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Mr. Patrick McLoughlin (West Derbyshire): Will the Secretary of State give way?

Mr. Byers: No. I want to make progress and deal with the important question of automated credit transfer.

Concerns have been expressed about the impact of ACT on the network, but the Government remain committed to its introduction, both because an increasing number of new benefit recipients choose that method of payment and because it is more secure and more cost-effective than existing paper-based systems. The average cost per transaction by ACT is 1p; the cost of an order book counterfoil is 49p, and the cost of a giro cheque is 79p. Moreover, we estimate that we should save about £200 million a year by reducing the amount of fraud and theft associated with order books and giro cheques.

For the avoidance of doubt, however, I can confirm that there will be no change in the existing methods of paying benefits before 2003. Between 2003 and 2005, the Benefits Agency will progressively withdraw the existing paper-based methods of paying benefits. The normal system will then involve payment into a bank account.

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We recognise that, for some benefit recipients, payment into a conventional bank or building society account may not be appropriate or desirable. We have therefore given a commitment that all recipients who wish to do so can continue to gain access to their benefits in cash at post offices both before and after the change to ACT-based methods.

Mr. Peter Bottomley: Has the Secretary of State any estimate of how much less money will be paid to sub-post offices as a result of the changes?

Mr. Byers: The hon. Gentleman is confusing two separate contractual arrangements--Benefits Agency payments to the bankers automated clearing system and transactions between the bank and the Post Office. Those contractual relationships will remain in place. If the hon. Gentleman disagrees with that, I shall be happy to allow him to intervene again, but I think he will find that our arrangements will give benefit recipients a genuine choice: if they wish to continue to receive cash, they will be entitled to do so, and that will not change following the transition to ACT.

Mr. Bottomley: Mine was not a trick question, nor was it confused. I merely asked what estimate of the change in sub-post office income was available to the Secretary of State.

Mr. Byers: We should consider the hon. Gentleman's question in the round, in the context of the extra facilities that post offices will be able to offer as a result of the measures that we intend to introduce. That is one of the reasons for delaying the move to ACT until 2003. The Post Office network will be in a stronger position to ensure that, if the move results in a loss--and I am not convinced that that will be necessary--it can establish other facilities ensuring that customers continue to go into post offices, either to obtain benefits or to make purchases.

Mr. Jonathan Shaw (Chatham and Aylesford): The Secretary of State's assurances about cash payments are welcome, but can he deal with a couple of points made to me by sub-postmasters about recent communications from their organisation? Will holders of bank accounts who choose to have their benefits paid in cash at a post office be able to receive it in that form?

Can my right hon. Friend also assure us that Crown post offices are safe under the Government? Sadly, two splendid buildings in the Medway towns were closed under the previous Government and the replacements are completely unsatisfactory. I should like that reassurance, too.

Mr. Byers: I can reassure my hon. Friend on Crown post offices. A minimum standard is now provided to protect the Crown post office network. On his important point about an individual who has a bank account, but who chooses to have cash paid at the post office, that person will still be able to do that between now and 2003. He will still be able to do that between then and 2005 as we move towards ACT, and he will still be able to do that after 2005.

The important point is that the individual benefit recipient will have a genuine choice. If he chooses to have his benefit paid in cash at the post office, he will continue

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to be able to do that. That is the position. He will be able to do that because an arrangement will be put in place between banks and the Post Office to ensure that that facility is available.

Mrs. Browning: For absolute clarity, will the Secretary of State confirm that if benefit recipients--people without a bank account--choose after 2003 to have their benefit paid in cash, that will be paid to them, without any cost to them, through a transferral from the bank to the post office? How will they receive the money? At the moment, they have books, which are being discarded, which we fully understand. Can he talk us through the procedure by which those people can exercise the option that he has described?

Mr. Byers: I know that there are some people--I will not associate the hon. Lady with it--who are trying to misinterpret the Government's position. I say this in direct answer to her question. There are two categories: there are those people who have bank accounts at the moment and those who choose not to have a bank account. We are working on an arrangement with the banks that will cover those who presently are unbanked, so that they will be able to get their benefit at a post office in full, with no deduction. Let us be clear: they will get the full benefit in cash at a post office.

For those people who have bank accounts, there will be an arrangement to ensure that the money is paid into the bank account. There will then be a facility to withdraw that money at a post office in cash, again with no reduction from the benefit payment. That is the situation that we are putting in place. It is simple. That is the position that will apply. There will be arrangements through Horizon to ensure that the individuals on the automated network will be able to secure that position.

Mr. John MacGregor (South Norfolk) rose--

Sir Peter Tapsell (Louth and Horncastle) rose--

Mr. Byers: I give way to the right hon. Member for South Norfolk (Mr. MacGregor) first. He is a former Chief Secretary to the Treasury, so I must give way.

Mr. MacGregor: I fully recognise that the Secretary of State is talking about 2003 and later, but is he aware that rural sub-post offices currently fear what will happen in 2003? Many have invested lifetime savings or have heavy borrowings. They are therefore taking decisions now and are concerned about what the position will be. They do not think that the options that he is giving will be adequate. Therefore, the crucial issue is what alternative services they can provide, to which he has just referred. Can he say something about the sort of alternative services that he thinks they will be able to provide and which will replace the lost income?

Mr. Byers: The right hon. Gentleman makes an important point. I want to come on to the alternative services that we might be able to offer through the network. The Post Office network system is a classic example of a public-private partnership. It is something that we should treasure and value. We need to put in place policies that will help to promote that. We have some ideas and I want to reflect on those, but may I address the wider point?

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What has concerned me in the whole debate is that there are people who misunderstand the Government's intentions. We have a responsibility to make clear exactly what we intend as a result of going to a system of ACT. I know that there are many worries among people who have invested much of their own money in the post office and are wondering what will happen. We need to do more to explain to them exactly what Government policy is and what our proposals are. If the message is that we need to get that over more clearly, we will need to reflect on that.

Mrs. Linda Gilroy (Plymouth, Sutton): Will my right hon. Friend give way?

Mr. Byers: I want to come to the right hon. Gentleman's point about alternative services, but before doing so I give way to my hon. Friend.

Mrs. Gilroy: Will my right hon. Friend confirm that the Treasury is investing £500 million in bringing ACT to post offices? Does he agree that the Treasury, which is known for its prudence, is hardly likely to do that if it is going to shut down a large number of post offices?

Mr. Byers: It is true that around £500 million is being invested by the Government in the Horizon network to automate fully the Post Office network. That is where the investment is being made. That is a tangible demonstration of our commitment towards the Post Office network, but I address again the point about the costs and the different contractual relationships.

There is an issue about the cost to the Government being just 1p when we move to ACT. The reason is because the Benefits Agency pays a fee of around 1p to what is called the BACS system, which is owned jointly by the banks, for the transfer of the payment into the recipient's bank account. There is no contractual relationship as such between the Benefits Agency and the Post Office for such a transaction. Equally, that will be the position after the introduction of ACT.

What concerns many sub-postmasters and mistresses is what will happen to the financial relationship that they have at the moment with many banks for providing a cash withdrawal system. Many of those contractual relationships are already in place. I understand that sub- postmasters and mistresses are paid in many cases in excess of 17p per transaction on a range of transactions carried out by the Post Office on an agency basis for the banks.

Nothing that we are proposing should alter those arrangements. Indeed, there is an argument to say that there will be even more transactions because of the way we intend to develop the system through ACT, so there is no question but that the present contractual relationships between the banks and sub-postmasters and mistresses will remain in place. They will be able to get payment for the transactions that take place, which they carry out on an agency basis for the banks themselves. That will remain in place. Nothing that we are proposing will affect that.

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