Examination of Witnesses (Question 620-639)
MR ALAN
COOK AND
MR GRAHAM
HALLIDAY
9 MAY 2006
Q620 Jim Cousins: But there is no
specific encouragement to do that?
Mr Cook: In response to your question,
this is me articulating a likely way forward which I think would
work for the different groups of the 4.3 million customers.
Q621 Jim Cousins: Have you asked
the DWP perhaps to provide some mechanism which would encourage
people to migrate to your own savings account?
Mr Cook: We are currently working
with them; we are in the middle of a three-month period producing
a plan as to how we would tackle these 4.3 million customers.
As ever, you have to break them up into groups because the answer
is going to be slightly different depending on the situation of
the different segments if you like of the ownership.
Q622 Jim Cousins: The Department
of Work and Pensions is considering specific means by which people
could be migrated from the Post Office Card Account to a Post
Office savings account?
Mr Cook: To alternative Post Office
products, certainly.
Q623 Jim Cousins: And there will
be specific measures to encourage and incentivise that migration?
Mr Cook: We are working on them
now. This is not a conclusion; I am answering your question as
to what is likely.
Q624 Jim Cousins: Where will the
resources for that encouragement and incentivisation come from?
The Post Office or DWP?
Mr Cook: We have not got that
far yet. I am still working on the proposition but it seems to
me if you are someone who leaves a reasonable amount of cash in
your Card Account on a routine basis and you do not transact very
often, we could come up with a proposition for that customer which
says, "You can have a full-blown LINK card and interest"
and I think it would be relatively easy to encourage those customers
to make that switch.
Q625 Jim Cousins: That is not terribly
clear but at least there are some ideas for the migration process.
Now back to the morphing process, morphing the Card Account into
something which has broader functionality. You heard Mr Pomeroy
earlier. In his world there is "the mainstream".
Mr Cook: Yes.
Q626 Jim Cousins: Then there is this
under-world of people who have not quite got their act together—
Mr Cook: You are starting to make
me feel uncomfortable, Mr Cousins, but yes.
Q627 Jim Cousins: This under-world
of people who are not mainstream, have not got their act together,
who do not have bank accounts or, if they do, they are not very
good customers and they do not keep them for very long. Do you
believe that any product, morphed or not, which is solely targeted
at people who Mr Pomeroy's world regards as non-mainstream can
survive in the longer term?
Mr Cook: I think there is a need
for a product that would enable individuals even after some further
encouragement, possibly by the DWP, to take out a bank account
who choose, for whatever reason, to not take out a bank account.
I think there will be a group of individuals who will need a vehicle
by which to obtain their benefits from the Post Office. The problem
is that that is not easily cost effectively run by any institution.
I believe it will cost Government to pay that benefit and they
will have to put that work out to tender. I am going to tender
and I am quite determined to win that business, but it will cost,
it will cost Government more to distribute benefit to people who
do not have a bank account than it would to people who do have
a bank account. That is looking at it from their perspective.
Jim Cousins: Let us be clear about this.
You are proposing to ask the DWP to offer you, on some basis you
can contract for, to morph the Post Office Card Account into something
with broader functionality but still exclusively targeted at people
Mr Pomeroy regards as non-mainstream, second-class people. Do
you think—
Chairman: I do not think, to be honest,
Mr Pomeroy would call people "second-class people",
so I think we have to keep the record straight there.
Q628 Jim Cousins: Non-mainstream
people, shall we settle for that? Do you think any product targeted
exclusively at non-mainstream people can possibly survive?
Mr Cook: I think there is little
alternative for Government to recognise that in order to pay benefits
to individuals who do not hold bank accounts that it will cost
more money to provide that benefit than it will to people who
do hold bank accounts. When they set up the vehicle to make those
payments, I believe we could provide that service.
Q629 Jim Cousins: You would not want
the possibility of this morphed product perhaps at some point
in the future competing alongside mainstream products for mainstream
custom?
Mr Cook: I am not too hung up
on this word "mainstream" I have to say. I think the
important thing for me is to recognise that where a customer has
a bank account and is content for their benefit to be paid into
that bank account, there is still a role for the Post Office in
providing free access to the cash that is in that bank account.
In fact some of those individuals may find it attractive to switch
into one of our own savings accounts rather than a bank account,
but for the proportion of customers who do not have bank accounts
today and are ultimately not prepared to switch, there is going
to have to be another vehicle established. I feel I am repeating
myself now. I think we can provide that vehicle.
Q630 Jim Cousins: Have DWP agreed
to consider such a basis you can contract for?
Mr Cook: We are working quite
constructively. They probably feel that they will be obliged to
put that work out to tender because that is a requirement.
Q631 Jim Cousins: So you think it
is likely, very likely, such a product will have to be made available
but DWP will not necessarily contract directly with the Post Office,
they may put it out to tender on a broader basis?
Mr Cook: What I am telling you
is what I believe would be the right solution. It is for DWP to
say whether or not that is what they are going to do. I am just
applying my background and knowledge to saying I do not see how
these benefits will get paid for those customers without a replacement
vehicle, but it will be on a much smaller scale than the current
Card Account in terms of numbers of users. We need to look at
how we can retain the customers who are currently holding Card
Accounts who are probably, to be fair, customers we never had
in mind—by "we" I do not mean the Post Office
but the country—as being Card Account customers because
they had a bank account and actually they are saving money in
it.
Q632 Mr Mudie: The thing that puzzles
me is why you feel they should be obliged to tender. You seem
to have accepted that, whereas it is not in your interests to
accept it. We are interested in financial inclusion and the one
thing that you definitely have got going for you, other than that
you have the trust of the people who use your organisation, is
the size and the geographical locations—14,000 locations.
Banks are just not in the same league in terms of accessibility.
So why tender this business? If by tendering it, you lose, there
is no question that the 14,000 is under threat.
Mr Cook: I would be very determined—
Q633 Mr Mudie: That is joined-up
government, is it not?
Mr Cook: I would be very determined
if I had to tender.
Q634 Mr Mudie: I know you would be
determined.
Mr Cook: It is for DWP to determine
whether or not they need to put this out to tender.
Q635 Chairman: We have the Minister
coming along.
Mr Cook: I think you will find
they are under some obligation under European procurement laws.
That is why. It is for them to defend that rather than for me.
Clearly I would love it if it did not go out to tender.
Q636 Mr Love: You mentioned earlier
there were a number of banks who do not allow their current account
customers to cash cheques at the Post Office?
Mr Cook: Yes.
Q637 Mr Love: Are you in discussions
with them and what progress are you making to persuade them to
allow this facility?
Mr Cook: As I recorded earlier
in this conversation, since the last time we came before the Committee
we have signed the Nationwide—I cannot claim any personal
credit for that, that goes to the gentleman on my right—
Q638 Chairman: The negotiations started
at the back of the room and we are delighted to see that they
were very successful. Correct, Mr Halliday?
Mr Halliday: Absolutely, it was
an excellent opportunity.
Q639 Mr Love: Perhaps I could ask
if there is any representative of HSBC, HBOS or RBS in the room,
so we can start a further negotiation?
Mr Cook: If there were, I would
be out of this chair like a shot! This is sort of linked. One
of the ways of achieving our aims here would be to achieve membership
of LINK, because membership of LINK would effectively give us
the same ends, and we did apply for membership of LINK and our
application was rejected.
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