§ Motion made, and Question proposed, That this House do now adjourn.— [ Mr. McNulty.]6.59 pm
§ Mr. Archy Kirkwood (Roxburgh and Berwickshire)
I am pleased to be able to raise this issue so early in the overspill period. I welcome the Minister to the debate: he has some experience in these matters, and we are delighted that he has a chance to bring it to bear in the Department.
During the summer, my hon. Friend the Member for Tweeddale, Ettrick and Lauderdale (Mr. Moore) and I engaged in consultation in our respective constituencies on the impact of some of the proposed Government changes on the future viability of closed offices. With your permission, Mr. Deputy Speaker—I believe that the Minister has no objection—my hon. Friend may seek to catch your eye later.
Three things were made clear by our consultation. The first—I am sure that the Minister does not need to be told this, for everyone knows it in their heart of hearts—was the importance of the social role played by post offices, especially small community and sub-post offices, in village communities. They have a social dimension, and they are often a focal point. Their value goes beyond their economic importance.
Secondly, it was clear that there was considerable uncertainty, indeed confusion, in the minds of sub-postmasters and sub-postmistresses in regard to the future, and how their financial viability would be sustained in the wake of some of the changes that will come on the back of the legislation for the Post Office that we expect to feature in the Queen's speech.
The third thing that was made starkly clear involved profitability. The Post Office representatives whom we consulted spoke with a single voice: they all said that their profitability was being continuously and inexorably undermined, to the extent that some were wondering whether they could remain profitable. In my constituency, post offices have recently been closed in Wilton Dean, in Hawick and in Heiton, just outside Kelso. There have been closures because of a lack of candidates for the job of postmaster or postmistress in other parts of my constituency, such as Auchincrow, Birgham and Burnmouth. There is a lot of stress out there, and a lot of anxiety.
For many years, the rural post office network has been supported by the peculiar dependence on transaction charges for benefit payments. It mainly involves pension books, but it involves the whole range of benefits. In the recent past, post offices have derived their core income from those sources, on which they have come to depend. An average of 35 per cent. of annual income is derived from them in typical rural sub-post offices. I am told that in inner cities the figure is even higher: it can be as high as 60 per cent., and apparently some 80 per cent. of annual income is derived from the giro-cheque system of benefit payment in one post office in inner-city Glasgow.
The National Federation of Subpostmasters estimates that at present some 5,000 post offices are on a financial knife edge. We all know—the trends can be seen in the records and the statistics—that between 200 and 300 sub-post offices are closing each year, before the 676 introduction of any changes, and I believe that making automated credit transfer payments compulsory could well be the last straw for many businesses. When we talked to people in south-east Scotland—in the borders—in the summer, we learned that many were planning to get out before things became worse. Many have mortgages, and their homes are part and parcel of their businesses. They live above the shop. They are concerned about the capital value—the capital assets—represented by their businesses: they are so worried about the possibility that those businesses will become unsustainable and debts will begin to accrue that they may leave.
It is a mistake to scaremonger, but I believe that the next six months will be crucial. Either the Government will be able to give some encouragement to professional people who provide communities with a valuable social service—as well as an economic service—about their viability in the medium and longer term, or many will leave. That would be a very bad thing.
We must go back to 1996 and look at the original conception of the Horizon project. The previous Administration had a good idea, which had a dual benefit in the Horizon programme. They decided to introduce a Benefits Agency payment card. We all remember the pictures of the former Secretary of State for Social Security, the right hon. Member for Hitchin and Harpenden (Mr. Lilley), waving the card at the Conservative party conference. It was one of the years when he did not sing. The audio-visual aid was the new benefit card, which never saw the light of day.
That was an anti-fraud initiative by the Department of Social Security and had value for that reason alone, but it was used to spearhead the automation of the Post Office network. The two separate policy items had a synergy. They complemented one another. They were an imaginative way forward.
Those two strands of policy are being disaggregated. Automation of the Post Office will be carried forward without any assistance from the benefit payment card. In 2003, the DSS will move directly to automated credit transfer. There are plans to begin to make all payment of benefit cheques via automated credit transfer and banks. That will start in 2003. The process is due to be completed by 2005.
Obviously, there are massive Government advantages with that. The Benefits Agency budget, about which I am concerned as Chairman of the Select Committee on Social Security, will be £400 million per annum better off. The Department will have better control, particularly over new resource and accounting procedures, where Government Departments have to trace where their assets are at any given time. It will obviously give wider choice. E-commerce is, rightly, a priority for the Government. I encourage them to go in that direction. It will do something to remove the distinction between people in work and people who depend on benefits. All those things are good. I make no secret about that. There are clear advantages.
Having said all that, the Government may intend that people who wish to continue to collect their benefit cash via post offices will be able to do so after the move to ACT in 2003, but they will do that only after the Post Office has introduced suitable bank technology. If people think, and some do, that they will continue to be able to 677 opt out of ACT compulsion in 2003, take their giro book and collect their pension from the post office, they are wrong, as far as I understand the Government's scheme.
if I am wrong, it will be helpful to me, if to no one else, if the Minister puts me right. I do not think that there will be the option to cash any benefit giro cheque in a post office after 2005. It might be done through hole-in-the-wall ATMs—automatic teller machines. It might be done by some clever Barclays scheme, but it will not be done by benefit giro cheque book.
I urge the Government to make that position clear—I nearly said, "Come clean." I do not want to be pejorative, but there is much confusion about what the consequences of the change will be. I am worried about that for several reasons; I again refer to my responsibility for the Social Security Committee.
I was interested to see recent research—it was published in April 1999—by Thomas and Pettigrew called "Attitudes Towards Methods of Paying Benefit." It was instructive. It examined how claimants wanted their benefits to be paid.
The study's main findings were clear. It found that, in general, those who received benefits often budgeted in cash on a weekly basis, as opposed to those who were better off, or in employment, who were much more likely—like, I guess, the Minister and me—to budget monthly through a bank. Benefit claimants clearly prefer a cash-based weekly budget.
We can understand why that is important. People saw order books as providing a guaranteed amount of money on a guaranteed date. That is important for people who live in a financially insecure context. The reasons why they did not want to opt to use ACT included the perceived cost of running a bank account—they will have some real worries about that if Barclays bank gets its hands on the system—concerns about reliability and, in rural areas, closure of local bank branches.
People were also concerned that the system would mean that they would be able to withdraw only whole pounds of money at any given time. Some claimants—it is an important point; I cannot stress it enough—did not want their money to be put into a bank account because their account was overdrawn and the benefit would be used by the bank to cover the overdraft. Therefore, we have some very serious concerns on matters that may dramatically affect how benefit claimants live their lives.
As I said, there are also real worries that, if banks do not play the game properly, although they will still be providing a service, they will do so in a way that is not conducive to the interests of those in the bottom decile of household incomes.
I was very pleased to see in today's Financial Times an exhortation by the Minister for Small Business and E-Commerce—who is also a distinguished former member of the Social Security Committee—to the banks to take action to deal with financial exclusion. She said that, if necessary, she will shame banks into providing a service. She is absolutely right on that issue, and I am pleased that the Government are taking action on it. There is a real worry that charges will increase.
Postmasters are concerned that they will lose money because they will have less Benefits Agency business, that they will receive less money per transaction for any business that remains after 2005, and that they will have 678 fewer customers through the door to take advantage of other services and goods that they provide. For all those reasons, the owners of those small businesses are on a very difficult financial footing.
I am delighted that today's written answer from the Prime Minister states that he has asked the performance and innovation unitTo identify the contribution made by post offices to the vitality of local communities … and in the process formulate objectives for the Post Office network.I very strongly welcome such action, particularly if it is taken as recommended at paragraph 37 of the 12th report of the Select Committee on Trade and Industry, which deals with the need for the Government to recognise the network's value and to support it financially. The Government should not simply leave the issue of support to the postal services and to ancillary retail outlets, but recognise that there is a social role for rural post offices and support them accordingly. If the innovation unit's report is to tackle that agenda, I should very much welcome it.
I draw the Minister's attention—although I am sure that he is already a subscriber—to The Subpostmaster magazine's September editorial, which states:There will always be those in society who need personal care, not just the elderly, but those who find it difficult coping with modern living.We have always provided that service in our offices as part of our daily routine.There is so much essential and unpaid service provided in sub post offices of which those who prowl the corridors of power are unaware and that society will not miss until it has gone".The editorial was entitled "Does anyone care?" I hope that the Minister cares, and that he will tell us why.
§ Mr. Michael Moore (Tweeddale, Ettrick and Lauderdale)
I am grateful to have the opportunity of speaking very briefly in this important debate. I am particularly grateful to my hon. Friend the Member for Roxburgh and Berwickshire (Mr. Kirkwood) and to the Minister for agreeing to my participation.
This debate is on a very important issue. As my hon. Friend has made clear, this summer, as we travelled round our constituencies and the borders, the Post Office's future was identified as a concern not only to those who run and work in post offices, but, most important, to many of those who use post offices.
Time and again, people stressed to us the importance of rural post offices to the communities they serve, not only in providing the more obvious Post Office services, but, as my hon. Friend said, because of the important role that they play in servicing the Department of Social Security and, equally—this is the unsung part of the work done by rural post offices—the general advice they hand out and information on the community that they know, simply because they are the focal point of those communities. In a world in which forms are getting ever more complicated and demands on people are getting ever more pressing, it is very important that that role played by rural post offices should be recognised.
We believe that the viability of rural post offices is under threat because of a process that has been in train for some time. Post offices worry that, in the next few months, if the Government's proposals remain 679 unamended, their viability will be seriously in doubt. However, the post offices are also keen to stress that none of them ant handouts. They are not looking for a Government subsidy, but want to do real work of benefit to their communities and to run profitable businesses. Many now stare the future in the face concerned that the business is going to dry up and that their pension, which is built into the capital value of the business, will be eroded.
The White Paper on the future of the Post Office properly focuses on some of the big issues facing the Post Office generally, but there is real concern that issues affecting rural post offices are not being tackled seriously or sensibly. The post offices in our constituencies across the Scottish borders are the centrepieces of most rural communities. They are already struggling and most are fearful. They need reassurances from the Minister this evening about their future.
§ The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Alan Johnson)
I thank the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) for his kind remarks. To quote the National Federation of Subpostmasters journal, I am now prowling the corridors of power, but for many years I was up at four o'clock in the morning as a rural postman dealing with the rural network. I am pleased to be able to make my maiden speech as a Minister on the subject of rural post offices.
I congratulate the hon. Gentleman on picking this subject for his debate. It is an issue of concern to many people living in rural areas. We opposed the previous Government's plans to break up and privatise the Post Office for many good and valid reasons, but none was more important than our concerns about the effects that privatisation or separation would have had on the rural network of post offices. We understood then, and we understand now, the important role that post offices play in village life and their importance to the poorer and less mobile members of the communities. Their unofficial services are exceeded only by the official services that they provide. I know from my experience of postmasters and postmistresses who go to find out what is wrong if a pensioner does not arrive to collect his pension. That is a crucial part of the social obligations that post offices carry out.
The debate takes place against the background of the announcement by my right hon. Friend the Prime Minister that he has asked the performance and innovation unit in the Cabinet Office to carry out an urgent study on the post office network. The reasons behind that move are the same as the concerns that the hon. Gentleman and his hon. Friend the Member for Tweeddale, Ettrick and Lauderdale (Mr. Moore) have expressed this evening. The PIU study will seek to identify the contribution made by post offices to the vitality of local communities, to consider how the post office network can best contribute to the Government's objectives for the future and in the process to formulate objectives for the continuation of the post office network.
680 I pay tribute to those post office managers who have done a superb job over the years balancing social needs against commercial objectives. It is a credit to them that 60 per cent. of rural parishes have a post office, whereas only 5 per cent. have a bank. That has been achieved by a combination of remuneration scales that offer additional help to the least viable offices and efforts to ensure a continuing post office presence when sub-postmasters and postmistresses retire and the existing premises close. The social, technological and demographic environment in which post offices operate has undergone considerable change. The process seems likely to speed up rather than slow down, so it is timely to pause and take stock. I very much welcome the PIU study, which will enable the issues and concerns to be fully aired and properly considered.
I should like to confirm again as categorically as I can the message of my immediate predecessor, my right hon. Friend the Member for Makerfield (Mr. McCartney) and my right hon. Friend the Secretary of State for Trade and Industry: the Government are fully committed to the maintenance of a nationwide network of post offices. In addition to launching the PIU study, we are backing our words with specific positive actions. In our White Paper "Post Office Reform" we have said that, for the first time, we shall publish access criteria for post offices, which the new postal regulatory commission, assisted by a revamped Post Office Users National Council, will have a duty to monitor. We are determined to ensure that everyone has reasonable access to the services provided by Post Office Counters.
We have taken a further important and practical step—we have put the Horizon project back on track. The House will recall that that is the project to automate the counters network. That project is crucial to the future of that network, since it will allow the business to streamline its internal processes and offer an improved service to clients and customers. The project that we inherited from the previous Administration was immensely complex and was running some three years behind schedule, with consequential cost overruns.
We have reconstructed the project in a form that greatly simplifies it, both technically and contractually. As a result, every counter position in every post office in the land—18,000 post offices and 40,000 counter positions—will be equipped with a modern on-line information technology platform by 2001.
As part of the process, we decided to discontinue work on the development of a benefit payment card as an integral part of the Horizon project. After a long and careful review of the project—making extensive use of independent experts—we had serious doubts about the ability of the contractor to deliver the project as originally configured. This is not an attempt to apportion blame. I genuinely feel, as did the hon. Member for Roxburgh and Berwickshire, that the previous Government made an honest attempt to move to a more up-to-date system. However, the decision to streamline and simplify the project by removing the benefit payment card was taken on wider grounds also.
The reality is that increasing numbers of benefit recipients choose to have their benefits paid directly into 681 their bank accounts. Thus, 54 per cent. of new child benefit recipients and 47 per cent. of new pensioners now choose to be paid by automatic credit transfer to their bank accounts. Against this background, we saw the priority as ensuring that post offices were equipped as quickly as possible with the facility to enable both benefit recipients and other bank customers to access their accounts at post offices. The key to this is to equip the network with the Horizon platform as quickly as possible, and that is what our decision will achieve.
Horizon will enable the Post Office to extend its commercial arrangements with the banks to enable benefit recipients and others to access their bank accounts at post offices. We have given a clear assurance in the White Paper that all benefit recipients who wish to do so will be able to continue to access their benefits in cash at post offices after 2003 when the Benefits Agency plans, over a two-year period, to move to a more modern and efficient means of payment, using the existing ACT system.
To assist the Post Office, the Government have agreed to make a substantial contribution to the capital cost of the restructured Horizon project, which represents a major investment in the future of the counters network.
Looking further to the future, the post office network—with its nationwide reach—represents a valuable channel for the delivery of Government and other services. This reach, coupled with the deployment of Horizon, should ensure that the Post Office is well placed to bid competitively to deliver electronic Government applications. We are, of course, ready to look at any new proposals that the Post Office may come forward with to diversify into new areas of business.
I have outlined some of the positive steps and initiatives that we have taken, and are taking, to secure the future of the nationwide network of post offices, including those in rural areas. However, I assure the hon. Member for Roxburgh and Berwickshire and the House that there is absolutely no complacency on the Government Benches. Over the last four years, the network of post offices has shrunk from 19,607 to 18,775—an average annual net loss of around 208 offices. The majority of these losses have occurred in rural areas.
That net figure hides a still greater number of closures, offset by the reopening of offices that had closed in previous years, and the creation of "community offices", which are open typically for just a few hours a week to carry out a limited range of services. In Scotland as a whole, there has been a net loss of 65 post offices over the same period. In the hon. Member for Roxburgh and Berwickshire's constituency, a total of 55 offices in March 1995 has shrunk to 46 offices, a net loss of nine offices.
It would be unrealistic and undeliverable for the Government to claim that no post office will ever close. About 18,000 out of the total network of approaching 19,000 post offices are run on a franchised or agency basis, the majority of them by individual business men and women, usually in conjunction with some other retail outlet.
That is the position with virtually the entire rural network, and, without that partnership, the rural network as we know it today would certainly not exist. It is estimated that sub-postmasters and sub-postmistresses have collectively sunk around £1 billion of their own money into their sub-post offices.
682 The ability to share overheads between the two sides of the businesses is often a crucial factor in the viability of each. The footfall generated by customers collecting their benefit payments or carrying out other post office business at the counter and then making purchases on the private side of the shop is an important part of the symbiotic relationship. The village store with its associated post office frequently becomes a focal point for village life: a place where people meet and information is gathered and exchanged.
The sub-postmasters and sub-postmistresses—I wish that we could find a generic term for them—are the backbone of their rural communities and are rightly held in huge regard by the people whom they serve. There is not time in this short debate even to begin to do justice to the many examples of exceptional dedication, but I am sure that all hon. Members here tonight will have examples from their constituencies and join me in paying tribute to that exemplary level of public service.
Those independent business men and women need to know that there is a viable future for their businesses. The viability of the network depends partly on Government, but also in large measure on local communities continuing to make sufficient use of their local post office and village shop. If customers stay away, it is unlikely that Government initiatives alone can suffice.
I do not want to disguise the undoubted difficulties that the transition from paper-based to electronic methods of paying social security benefits will cause for Post Office Counters Ltd. The transition, and its financial consequences for the counters business, will be an area to which the performance and innovation unit will pay particular attention in its work over the next month. The hon. Gentleman was right to say that the next six months will be crucial to the network's future.
The network needs to have the flexibility to be able to adapt to changing demographics and social preferences. More and more individuals are happy to interact electronically with a range of institutions, including banks and building societies. Increasingly, institutions—including Government—are keen to promote and encourage those modem means of communication. The Horizon platform should leave the counters network well placed to take advantage of those trends.
We should not forget that the network of Post Office Counters brings some formidable strengths. I have already referred to the skills and dedication of the sub-postmasters and sub-postmistresses, and the trust and high regard in which they are held by their customers. Despite some shrinkage of the network over the past decade, it remains the largest retail network in Europe. Within the United Kingdom it has an unrivalled reach, with 10 times as many outlets as Boots, Tesco and W. H. Smith combined, and more than all the banks and building societies put together. It is ubiquitous with a capital U.
The business has shown that it is more than capable of taking on new areas of work, and making a success of them. Recent examples include bureaux de change—the Post Office is now the biggest bureau de change operator in the country—the national lottery, the sale of basic insurance products and the extension of banking facilities to customers of the Co-operative bank and Lloyds TSB. 683 The arrival of the Horizon platform, which will shortly celebrate its 1,000th installation, should greatly enhance the attractiveness of the counters network to a range of potential new clients and business opportunities.
This evening's debate has been about the future of rural post offices but I would not want to lose the opportunity to pay tribute to the offices that the Post Office runs and 684 staffs directly—the so called Crown offices—where we have agreed in the White Paper that 15 per cent. of transactions will continue to take place.
Those are the reasons why the post office network in urban and rural areas is crucial to the Government's plans for the future. It is crucial to our policy on ending social exclusion and to the future of our rural communities.
§ Question put and agreed to.
§ Adjourned accordingly at half-past Seven o'clock.