Sub-post Offices

Part of Opposition Day – in the House of Commons at 4:48 pm on 12th April 2000.

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Photo of Vincent Cable Vincent Cable Shadow Spokesperson (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry) 4:48 pm, 12th April 2000

It is a perfectly fair question. I will happily copy to the hon. Gentleman a letter from a Mrs. J. Spiller of the DSS, who acknowledges that the information is available, but says that she will not disclose it because it is commercially confidential. That is a matter of record.

The Minister for Competitiveness, who has responsibility for postal services, is fond of using an analogy that is quite helpful. He talks about the need for the Post Office Counters network to achieve a soft landing. One has a mental picture of an aeroplane with him at the controls and the runway in the distance. I think that we can see the outline of the runway, which consists of a new income stream that will come from a mixture of online government, banking services and so on. That is fine and clear. However, the problem with that mental picture is that the Minister is flying an aircraft that has no undercarriage—it has no wheels. The problem with the Government's story is how that landing can take place.

One of the key aspects is the replacement of the present income stream with one from banking services. That is an important and welcome part of the story. We need to break down those banking services, to find out what they are, how they will be provided and what benefit the network will derive from them.

The banking services have two distinct elements. One is the 3,000 cash machines, which are welcome if they provide an additional facility. However, there is still a question about the many people—especially in remote areas—who will continue to pay a charge for that service. Even if Barclays and the rest move away from their £2.50 charge, the hidden loyalty charges will remain. The public will not receive a free service—the bank will derive income from it.

A more serious and important development—although it is welcome—is that 10 banks have agreed to use the Post Office Counters network for the provision of banking services. That is an advance and represents a significant new vision for postal services. However, why are the banks doing that? After all, Barclays and the rest are closing down thousands of branches throughout the country. Why are they entering into agreements with the DSS or the Post Office to open up such services? The banks are not charities—as we are painfully aware. Sir Peter Middleton and his chums are the most hard-headed bunch in business. Why are they doing that?

One obvious reason is that the agreements represent an extremely good deal for the banks. Instead of providing traditional bank branches, with all their overheads, security costs and business rates, the banks will acquire a cheap facility inside post offices—while keeping their brand. As the Government are in a weak negotiating position, they will not ask much for that service.

The banks will gain in other ways. As people will be encouraged—we are told that they will not be coerced—to have bank accounts, new accounts will be opened. They will bring the banks deposits and spreads on those deposits. The banks will earn charges. Banks will do extremely well from the shift to automated teller machines, and from the provision of banking services. We should be asking the Government—and they should be asking the banks—whether they are getting the best of that bargain with the banks.

The broader context is important. Many questions are legitimately being asked about the operation of the banking system. The Cruickshank report referred to estimated excess profits of £5 billion—in other words, rates of return to shareholder value that are larger than the market—for an industry that does not run full commercial risks, because, of course, banks and their shareholders are underwritten by the lender of last resort. We are talking about a system which has excess profits and is not fully competitive muscling in on the closure of the post office network to earn a nice little penny.

Although I welcome the vision—the development of the post office network from mere post offices to centres for online government and for banking services—will the banks be required to make sufficient payment to the network for that service? I fully accept and welcome the idea that the taxpayer has to pay a subsidy for the post office network, but the banking system also has a social obligation—to deal with the problem of financial exclusion. Are the Minister and—especially—the Chancellor paying adequate attention to the extent to which the banks, as well as the taxpayer, have a financial obligation to maintain the network as it is?

The key issue raised by Members on both sides is that the post office network needs an absolute guarantee of its future. That guarantee will be partly met from subsidy and when the access provisions are identified. However, until then, the crisis of confidence will continue; asset values will continue to fall; and there will be continued closures in all our constituencies.