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The Post Office needs the replacement card account contract as a bridge to enable it to move to a financially viable position. In countries such as Italy and Ireland, there are examples of successful and thriving post office networks that operate as a “postbank”. There is no reason why we cannot have a thriving and successful post office network in the UK, but by pulling the rug
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out from underneath the Post Office’s feet at this point, the Government are almost guaranteeing that there will be no future for it.

Daniel Kawczynski (Shrewsbury and Atcham) (Con): I am very grateful to the hon. Lady for giving way, and she is making a very good case. I was hoping that she would spend a little more time talking about the impact on rural areas. If this card account is not secured, post offices in rural areas and in villages such as Minsterly, in my constituency, will definitely close and the impact on rural communities will be far worse than on urban ones.

Jenny Willott: The hon. Gentleman is absolutely correct and I hope that I have already made that point, but I am sure that there will be opportunities for others to raise it in this debate.

Ms Katy Clark: The hon. Lady is making a very strong case about how deadly it would be for the Post Office if it lost the card account. Does she therefore agree that there were overriding public policy reasons why the European competition regulations should have been set aside on this occasion, and the tendering process should not have proceeded?

Jenny Willott: The tendering process certainly gives rise to issues that I want to raise myself, and the hon. Lady makes an interesting point. So far as I can see, the tendering process is probably one of the least open such processes that we have had. I, among others, have been trying to get hold of the terms of the tender. I recently asked for a copy of the documentation setting out the criteria used for the basis of making a decision on the contract to be placed in the Library. The Minister replied as follows:

That may well be true—although some people believe that the decision has been made already. However, true or not, it does not answer my question. I asked for the documentation to be placed in the Library. All Members are aware that the decision is being looked at, but the documentation could still be made public. The Government’s evasiveness on this point raises questions about the criteria that they have laid out in the contract tender, such as how much emphasis they placed on the need for geographical spread, which links to the issue of rural communities.

Mr. Alan Reid: My hon. Friend is right to talk about geographic spread. She mentioned earlier that PayPoint is one of the bidders. The island of Colonsay has a post office, and if people put the postcode into the PayPoint website, they are told that the nearest outlet is at Bowmore, on the island of Islay, which is 22 miles away. Rural areas will be badly hit; however, islands that have post offices but no banks or PayPoint outlets will be much harder hit if the Government do not take into account the fact that, for all these small islands, they must keep the account with the Post Office.

Jenny Willott: My hon. Friend gives another example of why we need to ensure that we know what the terms of the tender agreement are. The evasiveness that the
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Government are displaying in this regard is also increasing concern and suspicion among the Post Office’s customers and sub-postmasters, who are fearful of the future.

A number of questions have been asked about the legality of providing continuing state aid if the Post Office is not delivering social benefits. The processing of social benefits is one of the criteria on which applications for state aid approval are measured. If POCA 2 is delivered by somebody other than the Post Office, will the Government’s £150 million a year social network payment become illegal? If so, it would be even more devastating for the Post Office across the UK.

The Government have said one thing about the Post Office and the POCA replacement, but their actions contradict it. While DBERR says that it is trying to reorganise the network so that it is financially viable, the DWP is doing all it can to undermine a valuable piece of business that the Post Office has. The Government need to start being joined up and to stop undermining themselves. I suggest that POCA should stay in the Post Office, that the Government should make wider services available through Post Office branches and that they should put an end to the uncertainty as soon as possible to stop the rot and ensure that post offices have a viable future.

8.1 pm

The Secretary of State for Work and Pensions (James Purnell): I beg to move, To leave out from “House” to the end of the Question, and to add instead thereof:

The whole House knows how much a Liberal Democrat MP loves a “Focus” leaflet, and we have a great testament to that here this evening. I was worried at one stage that the hon. Member for Cardiff, Central (Jenny Willott) was never going to finish her speech, because she was being intervened on by so many of her colleagues—it was extraordinary. I have heard of people being mauled by a dead sheep; I was worried that she was about to be mauled by her own very supportive sheep halfway through that contribution.

We heard the typical response from the Lib Dems: the prewriting of that “Focus” leaflet, but with no proposals. We heard nothing on whether they thought that there should have been a tender, on whether they would subsidise it more or on what they thought about whether the Post Office and its future should be guaranteed, and how that should be done. In terms of policy enlightenment, we learnt very little.

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Several hon. Members rose

James Purnell: If I may first set out my case, I shall then give way.

Let me start by making one central point clear: nobody in this House believes that the Post Office should be run on a purely commercial basis. If we believed that it should be, the network would consist of 4,000 post offices, rather than at least 12,000, even after the current closure programme, as has been mentioned. That figure is higher than the total of all the high street banks put together. We do not believe in a purely commercial network, because the Post Office is not a purely commercial service; it reaches parts of our community that others do not, it is used and understood by people in ways that others are not, and most of all it is a cornerstone of our local communities. George Thomson, the general secretary of the National Federation of SubPostmasters has said that for many of the elderly and disadvantaged people in our society

Peter Luff rose—

James Purnell: I can see the hon. Gentleman, who chairs the Select Committee on Business and Enterprise, twitching to intervene on me.

Peter Luff: The Secretary of State has puzzled me. I am happy to stand corrected on this, but my understanding is that, historically, the post office network has run on a commercial basis and that the aspiration of its current management is that it should once again do so. An interim period has to be got through, but the noble aspiration is for post offices to stand on their own two feet, and I heartily support it.

James Purnell: I said on a purely commercial basis. Indeed, under the hon. Gentleman’s Government there was no subsidy for the Post Office, whereas our Government have spent £2 billion, and we are planning to spend a further £1.7 billion between now and 2011. There is a significant difference between the way in which we have supported the Post Office and the way in which his Government did.

Mr. Lindsay Hoyle (Chorley) (Lab): Will my right hon. Friend look again at the situation that we have got ourselves into? People who are using the Post Office card account were told that it would finish in 2010, but they were not told that there would be a POCA 2. Will he put right that wrong and ensure that not only will customers be told that POCA is being replaced, but that we will encourage people to use POCA, rather than give the discouragement that we have seen previously?

James Purnell: I am happy to give my hon. Friend that assurance. Indeed, the hon. Member for Mid-Worcestershire (Peter Luff) wrote to me recently complaining about the POCA not being featured in our cheque conversion literature, and I am glad to tell him that we have now addressed that and that we have a new leaflet. The leaflet does exactly what my hon. Friend requests, stating that

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It also states:

It makes clear in a list of accounts that that is one of the things that will be included. I am also happy to say to my hon. Friend that we will review our marketing of the POCA to ensure that exactly what he set out is achieved. We have not written to people asking them for their bank account details if they have a POCA; there has been a process in respect of cheques, but I shall return to that later.

Mr. Hoyle: I welcome that reply, but to back it up, will the Secretary of State look at what services can be brought into post offices for their longer-term viability and sustainability? Will he also look to set up a taskforce to ensure that we can find new services, beyond POCA 2, to ensure that the Post Office remains in its entirety and to secure its long-term viability?

James Purnell: Yes, I am happy to make that commitment to my hon. Friend; the process that he describes would be a helpful one. We cannot guarantee that any particular service will go to the Post Office if it required procurement, but we can say that identity cards and identity services could be a good business opportunity for the Post Office. By contrast, we know that under both the Conservatives and the Liberal Democrats the Post Office would have no ability to secure such services.

Susan Kramer (Richmond Park) (LD): Do I correctly understand what the Secretary of State just said as a Government commitment to make up in subsidy any business loss that would come from shifting POCA to another provider? If not, the comments that he is making are simply empty, because they merely presage other post office closures.

James Purnell: I have no idea to which of my remarks the hon. Lady is referring. I am happy to be intervened on again, but I said nothing to imply what she describes. Indeed, I make it very clear that it would not be appropriate for me to make any comment on the procurement process and where it has reached.

As much as the Opposition would like to pretend that we can ignore the way in which the world is changing, we cannot do so. The way in which the Post Office operates and the market in which it does so are different from what happened 10 or 15 years ago; they are even different from the situation two years ago. Some 4 million fewer visits a week are made to a post office and 1 million car tax disc renewals are done online each month. [Interruption.] The Opposition can protest if they want, but these changes are happening in our society. People want to renew their tax disc outside working hours and to do so online. Are the Opposition seriously saying that we should refuse to offer online services? If that is their position, they are even more antediluvian than the hon. Member for Castle Point (Bob Spink).

Bob Spink: I am so surprised that the Secretary of State does not appear to be listening to the noises coming from his own Back Benches on this important subject. Does he not realise that there are fewer footfalls in post offices because the Government have been removing
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public business from the Post Office for many years? When will he adopt a policy to return public business to the post offices?

James Purnell: I do not know whether the hon. Gentleman has heard of the internet, but it is having quite a big impact on retail outlets. For example, he might be aware that Tesco sells some of its products over the internet these days. The Post Office cannot be immune to these services. The question is: how do we maintain the fundamental objectives that we have for this important service, while realising that the world in which post offices operate is changing? How can we help them to modernise, as opposed to putting our head in the sand and pretending that those changes are not happening?

Steve Webb (Northavon) (LD) rose—

James Purnell: I need to make some progress, because many hon. Members wish to speak. The hon. Gentleman can intervene on me later.

We need to recognise that we are operating in a world where people are getting services online and in other ways, but it is also important that we do not forget that that does not apply to everyone; a large minority—one in three people—still do not have online services at home and 2 million people do not have bank accounts. As the hon. Member for Cardiff, Central said accurately, they are often the most disadvantaged and vulnerable in our society. That is exactly why we have decided to renew the Post Office card account—although at one stage she implied that we were not doing that.

Steve Webb: The Secretary of State repeats the tired old excuse that society is changing because of the internet and all that, and so such things were happening anyway. However, they were happening slowly. The Government have hastened the process and given the post offices less time to adjust to the new world that we accept we are moving into. Why have the Government made it more difficult for the post office by speeding up the process of change and pressing people to move over to banking instead?

James Purnell: We are actually doing exactly the opposite. We have put in place access criteria to preserve that spread. The Committee chaired by the hon. Member for Mid-Worcestershire recommended that change. It said that the access criteria

Peter Luff: If the criteria are so good—I believe that they probably are—why were they not part of the bid for this contract?

James Purnell: They are reflected in the minimum criteria in the contract. The exact tender document is commercial in confidence, but we have made available the Official Journal of the European Union advert and it has been put in the Library.

I know that Liberal Democrats find this hard to understand, but we have to modernise the service and get more services into the Post Office. We have invested in IT, for example, which has allowed the Post Office to
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have a very successful IT project, as my right hon. Friend the Member for Birkenhead (Mr. Field) said. We put £500 million into that project precisely so that the Post Office could deliver bank accounts, offer foreign currency services, expand the service that it provides and increase footfall. That strategy has had a significant effect—

Steve Webb: Yes, it has.

James Purnell: The hon. Gentleman might be interested in the facts. The Post Office is now the fifth largest fixed line telephone service provider in the UK. It sells one in 50 of all car insurance policies and insures one in every 200 homes. It is the largest provider of foreign currency in the country. That is all because of the investment that we have put into the Post Office. As a result of those changes, 60 per cent. of bank accounts can be accessed in post offices, including those in both the Scottish banks mentioned by the right hon. Member for Gordon (Malcolm Bruce), who has now left his seat.

Mr. Elfyn Llwyd (Meirionnydd Nant Conwy) (PC): May I ask the Secretary of State a specific question about the bidding process? If PayPoint—a private company—was successful, it would not be covered by the provisions of the Welsh Language Act 1993, so would there be no Welsh language provision for those who require it?

James Purnell: The hon. Gentleman can ask, but I shall frustrate him and the House, because there is nothing I can properly say about the tender process. It is important that we take that decision with due process and we will make our announcement in due course.

Kate Hoey (Vauxhall) (Lab): My right hon. Friend talks about the tendering process. Will he tell the House clearly why we had to put this account out to competitive tender? Does he not accept that there are other countries in the European Union where that has not happened? Those examples might not be direct comparisons to do with the same type of contract, but they have occurred in other areas to do with public service where there is a social motive. Why do we always have to obey every little dot of the European Union and European Community competitive actions when other countries get away with it? We are left with a situation in which the Post Office might end up without the Post Office card account.

James Purnell: I know that my hon. Friend shares with the Opposition a lack of keenness to obey the European Union. There is a tradition of not commenting on legal advice given to the Government, and it is important that we maintain that. The Republic of Ireland is an example of a country that did not go out to tender and was taken to court by the European Commission. The case was not proven in the end, but it is not true that that example was not affected by European regulation. The important point is that we have to complete the process and to do so in good order.

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