Examination of Witnesses (Questions 840-859)
MR DYFRIG
JOHN, MR
GARY HOFFMAN,
MR JAMES
CROSBY, MR
MIKE FAIREY
AND SIR
FRED GOODWIN
18 MAY 2006
Q840 Mr Fallon: Sir Fred, could you
explain to me the position regarding the Post Office? You are
one of the banks that do not allow your current account customers
free access to cash withdrawal at the Post Office, and I think
in your evidence you said you do not do that because you do not
see any evidence that the expense of it would be justified. Is
that the main reason or is it because the Post Office is negotiating
agreements with another bank?
Sir Fred Goodwin: It is more than
negotiating agreements with another bank. The Post Office is in
active competition with us. All of our basic bank accounts can
be used at the Post Office. Again, that was one of the Pat 14
design requirements of the basic bank accounts—that they
can all be accessed at the Post Office. Interestingly, there is
relatively small number of them who do withdraw cash from the
Post Office. As far as our current account customers are concerned
this is not an issue we are getting particularly from our current
account customers, but the Post Office is a competitor in the
same way as the people here are competitors, so I do not like
to put in place arrangements for our customers to use their counters
either. The Post Office has set itself up in competition right
across the waterfront. We collectively subsidised the creation
of a means for the Post Office to make available, the POCA we
have paid for, and we have done quite a lot to help the Post Office
meet the needs of small customers, but there is a limit and we
are at that limit.
Q841 Mr Fallon: I am coming to the
POCA in a minute but do you feel that the Post Office should not
have made an arrangement with one particular bank and should have
allowed or encouraged through the LINK network free cash withdrawals
for all current account holders, given the financial commitment
you have all made, and whether it should not have made this arrangement
with everybody?
Sir Fred Goodwin: We could have
that discussion. I am not here to make the Post Office's choices
for them but they have made a very clear choice and that choice
brings with it, as all of our choices do, certain consequences
and one is that it is now a competitor and we view it accordingly.
Q842 Mr Fallon: But do you regret
it?
Sir Fred Goodwin: I do not know
that we regret it or not regret it. It is one more competitor,
but we live in a very competitive world.
Q843 Mr Fallon: Can we turn to the
Post Office Card Account? Barclays have told us that they contributed
some £30 million to this over five years. Are you going to
ask for your money back now it is not going to go ahead?
Mr Hoffman: I would like to but
I think it is impractical!
Q844 Chairman: Why are you so shy!
Mr Hoffman: That is part of the
£180 million that Fred was referring to to create the universal
bank. I think the key point about Post Office Card Accounts is
that the future beyond 2010 is confusing. I do not think it is
up to us as competitors of the Post Office to define the future
for the Post Office Card Account but it is confusing to us.
Q845 Mr Fallon: But you were encouraged
to contribute towards this. Collectively you have all put £180
million in. You have put £30 million of your shareholders'
money in. Do you not feel slightly defrauded?
Mr Hoffman: We regard it as part
of our contribution to financial inclusion.
Q846 Mr Fallon: So you have written
it off, in effect?
Mr Hoffman: We regard it as an
investment in financial inclusion.
Q847 Chairman: A good investment?
Mr Hoffman: Well, if you take
what we have all done together in basic bank accounts and what
the Post Office Card Account has done, £1.6 million basic
bank accounts and £4 million or so POCAs, then I think that
is significant process against the shared goal. How it was funded
we should take to one side.
Q848 Mr Fallon: Sir Fred, in your
memo you have said it is not clear whether the Government genuinely
wishes the Post Office to play a longer term role here. What would
you like to see the Post Office do?
Sir Fred Goodwin: I was very disappointed
that the opportunity was missed with POCA because what we all
signed up to develop was an account which had far greater functionality
than the one we have. The fact you cannot make deposits into a
POCA greatly limits its usefulness; the ways that money can be
taken out are limited; you cannot use it for direct debits. At
the end of the day, debating whether we can or cannot get our
money back and whether we are defrauded or anything else, the
fact of the matter is there are several million people using a
POCA who are denied the basic functionality that would give them
a greater shot at being financially included, and that is disappointing.
I do not think it is particularly helpful to have this hanging
out there, that it is uncertain in 2010. It is certain that it
is not going to be supported at least by government. There is
quite a lot of people there; if the POCA is going to disappear
what are the plans, then, for how benefit is going to be paid?
In the past we were given to understand it was going to come into
banks which was fine, but it was then felt that that was not an
acceptable outcome so the POCA was cobbled together, so it would
be good to have some clarity around this as soon as we can.
Q849 Mr Fallon: Are you discussing
with the Department of Work and Pensions how these accounts after
2008 might be migrated into basic bank accounts? Has that discussion
started?
Sir Fred Goodwin: We are not party
to any such discussion.
Mr Hoffman: Nor are we.
Q850 Mr Fallon: Is that what you
now expect to happen?
Sir Fred Goodwin: I do not know
what the plan is, that is the problem. The issue of how benefits
get paid is really in someone else's hands in the first instance.
Once that has been decided we would be more than happy to discuss
what the implications of it are, but it is not principally our
business issue.
Q851 Mr Fallon: But there are huge
logistical implications for you, are there not, if there are over
a million people on these accounts?
Sir Fred Goodwin: Yes. That is
why some clarity would be good.
Q852 Chairman: We have Government
Ministers coming before us on Monday, so do not be shy!
Sir Fred Goodwin: I think we would
like to know what is happening.
Q853 Mr Fallon: But you are confirming
to us that the present position is nobody has any idea what will
happen to these accounts after 2008?
Sir Fred Goodwin: Somebody might.
I personally do not know.
Q854 Chairman: No Government department,
DWP or others, have chatted to you about this?
Sir Fred Goodwin: Not to us at
this stage. I do not know about others.
Q855 Mr Fallon: Has anybody anything
to add to this?
Mr John: No.
Mr Fairey: No.
Q856 Mr Fallon: You are all completely
in the dark as to what will happen?
Mr Fairey: Absolutely.
Q857 Chairman: This is a bit of a
shambles with Government, is it not?
Sir Fred Goodwin: 2010 is still
a few years away, so -
Q858 Chairman: Do you want to give
us a clearer answer? It is a bit of a shambles with Government,
is it not? It is all hanging out there in 2010; nobody knows what
the hell is happening. James, what about you, seeing you are retiring!
Mr Crosby: At the end of the day
something is going to have to be agreed for this very large number
of customers by 2010. The reality is there is going to have to
be a series of conversations between government, the banks and
the Post Office because at the moment clearly there is no plan
but there is plenty of time to create one.
Q859 Chairman: It is a big issue.
Mr Crosby: It is, and I am sure
we will all engage constructively in conversations. It is a bit
difficult to commit more than that when it is such an open agenda,
as it is at the moment.
Sir Fred Goodwin: In terms of
the timescale when we were first talking about this 2010 seemed
like quite a long time. There is a sense of deja vu here.
| 
