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Mr. Timms: There has been some controversy on that point. Under the Post Office's definition, a contiguous population of more than 10,000 should be classed as urban, while one of fewer than 10,000 should be classed as rural, and that has been applied consistently throughout the network. I am aware that it has given rise to concern in some areas, but it is right to have a clear definition.

Mrs. Patsy Calton (Cheadle) (LD) rose—

Mr. Timms: I need to make a little more progress before I give way again.

In recent research, Postcomm pointed out that people in other countries, too, are increasingly accessing services electronically over the telephone or even through the internet. Most countries have been remodelling their post office networks, usually by closing the smallest or least profitable offices, converting directly run offices to agency offices, or relocating or opening new urban offices to take account of changes in urban population and customer flows. In Germany, the number of post offices was reduced from 30,000 to 13,000—a much more drastic change than is contemplated here—and other countries have embarked on a similar process. In the UK, other networks, such as those of the banks, have also been

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scaled back. Like them, the post office network needs to adapt, in both rural and urban areas, to changes in people's preferences and to new ways of doing business.

David Hamilton (Midlothian) (Lab): Does my hon. Friend agree with the early-day motion tabled by a Scottish Member that condemns the three main Scottish banks—the Royal Bank of Scotland, Clydesdale bank and the Bank of Scotland—for not co-operating with the Post Office to allow such facilities to be put in place? They are trying to bring people into their own banks, which militates against people in rural post offices.

Mr. Timms: I would welcome additional banks opening up their accounts to Post Office access, as have Lloyds TSB, Barclays, and Alliance and Leicester, and I am aware that the banks with much the biggest market share in Scotland are not in that group. I would welcome such changes—indeed, I have had discussions with one of those banks. I hope that their customers will demand that they should have the same opportunity as those of the other banks in being able to access their account at their local post office. I look forward to the day, which I think is not far off, when the post office will be the best place to do one's banking—to get cash, pay bills and do the other things for which people currently have to go to the bank—because, in many urban and rural areas, the post office is the best located place in which to do so.

Mr. David Drew (Stroud) (Lab/Co-op): Does my hon. Friend agree that it is not helpful to shut down the post office savings account, given that we need to maximise people's saving opportunities? Would it not be a good idea to link the continuation of the post office savings account to the opening up of post office card accounts instead of closing it to new recipients, which sets a dreadfully bad example?

Mr. Timms: As my hon. Friend will know, the Post Office has announced a joint venture with the Bank of Ireland to offer a whole range of new financial services products precisely in order to increase the amount of financial services business, including savings, that goes across post office counters. I believe that those products will prove attractive to many of our constituents and that they will enable them to deal with financial matters at their local post office, which is what many of them wish to do.

Mr. Waterson: Will the Minister give way?

Mr. Timms: I need to make a little headway.

One of the recommendations of the performance and innovation unit's report was that if the Post Office decided that fewer offices were needed in some urban areas, the Government should consider providing funding to compensate affected sub-postmasters adequately for the loss of their business. Those men and women have worked hard, as the hon. Member for Eddisbury said, and it is right that they should be treated fairly even though the current level of business cannot support a post office network as dense as that of the past.

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In November 2002, following parliamentary approval of the funding, Post Office Ltd. began its urban network reinvention programme. It was a dense network. Before the process began, more than 1,000 urban sub-post offices had more than 10 other branches within a mile. There is no longer enough business to sustain such a dense network in urban areas. Sub-postmasters have found it increasingly difficult to earn a reasonable income; too many have simply shut up shop and left. We therefore need the rationalisation that is under way. Without it, there would be unmanaged decline as many sub-postmasters shut down and leave. That would lead to unplanned big gaps in the network. The current programme can avoid that.

Tim Loughton: By reinvention, the Minister means "between a rock a hard place". Some postmasters or postmistresses have worked all their lives and now approach retirement. A choice between taking a compensation package now and getting at least something out of it—although the Government took away retirement tax relief—and holding on for a few more years, because they want to keep the post office open, but without a compensation package if, through declining business, they then wish to shut the post office, is no choice. They are being bullied and blackmailed to take the money and run, whether they want to or not.

Mr. Timms: The hon. Gentleman is wrong. The compensation payments are broadly based on what a sub-postmaster might have expected if the business had been sold two or three years ago, before the recent changes. They have been negotiated with the National Federation of Sub-Postmasters and based on long-standing views of the value of a business. It is appropriate for somebody who shuts down a business to contribute to establishing a network that is sustainable in the long term to receive a fair amount in compensation. The arrangements provide for that. Of course, if people stay in the network, as many sub-postmasters will, we can look forward to those businesses having a much more buoyant value in the future because of the reductions in the urban network. That is why the National Federation of Sub-Postmasters has been so supportive of the exercise.

Mr. Gerald Kaufman (Manchester, Gorton) (Lab): Does my hon. Friend agree that popular support for a local post office is an important factor that should be taken into account? Will he pay tribute to the campaign by Levenshulme branch Labour party in my constituency to keep open the Albert Road post office? It has obtained 3,000 signatures. Will he draw the attention of the chief operating officer of the Post Office to those local wishes and the determination to keep the post office?

Mr. Timms: I agree that local support for a post office branch is an important factor. I am happy to congratulate the members of the branch Labour party that my right hon. Friend mentioned on their demonstration of that support. I shall be glad to ensure that the information is passed on.

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It is right for hon. Members to engage in the process, draw attention to especially valuable post offices that should be retained and perhaps suggest others that should be closed instead so that the exercise can be completed successfully.

Several hon. Members rose—

Mr. Timms: I shall give way shortly.

The key to the exercise is that the largest possible number of customers from each closing branch should remain Post Office customers and move to branches nearby. The initial planning assumption was that perhaps 80 per cent. of customers from closing branches would do that. However, many more transfer to other branches. That is excellent news for the Post Office. It is important, however, that the right decisions are made about identifying the urban branches that should close.

Mr. Mark Fisher (Stoke-on-Trent, Central) (Lab): Does the Minister understand that although the strategy that he describes may exist in his head, it is not happening in practice? The Post Office is inviting sub-postmasters to apply for the scheme, but in Stoke-on-Trent—and, I suspect, many more areas—people accept the invitations but neither propose nor oppose closures. There is no plan; the process is led by the applications. There is no strategy and therefore a great deal of what the Minister says falls by the wayside.

Mr. Timms: I am aware of that criticism but I can assure my hon. Friend that it is untrue. Initially, 3,500 sub-postmasters expressed an interest in leaving the network under the programme, but something like 1,000 of those will not be doing so: 500 have been told already that their branches cannot close, and another 500 will be told the same thing.

Several hon. Members rose—

Mr. Timms: I need to make a little more progress before I give way again, but then I shall do so gladly.

Initially, closure proposals under the programme were focused on single offices known to be most at risk of closure because of poor viability. The aim was to minimise the possibility of damaging and unco-ordinated closures. It was in part in response to feedback from hon. Members and others that the Post Office moved, in September last year, to producing its proposals area by area, using each parliamentary constituency as the basis.

The House will acknowledge that a plan that tells us the ultimate shape of an area's urban network at the end of the process helps to provide a clear view of the level and configuration of provision that will be in place at the end of the programme. It also helps to put in context discussions about each individual post office.

The plan also helps to give sub-postmasters confidence about their prospects, as they know where they are going. Moreover, it helps to guard against unplanned closures, and it has also made a significant contribution to reducing uncertainty. Under the programme the aim is to complete all the public consultation by December this year, somewhat earlier than was originally intended.

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