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Earl Russell : I thank the Minister for that point, though it is now rather more normal than it was for women to attend this House in trousers, and I am glad to see it!

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However, as regards the main principle, we should like an assurance that we have some purchase on the situation, just in case the scheme does not work out as we would wish. Ministers are at the mercy of events at all times. So an intention that is perfectly good now might not prove to be so good after the next economic blizzard--indeed, one day, this year, next year or sometime in the future, there will inevitably be another. Therefore, we need this security. We can achieve that either through the amendment tabled in the name of the noble Lord, Lord Higgins, or through this one. We may even achieve it through some composite amendment upon which we may agree in the future. But, one way or another, we need the purchase. I beg to move.

Lord Higgins: It has been a constant theme of our debates that matters which normally fall under the social security remit are being taken over by the Treasury. This is yet another example of the Treasury carrying through its policy regardless of the social consequences.

There are two amendments in this group. Amendment No. 180, which the noble Earl just moved, suggests that,

    "the regulations may not require automated credit transfer to be the only manner of paying a benefit".

If that were to be accepted, the noble Earl suggested that primary legislation would be needed to alter the situation.

Our amendment, Amendment No. 181, is rather different and tackles the problem from the other end. It says that the system will be all right,

    "providing that the regulations ensure that payments may continue to be made by the same method as that employed on the date of commencement of this Act".

In the light of this debate, we may, as the noble Earl suggested, wish to get together and decide what the best format would be. But that will depend on the Minister's forthcoming answer in which she may persuade us that this is no longer necessary.

In our view, the decision by the Government to move to a system of automated credit transfer threatens the future of at least one-third of sub-post offices; indeed, the number may be something over 18,000. A substantial part of the revenue of post offices derives from the income that they receive as a result of dispersing various social security benefits. The previous government made a suggestion for overcoming this problem in a form that would--it was hoped--help to maintain the sub-post office network while, at the same time, facilitating the payment of cash through the post office. The Government abandoned that so-called "Horizon Project", but we remain totally unclear and puzzled about what they propose to put in its place.

I have some sympathy with the views expressed by the noble Earl on the question of banking services. He suggested that they are not suitable for many people on social security benefits. In some ways, banks are not suitable for people generally. Some years ago when I was chair of the Treasury Select Committee, we carried

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out an investigation into bank charges. The then chairman of Barclays Bank appeared before us and managed to sustain a defence of his position for some two hours. However, right at the end of the process, we asked him how he made sure that he received payment of those excessive charges. He replied, "We've already got the money". That was rather typical of the attitude that was prevalent at that time and which, to some extent, is still prevalent now.

In reality, many people who receive social security benefits are not well suited to arranging their financial affairs through banks which, as the noble Earl rightly pointed out, may well impose quite heavy charges on them. Indeed, in the context of someone on income support, that may prove to be quite a substantial amount of the income that he or she receives from the Government. Some people are not used to working through the banking system and have a real preference for receiving their money in cash; for example, from the "order book", which is frequently used. However, as has already been pointed out, the proposed new system will also have an effect on the whole structure of post offices and the important role that they play in the communities which they serve. Indeed, my noble friend Lady Byford may wish to say more on the subject.

We seek a response on two matters this evening. There have been a number of exchanges at Question Time and on other occasions across the Floor of the Chamber with regard to the Government's position on these matters. First, it appears to be difficult to get across to the Minister people's worries on this issue. People rightly want to receive their benefits in cash. The Minister has said that they will continue to receive them in cash. However, she has not at any time explained how this is to be achieved. We are ever hopeful that she will tell us this. The Government have considered this matter for a long time. It is no good just saying that benefits will be paid in cash without saying how that will be achieved.

Secondly, I understand that post offices are under a legal obligation to fulfil their universal service obligation with regard to certain services, for example, registered post and the delivery of parcels weighing up to 20 kilos. We are not at all clear whether post offices will fulfil that universal service obligation if their number is significantly diminished. It clearly is not just a question of fulfilling that universal service obligation at one point. Post offices must fulfil that obligation over a reasonable geographical spread of the country.

I also seek clarification on my next point. I understand that in responding to a recent debate in another place the Minister concerned seemed to indicate that there was to be some form of compensation or alternative payment to post offices to enable them to continue to survive. Generally speaking, post offices comprise small businesses and the people who run them may well have invested their life savings in them. However, if the Government's present proposals are implemented, and these amendments, or something like them, are not accepted, people who run post offices may no longer

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be able to continue in business and may suffer considerably as a result. These are not unimportant issues. We hope at the very least for some clarification from the Minister this evening. We hope to be given a helpful response.

Baroness Gale: The noble Earl, Lord Russell, remarked on the immense importance of small post offices. I think we all agree with that. However, the Government regard as outdated the present method of payment of benefits by order books and giro cheques. We must consider new and more secure methods of payment. The payment of benefits by automated credit transfer will not begin until 2003. Some fears have been expressed with regard to the Government's proposals. Some people fear that they will be unable to collect their pensions or benefits from the post office. However, this fear has been addressed. The Government will ensure that people who wish to do so can collect their benefits and pensions at the post office and can receive payment in cash. Another fear is that rural post offices--

Lord Higgins: Has the noble Baroness any idea how that will be done?

Baroness Hollis of Heigham: I am happy to try to spell that out to the noble Lord in due course. I do not think that it is reasonable to ask someone other than myself that question at this point.

Lord Higgins: I do not understand why that is the case. The noble Baroness, Lady Gale, has asserted that payment will be made in cash. I asked the simple question: how will that be done? I think that is a reasonable question to ask someone who is asserting that all will be well.

Baroness Gale: I repeat that those who wish to receive their benefits in cash will receive them in cash. I am sure that my noble friend the Minister will explain how that will be done.

Another fear expressed is that rural post offices--and also post offices in isolated areas--will close as a result of the new measures. However, that will not occur because post offices will still act as access points for the collection of pensions and benefits. The benefits of the new method far outweigh any disadvantages. For example, ACT will clearly assist in the elimination of fraud. The flexibility as regards the collection of payment will also assist people. Many thousands of people already use this method. The Government's proposals will bring about a more efficient and secure system of payment and, by the time that it is fully implemented, it will be seen as a sensible measure. I believe that these are practical proposals fit for the 21st century.

9.30 p.m.

Baroness Byford: I thank the noble Earl, Lord Russell, and my noble friend Lord Higgins for their amendments. The Committee will be relieved to hear

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that I shall not go through all of the arguments that I put forward earlier in Committee. However, there are some issues that I wish to raise at this stage.

Both noble Lords are right to refer to the role that post offices will play in the future payment of benefits. Although the Minister was nodding her head and saying, "Yes, they will be paid in cash"--which I accept--that is not part of my argument. However, I shall return to that issue later.

I, too, acknowledge that although the problem concerns predominantly rural areas, some urban areas are also feeling the squeeze, if you like, as far as concerns payment of benefits.

Earlier in Committee, I referred to the fact that some 2 million people are "unbanked". The Minister acknowledged that. We also discussed the kind of system there will be and my noble friend asked how people will receive their money. I hope that the Minister will enlarge upon that matter when she responds. I have offered her little morsels in an attempt to extract from her how payments will be made, and painfully, painfully, painfully, we seem to be getting there.

In fairness to the Committee, I should say that, following our last debate, the Minister wrote to me on 16th May. In her letter she stated that,

    "The precise means of doing so will be a matter for the Post Office and the banks. However, we expect available options to include withdrawing money through a bankcard"--

which is something my noble friends may not know--

    "being swiped through the new 'Horizon' computer terminals currently being installed in post offices".

If that is so, my first question to the Minister is how does that differ from the system proposed by the previous government. I suggested that payments would be made by means of a Smart card, but the Minister denied that. However, her letter states that there may well be a "bankcard". Call it what you will; it seems to me that we are going back to the previous government's proposals and starting all over again. Perhaps the Minister will bring me up to date when she responds.

There are, of course, cost implications involved in such a system. It was suggested originally that the system proposed by the previous government was too expensive. This Government wish to do away with books and giros and so on, but obviously people will need some form of identification. We perhaps reached this stage previously in Committee. Members of the Committee were asking how people would identify themselves in order to receive cash, a facility that the Minister said would still be available. Perhaps the Minister will be able to clear up that query when she responds; I am still a little unclear. There will obviously be cash implications if a bank card is going to be used and, if books are no longer required, it may make a difference to one or two of the amendments which have been tabled today. We may wish to consider that matter and come back to it at the next stage.

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Perhaps I may move on to one or two other matters. We discussed social banking provision for some of the 2 million "unbanked" people. Several questions arise from that. First, what do the Government think will be the cost? Secondly, who will bear that cost; who will pay it? Will it be the Government, the Post Office or the banks--or all of them? Certainly it was mentioned in the correspondence that I have received recently from Barclays Bank that one of its people is arranging a presentation, and that in that presentation he quite rightly refers to the cost of such provision, saying:

    "The potential cost to banks of opening and operating these accounts is an interesting question. We certainly do not expect to make any profit from them, indeed a loss is a real possibility".

It was agreed that an average balance of around £1,000 a year is needed to make a bank account profitable. Clearly, we would not expect to see that level of credit balance maintained by the kind of people about whom we are talking. He acknowledged that there is a cost, and someone must bear that cost somewhere along the line. Perhaps the Minister will touch on that point when she comes to reply.

Since my previous contribution on the first day of Committee I have had a letter from the Alliance & Leicester stating that it had noted my mention of increased or compulsory ACT. The Alliance & Leicester has been lobbying the Government very hard against that as it greatly impacts on Giro and the POCL's commercial objectives. As two of the major banks have expressed concern on this matter, I hope that the Minister will be able to say that something has happened since the previous debate.

Other noble Lords have referred to the fact that people need to have access to cash. I have been looking at the Select Committee report on the rural White Paper, although I do not expect the Minister to have seen it or indeed to have studied it. On page 18 of the report the committee referred to benefit payments through post offices. The committee stated:

    "The Government must move rapidly to reconfirm that individuals will continue to receive benefit payments through the Post Office and that any loss of income to the Post Office brought about by the changing pattern of payments should be offset by additional opportunities to gain custom".

Indeed, during our exchanges two weeks ago, the noble Baroness stated the other advantages. I accept that. The committee went on to state:

    "We fear that if they do not do so there will be a loss of some rural post offices".

This is a matter of great concern. It is not just my concern. It is a concern to those who will draw the payments and to the banks and others involved. It is an important issue and one where there is uncertainty. I should like greater clarification from the Minister when she comes to reply.

Perhaps I may pose some questions to the Minister in summing up my thoughts on the issue. If recipients do not wish to have their payments made through banks, how will they be paid? Will they be made through the card, or do the Government have other options in mind? If recipients have such an account and then run up an overdraft, what will the position be? Will the Government cover them? Is the social

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bank to be limited to the payment of welfare benefits, or will recipients be allowed to develop their bank account into a normal bank account, whereby some will be in credit and others will have overdrafts? For those who want to claim in that way and may not want to receive payment through the post office, how will those who do not qualify to be banked get over the whole question of being banked?

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