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Baroness Byford: I rise to support the case put forward by my noble friend Lady Miller. I am not sure how the Minister will respond—whether he will be coy or whether the Government still do not know. I apologise to your Lordships that I shall take some time over this item because the crux of the matter is how people claim and receive benefits. I have been through this exercise on the Child Support, Pensions and Social Security Bill and I still have no answers. I believe that the Government do not know the answer. I hope noble Lords will understand why I shall take my time to go through this yet again.

The purpose of my amendment is to establish a method of payment and the practicalities for people who live either in rural areas or in urban areas. I want to try to flush out how people will receive payment, what the cost will be and when and how this will happen.

Perhaps I can begin at the beginning. In this country some 2 million people are still "unbanked". When I raised this matter on 16th May during the debate on the Child Support, Pensions and Social Security Bill, the noble Baroness, Lady Hollis of Heigham, commented that she was not happy that I used the term "switch card" and that they may well come forward with a bank card. In a letter she stated that the precise means of doing so will be a matter for the Post Office and banks and that they expect available options to include withdrawing money through a bank card. That is a start.

My question to the Minister—there will be several—is, if that is so and we move to a bank card system, how will that differ from what the previous Government had started and which this Government abandoned? How will it save money, if it is being reinstalled? Who will pay for the new bank card? Will it be cheaper than

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the previous system? Will the Department of Social Security be expected to pick up the bill, or will the Post Office pick it up?

We know that there are some 2 million people who are "unbanked". The Government have indicated that they will finance a scheme to give them banking facilities. If that is so, how will the Government do that? What do the Government believe will be the cost and who will bear it? Will it be the Department of Social Security or the Post Office? If the banks have to bear it, the potential cost to them of opening and operating such social bank accounts is an interesting point. Whether or not we expect them to make a profit from such accounts, there would be a loss.

I have received letters from banks and it has been agreed by them that an average balance of around £1,000 a year will be needed to make any bank account profitable. Many of these accounts will not contain that sort of amount. We certainly need to have some indication from the Government as to how and who will cost the scheme.

I believe that the Minister will say that the Government still do not know. We have been waiting for the PIU report that was supposed to be with us at Easter. Easter has come and gone, May has come and gone and we are half way through June and the report is still not with us. I am told that there are great matters in the report, but I and many other noble Lords are anxious that if we are not careful, not only this Bill, but also the Child Support, Pensions and Social Security Bill will pass through the House without us having answers to these basic questions. It is extremely important that we have answers.

On top of that, today I received the CAB social policy bulletin for June 2000. The Skipton CAB has carried out research which showed that its clients were experiencing real difficulty in gaining access to bank accounts, and were anxious about ATM usage, particularly in rural areas. The bulletin said:

    "A survey of all banks and building societies in the Craven District area aimed to find out what facilities were on offer and what checks were made before a bank account could be opened. Few of the 21 banks and building society branches surveyed seemed to be able or willing to offer any facility to clients experiencing financial problems or who had a default recorded".

If that is true, and if the banks are not keen to give people banking "streams" without back-up, who will?

The Alliance & Leicester Bank has also written to me as, I believe, I mentioned at Second Reading. That bank is concerned about the impact of withdrawing the current system of the Giro. The Select Committee report on the Rural White Paper, dated 3rd May 2000, stated on page 18 that the committee feared that the loss implications of withdrawing the current benefit payment system would result in some more losses of post offices, particularly rural post offices.

I believe that banks are entitled to refuse banking services to certain clients; a point I made when I referred to the letter from the CAB. However, the Government wish to see universal coverage. If the Government forbid banks to charge "unbanked" people for using banking facilities, who will pay for it?

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Having referred to the PIU, I shall now move on to the speech made recently by the Prime Minister at the Women's Institute meeting. I am sure that it is a fact now well known to noble Lords that that speech was received with a certain coolness. However, it contained a very important section. The Prime Minister stated:

    "You have a strong campaign on rural post offices".

That is indeed the case.

    "I want you to preserve them too. This month we publish plans that will allow people to carry on taking out pensions and benefits in cash; and that will protect rural Post Offices and offer them a new lease of life. Be under no illusion: over the years more people will choose to have their money paid into their bank accounts all around the world, postal services are going to be revolutionised by new technology and the growth of the internet. So we can give rural post offices a future."

He went on to say:

    "I would fail in my duty to you, if I don't also say it has to be a future allied to future reality".

I do not think that anyone would deny that. I should hate it if Members of this House thought that I was someone with a negative view, one who felt that things should remain as they are. However, changing from one system to another without knowing what the new system will be and what it will cost is important and needs to be thought through.

We spoke of this problem during our deliberations on another Bill. We were told then that the ACT transactions to be introduced will cost only 1p per transaction, as compared with order books, which cost 48p. It has also been stated that benefit payments made using ACT will reduce fraud. I shall probably not argue about that because I have no reason to suspect that that would not be so. However, I suggest that the Government's comparative exercise as regards ACT has not given a true result, or at least not a full one. The figure of 1p per transaction quoted by the Department of Social Security is what it will need to pay rather than a calculation of the full cost, whereas the cost of the order book reflects the full costs involved.

Research carried out by the banks estimates that it will cost £350 million a year to establish and run a social banking system that will pay all benefits into bank accounts. That is a very different figure from that of 1p which is being bandied about so freely and is the reason why I keep posing such questions. For a successful introduction of ACT, the Government need to be realistic about the actual costs involved.

I should like to raise one or two other points. Each week 20 million benefit claims are made at post offices. Over the course of a year, those claims attract some £50 billion in cash payments, distributed via 712 million transactions. As I have said, research carried out by the banks has shown that the establishment of ACT will cost £350 million, while the Government continue to quote 1p per transaction. If an additional £50 billion in cash is to be paid out via the banking system to benefit claimants, then in addition to the 1p cost per electronic transfer from the Benefits Agency to a claimant's bank account, surely other costs will arise; namely, the cost of physically moving £50 billion in cash to millions of bank accounts and to post

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offices. Furthermore, the cost of setting up new bank accounts for claimants must be taken into account, as well as the cost of running bank accounts to be used for paying benefits. For example, a cost is incurred every time a plastic card is used at an ATM.

I apologise that I have had to speak at length. However, noble Lords will understand my concerns in this area. If rural post offices and some of our more remote urban and suburban post offices do not survive, the reason for their demise will be because of the withdrawal of the payment of benefits via sub-post offices. Given that, the Government's wish to ensure that each recipient will still be able to visit a post office will need to be looked at in a different light.

I have posed several questions in my contribution. First, I do not believe that we have received a full answer as regards the full cost of implementation. It may be that the Minister will tell me that it is still too early to tell. Secondly—this point was also raised by my noble friend Lady Miller—we must address the question of the subsidy. The amendment was introduced only during the later stages of the Bill's progress through another place. It has been suggested that some of the proposed subsidies could be paid through local authorities. However, I understand that sub postmasters are concerned about that for the simple reason that one local authority may take a quite different view from another. From a practical point of view, I should like the Minister to comment on this. It is not a good idea to implement all kinds of different systems when the aim is to achieve universal coverage.

On the last occasion that we discussed the matter of ensuring that payments reach claimants, the noble Earl, Lord Russell, said that he was happy with the assurances given by the Minister. However, those assurances will be valid only if claimants retain access to a post office. If I have over-egged the pudding here, I apologise. This matter is posing a dilemma for those who need to examine the hard reality of how claimants are to receive their payments. I raised these matters during our debates on the Child Support, Pensions and Social Security Bill and I have raised them again today. That is because it appears that the buck is passing between two departments. It is now time for the Minister to clarify one or two of these very important points.

6 p.m.

Lord Clarke of Hampstead: I shall again declare my interest as a former Post Office worker and as a former official of the Union of Post Officer Workers. I am grateful to those sitting opposite for having put down these amendments. They have given the Committee an opportunity to examine the whole question of subsidies.

It is common knowledge that the idea of providing subsidies came only as a late add-on during the deliberations in another place because the plans for the transfer of benefit payments to ACTs were ill judged. Those plans had not been thought through and the subsidies were introduced as a reaction to that.

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Perhaps I may say at the beginning of my remarks that I do not believe that subsidies will provide the answer to the long-term future of sub-post offices and post office counters in either urban or rural areas. The salvation of the counter network will come through the provision of more business, better competitiveness that will attract new business and a climate that will enable those small businesses to stand on their own feet. We must recognise that the proposals for subsidies have been introduced to compensate for the loss of payments that would accrue from the transfer of cash payments to automatic credit transfers.

The Government's intention to enable the possible use of subsidies was first indicated only as late as February of this year. The Secretary of State for Industry stated that:

    "the Government will consider very closely the need to include a provision that would enable a subsidy to be provided where it is appropriate to do so".—[Official Report, Commons, 15/2/00; col. 805.]

That statement in itself begs a number of questions.

Like many others, I had expected that an amendment would be introduced during the Committee stage in another place, but no amendment was forthcoming. Instead, on 12th April the Secretary of State announced that,

    "we will table a new clause to the Postal Services Bill when it is debated on Report. It will enable me to set up a financial scheme to ensure that essential services can still be delivered through a nationwide network of local post offices".—[Official Report, Commons, 12/4/00; col. 385.]

Clause 102 has now been introduced. The clause does not make it clear how subsidies are to operate and when they will be considered necessary. If we must have subsidies, then the most straightforward method of providing them would be through direct payments from the central government, authorised by the Secretary of State in consultation with the Treasury.

Clause 102 enables the Secretary of State to make such payments to assist in the provision of post offices and the services provided as he sees fit. These payments can also be restricted to post offices of a "particular description". I am most anxious to know what the criteria of a "particular description" would be. It seems likely that the Government will have to consider any criterion for access to postal services that is recommended by the PIU.

However, both previous speakers mentioned that we have been waiting with bated breath for the report of the PIU which was promised when this matter first came before this Chamber. The noble Baroness, Lady Byford, drew attention to the fact that we are still waiting. Perhaps we shall get another rabbit out of the hat, as happened in the other place when the whole question of subsidies was revealed. But if we have had to wait all this time just to see what the future of the counter network will be, it is a poor performance by the Performance and Innovation Unit. We expect the report to talk about the social and environmental guidance emanating from this Bill relating to the number, or percentage, of people living within an area to be served by a post office, otherwise, I see no clear indication regarding what will happen.

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We talk about local authorities, but there is already a precedent for local authorities to become involved. Section 97 of the Telecommunications Act 1984 quite clearly states:

    "Where a local authority consider that it would be for the benefit of the whole of any part of their area ... the authority may undertake to pay ... [an] operator any loss he may sustain by reason of the provision or continued provision of those facilities".

It is unlikely that most local councils will be able to find the funds to do so. In fact, as a former local councillor I find it offensive for central government to pass over the responsibility to put something right that it created in the first place—namely, taking away the cash payment, thereby making it necessary to find the money to subsidise the post offices—and then say to local government, "You have to do it". That seems to me to be incomprehensible, if not less than straightforward.

I should like to say much more but both previous speakers covered a whole range of issues about sub-post offices. I completely agree that we should not be paying subsidies to banks or building societies, which are actually putting extra pressure on the whole system. I hope that my noble friend the Minister will be able to give us some answers, as well as an indication of where we are going on this question of subsidies. As I said at the beginning of my remarks, subsidies are not the answer: more business in our post offices is. The future of the network would be much more secure if the Post Office were allowed to get on and promote its business.

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