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Mr. McLoughlin: Will the Minister give way?

Mr. Timms: No, I need to make some progress.
 
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The network has been in decline for some years, and the programme will help to restore the confidence of sub-postmasters in their future prospects, while reducing the level of over-provision and leaving a viable network. That job had to be done, and the process has been given strong support by the National Federation of Sub-Postmasters. The increase in the business of the remaining offices, backed up in many cases by funding from the £30 million that we have made available for investment grants, will go a long way towards ensuring that the sub-postmasters who run them may have confidence in their prospects. That is vital for the future viability of the urban network as a whole.

The £2 billion funding that we have made available since 1999 was the first money provided by any Government for the urban post office network. Such action was in stark contrast to the behaviour of the previous Government, who starved the Post Office of the investment that it needed. Some 20 million existing current account holders can now use banking services at every post office in the country. Universal banking services provide customers with free access to their basic bank accounts at post offices, and I am glad to say that there is a substantial growth in the number of those accounts that are being used.

We have encouraged the introduction of a range of new products, the first of which was personal loans, which were made available at every post office in the country. The Post Office successfully provides travel insurance and is now the country's leading supplier of foreign currency exchange, which is a successful development.

On Friday, I visited the Crown post office in my constituency of East Ham and met the new manager, Mrs. Jay Shri Patel. She gave me its trading figures, which every member of its staff now has the chance to see. The branch is not yet profitable, but there is much optimism that it will be as a result of the changes that are being made. Last year, its income from banking increased by 2.5 per cent., but so far this year that has increased by 19 per cent., compared with the same period last year. Its income from travel services has increased by even more than that, which has offset the loss of income from its benefit business. The new car insurance product has a great deal of promise. That is the picture that we want to see throughout the network in the future. The National Federation of Sub-Postmasters, Postwatch and Post Office Ltd.—three organisations with different perspectives—have all agreed that the programme is essential if we are to avoid the alternative of unmanaged decline, and hon. Members also recognise that hard reality.

Mr. McLoughlin: I have raised with the Minister on many occasions the closure of four of the five post offices in Belper. Does he think that that policy has lived up to the undertaking in the Labour party's manifesto at the last election, which read:

"There will be increased incentives for people to take over and modernise post offices"?

If there were five post offices, but there is now one, where is the increased incentive?

Mr. Timms: There are greater incentives for people to do exactly that, which is the purpose of the £30 million
 
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fund that sits alongside the funding agreed by the House in October 2002 to allow the programme to go ahead. We are experimenting with new ways of delivering post office services in rural areas. Above all, the incentive that people need to invest in the post office network is the prospect of a secure business future, so the process of rationalisation through which we are going is an indispensable contribution towards bringing that about.

Keith Vaz (Leicester, East) (Lab): I appreciate all the effort and work that my hon. Friend has put into the issue, but it remains the case that local people feel that they are not being listened to by those at Royal Mail. As he knows, there have been more than 10 post office closures in Leicester, although we are delighted that Clarendon Park post office has been given a reprieve. I am very grateful to the Minister for that, even though it is not in my constituency. The fact remains, however, that if people had confidence in the consultation process, the proper points that he is making would be understood by the public.

Mr. Timms: That is why I have made sure that Postwatch has played a key role from the beginning, and is able to examine each and every proposal and to monitor the programme as a whole.

Mr. Burns : Will the Minister give way?

Mr. Timms: No, not at the moment.

There have been more than 1,200 closures since the start of the programme following the vote by Parliament to provide funding. In more than 50 cases around the country where Postwatch has become convinced that a proposal should not go ahead, the decision has been reversed following public consultation. What my hon. Friend is rightly calling for is indeed what has happened. In addition, 57 proposals were withdrawn in the light of Postwatch's preliminary views and comments before the public consultation stage. About 200 proposals have been amended as a result of issues raised during consultation.

Research carried out separately by Post Office Ltd. and Postwatch shows that nine out of 10 customers of branches that have closed under the programme have moved their custom to offices that the company predicted would benefit from additional custom as a result of a nearby closure. That is clear evidence that customers are continuing to use post offices and that the programme is achieving its objectives, boosting the businesses of the branches that remain.

Of course the programme was always going to be controversial, but the vast majority of closures have been accepted as necessary and have attracted little criticism. Following concerns expressed in this House and elsewhere about the consultation, I asked Post Office Ltd. and Postwatch to review the arrangements and to propose changes to make them work better. I subsequently announced a number of changes in a statement on 5 February, and I am pleased that the process has worked much better since then.

Mr. Burns: I do not know whether the Minister has been involved in any part of the consultation process in
 
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his capacity as a constituency MP, but I have to tell him that, regardless of the figures that he cites, the hon. Member for Leicester, East (Keith Vaz) is right. Seven urban sub-post offices have been closed in the past 15    months in Chelmsford, and to be frank, the consultation process was a farce. The Post Office was utterly courteous in its dealings with those united in opposition to the closures, but it did not pay one iota of notice to the representations and just rammed through the closures.

Mr. Timms: As I have said, Postwatch has been able to take an independent view of each proposal, and where it has concluded that a proposal should not go ahead, the matter has been taken to the Post Office, an escalation procedure has been put in place, which I think has worked well, and as a result there have been a significant number of changes to proposals around the country. That is how the exercise should work.

Mr. Jim Cunningham (Coventry, South) (Lab): First, the initial consultation was all right until what was to be closed and not to be closed was published, and then it became very difficult to have any further meetings or discussions with the Post Office. I accept what my hon. Friend says about Postwatch. Secondly, many people have volunteered to take redundancy, for want of a better term, but there has been a problem finding others to take over the service where it might be needed. That is one of the problems that we have encountered in Coventry.

Mr. Timms: The intention behind—indeed, the justification for—paying compensation is to enable a branch to close, thereby supporting the viability of other branches in the area. My hon. Friend is right; one problem has been finding people to run the offices on the basis of the business as it was. That is one reason why we have had to make the changes—reducing the overall number of branches in urban areas and so making the businesses more attractive propositions for the future.

Local post offices also have particular importance to those living in rural areas. The network of post offices serving those communities is especially important to maintaining local access to essential services for those who are less mobile than others. That is why we have taken steps to protect rural post offices. In October 2000, we placed on Post Office Ltd. a formal obligation to maintain the rural network and prevent all avoidable closures of rural post offices, in the first instance, until April 2006. Post Office Ltd. appointed a network of 31 rural transfer advisers, who often become closely involved with community efforts to reopen or save rural branches. They have had considerable success in finding alternative sub-postmasters to replace those who have left, locating suitable replacement premises where necessary, and encouraging community efforts to provide services to the local community.

We have made £450 million available for Post Office Ltd. to maintain the rural network and prevent avoidable closures until at least April 2006, thus helping to ensure that reasonable access is maintained for all citizens to over-the-counter services in rural areas. To pick up the point made by the hon. Member for Lichfield, we will make decisions on future support for
 
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the rural post office network beyond 2006 in good time to allow for a smooth transition from the current arrangements. We are considering the options at the moment, and will make an announcement in good time. We want to minimise any uncertainty, both for sub-postmasters and for people in rural communities, and to take account of lessons from the pilots that are under way.

Direct payment of benefits provides a modern, secure, efficient system that is cheaper to administer. It is not new for benefits to be paid into an account—indeed, it is increasingly the norm. Before the decision by the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Gravesham (Mr. Pond), and his colleagues in the Department for Work and Pensions to switch to making all payments by direct credit, more than 43 per cent. of benefit recipients already had payments made directly into their bank accounts, an increase from just over 25 per cent in 1997, when a dramatic change in people's behaviour began. Nobody should be surprised that more and more people want to use bank accounts. For example, 93 per cent of all new child benefit recipients and more than 90 per cent of newly retired pensioners choose to have their benefit paid directly into their account. The old order book system is out of date, as it is based on ration book technology. It is inefficient, open to fraud and abuse, and expensive to administer. It must be modernised to keep in step with changing customer needs and to reflect the fact that owning and using a bank account is now the norm. Over 87 per cent. of benefit recipients and 91 per cent. of pensioners already have access to a bank account.

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