| Previous Section | Index | Home Page |
22 Mar 2006 : Column 99WH—continued
Post Office Card Accounts
2.30 pm
Mr. Mike Weir (in the Chair): I should say before we start that there are three clocks in this room, all showing different time. For the sake of clarity, we are working from the digital clock.
Huw Irranca-Davies (Ogmore) (Lab): I am glad to have secured this debate on an important subject that has caused a lot of consternation in all our constituencies. There are two possible ways to approach the debate. One is to harangue the Minister endlessly, in the hope that constant haranguing for an hour and a half will beat him into a political pulp. The other is to try to seek explanation and genuinely pose questions—I have more questions today than answers. Pursuing the second approach is in the interests of all our constituents.
I know that the Minister will respond better to the latter approach, as long as he is allowed the time to respond. I followed with interest the previous debate on a similar subject only recently, in which, because of the number of passionate speeches, the Minister had only nine minutes at the end to wind up. Within that nine minutes he took 15 interventions and as such we did not learn a great deal. I want to hear the fullest possible answers for my constituents and do not want to miss this vital opportunity. As such, I shall tailor my comments and have regard to the interventions that I take.
The title of this debate focuses on Post Office card accounts and benefits, but the issue is far bigger and further reaching than that. The fundamental issue is financial inclusion. How do we ensure that everybody in our society—the elderly, the carers, those with mental or physical health challenges, the physically and socially isolated, those who are vulnerable to loan sharks and doorstep bully-boys and others whom we represent, even when others look away—is included and not financially isolated, when others can gain the rewards of rising prosperity? This debate is about financial inclusion and fairness—it is as simple as that.
Let me set out the backdrop to this debate on POCAs and why they have become so integral to financial inclusion. I shall speak of my constituency; others will speak of theirs. In the eyes of the Post Office my constituency is overwhelmingly rural. It consists in part of narrow strip settlements in former coal mining valleys. Only one of the many post offices in my constituency, which borders the M4, is deemed urban. All the communities in my constituency, under the definition of rural post offices, have fewer than 10,000 inhabitants. I therefore make no excuses for focusing on rural post offices.
There are now 8,000 rural post offices in the United Kingdom, but only 1,500 run at a profit. A network that the Post Office originally established as a cost-effective system of branch sub-post offices, typically running alongside small shops, has over decades been overtaken by trends towards car ownership, supermarket growth and centralised shopping. As we all know, there has been a commensurate decline in the vitality of village centres, as measured by the range and profitability of shops.
22 Mar 2006 : Column 100WH
David Taylor (North-West Leicestershire) (Lab/Co-op): I come from a family that has run rural post offices for four generations, so I am pleased to hear the hon. Gentleman concentrating on rural post offices. The urban areas also have problems and feel that they are going to suffer a quadruple whammy. First, they are not given the rural protection that rural post offices receive. Secondly, they do not receive the POCA amount for each transaction. Thirdly, the money that POCA would have produced to be spent in the shop will not be there. Fourthly, and most importantly—this was put to me strongly by an urban sub-postmaster in his 60s just a few days ago—the value of the business is often the lump sum for a postmaster's retirement, but that will be hit significantly. The Minister is a decent and able man and does not deserve to be harassed, but I hope that he will respond to that.
Huw Irranca-Davies : My hon. Friend makes an important point on behalf of his constituents. As I said, I shall reserve my comments for my rural post offices, but the Minister will have heard what my hon. Friend said.
A submission from one of my postmasters shows the concern over the issue. He is a very good postmaster in the Garw valley, which is a settlement of around 5,500 people in a long, narrow strip, with one road in and the same road back out—it does not go anywhere else. People either live or work in the valley; they do not go through it to get anywhere. However, there is a lively town centre and we are struggling to keep hold of that. That postmaster wrote to me:
"Since the POCA was introduced I have seen quite a drop in Benefit Claimants using the Post Office. Under the old book system we would pay out, on average, £76,000 per week and now it is £45,000. We used to be paid on the Volume and Value of book payments made but now it is only on the Value. This is a drop of roughly 34 per cent. in income terms per month."
Before I continue, I should say that that postmaster is very good and has done a lot. He works the post office alongside a shop, which is bright and energetic. He has been fully part of the modernisation approach, but he is struggling. He continues:
"My overall annual income from the Post Office has seen a reduction of about 30 per cent. from what I was earning when I first started. But overheads have increased even though I now employ only 3 staff. (It used to be 7). The takings from the shop just cover staff wages and therefore we gain no income from it. That on top of the Post Office salary reduction means that we just stumble from one month to the next . . . one other thing"—
I shall return to this issue in a moment—
I have previously mentioned to the Minister how important the pattern of bank closures is. The letter continues:
"They are not a partner bank with the Post Office and the majority of our customers are with them so if we were to lose the POCA we would have no chance of survival."
Jessica Morden (Newport, East) (Lab): I recently met enterprising small shopkeepers with post office counters in Maindy in my constituency, who expressed their concern at the removal of the POCA. Does my hon. Friend agree that the measure will deplete the customer base of local community shops, which are already trying hard to compete with large supermarkets, which are now diversifying into smaller convenience stores?
22 Mar 2006 : Column 101WH
Huw Irranca-Davies : I would agree to the extent that we need to find satisfactory methods to put in place things that will keep the footfall for post offices. Let us not forget that this debate is not about post offices per se—we can become fixated on that—but about the customer and the groups that use the post offices. I agree with my hon. Friend to the extent that part of my intention in this debate is to focus on something that has not been greatly focused on, which is not only the need to revitalise and find a full sign-up with other banks—not just with the basic bank account, but other alternatives—but the idea that our post offices should have a future as a vital high street presence in all our small communities.
I am not convinced that Post Office Ltd has done enough, although it started doing a lot, nor am I convinced by any stretch of the imagination that the banks have done enough. They will talk about what they have done with the basic bank account and so on, but I am talking about the ones that do not support the post office and I am adamant that they include significant banks—I shall read the list out in a moment. I am in the fortunate position of having three different accounts. I have to make my own decision—I cannot say for my constituents—but I would be pulling away from the banks that did not support my post office.
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD): The hon. Gentleman made the important point that this debate has to be about the customer. We should also recognise that it has to be about choice. More than 4 million customers took out a card account, fighting to overcome the Government's hurdles and resisting a lot of pressure not to do so. Surely the Government should now at least recognise that customer choice, and keep the card account available for those people and keep post offices open so that they can use it.
Huw Irranca-Davies : As the debate goes on I hope that I shall make clear my personal idea of where the Post Office should be going, focusing on the customer as well as the post office. The hon. Gentleman will remember, as many of us do, the immense reluctance of many people to move to the POCA. However, the POCA has served a useful purpose. I brought a delegation to the House to lobby the Minister's predecessor, because of the concerns about losing the pension books, moving to the electronic system and so on. Actually, experience of the POCA has proved that it has a point. The point of the POCA is that it is simple: money in, money out. People cannot go into overdraft and they do not face the dangers of a wider mechanism.
However, there are disadvantages with POCA and that is why I want us to move away, but to a Post Office product—to a POCA plus, say. Let us find something that does not involve just the high street banks offering the accounts, but a development of the POCA that will allow direct debit. While I can save on average around £230 a year by paying my gas and heating combined bills and other bills by direct debit, the most vulnerable in our communities—the ones who can least afford not to make those savings—are currently in POCAs and precluded from doing so.
22 Mar 2006 : Column 102WH
We must agree across the Chamber that the argument is not simply, "We must have POCAs; POCAs are brilliant." When I brought the delegation here, POCAs were seen as the devil incarnate. They have a purpose, but we have to build a mechanism and—I argue strongly for this—a POCA plus Post Office product. If people want to use both bank accounts and the Post Office, good for them, but what about others?
Hywel Williams (Caernarfon) (PC): The hon. Gentleman refers to the controversy surrounding the introduction of the card account, which other hon. Members and I well remember. Does he recall being aware that the card account was supposed to be an interim measure? I confess that I was not aware of it at the time.
Huw Irranca-Davies : As I am not a member of the Government, I find it difficult to answer that question; I am sure that the Minister will.
I say openly that I never regarded the POCA as a sufficient product. It was designed to meet a need at that time. We in the House have to be realistic and frank with the public that while the POCA has certain advantages, it also has significant disadvantages. If we want to keep the footfall coming through the post offices—indeed, to encourage more people to use them—and give them the benefits that come with having more than a basic POCA, we must be frank. We should not go out of here today and tell people that it is a disgrace that the POCA is going; let us argue the case for what will come after it.
Andrew George (St. Ives) (LD): I am grateful to the hon. Gentleman; he is generous in giving way.
May I phrase the previous question in a different way, which I hope that the hon. Gentleman is prepared to answer? Do not Post Office card account holders deserve some consistency? In a letter to me received this week, the Minister said of the card account:
But a letter from the Secretary of State for Work and Pensions and the Secretary of State for Trade and Industry, dated 3 February 2004, made it clear that there was no expectation that the accounts would be a temporary measure. In fact, the letter said that they intended that people should
Of course they should be developed and improved, but there was no mention then that the accounts were a temporary measure, which is what the Secretary of State for Work and Pensions and the Department now claim.
Huw Irranca-Davies : I am not here as a spokesperson for the Government, or to defend them. I am here to argue a case on behalf of my constituents.
Let me make something clear about the much disputed statement of Tricia Jenkins, which is part of a longer missive. This issue has come about not because of the transitory nature of POCAs, but because of the three pilots, to which I shall return in a moment. Last
22 Mar 2006 : Column 103WH
November or October, Tricia Jenkins, the National President of the National Federation of Sub-Postmasters, members of which I met when preparing for this debate, said:
"POca does indeed have a limited life. When it finishes, we hope to convert existing POca customers into using another POL"—
"service. It could be that because POca customers are used to banking, they might be prepared to switch to a bank account. And since we can offer a banking service, we would like to think we can keep those customers. So it is 'all change' in 2010, but it will not necessarily be all bad news."
I am worried about timing and planning and whether we will have appropriate products in place so that if people migrate from, or are migrated out of, POCAs there are suitable products for them to use that will retain the vitality of and footfall within post offices.
Mr. Bob Blizzard (Waveney) (Lab): My hon. Friend is right about timing. Customers might have been reassured that they have until 2010 to move from a POCA to something else, but I wonder whether any of my hon. Friends' constituents have received a letter that some of mine have received, which simply says:
"Those people who can use a bank . . . account should have their Incapacity Benefit paid into it, rather than into a Post Office card account . . . now is the time to make arrangements to pay your Incapacity Benefit into a bank (or building society) account."
That letter caused huge distress to my constituent, who thought that they had to move now. When they rang the number on the form, as they were requested to, they were even more distressed to be told, "You have to have a bank account; trot along to your nearest bank." My constituent lives five miles from a bank and has multiple sclerosis. As a result of that kind of thing, people are concluding that the DWP does not mean what it says. If that is not the case, the Minister is being let down by some of the staff in his office.
Huw Irranca-Davies : I thank my hon. Friend for that intervention. I have not received any such letters directly from customers, but that is because I am not in one of the pilot areas.
I have made this point about timing to the Minister before. I accept that there is a case for developing beyond the POCA—it is in the interests of our constituents, particularly the most vulnerable ones, to do that—but those products need to be there as we do it. There is a crucial time issue, not to do with 2010 per se, but earlier than that, so that people have time to change. It is also to do with 2008, which is when we consider the issue of the social network payment again.
To their credit, the Government have worked hard, with the European Union, to ensure that funding for rural support is extended to 2008. That is excellent, but we must then have another tranche of funding, which we will have to discuss with our European colleagues because of competition regulations and so on. At the moment, we are looking at 2008. That gives us a short window in which the Government, the Treasury, the Department of Trade and Industry, the DWP, Post Office Ltd, the NFSP and the banks should sit down and get in place a range of products that will genuinely address issues of financial exclusion.
Having said all that, let us not forget the commercial realities of sub-post office branches, and that post offices are independent businesses, not public sector
22 Mar 2006 : Column 104WH
organisations and employees. To the Government's credit, in 2003 they recognised the huge social value of post offices to many rural communities and rightly introduced the SNP—not the Scottish National party but the social network payment.
The SNP initially allocated £150 million a year to support the rural post office network in recognition of its inherent social value. That has now been extended to 2008 after negotiations. The SNP provides for three elements, including the annual fixed pay of around 6,000 sub-postmasters in rural post offices—those that would not be commercially viable—and the development of new economic approaches to providing services in rural areas. I shall return to that issue later if I have time, but it does not look as though I will.
The adoption of the policy that there should be no avoidable closures means that the number of rural branches has been relatively stable in the past four years. Roughly 10 per cent. of branches have exchanged hands—I have seen them do so in my own patch in the four years since I have been an MP—but the closure rate is only 2 per cent. There is a lot of flux and movement, but we are keeping branches open, partly through community involvement and, certainly in my area, partly through a proactive stance from Post Office Ltd, Postcomm and others, to ensure that if one branch closes, another opens down the street. That is important.
When he responds, will the Minister talk about the long-term future of the no-avoidable-closures programme? In this transition period, it is vital that while we try to find a new future for some post offices, we do not trip over one thing, lose that policy, and see hundreds of post offices close before we get the new lifelines in place. The sudden panic is to do with the pilots. Will the Minister address that issue in his response? I genuinely want to know the purpose of the pilots and, more importantly, what will happen as a result of them.
I keep returning to the issue of the timing. If the pilots are meant to show the best mechanisms to migrate people when we have the products in place, that is fine, but they have caused a lot of worry. I acknowledge what hon. Members, including my hon. Friend the Member for Waveney (Mr. Blizzard), have already said. If we intend to rush towards the pilots tomorrow and if they were to be rushed out in the Garw, in Ogmore Vale and in Gilfach Goch and Maesteg, it would be a nightmare because of the pattern of banking. Let me explain why.
In my constituency—I do not think that it is untypical—there has been a pattern of bank closures over many years. They have gone in a certain order, which is fairly typical. One of the last to go from Ogmore Vale, which has a population of 7,500 and is a narrow strip valley, was HSBC, a bank that I bank with. It was the last to pull out and so it spent the year before, when the other banks were closing, marketing aggressively. It said, "We are the last bank in town, so come and bank with us. We are the world's local bank." Last year, it shut its doors and went. There is no other bank in the whole valley system.
It is 25 or 30 minutes from Nantymoel to Bridgend town centre. They are areas of high deprivation, covered by the communities first programme, and are some of the areas with the highest deprivation in Wales. When
22 Mar 2006 : Column 105WH
HSBC went, people transferred to the Post Office or to the one remaining other centre, the Halifax building society. Two weeks ago, the Halifax shut its doors. Neither organisation is fully signed up to the banking systems in the post office.
Mr. Christopher Fraser (South-West Norfolk) (Con): I agree wholeheartedly with what the hon. Gentleman has said about access to facilities, and I support his concept of a POCA plus. However, does he agree that one of the biggest problems that elderly people have, particularly with remote banking, is that it is inherently difficult to open a bank account and manage it remotely across a wireless telephone system? Older people, particularly in constituencies such as mine and that of the hon. Gentleman, find that difficult to undertake. The simplicity of POCA and POCA plus is what they are looking for as a consequence.
Huw Irranca-Davies : I would agree to the extent that undoubtedly those who have never had bank accounts before encounter difficulties with not only remote banking but normal banking. Citizens Advice has highlighted that, and I thank it for its briefing. I have the executive summary with me, rather than the 60-page briefing. The Minister might want to respond to that.
Citizens Advice is not against a successor to POCA. It is not against basic bank accounts. However, it recommends that all banks should review their existing basic bank accounts against several principles. There should be no use of credit scoring, because credit scoring is not a disincentive but a roadblock to some constituents when it comes to bank accounts. We tell them that if they want to move to the Post Office they should use a basic bank account, but credit rating makes that immensely difficult. Accounts should be opened on the spot, provided that the customer has acceptable forms of identification. One of the big problems with people who are not used to bank accounts is that, unlike us, they are not used to wandering in with two or three forms of identification. They might not even have the forms of identification that we take for granted. I recommend the briefing to hon. Members, because it gives the issues about banks and financial exclusion.
Twenty-six banks—I have been told 25, but there are 26 on my list—are currently signed up to the Post Office. Perhaps one has joined in the past few days. They provide 26 basic bank accounts. The interesting thing about basic bank accounts, from my understanding and my discussions with regional executive members of the NFSP, is that they can give some of those features like a POCA. However, if we consider facilities such as a balance inquiry, which is something that we take for granted when we are managing our money, Barclays, Cahoot, Barclays cash card account and HSBC do not offer that option.
Let us consider those that offer cash accounts, where one can pay money in as well as take it out. If we are genuine about financial inclusion, we should try to say to people that we do not want to give them unsatisfactory products and for them to be inundated with banks offering everything under the sun, but that we do want them, if they are able and willing, to be able to take advantage of the accounts.
22 Mar 2006 : Column 106WH
Only 13 of those 26 accounts allow cash to be paid in. It is a disgrace. Nationwide building society, Abbey, Bank of Scotland Easycash, Barclays, First Trust bank, Halifax Easycash, HSBC, Nationwide FlexAccount, NatWest, Northern bank, Royal Bank of Scotland, Ulster bank and Yorkshire bank—none is signed up in the full way that they should be to keeping the Post Office going. If they were, it would mean that a person could go into a post office and not only take their benefits out or have them paid in but, when they wanted to, take that further.
Mr. Eric Illsley (Barnsley, Central) (Lab): Is that not the crux of the whole debate? I know that my hon. Friend is speaking about financial inclusion, but we are faced with a situation where some of the major banks that have been referred to simply do not want to involve themselves. My hon. Friend talks about POCA plus being the next product; POCA plus would obviously be as close as it can get to a normal bank account, but the normal banks do not want to take part. There is a wider debate about competition in the financial services industry and whether the big banks want to be bothered with all such accounts.
Huw Irranca-Davies : I agree with my hon. Friend. I imagine, and I do not think that it is a futile hope, that post offices have a good future. However, it will only be achieved if we have full sign-up. That should come not only from the Government. The Government are trying, and pushing hard, but perhaps the Minister, along with his Treasury colleagues and the DTI, should be putting more pressure on the banks. I am more than happy to sign up here and now to a cross-party campaign to try to put pressure on the banks to sign up fully. When the banks withdraw from our communities, that gives a golden opportunity for our post offices, but not at the moment.
Surely some of the profits made in the banking system could be put in to provide the basics, such as keeping the vitality of the high street in Pontycymer, so that shopkeepers can go in and out—bring money in and keep that going so that the vulnerable and those who need access to money at the drop of a hat can have a free cashpoint and so on. Although we hear the arguments about the commercial imperatives of the banks withdrawing, there is no excuse for banks to stay away from the remaining outlet in many communities, which is the post office. Anything that the Minister, the Treasury, the DTI and we can do should be done to put pressure on the banks to play ball more fully than they are.
I must pay credit to those who have sent me so many briefings, but as hon. Members can see, I am inundated with them. I shall draw to a close, but before I do I want to touch on the issue of cash machines. The Post Office has been trying to increase massively its number of cash machines, but there are significant problems. I want to read from a courteous letter that I was sent from the Nationwide building society about cash machines. It has researched the number of cash machines in various constituencies; other hon. Members might have received such a letter. It states:
"In Ogmore 76 per cent. of machines charge a withdrawal fee. This is one of the ten highest figures in the country and compares to a national average of 43 per cent."
"We believe fee-charging machines are hitting hardest those least able to pay for withdrawals and that this menace contributes to the problems of that element of society who are financially excluded. That is why"—
I applaud Nationwide for this and we should get behind it—
"Nationwide has written to the UK's bank and building society chief executives to ask them to agree to the following pledge:
Free ATMs should have a standard "free" green sign so that consumers can see at a glance whether or not they will be charged
It is deplorable when, in communities such as Ogmore Vale, banks not only do a runner and explain it in commercial terms but then make no effort at all to ensure the "last bank standing" provision of a free access machine, or even to get behind the Post Office. That is deplorable.
I want to draw to a close. The Countryside Alliance sent briefings out as well. It talked about the subsidy that has been achieved until March 2008 but not beyond. It might seem odd to colleagues that I am quoting the Countryside Alliance, but its comment is particularly pertinent. It says that
"the government needs to have a clear view of what it wants from the rural network and what measures need to be put in place now in preparation for 2008."
"This will need . . . planning and mapping of requirements, and could mean closure of some offices where instead a service is offered by one of the new methods—for example a travelling Post Office."
I have not even touched on the alternative methods, but perhaps the Minister will.
In all this, my focus has been on trying to keep our post offices open—not because I have a romantic view of post offices, but because they frequently offer the last financial services available in communities such as mine and have a social role. I am not arguing for the retention of the POCA as it is, and that may be where I differ from other Members. Frankly, we need something better. I know that the Minister is genuine in his attempts to do that, but I urge him and the DTI to look not only at POCAs but at financial inclusion, to see how we can bang the heads of the various partner agencies together and work out what things will look like in a couple of years. That will not only sustain a good post office network for customers—whatever form that takes—but ensure that we do better on financial inclusion.
I shall not stand here today and defend every last post office on earth for the sake of it—that is not necessarily in my constituents' interests. However, we must ensure that post offices, credit unions and many other bodies form an umbrella organisation. That will ensure that elderly pensioners and lone parents—some of the most vulnerable people in our society, who may not own cars or have access to public transport—can access money in a post office setting and have the whistles and bells that we demand from our current accounts. That is what I ask the Minister to look at in his response today.
Several hon. Members rose—
22 Mar 2006 : Column 108WH
Mr. Mike Weir (in the Chair): Order. Several hon. Members are trying to catch my eye. I intend to call speakers making the winding-up speeches no later than 3.30 pm, so I appeal for brief speeches and interventions.
3.2 pm
Mr. Alan Reid (Argyll and Bute) (LD): I congratulate the hon. Member for Ogmore (Huw Irranca-Davies) on securing the debate and on the excellent way in which he presented his case.
Post offices are important in many of our communities, particularly rural communities and deprived urban areas. Such communities often lack big businesses, and the hon. Gentleman mentioned banks. The post office is very important and is often the core of the community. In villages, it will contain the sole shop or be surrounded by one or two other shops. The money that it pays out to pensioners and those collecting their benefits plays an important role in sustaining the post office shop or the shops round about. Post offices therefore play an important role in the community.
We must find a post office-based solution, not a bank-based solution. If we have a bank-based solution, customers will gradually be drawn away from post offices to the banks, with the post offices gradually losing business. Even though people might theoretically be able to collect their money from some bank accounts at the post office, the loss of business will mean that there is no post office. It is therefore important that we retain post offices and continue with POCA or an improved form of POCA that offers a post office-based solution. People have chosen to use the post office and had to fight their way through the customer conversion centre. Millions of them have put up a big fight to get their Post Office card account.
I want to engage constructively with the Government, but it is difficult to do so when the Minister with responsibility for post offices refers to them as "inefficient physical structures". It has also been difficult to engage with the Government because of the secrecy and the cover-up of the past few years. There has been a secret conspiracy and a deliberate cover-up within the Government in an effort to take people away from post offices. If Government policy remains unchanged—I make no bones about this, and Adam Crozier of the Post Office has made this clear—10,000 post offices will close, leaving only 4,000 in the country.
The Speaker forced the Government to release their secret agreement with the Post Office, and I shall quote a couple of items from it. The first states that the Post Office
"shall not, and shall procure that the PO Personnel and the Post Office Agent shall not, market or procure the generation of Publicity or Marketing for the POCA".
Post Office agents include sub-postmasters, so sub-postmasters are not allowed to market the Post Office card account to their customers—that is what the Government and the Post Office have decided. The secret agreement also states:
"The POCA is intended to be an interim step for Account Holders who will be encouraged by both Parties to migrate to Bank Accounts".
In other words, the Government and the Post Office have agreed that they and sub-postmasters should encourage customers to move to bank accounts.
22 Mar 2006 : Column 109WH
I tabled a question to the Minister to ask him about two issues. The first part of the question asked,
"when Parliament was first informed that . . . the Government's contract with the Post Office to pay pensions and benefits into Post Office card accounts lasted until 2010."
He answered by quoting Hansard from 4 February 2005, which was two years after the card account started. The other part of the question related to when the Government announced to Parliament that they
"did not intend to renew this contract with the Post Office when it expired in 2010."—[Official Report, House of Commons, 13 March 2006; Vol. 443, c. 1849W.]
However, the Minister failed to answer that part of the question. It therefore appears that, until the last month or so, the Government never announced to Parliament that there was no intention to renew the contract in 2010.
I want to enter into constructive engagement and to hear what the Minister sees happening after 2010. With all these pilot schemes, the Government's present approach is moving people away from the Post Office now. The Government have obviously realised that the Post Office card account comes to an end in 2010. We cannot have a big bang in 2010, so there must be movement before then. With all these pilot schemes, the Government are moving people to the banks now. Why are the Government and the Post Office not working on producing an improved form of POCA for after 2010? All that they seem to be doing is moving people to the banks. The letters that they send people simply tell them that they must move to the banks and that they must phone up and give the Government bank account details.
The Government seem to be going down the track of moving people away from the Post Office, and the loss of custom will lead to the closure of post offices. The only legal protection for post offices is in the Royal Mail's universal service obligation, which states that
must be within 10 km of a post office
postcode area means the initial two letters of the postcode. That means that large tracts of the country will not need to be within 10 km of a post office. That is particularly the case in a postcode area such as mine—the PA postcode—where the vast bulk of residents are in the urban areas of Renfrewshire and Inverclyde, with my rural area added on. If the proposed policy is implemented, only a handful of post offices would be left in my constituency of the 100 or so that are there now. I therefore appeal to the Government to engage positively with pensions groups, sub-postmasters and other parties, to keep the Post Office card account for the moment and to produce a post office-based solution after 2010.
3.9 pm
Mr. Eric Illsley (Barnsley, Central) (Lab): It is a pleasure to follow the hon. Member for Argyll and Bute (Mr. Reid). I take his point that there seems to be a policy of running down the post office network, but I disagree that that is somewhat secret—it has been painfully obvious to everybody that the future of the sub-post office network is under threat.
22 Mar 2006 : Column 110WH
This is an important debate, and I congratulate my hon. Friend the Member for Ogmore (Huw Irranca-Davies) on raising the issue once again, because the Minister needs time to explain the Government's position. I will therefore keep my remarks very brief. The debate is important because it relates to issues such as financial inclusion and the future of the sub-post office network. It raises questions such as whether the big banks are involved or want to be involved, whether there is over-provision in the financial services sector and whether the major banks simply do not want to be bothered with this type of account and would point to what my hon. Friend calls POCA plus as being like a normal bank account and say that people can now have mainstream bank accounts.
At the end of the day, however, the reason for the POCA was to maintain the post office network. Once we look towards mainstream bank accounts—current accounts with major banks—and moving away from POCA or POCA plus, there is no reason to have that facility in post offices. Once we remove the POCA, the sub-post office will die on its feet because of the lack of income, unless there is something to do with the finances of which we are not aware. What does the Post Office get out of this system and what does it cost the Government? When will we obtain the figures so that we can see for ourselves what the juxtaposition is?
Mr. Blizzard : In the context of what my hon. Friend is saying, one of the sub-postmistresses in my constituency said that it would make a huge difference if more banks had the LINK mechanism and if all the banks with the LINK mechanism signed up with the Post Office. At the moment, Nationwide is there—good for Nationwide. Why are the others not there?
Mr. Illsley : That is a fair point and it is part of the debate about financial services. An automated teller machine near my home is in the local garage, so when I fill my car with petrol, I can withdraw money. I need not go near a post office—or a bank, come to that. If the post office closes but the garage is still there—the chances are that garages will outlive post offices—people will be able to use that ATM, which does not charge for my account. That poses a threat to the sub-post office. Much of the argument is about the future of the sub-post office network.
I wanted to speak in the debate because I have received more than 40 letters this week about one sub-post office in what is an urban constituency, because the sub-postmaster has told the customers that the Government's withdrawal of the POCA from 2010 could pose a threat to the post office, and the customers have reacted. I cannot recall receiving so many letters in such a short time about one issue. My hon. Friend the Member for Ogmore talks about the Post Office and takes a romantic view. I am talking about people who have put pen to paper because they have a beef about the future of their post office. To many people, the future of the network is hugely important.
Chris Bryant (Rhondda) (Lab): Is not the central point the fact that somehow or other the Government must ensure that after 2010 everyone can still withdraw their money, whether it is pension money or whatever, from a post office, not principally to keep post offices
22 Mar 2006 : Column 111WH
going but because that should be their basic right? The Government should have given people that guarantee. We hope that, whether or not it is called the Post Office card account, there will be that guarantee for everyone, whether they live in a rural constituency, a poor constituency or a semi-rural one such as mine.
Mr. Illsley : I agree, but whether we have a right to a sub-post office network is debatable. There is a school of thought that says that the Government are not committed to that network and would be quite happy to see it wither on the vine, the way things are going. However, something may be being negotiated between the Post Office and the Government so that there can be a future for what my hon. Friend the Member for Ogmore calls POCA plus, which will slot in between the post offices and the banking network.
I return to the question of what a sub-postmaster gets from someone coming into his post office and using a high street bank card. Can sub-postmasters draw an income from that? If they can, what are sub-postmasters complaining about? Let us give everyone a bank account and let them go into the post office and use it as a branch of their bank.
Huw Irranca-Davies : One of the interesting discussions that I had with a Welsh executive member of the National Federation of Subpostmasters in Wales was on that very point. He pointed out that, with POCA, a person gets 15p for every £100 transaction. They have to have £100. However, for a banking transaction, regardless of its size, someone gets on average 13.5p. The average transaction involves about £50, so we are talking about 27p per £100. To return to what my hon. Friend was saying, the issue is the wider level of support. If it is not POCA, what will keep those post office branches going?
Mr. Illsley : Some revealing facts are coming out about the amount of money that post offices and banks get and whether we can achieve something in the middle. As we know, all manner of new banking products are introduced every day. There is huge competition in the banking sector. I am referring to direct debit banking, internet banking and so on. People are obviously sat in a room somewhere designing new products even as we speak, moving away from POCA plus towards accounts with all the bells and whistles to which my hon. Friend the Member for Ogmore referred. The caravan is moving on in terms of what is available in the financial services sector. My hon. Friend made the good point that the profits made by high street banks these days are incredibly high—more than £1 billion for each bank that declares profits. Why are we talking about profits such as that and yet high street banks are not coming into this system? We are arguing for people who do not have a basic bank account.
I come to the question whether the POCA was meant to be permanent or temporary. I could not recall anyone saying when we debated the system initially that it would be temporary. I can see the point in including people in financial services and migrating them from the POCA to a mainstream bank account; that is about financial inclusion. However, I do not recall the argument that the POCA was to be temporary. The Government said in response to the Trade and Industry
22 Mar 2006 : Column 112WH
Committee that the contract would last until 2010. I think they said that it was too early to speculate beyond that point. They did not say that the system would end in 2010 and they would not renew it. The fact that it will be ended so soon has caused a lot of concern.
I take the Minister's point that, for 25 per cent. of the delivery of Government benefits, this system takes up 80 per cent. of the cost. It looks as though the Government set up the system in 2003 and have since realised that it is costing a hell of a lot of money for a small number of customers, hence they need to get out of it pretty quickly. It looks as though the Government are getting out of it sooner than 2010, given the pilots and the fact that people are being encouraged to move away from the account. The pilot schemes involving migration are causing the problem. The POCA is closed to new entrants; 35,000 individuals with Post Office card accounts have been told to open a bank account; and 2,500 accounts have simply been closed. Those are the reports that have reached me. It looks as though the Government are intent on closing the contract down even before 2010.
It would be interesting to hear from the Minister whether the cost to the Government is a factor in the midst of all this. It is important that we debate the sub-post office network, but an hour and a half in Westminster Hall does not do the subject justice. The Government should consider allowing extra time to debate the sub-post office network, perhaps on the Floor of the House, because it is a serious issue. The Government should also end the uncertainty and either agree to extend the contract for a couple of years beyond 2010 or make a statement of certainty on what will happen, so that people with the accounts know what will happen and we can advise our constituents for the future.
3.19 pm
Hywel Williams (Caernarfon) (PC): I will be brief both to save my voice and not have it jangle on your nerves, Mr. Weir, and to give the Minister time to respond to the debate. I congratulate the hon. Member for Ogmore (Huw Irranca-Davies) on securing the debate and on his speech. I, too, have received a postbag on this issue. Some of it has been prompted by the fact that post offices in my constituency are being closed or are potentially being closed and replaced by a van, which I am sure will provide a good service for the few hours during which it is available, but which in global terms will reduce the service available from local sub-post offices.
My constituents make two points when they write to me. Initially, they are concerned that the Post Office card account will probably disappear, but they also make a slightly more subtle point: they are concerned about the lack of consistency and security, particularly for those who are older or have a disability. That is a particular issue in my constituency and those of many hon. Members present who represent rural areas, where there is a higher than average percentage of older people, of people with disabilities and certainly of people who are financially excluded because of their income or employment record.
Mark Williams (Ceredigion) (LD): I want to help the hon. Gentleman state his case. Does his postbag, like
22 Mar 2006 : Column 113WH
mine, reflect a deeper concern about the viability of post office shop businesses in his constituency? Does he recognise the character of one of my village post offices, Llanrhystud, where 130 Post Office card transactions take place each week? The viability of the shop associated with that business will be very much under threat if the uncertainty continues.
Hywel Williams : The hon. Gentleman makes a very good point, and I will refer to that issue now rather than later, as I had intended. There are great potential effects on local sub-post offices, and that is in contrast to the great efforts made in areas such as mine to support local shops. In my constituency a village co-op was set up specifically to buy the local post office-shop. The huge effort that went into that may now apparently be rewarded by a severe blow to the income of that business. We certainly must have concerns about footfall and the amount of other business attracted to shops by the Post Office card account facility. As has been noted by other hon. Members, the Prime Minister has said that he wants the network to thrive, and that wish is shared by all of us. However, given the points made by me and other hon. Members, how can it thrive?
I finish on a point that another hon. Member made about the service to the individual customer. There is a certain amount of pressure on card users to take advantage of a bank account. People in some parts of my constituency would say bitterly, "What bank account?" When one looks at deeply rural areas—some of my constituents have to travel eight or even 15 miles to access their bank accounts—one has to be sceptical to say the least.
I refer hon. Members to the report of the Select Committee on Welsh Affairs. In the previous Parliament, I had the opportunity to be a special adviser for its investigation into financial exclusion. One need only look at the response at the time of the large clearing blanks to the closure of branches, to which the hon. Member for Ogmore referred. I will give a particular example that Welsh Members will relish: a bank in the Rhondda was closed and the alternative service offered was in Pontypridd. That is but 3 miles away as the crow flies, but as the bus or train travels, it is a day's expedition to get to the nearest bank. That was the level of understanding demonstrated at the time.
Chris Bryant : As the hon. Gentleman mentioned my constituency, I thought it incumbent on me to comment. I am not particularly sure which part of the Rhondda he thinks is 3 miles from Pontypridd, but large parts of it are 12 miles away from it. One recent closure was in Treherbert, and that was very disturbing. Does the hon. Gentleman not think it ironic—worse than ironic, in fact—that many of the banks show no great interest in many such communities when it comes to providing banking services, except when they want to lend money to people? Then they are quite happy to provide them regularly—almost daily—with yet another free, pre-arranged, pre-guaranteed credit card, pre-guaranteed loan, or with credit card cheques? There is a great deal of hypocrisy going on with some of the banks.
Hywel Williams : The hon. Gentleman makes a very good point. It strikes a very false note when credit
22 Mar 2006 : Column 114WH
facilities are pushed on people who cannot afford them, while they cannot access bank accounts. That is a particular issue in areas of high deprivation such as the hon. Gentleman's and mine.
I support the point that the hon. Member for Ogmore made about bringing in POCA plus, an improved Post Office account. That sort of account exists in many European countries and is very successful there, and I have no idea why we cannot replicate that in the UK.
3.25 pm
Andrew George (St. Ives) (LD): I am aware of the need for brevity, and following the excellent contributions of the hon. Member for Ogmore (Huw Irranca-Davies), who secured the debate, my hon. Friend the Member for Argyll and Bute (Mr. Reid), and the hon. Members for Barnsley, Central (Mr. Illsley) and for Caernarfon (Hywel Williams), I wish to make just three brief points.
First, it is clear to me that we all have to accept that, although we feel strongly about the issue and have communities who have depended on post offices for many years, any decisions on the future of Post Office Ltd and our post offices cannot be made purely on the basis of sentimentality, and we cannot plan the future of those services purely on that basis. However, we need to make sure that the decisions are made on the basis of giving Post Office customers genuine choice, not a lack of choice.
Many of us who followed the offer of a variety of methods of collecting pensions and other benefits feel that despite what the Government have said, a lot of the choices that we believe should be available to customers have been closed, denied or at least made extremely difficult. Large and significant obstacles were put in the way of customers, both in terms of the information put out in Government leaflets, and the complexity of the forms that people needed to complete to open a Post Office card account. For other reasons, those opportunities have been significantly restricted. Despite those obstacles, and the obstacle course that the Government have put in the way, the fact is that a larger number of people—4.7 million of them—opened Post Office card accounts than the Government anticipated.
Secondly, the Minister needs to address the issue of the honesty with which the Government are managing the next stage of the future of the Post Office card account, and their decision to close options beyond 2010. As I said earlier, I received a letter—sadly, the date on my copy is too faint, but I will provide it later—this week from the Minister. He says:
"It was designed as a stepping stone to help people who had not used a bank account before get used to banking before moving on to an account offering more features. The Post Office card account contract runs up to 2010. There was never any expectation that we should provide funding beyond that date and there is no case for doing so."
Earlier, I also referred to another letter, signed by both the then Secretary of State for Trade and Industry and the then Secretary of State for Work and Pensions. I shall quote from page 4 of that letter, which was circulated to all hon. Members, and I shall do so in full, to be fair. It says:
"New banking services and the introduction of the Post Office card account are central to the future of the Post Office."
If it is central to the future of the Post Office, why is that option being closed down? Nothing in that five or six-page letter referred to the closure of the card account.
Tim Farron (Westmorland and Lonsdale) (LD): I have 50 post offices in my constituency. The largest single cause of closure of post offices is people reaching retirement and not being able to sell on their business. Would my hon. Friend agree that it is the uncertainty created by the lack of clarity over the future of the POCA, and indeed of the rural post office network grant, that causes those people not to be able to sell on?
Andrew George : I agree with my hon. Friend, and I hope that the Minister has taken that point on board and will consider it.
The third and final point that I wish to make is simply that the uncertainty is putting the most vulnerable in society at the mercy of the banks. I have taken up a large number of cases on behalf of constituents, and am also aware of other cases on which the Office of Fair Trading ruled in July. Some bank account customers find themselves with unauthorised—or, indeed, authorised—overdrafts with charges that the OFT has found against. It asked the high street banks to regularise and make more transparent their opaque charging mechanism, particularly for people on very low incomes, the people we are talking about when we talk about Post Office card account users. Given that those banks were given three months to respond and they have still not come up with any conclusion at all at this stage, I hope that the Minister accepts that, with this measure, he is throwing the most vulnerable in society at the mercy of an unacceptable situation.
3.30 pm
Danny Alexander (Inverness, Nairn, Badenoch and Strathspey) (LD): I congratulate the hon. Member for Ogmore (Huw Irranca-Davies) on securing this debate and on his eloquent opening contribution. I strongly echo the remarks made by the hon. Member for Barnsley, Central (Mr Illsley) that although a debate in Westminster Hall is important, it does not give enough time to debate this matter in full. Reiterating a point made in a previous debate, we should have some Government time in the main Chamber to debate this matter more fully.
Hon. Members have been right to say that the news that the account was temporary came as a shock to many people. As my hon Friend the Member for Argyll and Bute (Mr. Reid) said, it was a well-kept secret by Ministers during the crucial period when the card account was being rolled out. In a letter sent on 21 February this year, the DWP told one correspondent that
"drawing attention to the end of the Post Office card account contract may have been seen in a negative light by critics. Therefore we made the decision not to refer to it."
That could not be more explicit. That is cynical spin and manipulation of an important issue.
Of course, a vast number of people are affected by this change. Some 4.7 million have opened Post Office card accounts and 6,500 make use of them every week in my constituency. Why have they proved so popular? Simply because they are based in the post office, an institution for which people have a great deal of trust and respect and which is simple to use.
22 Mar 2006 : Column 116WH
The card account contract, as it has been said, was worth more than £1 billion over its term to post offices and without that income many of them could be forced to close. As Adam Crozier, the chief executive of the Royal Mail, has made clear up to 10,000 closures could be caused by the end of the Post Office card account and the removal of the social network payment, to which the hon. Member for Ogmore referred. Rural areas such as the highlands, and deprived urban areas with high concentrations of benefit recipients, would be worst affected if that were to take place.
I should be interested to know from the Minister whether the approach to this is based on joined-up government. We hear rhetoric about supporting post offices, but Departments seem to act contrarily. Have the Government made any estimate of how many post offices they would expect to close if the Post Office card account is withdrawn?
The pilots, which have already been mentioned, are over, thank goodness, but not without considerable distress being caused to some of the people affected, as has been said. In one case that I have been informed of, a letter was sent informing the person that their pension would be switched to a bank account, without their consent, three days after the letter was received. No wonder the Government's approach to this matter has been seen in the poorest light possible so far.
Given that one of the main reasons for the popularity of the card account is that it is post office-based, surely it would have been better to allow the Post Office to develop its POCA product for 2010 onwards and include that option in the pilots. The risk is that the Government will come back from the pilots and say, "Ah yes, people are quite happy to switch from the POCA to a bank account, so there's no need to worry," especially because people in pilots were not informed of their right to keep a Post Office card account. I am concerned that the pilots are a hanging jury for the POCA, a test specifically set up for the Post Office to fail in order to justify cutting the support provided to post offices for receiving benefits and pensions.
Will the Minister commit today to making public the results of the evaluation of the pilot schemes in detail? Will he explain in his response the use that he intends to make of the pilots? Are there any plans for any further pilot schemes to be conducted? If so, have the Government learned the lessons from the lack of consultation on the pilots and the hostile reaction that they generated among many people?
If the Government are still determined to abandon the Post Office card account and its nearly 5 million users, how will its phasing out be conducted, if they wish to honour the contract in full? That point has been made by other hon. Members. Will people who do not already have other arrangements in place simply have their Post Office card account closed and payments cancelled overnight in 2010, or, in order to satisfy the need to end the contract in 2010, will the accounts be withdrawn before that? What is the plan for phasing out the card account, if it is not to be continued?
I concur with remarks made by other hon. Members in this debate. Why not build on the success of the Post Office card account, rather than remove it? After all, it has proved to be popular and attracted nearly 5 million users. What efforts have the Government made to work
22 Mar 2006 : Column 117WH
with the Post Office to develop and enhance the Post Office card account, perhaps in line with the POCA plus, as the hon. Member for Ogmore suggested, and perhaps by adding features to the card account in future?
It is worth pointing out, as the hon. Member for Rhondda (Chris Bryant) said in regard to debt, that one feature that most puts people off having a bank account, especially elderly people, is the idea of an overdraft and setting up a direct debit and running into debt. Of course, the banks make money by people getting into debt and paying interest, which is perhaps why the banks have shown less interest in this product. That will be a major concern, before adding too many new features to the Post Office card account plus.
Adding features would allow customers to stay with the Post Office, which they trust, maintain vital income for post offices, so the services can continue to be provided in rural communities, and allow customers to develop their use of banking-type services. If that happened, the nearly 5 million current card account users would not all have to go through the disruption and upset of changing accounts and there would be a smooth transition between the card account and the card account plus. Rather than the Government saying to people, "This ends now and you're going to have to make a choice about where you go from here", it is a much better way to proceed.
Is not the offer of using a bank account at the post office a pretty hollow one, given that, as Citizens Advice says, 60 per cent. of personal bank accounts are not accessible at the post office at the moment? For example, the Royal Bank of Scotland, HBOS and HSBC do not allow access to their main bank accounts at post offices. In that sense, as the hon. Member for Ogmore said, Post Office card accounts are good for financial inclusion.
Is not the real risk of abandoning the Post Office card account, rather than developing it, that, as Citizens Advice says,
will be created? It is worth noting that 700,000 people currently still receive their benefits or pensions directly by giro payment. Is not the risk that that number could balloon even further, if the card account is ended without a suitable post office-based replacement being put in place well in advance?
Willie Rennie (Dunfermline and West Fife) (LD): I thank my hon. Friend for giving way. In Dunfermline and West Fife, we have 18 rural post offices, many of which are under threat, including some in former mining communities, like Blairhall and Oakley. However, a lot of the post offices are failing to invest, because of the uncertainty about the future. Does my hon. Friend agree that the Minister should address this uncertainty?
Danny Alexander : I am grateful for that intervention. I certainly agree that the Minister should do that.
In conclusion, I urge the Government to think through more clearly the impact on benefit claimants and pensioners of the change—abandoning the Post Office card account—and the impact on post offices. I urge the Minister to look seriously at the option of a seamless continuation, with an enhanced Post Office
22 Mar 2006 : Column 118WH
card account after 2010, rather than a disruptive process of ending the card account and asking people to go hither and thither into bank accounts. That would be good for customers and post offices. Most of all, I urge him to be up front and straightforward about the process, rather than repeating the serial deception that we now know took place when the card account was introduced.
3.38 pm
Mr. David Ruffley (Bury St. Edmunds) (Con): I congratulate the hon. Member for Ogmore (Huw Irranca-Davies), not just on securing this debate, but on a thoughtfully forensic contribution, which I think we all appreciated.
This is an important issue that will not go away. More than 350 signatories in this House have put their names to two early-day motions, marking out clear dissatisfaction with how the Department has handled this issue. The payment of benefits through POCAs is vital to any serious analysis of the future of the post office network.
Since the last POCA debate on 15 February, a rather important letter has been circulated to some hon. Members from the managing director of Post Office Ltd, Mr. Alan Cook, and I should like to read into the record some important points made by him.
"We were both surprised and disappointed to learn the Department for Work and Pensions had decided not to support the POCA after March 2010 . . . we were well aware, of course, that the contract—like any other—had an end date. But we expected all along that the contract would either be renewed or the POCA would be replaced with a similar product and would generate equivalent income for sub-postmasters and the network.
We are also disappointed that the DWP has launched a series of pilot schemes to test ways of moving existing customers away from the POCA to other payment channels for receipt of their pensions and benefits, as well as not making the POCA available as a payment option to some new customers. The effect is to begin now a rundown of the POCA before the Post Office has had time to develop and introduce an alternative product."
That has been the thrust of many Members' arguments today. The letter goes on:
"The withdrawal of the POCA would mean that after 2010, less than 10 per cent. of the network's revenue would come from Government departments, in contrast to the position a decade ago when the majority of business transacted in our branches was Government business."
"The Post Office network, which makes a loss of some £2 million a week on its operations, currently derives £200 million of revenue a year from the use of the card".
The managing director himself has given us some understanding of the massive contribution made by the POCA to the turnover of sub-post offices. That, I suggest, is revenue that they can ill afford to lose.
That letter leads me to the conclusion that Ministers have been guilty of at least leading on senior Post Office management for years. Ministers have created a sense of uncertainty among customers, many of whom, as we have heard, are old and vulnerable. Although Ministers have had plenty of opportunity to do so, they have not made clear what will replace the POCA.
What about the consumer and the customer? We all know that a key factor in people's decisions to opt for the POCA instead of a basic bank account has been the
22 Mar 2006 : Column 119WH
ability to withdraw benefit payments over the counter at the post office without any hassle. We know the problems with basic bank accounts. As the hon. Member for Ogmore described in some detail, of 26 basic bank account products, about half had serious restrictions in respect of balance inquiries and the rest. The hon. Member for Barnsley, Central (Mr. Illsley) pointed out what we all know: a lot of banks are really not that interested in basic products. They will not extend a suite of options to users of basic bank accounts, even assuming that such accounts could be accessed at the sub-post office, whether in a village or an urban area.
In effect, Ministers are trying to kill off the POCA well before 2010. Without any real consultation, they have imposed three pilot schemes. We have heard about the unhappy situation of someone in the constituency of the hon. Member for Waveney (Mr. Blizzard), in my county of Suffolk, who was put to trouble by the letter he received as a result of being on one of those schemes. I shall not rehearse the details of the scheme, but one fact is key. I asked the Minister in respect of the POCA about when the three pilot schemes would be completed. I asked him
The Minister, who is here today, replied:
"The pilots... will be concluded by mid-March. When they are completed we will evaluate the results and discuss the findings with the Post Office and other key stakeholders. I have no plans to increase the number of customers covered."—[Official Report; 14 March 2006, vol. 443, col. 2164W.]
It seems from that answer that he is not going to do any more pilots, and that this will be the last word on test driving new ways of migrating people from the POCA to basic accounts. However, nowhere in anything the Minister has said today or in any parliamentary answer that I have seen is there any clue about when an announcement will be made about an alternative to the POCA, how much that would cost, what functionality it would have and what kind of revenues it would be likely to deliver to the sub-postmaster network that so desperately needs something like the POCA, never mind to the customers who want a replacement card.
When the pilots have been properly evaluated, will the Minister have a public discussion, not just one with the Post Office behind closed doors? Will he publish all the results in respect of where he thinks the pilot leads us in the development and delivery of an alternative to the POCA, if that is what he has in mind? I also seek an assurance that he will not be doing any more piloting—that he will get on with it.
The interim nature of the card has come as a surprise to a lot of us in the past few months; the cat has been let rather belatedly out of the bag. Will the Minister end the worry and concern caused to sub-postmasters and users of the POCA, and tell us today what will replace the POCA and when? If he cannot tell us today, will he tell us why not?
3.45 pm
The Parliamentary Under-Secretary of State for Work and Pensions (Mr. James Plaskitt) : I, too, congratulate my hon. Friend the Member for Ogmore (Huw Irranca-Davies) on securing this important and instructive
22 Mar 2006 : Column 120WH
debate and on his excellent and thoughtful speech. The debate has been good, but will be a wee bit better if I can make a comprehensive response to all the points made by hon. Members. I say up front that I shall be rather less generous in giving way than last time. I want to give the reassurances that almost every hon. Member who has spoken has asked for, and I want to answer the questions that they have raised; I hope that that will be borne in mind as I proceed.
For the most part, the debate has rightly focused on the future. Now that the Post Office card account has been running for three years, we see that it fulfils the interim purpose for which it was designed—namely, providing a very basic form of account for collecting benefit payments via a post office. It has been taken up by those who did not have any form of bank account, as well as by others who do.
However, three years into its operation, we can also see its significant limitations. That, too, has been broadly expected. Let me remind hon. Members of the preamble to the card account contract between the Post Office and the Government. I make no apology for repeating it; it is extremely important. The contract states:
"Under the Government's present policy to combat social exclusion and in order to improve the efficiency and effectiveness of government and minimise fraud, Benefits recipients will receive Benefits by Direct Credit. A POCA will complement the range of Bank Accounts available to customers; in particular, to promote a service to those who do not have or cannot otherwise obtain a Bank Account.
The POCA is intended to be an interim step for Account Holders who will be encouraged by both Parties to migrate to Bank Accounts which provide services and opportunities not available through the POCA."
To fulfil the undertaking in that contract, we, with Post Office Ltd, need to start to plan the range of products to be available from 2010, based on customers' actual behaviour and requirements. That is the context into which the pilots fit; without doing the piloting work, we shall not know how to proceed with that migration in advance of 2010.
Let me reassure hon. Members who raised points, which I have been interested to hear, about the pilots. The pilots were discussed with the Post Office before they were commenced. The Post Office saw the letters that we sent out to customers in the pilots and raised no objections to them. As has been indicated already, the pilots have concluded; they finished on 10 March. We are now analysing their results. We shall discuss the results with the Post Office and, yes, I shall be more than happy to put those results into the public domain and report later to Parliament on them.
Andrew George : Will the Minister give way?
Mr. Plaskitt : Yes, but I will not do so often.
Andrew George : Given the nature of the quote from the original POCA contract with the Post Office that the Minister has just read, will he, bearing in mind the six-page letter from both Secretaries of State that I read out earlier, apologise on behalf of the Government for having misled the House into believing that the Post Office card account was going to be a substantial contributor to the very future of the options available for post office users?
22 Mar 2006 : Column 121WH
Mr. Plaskitt : No, no one has been misled about this matter. It was explicit in the contract right from the outset. Statements were made way back in 2003 at the launch—Labour Members referred to this in terms of the Select Committee—to the effect that it was too early to comment about what would succeed the POCA. In 2003, of course that was right, because it was just beginning its life. It has four more years to run and will last until 2010. That is why now is an appropriate time to start thinking about what will succeed it.
Some, who allow large balances to build up in their POCA, would be better off with a savings account, and the Post Office is developing one. It is currently being piloted in Scotland. Some customers could be equally well served by a bank account that they can use at the Post Office. That would still generate income and footfall for the sub-postmaster. As my hon. Friend the Member for Ogmore pointed out, if there is a larger switch from card account to post office-accessible bank account, the revenue stream for sub-postmasters might be higher than it is under a POCA. The migration is particularly important for them as well.
Clearly, some people will still need a product like a POCA because they cannot manage, or perhaps do not wish to have, a bank account. Even in that area, we could do more for financial inclusion if the replacement products were better targeted on the unbanked and perhaps offered some services that the POCA does not, such as the ability to pay in cash and cheques. None of that will happen overnight. The POCA still has several years to run, but the responsible thing to do now is to start planning for the world of 2010 and beyond. That is exactly what we, and the Post Office, should be doing, and are doing; it is what we are jointly contracted to do.
There is no doubt that the post office network faces real challenges. We want to work with the Post Office to help it meet those challenges and seize the opportunities available to it. The world of financial services has changed dramatically in the past decade alone and is continuing to evolve. The expectations of customers and the way that they want to do their business have changed enormously and will continue to change. There is a trend towards a cashless society, including the increased use of direct debit, the internet and e-mail, which means that we also need to respond to the service requirements of increasingly sophisticated customers in a changing world.
Technological and other improvements are opening up completely new ways of doing business and leading to a further transformation in lifestyles and customer preferences. As hon. Members have said in this debate, that has already had a very significant impact on the Post Office. Post offices are no longer places where people just cash their benefits or pensions; they buy lottery tickets, insurance and foreign currency, top up their mobile phones and take out loans in post offices. Responding to that, the Post Office continues to develop and actively promote new products, in competition with other providers.
The challenge for the Post Office is to provide a range of high-quality services that people want to use, and to do so in the context of that rapidly evolving customer base, and in the context of a crowded field of financial service providers. We would like every Department for
22 Mar 2006 : Column 122WH
Work and Pensions customer who has a POCA to continue to do their banking at the Post Office if that is what they want.
We want to work with the Post Office to plan how we can best manage the change and ensure that we are delivering services that will match evolving customer demand. The Government's commitment to the Post Office—every single one of us understands its importance in our communities—is clearly confirmed by our record of support. We have invested more than £2 billion since 1999 to help the Post Office develop its services and have made available £750 million to support the rural network, as a result of which the rate of rural closures has slowed dramatically.
The Government have also provided £500 million to help computerise the entire network, which enables the Post Office to tap into new markets and open up its counters to those 20 million bank customers. I understand why in the context of this debate there is a heavy concentration on the 4 million or so POCA users. We should bear in mind, as the Post Office should, that 20 million bank customers have accounts that are potentially accessible at post offices. That is an even bigger market to go after. Many of those customers are probably unaware that their bank account could be accessed through a post office. That represents a campaign to be taken up by the Post Office in addition to the current issue about the POCA.
The Government want a post office network that can prosper on the basis of today and tomorrow's needs.
Mr. Blizzard : Will the Minister say how many of the 4 million POCA customers were involved in the pilots? Were those involved spread across the whole country or were they concentrated in certain areas?
Mr. Plaskitt : Some 30,000 POCA customers were involved in the pilots; geographically, they were spread across the entire country. I wanted to let my hon. Friend come back in on this matter, because I wanted specifically to reply to the point he made in an earlier intervention. He talked about the way in which a constituent was spoken to by an official. As far as I am concerned, that should not have happened and I am grateful that he has drawn my attention to the matter.
The Post Office is already developing new banking and savings products that will be suitable for some existing POCA customers. In addition, appropriate products must be in place for vulnerable customers when the POCA contract ends in 2010. We will work with Post Office Ltd to ensure that such accounts are available. The Post Office's own research shows that POCA customers are far from a homogenous group. They range from some vulnerable groups to those who do not depend on their pension or child benefit but who still let large balances build up in their card accounts, despite the fact that they pay no interest.
It is likely, therefore, that as we look to 2010 and beyond there will be a range of accounts. For some people, using an existing bank account might well be the right answer. Most of the big banks offer basic bank accounts, as has been mentioned, which are very similar in their day-to-day operation to a POCA, and all with post office accessibility.
I have explained how the Government support the Post Office. I have also tried to stress that this debate is not taking place against a static background. If the
22 Mar 2006 : Column 123WH
Post Office stands still in the range of financial products that it offers, it will be left behind. If the Government and the Post Office work together to honour the contract to which we were joint signatories in 2003 and to develop further products, that would be the correct response. If we do not do so, it will pitch post offices into a far worse position in 2010, than if we were to start working now in anticipation of the contract's expiry.
I repeat that there is opportunity for the Post Office. That has not just been recognised by me, as a Minister in the DWP, but by Tricia Jenkins, who is the National President of the National Federation of Sub-Postmasters. At its conference last year, she said:
"POCA does indeed have a limited life. When it finishes, we hope to convert existing POCA customers into using another Post Office Ltd service . . . and, since we"—
"can offer a banking service, we would like to think we can keep those customers. So it is 'all change' in 2010, but it will not necessarily be . . . bad news."
Undue pessimism and scare stories suggesting that, as a consequence of the current POCA contract ending in 2010, thousands of post offices will close and that customers will no longer be able to collect their benefit or pension at the post office, are not only totally misleading but, by spreading unfounded fears, are not in the Post Office's interests. We want to work with the Post Office and in the best interests of our joint customers, but it is important that the Post Office makes rapid progress in developing its own new products so that they are in place, and established, when customers need them.
We are ending the Government funding for the POCA in March 2010, as was always planned. People will still be able to collect their benefit or pension at the post office, as was always promised. If customers continue to use post offices, that will help them to stay open. Crucial to achieving all of that is having the right products in place at the right time. That is why we are working with the Post Office to bring that about.
| Next Section | Index | Home Page |