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For many in the poorer communities, this means strengthening the hold of loan-sharks and usurious interests on small loans. If anyone has ever lived on a housing estate and seen the effect of loan-sharks they will realise how important a simple banking system is and how much it is needed by ordinary folk who are at the mercy of these people. The Government have introduced the Saving Gateway Accounts Bill, which aims to encourage savers of very modest means. I hope that they will examine the need to support loans and micro-credits to the poorer communities as a supplement to the gateway savings scheme.

The arguments for a post bank are very strong. At present, the Post Office is the fastest growing financial service provider in the United Kingdom. This trend is matched in many countries where postal banking is offered. In a recently published report, the Universal Postal Union found that Post Finance, the financial branch of Swiss Post, in 2008 increased its customer numbers by 55 per cent; increased its accounts by 71 per cent; and underwent a 12.8 per cent growth in total deposits. The French postal bank increased its total deposits by 7 per cent in the same period. The German postal bank showed a 58 per cent increase in new savings and increased its market share by 9.4 per cent in the same period. These are extraordinary figures during the middle of a recession, and they show how much scope there is for the development of a post bank in the United Kingdom.

It would be best if the Government took the bull by the horns and introduced a post bank. However, to date they have shown a degree of lukewarm encouragement rather than leadership on this question. During the first day in Committee, the Secretary of State said:

“I am looking with interest at the post bank proposals”.—[Official Report, 24/3/09; col. 565.]

It appears that that Government are concerned about whether the post bank proposals cut across the relationship that the Post Office has with the Bank of Ireland. Indeed, when the campaign coalition supporting the post bank launched its initial document, my right honourable friend Pat McFadden, responding for the Government at the launch, suggested that increasing bank services through the Post Office may best be done through strengthening the relationship with the

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Bank of Ireland, rather than through a distinct post bank. This would be a bad mistake for the Government to make.

Perhaps they are unaware that Bank of Ireland deposits are covered by a guarantee of the Irish Government; the market regards the Bank of Ireland as less than solid. As things stand, the partnership with the Bank of Ireland results in that bank receiving 50 per cent of the profits generated by these banking services. This limits the potential for growth of postal banking services, which clearly require substantial reinvestment. The Post Office bank could instead operate independently, rather than simply mimicking products on the high street. It would operate with a mandate to target its products at the financially excluded and those on lower incomes. Central to the services provided by a Post Office bank, there should be a basic bank account—a more functional version of the Post Office card account. Additional services provided by a Post Office bank could include current accounts, savings products, micro-credits, mortgages, credit for small businesses and financial advice.

I sincerely thank the noble Lords, Lord Razzall and Lord Cotter, for tabling this amendment. The suggestion that an investment fund of at least £2 billion may or may not be adequate has been readily accepted. However, I understand that the policy being pursued is to support the sale of all or part of the Royal Mail to raise funds to transfer to the post office network or a Post Office bank. I have made plain that I see no redeeming features in the privatisation of Royal Mail. There are plenty of other ways of raising money for the marginal amount of modernisation that is still required; there are plenty of other ways to fund the establishment of a post bank which do not involve the break-up and sale of Royal Mail. It is merely a matter of having the will and the wit to find them.

Lord Cotter: I support my noble friend and colleague Lord Razzall in his amendment. He rightly said that we see this as an extremely important key amendment as regards the Post Office and postal services. We are very pleased to have the support of the noble Lords, Lord Hoyle and Lord Clarke. My noble friend said that we are not excluding other ideas or proposals. As the noble Lord, Lord Clarke, said, the post bank is a very important ingredient for the future. He talked about the many different ways in which post offices can help their communities.

I am sure that the Secretary of State will recall that there have been trials of the provision of local and central government information centres. Unfortunately, I did not look up the detail before I came in, but I think that up north or somewhere there was a trial a year or two ago. The provision of these services is a viable and possibly important part of our amendment.

The Secretary of State will know that I am very keen to support small businesses. In subsection (1)(b) of the amendment we refer to “training in business opportunities”. It is extremely important to help post offices and small businesses, which is very often what post offices are, to look for business opportunities. Nowadays, we talk about increasing people’s skills, which is an important ingredient of what we are proposing.

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I hope that the Secretary of State will seriously consider what we, with the support of colleagues, have put forward, and we are very open to the addition of different ideas. There are templates here of what could be part and parcel of such support. We very much look forward to hearing what the Secretary of State has to say.

Lord Whitty: I declare an interest as chair of Consumer Focus, which last year inherited the powers of Postwatch in relation not only to Royal Mail services but to the post office network. This is an important point in the Bill, because as far as consumers are concerned, yes the services of Royal Mail and the universal service obligation are very important, but of much higher salience is often the post office network itself—the local post office, the services it provides and the effectiveness with which it provides them. I am not talking just about those who Postcomm rather disparaging referred to as “social consumers”—that is, you and me—but a wide range of business consumers who use their local post office for various purposes.

Therefore, as I said at Second Reading, it is important that in parallel to any changes in the Royal Mail side of the Royal Mail Group, some assurances are given in relation to the post office network. Those assurances should be not only on the size of the network but on the services it provides. I am strongly in favour of a post bank, and I should say that I had interpreted the Government’s view on this slightly more positively than my noble friend Lord Clarke. I hope that I am right in thinking that they are strongly going down the road of considering a post bank and trying to bring back other services to the Post Office. I commend the work of Pat McFadden in this respect.

However, if this Bill is passed without there being reference in it to providing additional support for and defending the post office network, we will find ourselves in the same situation in which my predecessors in Postwatch found themselves during the previous closures, when the consumer organisation’s only job was to decide whether that post office or another should close. That is not a sensible position, except in a few limited circumstances. By and large, consumers and communities want an effective post office network.

We are in a happy position. It is not just the Secretary of State and the Government who have declared, “We do not want to see another swathe of closures in the post office network”, the two opposition parties have made similar declarations. I am afraid that out there is a certain degree of cynicism that says, “They would, wouldn’t they, at this stage before a general election”, but it would be helpful, if my noble friend the Secretary of State is to sell the total package that he is proposing, were there to be a reassurance on the Post Office side in statute, whereby it should not have been episodic declarations by all three political parties at this stage of the political cycle, but that it was written down in the law of the land that the post office network would be sustained and various supports built into it.

Whether or not I agree entirely with the formulation of the amendment or the amendments to the amendment, it would be useful for the Government to come forward with a version which gave that kind of assurance.

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Lord De Mauley: We feel strongly about this, but although we share the concerns of the noble Lord, Lord Razzall, and other noble Lords that the post office network be maintained and, as we have said, that some of the recent closures be reversed, we are as yet unconvinced that Amendment 95 is the best way to achieve that. I might hazard a guess that the Government will be similarly unconvinced.

It is clear from the Hooper review that the problems of Royal Mail and the post office network go deeper than just a shortage of funds. When considering Part 1, we had some useful debates about other ways that the Government could support the post office network, including sending more government business its way and looking at expanding the services that post offices can provide. The noble Lord, Lord Clarke, spoke eloquently about that.

In passing, on the new scheme with the Bank of Ireland referred to in the press over the weekend, is it true that it will not be covered by government-backed depositor protection? I should be interested to hear from the Secretary of State on that.

The amendment of the noble Lord, Lord Razzall, makes some reference to our earlier debates but sets an arbitrary figure on the amount of investment that he feels is needed to ensure that these services are provided. As I read it, it might also hold up the much needed reorganisation of Royal Mail until the post office network has been sorted out too. We do not agree that such a sum of money should be thrown at the problem without a proper assessment of the network, the problems that it is facing now and the potential opportunities that it could develop, and so on. Although we agree that something certainly needs to be done to help post offices, it is Royal Mail that needs our urgent attention. I am sure that we will return to this issue on Report.

7 pm

Lord Mandelson: Before I address the original amendment moved by the noble Lord, Lord Razzall, perhaps I may respond to one thing that he said. He suggested that we were divesting the Post Office but, just to be clear, the two businesses are not being separated. Post Office Ltd will remain in the same corporate group as Royal Mail Group Ltd. The Government’s stakes in Royal Mail Group Ltd and Post Office Ltd will be owned via their 100 per cent-ownership of Royal Mail Holdings plc.

The original amendment moved by the noble Lord, Lord Razzall, is grounded in an admirable sentiment: the wish to maintain, modernise and improve the nationwide post office network. As noble Lords know from previous sittings of this Committee, that is a wish that I share. The future of both Royal Mail and the post office network needs to be secured, and that is the purpose of the Bill.

Through Amendment 95, the noble Lords, Lord Razzall and Lord Cotter, call for a commitment to invest in the post office network. Over the past 10 years, this Government have provided unprecedented financial support to the network. Between 1999 and 2005, we provided some £2 billion, and we are now providing up to £1.7 billion to support the network to 2011.

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Without that funding, some 7,500 branches might not survive. That is a measure of our financial commitment, which is unwavering.

The National Federation of Sub-Postmasters set out in a recent report its views on how we could further improve the sustainability of the post office network. In many ways, the report echoes the Government’s own efforts, and I want to describe how. Before I do so, perhaps I may pick up the point that the noble Lord, Lord Cotter, made about Post Office-trialled local information centres, because this relates to the Post Office’s relationship to central and local government services. The Post Office has a vital role in our communities and, as I have said, there are significant opportunities for it to undertake new work for Her Majesty’s Government, to which I shall come in a moment. However, we must remember that, if a new service is to support the viability of the post office network, it must provide commercial income for Post Office Ltd and, vitally, for its essential sub-postmasters. We need to bear that in mind in the context of our discussion on the future of the network.

On central and local government services, I asked the Business and Enterprise Select Committee in another place to identify new business opportunities for the Post Office. I am also leading discussions within Whitehall to identify new services that Post Office Ltd can provide. The Department for Transport announced last month that the Post Office would provide the face-to-face service for the 10-year renewal of photo driving licences. This will allow Post Office Ltd to undertake a multi-million pound investment in ID verification technology and is a major step forward. As the new generation of passports is developed, there is, similarly, a large potential stream of work for the Post Office.

On financial services, I understand and agree with the idea that the Post Office should expand its range of banking services. It will be an important area of new custom. However, sometimes this debate ignores the fact that the Post Office has already been growing in this field considerably in recent years. Alan Cook, the managing director of the Post Office, told the Business and Enterprise Select Committee on 21 April that, in effect, a post bank already exists. Post Office Ltd offers a wide range of financial services and products: savings, insurance, mortgages and cash machines. Therefore, the Post Office already plays a vital role providing access to financial services through its network of 11,500 branches—a network still bigger than all the UK’s banks and building societies put together.

I know that interest has been expressed about the Post Office’s relationship to the Bank of Ireland—a point to which my noble friend Lord Clarke and the noble Lord, Lord De Mauley, referred. However, noble Lords will appreciate that the Government do not comment on the financial position of individual banking institutions; nor are we in the habit of commenting on entirely hypothetical situations. It is, however, worth noting that Post Office savers who have Bank of Ireland accounts benefit from the protection of the Irish deposit guarantee scheme and the Irish Government’s guarantee covering retail deposits until September 2010. The Post Office, as we know, has confirmed its complete confidence in the success of its financial services joint venture with the bank.

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In that context, perhaps I may pick up the point made by my noble friend Lord Clarke about the need for the Post Office to do more in relation to financial inclusion. The Post Office already plays an important part in reducing financial exclusion, particularly in the current economic conditions. The Government subsidise the network of branches so that there is a branch within reasonable reach of everyone, providing access to cash and benefits throughout the UK. The Post Office provides almost 1,700 free-to-use cashpoints. Thanks to this Government, the Post Office will continue to operate the Post Office card account. The Chancellor also announced at the Pre-Budget Report last November that the saving gateway scheme would be available through the post office network. Post Office Ltd is also in discussion with the Association of British Credit Unions Ltd to see what opportunities there might be for the two organisations to work together more closely. I hope that that will go some way towards reassuring my noble friend about the concern of the Government and the Post Office to maximise financial inclusiveness through the operation of its services.

On mail services, I understand how critical the contract between the Post Office and Royal Mail is for the post office network. The existing commercial arrangements between Royal Mail and the Post Office will of course be maintained. We will ensure that the Post Office is not adversely affected in any way by the introduction of a strategic partner for Royal Mail. However, the Post Office is not simply standing still in the mails market. Last week, it announced a contract with DX Group which will allow DX Group’s customers to collect their mail from their local post office. This is the first time that a private mails company has offered access to its services via the post office network, and I am sure we can all welcome that.

On support for local retailers, the Government are about to consult on a range of measures to sustain town centres and on the provision of retail services in both urban and rural communities. Those include changes in planning policies to make them more flexible and to facilitate the future sustainability of local economies.

On government support for the network of post offices, as I have made clear, we shall continue to subsidise the network beyond 2011 and we shall not support any further programme of post office closures. The next funding deal for the Post Office will require discussions within government and with the company. I cannot at this stage pre-empt the detail of those funding discussions, but I expect to be able to make further announcements later in the year.

A great deal is being done to improve the sustainability of the post office network, particularly in the specific areas identified by the National Federation of Sub-Postmasters. The Government have been, are now and will continue to be committed to subsidy, to investment and to the expansion of post office services. I want to work constructively with the federation and the Post Office on a strong agenda for the future of the network. Although much of the federation’s agenda is not directly related to the Bill, there is clearly a link between a more secure future for Royal Mail and for the Post

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Office. I would go further and say that in many ways the one depends on the other. If Royal Mail is not transformed and fails to maintain its position in a competitive marketplace, that would be damaging to the Post Office as a company and to the viability of the post office network.

The success of the two businesses remains very much connected. If the Post Office required even further subsidy to make up for a decline in Royal Mail’s business and if we had not been successful in reversing that decline, that funding for the Post Office would clearly need to be balanced against other spending priorities, not least any extra funding required to support an untransformed Royal Mail. So it is certainly in the Post Office’s interests and its network’s future to see the finances of the Royal Mail turn round and the business transformed. That makes the implementation of this Bill and its impact on Royal Mail all the more important for the Post Office and its network.

Finally, through their amendments to Amendment 95, my noble friends Lord Clarke and Lord Hoyle seek to provide that the Bill will not come into effect until I have laid a Statement before Parliament that I will not support a further programme of post office closures. As noble Lords will have heard, I have given that commitment to the Committee tonight and at previous sittings, and I shall continue to make that commitment, so I have already fulfilled the requirement. I have made the statement and provided the assurance on the Government’s behalf that noble Lords seek through the amendments. In light of everything that I have said about the Government’s commitment to the post office network, the importance for the Post Office of Royal Mail being turned round and the commitment I have made to the future network, I hope that noble Lords will feel able to withdraw their amendments.

Lord Razzall: I thank the Minister for that lengthy reply. As I explained, this is a probing amendment and, as I indicated, I have no clue whether £2 billion is the right amount to secure the future investment in the Post Office. My objective is to ensure that before the Bill leaves your Lordships’ House we have sufficient undertakings from the Government that the future of the post office network is secure. The Minister has made some extremely interesting observations about what the Government intend to do. I shall read what he has said in Hansard and in the mean time I have pleasure in withdrawing the amendment.

The Deputy Chairman of Committees (Baroness Fookes): First, may I be clear that Amendment 95ZA is to be withdrawn?

Lord Hoyle: Yes, I shall withdraw it. I shall take into account what my noble friend has said but I would still like to have seen this provision on the face of the Bill.

Amendment 95ZA (to Amendment 95) withdrawn.

Amendment 95ZB (to Amendment 95) not moved.

Amendment 95 withdrawn.

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7.15 pm

Amendment 95A

Moved by Lord Razzall

95A: Before Clause 42, insert the following new Clause—

“Charges made by national providers

(1) OFCOM must have a duty to set the minimum charges made by any national provider for the provision of courier or postal services.

(2) OFCOM must determine that any charges are applied on the basis of either—

(a) a price per mile, or

(b) a fixed rate,

throughout the whole of mainland Britain.

(3) “National provider” means any provider that offers a courier or postal service that crosses the border of any country within Britain.”

Lord Razzall: On the face of it, the amendment is rather general and is not dissimilar from what the noble Lord, Lord Tunnicliffe, would remember as the Argyll and Bute amendment. It relates to the impact on the universal pricing structure in northern Scotland. The Royal Mail is the only provider of a universal pricing structure; therefore, the cost of sending a parcel anywhere in the UK is the same. However, other providers of delivery services do not operate on that basis and, as a result of postcode districts, they draw an arbitrary line north of Perth which in effect makes it cheaper to send a parcel from Perth to Penzance than from Inverness to Kirkwood.

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