I congratulate the hon. Member for Sutton and Cheam (Mr. Burstow) on securing the debate tonight. I have listened carefully to his speech, and welcome the opportunity to respond to the issues and the points that he raised. The House has not exactly been bereft of debates on the Post Office network—this is one of many to which I have responded, and I doubt whether anything that I say tonight will be fresh and new. However, it is important to emphasise the Government's position with regard to this important matter.
The concerns voiced by the hon. Gentleman centre on the future of the network and the move to the payment of benefits and pensions by automated credit transfer. He also made an important point about the suburban network, and I hope that I can give him some reassurance about that.
The future of the post office network is a matter of public concern in all communities, irrespective of whether they are urban or rural. The challenges facing the network are of interest to all of us. That was demonstrated on 12 April, with the presentation of a record-breaking petition to No. 10 Downing street, which contained more than 3 million signatures. In addition, the network has been extensively debated in the House. As the hon. Gentleman said, the focus of this concern is the progressive migration, over a two-year period, of state benefit payments to ACT as the norm.
The hon. Gentleman also made the point that the network has been declining for some years. He said that four Crown post offices were converted in his constituency. This Government, of course, placed a moratorium on Crown post office closures, so that we could have a proper appraisal of the system. I understand that an office that had been converted to sub-post office status in the high street in Sutton has now been re-converted to a branch office. That suggests that the review of the system has been fruitful. Indeed, in last year's White Paper, we said that 15 per cent. of all transactions will go through Crown post offices, so a flagship of Crown post offices will remain.
The harsh reality is that, despite its many strengths and its importance to the community, the network has not modernised sufficiently over the past 20 years to respond to, and keep pace with, social, economic and technological changes. The previous Government had a well-intentioned plan to computerise the network with the benefit payment card. It was a private finance initiative project. The key objectives of the contract were to automate the network and provide the Benefits Agency with a computerised service.
The contract was for only eight 5 years—it was never going to be a permanent solution. Shortly after we came into office, it was clear that the project had run into significant problems. By late 1997, the project was incurring substantial cost over-runs and would have come into service some three years later than planned.
We knew that we could not go on against that background. We concluded that changes had to be made, and took the tough decisions necessary to get that project back on track. Our decision was to get Horizon working as a simple public procurement, and that has been very successful. We are converting 300 offices a week. This huge network will be completely online and computerised by the spring of 2001.
The argument about ACT, as I have mentioned many times in the House, has been a constant problem. I said at the conference that the National Federation of Sub-Postmasters rallied in the early 1980s when the previous Government introduced ACT for the first time, and it rallied in the early 1990s when ACT was extended to cover other benefit payments. If we do not solve that problem, once and for all, in a way that suits the Benefits Agency, the network, the Post Office and sub-postmasters and sub-postmistresses, we will not have a lasting solution. The move to ACT is accelerating; 500,000 more people are voluntarily having benefits paid into ACT every year, and that number will grow as a new generation used to cashless pay reach pensionable age. We have to resolve that problem.
We must also ensure that the solution deals with how people access their cash once it has been transmitted by ACT. It would benefit no one if the Post Office ignored customer preferences, and the NFSP certainly does not believe that it would. The organisation is not comprised of luddites, and it has raised real concerns that we are trying to tackle constructively. The solutions that we have identified must concentrate on allowing people to access their cash in a modernised network that can thrive, rather than simply survive, clinging on by its fingernails, as has been the case for too much of the past. We need to change that for the 21st century.
The emerging vision that I unveiled at the NFSP conference contained three specific opportunities—in financial services, in e-commerce and in Government services. Important initiatives can be taken, and when the policy and innovation unit report is published shortly, I hope that that emerging vision will be one that both sides of the House can sign up to as a way forward for the Post Office.
On financial services, the Post Office has done well at developing new lines of business. Contracts with institutions including the Co-operative bank, Lloyds-TSB and, most recently, Barclays allow people to access their bank accounts through the post office network. I hope that the incentive of the Horizon automation platform, which reduces the cost to the banks of transactions made across post office counters, will encourage banks to extend that situation to cover many more accounts.
Our arrangements with the high street banks do not by any means cover the sizeable group of customers—three and a half million—who have no form of traditional bank account. We welcome the Post Office's work in developing a universal bank. In his Budget speech, my right hon. Friend the Chancellor invited the banks to work with the Post Office to offer not just a substitute distribution network, but a basic banking service to all.
A universal bank in partnership with the banks could help address the problems of financial exclusion. It would greatly reduce the number of people who do not have a bank account. More importantly, it would provide a post office-based solution, allowing a post office card to replace benefit books, allowing people to access bank accounts and pay bills—as many pensioners, particularly the elderly, like to do when they draw their pensions across post office counters. It could meet our clear pledge that, even after the move to ACT, any customer who wants to access benefits or a pension across a post office counter in cash, undiluted by bank charges, should be able to do so. The Post Office is well placed to expand its role in financial services, both in social banking and as a substitute distribution system for the high street banks.
Despite the recent boom and almost immediate gloom in the dot.com sector, there is a wide consensus that e-commerce will be a major growth area over the next few years. The Post Office must think creatively about how to take advantage of the opportunities that that offers. Many people will order goods across the internet, but will not be at home to receive them. Post offices could become places where many customers can order and pay for goods over the internet, and where they can collect the products.
On Government services, the reach of the post offices, which are ubiquitous, makes the network a major national asset. Millions of people already see post offices as places in which to do Government business. There is potential to build on. We are also looking at the role post offices may be able to play in the Government's crusade to bring internet access to all by 2005.
The Government, the Post Office and sub-postmasters will need to work with the private sector, especially the high street banks, to turn that vision into a reality. We want Post Office management to forge a strong future in diversified lines of business. Some of that has started, but there is much still to do. We want rapid movement on that matter.
The contribution of sub-postmasters, which is recognised as one of the greatest strengths of the network, could be utilised more, so that sub-postmasters continue to provide the crucial service of running shops and post offices in many areas that have few or no other facilities. The dedication of sub-postmasters will be essential if we are to unlock and build on the potential of the network.
However, we in Government also have to play our part. We are already investing £500 million to computerise the network. The issues raised in the debate highlight the range of problems of managing and maintaining a retail network of more than 18,000 post offices.
The hon. Gentleman referred to North Cheam sub-post office, which unfortunately had to close on Wednesday because the temporary sub-postmaster had resigned. I am not sure why, but I am aware that sub-postmasters and mistresses resign for a range of reasons. Sometimes they want to retire and the post office is in their private home. Many sub-postmasters and sub-postmistresses—especially the elderly ones—are resigning as computerisation comes on line. However, whatever the reason, the Post Office goes to enormous lengths to keep a service running.
I assure the hon. Gentleman that I will ensure that every effort is made in that case. I am informed by the Post Office that it is intended to restore the service in north Cheam as soon as possible. I shall certainly keep an eye on the matter.
Although the Post Office network management might not get everything right all the time, they remain strongly committed to maintaining post office counter service provision wherever possible—often with considerable ingenuity; we should not allow ourselves to forget that.
I do not know where The Guardian reporter found the information in his first paragraph about lots of cash being put into inner-city and rural post offices. We included a subsidy clause in the Postal Services Bill, because, in a measure that will remain on the statute book for a generation, it would be remiss of us not to include at least a safety net, in case subsidy was necessary. As the hon. Gentleman was kind enough to mention, that is a clear demonstration of our determination to support the network.
No one wants subsidy to be the answer; we want transactions. We want the Post Office network to be a going commercial concern. We need to ensure that business flows across the counters in order to meet that objective.
However, we are committed to protecting and modernising the rural network. The reason for the emphasis on that network and the need for post offices in socially deprived areas is that, at present, those offices are cross subsidised within the network—more heavily used offices subsidise those that are used less frequently. That has been true for many years.
The focus on rural and deprived urban areas does not mean that we are not equally committed to the rest of the network. Indeed, we believe that there could be bigger and brighter post offices in suburban areas. The NFSP accepts that many post offices are not pleasant places to visit. We could improve the accommodation; this review offers us an important focal point.
We are looking to work with the NFSP and with the Post Office to reinvent and modernise the network. We are committed to ensuring convenient access to all post offices. We are prepared to define what we mean by a nationwide network of post offices—unlike the previous Government, who talked about achieving that while closing half the network. We are looking to define what is meant by such a network through access criteria.
I set out the Government's emerging vision for the network at the conference of the National Federation of Sub-Postmasters on 16 May and the performance and innovation unit report will be published shortly. It will provide the platform for us to take the vision forward, so that we have a network equipped for the 21st century and that is able to provide a secure future for sub-post offices and the communities that rely so heavily upon them. That includes post offices in Sutton and Cheam. They provide a valuable service and are part of the social fabric of this country. This Government are pledged to protect them.