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Mr. Laxton: Will the hon. Lady give way?

Mrs. Browning: If the hon. Gentleman will excuse me, I have answered his question and I should like to respond to my hon. Friend. The record shows that right up until May this year no one in the DTI Front-Bench team, either in written or oral answers to hon. Members on both sides of the House, gave any indication that there was likely to be a problem with this system, let alone that the problems were so severe that it would be abandoned within three weeks of ICL making a public statement.

Mr. Mark Todd (South Derbyshire) rose--

Mr. Tony Clarke (Northampton, South) rose--

Mr. Ian Bruce (South Dorset) rose--

Mrs. Browning: I shall give way to my hon. Friend the Member for South Dorset (Mr. Bruce).

Mr. Bruce: Did my hon. Friend see the two press releases that were produced when the scheme was abandoned: one from ICL, which had been approved by the DTI, and one from the DTI? Those two press releases were at odds with each other. The scheme was clearly not keeping to the timetable, because the NIRS2 computer, which was to provide the information, was not available. It was nothing to do with the roll-out of the Post Office. When the Conservative Government introduced this scheme, they went for the more expensive option of paying through post offices for the social reason of keeping those post offices open.

Mr. Deputy Speaker: Order. This intervention is getting far too long.

Mrs. Browning: My hon. Friend is right. I have a copy of the Secretary of State's letter dated 27 May this year, in which he informed us of his decision. There is no attempt to explain the decision. He says:

The only explanation he gives is to say:

    "It has suffered severe delays and setbacks."

That is contrary to what had been said in answer to questions only a matter of days before.

Mr. Tony Clarke: I refer the hon. Lady to the comments of the Secretary of State, who said that the project has been delayed for three years. We have been in government for two years. Which part of that mathematical equation does she not understand? Will she answer the question put by my hon. Friend the Member for Derby, North (Mr. Laxton)? Why was the contract renegotiated in February 1997?

Mrs. Browning: It is very simple. The Government have had full responsibility for this programme for more than two years. The hon. Gentleman asked me to answer a question. If there were problems with this system in the

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past two years, one would have expected Ministers to have flagged that up in parliamentary answers. Even in the letter in which it is announced that the system is to be abandoned entirely, there is no explanation and no allegation that it was because of incompetence and serious problems with the computer. I repeat that this is a Treasury-driven decision with huge consequences for rural post offices.

I give way to the hon. Member for South Derbyshire (Mr. Todd), who has been very patient.

Mr. Todd: The hon. Lady set out clearly the cost differentials of the various methods. Does her analysis mean that the Opposition disregard those cost differences and regard them as unimportant?

When ICL Pathway announced its view of the closure of the scheme, the managing director said:

That was a fundamental problem with this projectright from the start when it was conceived by your Government.

Mr. Deputy Speaker: Order. It was not conceived by anything to do with me. Mrs. Browning.

Mrs. Browning: When I read out the tariff, the hon. Gentleman will have heard me say that the payment card, which the Conservatives designed and put in place, would have cost 67p. We supported that, because we supported a vibrant rural post office system on which small communities depend. It was a cost that we were prepared to support, because it had far-reaching consequences for the heart of fragile communities in rural areas.

Mr. David Chidgey (Eastleigh): Will the hon. Lady give way?

Mrs. Browning: I am answering a question. Whatever the consequences of the Secretary of State's decision to deny post offices that opportunity, if serious problems developed in the two years since they have had stewardship of the scheme, they kept them a well hidden secret. That is not characteristic of the Government, who are constantly baying about what the previous Government did. They keep repeating the mantra: we have inherited this, we have inherited that. Yet they kept discreetly quiet about the Horizon project. That is a suspicious indication that there is another agenda.

Mr. Chidgey: I believe that 3,500 sub-post offices were closed during the 18 years for which the hon. Lady's party was in power. The pathway project came to light in the final three years. I do not recall that the Conservative Government showed any concern about the closures that took place in the preceding 14 years or so. Can the hon. Lady tell me what they did then?

Mrs. Browning: The hon. Gentleman will know, as I do--I represent a large rural constituency--that one reason why post offices close is that all too often they are not viable in terms of the full range of services and products that they sell, sometimes purely on site. Post offices in my constituency are little more than converted sitting rooms in cottages. People who retire at, say,

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50 often take on such businesses, run them for 10 or 15 years and, when they retire from that, find that the businesses cannot be sold as going concerns.

Conservative Members are only too conscious of the fragility of the economy of those post offices--which, I should add, are not just post offices but village shops. That is why we were prepared to put public funds into the card system. That helped to deal with the DSS fraud problem, and also helped to support fragile rural communities.

Mr. Martin O'Neill (Ochil): Will the hon. Lady give way?

Mrs. Browning: As the hon. Gentleman is the Chairman of the Select Committee, I will give way to him, but then I want to make some progress.

Mr. O'Neill: Perhaps the hon. Lady will share some information with us. What proportion of the 67p would have gone to the post offices, as opposed to the 7p? The hon. Lady might mislead the House, albeit by accident, if she suggested that all 67p would have gone to the post offices. I think that the administration costs were rather more substantial in the original scheme.

Mrs. Browning: I certainly would not wish to mislead the House. The hon. Gentleman is right, in that the tariff that I read out--with which he will be familiar--did, in my view, influence the DSS's decision to abandon the project. He will know, however, that the formula used for payments to post offices involves the number of transactions that they handle. If people went into their local post offices with cards, that would have meant remuneration for the post offices. Payment through bank accounts means no such remuneration--or so we think; I hope that the Secretary of State will give me a pleasant surprise by telling me otherwise. Moreover, there is the "lost opportunity" cost, in the case of post offices that sell other goods.

Mr. Edward Leigh (Gainsborough): Will my hon. Friend give way?

Mrs. Browning: Yes, but this is definitely the last time.

Mr. Leigh: Will my hon. Friend confirm that it was for all the reasons that she has mentioned that the last Government decided not to privatise Post Office Counters, wishing to preserve the rural network? Will she also confirm that it was the wish of that Government, and that it is the firm and settled intention of the party that will form a future Conservative Government, to proceed with the privatisation of Royal Mail, while at the same time preserving that Post Office Counters rural network?

Mrs. Browning: We have already made known our support for the Government's decision to privatise Royal Mail, although, as I said earlier, we are a little disappointed that the Minister is to retain 100 per cent. of the shares. We shall have to see what we inherit at the next election, but I predict that, if it has not already happened by then, the sale and disposal of those shares will be imminent by the time of the next election. It is clear from the White Paper that the Government would

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like fully to privatise Royal Mail--I make a distinction between Royal Mail and the Post Office Counters network--and we support them on that; but they have been held back by pressure from the unions.

Nearly 8,000 sub-post offices are in rural areas, and have limited opportunities to expand their business. They have a 35.4 per cent. dependency on the Benefits Agency work that they handle. Let me quote what the Secretary of State said about the rural network, on page 63 of the White Paper:

The Secretary of State also said:

    "Similarly, the unique reach of the counters' network, coupled with the Horizon platform, should mean that POCL"--

Post Office Counters Ltd.--

    "is well placed to offer a major channel to deliver the Government's ambitions to interface with citizens in a modern, convenient, efficient and coherent manner through the increasing use of IT."

It would be helpful if we could investigate in more detail today exactly how those words will be turned into income for small post offices in rural areas.

I remind the Secretary of State that it was on the eve of the countryside march that he was called in by the spin doctors, and was shown on our television screens giving an assurance about the future of rural schools. He made that statement, on a Saturday night, to try to placate people in rural areas who were going to march through London the next day. He promised that no rural village school would close, because the Secretary of State for Education and Employment would intervene personally. That statement was made against the background of a Bill that the right hon. Gentleman was taking through the House at the time and which clearly provided for those powers to be removed from the Secretary of State.

I know that the right hon. Gentleman was set up that night. He was probably the only Minister on call. Let me, however, say this to him--in the warmest way I can, but quite seriously. People in rural areas do not want empty promises and platitudes from the Government. The Government have a long way to go to persuade people in rural areas that they understand either how such communities function, or the importance of what is at the heart of the rural way of life. I can assure the right hon. Gentleman that the post office is at the heart of the life of rural village communities, and that those communities will not forgive the Government if they make empty promises about its future.

Post offices, their customers and Conservative Members now look for substantive replies from the Secretary of State, so that the post offices can plan for the future. They face a huge change by 2003, which is not very far away. I should be grateful if the Secretary of State would answer some of our questions.

First, who will bear the cost of the transfer of ACT payments from a bank account to a local post office, allowing cash withdrawals? Secondly, will post offices be free to contract with all private sector companies handling mail costing more than 50p per item? Thirdly, what did those words in the White Paper mean? Presumably,

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the Government intend post offices to continue to offer services that are Government-generated, and to receive remuneration.

What is meant by that? Presumably, post offices will have to tender competitively if they are to deliver information on behalf of the Government. If POCL won such tenders from the Government for the extra work, what revenue would they produce? Have any calculations been made? Given that 30 per cent. of their revenue will disappear in 2003, it is important for these small businesses to know how to plan to make up that 30 per cent. Moreover, they will want to expand rather than remaining where they are today.

Fourthly, what guidance will be given to POCL concerning the cross-subsidy between urban and rural areas? At present, 200 post offices are closing each year. Yesterday Mr. Martyn Baker, director of consumer goods, business and postal services, was asked by the Select Committee about the number of future closures. His reply was interesting. He said that Germany had approximately half as many post offices as the United Kingdom, with approximately the same volume of business. Of course, they do not have to deliver any benefits--and that will be the position of the UK post offices by 2003.

What are we to conclude from such an answer? I seek specific reassurances from the Secretary of State, but I can only conclude that, if we are to produce a model similar to Germany's by 2003, we can expect approximately 50 per cent. of our existing post office network to disappear even before then.

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