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Let us consider the experience of the Inland Revenue. It has taken the Inland Revenue some 10 years to get its call centres into a condition whereby there is a better-than-evens chance of getting through if someone is seeking to contact Her Majesty’s Revenue and Customs. That happened only last year. Before then, 75 per cent. of callers did not get through when
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they tried to place a call. The relevance of that is that it is unrealistic to assume, as the Government are finding out, that access to financial services products in the private sector, which has been far more efficient than the public sector in introducing that new technology, can be achieved simply through the use of technology. There has to be physical capacity for individuals, particularly the elderly, but also the more vulnerable groups in society, to gain access to basic financial services and products. We must recognise that when we consider the infrastructure in this country that is in place to support the delivery of financial services products, and the most logical aspect of the infrastructure that the Government have influence over is clearly the Post Office, which I shall come to in a few moments.

I should like to touch on some of the points raised by other hon. Members which I think are entirely appropriate in this context. The first is financial education. I agree with the hon. Member for South-East Cornwall (Mr. Breed) thatthe content of financial awareness education in the curriculum needs to be beefed up. In this country, someone needs a GCSE in maths to be able to complete a self-assessment tax return. I regret to say that less than half of school leavers today achieve that level of financial sophistication, and those are the people who are concentrating on maths. A large swathe of the population does not take maths to that level, and one assumes that they will be the vulnerable groups of tomorrow. They need some form of basic financial education to get on in contemporary society—not just to be able to read a spreadsheet, as the hon. Gentleman mentioned, but to be able to cope with the increasing delivery of services through technology. A combination of information technology skills and basic financial education is required.

The second issue is advice given through citizens advice bureaux. Until there is better education in our system and our citizens are educated to be able to carry out their own self-assessment, for example, there is a very significant role for the voluntary sector in providing advice to those who need it most. The squeeze on the budgets of local authorities, to which the hon. Gentleman also referred, is very evident in my area, where they are the primary providers of funding to citizens advice bureaux. They are increasingly looking to that as an area of saving, placing citizens advice bureaux in a much more precarious financial situation. I urge the Minister to say whether any help will be available for citizens advice bureaux to keep those services going.

The report covers access to the range of financial products. In relation to banking services, the era of the building societies and the banks competing to have an expanded presence on our high streets is clearly long gone. The proliferation of banks and building societies that we saw on local high streets over recent decades is now a thing of the past. There are fewer and fewer building societies left functioning in this country, and following the Northern Rock debacle of the summer, I suspect that that trend will go in one direction only.

Banks are looking at combining branches as a means of cutting down on their cost base. The anecdotal evidence in my area, where that has been tried, is that there is considerable suspicion about it, particularly on
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the part of some of the more elderly people in our society. If someone goes into a bank and provides their information to the clerk, they establish a relationship with that bank. If the branch is providing services for another bank, there is a natural suspicion that somehow the information about one’s own circumstances could be more widely disseminated. I think that that is a completely misplaced conception, but I have been told by bank managers who have tried to co-locate within individual branches that it has a significant deterrent effect on customers. There is a fear that in some way other banks, and therefore potentially even other bank customers, might gain access to their information. That view is clearly misguided, but that has been the experience, as I understand it, along the Welsh borders, so it has not proved a particularly successful model. If banks decide that they cannot co-locate and operate effectively, they will decide to close their branches once they cease to be economically viable because of the decreasing frequency of face-to-face contact within their customer base. That is resulting in an increasing reliance on the post office as the only remaining alternative place for individuals to gain access to financial services.

Access to insurance is another issue touched on in the report. The Government response to the insurance with rent schemes was pretty feeble. It is on page 18 of the Government response under the heading “Access to insurance”. Their response to the Committee’s recommendation that insurance with rent schemes are very appropriate schemes to extend to low-income groups was, “Well, we are reducing the targets on local authorities. Therefore local authorities will have either more funding or more time to devote to other things and they will be able to look at extending those schemes.” That is clearly complete obfuscation and does not address the point at all. I ask the Minister to consider a rather more robust response in her closing remarks with regard to how she will consider extending such schemes, in particular to registered social landlords and arm’s length management organisations for housing association tenants.

The relevance of that issue has been much more widely recognised this summer as a result of the extensive flood damage that has affected large parts of the country, including my constituency. Those households without insurance found themselves, in many cases, without household possessions and were reduced to seeking help from voluntary organisations, furniture schemes and the like to provide themselves with essential household furnishings that, had they possessed an insurance with rent policy, they could have secured in that way.

That brings me to the Government’s response to the savings gateway pilots. As my hon. Friend the Member for Sevenoaks (Mr. Fallon), the Committee vice-Chairman, said, the savings ratio is now at a record low. It has been declining steadily for at least as long as I have been a Member of Parliament. Whenever hon. Members raise the issue with the Government, the stock response has been, “You don’t need to worry about that, because the savings ratio has an inverse relationship to the growth of the economy. The economy is growing, so it does not matter whether the savings ratio declines.” That excuse has run out, as the Chancellor has acknowledged that the economy is now declining. How does the Minister reconcile that with the declining savings ratio?

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Kitty Ussher: I am loth to intervene before my allotted time, due to protocol, but I am afraid that I must do so on this point. How does the hon. Gentleman reconcile his statement that the economy is declining with the Treasury’s forecast and international forecasts that the economy will continue to grow in the foreseeable future?

Mr. Dunne: The economic growth rate is declining, as the Chancellor acknowledged in his pre-Budget report. It has declined by roughly 50 per cent. from last year. As a consequence, the savings ratio should, by the Government’s admission, be affected. There is no direct correlation, but a lower savings ratio is a result of an increasing economy. By the Government’s logic, as the economy increases more slowly, the savings ratio should start to increase, but it is not increasing. It is now at a record low. The Minister’s intervention does not address my point.

For several years under this Government, as a result of the incompetent introduction of means testing to pension credit, we in this country were in an extraordinary situation in which the majority of the population—those other than very high earners—were financially disadvantaged in saving for their pensions. For every extra £1 of savings that they put into their pension, the pension would be reduced by £1 when they reached retirement age. That was what I charitably assume to have been an unintended consequence of the Government’s introduction of pension credit, but it created an extraordinary climate in which saving was not worth while. In fact, people who sought advice from financial advisers or the Government would have to have been advised not to save, or financial mis-selling would have occurred. That was one of the reasons why the savings ratio declined so much.

The Government’s savings gateway pilots for the financially excluded initially looked quite promising. However, the second pilot in 2001 introduced a level of complexity to the savings gateway that, commentators who reviewed the first pilot warned the Government, would make it so complicated that it would not work. Paragraph 108 on page 45 of the 12th report quotes Professor Kempson as saying that he was

That is precisely what appears to have happened, because the Government chose to make the whole system so complicated that it has become too difficult for people to participate in it. I urge the Minister to give us some clue about what the Government intend to do, if they persist with the project, to make the savings gateway more accessible to people on low incomes—or, if they are going to scrap it, to tell us what they will put in its place. Given the Government’s propensity to seek inspiration from elsewhere, a lifetime savings account might be something for her to consider in more detail.

That brings me to my final comments about the relevance of the post office network and the products that it provides, particularly to those on low incomes. I am pleased to say—if one can take any satisfaction out of that wretched programme—that the closure programme, which is regrettably under way, is now to be shared equally between rural and deprived urban areas. That is some comfort to those of us who represent rural areas, which otherwise would have borne the brunt of the entire programme.

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The Government have got themselves into a complete mess over the post office network by ignoring their own advice to undertake joined-up thinking when it comes to the provision of services and allowing individual Departments and agencies to whittle away gradually at the services that they provide through the Post Office, without anybody paying sufficient attention to the impact that that loss of business would have on Royal Mail. That is well known and has been well argued in this and other Chambers. The Government received advice from all sorts of quarters about things that they could do to shore up business within post offices. Regrettably, very little of it has been taken into account.

I shall give the Government a few pointers on how they could provide a consistent level of business in post offices to ensure their survival. We have the current closure programme, but no real confidence that the Government know how to arrest the decline in business going through post offices. What is needed from them to avoid yet another round of closures in a few years’ time is a clear strategy about what the post office is for and how it can be used—particularly, as I said, to provide a physical, face-to-face opportunity for the financially excluded to access financial services. That access could occur in two forms. It could include services from the public purse, such as the payment of income from benefits and pensions, and individuals’ payments to the Government for various services; and it could include private-sector payments using the Post Office and its product range, including the card account, to ensure a sufficient volume of business to give the Post Office some prospect of economic viability without increasing levels of subsidy, which I recognise is at the heart of the reasons for the closure programme.

My first suggestion is that the Government remove some of the barriers to expanding the revenue sources available to the Post Office. The Whip, the hon. Member for Watford (Claire Ward), might have missed the introduction to my remarks, but I am seeking to give Ministers an opportunity to salvage income sources for the Post Office and some pointers on how it could be used to provide services to the financially excluded. Currently, the Post Office, not unreasonably, must compete with other payment systems to access Government contracts. Such contracts have been withdrawn, in some cases unilaterally, after the Government decided to deliver services electronically or through other technologies, withdrawing the Post Office’s ability to tender without giving it a minimum notice period. That seems unfair on the Post Office. It should be given an equal opportunity to bid for contracts.

Post Offices should also be given the opportunity to offer local authority services. In some cases, there is an increasing use of Government-owned businesses sharing facilities. Worcestershire has some particularly good examples, with several tiers of local government combining together. In Evesham, or Pershaw, the local police and Jobcentre Plus use the same building, sharing the front counter and delivering services from there. Some post office premises could be encouraged to share in that fashion.

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The Government have announced the introduction of free ATMs, something that was mentioned by other hon. Members. The move is most welcome, but I urge Ministers to focus on the deployment of ATMs in remote rural areas. As we heard from the hon. Member for Leeds, East (Mr. Mudie), the Committee’s work has led to the introduction of free ATMs, and the lack of charges for using them is clearly welcome throughout the country. However, their availability is very much skewed to urban areas and population centres. Given the absence of access to premises for financial services in rural areas, the ATM is the logical way to provide remote communities with access to cash—particularly those communities that have no realistic access to public transport. A case can be made for giving priority to free ATMs in rural post offices. I hope that the Government will consider that.

The Government missed a trick when awarding the lottery licence for 2009. Although we should not encourage those who are financially excluded to spend their limited resources on the lottery, having lottery terminals in post offices would have provided a level of footfall that could have allowed them a more viable future. It was regrettable that the Government did not take up the suggestion of our cross-party group that those awarding the lottery licences should have been compelled to include post offices.

The Post Office should be allowed to reach commercial arrangements with other bill payments mechanism networks. That should be encouraged, particularly in rural areas. I appreciate the commercial sensitivity of allowing other bill payment networks access to post offices if there are plenty of alternatives—if there is competition. However, in those rural areas that do not have extensive alternative networks, post offices are precluded from entering into arrangements with alternative networks. That seems to disadvantage the financially excluded in rural areas. I urge the Minister to consider that.

I turn briefly to two other aspects of the Post Office’s work. The first is the Post Office card account, which has been mentioned. Usage of the card account is obviously declining, given last year’s publicity about its demise. The Government belatedly, and it seems reluctantly, agreed to allow the Post Office to bid for a replacement for the card in March 2010. I understand that there are now fewer than 4 million users of the card account, but it is an invaluable tool for those who are financially excluded as it allows them to gain access to cash through post offices. In my view, it is vital that the Post Office should have a realistic prospect of replacing that card with its own, rather than a competitor winning the card contract. If a competitor were to secure it, it would merely hasten the decline of the viability of the remaining post office network. Its demise would be extremely regrettable.

Other hon. Members have referred to Post Office savings schemes and to the collapse of Farepak. I was pleased to learn that the Post Office intends to introduce a Christmas club savings scheme from Christmas 2008. That is a good example of an innovative product meeting the needs of the financially excluded. I am sure that it will be welcomed, and it should be encouraged. It will help to fill the gap identified by Brian Pomeroy in the Treasury’s review that resulted from the Farepak collapse.
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That is a good example of the Post Office proving its worth in helping the Government achieve their objectives.

I hope that the Minister will recognise the vital role that post offices play in delivering financial services to those who otherwise would be excluded, and that she will work with her colleagues in the Government to produce a durable solution for maintaining a viable post office network in our rural areas.

4.15 pm

Julia Goldsworthy (Falmouth and Camborne) (LD): It is a pleasure, Mr. Bercow, to serve under your chairmanship. It is also a pleasure to participate in this debate. The Treasury Committee has done some important work in identifying the problems of financial exclusion, and it has made fruitful progress towards tackling some of them. It is a pleasure to learn about the subject and to hear about those successes.

The reports make clear how desirable it is to improve the take-up of bank accounts. They highlight the extra costs involved for those without access to a bank account; for example, they cannot take advantage of the savings to be gained through paying by direct debit. They also highlight the difficulties faced by the financially excluded in opening a bank account and in having to prove their identity.

Another telling factor is the scale of the problem. I estimate that nearly 2 million households do not have access to a bank account, which is a significant number. We should bear in mind who those people are. Many will be old, and many will have all kinds of interaction with the state. It is important that the Government take a cross-cutting approach when tackling these issues.

The report of the Work and Pensions Committee highlights some of the difficulties involving the social fund, such as the problem of getting telephone calls answered. The hon. Member for Ludlow (Mr. Dunne) mentioned some of the difficulties with telephone contact centres. Unfortunately, the social fund is the classic example of a complete system failure. The social fund commissioner’s annual report shows that he did some cold calling. His office made 500 calls to eight of the new social fund call centres. One office answered one in five calls; the other seven offices answered three calls between them. The social fund is the last line of defence in the welfare system. The bottom line is that those who are most likely to be financially excluded are being failed. In approaching this issue, the Government need to consider the sort of impact that they can have on improving confidence in banking.

Another example that springs to mind is bank charges, where the debate is about the impact that those charges can have on people’s confidence in banking. I know of several cases in my constituency in which individuals have racked up huge sums in charges in a very short time because direct debits have bounced. People are worried about being exposed to such risks should things go wrong. In many cases, the charges could be the result of a tax credit payment having been stopped because of an overpayment. The Government need to decide how to interact with the banking system and what they can do to help to restore confidence in that system.

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Mr. Love: I am listening carefully to the hon. Lady’s argument. Is it not the case that while banks charge what they consider to be a punitive rate, what is required is that they should charge something approaching the cost to them of those who do not meet the requirements of their bank accounts?

Julia Goldsworthy: The hon. Gentleman makes a valuable point. The concern expressed by people who come to me with such problems is that despite all the talk about a free banking system, that system is actually more expensive for them than a fixed payment system. That brings us back to the question of who meets the cost. Should the burden fall on those with the lowest incomes, who are most vulnerable, or on those who are more financially secure?

I took part in yesterday’s Treasury and economy debate on the Queen’s Speech, and that set me thinking about some of the legislation that we will be considering during this Session and its possible interaction with what we are discussing. Legislation was proposed in the Queen’s Speech to try to tackle the aftermath of Northern Rock, which is having an impact on people’s confidence in savings, but I wondered why there was no counterbalancing proposal in relation to all those people who have had similar knocks to their confidence, such as through the Farepak incident last year.

That is why I am pleased that the Post Office has produced a very innovative proposal, which the hon. Member for Ludlow mentioned. It is a great proposal because it seeks to create a pathway to financial inclusion. There is much talk from the Government about barriers to financial inclusion, but one would almost think that there was a big step to take, whereas what is actually needed is to present people with things with which they are familiar and comfortable, and then to introduce new aspects. In that way, they can make progress towards having a bank account.

On the payment of pension credit and many other benefits—next year, housing benefit will be paid directly into people’s bank accounts—people often feel that they are not given any alternative. There is an impression that it will be difficult for the payment authorities to do anything for them unless they accept direct payment of benefits into their bank. The Government’s approach should be that the journey to financial inclusion is just that: a journey, rather than simply a barrier that must be removed. The Post Office’s innovation is welcome, because the Post Office is a familiar organisation for all people with a Post Office card account—one through which they tend to access their benefits. The proposal will make people feel more comfortable. That is another reason why organisations such as credit unions need to be supported and extended.

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