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Mrs. Browning: Just for clarity, the press release that was issued by the Minister for Competitiveness on 11 February states:

What does that mean?

Mr. Byers: I will say it a bit more slowly this time, so that the hon. Lady can follow. The point that I was trying to make was that the 17p transaction fee that is paid to post offices on an agency basis for the work that they carry out for banks will remain in place. Nothing that we are proposing changes that contractual relationship. Indeed, in some contractual relationships, they receive more than 17p per transaction, so the benefits of receiving that income will still remain. It is different from the BACS system, which involves a relationship between the Benefits Agency and the banks. The 17p per transaction is a commercial relationship between the banks and the Post Office, where the Post Office acts as an agent for the bank and charges the bank accordingly. Nothing that we are proposing affects that commercial relationship.

I regret the fact that some commentators who should know better seem to have confused the two and, indeed, are briefing people that it will suddenly drop to 1p per transaction. The 1p is the sum that the Benefits Agency pays the banks under the BACS system. That does not affect the contractual relationship--a distinct relationship--between the Post Office network and the banks themselves. The agency transaction that applies there will remain in place.

Mr. Russell Brown (Dumfries): Will my right hon. Friend give way?

Mr. Byers: I will give way once more and then I want to make some progress.

Mr. Brown: Will my right hon. Friend clarify something for me and, I suspect, for others? If someone goes in with a benefit book for a cash transaction, the sub-postmaster or sub-postmistress will receive about 11p or 12p for that transaction. Is my right hon. Friend saying that, in future, if that person opens a bank account and receives cash from that account over a post office counter, that sub-postmaster or sub-postmistress could well receive 17p for the transaction? Is that what he is saying?

Mr. Byers: That is a transaction arrangement between the Post Office and the bank and will be dealt with on an agency basis. It will be determined, as it is now, in commercial negotiation between the Post Office and the bank system. On average, the transaction fee is now 17p, if not more, for each transaction that is performed. There is nothing in the Bill or in the ACT arrangements that will change that contractual relationship.

I should like to deal with the point raised by the right hon. Member for South Norfolk on the alternative services that might be provided through the Post Office network.

Mr. McLoughlin: Will the right hon. Gentleman give way?

Mr. Byers: No, I should like to make some progress. [Hon. Members: "Give way."] As Conservative Members

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know, I am generous to a fault in giving way. However, I should like to make some progress, as many Back Benchers would like to speak in the debate.

We are investing half a billion pounds in equipping all post offices with a modern, on-line computer system that will enable them to provide a wider and better range of services. The Horizon platform will enable the Post Office to extend substantially its arrangements with banks and building societies, which should greatly extend the banking facilities available to customers generally, but especially in rural and some urban areas from which the banks themselves have withdrawn. The platform has the potential of reinstating banking services in rural communities.

The Post Office is an under-utilised resource, and its services need to be enhanced and more widely advertised. The provision of 3,000 new cash machines at post offices across the country is an indication of the new opportunities that business is exploiting.

I am sure that Labour Members will have heard the hon. Member for Rutland and Melton (Mr. Duncan), on behalf of Conservative Members, say that his solution is to privatise the Post Office network--[Interruption.] That has gone on the record as being the policy that he wishes to pursue. However, it is interesting to note that when the issue has been debated, the public have rejected the option of privatisation--whether of the Royal Mail or of the Post Office--and the effect that privatisation would have on the rural network.

The reality is that the Post Office network--which is, as I said, a very good example of a public-private partnership--depends on having a network that is in public ownership. That is the reality of the situation. Privatisation is the preferred approach of the hon. Member for Rutland and Melton--[Interruption.] I am pleased that he agrees with my statement of his preferred approach. However, neither the Post Office network, nor sub- postmasters and mistresses, support that approach. Nevertheless, it is interesting to know his position on the issue.

We can and will provide 3,000 new cash machines at post offices across the country.

Mr. Gordon Prentice (Pendle): Will my right hon. Friend give way?

Mr. Byers: I should like to make some progress.

People can now buy a lottery ticket from a post office and they can exchange foreign currency there. Over 4,000 post offices have national lottery on-line terminals, 1,500 of which are in rural areas. In the past 20 years, the number of post offices providing vehicle licences has doubled. Mobile telephone pre-payment cards are available from almost 5,000 post offices, and that number will rise to more than 6,500 by April 2000.

We need to build on those types of facilities, and part of the modernising government agenda will ensure that we continue to do so. There is no doubt in my mind that our programme for the Post Office network will guarantee a future for the network, recognising the very important role that it plays in our communities.

The Bill obviously offers much more on the Post Office. It provides a framework for modernisation of the Post Office so that it is able to deliver a world-class

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service and compete with overseas competitors. The time has come to modernise the Post Office, to enable it to meet the challenges and opportunities of the changing market and of increased competition.

Britain's Post Office has real achievements to its credit, and the Royal Mail is one of the country's most recognised and valued brands. However, to build on those achievements the Post Office will have to meet four major challenges: to respond to the growth of e-mail and other forms of electronic communication; to meet the challenges of the liberalisation of postal markets in Europe and elsewhere; to meet the growing competition for business consumers; and to adapt to the emergence of new business opportunities.

The Post Office shares those challenges in common with Europe's other traditional postal service organisations. Change is occurring throughout Europe, and the pace is likely to accelerate. Already, the Post Office faces competition in the United Kingdom from overseas postal administrations and delivery companies, some of which are ahead of the game. The Bill will provide a framework to enable the Post Office to develop to its full potential, providing the greater commercial and financial freedom that it needs to compete effectively.

The Bill will complete the reform package that we began last summer, giving the Post Office the flexibility it needs to modernise and to run a fully commercial business in the 21st century, but maintaining it within the public sector and delivering our promises on share disposals.

Part IV of the Bill reinforces our manifesto commitments to give commercial freedom to the Post Office within the public sector. It will convert the Post Office into a public limited company that is able to be more responsive to market demands and to customer demands. A regulated, Government-owned plc is what the Bill proposes. The plc model is widely understood and clearly sets out the duties of directors to the company. It helps to establish the clear separation of the functions of ownership and of management. It also enables the Government to receive a proper dividend, rather than requiring the Post Office to build up cash deposits on its balance sheet.

The Bill delivers our promise that there will be no sale of Post Office shares without primary legislation. The Bill prevents the Government from disposing of shares or share rights in the Post Office company unless parliamentary approval has been given under the set procedure which is clearly stated in the Bill. Primary legislation will be required to remove those restrictions, to allow a wider disposal of shares.

The commercial future of the Post Office depends on its being able to compete effectively with other global players. The Post Office must therefore be equipped to develop its business, which may well involve forging alliances and commercial partnership with organisations that have complementary skills. We have to ensure that it has the freedom and commercial flexibility to do that, and the Bill achieves that objective. We have already acted to enable the Post Office to borrow at commercial rates for growth investments up to £75 million annually, without Government approval. Borrowing beyond that sum will still require Government approval. In recent years, an average of 80 per cent. of the Post Office's profits have gone to the Exchequer. The sum will be reduced to

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50 per cent. this year, and to 40 per cent. in 2000-01. The Post Office will, therefore, have new finance to invest in the future.

I am confident that the Bill will transform the Post Office into a more commercial organisation. It will enable the Post Office to realise its ambition to become a world-class distribution company. In the new global economy, we need a modern and competitive Post Office that can win new business, expand into new markets and create jobs and wealth in Britain. We also need to ensure standards of service and protection for disadvantaged groups and communities. The Bill does precisely that.

The Bill provides for a Post Office with a modern commercial structure while keeping it within public ownership. It provides for strong consumer protection, wherever possible through competition, and ensures that the benefits of competitive, modern postal services are available to all. It provides the commercial freedoms that will enable our Post Office to become a major global player, while ensuring that we retain the important social obligations--including the counters network--that make the Post Office such an important part of the social fabric of our country.

The Bill is forward looking. It creates a postal service that is fit for the 21st century, and I commend it to the House.

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