Examination of Witnesses (Question 640-659)
MR ALAN
COOK AND
MR GRAHAM
HALLIDAY
9 MAY 2006
Q640 Mr Mudie: Disgraceful.
Mr Cook: Our application was rejected,
or the answer we were given was, because a Post Office counter
clerk is not a machine, not an ATM. Then there has been an OFT
Payments Taskforce review which has made the recommendation that
LINK should consider setting up a Post Office scheme which would
have the same effect. The Post Office scheme is not though obligatory
on LINK members, so LINK members have an option of whether or
not they choose to sign up. What the Post Office, primarily Mr
Halliday, is currently working on at the moment is diligently
working to set that scheme up. It remains to be seen whether all
the banks will sign up. That is the vehicle by which we are pursuing
our goal of having free cash available for all banking customers.
To go round one at a time—I know you have mentioned the
three big banks but there is a variety of small ones—the
way to fix this in one shot is to have full membership of LINK
basically and that is what we are pursuing.
Q641 Mr Love: Is there any evidence
the reason why membership was refused you was because the members
fear the competition which might result?
Mr Cook: That would not be for
me to comment. I have given you the reason we have been given.
We continue to push it. All support, joking aside, welcome.
Q642 Chairman: LINK are scared the
supermarkets will come in and that would spoil the cartel, would
it not?
Mr Cook: We are not in a position
to comment on what the motivations might be, but the membership
of LINK would be, if you like, a neat solution to the problem.
Currently we have 10 banks we have signed up with on a bilateral
basis but that is a lot of organisations to work round one at
a time and a very time-consuming way of achieving our goal.
Q643 Mr Love: Putting the question
the opposite way round, do you think the reasons given to you
as to why they have refused membership for LINK are valid, or
are you simply complying with them because it is the only way
you can gain membership?
Mr Cook: For me the goal is to
provide free access to cash for the British public. Within reason,
how we get there is up for grabs. At the moment I do not accept
that it would be disadvantageous to the major banks to allow free
access to cash from their accounts, given that several of the
major banks already do this. Lloyds TSB and Barclays already allow
their cheques to be cashed and cash withdrawals at our branches
and I do not think it is causing them any particular grief. We
have 28 million people every week coming to post offices, they
are going to come into the post offices anyway, I do not think
we represent an additional competitive threat just because we
are cashing their cheques providing access to their accounts.
Q644 Mr Love: In a letter to the
Chairman, one of the major banks concerned gave us a reason why
they would not allow their current account holders, which was
that you had entered into an arrangement with another bank to
provide competitive financial services through your organisations.
Is that a valid reason?
Mr Cook: I think I have probably
just answered that. We are talking to all those customers all
the time anyway, they are coming into post offices frequently.
I do not think the fact we have a partnership with the Bank of
Ireland, where we are producing a variety of new financial service
products, for want of a better expression, should be of concern.
Q645 Mr Love: Let me ask you the
question looking forward in more general terms. You have outlined
today that your role in coming into the Post Office is to replace
what are the current services provided by what would probably
be considered a range of basic financial services. Looking at
how the banks will respond to that, they will see that as competition.
Mr Cook: Correct.
Q646 Mr Love: Do you have any concerns
that the current good relationship you have with the major banks,
the ones you have arrangements with, will likely be adversely
affected by the more competitive atmosphere which will undoubtedly
develop through your strategy leading up to 2010?
Mr Cook: I would like to think
one of my skills would be to manage that. I think it is important
and you do not have to fall out with organisations you compete
with. It is possible in today's more sophisticated business environment
to collaborate in one sense and compete in another. At the end
of the day, fascinatingly, Post Office is part of the Royal Mail
Group and these banks are some of the Royal Mail Group's largest
customers, because they send out an awful lot of post. So it is
possible to both collaborate and compete. I am from that world
myself, I think it is entirely feasible to maintain good relationships
and on occasions collaborate in, say, the provision of free access
to cash, and in another instance to compete in terms of, say,
the provision of a savings account or a bond of some sort or whatever.
I think that is entirely feasible but I am not saying it is straight
forward.
Q647 Mr Love: Let me press you a
little on that. We have already talked about the strong brand
name of the Post Office and, even considering the larger blue
chip banks, I think everybody would recognise how strong the brand
is in relation to that. Do you see any concern likely to be held
by the banks of the natural advantages that the Post Office may
possess in being able to compete? In other words, would they consider
it not quite a level playing field in trying to compete with the
Post Office in certain areas?
Mr Cook: Not at all. I think we
are in a strong position to put forward an effective, simple,
fair, good value proposition to customers. Insofar as the banks
are trying to do the same, then the entry of a new competitor,
I am sure, would be a concern. That does not mean we have to fall
out with them over it but I think we can make quite an effective
play into the financial services market, and I am sure that will
concern them. My belief is, for example, that we can also make,
and have made, strong strides over the last six to nine months
in providing an effective telephony solution, so currently we
are offering home phone services at competitive prices and we
have signed up 350,000 people who are now making their calls on
the Post Office home phone service. Another example of where maybe
we can build a business which can sustain the organisation and
ultimately the network.
Mr Halliday: When you talk about
a level playing field, I think it is important to recognise that
even with the existing LINK arrangements a customer of one bank
can go into, let us say, the branch of another bank where there
is an ATM, and use that other bank's ATM and therefore be exposed
to all their products and services while they are in there. In
that respect all we are seeking is that same level playing field.
Q648 Mr Love: One understands that,
I am just looking at it from the point of view of the banks. You
may think another bank is on a level playing field but because
of the reputation and the good-standing of the Post Office their
attitude is that they may think you have a natural advantage over
them.
Mr Cook: Reputations are to be
earned and we have a good reputation. It is in our own hands.
Q649 Mr Love: Can I take you on to
another part of your business? There was a survey carried out
recently by the British Bankers' Association which revealed that
almost a majority of basic bank account holders were not aware
of the service you provide at the Post Office. What are you doing
to publicise the fact people can cash cheques from basic bank
accounts, because it would appear that quite a lot of people who
have them do not know about this service and therefore are not
making use of it?
Mr Halliday: We from time to time
run publicity campaigns for our banking services. We have the
tills in the branches saying they can use the services and our
people at the counters are encouraged to tell our customers when
they are at the counter they can use the service. In actual fact
we have seen the benefits of that in a growth in the overall banking
services including basic bank accounts. The other thing we do
is test out people who are doing that by using mystery shoppers
and we check that we are telling the customers the right information
when they are with us. There is an onus on the banks themselves
and indeed the DWP when customers receive their benefits or when
they open their accounts to make sure that customers are aware
they can use the Post Office, and it is an interesting question
to ask of those organisations.
Mr Cook: It is a complicated proposition
unfortunately. You can get access to your cash if you have an
account which is called this—a basic bank account. If I
had LINK membership I would cover the country with the message
that you can cash any cheque in a post office. That is a really
simple message to put across. Basic bank accounts however have
slightly different names with different banks and it is quite
difficult to put across the proposition, and if you are not careful
someone turns up from a bank we do not have a bilateral arrangement
with and it is not actually a basic bank account and we have to
say we cannot cash it.
Mr Halliday: Confusion might also
be caused by the fact there are a significant number of accounts
which are designated basic bank accounts which are not accessible
at the Post Office. Out of the total of 5.9 million, it is only
about 2.6 million which can be used at the Post Office. That is
because some banks introduced new basic bank accounts on the creation
of universal banking services so that only those customers could
use the Post Office rather than existing basic bank account holders.
Mr Love: I think we have that central
message about LINK membership and no doubt we will comment on
it. One final question and it is related to this: we have already
talked about there being cash machines in post offices where there
are charges made, yet the same customers who would get their money
from that cash machine could use the cashing facilities at their
post office free of charge. I think we have asked before that
this be publicised so that customers know there is a cheaper way
to access their cash. What have you done to ensure customers are
fully aware they can get that free service across the country?
Q650 Chairman: In Speke 38% of customers
were paying for their withdrawals when they could have gone to
the counters.
Mr Halliday: I think it was 38%
of the people who had used our machine, and it was based on LINK's
data which does not include a lot of the other transactions we
do which do not go through LINK. The merchandising I talked about
and the messages given by our people at the counters are the real
method by which we are letting people know they can use the counter.
Last year, we did send out some notices to our branches to put
by fee-charging machines so they could be aware our counters provided
a free service, for some customers in any case. The real message
we want to convey is that customers can use the counter free of
charge and, as we move forward, those fee-charging machines will
not be within our grasp, they will be run by the individual sub-postmasters
and we will have to work with them to make sure we do get the
right level of merchandising and for the customers to be aware
of the service.
Q651 Mr Mudie: You might not be able
to do it, but would you think it wrong of us if the question of
LINK and their refusal to let you join was referred to either
the Competition Commission or the Office of Fair Trading?
Mr Cook: It has been to the Office
of Fair Trading.
Mr Halliday: We have worked with
the Office of Fair Trading on the Payments Systems Taskforce and
there was a lengthy report produced only a few weeks ago on that
work. The conclusion was that we could not be admitted to join
LINK, as Alan just mentioned, on the grounds that our service
is a manned-counter service as opposed to an ATM service and the
LINK scheme is specifically designed for ATMs.
Q652 Mr Mudie: Which is very debateable.
Mr Halliday: That was our challenge.
The outcome of the Taskforce was that we should work with LINK
to create a separate scheme.
Q653 Mr Mudie: I am not sure the
Taskforce is important, but have you just accepted the decision
of the Office of Fair Trading?
Mr Halliday: What we need to do
is progress the work to set up a separate scheme. That is what
they asked us to do and the industry representatives on the Taskforce
agreed that should be the course of action and we have to let
that particular piece of work run its course. Over the next few
months really we will start to see some reaction to that scheme
being created because it is available to be up and running during
the summer.
Mr Cook: Once that scheme is set
up then it is for individual banks to join. Anything we can do
to encourage banks to join that scheme would be beneficial.
Q654 Mr Mudie: In all the discussions
we have been having, we have only referred to the DWP, but when
I had the debate in Westminster Hall, when the news broke that
Post Office Card Accounts were finishing, informally the Treasury
were livid, informally people in the DTI were livid. The decision
was taken at certain ministerial level and it was taken in isolation.
The Treasury pay tax benefits et cetera, they pay many benefits.
Did they pay any of them through the Post Office? Is there access
to the Post Office for anyone on tax credits of any kind, or must
they all be paid into bank accounts?
Mr Halliday: There are three government
departments which pay money through the Post Office Card Account.
One is the DWP, the other is Revenue and Excise, which is the
tax credits, and the other is Northern Ireland Social Security.
So those three departments are impacted by this decision on POCA
but our dealings are mainly with the DWP.
Q655 Mr Mudie: Is the Revenue and
Excise important in terms of income? Is it an important level,
or is it nothing compared to the DWP?
Mr Halliday: DWP is effectively
the lead organisation.
Q656 Mr Mudie: They maybe but what
proportion of the income you get from government departments comes
from DWP? Tax benefits are a considerable amount of money. Do
you have a knowledge of the proportion?
Mr Halliday: I would like to check
on that and come back to you.[7]
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Q657 Mr Mudie: I know they are the lead
department, but this is what certainly incensed me and incensed
all the other people in the wider government, that the DWP which
was going to save this money took a decision which affected other
departments. It is all right them being the lead department but
it does not stop you speaking to other customers. Have you spoken
to Revenue and Excise?
Mr Cook: I had a good conversation
a couple of weeks ago with the DTI which was an attempt to get
a much more joined-up perspective between government departments.
Q658 Chairman: You will have made
good progress with Alan, and now it is Alistair, so it is important
to get in there.
Mr Cook: To keep going, absolutely.
A more joined-up perspective between the different government
departments is beneficial. Certainly the conversation with Alan
Johnson showed he was really up for that, so I need to have it
again, as you say.
Q659 Chairman: We are wise enough
to keep someone in the same place for at least three months before
we move them.
Mr Cook: The Committee may have
detected that I can be quite repetitive, so I will keep going
on that.
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