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Madam Deputy Speaker (Sylvia Heal): Order. Members should be aware that the digital clocks on each side of the Chamber were re-programmed during the summer recess in order to give a longer warning period. The warning lights will now start to flash one minute before a time limit is due to expire, rather than 30 seconds, as previously. That applies to the end of time-limited speeches and to the end of time-limited debates. The next item of business will be the debate on urban post offices, which has a time limit of an hour and a half. I must also announce that there is a 10-minute limit on Back-Bench speeches in all debates for the rest of the evening.
A key recommendation was that if the Post Office decided that fewer offices were needed in some urban areas, the Government should consider providing financial assistance to the Post Office to ensure that sub-postmasters were adequately compensated for the loss of value of their business. Post Office Ltd. is now planning a three-year urban network reinvention programme. Following discussions between Post Office Ltd. and the National Federation of Sub-Postmasters, the Government announced on 3 January their agreement in principle to fund the compensation package.
In March, the Government applied to the European Commission for its approval of funding for the programme, and approval was announced on 18 September. The House is being asked today to agree the funding for that programme.
The House will want to understand why the urban post office network needsrestructuring and why the income of the post office network has declined. Thereasons date back more than 20 years, and past under-investment has been an important factor. Greater mobility and changes in shopping habits have alsosharply reduced customer numbers. The Post Office is not alone in having had to deal with these changes. Other networks, such as those of the retail banks, have been scaled back too. Post office networks in other countries have been through similar changes. I recently met Monika Wulf-Mathies, a board member of Deutsche Post and a former European Commissioner, who told me that in Germany consistent profitability has been achieved by reducing the number of post office branches from 30,000 to 13,000. Other countries have also embarked on a similar process.
Mr. Tony Lloyd (Manchester, Central): There is clearly a rational case for a change in the structure of post offices. The Government have accepted it, as most people do, but the Post Office is pre-empting the process. In my area, five post offices have either been closed, temporarily closed with no signs of reopening, or their future is open to consultation with a view to closure. That is not the rational process that my hon. Friend and other Ministers promised us. It is a culling of inner-city post offices, and it is not fair to people who are less mobile or who have less access to transport, public or private, and who therefore depend on the post office.
Several factors have had a big impact on the post office network. Post office income has been heavily dependent on benefit payments. More than 42 per cent. of benefit recipients now access their benefit payments via bank accounts, compared with only 26 per cent. in 1996. If we compare the last financial year with five years previously, we see that the number of retirement pensions and widows benefits paid by order books and giros dropped by more than 1 millionfrom just over 6 million to less than 5 millioneven though the total number of pension recipients rose by more than 1 million. The number of child benefits paid through giros dropped from just under 5 million to less than 4 million, and payments at a post office of incapacity benefit fell even more dramaticallyfrom more than 2.5 million to less than 1 million.
The drop in benefit transactions at post offices, however, has not been due only to people switching to bank accounts. The number of people receiving working age benefits has fallen in total. In February 1997, 1.6 million people were claiming jobseeker's allowance. By February this year, the number had fallen to 890,000. Clearly, that is a very welcome development, but it has reduced post office income. Benefit payment has accounted for up to 40 per cent. of post office branch income in some cases.
Mr. Tyler: I accept the Minister's point that this is a longer progress, and that it goes back to the time when Conservative Governments were pursuing this course. Will he give an explicit assurance, however, that the consultation process will consider the implications not just for post office business but for other businesses alongside, which are often in the same building? If one draws a pension or a benefit at one counter, one is likely to use that money at the other counter. The viability of a great many businesses is therefore at stake, not just that of post offices.
Mr. Timms: No. Those arrangements will be in place by April 2003. There will, of course, be a process of transitionnot everybody will switch in April next yearand it will be properly planned and phased.
In the five years from March 1997 to March this year, Girobank transactions at post offices fell by 37 per cent. and postal order transactions fell by 13 per cent. There have been areas of increase, such as motor vehicle licences, lottery sales and bureau de change services, but they have only modestly offset the reductions. As a consequence, in many urban areas, there is now too little business for the number of post offices. The Post Office has the largest retail network of any organisation in Europe. It has half as many branches again as all the UK banks put together. More than 1,000 of the 9,000 urban sub-post offices have at least 10 other post offices within a mile. The volume of business through the network is simply no longer sufficient to support such a dense network. The restructuring proposed by the Post Office is intended to restore the urban network to commercial viability, restoring the confidence of sub-postmasters and making it possible to attract much-needed new investment into their post offices. The briefing circulated for this debate by the National Federation of Sub-Postmasters states:
Mr. Colin Challen (Morley and Rothwell): Does my hon. Friend recognise that it is not simply a question of commercial viability, given the need for that number of post offices in urban areas? The Government's social exclusion policy would take a great knock if too many post offices were closed. Will he assure me that it will not just be a few of the usual professionally engaged people who will be consulted in this process? When a local community demands that a post office stay open and other people agree that it should stay open will he assure us that the Government and the scheme will support its staying open?
Mr. Timms: My hon. Friend makes an important point. I can assure him that there will be a very thorough process of consultation around every proposed closure and that the Post Office will take seriously the results of that consultation.
The programme that is the subject of the debate relates only to restructuring the urban networkoffices located in communities of more than 10,000 inhabitants. Our stated commitment to ending avoidable closures in the rural network remains in place, and it has led to very sharp reductions in the numbers of rural post office closures. However, for each urban area, the Post Office has received indications from sub-postmasters who would like to accept the compensation and close their business. Post Office officials will visit and walk around every area and make a careful study of the configuration of the offices and of local factors, such as public transport, demographics, geography and where the hills