set on the basis of standard public postal prices, minus the savings made in the long run as a result of Consignia having avoided costs in the collection, sortation and transportation of mail. That retail-minus basis will ensure that rivals taking advantage of access to Royal Mail's delivery network have to be efficient.

Deliveries are by far the most expensive part of Royal Mail's operation. Access prices would depend on the weight and size of individual items as well as where they were posted in the network. For a basic letter weighing up to 60 g, posted in Consignia's network immediately prior to final delivery, the level of access price would need to be about 20p at today's prices. That, most importantly, would ensure that Consignia could continue to meet its universal service and uniform tariff obligations. However, Postcomm is silent on this crucial issue; it has not said a word. Nor has it yet defined precisely what will be protected by the universal service and tariff obligations. Will the Minister clarify what we are talking about? Are we talking about a basic one delivery and one collection per day under the universal service obligation? If so, that would represent a greatly worsened postal service for many people.

The regulator has not yet announced the pricing system within which Consignia will be expected to operate. However, Postcomm has misinterpreted the Postal Services Act, although I am not sure whether it has done so through dogmatic arrogance or incompetence. When I and a number of colleagues from the House met representatives of Postcomm, they displayed little knowledge of the workings of the postal industry and failed to answer the many pressing questions that we asked. They appeared to display a dogmatic arrogance, they appeared incompetent and they appeared not to understand the postal industry.

Postcomm appears to believe sincerely that it has a duty to introduce competition into the reserved area wherever it is possible to do so. It does not have such a duty, only a requirement to introduce competition where it is appropriate, after ensuring that the universal service and tariff obligations are secure.

Postcomm's first obligation is to protect the universal service, yet its approach is to reverse the criteria and put the introduction of competition at the top of its agenda. To this end, it has made proposals that threaten the universal service and tariff obligations and introduce competition further and faster than the rest of Europe, thereby making Consignia vulnerable to foreign competition because it does not have reciprocal arrangements.

Postcomm has introduced proposals that target the most profitable areas of the postal business and could, indeed, lead to the collapse of Consignia. The profitable areas of the Post Office support the rural network. Competitors will not step in and take over the small rural post offices, which do not make much money. They are not the part of the Post Office that private competitors want. The cross-subsidy keeps the Post Office in business, and it is so important.

Postcomm's proposals have been based on a financial model that had built into it woefully inadequate and incomplete data and assumptions about future growth, revenue and cost that bordered on the ridiculous. They were arrogantly presented to Consignia, with a wholly unacceptable period of only six weeks allocated for the company's response.

Where was the consultation with the general public? Where was the consultation with district and parish councils? Many parish councils in my constituency were not even aware of Postcomm's proposals. That is wrong. When I tabled parliamentary questions on Postcomm, they were not even answered because Postcomm is, supposedly, an independent regulator—but it is also accountable to Parliament, so why can we not obtain answers to our questions?

There is no doubt that if the proposals are implemented they will be disastrous for our postal services, for many of my rural constituents living in villages and for many of my constituents who currently receive a good service from the Post Office. The Post Office is not in a shambles—it is not in a mess; all it needs is the ability to raise prices. If the regulator allows it to increase prices so that it can once again be profitable, we will have the postal service that our constituents want and deserve. Postcomm's proposals are disastrous and they should be opposed.

I do not often have reason to praise and thank the Liberal Democrats, but I do so today. Under the auspices of the hon. Member for Twickenham (Dr. Cable) they have initiated debate on an important subject that will not go away; the House will return to it time and again until the Government of the day provide a solution.

In that spirit of generosity, which will not last long, may I turn to the Minister for E-Commerce and Competitiveness and even to the Secretary of State for Trade and Industry? I do not blame the right hon. Lady for the mess that Consignia is facing—it is not the Government's fault. In politics, as we know, the guilty party often moves on and someone else is left to sort out the mess—[Interruption.] To set the minds of Liberal Democrats at rest, I acknowledge that many of today's problems actually started in the early to mid-1990s. I am not sure whether the Labour party had undergone its butterfly transformation to new Labour by then, but the House may recall that the then Labour Opposition, supported by between 12 and 15 misguided Conservative Members, resolutely blocked any move by the Conservative Government to introduce competition in our postal services. Let no one forget that: the Government were blocked from doing what was necessary. If we had taken that path in the early to mid-1990s we would not face our current difficulties.

The only crime that I could possibly lay at the door of the Secretary of State is that she may have agreed to the change of name to Consignia. My hon. Friend the

Member for Eastbourne (Mr. Waterson) made a most important point: in any form of selling or marketing, the brand name is the most important thing. To throw away the name "Post Office" shows that someone has no grasp of what is needed to sell things in the modern world. Perhaps the Secretary of State or the Minister for E-Commerce and Competitiveness will tell us who pleads guilty to that crime.

Although Consignia's name has great entertainment value and is an easy target, does the hon. Gentleman agree that the organisation effectively continues to do business under its two brand names "Royal Mail" and "Post Office"? We should not confuse the rebranding of the whole group with the services given to customers.

I understand the hon. Gentleman's comments, but when one is trying to advertise something it is helpful if it has only one name rather than two or three. Everyone agrees that the Consignia issue has muddied rather than cleared the waters.

I was convinced when we were in office and afterwards that the way ahead was for a BT to be done on our postal services. In 1988, I made that point to the Minister for Pensions, who was then a Minister at the Department of Trade and Industry. He responded by drawing the House's attention to my general shortcomings. He has done so regularly, and I fully accept that; I am used to it. Apart from doing that, he said:

"we are rebuilding a Post Office from the wreck left by the previous Government. From day one of this Government we have made the Post Office a priority, and we shall continue to do so."—[Official Report, 14 May 1998; Vol. 312, c. 499.]

Well, that gave me so much confidence, but what have we got at the moment?

Four years or so on—five years after day one of that commitment—the Post Office is losing substantial sums of money, post offices are closing at a record rate, and there are worrying levels of inefficiency. Massive redundancies are coming. A national strike was narrowly averted, and the Director General of Postcomm was warned off introducing any form of competition.

I have listened to that litany of failure. I understood the hon. Gentleman's initial point to be that, if the process had been completed earlier, it would have been done better in some ways. I have not heard him amplify that point. All those things could have happened if he had had his way, but they would have happened a lot earlier. Why should that not have been the case?

I do not in any way mean to be condescending, but the hon. Gentleman is relatively new to the House. If he had been here just a little longer he would realise that, if we had started to introduce competition earlier, we would have beaten what is happening on the continent with the Dutch and German Post Offices and we would have managed to achieve improvements and to introduce competition earlier. We did that with BT; we caught the continental countries cold.

Will the hon. Gentleman give way?

Hold your horses.

We enabled BT to become a world player because we were first on the list. BT had been well behind, but it did a fantastic job when it was privatised. If we had started earlier with the Post Office, we would have done much better.

Perhaps I shall give the hon. Gentleman a chance to be really condescending to a new Member from the 2001 intake. Does he support the current Postcomm proposals? Will he give a clear answer, yes or no?

As a humble Back Bencher, with no responsibilities whatever—I have no position from which I can be removed or sacked—I can say that the director general of Postcomm is going in the right direction. I only wish that we had moved in that direction much earlier, as I told the hon. Member for Southport (Dr. Pugh), who is fresh to the House.

I thank the hon. Gentleman; he has been most generous in giving way. As a humble Back Bencher claiming visionary times for the previous Conservative Government, does he not accept that those proposals failed because they were deeply unpopular with the people of this country? We are accountable to the people, and they simply did not want those proposals.

The hon. Lady is absolutely right. In saying what she says, she pays tribute to an intensive, clever, smart and focused campaign by the Union of Communication Workers, in which it suggested that any form of privatisation would involve losing sub-post offices. It so confused the issue in people's minds—it was not the clearest of explanations—that they were very unhappy about going forward.

I pay tribute to the union: as a political exercise, it did a fantastic job. Whenever I can, I pay tribute to the Minister for Employment Relations, Industry and the Regions who used to be the general secretary of that union, for the skill with which he conducted that campaign. I am prepared to do that time and again; he did a fantastic job. The campaign misled the people of this country and it set our Post Office back years, but he won, and perhaps the Labour party thinks that that is all that counts.

Does my hon. Friend agree that one of the crucial differences between then and now is that, then, the Post Office was contributing £1 million a day to the taxpayer, and now, it is losing £1.5 million a day, and the Government are in the humiliating position of having to give it its dividends back?

With his usual sagacity, my hon. Friend has put his finger right on the point. That was the time to have made the change. Now, it is going to be more difficult and more painful. A total of 30,000 redundancies are being talked about. I shake my head in sorrow at the size of those figures.

Will my hon. Friend give way?

I will give way just this once; otherwise, I will still be talking at 7 o'clock and no one will be able to wind up the debate.

I am grateful to my hon. Friend. He has referred to 30,000 redundancies, and we have heard reference to the importance of the people working in the postal system. We may not be paying enough attention to that. Much has been said about Post Office Counters, but the work force are another priceless asset. If we lose that work force, their skill, their knowledge and the social service that they provide, we will never replace it.

My hon. Friend makes an important point. All Members have visited their local post offices and sorting offices and have seen the bank of knowledge, good will and caring for the people of this country. The staff there know when somebody is not answering their door or taking their mail, and they will call the emergency services. I do not want that to be destroyed, and neither does any other hon. Member.

We must find the right way forward. Unfortunately, five years on, with the privilege of this Labour Government, we are no further forward. The post office system seems to be collapsing around our ears. I do not know what to believe. Going back to 14 May 1998, the Minister for Pensions, who was then the Minister with responsibility for the Post Office, said:

"The terms of reference are unequivocal. The Post Office will remain in the public sector".—[Official Report, 14 May 1998; Vol. 312, c. 505.]

My hon. Friend the Member for Eastbourne says, however, that there were negotiations to try to do a share swap deal with the Dutch post office. If that is trying to remain in the public service, I am a Dutchman—[Laughter.] That came to me on the spur of the moment. I apologise for it. Unfortunately, we cannot go back.

As my hon. Friend the Member for Eastbourne said, both sides of the House agree that sub-post offices are an essential part of the fabric of our society. They supply all the services that we need to drive ourselves forward. They help the older as well as the less-well-off customers. As I said, I want to pay full tribute to the daily work of sub-post offices.

A vital concern is that sub-post offices continue to expand and develop, but as we all know, they have been contracting over the past 20 years. That has been partly due to changes outside the control of the Post Office—new technologies and new patterns of work, the difficulties of finding new recruits when a sub-postmaster decides to retire, and the lack of profitability of operations in some rural and urban areas. All those factors come into play. No Government or postal provider could have compensated for or counterbalanced those factors entirely. The process of contraction, however, is now taking place at an unacceptable rate.

Despite the Government's promises back in 1997, the Minister for Employment Relations, Industry and the Regions, in his former capacity as the Minister for Competitiveness, commented more than once on the fact that the network was under-utilised and not properly promoted. He told the House in January 2000 that the measures that the Government had in mind would attract new business to the post office network. He did not mention the fact that they would remove 35 per cent. of the income of sub-post offices through the introduction of ACT. In a debate in the same month in Westminster Hall, he said that attracting banking back to rural areas and taking advantage of computerisation would allow the random effects of the previous 20 years of erosion to be tackled. He was equally clear in the Committee that considered the Postal Services Act 2000, on which I had the privilege to serve, about how that would be achieved. I have great respect and affection for the hon. Gentleman, but I do not share his faith in the Government's powers of prophecy or their ability to deliver.

One has only to consider the number of sub-post offices that closed last year to realise that the organisation is in meltdown. Sub-postmasters and sub-postmistresses cannot sell their sub-post offices when they want to retire because no one has any confidence in the levels of income that they will earn. People who have sunk their savings and their pensions into the business or who have borrowed money are now saddled with a sub-post office. There is nothing that they can do. The measures in which they put their trust—the creation of the universal banking service with post office card accounts for people receiving state benefits, basic bank accounts and access to current bank accounts via the post office, the provision of information on Government services, the routing of transactions through the "your guide" scheme and so on—look more like a coherent strategy in theory rather than in practice. The sub-post office network is melting away.

I understand from the National Federation of Sub-Postmasters that the Government are working on the assumption that 3 million people will opt for post office card accounts. When I asked the hon. Member for Twickenham whether that would be the figure and what would happen if it were even higher, he expressed the alarm that I share. People might say, "This is a useful method. I will transfer out of the banking system and have a post office card account because it is a system for which I do not pay any charges." However, the pressure is on the clearing banks to provide the moneys to subsidise the service. Unless the banks are careful, they could face considerable difficulties.

How will the Post Office be able to offer basic bank accounts to the several million people who have poor credit histories and perhaps county court judgments or bankruptcy orders set against them? Will those people be able to set aside the orders and take money out? Is it true, as the National Federation of Sub-Postmasters alleges, that the Department for Work and Pensions will actively discourage people from opening post office card accounts?

If the sub-post office is to become the vehicle for basic and current bank accounts, we want to know who will be the beneficiaries. Will it be the people who open the accounts or will it be the banks? Perhaps the service will cost the banks so much money that they will call a halt and the whole system will collapse like a pack of cards.

The hon. Gentleman is characteristically generous in giving way. However, does he not recognise the possibility of a win, win, win situation? Some people are kept out of the formal economy because they do not have access to hank accounts. It will benefit them to be in the formal banking system and to be able to run their affairs appropriately. Such a system could also benefit post offices, because they might benefit from the extra services that they can offer the public and will be better able to sustain themselves. The banks also believe that the system will be commercially viable. Once they have a new customer, they rarely lose them. Customers stay with the banks for life; 85 per cent. of people never change their bank account. Does the hon. Gentleman not see that everyone could benefit from the proposal?

I can see many advantages, but I have pointed out that there could be some disadvantages. What is incredible is the Government's insensitivity in announcing to all sub-postmasters and sub-postmistresses, "By the way, you will lose, on average, 35 per cent. of your income. We will come along sometime in the next two or three years and let you know how we will supplement it through this universal banking scheme." The details of the universal banking scheme are not universally clear. I hope that the hon. Lady is right and it is win, win, win, but sub-postmasters and sub-postmistresses do not share her optimism. The difficulty of selling on sub-post offices is a serious worry. If it is such a win, win, win situation, why are they closing at record rates? Perhaps she will ponder that reality of life. Rural post offices are closing at a worrying rate and before funding is allocated to tackle the problem.

There are rumours of a plan to allow sub-post offices to close until they number about 12,000, when each will have enough income to make them viable. The hon. Member for Southport talked about the move towards bigger sub-post offices, but if they have a limited throughput of work, there will be fewer of them. When I mentioned the 12,000 figure, the Under-Secretary shook his head. At what number does he think the sub-post office network will stabilise? When will it reach an equilibrium? The Minister for E-Commerce and Competitiveness is giving him advice, no doubt using words to the effect, "Don't you dare give an answer because it will be too embarrassing." I see that the Minister for E-Commerce and Competitiveness is shrugging, and it is clear that they do not have an answer. We are obviously flying into the wild blue yonder.

We also need to understand how the £15 million fund to support post offices in deprived rural areas is functioning, because it is shrouded in mystery. The Government remove money quickly, but it is less than clear how they are going to replace it.

Postal services are being opened up to greater competition, which I welcome, but sub-postmasters want to know how likely it is that Consignia will ensure that local sub-post offices continue to hold cash deposited by businesses. If financial difficulties force the organisation to put its cash handling out to tender, will the new postal services be encouraged to locate their boxes at or in existing sub-post offices, where the flow of customers may be critical to their survival? Those are not academic issues.

We heard that handling costs will determine whether sub-post offices survive or die. Handling charges have to be realistic and set at the right level. Only today, however, someone approached me to say that the sub-post office charge for handling payments for her utility services had gone from well below £1 to more than £1. She is actively considering whether to make those payments in a different way.

My constituents have made their views clear. I have a petition from a small post office run by Mr. John Hayden in Tudor parade, Moneyhill, in my constituency. It is just three short of 300 signatures. Everyone who signed it is concerned about the closure of sub-post offices, the fact that they are losing 35 per cent. of their income and that more than 500 closed last year. They want to know where the line will be drawn. I hope that I get specific answers to my constituents' concerns on those wider issues. However, experience has taught me that I must not raise my hopes too high.

In recent years, the Post Office has become a symbol of the confusion at the heart of the Government's strategy for the public sector. We had a Post Office that was the envy of the world, but instead of a brave new world of modern services and commercial and financial freedom, what have we now? We have a Post Office that, in the words of the former general secretary of the Labour party, is suffering from inherent faults and crippling levels of inefficiency.

It is too much to expect Ministers to accept any blame for the situation. I have noticed that this Government are prepared to accept only credit, not blame, but the country, and my constituents, will hold them to account. We have to reverse the decline in our sub-post offices and put them back on the map, with security, and that is what my constituents are looking for.

I am grateful for the opportunity to make a short contribution to this important debate. I am committed to a publicly owned and publicly managed universal postal delivery service, and to the maintenance of a comprehensive network of well equipped post offices.

That said, I am greatly disturbed by the style and standards of much of the management of Consignia that I have encountered since I entered the House in 1997. I know that Consignia's statistics demonstrate that postal delivery standards are improving, but my postbag, like those of other Members, deals with individual cases, not statistics. My experience is real, not statistical, and it includes loss, delay and misdirection.

The management style of the Post Office seems frozen and unyielding. The Welsh Affairs Committee, of which I am a member, has several times taken evidence from the Post Office. On the most recent occasion, a list of post offices in Wales was requested from the company. It provided the list, but clearly with some reluctance because it asked that it should not be released to the public. That is a novel way to conduct business—to set up thousands of outlets but not let the public know where they are. Fortunately, the company agreed with the Committee that it was being over-zealous. Perhaps by then it had seen the list published, for all to see, in the Yellow Pages. The list that the company provided to the Committee appeared to be in an entirely random order; it was set out neither alphabetically nor geographically, so the post offices in my constituency were distributed throughout a 25-page list.

I had earlier asked the management for a list of the post offices in my constituency. I was told that it was cost-prohibitive to provide it. In fact, from a list of all Welsh post office locations and their postcodes, it should he possible to produce such a list for all constituencies in Wales without any difficulty. It may surprise hon. Members that although the Post Office uses postcodes for the efficient delivery of mail, and an excellent system it is, its management is incapable of using them in its business, so it is happy to tell me that post offices in Dyserth and Holyhead are in my constituency. That may surprise my hon. Friends the Members for Vale of Clwyd (Chris Ruane) and for Ynys Môn (Albert Owen) because, as intelligent people will know, neither of those places is in my constituency. Those are just two examples of such errors.

Other hon. Members have commented on the closure of post offices. In Wales, the Post Office has appointed rural advisers, but there are only four for the whole of Wales and they have yet to prove themselves. Closure also affects urban post offices, and they are outside the remit of the advisers. Post office closures are not always handled well by management. Standards of communication between management and sub-post offices appear to be less than satisfactory.

I am aware that the National Federation of Sub-Postmasters has concerns about the future of the post office network, and I understand the remarks made by the hon. Member for South-West Hertfordshire (Mr. Page) about rumours. Let me quote a letter from one sub-post office proprietor, who said:

"I am afraid the people at the top of the Post Office, who are the people who can actually make the changes and are often those who reply to you, seem to have little or no first hand experience of what actually happens at a Post Office counter. It is not surprising therefore to find that the real reason so many Subpostmasters are trying to leave the organisation is because they have such little confidence in the hierarchy. The ACT threat is of course very real, but most Subpostmasters also run another side to their business and are used to competition and challenges. It is when they see the constant floundering exhibited in the managing of the Post Office and the utterly disgraceful failure to develop the business to meet a long known about challenge that Subpostmasters become despondent about their future livelihood."

That is the view of a practitioner delivering a service to the customer over the counter.

Closure of the sub-post office in Mostyn street, Llandudno, was announced in November 2001, to take effect in March 2002. It was caused by the franchise partner deciding not to renew the contract. There was considerable local opposition to the loss in that town centre location. The mayor of Llandudno, Councillor Brian B. Bertola, and Llandudno town council raised a petition of more than 3,000 signatures. When asked to receive the petition from the mayor and myself in the town of Llandudno, management in Wales declined to do so. They also declined to receive it in Westminster, saying that it was

"not cost effective to do so."

I have used the expression Post Office rather than Consignia because the name Post Office is known to the public. In Wales, the Post Office has a long history of providing reliable delivery of mail to households, many of which are in remote locations. I have nothing but admiration for Post Office staff, who on occasion must deliver in weather that can be understood only by hon. Members with mountainous constituencies. The universal postal obligation is essential to my constituents. Mr. Martin Stanley, chief executive of Postcomm, knows of my concern through correspondence and early-day motions 797 and 827. Cherry-picking of rich urban areas must not be permitted.

Equally important is that the management of the Post Office become more responsive to their staff, their sub-post offices and to the users of their services. So far, management have hardly begun to demonstrate a willingness to do so. I hope that I have been able to demonstrate that it is too simplistic to say that throwing additional funding at the issue will be sufficient. The attitude of management must change.

I am sorry to have to speak in the debate, but although all rural Members are used to the occasional pub or filling station closure in their constituency, the closure of local sub-post offices in villages in my constituency happens too often. On 27 March, the post office at Bryanston, just outside Blandford, closed. On 12 April, I received a letter headed "'an essential part of everyday life' www.postoffice.co.uk" which read:

"Dear Mr. Walter

Winterborne Whitechurch Post Office Branch …

We wrote in August 2000, advising of the temporary closure of the Post Office branch … At that time, we were unable to identify a suitable candidate or premises".

That was the second time that that post office had closed in five years—they had previously found a suitable candidate. The letter continued:

"The purpose of this letter therefore is to ask if you are aware of any changes".

On the same day from the same gentleman on the same headed paper, I received a letter about the Glanvilles Wootton post office branch, which had also closed in 2000. It said:

"Do you know of any changes in the circumstances within Glanvilles Wootton which may help us restore a service to our customers?"

The first post office that I mentioned at Bryanston was located in a small village shop and its closure was involuntary. Everyone in the village knew where the post office was. Those who used its facilities knew that if they went to the village shop the post office counter was located at the back. But that was not good enough for those who run the post office network. They made it a condition that the person who ran that post office—for only a couple of days a week—would have to relocate the counter so that it was more prominent within the shop. The capital expenditure that would have been required for that would have been out of all proportion to the shop's commercial viability, so on that basis the postmaster declined to renew his contract because he did not have the resources.

So far I have mentioned just three post offices, but the list is not complete. During the last five years, my constituency has lost post offices at Tarrant Gunville; Pimperne, where it has fortunately re-opened; Weston; Lydlinch; and Hazelbury Bryan, where I am also pleased to say that a year ago I was invited to cut the tape as we re-opened the post office. However, the net loss of village post offices is symptomatic of an underlying problem. The village postmasters are under pressure. Forgive me if the evidence is anecdotal; it is none the less valuable. Several village postmasters have told me that village businesses no longer buy stamps from them because they are being offered stamps at a discount direct from the Post Office.

Car tax is a matter for the Driver and Vehicle Licensing Agency, not for the Post Office or the DTI, but in the interest of joined-up government, surely it would be good news for village post offices if the Government could give

some encouragement to the DVLA to allow all sub-post offices to sell car tax. A village garage in my constituency has within its premises a shop and a post office. One can buy a car, insure it and have an MOT done there, but one cannot buy a tax disc.

The key threat, which has already been mentioned, is the changeover in the benefits business. Nothing in the Minister's opening remarks convinced me that the Government are sensitive to the threat that that poses for village sub-post offices. What I heard sounded like an urban agenda. Few of my rural constituents live within half a mile of a post office, which I think was the phrase that he used. The village post office is a key part of the social fabric of the countryside and the strategy for transferring the benefits business is confused for the sub-postmasters involved and for the public whose benefits will be involved.

Will the hon. Gentleman give way?

No.

The result will be the closure of more vital village post offices. Too often have I received letters from the Post Office informing me of the closure of yet another post office and giving alternatives up to five miles away. Post office facilities affect the elderly and their closure is a disaster for the many in those villages who have no public transport and is usually soon followed by the closure of the village shop. It is devastating for the social fabric of our villages. I believe that the Post Office and the Government are indifferent to that and I pray that the Government will wake up to the damage that they are doing to rural Britain.

The Minister will be aware that on many occasions I have raised with him problems with sub-post offices in my constituency and the postal services. He and many hon. Members present today will be aware that I have certainly not been slow to raise with Ministers, publicly and privately, concerns that have affected my constituency. Hon. Members speak up for local interests and try to resolve local difficulties as well as possible. But the difference between the approach that I and many of my hon. Friends try to adopt and that taken by some Opposition Members today is that, as well as trying to address some of the local problems and issues, we recognise that there have to be fundamental changes to the post office network and to postal services. Changes are taking place in the marketplace, in technology and in demand that cannot be simply wished away.

I listened closely to the carefully crafted opening remarks of the hon. Member for Twickenham (Dr. Cable) and read the Liberal Democrat motion, but at the end of the day I saw no real recognition that there are fundamental problems and changes that need to be addressed. Their approach today has been very much along the lines that something must be done and radical steps must be taken, but they are not sure what they are and there must not be any changes.

The Minister charitably suggested that the Liberal Democrats would not oppose the closure of some post offices, but the line that they have taken today and on other occasions has been to suggest that no post office anywhere in the country should ever close. If I do the Liberal Democrats an injustice I invite them to show me a single Liberal Democrat "Focus" newsletter anywhere in the country that has done anything other than condemn a sub-post office closure as outrageous, scandalous and attacking the fabric of the community. If I am being unfair and any of the diminishing number of Liberal Democrats here can show me such a leaflet, I shall be happy to give way to them.

I hope that the hon. Gentleman will understand that, in the context of local campaigning, I have yet to see a single copy of Labour's "The Rose" or the Conservatives' "In Touch" saying, "We are happy with the post office closure." I think that we should accept that we are talking about the big issues of the future of the Post Office in our motion and that any local party of whatever persuasion is bound to campaign against post office closure. It is unrealistic to think otherwise.

I am touched by that refreshing honesty. In my constituency, I have a problem where two sub-post offices in one area are closing and I have done my best to campaign, with the assistance of the Minister, for the retention of those postal services. I accept that the best solution may be one post office in place of two, so we do not all take the hon. Gentleman's approach.

I do not know whether the hon. Gentleman has seen the Liberal Democrat campaign document that advises candidates to "act shamelessly", "be wicked" and "Don't be afraid to exaggerate". It concludes with advice relevant to the point that the hon. Gentleman was making, saying:

"Oppose all service cuts. No cut is going to be popular and why court the unpopularity that goes with the responsibility of power".

I am glad of the hon. Gentleman's support on that point, but I now come to a criticism of his position on the matter. Although I enjoyed his quoting from the briefing of the National Federation of Sub-Postmasters, he showed, I believe, that it is always dangerous selectively to quote from a briefing that is sent to all hon. Members, as others are invited to draw attention to the other points that are made in that briefing. The federation has a realistic approach to the problem facing the sub-post office network, by contrast with Opposition Members. It states:

"It is accepted that there is duplication and overprovision in some urban areas, making those post offices commercially unviable. There is an urgent need for restructuring."

It goes on to state:

"Tough decisions must be made in order to ensure a viable network for the future to create bigger, better and brighter post offices … The larger customer base for some offices following restructuring should enable sub-postmasters in many cases to invest in improved facilities, additional counter positions and longer opening hours."

That is a realistic approach. Of course, the federation makes other comments, as one would expect from a lobby group whose role is to be critical of the Government and which is likely to demand action that they may not be able to support. The basic point, however, is that the federation supports the urban reinvention programme, and that should be emphasised in this debate. A dose of reality is required when we discuss sub-post offices and postal delivery services. Of course, all hon. Members support the universal service obligation; the Government and every hon. Member who has spoken support it. The universal postal delivery service must remain. Along with many hon. Members, I have signed a number of early-day motions strongly criticising the Postcomm proposals, as I do again today. At the same time, we must recognise that times have changed since the postal service was the only way in which communities—remote ones in particular—could stay in touch with the rest of the world.

Of course, the postal service still plays a vital role in communities throughout the country. We should be proud that, through the postal service, somebody in the Isles of Scilly can be in contact with somebody in Lerwick—or Leir-vik, as I believe we are meant to call it—just as easily and at the same price as somebody here in Westminster can communicate with somebody in the City of London a mile down the road. However, it is one thing to say that we should provide a cross-subsidy to enable people throughout the country and especially in remote areas to enjoy the same postal service as everyone else and allow them to stay part of the community and to stay in touch with friends and relatives, but quite another to say that we should give the same large cross-subsidy to enable direct mail marketing companies to send the same junk mail to everyone in the country—the sort of rubbish that finds its way into the bin whether it is delivered in Thurso or Truro, Edinburgh or London.

That is the reality of the changing way in which the postal service is used. There are no easy solutions. I am not calling for the abolition of the universal post; far from it—I want it to be retained. However, we must recognise changes in the marketplace and in the role that the postal service plays in our society.

The way forward is not to stay stuck in the past, but to rebuild a post office network to take account of changing needs, technologies and opportunities. The "your guide" initiative is an excellent scheme; like many hon. Members, I saw the display in Portcullis House. There are many opportunities to develop that system, perhaps by involving local government and other services that can be provided for communities.

The Liberal Democrats' approach seems basically one of managed decline of the sub-post office network. They do not have the same grounding in reality as the National Federation of Sub-Postmasters. We are all concerned about change in our areas and communities, and all of us will speak up for the interests of our communities whenever they are threatened, but I recognise that fundamental change is necessary. I welcome the fact that the Government are taking that need seriously and putting in £270 million to back up what they say with actions.

A great deal has been said in this debate that I would like to pick up on, but I have one careful eye on the clock and I am aware that other hon. Members want to speak, so I shall try keep my remarks within as narrow a compass as possible.

There were interesting contrasts between the speeches of the hon. Members for Edinburgh, North and Leith (Mr. Lazarowicz) and for Morecambe and Lunesdale (Geraldine Smith), who is unfortunately not in her place. If there is a race to achieve junior ministerial office, I suspect that the hon. Member for Edinburgh, North and Leith will probably win it, but I thought that the speech of the hon. Member for Morecambe and Lunesdale was a great deal more commendable.

The closure of post offices has been an ongoing sore in my constituency for many years. It strikes at the heart of island communities—especially the smaller ones that I represent. Rural post offices in such areas bring with them another Government wage and eventually a pension—money coming in to an island that would not otherwise be available. As other essential Government services such as coastguards and Customs and Excise are withdrawn, taking with them jobs from rural and island communities, particular importance must be placed on the continuation of post offices in our communities.

Barely a month goes by when I do not receive another letter from the Post Office telling me that yet another sub-post office is to close. It always happens because somebody has retired or is moving away, which is an indication of just how unattractive the job of sub-postmaster in a rural or island community now is.

I shall focus on the current Postcomm consultation on deregulation of letter post—a subject that has exercised many of my constituents and causes grave concern throughout Orkney and Shetland. In March, I presented at Downing street a petition bearing some 5,000 signatures; since that time, a further 1,000 signatures have been added. I have an electorate of 34,000, so about 17 per cent. of my electorate were represented. [Interruption.] I hear barracking from behind me, but I remind hon. Members that were my constituency situated on the mainland, it would stretch from London to Harrogate, so 1 am not looking for any extra pieces to be added, even if that were possible.

My main concern about the Postcomm proposals is that they are a licence for cherry-picking. I can see the great advantage of competition in attractive areas such as Glasgow, Edinburgh and other towns, but I cannot envisage much competition to deliver mail to Papa Westray or to Graemsay, which has a population of 17, or Papa Stour, which now has a population of 15. That is why the continuation of the universal service obligation is so important to my constituents and why we so desperately oppose the Postcomm proposals.

The proposals are the thin end of the wedge, as once the Post Office monopoly is removed, the universal service obligation will also go as sure as night follows day. I do not understand how Postcomm can possibly say that its primary concern is the preservation of the universal service obligation when it chooses to conduct a consultation about it after the current consultation on deregulation. To my mind, that seems a classic case of putting the cart before the horse, and I think that it gives the game away.

We have had experience of deregulation in relation to parcel post. Hon. Members can now pick up any Sunday supplement and see in the mail order advertisements small print saying "Free delivery to all mainland areas of the United Kingdom". We already routinely expect to pay a supplement for our parcel delivery service.

Postcomm's response to my concerns about the universal service obligation ending as a result of deregulation was to tell me, "Don't worry, old chap—we've thought about that one and we've got it sussed. The people who want the universal service obligation are the banks, credit card companies and big mail users, and they won't let it go." The real tragedy of that argument is that it was made with a totally straight face—I could almost have believed that it was made sincerely. I cannot believe that the Royal Bank of Scotland, the Bank of Scotland, Mastercard and American Express will go to the barricades to save the universal service obligation in my constituency.

The problems with Consignia have been well documented, and I am pleased that they are at last being taken seriously. Now, time should be given to allow the radical measures proposed by the Post Office in relation to the Postcomm consultation to bed in and take effect.

I want to say a few words about Postcomm—the regulator on a mission. I am disappointed that the Government take such an extremely non-interventionist attitude towards Postcomm. The Government have a duty, where they see a regulator acting as perversely as Postcomm, to intervene and pull it back into line. Whatever the fine print of the law may be, the fact remains that this House must ultimately be accountable for postal services, and the Government cannot be allowed to duck the issue in this way.

My other great disappointment over the past few weeks with the Postcomm consultation came from the body that one might have hoped would be prepared to take up the cudgels for the individual customers being served by the Post Office—Postwatch. When I met the chairman of Postwatch Scotland, he told me that it regards the big mail companies, banks and credit card companies as consumers as well, so it was prepared to represent their views as vigorously as those of my constituents. That unhelpful attitude leaves a big gap in the debate and a vacuum where there should be proper representation of constituency needs and wishes.

I deeply regret the exceptionally poor relations, as I see them, between Consignia and Postwatch. Having those two bodies, regulator and provider, at each other's throats, as they have been since the end of January, is not in any way helpful. My plea to the Minister is this. Do not leave it to the regulator, because it has shown that it is following an agenda that will be to the detriment of communities such as those that I represent. Get in there, bang heads together and get it sorted out.

I am grateful for the opportunity to speak in this debate. We seem to have a similar debate every few months as we follow the Post Office's progress.

Ministers are well aware of my concerns about the future of the Post Office. Many of its problems can be traced back many years. I want to separate the problems in postal services from those in the sub-post office network, as they are slightly different.

I well remember discussing the structure of the Post Office during the passage of the Postal Services Act 2000. The dilemma that we faced was how to allow the Post Office commercial freedom while retaining its role as a public service. Under the model that we came up with, a Post Office regulator—Postcomm—was introduced. Since then, the frailties and inadequacies of the management, operating under the old nationalised industry model, have become increasingly apparent, and their failure to cope with the change to a commercial freedom role has become increasingly obvious. I hope that the changes that have taken place since the introduction of Allan Leighton and David Mills to the Post Office's senior management will begin to make a difference.

On Postcomm, having a regulator in a public service will remain a problematic issue whether it is a publicly owned company such as the Post Office or a privatised utility. Wherever it is necessary for the public interest to intervene in the markets, and there is a regulator, that imposes a great deal of responsibility on that regulator, which needs to be at arm's length from the Government. I fully recognise the difficulties faced by my colleagues on the Front Bench in intervening directly. The key decisions that Ministers make about regulation concern the brief that is given to the regulator and the individual or individuals who are appointed to regulate. Let us be under no illusion. If Postcomm messes up when it produces its final report, and the universal service is not maintained because it is not financially viable, the regulator will walk away and politicians will be blamed.

I have noticed in discussions with privatised utilities that have moved through several regulation regimes that they are always dependent on the skill and knowledge of the regulator in being able to make a judgment on the degree of competition and. where relevant, of price fixing that it can impose on a monopoly or semi-monopoly. Postcomm has to make decisions on market access from other competitors and on whether to allow an increase in the price of first-class and second-class stamps. The job of a regulator is to make a judgment on whether the industry concerned is capable of making the internal reforms and changes that are required to meet external competition and price restraints. That is what happened in relation to many of the other utilities that were privatised. Getting it right places a great deal of responsibility on Postcomm.

One of my concerns remains the quality of the Post Office's management, because the key information on which Postcomm will make its judgment when it has finished its consultation is that provided by the Post Office. If that information is not robust or is badly put together or inadequate, there will be a grave danger of real damage being done to the Post Office in terms of postal deliveries. I stress to my colleagues on the Front Bench that that is my main anxiety.

I voted for the model that we established, but it depends on a Post Office management that can provide good and adequate information to the regulator, and a regulator who has skill and knowledge and is prepared to seek information to make an adequate judgment on the market in postal offices—on what it is and what it should be.

I want to consider also the post office network. We have debated the matter endlessly, but I believe that the existing network will continue to decline irrespective of what happens to the benefits system. More and more people will transfer benefits directly into their bank accounts, and fewer and fewer will collect them from the post office. The drip, drip decimation of the post office network over the past 20 years will continue.

We must also acknowledge and make it clear to our constituents that the post office network is, to all intents and purposes, a network of private businesses. It is not run, owned and controlled by the Post Office. If it needs to he subsidised, robust and adequate systems need to be in place to assess reasonable and fair amounts of subsidy to ensure that a specific rural post office is maintained.

Is my hon. Friend interested in the example that I would like to cite briefly of the post office in the largest town in my constituency, Coalville? It is not only rural post offices that experience commercial problems that lead to their collapse and create social difficulties. It has happened in Coalville and although there are other post offices in the urban fringes, the Post Office, or Consignia, appears extremely slow and not especially willing to find alternative facilities for a town of 30,000 people.

I shall deal with that shortly, but first I want to consider support specifically for rural post offices.

The PIU report set out a way forward, but we need to ensure that systems exist to ensure that money reaches the places where it is needed. The Post Office must properly assess the sort of rural network that is sustainable and should be sustained.

Similar problems exist in urban areas. I accept that where there are many urban post offices in close proximity, it makes sense to have a smaller network of larger and more viable businesses to serve the area. However, the trick is moving from the current position to where we want to be in dealing with private businesses. Sub-postmasters and mistresses say that they have never felt that Post Office Counters is good at communicating and working with them or at managing the system. Unless we get the right management to cope with the essential change in the urban post office network, it will not happen.

Many of our problems are down to getting the right management to work in the existing structure and to use the funding properly to ensure the maintenance of the post office network and the right postal delivery service. My greatest fear for both is that we may have left it too late to appoint the right sort of management to make the necessary changes to the business. Our constituents will not only suffer poorer postal services, but hundreds of them in most constituencies will experience employment problems because of the difficulties of the post office for which they work and for which they want to continue to work.

In my short time as a Member of Parliament, this is the third time I have spoken about the Post Office on behalf of the Scottish National party and Plaid Cymru. The direction appears no clearer, and we shall happily support the Liberal Democrat motion.

The position of sub-post offices in Scotland and Wales is precarious and causes great anxiety. It has already been said that the Government's determination to press on with automated credit transfer means that some 40 per cent. of post offices' income will vanish. It is difficult to understand how they will be replace that.

In opening the debate, the Minister spoke at length about network banking. However, the experience in my constituency is that banks, like many other businesses, have removed themselves from rural areas. In the past decade, banking services have retrenched out of rural areas. It reached the stage where one big bank was running an advertising campaign to try to gain a lead over its rivals on the basis that it was not closing branches.

In my constituency, several rural post offices have closed in the past few years. In the village of Farnell, the post office closed six months ago and is unlikely to reopen. The post office in Monikie keeps going simply because the current postmistress, who wishes to retire, has agreed to stay on in the hope that a new owner can be found. If that does not happen shortly, the post office will inevitably close. A third example is the post office in Marykirk, just over the border in West Aberdeenshire. It closed last month and will be converted into a house. The people of the village face a trip to Montrose in my constituency to obtain postal services. That may not seem a long way, but it is for those who do not have a car or are elderly or disabled.

The Minister cited the statistic, which Consignia also gave, that nine out of 10 people live within a mile of a post office. That is disingenuous when one considers the population break-up of rural areas. People in my constituency and in that of the hon. Member for Orkney and Shetland (Mr. Carmichael) face much longer trips to reach a post office.

Much has been said about the closure of post offices in the United Kingdom. In a rare bout of charity to the Government, I must say that it is not entirely their fault—the trend began some 20 years ago. In 1980–81, there were 22,475 post offices in the UK. That figure fell to just below 18,000 last year. It has been said that 547 post offices were closed in 2000–01. I appreciate that the rate has slowed, but that may be for various reasons. It is worth looking behind the statistics because they contain alarming messages for Scotland and Wales.

Most closures have occurred in rural areas, and 64 per cent. of all Scotland's post offices are in rural areas. In 2000–01, 89 per cent. of closures were of rural post offices. That is much higher than the UK average. The position is even worse in Wales, where 70 per cent. of post offices are in rural areas. That is the highest proportion in the UK. Last year's closure rate of 6 per cent. was again much higher in Wales.

It is not only rural post offices that are under threat. Consignia' s latest restructuring plan, which was announced in March, foresees the closure of up to 3,000 urban post offices—one third of the total. The closure rate is higher in deprived urban areas. We cannot consider the Post Office purely in terms of business, balance sheets and profit and loss accounts. There is a social element to it, especially in rural and more deprived areas. That must be acknowledged.

I should like to know more about the "your guide" proposals, which are innovative, although in some ways they seem simply a more electronic form of doing what many sub-postmasters have done for many years. Post offices have been the hub of the community.

The motion also refers to delivery services and the universal service obligation, which is vital to Scotland and Wales. Both nations have large rural and remote areas, and delivery costs are higher to them than to densely populated urban areas. If the universal service obligation and the universal tariff are allowed to go, it will spell disaster for postal deliveries in those areas.

The Government have previously said that they would insist on the retention of the obligation, but I would like the Minister to tell me how that would be workable in a system with a multitude of operators. Many of the players will wish to go for profitable urban routes, and there is a clear danger that rural areas in particular will be left out in the cold. It does not seem feasible to insist that one carrier, Consignia, should have a universal service obligation when others do not.

What would such an obligation mean to a carrier operating only in an urban area? It would be very easy to fulfil the universal service obligation and guarantee a universal tariff in such a location. It would be much more difficult, however, for a carrier operating only rural deliveries. Most hon. Members on this side of the House believe that Postcomm's proposals will ultimately lead to the end of the universal service obligation and the universal tariff.

International comparisons give serious cause for concern. In Sweden, for example, prices have increased by 72 per cent., and deliveries in rural areas are made not to the door but to cluster points along the postman's route. The number of post offices in Sweden has halved over the past 10 years, and employment in the industry has fallen by 20 per cent. In spite of that, the Swedish postal service now runs an operating deficit approaching £20 million a year. Furthermore, postal deliveries to rural areas in New Zealand now take, on average, two days longer than before.

When Sir Rowland Hill introduced the penny post in 1840, he did so to reform a system in which many carriers were operating services of variable quality and charging whatever they liked. Mail was paid for by the addressee, and if they could not afford it they could not have it. The Postcomm proposals seem to take us back towards that system. For all those reasons, we shall support the Liberal Democrats tonight, and we urge the Government to reconsider this matter before it is too late.

I am conscious of the fact that we are short of time, and I shall be brief. I would like to consolidate what I said in the two interventions that I made earlier in this very interesting debate.

First, I very much appreciate the remarks of the hon. Member for Angus (Mr. Weir), with which I have a great deal of sympathy. He will understand why, when I have said what I have to say. We have heard a lot about rural village post offices this afternoon, and "village" has always been synonymous with "rural". In a town called Herne Bay in my constituency, there are a number of villages. It is a town of 25,000 people, but within that town, Studd Hill, Hampton, Greenhill, Herne, Reculver, Broomfield, Beltinge, and Eddington Lane all regard themselves as villages. In that urban community, those village sub-post offices—those little private businesses—are every bit as important as the ones in the bigger towns. To suggest that it is possible to consolidate all those private businesses into a few bigger ones just because they are in a town—and to say, "That's all right, isn't it?"—is completely to gainsay the demands and requirements of the people living in the immediate vicinity of those little businesses.

Those businesses are used by many elderly people, by young mothers with babies in prams, and by people who regard them as the shopping core—sometimes their once-weekly contact with society—of their community. We must all—not just the Minister, but all of us—be very careful before we take that away and destroy it. If we take it away, we will never get it back, and that would be one social service gone.

Not much has been said this afternoon about the other bit of the debate on the Order Paper, which concerns the delivery service. Yes, we have rightly talked about the needs of the highlands and islands; I understand why. But who is going to compete to deliver a letter from Margate in my constituency to East Anglia overnight at the price that is now charged? Who is going to want to do that job?

I know who is doing the delivering at the moment, and I suppose I should declare a slight interest here. My wife and I have living in our house a young lady whom we regard practically as a daughter, who also happens to be a postman. We know what time she and thousands like her all over the country get up in the small hours of a dark winter's morning when it is bucketing down with rain. She goes into the sorting offices and does her job there. She then lifts a very heavy bag on to a bicycle or into a van—she is lucky enough, most of the time, to use a van—and goes out into the dark with a torch to deliver those letters, as thousands like her do all round the country.

Those are the people who tell the local bobby or someone like me that somebody is not well or in trouble and needs help. We have talked a lot about business, and I understand that this is a commercial business, but if we lose the expertise of all those people delivering all those letters, trudging and cycling all those miles all around the country every day except Sunday—although even on Sunday there are collections—we shall never get it back.

I want to say to hon. Members on both sides of the House—on my own Front Bench, on the Government Front Bench and in the Liberal party—that we must not take away something that is very precious. It has been damaged by some fool who turned it into Consignia, which is about the most crass thing to have been done since we changed the tail fins on British Airways planes and ceased to "fly the flag". It is just another brand image, but it matters to people and is very precious. If we destroy it, we shall never be able to rebuild it.

We need to take a step back and have a long hard think before we lose more of our urban village, and rural village, post offices, and before we sacrifice their work force. Yes, that work force might have Spanish practices—they need to be dealt with—but in the main, it is dedicated, hard working and does a job that most people in this House would not wish to do.