Select Committee on Public Accounts Third Report


33. In advance of the hearing, the Department of Social Security gave the Committee a report of the progress made with the Post Office and the banks in developing suitable bank account arrangements for benefit claimants - the so called Universal Banking service.[26]

34. The Department advised that Automated Credit Transfer would become the normal method of paying benefits from 2003, and they now had a Public Service Agreement target that by 2005, 85 per cent of their customers would have their benefits paid into bank accounts. Automated Credit Transfer will provide a more modern, efficient and secure method of paying benefits, and deliver administrative savings of some £500 million a year and fraud savings of over £100 million a year. Their plans were on schedule.[27]

35. All high street banks had agreed to introduce basic no-fee accounts in line with the recommendations from the Social Exclusion Unit's Policy Action Team on Financial Exclusion (PAT 14). In addition, banks had agreed to allow free cash withdrawals at post offices. The Post Office had announced its plan to offer Universal Banking services. Six high street banks had agreed in principle to provide a financial contribution to the cost. The Department had commissioned research to help design the new service in a way that would take account of different people's needs and preferences. Amongst other things, this would inform an educational programme to ensure that customers had all the information and advice they need.[28]

36. The Department confirmed that the Government were committed to providing for people to continue to collect their payments in cash from post offices if they so wished. Their research suggested that the numbers involved would be thousands not millions, but the method of doing this was still under discussion. The Post Office was close to signing a memorandum of agreement with the banks, which would be the key underpinning for putting in place the Universal Banking service. Their objective was to have it fully up and running well in advance of the changeover in 2003. The main components would be a Post Office card account, basic bank accounts, and enlarged arrangements for availability of current accounts at post offices. These would all provide channels through which cash could be obtained at post offices. In addition, the Department were in discussion with the banking industry about possible arrangements for urgent payments, such as Social Fund crisis loans.[29]

37. The Committee noted that the Universal Banking Service would require public money, Government guarantees, or both, and asked for an assurance that there would be proper arrangements for public accountability, particularly by ensuring access rights for the Comptroller and Auditor General. The Department of Trade and Industry confirmed this was their intention, as far as the public financing aspects were concerned.[30]

38. We took note that, in undertaking their study of the Benefits Payment Card, the National Audit Office had access to certain Post Office documents held by other parties, but the Post Office had not provided them with access to Post Office records. The Post Office assured us that they had co-operated with everything they were asked to do; but they considered that the issue of access was a matter for the Government and successive administrations had decided that that was not what they wanted. The Treasury confirmed that the Government was considering its response to the Sharman Report, which dealt with that kind of issue. The report had emphasised the importance of auditors having rights of access to obtain sufficient appropriate evidence in order to provide Parliament with independent assurance.[31]


39. In principle, the arrangements for payment of benefits through Automated Credit Transfer from 2003 should provide a more modern, efficient and secure method of paying benefits and deliver significant administrative and fraud savings. It is important, though, that these arrangements are developed with the customer in mind, in terms of access to their benefits through post offices, and continued access to cash payments if claimants so desire. The Department will need to communicate the new arrangements to claimants clearly and effectively.

40. Arrangements are in hand to create a Universal Banking service, to provide claimants with a post office card account, basic bank accounts, and better access to current accounts at post offices. These arrangements are likely to require public money, government guarantees, or both, and to cover benefit payments of many billions a year. The Department, along with the Department of Trade and Industry, will need to secure proper arrangements for public accountability for these payments and guarantees, and for the quality of services delivered by post offices to benefit recipients. We expect the departments to enter into discussions with the Comptroller and Auditor General on access to the Post Office for this purpose, and to submit a note to the Committee on their proposals to secure accountability before the arrangements are finalised.

26  Evidence, pp 1-2 Back

27  ibid Back

28  Q132 and Evidence, pp 1-2 Back

29  Qs 4, 8-9, 94-100, 155-156, 175-176 and Evidence, Appendix 2, p22 Back

30  Qs 10-13 Back

31  Qs 14-17 and 73 and Holding to Account-The Review of Audit and Accountability for Central Government, by Lord Sharman of Redlynch, February 2001 Back

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