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6.10 pm

The Minister for Energy, E-Commerce and Postal Services (Mr. Stephen Timms): I congratulate the right hon. Member for Berwick-upon-Tweed (Mr. Beith) on

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securing this debate, and I thank him for what he said about the work of the Post Office's rural transfer advisers. I agree that they have been very effective in ensuring, wherever possible, that an alternative branch in a nearby location can replace rural Post Office branches that are threatened with closure.

The right hon. Gentleman spelt out very clearly and fully the problems that the main Post Office branch in Berwick-upon-Tweed has faced, and he gave a detailed account of events since last September, when the problems first arose. Let me emphasise that Post Office Ltd. considers the current closure to be temporary, and I entirely sympathise with the frustration that he has expressed on behalf of his constituents about the fact that it has lasted so long. The Post Office and I very much wish that it will be able to provide a service again to his constituents as quickly as possible.

As the right hon. Gentleman said, the office closed following a dispute with the sub-postmaster, and the Post Office is continuing to try to re-establish the service. As he also said, despite the Post Office's efforts in the early weeks, it is unlikely that it can resume a service in the previous location at Marygate. He has rightly paid tribute to the sub-postmaster at the Castlegate branch, which has been struggling to cope with the increased traffic. Since the closure in October 2003, Post Office Ltd. has been working with the local borough council and others to try to find a solution to reopen a branch in the town.

I can confirm that the Post Office is committed to finding a long-term solution for the town on the north side of the river. There is certainly no intention at all to leave things as they are. The Post Office is talking to possible new sub-postmasters and is still looking for new premises, which should be close to the town centre. As the right hon. Gentleman said, nothing has yet been confirmed, although I understand that detailed discussions have taken place with prospective candidates for the position of sub-postmaster.

In defence of the Post Office, I would make the point that, clearly, if finding appropriate premises is a real difficulty, that may well constrain—I imagine that it has done so—the speed with which the replacement service can be provided. However, I entirely accept that the current position is unacceptable and the fact that it has last so long is deeply regrettable. I am sure that the Post Office would wish to express its apologies to all the right hon. Gentleman's constituents, who have been so severely inconvenienced over the past seven months.

The right hon. Gentleman raised some ideas about what might be done in the future. A lot of post offices have been converted from Crown offices to privately run offices. That happened at Berwick, where the Co-op initially operated the office. About 570 post offices are still run by Post Office employees—the directly managed or Crown offices. The process of conversion started in the 1980s as a means to strengthen the economic viability of the Post Office network.

Concerns arose as a result of some of the earlier conversions, so in May 1997, the then newly elected Government imposed a moratorium on further conversions pending a review. That moratorium was

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lifted in December 1998, following agreement on proposals submitted by the Post Office to the trade unions on a future strategy for the Crown office network. Those arrangements were included in the White Paper on the Post Office published in July 1999, and they require Post Office Ltd. to ensure that a significant proportion of its total business transactions are carried out at Crown offices. Currently, that figure is at least 15 per cent.

The performance and innovation unit report on the future of the network in 2000 concluded that as a matter of priority the Post Office should pursue work to maximise the commercial potential of the network, the efficiency of its operations and the quality of individual post offices. In particular, the report concluded that more Crown offices should be converted to privately run operations as a means of addressing the poor profitability of the Crown office part of the network. The network of directly operated offices, which, as I said, numbers only about 570, loses about £80 million a year. In the last financial year, Post Office Ltd. as a whole lost £194 million before exceptional items. We therefore need to be cautious before suggesting that we could move to an arrangement with substantial new subsidies for offices that were previously Crown offices and have since been franchised. I understand, however, the point that the right hon. Gentleman made about the inconvenience suffered by his constituents. I will convey the frustration and anger that he conveyed on their behalf to the management of Post Office Ltd., and encourage them to find a solution to the problem as quickly as possible.

Mr. Beith: The Minister has just made a helpful point, because he has demonstrated that many post office staff are still working in Crown offices. There is therefore a pool of staff, so it is surely possible to draw a few people from here and there to staff a temporary facility where such a change has taken place. That would help the people of the area, and if such action is not undertaken it will become increasingly difficult to franchise any more Crown offices, as people will think that the continuity of service may be lost.

Mr. Timms: I can reassure the right hon. Gentleman that the situation that he described is extremely unusual. As he said, I frequently respond to Adjournment debates and receive letters form hon. Members about post office matters, but this is the first instance of such a situation that I can recall. I do not think that we are seeing the beginning of a general pattern, and I certainly do not think that there are grounds for concern about other conversions of Crown offices, as happens from time to time, to franchised status. If it became a frequent occurrence in any way the right hon. Gentleman's argument would be a strong one.

The Post Office does not have numbers of people around the country who can be moved in, as the right hon. Gentleman suggested, although I agree that that ought to be considered if the problem lasts much longer. However, there would still be a problem with providing premises. He proposed a mobile arrangement, but we would have to address logistical issues. However, I shall certainly convey to the management of Post Office Ltd.

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the problems that he has described fully this evening, and encourage them to do everything possible to sort them out.

The post office network faces an enormous challenge, and I have already talked about the losses that Post Office Ltd. suffered last year. Ninety-seven per cent. of the nation's post offices are run by sub-postmasters, private business people who have invested not only their own money in their businesses but a great amount of care and effort to help the post office network achieve its highly regarded status. That is true of a large number of sub-postmasters, including the gentleman in the Castlegate branch to whom the right hon. Gentleman referred. However, declining profitability in the network as a whole has given a severe knock to the ability of sub-postmasters to sell on their businesses, which is how they have moved on in the past. Decisive action has been required to ensure that we maintain a sustainable and countrywide network for the future, and that is the action that the Government are taking. As the right hon. Gentleman said at the beginning of his speech, we must not allow gaps of the kind that have temporarily opened up in his constituency to become a more widespread phenomenon.

That is the reason for the process of urban reinvention—I understand the misgivings of the right hon. Gentleman and some of his hon. Friends about that name—that we have been going through. It is also the reason that we have invested £0.5 billion in technology to ensure that banking services can be provided at every single post office branch in the country. According to the latest figures, about 1 million banking transactions a week take place in post office branches around the country. I believe that there is a very attractive future for the post office network and hope that that will address some of the problems that have arisen in Berwick as a result of the difficulties that people who run sub-post offices have faced over the past couple of years. I hope that a much better prospect for those individuals will emerge in future.

I was pleased to see evidence that the number of sales of post office branches increased in the last financial quarter to the end of December, with 231 successful transfers of urban post offices compared with 148 in the corresponding period of the previous year. That significant increase in successful urban transfers suggests that there is a strengthening market and greater confidence in the future viability of many urban post offices as the implications and effects of the programme work through. That has always been its aim.

Mr. Beith: Is the Minister aware of anxieties about the Post Office card account in relation to the attitude of some Departments towards encouraging, or not encouraging, people to take it up? Although several people are registered, a relatively small number have

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communicated the details to the Department concerned, and there is anxiety that the system is not developing as originally envisaged.

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