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BUSINESS OF THE HOUSE
Ordered,
That, at the sitting on Monday 25th October, the Speaker shall put the Questions necessary to dispose of proceedings on any Motions in the name of Margaret Beckett relating to Financial Services and Markets Bill (Suspension), Thursday Sittings, Meetings of Standing Committees, Sittings in Westminster Hall, Questions to Ministers, Select Committees (Devolution) and Advocate General for Scotland not later than Ten o'clock, and such Questions shall include the Questions on any Amendments selected by the Speaker which may then be moved.--[Mr. McNulty.]
Ordered,
That Jane Griffiths be discharged from the Committee of Public Accounts.--[Mr. McNulty, on behalf of the Committee of Selection.]
21 Oct 1999 : Column 675
Rural Post Offices
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
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
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
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 unit
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:
"To 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.
"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.
The editorial was entitled "Does anyone care?" I hope that the Minister cares, and that he will tell us why.
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".
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