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The Secretary of State for Trade and Industry (Ms Patricia Hewitt) indicated dissent.
Dr. Cable: I see that the Secretary of State is looking both mystified and negative. I hope that she will be able to reassure the House that the report to which I referred is completely wrong. However, the version given to me by people close to the project is that the Government propose to introduce a system called UK Online. I am not a computer buff—other Members may be more familiar with the significance of this—but UK Online is the Government portal for accessing Government information. It does not have the GP service, the advisory service or the transaction work. If the Secretary of State does not accept this version—judging by her body
language, she does not—I hope that she will reassure us that it is completely wrong. As a result of talking to people close to the project, many post office employees and people in the network have been persuaded that it will happen. I sincerely hope that they are wrong and, from a sedentary position, Ministers seem to suggest that that is the case.The other, very important, part of the package is the idea of the universal bank and the use of alternative facilities by which people could be paid cash at the post office—a combination of the post office card account, agency facilities for people who have bank accounts and the basic bank account. The importance of this has always been to honour the Government's promise that people should be paid in cash. Whether that would provide a large amount of replacement income was never clear, but perhaps we shall receive clarification on that point today.
Information is available about what the new system could mean for customers. A very good academic study has been carried out by the Department for Work and Pensions. Elaine Kempson and Claire Whyley have performed a detailed analysis of post office customers, what they can cope with and what they expect.
To summarise a complicated study, there are essentially three groups of people who use the network. About 40 per cent. will have no problem with automated credit transfer. They are fully familiar with banking—they use banks, they will not be greatly inconvenienced by the new system and the money will be paid into their normal bank account. These are mainly people who receive child benefit and who are mobile. ACT will not present them with a problem, but it will present the post office with a problem, because those people will, in all probability, stop using their post office branch. That figure of 40 per cent. represents a lot of people—about 8 million.
Another 30 per cent. of people have no problems coping with the ACT idea—they know about banking and have bank accounts—but are very attached to the post office. These are the younger pensioners who may be rather conservative in their habits. They find it convenient to use the post office and want to continue to do so. They want the choice of using the post office, even though they would be perfectly able to use a banking arrangement. If those people are to be accommodated within the new system, there needs to be an efficient arrangement whereby the agency banking, which I believe has been worked out, operates in full. Will the Minister explain how people who want to use the post office as a bank to cash their money will be able to do so?
The technology involved is complex: it means marrying the Horizon technology, which the Government inherited some years ago, with the new technology of the banks. How will that mesh? We are talking about 10 months, which is a short time away. We need reassurance that the system will work and that that 30 per cent. of customers will continue to be able to use the post office as a banking facility without being steered away from it.
Mr. Nigel Waterson (Eastbourne): In his researches, did the hon. Gentleman stumble across the civil service phrase "actively managed choice"? I gather that that is now the Government's policy for ensuring that, rather than having a level playing field, people will be channelled into choosing
a particular bank account. Does he agree that that makes a complete nonsense of the Government's removal of the so-called cap on the number of post office accounts?
Dr. Cable: It does. I have heard that phrase, which is beginning to percolate through the post office network. The scripts being prepared for customers, which some people have seen, make it clear that unless there are strongly extenuating circumstances, people will be expected to move to a banking service. The hon. Gentleman is absolutely right about that.
The policy affects the people to whom I referred, but the effects would be even greater for the remaining 30 per cent: people who really need the post office. They do not have bank accounts, or they may have a savings account that they do not use for cash transactions. They are often extremely old and frail and are, in the words of the DWP report, "difficult to move".
The DWP study suggests that the number of people in that category is about 5 million. They cannot realistically be expected to move over to a banking system. The concept of the post office card account—a simple alternative—was developed with such people in mind. However, the problem is that the Government have set a target of 3 million such accounts to serve about 5 million people. That may answer the hon. Gentleman's intervention about active management.
What will happen to the 2 million people who want to continue using the post office much as they have always done and who do not want to use banks? How will they cope in the new environment? I think that "active management" means that many of those people will be steered or encouraged to open a bank account, even if it is only the PAT 14, the basic account developed by the banks in recent years.
Kate Hoey (Vauxhall): I agree completely with the hon. Gentleman's analysis. Does he agree that many of our most elderly and vulnerable pensioners find it extremely difficult to deal with any type of officialdom at any time? Does he share my anxiety that money will be spent on trying to force those people to change over and stop collecting their pension in cash every week? It is a form of coercion. Does he agree that it would be wrong for a penny of Government or Consignia money to be spent on making people—especially the elderly—give up that choice?
Dr. Cable: The hon. Lady is right. I can add nothing to her comments. We are talking about choice on a level playing field. We need reassurance from Ministers that the undertaking given two years ago by the then Under-Secretary of State for Trade and Industry—the current Minister for Employment Relations, Industry and the Regions—will be honoured. There are grave doubts about that.
Mr. Richard Page (South-West Hertfordshire): I agree with everything that the hon. Gentleman says. What happens if the pendulum swings a little further and a vast number of people—more than 3 million—realise that the basic account would be cheaper to run than their normal account and decide to open one? Who will pay the extra costs involved? Will that not worsen the situation and result in even more expense for the Government?
Dr. Cable: The hon. Gentleman touches on a real dilemma. The assumption is that the banks will contribute
to that process. However, there is much evidence to show that they are not enthusiastic about that—to say the least. It costs them between £60 and £70 a year—that is not the customer service charge—to run such an account. An account is viable for the banks only when it contains a minimum of £1,300, and they have made it clear that they are not really interested in running those basic accounts.If the Government have any doubts about that point, they should consult the useful blind study carried out a couple of weeks ago by the consumer panel of the Financial Services Authority. It investigated how people shop around between banks and found that only one of the 10 banks even mentioned a basic bank account. Four in 10 people who tried to open a bank account were turned down with no reference to the fact that the basic bank account was on offer. The banks are not interested in the scheme; they do not want to undertake it but they are being pushed into it—that is where the scheme will fail.
Why should the banks be involved? Why have they undertaken to give that service, even though they are reluctant to provide it and their customers are reluctant to take it up? I suspect that it has something to do with some of the points under discussion yesterday in the Select Committee on the Treasury. A group of bankers were interviewed about the Cruickshank report and so-called excess profits in the banking system.
I suspect that the banking community was very worried two years ago that the Government would propose tough regulation through Paycom and perhaps even a windfall tax on the banks. The Government promised to do that, but it never happened and the pressure is now off the banks, as was reflected in the somewhat arrogant tone that their representatives adopted during yesterday's Treasury Committee sitting. The banks are now in a much stronger position in dealing with the Government, but that explains why that process was once encouraged. However, it is difficult to understand how the basic bank account system can accommodate the needs of that substantial group of people.
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