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Mr. Letwin: Does my right hon. Friend agree that we anticipate, in the near future, some Secretary of State--possibly the present one--coming before the House to tell us about the subsidies that will need to be paid also to the banks?
Mr. Lilley: That is a good point to which I shall come in due course. The clause makes provision for such subsidies; rightly so, given the path upon which the Government have embarked.
The Opposition can at the very most give the clause a very reluctant and conditional welcome. We do not believe that the post office network ought to survive and exist on subsidy. We do not believe that it is necessary to embark upon a path that will make that essential. We agree with the National Federation of Sub-Postmasters, whose members do not want to live off subsidies--certainly not permanent ones, and preferably not even temporary ones--and want to restore a system where they are paid by the Government to deliver a service to the Government and to those whom the Government need to provide with benefits near the places where they live.
Mr. Gale: I wanted to intervene after my right hon. Friend's first sentence, but I thought that it would be
discourteous so to do. I share his view that this clause is anathema in its content simply because we do not believe in subsidies. However, we are engaged in damage control, and it is not my job to make the case for the Liberal Democrats that they so signally failed to make for themselves. The new clause says not "shall" but "may", and states:
- The power to make a scheme . . . shall not be exercised without the consent of the Treasury.
5.30 pm
Mr. Lilley: My hon. Friend makes a powerful point that leads me to ask how the Government got into this mess. As I have mentioned before, I have come across this issue in previous incarnations as Secretary of State for Trade and Industry and as Secretary of State for Social Security. In this context, my experience as former Treasury Minister is even more valuable. As a Treasury Minister, I wanted to see savings made, but I learned in seven years at the Treasury--four as parliamentary private secretary to the Chancellor and three as a Treasury Minister--that the Treasury has a structural weakness. It is inherently prone to seek savings in one Department even though that may result in costs in another that more than offset the savings.
That approach is even adopted consciously and willingly and has been enshrined in a doctrine by a distinguished Treasury mandarin, Nick Monk. He said that the doctrine should be, "Take any savings from any source when possible." The Treasury does so, because even if there are offsetting costs in another Department, it hopes to be able to cap that spending or force that Department to find other savings to offset the extra costs in turn. That is a weakness of Treasury spending controls and I have always thought so. I thought so when I was a Treasury Minister and when I was Secretary of State for Social Security, which is why I resisted the proposals before us. The result of the policy of trying to make savings by eliminating the £400 million contract for the DSS to pay Post Office Counters Ltd. to deliver benefits through post offices would inevitably be a rise in the costs of the DTI as it introduced subsidies to uphold the post office network throughout the country.
The Treasury was able to proceed with that policy--and it has always eyed the possibility of a saving of £400 million and tried it out on previous Secretaries of State, including the predecessors of the present incumbents at both Departments--only because it had installed two fresh-faced, wet-behind-the-ears former Chief Secretaries to the Treasury as the Secretaries of State in the relevant Departments. It was a necessary precondition that the DSS and the DTI be in the hands of former Chief Secretaries who had not yet learned how their Departments interacted and how the consequence of savings in one would be increased costs in the other.
As soon as a problem emerged with the Horizon project, the Treasury seized the opportunity and told its old boys to go into action to clobber the contract with Post Office Counters Ltd. and impose payment of benefits through banks, as it had often wanted to do before. The problem with that policy is that it removes from the post office network a third of the income of sub-post offices.
The underlying problem that the Government have is that, if they remove that income, they will render many sub-post offices--probably a third of the network--non-viable. Indeed, many sub-post offices receive more than half of their income from the DSS contract.There are only two solutions to the problem. One is to provide alternative sources of revenue for the sub-post offices and the other is to provide a subsidy. Today, the Government are taking the first step towards subsidies. However, Ministers will have been given permission to introduce new clause 1 only with extreme reluctance on the part of the Treasury. It had hoped to get away without a subsidy clause and that is why it was not in the original Bill. The Secretary of State was forbidden from including a subsidy clause at that stage--if he even asked to do so--and it was only when uproar began to grow in the sub-post offices that he had to announce on Second Reading that he was considering introducing such a clause. He did not dare announce it before the two debates last week, for fear that those protesting would have realised that the new clause was permissive rather than prescriptive because it uses the word "may" rather than the word "shall".
Mr. Letwin: Is not another reason why the Secretary of State might not have wanted to present the new clause to the 2,000 sub-postmasters is that they want not subsidies but a viable future?
Mr. Lilley: My hon. Friend is right. That is central to the Opposition's case about the fallacy of what the Government are doing.
Initially, the Secretary of State would have met stalwart resistance from the Treasury, as I am sure he would confirm. The Treasury would have opposed the introduction of any power enabling the right hon. Gentleman to subsidise the post office network. It is almost certain that the right hon. Gentleman would have had to enter into an agreement with the Treasury that the proposal was being introduced only for cosmetic reasons, to placate the sub-postmasters, sub-postmistresses, pensioners, young mothers and disabled people who were frightened that the post office network would collapse without subsidy.
The Secretary of State is sniggering in a complacent and self-satisfied manner. I hope that the Government's freedom of information legislation will mean that we will be able to learn the terms of the agreement with the Treasury that has enabled him to introduce the new clause.
The right hon. Gentleman may be sniggering now because he thinks that the Freedom of Information Bill is also a cosmetic exercise and that he will not have to reveal the terms of that agreement. However, I rather think that he will. Advice to Ministers may be precluded from the Freedom of Information Bill, but agreements between Ministers are not. If he were candid, he could tell the House today the nature of his agreement with the Treasury--or at least whether such an agreement exists, even if it remains secret.
Mr. Letwin: If my right hon. Friend pursues this line of inquiry, is he not worried that the Secretary of State
will bring forward further measures in another place to amend this Bill to prevent the Freedom of Information Bill applying to it?
Mr. Lilley: I would not put it past the Secretary of State to wish to do that, but I am confident that he would find the option outside the terms of the long title of the Bill. However, the Freedom of Information Bill has not completed its passage through the House and the Government may try and amend that instead.
Mr. Bercow: The clause is imprecise and does not specify the sums that would be available, or the circumstances in which they would be allocated. Does my right hon. Friend agree that that means that the Secretary of State has no defence on grounds of commercial confidentiality?
Mr. Lilley: I am certain that that is the case. It is alarming for Parliament to agree a clause such as new clause 1. It is open ended and not specific, yet it gives the Secretary of State enormous powers. The Secretary of State can delegate those powers to other people, of unknown provenance, and they enable money to be allocated in ways that we have no guarantee would be fair, equitable or above board.
I suspect that the Secretary of State has got away with all that because he has promised not to use the provision. Therefore, the House faces a dilemma. We do not want the clause to be exercised or subsidies used to support the post office network. The network should be paid for providing a service, not subsidised in lieu of that. However, the Government took the first false step and we need a mechanism for subsidising the network until a Conservative Government can get back in office and restore it in a more sensible and fundamental way.
Mr. Prior: If we were looking at a one-off, measurable change that reflected a change in technology, I could understand the argument for a subsidy of a given amount and for a given amount of time. However, as I understand it, we are looking at a permanent diminution of income, amounting to perhaps 50 per cent. of the revenue of a sub-post office. How can that possibly be rectified by anything in new clause 1?
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