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Lord Warner: My Lords, perhaps I may just intervene to refresh the memory of the House on some of the history of this subject. In 1979 I was a jobbing civil servant and the previous administration, led by the now Baroness, Lady Thatcher, and with a Secretary of State who is now the noble Lord, Lord Jenkin of Roding, asked me to undertake a study in this area.

As a historian, the noble Earl, Lord Russell, might care to go back into the archives and look at the report that we produced in 1980, which I believe is still in the public domain. He will see that this subject has been around for a very long time: about 21 years. The arguments have not changed all that much. He will also see that the implications for the sub-postmasters' network was brought out very clearly in the report.

It was the previous administration who were reasonably enthusiastic about these changes and who tried immensely hard to press on with many of them. However, there were a series of problems. One was that people had become very attached to a system of paying benefits that is extraordinary in the 21st century. It involves large numbers of antiquated machines in Newcastle central office cranking out books with tissue paper in them that are exchanged for money in post offices.

I suggest that it may be possible to help the rural sub-postmasters network without preserving that system. It is high time that we provided people with more choice in how their benefits are paid. The issue has been around for 20 or 21 years and the arguments have not changed much. They are still about how best

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to give encouragement, support and perhaps a little subsidy to rural sub-postmasters to keep those community facilities going. Keeping foil systems of paying benefits is probably the least effective way of doing that. We should be prepared to move on and not freeze the system of paying benefit.

Lord Higgins: My Lords, I shall speak to the amendment of the noble Earl, Lord Russell, rather than mine, which is somewhat different. I thank the Minister for the copy of the letter that she wrote to my noble friend, Lady Byford, which covered a number of the points that were of interest to us. My noble friend has made a considerable study of the issue--an issue as regards which he has great expertise and enthusiasm.

There are three separate groups with an interest in the issue: the benefit recipients, those who own or work in the post offices and the communities that they serve. Each group is very important.

The same statistics tend to get recycled rather rapidly from one speech to the next in debates such as this. I have some doubts about some of the figures. In her letter, the Minister said that 80 to 85 per cent. of benefit recipients already have a bank or building society account suitable for receiving ACT payments. I find that a surprisingly high figure. For years, many people insisted on being paid in cash. That gave rise to problems such as the possibility of robberies as the cash was transmitted to their workplace.

We all recognise that a lot of people prefer to be paid in cash. That leaves open the question of how the payment is made. So far, the Government's response has been rather opaque. I have been told not to worry because everything will be all right and people will be able to continue drawing benefits in cash, but I confess that I remain puzzled as to exactly how that is to be done. No doubt the Minster can enlighten us this evening.

Baroness Hollis of Heigham: My Lords, I spent 10 minutes in Committee explaining that.

Lord Higgins: My Lords, after 10 minutes in Committee, I still did not understand what the Minister was saying. Perhaps it would be better if she could explain the issue in one minute.

One cannot doubt for a moment that a number of people believe that they are entitled to receive their benefit payments in cash. That brings me to the second point--the position of the post offices. It is generally recognised--this is one of the statistics that I do not doubt--that they have been closing at a rate of about 200 a year. That is a matter of concern. If the changes that the Government appear to be envisaging come about, post offices are likely to suffer considerably, because many of them gain anything from 20 and 80 per cent. of their income from these payments and 40 per cent. of them get 40 per cent. of their income in that way. Clearly, this is a very dramatic change in the profitability of post offices, especially small ones. The worry here is that they will go out of business.

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When we previously debated this matter, I asked the noble Baroness whether the Government have some view as to the extent to which they wish to preserve the post office system, both in rural areas and in cities. But, again, we are not very clear as to the exact nature of the Government's policy in this respect. It is of considerable importance to those operating post offices, many of whom have invested their savings in the business. They may well feel that they are in danger of losing their capital--in the same way as if you increased the number of taxi-driver licences, existing taxi-drivers would get very upset about the value of their plate. It is that sort of small entrepreneur situation. Moreover, if someone simply comes into the post office, sticks a card into, say, a machine and then walks out again, there is some cause for concern as regards the business that post offices currently attract from a rather more social sort of environment. Indeed, as my noble friend Lord Boardman said, in many cases the post office represents a social centre.

There is one further relevant point here; namely, the question of the cost per transaction. Again, the cost of 1p per transaction has been bandied around. As a former and very successful chairman of the National Westminster Bank, I was rather hopeful that my noble friend Lord Boardman would give us some idea as to whether he thought that that was a credible figure. It seems remarkably small to me. At the same time, if there are that many people with bank accounts, one has to ask: what are they paying at present in terms of charges and, more particularly, what will be the charges to people who, apparently, will only have this one bank account (operated through the post office) and only use it for the one purpose?

These are very difficult questions and it is right that the House should express concern. However, as has been pointed out, we do so in something of a limbo. We are told that the PIU report is about to arrive, though somewhat late after a number of delays. Obviously that may be relevant to the final conclusion that we reach on the issue. In the meantime, it is only right that the Minister should make clear what is her reaction to the noble Earl's amendment which says that the system and,

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

9.45 p.m.

Baroness Hollis of Heigham: My Lords, I have to say that there is a faint air of unreality about this debate. Indeed, we have been through this discussion over and over again. I do not know where the problem lies. However, before I go into the main part of my text and try to deal with the detail, perhaps I may point out that people seem to be confusing the method of getting the money to the post office and the method employed by the benefit claimant in getting the money out of the post office. I am absolutely baffled by the failure to comprehend the situation. Frankly, it does not matter tuppence whether the money comes through ACT, through Securicor vans drawing up at the post office, and so on, as long as the person in the village or the

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small community goes to the post office with some form of identification--in this case, the card--and draws the money out. That is what will happen.

People will draw their money in cash; it will be paid to them by the post office in cash. How it gets to the post office, which is the mode of ACT, or, alternatively, to a bank account held at the post office, does not matter. That is irrelevant from the point of view of the recipient. I cannot comprehend why we seem to be at cross-purposes here. Instead of having an order book in their pocket when they go to the post office--the equivalent of a ration book--people will have their card. When they go to the post office counter, they will decide how much they wish to withdraw and that will be the money they receive. All that will happen is that instead of an order book there will be a card. I am baffled and genuinely cannot comprehend--if I may be so rude as to say this--why noble Lords are making such heavy weather of this.

Baroness Byford: My Lords, I am grateful to the noble Baroness for giving way. I am trying not to labour the point, but I hope that if the noble Baroness can answer one or two of the questions that we have asked we can then move on. I have no argument with the prospect of people being able to draw benefit in cash. However, there are two critical matters. First, will the post offices still exist for them to be able to draw the cash? I think the Minister will accept that 40 per cent of the income of many sub-postmasters is gained from handling benefits. If they lose that 40 per cent of their income, unless another payment is made, those post offices are likely to close. The noble Baroness has not responded to that point. That is why I mentioned the PIU report.

The noble Baroness said that it did not matter whether a card or a book was used for the purpose we are discussing. However, a book or a smartcard will still constitute a cost. Whatever form of identification is used will still constitute a cost. I accept the Minister's assurance that claimants will be able to draw cash from the post office. However, unless the postmasters are compensated for the 40 per cent of their income that they will lose under the system that is proposed, I repeat that the post offices are likely to close.

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