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Mr. Deputy Speaker (Mr. Michael J. Martin): Order. I remind the House that a 10-minute rule applies to Back-Bench speeches.

6.36 pm

Miss Geraldine Smith (Morecambe and Lunesdale): I am particularly pleased to have the opportunity to contribute to the debate. Not only do I represent a constituency in which a significant proportion of the population depends heavily on the service provided by post offices, but before being elected to the House in May 1997, I spent the whole of my adult life working in the postal industry. In my capacity as a Member of Parliament representing Morecambe and Lunesdale, and also as a former Post Office employee and trade union representative, I warmly welcome many of the measures in the Bill.

I welcome in particular the conversion of the Post Office from a statutory corporation to a public limited company owned by the Crown. That will provide the stability and commercial freedom that the Post Office needs to expand and compete in the global market place, and it will curtail political interference in its affairs. The measures are long overdue, and will no doubt be warmly welcomed by all who work in the industry.

I pay tribute to all the men and women who work for the Post Office and who, despite the continuous changes, reorganisations and uncertainty over their future, have continued to raise productivity, provide an excellent service to their customers, and play their part in ensuring that the Post Office is a profitable organisation that can compare favourably with any postal business anywhere in the world. The Bill, and the prospect of stability that it brings, is therefore most welcome.

I have however a couple of areas of concern about the Bill. Clause 56 sets out the procedure to be followed to obtain the approval of Parliament to make share issues or disposals that would otherwise be prohibited by clauses 54 and 55. It appears that the main criterion to be met before a motion to dispose of the public's stake in the Post Office is brought before the House is that the Post Office should persuade the Secretary of State that it is in the company's commercial interest for him to do so.

Bearing in mind the importance of the Post Office to the economy of this country and the essential role that it plays in the fabric of our society, I believe that the Secretary of State should have a wider obligation than that of simply considering the company's commercial interest. I am of the opinion that prior to any such motion being brought before the House, the Secretary of State must be convinced that the disposal of shares is in the national interest. I believe too that that should be reflected in the Bill. I hope that my right hon. Friend will consider this point, and I will listen with interest to his response.

Opening up the reserved area to competition is also a matter of concern. The Bill enshrines, for the first time, a universal service obligation and a universal tariff, and I welcome those measures. However, we must be aware

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that provision of that service will require the Post Office to subsidise high-cost, low-revenue services from the income generated by the most profitable areas. Any operator granted a licence in the reserved area must, therefore, face the same service and price obligations to prevent them from cherry-picking the most profitable areas.

Closures of rural and sub-post offices, and the threat posed by the conversion of benefit payments from order books or giro cheques to automated credit transfer in 2003, are also matters of concern. Closure of post offices is by no means a new phenomenon; about 200--1 per cent. of the network--have closed in each of the past 20 years. There are many reasons for closure, but one of the most common, particularly in rural areas, is that the Post Office cannot find anyone to keep them open because of the low income offered.

The village of Wray in my constituency is in that situation at present. The post office is up for sale, but no buyer can be found. Clearly, positive action is needed or that problem will continue, and ACT conversion will rapidly accelerate it. Rural post offices are not the only ones that will be affected by ACT, as those in the most deprived areas of towns and cities will be hardest hit because those areas host the largest number of benefit claimants. The west end sub-post office in Morecambe is a good example, because benefit payments constitute the vast majority of transactions carried out there. If revenue from that work is lost and not replaced, the office will undoubtedly close.

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

Miss Smith: I am sorry, but I do not have time.

Even at this early stage, local residents are sufficiently concerned to have started a campaign to save the local post office. I accept that it would be foolish to argue against the ACT conversion programme, because its benefit to the Exchequer and its usefulness in combating fraud are plain for all to see. However, the Government must do all they can to mitigate the system's impact on post offices.

The Horizon project, which will see post offices automated by 2001, will undoubtedly help to attract banking and financial services to post offices. However, I do not believe that that will compensate for the loss of revenue arising from implementation of ACT. The banking industry itself has experienced a sharp decline in demand for similar services.

I do not offer a universal panacea that would overcome all the problems of post office closure, but I believe that many of them could be avoided if we imaginatively combined the different services that post offices provide. The universal letter guarantee ensures some postal activity in all areas, and it is invariably supplemented by parcel deliveries. When added to the Post Office Counters part of post office work, that can produce an economically manageable level of activity.

Before any post office is closed, the Post Office should have a duty to examine the possibility of establishing a combined operation. In addition, the Post Office's findings should be made known through existing

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consultative arrangements. Will the Minister consider what I have said? I shall be extremely interested in his response.

I firmly believe that the Bill takes a huge step in the right direction. I look forward to its passage through the House. Having worked in the Post Office during the 18 years the Tories were in power, I feel that we have little to learn from them, and I dread to think what the Post Office would be like if they ever returned to power.

6.45 pm

Mr. Peter Lilley (Hitchin and Harpenden): I apologise for being unable to stay for the wind-up speeches, because I had entered into another commitment before the date of this debate was changed. I congratulate my hon. Friend the Member for Tiverton and Honiton (Mrs. Browning) on effectively dissecting a badly drafted Bill and on demolishing an even more poorly briefed Secretary of State, who gave one of the most inadequate explanations of a Bill that the House has ever heard.

I had hoped to offer some support to the Secretary of State and his Bill. When the White Paper was published, I said that it merited at least one cheer from the Conservatives. I believed that the process initiated by the White Paper would lead inexorably to full privatisation of the Post Office, which would be in the interests of customers, taxpayers, the economy and the employees of the Post Office, who, under a Conservative Government, would be able to become shareholders in their own enterprise.

Having read the Bill, however, I must reduce my applause to, at most, half a cheer. I still believe that it will ultimately lead to privatisation. However, the obstacles that have been erected to pander to the left wing of the Labour party and the trades union movement will slow the process, prolong the agony and uncertainty and mean that the Post Office misses many of the glittering prizes that would be available if it were in the vanguard of enterprise.

The Government said that they aimed to modernise the Post Office. The Bill, however, is a "make us modern, but not yet" measure. It deals with a massive, important and rapidly changing industry. That industry needs the dynamo of competition and enterprise if it is to maximise benefits to this country. However, the industry also impinges on certain social priorities, which must be satisfied.

The Government have acknowledged three main social objectives, which they inherited from the Conservatives. The first is the universal service obligation to deliver to every address at a uniform cost. The second is the universal delivery of benefits, not least to those who cannot afford to travel long distances to pick up their money. The third is the need to maintain a nationwide network of sub-post offices.

The universal service obligation can readily be met by regulation. We can make universal provision a licence condition and prevent exploitation of any partial monopoly by turning on the tap of competition. The regulatory function does not require the continuation of state ownership. Indeed, if the state owns the company that it regulates, there is an inevitable conflict of interest. The Treasury will want higher prices, but the regulator will want them down at more competitive levels. That is

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inherent in state ownership. Only privatisation can bring about a separation of regulation and ownership, which results in better regulation.

Moreover, state ownership can lead to unfair competition through access to cheap borrowing. Avoiding that will mean restricting the Post Office's rights to borrow and to diversify, but those things are essential if it is to take advantage of the rapidly changing world of e-commerce and e-mail.

Above all, the Bill will inhibit international mergers, takeovers and alliances. Indeed, it is clear from the opposition within the Labour party that Labour's main bogey is the threat of international involvement in our Post Office, or its involvement overseas. No group is more xenophobic than the Labour party. Mr. Haider could take lessons from it. By contrast, the Conservatives believe that free trade and free investment maintain and build links between countries, and those links are both to the social and economic good.

The second and third social obligations--to deliver benefits and to maintain a nationwide network of sub-post offices--have until now been met simultaneously. The Department of Social Security contracts with Post Office Counters Ltd. on condition that the latter maintains a nationwide network of post offices through which benefits can be delivered.

The Government now claim that they can deliver benefits through the banks instead, and save large sums of money. They say that they will save £400 million without hurting anyone, as if that money will come out of thin air. If the Treasury gains £400 million, somebody loses £400 million, and the losers will mainly be the post offices, which will lose a third of their direct income.

When I was Secretary of State for Social Security, I received clear advice that a move to compulsory payment of benefits into bank accounts would destroy the network of sub-post offices as we know it. The only way to avoid such a catastrophe would be to introduce a subsidy, which of course would absorb a large part of the savings that the move was intended to make. The net effect would be minimal savings and maximum inconvenience for pensioners, disabled people, young mothers and those on income support.

When I recently challenged the Secretary of State for Social Security to confirm that he had received similar advice, he refused to answer. He side-stepped the question and went off into auto-rant about my wishing to privatise the sub-post office network--apparently unaware, as was the Secretary of State for Trade and Industry today, that it is already privately run, owned and managed.

I want the Minister or the Secretary of State to confirm today that the Government received advice similar to that which I received--that without subsidy, post office closures will accelerate. Can he explain why there was no provision in the Bill as originally drafted for such a subsidy? Can he confirm that because the Government have met pressure on their own Benches as well as from ours, they will agree to subsidise the network?

Is the Secretary of State aware that even if he paid the post offices a subsidy equal to the money that they will lose as a result of the cancellation of the contract from the DSS, he would not undo all the damage that he will have done to the network? Paying the subsidy direct to post offices will not bring the customers back into those

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shops. It was those customers coming to claim the benefits who spent some of that money in the shops and gave them a significant proportion of their revenues.

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