Post Office

Opposition Day — [19th allotted day] – in the House of Commons at 4:26 pm on 16th October 2006.

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Votes in this debate

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

I beg to move,

That this House
believes the Government is putting the future of the Post Office network and of Royal Mail at risk by their continued failure to take the tough and overdue decisions needed;
further believes that many local post offices have closed or are under threat because of the uncertainty over the future of the subsidy to rural post offices after 2008 and the withdrawal of public sector business from the network, including the pension book, the television licence, passports and the decision to withdraw the Post Office card account when the existing contract expires in 2010;
shares Postcomm's concern that over 6,500 remaining rural post office branches are vulnerable and could close over the next few years;
further believes that the Post Office network provides significant social and economic benefits and can play a key role in tackling financial exclusion and helping rural and deprived urban communities to survive and thrive;
further believes the delays in finalising the investment package for Royal Mail is undermining Royal Mail's ability to compete in the postal market following liberalisation last January threatening jobs and Royal Mail's market share;
and therefore calls on the Government to end this paralysis in decision-making at the heart of Government so that the Post Office network and Royal Mail can make the investments they need with greater certainty about a sustainable and stable commercial future.

Royal Mail and the Post Office are in crisis. If anyone should doubt that, or ask why we are holding this debate today, they need only read page 2 of today's Financial Times and last week's report from Postcomm. The report backs up the warnings that Liberal Democrat Members of Parliament have been giving for at least the past year and, unfortunately, confirms our worst fears. For those hon. Members who have not read the Financial Times today, it contains a piece headed

"Thousands more post offices face axe".

The article was written following an interview with the Secretary of State for Trade and Industry, so we believe that it is well sourced. It suggests that the Government intend to make a statement before the Christmas recess about that cull.

The Postcomm report was equally alarming. It shows that decisions by the Government, as well as their lack of decision making, have caused the current chaos. In other words, the Government have been getting it wrong and have failed subsequently to put it right. I do not think that I have ever read a report from an independent regulator that contains such stinging criticism; it is probably unprecedented. It talks about the Government's failure to deliver on tough and overdue decisions, and about the possible cutting of nearly 6,500 post offices in the rural network that are making a loss.

The Liberal Democrats' argument today is that the problem has been caused by the Government's decisions over the past few years on pension books, television licences, passports and the Driver and Vehicle Licensing Agency, and by their indecision on the social network payment, the Post Office card account and the future of Royal Mail. These are the factors that have brought this crisis to a head.

Photo of John Redwood John Redwood Conservative, Wokingham

Will the hon. Gentleman remind the House how much income the Government have withdrawn from post offices, and how many post offices have already closed? Does he not agree that a lot of this has already happened?

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

I will deal with those detailed points in a moment. The right hon. Gentleman is absolutely right; the Government have withdrawn hundreds of millions of pounds of business from post offices, which has caused many of the closures.

Photo of Bob Spink Bob Spink Conservative, Castle Point

Does the hon. Gentleman believe that there is still an opportunity for the Government to reverse their short-sighted policy to withdraw public business from post offices? Such a reversal would receive all-party support and benefit all post offices, particularly the new one that I opened in Canvey Island high street this summer.

Photo of Geraldine Smith Geraldine Smith Labour, Morecambe and Lunesdale

Does the hon. Gentleman think, as his party does, that the solution is to privatise Royal Mail, the most profitable part of the Post Office that, in effect, is a cross-subsidy that helps to keep the rural network going? Surely that is a crazy idea. Will he make clear the Liberal Democrats' intentions to privatise Royal Mail?

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

I am grateful for the hon. Lady's intervention. I shall provide detailed analysis of our policy and advocate it to the House tonight. We do envisage a partial privatisation of the Royal Mail, with 49 per cent. of the shares being sold to the private sector. Her Government, however, are privatising Royal Mail by stealth. They are under-investing in Royal Mail and are not backing it, and as a result private competitors are winning market share and undermining the Royal Mail, its employees' jobs and services to our constituents. She is therefore backing privatisation by stealth, and she ought to be aware of that.

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

No, I shall make some progress.

Until the intervention of Geraldine Smith, I sensed a consensus in the House. We tabled this motion, which we believe is pretty uncontroversial, to try to create a consensus. We omitted some of our policies that, I think, she does not like. We want the whole House to send a clear message to the Government. There is a huge campaign in this country against what the Government are doing—a groundswell of opposition to their policies. I am looking forward to the lobby, this Wednesday, with the National Federation of SubPostmasters, which will present to Ministers a petition from nearly 4 million citizens, arguing that the Government need to change tack. Hon. Members will have been in their constituencies over the summer, they will have heard the anger from sub-postmasters and sub-postmistresses, and they will want to back us tonight so that we can send a real message to the Government.

Photo of Laura Moffatt Laura Moffatt PPS (Rt Hon Alan Johnson, Secretary of State), Department for Education and Skills

Is the hon. Gentleman aware of the latest change in the network of post offices in my constituency, in the neighbourhood of Broadfield, where the post office has just been reopened by a successful businessman, Mr. Limbachia, who sees an opportunity to serve his community and is delighted to offer that service?

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

I am always delighted to welcome the reopening of a hospital, post office or school that has closed under this Government. However, the hon. Lady ought to talk to her right hon. Friend the Secretary of State for Trade and Industry, who was interviewed by the Financial Times today and is predicting thousands of closures.

Photo of Michael Weir Michael Weir Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Trade and Industry)

The hon. Gentleman has talked about the anger among sub-postmasters. Is not he also aware of the anger among the public? When he talks about reports, has he seen the report from Postwatch Scotland on the importance of rural post offices in Scotland, which shows that 67 per cent. of respondents rate the post office as either "very important" or "important". Significantly, the percentage rose substantially among the unemployed and those on low incomes. Post offices are vital to that group, and if the Government do not make decisions on funding for the future, it will be a disaster for the unemployed and those on low incomes in rural areas.

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

The hon. Gentleman is absolutely right. It is our most vulnerable constituents who are most at threat when post offices close. The Government say that they care about social inclusion and that they want to deal with financial exclusion, but, on post offices, they do exactly the reverse.

Photo of Sarah Teather Sarah Teather Shadow Secretary of State for Education

Does my hon. Friend agree that the problems only just begin when a post office closes. It is not just those using such post offices who find themselves excluded but the many others using neighbouring post offices who find that the queues become so excessive that they also have problems accessing a local service.

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

My hon. Friend is absolutely right. In my constituency, Post Office Ltd railroaded the closure of six post offices in the borough of Kingston. Queues at Surbiton post office have now lengthened, reducing the quality of service.

Photo of Susan Kramer Susan Kramer Shadow Secretary of State for International Development, International Development, Shadow Secretary of State, Liberal Democrat Spokesperson (International Development)

Is my hon. Friend aware that this is not just a rural issue? It applies very much to suburban communities. My most deprived ward, Ham, contains a large estate where many elderly people live. It now has not one sub-post office, and the nearest post office—which necessitates a mile-long walk for some 90-year-old people, because it is the only one they can get to—is very likely to close as other services, notably the provision of television licences and Post Office card accounts, are removed. That is genuine deprivation.

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

My hon. Friend is absolutely right. I think the comments that we have just heard demonstrate the anger of our constituents. Interestingly, a recent poll of sub-postmasters and sub-postmistresses by the national federation showed that 72 per cent. were no longer confident about the long-term future of their businesses. There is real anger out there in our communities.

Although we have tabled a fairly consensual motion, I cannot promise that my comments tonight will produce a consensual alternative. There are some tough decisions to be made, along with some difficult choices. There is no easy solution, whether for Royal Mail or for the post office network.

Our party has looked at the policy in detail and debated it democratically, and we have reached a tough decision. We believe that Royal Mail must be reformed if it is to compete in the liberalised market. We know that if we face up to that harsh decision, we shall be able to secure the cash to invest in the public sector post office network. That proposal will not meet with approval on all sides—it is a tough decision—but we believe that it is a serious and credible proposition, and that if Members want to save the post office network in their constituencies, it is the only option.

Photo of Anne Begg Anne Begg Labour, Aberdeen South

Nearly three years ago, when the urban regeneration programme hit Aberdeen and a number of post offices consequently closed, the then Liberal Democrat-controlled council promised to put council services into post offices so that they remained viable. To date, not a single council service has gone into a post office in Aberdeen. I wonder whether this is in fact a tough choice, or just the Liberal Democrats promising what they cannot deliver.

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

That was a good try, but I am afraid it failed. In many constituencies where local authorities have tried to work with post offices, Post Office Ltd—thanks to restrictions imposed by Royal Mail Group—has got in the way of such partnership deals. I am afraid the hon. Lady has scored an own goal against her own Government.

The post office network faces huge problems. Members throughout the House will know the history. Over the past 20 years 7,500 sub-post offices have closed; last year nearly 150 closed. Even that does not tell the whole story. Many full-time post offices have become part-time as their hours of service have been cut. That is due to years of lack of investment and lack of imagination on the part of successive Governments.

I referred to some of the bad decisions earlier. That is why we are here today, facing—if we listen to the chief executive of Post Office Ltd, Alan Cook—a potential reduction in the post office network to just 4,000 following cuts of 10,000, or—if we listen to Postcomm—a potential cut in the rural network from 8,000 to 1,500. Then there are the leaks from the Secretary of State.

No doubt the Government will say that it is nothing to do with them. They will say that it is all to do with the customers who are not using post offices any more: they are using new technology, and it is all too expensive. The Government have tried terribly hard and invested lots of money, but it is just not working, so they have to cut post offices. That will be the Government's line, and of course it is absolute tosh.

The Government have been following completely contradictory policies. They are trying to say that they want to save the post office network, while taking business away. Last year they were subsidising, through the social network payment, to the tune of £150 million. In the same year, they took business worth £168 million out of the post office network. According to Adam Crozier, five years ago 60 per cent. of the revenue of the average post office came from Government business; in two years' time, it will be down to just 10 per cent. That is the size of the cut in post office revenue. It is not the fault of the customers or of technology; it is the fault of those people over there who are making the decisions.

Photo of Chris Bryant Chris Bryant Labour, Rhondda

Building on the consensual basis that the hon. Gentleman mentioned, I was accompanied by an Assembly Member when I carried out a tour of all the post offices in my constituency last week. When we called, 25 were open. Surely we would all agree that one of the worst decisions taken in recent months was on television licences. It was a bad decision for two reasons. First, as the hon. Gentleman said, it withdraws business from post offices, but, secondly and even more importantly, it means that an awful lot of people will not get their TV licences and will have to go to court over the next few months. What does the hon. Gentleman suggest the BBC should do about that?

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

When the hon. Gentleman carries out his next tour, I hope that there are no fewer than 25 post offices open, but if he continues to support his Government I suspect that there are likely to be a lot fewer.

If the hon. Gentleman spoke to BBC managers, he would hear from them that the Government were unable to guarantee the future size of the network, so they were not able to ensure that a network would be in place for TV licence payers to use. That was one of the main reasons the BBC refused to go ahead with a contract with Post Office Ltd. Once again, it was the Government's failure that led to the problem.

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

I am not giving way, as I want to make some progress.

A number of reasons can be cited for the failings of the post office network and the lack of confidence among sub-postmasters. The first is the Post Office card account, which represents more than 10 per cent. of annual income for the average post office. For many months, uncertainty about the future has been evident, but we observed at parliamentary questions today—probably thanks to the Liberal Democrat Opposition day—that Department for Work and Pensions Ministers went further than usual to say that there might be a future for the Post Office card account. If that proves to be the case, it will be very welcome, but we want to see more details before we can believe the weasel words of Ministers. We also want to be sure that individuals are able to choose the Government account rather than be pressurised to move their business to a bank.

Photo of Jo Swinson Jo Swinson Shadow Secretary of State for Scotland, Liberal Democrat Spokesperson (Scotland)

Does my hon. Friend agree that it is not just the revenue lost to post offices by the withdrawal of the Post Office card account, as the footfall is relevant, too? In common with Chris Bryant, I toured sub-post offices in my constituency this year and some estimated that 40 per cent. of their footfall came from benefits and POCA. There is the further point that other services within the post office will also be lost if POCA is withdrawn.

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

My hon. Friend is absolutely right: that is precisely why it is so damaging for the Government to keep withdrawing all these services. It creates uncertainty. Sub-postmasters or sub-postmistresses want to invest in their businesses, but in order to do so they must know that there is a future. They want to know that the contracts will stay with them and that they will be able to secure some return on the investment, but the Government have created a climate of huge uncertainty.

Social network payments are the next issue. We know that they are due to run out in 2008, yet the Government have given no indication whether they will continue or at what level. Sub-postmasters and sub-postmistresses simply will not invest beyond 2008 because they do not know what income they will receive. It might all be to do with the spending review, or perhaps the Secretary of State has been told to find a lot of savings for the Chancellor. If so, our fears are magnified. Failing to support post offices in rural or deprived urban areas creates real problems.

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

No, I will not.

Another problem with the Government's handling of post offices is the lack of imagination. Only last year did they establish a set of pilots, looking at new services such as home delivery, mobile post offices, partnerships with pubs, local authorities, police stations, pharmacies and others, and host services with satellite post offices. All those pilots are welcome, but they have come very late. We have been arguing for more innovative approaches for a long time, but the Government have left it late without putting the investment behind the pilots to ensure that they work.

There have been other problems with the Government's thinking on post offices. A particular concern for the Liberal Democrats are the restrictions that Royal Mail Group forces on Post Office Ltd, which force restrictions on postmasters.

Photo of Robert Smith Robert Smith Liberal Democrat, West Aberdeenshire and Kincardine

On the restrictions forced on postmasters in respect of the business they can take from other postal providers, is my hon. Friend not concerned that Royal Mail, facing competition, is beginning to get its own employees to look for new business for Royal Mail? In one of its videos, it appears that it is encouraging people to look at who goes into the post office and to steer them away from the post office so that they go direct to Royal Mail. If these people are to have their hands tied behind their back by Royal Mail, it seems a complete betrayal by Royal Mail to take away the business that they can get only from Royal Mail.

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

My hon. Friend is right. The position is particularly disturbing. Since 1 January, post offices could have been working with 17 other licensed operators to bring in more letters or parcels business, but Post Office Ltd has prevented that from happening. As he suggested, it is working the other way; it is a negative because Royal Mail is trying to take that business away. Therefore, those restrictions need to be removed and we need to have freedom for our sub-post offices.

Photo of Alan Duncan Alan Duncan Shadow Secretary of State (Trade and Industry)

May I seek clarification about which measures the hon. Gentleman thinks are a solution to which problems? I am following his logic and, by and large, I agree with him. His party's policy of the part-sale of Royal Mail will address the problems of the lack of investment in Royal Mail and stand to replenish a large part of the pension fund, but does not he accept that we need to segregate that from the problems of the network? That policy is not a solution to its problems and, if his argument is to hold together today, as I think so far it is doing, we need to explore other solutions to those problems.

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

I cannot agree with the hon. Gentleman. Part of our policy is to have significant new investment in the network and to create an investment fund from the sale of 49 per cent. of the shares in Royal Mail. We believe that that will produce £2 billion that could be invested in the network. Royal Mail would then be free to borrow on the capital markets to invest in the automation that it needs. Our solution will provide money for the Post Office network and freedom to borrow on a commercial basis for the Royal Mail.

Photo of Alan Duncan Alan Duncan Shadow Secretary of State (Trade and Industry)

This is a grown-up, sensible debate, but the ability of the Royal Mail to borrow or to act like that does not necessarily help all those tiny rural or urban post offices that are privately owned and perhaps linked to a shop. Therefore, the investment that the hon. Gentleman is talking about will not necessarily benefit them one penny.

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

Of course it will because the investment can come through in terms of extra training, and extra support for business development, marketing, ICT and all the things that are needed for those private entrepreneurs. Moreover, the proposals that I have mentioned to remove restrictions will enable them to develop their business far more with mail operators. I am sure that the hon. Gentleman is aware that the mail business is the most profitable and the biggest business of the average sub-post office. Therefore, allowing that to expand is the best way to ensure the viability of the network.

The Government should have been pressing the banks to enable the Post Office network to join the Link network. If that could be accessed through every sub-post office around the country, so that every sub-post office could be used as an ATM, that would be a great way not only to end financial exclusion but to ensure the footfall that my hon. Friend Jo Swinson mentioned, so that business went into every post office. Therefore, we have made some very attractive proposals for reform and investment that we believe will deal with the problem.

Photo of Anne Begg Anne Begg Labour, Aberdeen South

The hon. Gentleman criticised the Government for taking Government work from the Post Office, which he said undermined the network. How much do the Liberal Democrats think needs to be spent, and how much are they pledging to spend, to prop up the network?

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

I mentioned the figure of £2 billion just a minute ago. I am sorry if I was not clear enough. To be precise, the £2 billion will come from the proceeds of the sale of 49 per cent. of the shares in Royal Mail.

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

I will not give way because I wish to make some progress.

The post office network has all the problems that I mentioned—the replacement of the Post Office card account, uncertainty over the social network payment, and the Government's lack of imagination—but what is the solution? The solution that the Government have come up with is to set up a Cabinet Committee chaired by the Deputy Prime Minister. That does not fill me with a great deal of confidence. When we have asked how many times the Committee has met, we have not had any answer, so I wonder whether we will hear—either in the Minister's summing-up or in his speech—whether the Committee has met, what it is considering, and what proposals it has for dealing with the problem.

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

No, I will not.

One of my problems with the Deputy Prime Minister is that he has often put forward 10-year plans, including the 10-year plan on transport and the 10-year plan on housing, and none has produced any of the things that were promised, so it does not fill me with confidence to know that the Deputy Prime Minister is now in charge of the future of the post office network.

I am delighted that, in the past year or two, Royal Mail's performance has improved, but it faces three major challenges, of which the Minister will be aware. First, there is the challenge from competition; secondly, there is the challenge posed by 20 years of under-investment; and, thirdly, there are problems caused by the pension deficit, which mean that it is competing with one arm tied behind its back.

As 17 licensed operators compete with Royal Mail, the competition is fierce and very real. Companies such as Deutsche Post, TNT Post, DHL and Business Post are taking market share from Royal Mail. At the moment, they are taking only 3 to 4 per cent., but most commentators believe that that figure may be set to explode. The 500 big business mailers alone represent 50 per cent. of Royal Mail's turnover of £6 billion, so those private sector competitors could take a big slice of the cake relatively quickly. That would seriously hit Royal Mail's finances. There are already some early signs of that, in terms of Royal Mail cutting back services. We are experiencing earlier collections and later deliveries. In some parts of the country, if people do not post their mail before 9 o'clock, it is not collected until the next day. However, their delivery does not come until 3, 4 or 5 o'clock in the afternoon, and that makes a complete mockery of next-day delivery promises. That is a cut in service.

There will be another cut in service, too, because the junk mail that Royal Mail now promises to deliver is set to increase in volume many times over. That is a real concern, and Royal Mail has gone to the ridiculous extent of punishing a postman for explaining to ordinary citizens how they can get the mailing preference service. That is a complete disgrace, but it shows the desperate measures that Royal Mail is taking because of competition. However, if we consider the lack of investment, we can see what is at the root of Royal Mail's problems.

I have to make a confession: before I came to the House, I was a management consultant, and the industry in which I consulted most of all was the postal services industry. I had the privilege of going to 40 countries and looking at their postal administrations, so I am afraid that I know an optical character reading machine and a remote video encoding unit from my elbow. The automation in Royal Mail is pretty poor compared to that of our competitors. The Germans and the Dutch, for example, can sort 95 per cent. or more of their mail by machine, but in the UK the figure is about 50 per cent. That is how far behind we are. Just imagine the impact that that has on a firm's cost structure. The estimates of how much investment is needed vary; some people say that £2 billion or more is needed, but the Government have offered less than £1 billion, so the investment crisis in the Royal Mail is very real.

On top of that, there is the pensions deficit. I agree with the Minister that there has been progress on that issue. He has allowed Royal Mail to make good its deficit over 17 years. That is a long time, and it is not the time-line given to private companies, but at least it will enable Royal Mail to make good its deficit. The Government have underwritten that by £850 million, but that still leaves Royal Mail with annual contributions of around £750 million per annum to make. That is a dead-weight cost that Royal Mail has to meet before it can make profits and invest in its business—and when it is fighting competitors, it is a real dead-weight cost.

Photo of Michael Weir Michael Weir Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Trade and Industry)

I do not disagree with much of what the hon. Gentleman has said, but I am confused. If it is his policy to privatise the mail delivery service, given the problems of competition and cost, how would a privatised Royal Mail compete while continuing to fulfil its universal service obligation, which is important to rural areas? Would that obligation not come under pressure from privatisation?

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

Let me spell it out for the hon. Gentleman. In the public sector—the Government want Royal Mail to remain in the public sector, as does the Conservative party, unless it has changed its policy recently—the Royal Mail cannot go to the private market to obtain the money required to invest for the automation that I have discussed. It relies on Treasury handouts, and the record over many decades shows that the Treasury has not given it the money it requires to invest, so it cannot compete or become efficient. Our proposal enables it to borrow on capital markets, so it can obtain the funds and thus achieve the automation that it requires. It can compete, so we will bring new life to the Royal Mail.

I am concerned that the Government, faced with those three challenges, have not done more. We are waiting with bated breath to hear when they will make an announcement about the future of Royal Mail. Royal Mail management have submitted a modest proposal to the Government, in which they suggest keeping Royal Mail in the public sector, while allowing 20 per cent. of shares to be held by employees. Management agree with us that that will give employees an incentive to perform well and improve productivity, as their future will be tied to that of Royal Mail. The Government balked at that modest proposal, and we must ask why. I think that that is to do with the Communication Workers Union, and the 213 Labour Back Benchers who signed the early-day motion saying that they should not accept the proposal —[ Interruption. ] Ministers are not prepared to make tough decisions, because they are still in hock to the unions and to their Back Benchers. The Secretary of State is not prepared to make decisions that would put Royal Mail back on its feet, and secure the investment that our post office network needs.

Our party has taken tough decisions. We have submitted proposals that work for Royal Mail and for post offices. That is the way to ensure that we revitalise the Post Office and Royal Mail. I would like to end by asking the Minister some specific questions. First, when will the Government end the uncertainty for Royal Mail and the post office network?

Photo of Alan Duncan Alan Duncan Shadow Secretary of State (Trade and Industry)

When the hon. Gentleman said that the Government's policy is determined by Members who signed the early-day motion, did he not hear, as the rest of the House did, Mr. Drew shout, "Yes"?

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

Absolutely. I am pleased that I allowed Mr. Duncan to intervene, because he has made my point for me. I hope that the Minister will tell us when the uncertainty will end, because the National Federation of Sub-Postmasters needs to know the answer when it comes to the House on Wednesday. Will he pledge to stop his colleagues in the Department for Work and Pensions undermining the Post Office card account, even before the contract is renewed? Will he pledge to stop taking Government business from the network? Will the Government stand up to the CWU, and give Royal Mail employees shares in their future? Will he give post offices freedom from the restrictive practices imposed by the Royal Mail Group? If can give us positive answers to those questions tonight, it will be a real step forward in the debate. I fear, however, that he will not do so, because although we have tabled a reasonable motion, it is clear that he will oppose it. We hope that colleagues on both sides of the House will join Liberal Democrat Members to send a message, because we believe that it is time to save our post office network and Royal Mail. The House should speak for the country, and for 4 million petitioners, and back our motion.

Photo of Jim Fitzpatrick Jim Fitzpatrick Parliamentary Under-Secretary (Employment Relations & Postal Services) 4:59 pm, 16th October 2006

I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:

"acknowledges the important role that post offices play in local communities, particularly in rural and deprived urban areas;
recognises that the business environment in which Royal Mail and the Post Office network are operating is undergoing radical change with more and more people choosing new electronic ways to communicate, pay bills and access government services;
applauds the Government's record of working closely with Royal Mail, Post Office Ltd and sub-postmasters to help them meet these challenges with an unprecedented investment of more than £2 billion made by the Government in supporting the network;
acknowledges the important role post offices can play in tackling financial exclusion while recognising that the Government must also take due account of the need to deliver services efficiently;
and acknowledges that the Government is committed to bringing forward proposals to help put Royal Mail and the Post Office network onto a sustainable footing."

As the Minister with responsibility for postal services, I am delighted to join Mr. Davey and other colleagues and participate in today's debate on the future of the post office network and of Royal Mail.

Clearly, this is post office week. We have today's debate, and on Wednesday we have the National Federation of Sub-Postmasters' rally and lobby of Parliament, together with the presentation of a petition of nearly 4 million signatures to No. 10. Of course, the week began with the publication of Postcomm's sixth annual report on the post office network, which comprehensively set the scene for many of the issues that I am sure we will cover in the course of today's debate. On Thursday, of course, we will also have Trade and Industry questions.

The future of the post office network and of Royal Mail is an issue of great relevance to every Member of this House. The hon. Member for Kingston and Surbiton has initiated the debate with some highly emotive remarks and claims, mirroring his recent press release, which referred to

"do-nothing Labour Ministers" and

"their acts of vandalism against the network".

I hope to challenge those assertions. As my hon. Friend Chris Bryant pointed out, there is certainly a contradiction between them and the hon. Gentleman's claim that he intended to introduce the debate in a consensual tone.

We need to centre the debate on such important matters in reality rather than in political point scoring, and in the proper context of the problems and challenges that we face. The hon. Gentleman claimed that the Secretary of State said in the Financial Times article that there would be thousands of closures. In fact, my right hon. Friend said that we were determined to provide certainty for the Post Office and put it on a long-term stable footing. He also said that we needed to ensure that we maintained a national network, which was not what the hon. Gentleman reported that he said.

We need to distinguish between myth and reality. This was recently given very clear focus by Sandi Brocklehurst, the sub-postmistress at Crewkerne in Somerset, writing in the Western Daily Press in August when she said:

"People think they need and want a post office but this just is not true these days. Many people now pay their bills by direct debit, do their car tax on the internet or by phone, have their benefits paid into bank accounts—these people do not use the post office, they only think they need one!"

I expect that that view is shared by many of her colleagues.

Photo of John Redwood John Redwood Conservative, Wokingham

Only this Government could decide to thin down, instead of fatten up, their asset by taking away much of the money that sustained it. Will the Minister now promise that postal workers will have an opportunity to own shares in their own business, because surely that would be the way to raise morale and provide real incentives?

Photo of Jim Fitzpatrick Jim Fitzpatrick Parliamentary Under-Secretary (Employment Relations & Postal Services)

If the right hon. Gentleman will forgive me, I will come to those issues later in my speech, when I hope to be able to satisfy him as to our general intention.

Photo of Tony Wright Tony Wright Labour, Cannock Chase

When my hon. Friend was giving his list of transactions that people do not want to do at the post office, I recalled that I have just received a reminder for my television licence, which said that I could no longer go to the post office to renew it, but I could go to a shop called "Supercigs", a discount tobacco outlet. I was puzzled by that, because as I understand it, we want to encourage people to go to post offices and dissuade people from going to tobacco shops. However, we have a policy that sends them to tobacco shops, not post offices.

Photo of Jim Fitzpatrick Jim Fitzpatrick Parliamentary Under-Secretary (Employment Relations & Postal Services)

My hon. Friend makes a fair point. The Government are making every effort to try to persuade people not to smoke. I will come to the issue of licences and the Post Office, but the decision was made on commercial grounds by the BBC and was not controlled by the Government. It was in line with the other choices that I will discuss shortly. The world is changing, and people are choosing to operate differently.

Photo of Chris Bryant Chris Bryant Labour, Rhondda

The Government are, however, directly involved in the Driver and Vehicle Licensing Agency. It is right that people should be able to get their tax disc on line—there are more insured cars on the road as a result of that successful system—but the form no longer states that they can obtain their disc at a post office. Would it not be a good idea for the Department for Transport to suggest to the DVLA that it should make it clear that tax discs are still available at post offices?

Photo of Jim Fitzpatrick Jim Fitzpatrick Parliamentary Under-Secretary (Employment Relations & Postal Services)

My hon. Friend makes a fair point. I can advise him that it was raised with me when I met the National Federation of Sub-Postmasters executive and I undertook to examine it. I am looking into the matter on the basis that people should have a choice—and do—but it is fair that all the choices should be made available to them.

Photo of Jim Fitzpatrick Jim Fitzpatrick Parliamentary Under-Secretary (Employment Relations & Postal Services)

If the hon. Gentleman will allow me, I should like to make some headway. Several hon. and right hon. Members want to speak so I do not want to hog the Dispatch Box for too long, although I shall not avoid interventions, because the debate is important.

I want to spend a short time, however, reminding the House about the Government's record on the network to date. In total since 1999, the Government have committed a funding package of well over £2 billion for the network. The hon. Member for Kingston and Surbiton might not agree with our policies, but I suggest that it stretches credulity to claim that they are "acts of vandalism" against the network or evidence of a "do-nothing" policy.

Our funding package for the network includes the provision of some £750 million over the five years to 2008 to maintain rural post offices—£150 million a year. That funding, backed up by the requirement for Post Office Ltd to prevent all avoidable rural post office closures, has helped to keep open thousands of offices that might otherwise have closed. The policy of no avoidable closures was extended earlier this year and will remain in place while the future strategy for the network is being finalised.

We recognise, however, that not all the initiatives undertaken—whether by the Government or by Post Office Ltd—have been as successful as we would wish. However, whether we like it or not, the truth is that post offices are not being used as once they were, and the trend is accelerating. The business is going through a sustained period of change, and needs to adapt to customers' changes in lifestyle and habits; for example, 75 per cent. of people have their pensions and benefits paid directly into a bank account, compared with the 23 per cent. who choose a Post Office card account.

Photo of Edward Davey Edward Davey Shadow Secretary of State (Trade and Industry), Liberal Democrat Spokesperson (Trade and Industry)

Can the Minister answer this simple question? Does he think that the reduced footfall in post offices has anything to do with the Government?

Photo of Jim Fitzpatrick Jim Fitzpatrick Parliamentary Under-Secretary (Employment Relations & Postal Services)

The reduced footfall in post offices has a variety of causes. For example, I was trying to make a point about the Post Office card account: 8.5 million of the 10.5 million pensioners have their pension paid into a bank account, while only 2 million have opted for payment through POCA. As a result of the dramatic advances in technology in recent years, we have seen unprecedented changes in the communications and banking industries. As we all know, for many people text messaging, the internet and e-mail have become part of their everyday lives, virtually replacing traditional written communications. People, young and old alike, increasingly use phone or internet banking, cash-point machines or direct debits to pay their bills.

R

One of the main reasons that so few people use the POCA is that at its inception, Government offices went out of their way to encourage applicants not to take up that option. It was made much simpler to have money paid into a High Street Bank account. As a post-master at the time I was told many times of this by my customers who were keen to support their Post Office and held out. Many others gave way to the pressure (less hassle!). It would...

Submitted by Roy Cottee Continue reading

Photo of Geraldine Smith Geraldine Smith Labour, Morecambe and Lunesdale

I agree that people's habits are changing and that they are having their pensions paid into their bank accounts, and that trend will continue, but the Post Office card account is causing much concern. I received a petition with 1,600 signatures from the sub-postmistress at Bolton-le-Sands in my constituency, so will my hon. Friend look carefully at what can be done to protect the Post Office card account?

Photo of Jim Fitzpatrick Jim Fitzpatrick Parliamentary Under-Secretary (Employment Relations & Postal Services)

With me on the Treasury Bench is the Under-Secretary of State for Work and Pensions, my hon. Friend Mr. Plaskitt, and although I shall talk about POCA later, I can assure my hon. Friend Geraldine Smith that he is working extremely hard to make sure that there will be a successor to POCA and it will allow people to draw benefits from a post office if that is their choice.

m

Postmasters are fearful of this alternative account, as we do not know if it will find favour with our customers, and we do not know if it will pay us the same transaction fees as the POCA currently pays us, it is rumoured within Postmaster circles that we may not be paid at all for handling this new account And we are looking for an assurance from the DWP that they will not migrate...

Submitted by mark baker Continue reading (and 1 more annotation)

Photo of Gerald Kaufman Gerald Kaufman Labour, Manchester, Gorton

With regard to delivery of written communications, what advice should the Post Office give my constituents in the Gorton, South ward, where a by-election is to take place on Thursday? The Liberal Democrat candidate is on the register at an address outside the ward, but his nomination form has the address of the home of the councillor who has died. How is the Post Office to deliver messages to that candidate—assuming, of course, that anybody wanted to get in touch with him?

Photo of Jim Fitzpatrick Jim Fitzpatrick Parliamentary Under-Secretary (Employment Relations & Postal Services)

Apart from the obvious and predictable message to the constituents to vote Labour, let me say that I cannot believe that the Liberal Democrats are giving two different messages to constituents. Surely that is not usually the case!

Several hon. Members:

rose—

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. Can we now get back to discussing the motion on the Order Paper?

Photo of Jim Fitzpatrick Jim Fitzpatrick Parliamentary Under-Secretary (Employment Relations & Postal Services)

I am very grateful for your protection, Madam Deputy Speaker, and I shall try to make some progress. I shall give way to my hon. Friends and other colleagues later, if I may.

Cumulatively, the trends that I have mentioned are having a pronounced effect on the levels of demand for social and personal mail services, for bill payments and for licensing transactions at post offices. Motor vehicle licensing is going through a period of rapid change. Last year there were 860,000 renewals online, and this year online renewals are running at an annual rate of about 3 million. There can be no turning back the clock—although that is not to underplay the fact that Royal Mail has moved from losing £1 million a day a few years ago to profitability under the leadership of Mr. Allan Leighton and his board. That has been achieved through the hard work and dedication of its work force throughout the country.

We all have to accept, and work with, the fact that changing lifestyles and modern technology have clearly changed the market in which sub-post offices operate. It is too often forgotten that the post office network operates in a commercial marketplace. The services that the network provides, including lottery tickets, foreign currency, telephony, bill payments and financial services, are in direct competition with other retailers and providers. There have, of course, also been some very notable successes in certain areas, such as foreign currency: the Post Office is now the UK's number one provider of foreign exchange services, with 12 million transactions last year. It is also the largest independent provider of travel insurance, with 1 million policies sold annually.

R

Unfortunately the new financial services provided by Post Offices largely favour urban offices over rural which cannot carry the staff required to spend time to talk properly about these things to customers. In the main there is only time to bring new services to the notice of people not to discuss the merits (sell). How many times can you tell a regular the same thing? After a short time it all becomes boring and they will go somewhere else like PayPoint?

Submitted by Roy Cottee

Photo of Michael Weir Michael Weir Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Trade and Industry)

I thank the Minister for giving way. He has given us a great list of things that post offices do, but does he not accept that the real problem for post offices began with the removal of benefits payments from them? Does he not also accept that although what he says about automated teller machines is all very well, in many rural areas people cannot get access to an ATM, or when they can, they have to pay to use it? If someone is existing on benefits or pensions, that can mean that a significant proportion of their weekly income is paid just to get access to their money. Does the Minister think that that is fair? Does he not accept that as well as operating in a commercial environment, sub-post offices have a social function, and that that must be recognised?

Photo of Jim Fitzpatrick Jim Fitzpatrick Parliamentary Under-Secretary (Employment Relations & Postal Services)

I totally accept that sub-post offices have a social function to perform, and I will come on to that subject later in my speech. However, I do not accept the entirety of the premise that the hon. Gentleman puts forward; for example, I know that Post Office Ltd will install 1,500 free ATMs in due course.

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If the Minister would bring pressure to bear on the Banks to allow the Post Office to join the Link Network, then he would have 14.500 free ATM machines, in the guise of Post Offices using...

Submitted by mark baker Continue reading

Photo of Kevan Jones Kevan Jones Labour, North Durham

I thank the Minister for giving way. Does he agree that not only is the way in which people access services changing, but in rural areas the way in which post offices deliver services is changing? There are two excellent examples from my constituency: the post office in Sacriston closed, and there is now a counter in the local mini mart, and in Craghead, another rural village in my constituency, the post office counter is now located in the local village hall, with support from central Government. Does the Minister agree that it is important to look at possible alternative ways of delivering the same service, which people actually want—perhaps not as extensively as previously, but so that they can get access to that service?

Photo of Jim Fitzpatrick Jim Fitzpatrick Parliamentary Under-Secretary (Employment Relations & Postal Services)

My hon. Friend makes a very important point about how Post Office Ltd is trying to develop services, and some of its successes in meeting that aim. I shall come to that later.

Photo of Mark Todd Mark Todd Labour, South Derbyshire

Basic transactions remain among the key services. Does the Minister not share my concern that Post Office Ltd seems unable to tender appropriately to retain basic transaction services such as TV licensing? In my area it has lost the water business as well. Those services, if retained, would enable its sub-post office network to maintain footfall. If that does not happen, Post Office Ltd should at least allow sub-post offices to engage with PayPoint to offer that same service. At present, it will not even do that.

Photo of Jim Fitzpatrick Jim Fitzpatrick Parliamentary Under-Secretary (Employment Relations & Postal Services)

My hon. Friend makes an interesting point, and I will respond to some of the issues that he raises shortly.

The network's strength is its unrivalled size, but the massive cost of supporting it also leaves it vulnerable to leaner organisations. Although the number of post offices has been reducing for decades, there are still 14,300 branches, which is almost more post offices than all the major banks and building societies combined. By way of contrast, Tesco, the most successful retailer in the country, has a total UK-wide network of just under 1,800 outlets—less than a quarter the size of the network that Post Office Ltd supports in rural areas alone. As the Postcomm report recognises, a large part of the network is making a loss and is being supported by the social network payment—it is worth £750 million over the five years to 2008—for uncommercial rural offices.

Maintaining a network of such size is hugely expensive and the cost is rising: Post Office Ltd expects to lose £4 million every week during the current financial year. The reality is that too many offices are chasing too few customers to be viable. The smallest 20 per cent. of rural offices—some 1,600 branches—serve fewer than 100 customers a week and generate an average loss of almost £8 every time one of those customers does business such as buying a stamp. The 800 smallest offices, which have an average of 16 customers a week, lose £17 on each transaction. Over one third of business in the rural network is done in the largest 10 per cent. of branches.

There are some 6,500 rural social branches, which lose around £150 million a year. While these branches represent 45 per cent. of the network in total, they account for less than 7 per cent. of overall income. Having too many branches with too few customers is clearly the root of the problem across much of the network, so we need to strike a balance between meeting and funding the reasonable needs of people who rely on the post office, and making prudent use of taxpayers' funds, on which there are competing calls.

R

It would be interesting to know what the figures were before the Pension & Allowance payments were removed. Each basic transaction removed from the Post Office Counter will exacerbate the problem of cost per customer.

Submitted by Roy Cottee

Photo of Owen Paterson Owen Paterson Shadow Minister (Environment, Food and Rural Affairs)

Adam Crozier, the chief executive, told the all-party group on sub-post offices that he needed 4,000 offices to run a physical mail network. Given what the Minister has just said—that there are 14,300 branches—how big does he predict that the network will be in five years' and 10 years' time?

Photo of Jim Fitzpatrick Jim Fitzpatrick Parliamentary Under-Secretary (Employment Relations & Postal Services)

I think that the hon. Gentleman and I had this discussion when I appeared before the Trade and Industry Select Committee. He is not going to tempt me —[Interruption.] Well, if we did not, other colleagues did, and I am afraid that I am not going to be tempted into a numbers game, because we have yet to arrive at such conclusions.

Photo of Michael Connarty Michael Connarty Labour, Linlithgow and East Falkirk

My hon. Friend is rattling out statistics, and sadly, he seems to be imitating the Post Office's new attitude to its customers: unfeeling, lacking in compassion and fixated only on numbers. When the village of Standburn, in my constituency, lost its post office, it then lost its one shop. The people in that small community now have to make a four to five-mile round trip. There are no buses running directly from the village to other local communities, and they have been left stranded. Are the Government not prepared to recognise that isolated communities must be provided with some form of social service through a local post office? Will they not guarantee that where there are no other shops, post offices will be funded, and not closed?

Photo of Jim Fitzpatrick Jim Fitzpatrick Parliamentary Under-Secretary (Employment Relations & Postal Services)

My hon. Friend takes me to task for being insensitive and for rattling through statistics. I apologise if I am offending anybody, but I have to get on the record the counter to the Liberal Democrats' challenge by explaining the nature of the problem that we face.

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

The Minister's response to the question from my hon. Friend Mr. Paterson was understandable, but given that the rural funding mechanism is not going to last beyond March 2008 on current plans, and that the Post Office card account is due to go in 2010, does the Minister not recognise that the consequence of what he has not said is that every small rural sub-post office in this country faces the threat of closure within the next five years?

Photo of Jim Fitzpatrick Jim Fitzpatrick Parliamentary Under-Secretary (Employment Relations & Postal Services)

What I recognise, and what I and am saying—I shall try to deal with this point when I conclude—is that there is too much uncertainty out there, which has been the case for some time. However, we are trying to address that uncertainty and we are coming to conclusions. I shall explain in detail how we are arriving at those conclusions, but I should point out that in the past 12 months there have been the fewest closures since 1998, and fewer resignations than at any point in the past 12 years. I suspect that that is because sub-postmasters know that we are reaching a conclusion, and they want to see what that is.

Several hon. Members:

rose—

Photo of Jim Fitzpatrick Jim Fitzpatrick Parliamentary Under-Secretary (Employment Relations & Postal Services)

If hon. Members will allow me, I wish to make considerable progress now.

I do not want Liberal Democrat researchers to head for their computers to start drafting press releases about 6,500 closures. That is not what I am saying; it is not the message that I am trying to get across. The key challenge for the future is how best to address the needs of offices both in rural areas and in deprived urban areas where post offices play a key social role. If the network is to survive, it needs to meet the present and future needs of its customers efficiently and effectively so as to establish a long-term sustainable foundation. Both the Government and the Post Office are looking closely at service provision in the context of utilisation levels.

In the past year, Post Office Ltd has been piloting new service delivery channels with particular focus on the loss-making rural segment of the network. The pilot trials are based on a core and outreach principle and aim to provide delivery of value-for-money rural post office services that can be tailored to different situations, as my hon. Friend Mr. Jones described. In the trials, a core post office provides services to a number of outreach sites using one or more of the four outreach options being tested. In all the pilots, service hours have been set at a level much more commensurate with the level of business generated in that community, to eliminate the wastefulness of long opening hours with little or no custom. However, in many cases, although hours are reduced the range of services available is extended, and many customers in very rural areas have local access to motor vehicle licensing and passport check and send services for the first time. Encouragingly, once people get used to the new means of service delivery, levels of satisfaction with the pilots are, at 93 per cent., very high.

Post Office Ltd has selected the pilot sites to achieve regional and national coverage and broad representation of community and service profiles, while ensuring that they are of a size that can handle the additional work. The pilot sites are also located within a spread of communities covering a variety of sizes and seasonal or holiday destinations, and of varying degrees of remoteness.

We are of course aware that there has been a prolonged period of uncertainty about the future direction of Government policy towards the network. In recent weeks, I have met Colin Baker and members of the executive of the National Federation of Sub-Postmasters. Mr. Baker will be having further discussions with my right hon. Friend the Secretary of State for Trade and Industry later this week, as well as visiting No. 10 with his petition. In addition, and more importantly, a dedicated Cabinet sub-Committee, MISC 33, which was mentioned earlier, has been established specifically to consider the future of the post office network. Since the meeting in July there has been a series of interdepartmental discussions, and a further meeting of the Committee is expected to take place shortly.

Hon. Members will no doubt be aware of the wide range of research and reports published in recent weeks and months by Postcomm, Postwatch, the Commission for Rural Communities, the National Federation of Sub-Postmasters and others. The findings, conclusions and recommendations from that extensive range of work are being taken into account alongside our own analysis and assessment work in informing our thinking on forward strategy. There is an ongoing dialogue and we are not yet in a position where we can say that we have the answers, but people can rest assured that we are listening, and that we shall take account of their concerns in reaching our decisions shortly.

We recognise that we need to take some tough decisions. Because they will be tough, we have to be as sure as we can be that they are right ones, but I want the House to be absolutely clear that the Government's forward strategy will continue to support the network to ensure that post office services will be maintained in rural or vulnerable communities, where they fulfil a key social and economic role and help to combat financial and social exclusion. We shall also seek to ensure that services are delivered as efficiently as possible and, where appropriate, utilise new and more cost-effective ways of providing them.

Photo of Russell Brown Russell Brown PPS (Rt Hon Douglas Alexander, Secretary of State), Scotland Office, PPS (Rt Hon Douglas Alexander, Secretary of State), Department for Transport

I had a rural postal pilot operating in my area, of which I await the outcome. My hon. Friend the Minister mentioned the £2 billion investment made by the Government. Unfortunately, the Liberal Democrat spokesperson did not give enough information in respect of part-privatisation, but strangely, he quoted a similar figure of £2 billion that would be put in to prop up loss-leading sub-post offices. How long does my hon. Friend think that money would last? For ever?

Photo of Jim Fitzpatrick Jim Fitzpatrick Parliamentary Under-Secretary (Employment Relations & Postal Services)

My hon. Friend effectively makes the point that £2 billion does not buy an awful lot in modern business. He equally effectively makes the point that once the money is spent, it is no longer available to support the network, which in five, six or seven years' time, would be confronting the same problems that we have today.

We have heard again today the concerns about the Post Office card account, but we must recognise that even before the Department for Work and Pensions' decision to make payment into account the normal way for people to receive their entitlement, almost half of recipients had already made their own choice to have their pension or benefit paid into a bank account.

The Post Office card account is one of 25 different accounts that can be used to access benefit and pension money over the post office counter. Every bank, and the Nationwide building society, has at least a basic bank account that can be accessed in any post office. Some 70 per cent. of Post Office card account customers already have a bank account, and 20 million people could access benefits at a post office. However, only 10 per cent. of those people do so.

The Post Office card account contract runs until 2010, and its successor is still being decided. As Alan Cook, the managing director of Post Office Ltd, said of the Post Office card account at the Treasury Select Committee inquiry into financial inclusion on 9 May 2006:

"You cannot do much with it at all, you go to a post office, you take the cash out. If you take too much out by mistake you cannot put any back in. It literally is an encashment vehicle. I think we can produce a card account that has more capability, which would enable you to access cash in different ways and pay bills. I believe that would be a big step forward for current customers that we regard as socially excluded who do not wish to make, for whatever reason, the bigger step towards taking out a current account. We could produce a successor vehicle."

Photo of Robert Smith Robert Smith Liberal Democrat, West Aberdeenshire and Kincardine

Does the Minister recognise that there are people who like to budget through the safe and simple way that the Post Office card account operates? Will he give an assurance that such people will not face charges if they go overdrawn accidentally?

Photo of Jim Fitzpatrick Jim Fitzpatrick Parliamentary Under-Secretary (Employment Relations & Postal Services)

I apologise to the hon. Gentleman, but I shall respond to his point about customers going overdrawn later. I can assure him that we are in the process of devising a successor to the Post Office card account that will allow individuals to access their benefits at a post office.

Accordingly, Post Office Ltd is working on new products with significantly greater flexibility than the Post Office card account that will ensure that customers continue to have a range of choices in how they access their money over post office counters. Post Office Ltd recognises that there is an opportunity to provide simple good-value options for customers. It has already introduced one new savings account and is developing other savings and banking products that will be more suitable for many of its customers than the current Post Office card account.

R

Why is it neccessary to introduce a new product? Cannot the existing product be upgraded as required by the customer?

Submitted by Roy Cottee

Photo of Henry Bellingham Henry Bellingham Opposition Whip (Commons)

The Minister kindly wrote to me the other day, and it seems to me that the Post Office is taking a few steps forward, but large steps backwards, including with regard to the point raised by Dr. Wright on the BBC licence fee. The Minister disavowed any responsibility for that, but what discussions did the Government have with the BBC about a vital matter, the effect of which has been devastating for post offices?

Photo of Jim Fitzpatrick Jim Fitzpatrick Parliamentary Under-Secretary (Employment Relations & Postal Services)

As I think I said before, that was a decision for the BBC, based on its need to protect the licence fee payer and get value for money in respect of the renewal of licences. It was not a matter for the Government to intervene in.

There will also be a new Government-funded product for those who, for particular reasons, are unable to operate any but the most basic form of account. If Post Office card account customers use a bank account or a new Post Office product at the post office instead, Post Office Ltd will still receive a payment. Exactly what accounts will be available after the card account contract ends is not yet settled, but it remains our intention to provide access to benefits in cash at the post office for those who want it.

In addition to benefit payment issues, the future of the Post Office is clearly a significant cross-cutting issue for the Government, with a number of different Departments delivering services through the network. It was, of course, disappointing that the Post Office failed to retain the contract for over-the-counter sales of television licences, but the BBC had a clear duty to act in the interests of licence fee payers and to ensure value for money for the public. It rightly put the process out to competitive tender, and Post Office Ltd was undercut by a significant margin.

G

This should have been a tender under European Procurement Directive Regulations, in which case, what were the qualification criteria?

Paypoint, the successful tenderer, cannot provide every service that the Post Office can, i.e. new licenses cannot be issued at Paypoint outlets.

There are also already a number of Paypoint outlets who either refuse (at busy times) or charge to provide this service, because the outlets make so little from Paypoint

Submitted by Gary Jackson

Photo of Owen Paterson Owen Paterson Shadow Minister (Environment, Food and Rural Affairs)

I am most grateful to the Minister for giving way a second time. On the point about delivery, what criteria do the Government apply to the quality of the service offered? I had a letter this morning from Mark Thompson, the director-general of the BBC, who states:

"I do appreciate however, that in some circumstances, licence fee payers will find it more difficult to visit a PayPoint outlet than they would a Post Office."

He freely admits that there will be an inferior service for large numbers of people in isolated areas.

Photo of Jim Fitzpatrick Jim Fitzpatrick Parliamentary Under-Secretary (Employment Relations & Postal Services)

If the hon. Gentleman will forgive me, I am obviously not privy to that correspondence, but the decision was a matter for the BBC, and one would expect that it would have examined the contract in all its aspects before placing it with whichever contractor won the contract, which I believe was PayPoint.

The Government, together with the Post Office, are urgently looking at strengthening the competitive position of the Post Office in ways that remain compatible with its social obligations. What people must recognise is that the huge costs associated with supplying cash, IT, marketing and training to such a large bricks-and-mortar network make it increasingly difficult for Post Office Ltd to compete commercially and effectively for Government and other business when faced with lower-cost competitors. We continue to look for ways in which we can use the network, but it is the duty of a responsible Government to provide services in a way that gives the public a choice of how to access them, and offers value for money.

In closing on the subject of Post Office Ltd, my key message to the House is that the Government recognise the scale of the challenges facing the network. They recognise the important social and economic role that post offices play, particularly in rural and deprived urban communities, and they recognise that where post offices playing that role can never become commercially viable, there will be a continued need for public funding to ensure the provision of Post Office services. We are listening to, and understand, the concerns of sub-postmasters and others.

For the Royal Mail the Government's ambition, as set out in our manifesto, is to see a publicly owned Royal Mail fully restored to good health, providing customers with excellent services and its employees with rewarding employment. Only a few years ago, as I mentioned earlier, the Royal Mail had annual operating losses of £318 million and the quality of service was poor. The Government put in new management and made available more than £1 billion of finance facilities to help turn the company around. In 2005-06 Royal Mail, as a group, had operating profits of £355 million. The quality of service had been improved, with 94.1 per cent. of first class post being delivered the next day and 10 of its 15 licensed targets being met. Quality of services remains the company's top priority.

That could not have been achieved without a willing, able and dedicated work force. It is right that employees should be rewarded for their part in that turnaround. They received more than £1,000 each following the successful completion of the renewal plan in 2005 and more than £400 this year. Working conditions for employees have also been improved during this period, with the introduction of a five-day working week and many sorting offices being provided with IT equipment to provide remote learning opportunities for staff. The company's range of policies and programmes have been redesigned to help and empower female employees, and it has been recognised as among the top 50 places where women want to work.

Royal Mail still has several challenges to face. The postal services market has been fully liberalised since 1 January 2006. Royal Mail has had to become more efficient to enable it to compete in such a market. One of its main rivals is already piloting end-to-end services. Added to that, Royal Mail has had to tackle its pension fund deficit, which stood at £5.6 billion at the end of March 2006.

Photo of David Drew David Drew Labour, Stroud

As someone who was a member of the Committee that considered the Postal Services Act 2000, may I ask whether the Minister accepts that one of our arguments during those proceedings was about the relative unfairness of the Royal Mail alone having to meet the cost of the universal service obligation? Other companies that come into the marketplace should also be required to meet the obligation, especially if they intend to offer a national service. Are the Government examining that matter?

Photo of Jim Fitzpatrick Jim Fitzpatrick Parliamentary Under-Secretary (Employment Relations & Postal Services)

My hon. Friend makes a good point and speaks with his experience of that Committee. As he is probably aware, a live debate about that matter is going on in the industry.

Royal Mail has developed a business strategy that will transform the business over the next five years. It involves the introduction and deployment of new sorting equipment and more efficient ways of working, and the rationalisation of the mail pipeline. That will need investment, and the Government are prepared to put in place the finance required to achieve that transformation. The Secretary of State set out the proposed finance framework that was agreed in principle with Royal Mail in his written statement to the House on 18 May. The measures in the framework allow the company to stabilise the pension deficit and give it the funds that it needs to transform the business.

The detail of the finance framework has not yet been finalised. The documentation is being drawn up, but, most importantly, the company and the Government need to agree on how the work force should be incentivised to deliver the transformation. The Royal Mail board has made it clear that it strongly believes that an employee share scheme is the best way to do that, and has submitted a proposal. The Government are prepared to consider options for incentivising employees in Royal Mail, including an employee share scheme in the context of a publicly owned business, under which shares would be held in a trust for the benefit of employees, and could not be transferred to non-employees.

The motion states that the delay in finalising the finance framework is damaging Royal Mail. In reply, I would say to Liberal Democrat Members that although the finance framework is not yet in place, the company has been preparing for the implementation of its strategy and has made other operational changes to improve its efficiency. It has not been in a state of paralysis. The Government are actively considering Royal Mail's proposals, but will not be pushed into making decisions without a thorough examination of the proposals that have been put to us. I understand that that is called due diligence in the business world. It would not be right for the Government, who are entrusted with looking after the taxpayers' shareholding in Royal Mail, not to carry out proper due diligence before making an informed decision.

The Government strongly believe that Royal Mail can compete in a fully liberalised market and meet its obligations to provide a universal postal service. A successful Royal Mail is good for the shareholder, the management, the employees, the taxpayer and the UK as a whole.

In both the post office network and Royal Mail, the endeavours of both the Government and the businesses will ultimately depend for their success, as ever, on the skills, dedication and sheer hard work of sub-postmasters and employees, which we often tend to take for granted, but which should never be underestimated or overlooked. As my right hon. Friend the Secretary of State has made clear, we are determined to give the Post Office the certainty that it needs by putting the network on a long-term stable footing. We are equally determined to continue to help Royal Mail on its way forward. I commend the amendment to the House.

Photo of Alan Duncan Alan Duncan Shadow Secretary of State (Trade and Industry) 5:39 pm, 16th October 2006

This is an important debate and it would be good if we could find some cross-party agreement. Every single Member of Parliament has a post office in their constituency—at least at the moment. The Post Office is a great national resource, but it is approaching a serious crunch point. Its long-term future will probably be decided in the next three years. As a country, we have to decide whether the network is something that we want to let wither and die or something that we will value and support. Our post offices already offer a great range of services, ranging from stamps to foreign currency and from insurance to passport services.

Photo of Robert Smith Robert Smith Liberal Democrat, West Aberdeenshire and Kincardine

The hon. Gentleman made an important point about the choice between allowing the network to wither and die or making an investment to sustain it for social reasons. Must we not get across to the Government the message that the sooner that decision is made, the less expensive it will be? To help the network recover from damage through neglect will be far more difficult than to intervene timeously.

Photo of Alan Duncan Alan Duncan Shadow Secretary of State (Trade and Industry)

I thoroughly agree with the hon. Gentleman. In a way, that is what I shall argue, and it is why we will join his party in the Lobby tonight in support of the motion.

Photo of Alan Duncan Alan Duncan Shadow Secretary of State (Trade and Industry)

Everything is a surprise to the hon. Gentleman.

As Adam Crozier has said, Royal Mail could fulfil its legal obligations with just 4,000 branches. When the Labour party came to office, there were almost 20,000 branches, but despite repeated manifesto pledges to keep post offices open, there are now only about 14,000. Under the Labour Government, a quarter of the network has disappeared, and the cuts fall hardest on the most vulnerable in our society.

Of course, the reason that post offices are closing is that many are losing money. Despite the subsidy that the Government hand to Royal Mail each year, the network still loses over £100 million a year. The majority of rural post offices have a very small customer base—1,000 of them have fewer than 50 customers per week. Much of the change from profit to loss in recent years is due, as we have been discussing today, to declining income from transactions that relate directly to Government.

Post offices used to be the only place that a range of services could be accessed, but times have changed and they are changing fast. People now pay their bills online, they have their benefits paid directly into a bank account, TV licences are no longer available from a post office, and people can even print stamps to put directly on the items that they want to post. These developments cannot be reversed. What is missing from the debate is any clear Government strategy for the role that our post offices should fulfil, because the Government do not appear to have one. That is why two post offices have closed every working day under this Government.

One of the things that is keeping post offices open is the Post Office card account. POCA is a very simple form of account, into which only benefit payments can be made. Over 4 million people use such accounts and the average post office branch has 355 customers a week collecting their benefits through the scheme. The Government's decision to abolish it is one of the greatest threats to the network that remains. Post Office card account transactions are responsible for 10 per cent. of a sub-postmaster's net pay. The National Federation of Sub-Postmasters has said it believes that this decision

"will close thousands of post offices".

On Wednesday, as we all know, they will deliver a petition signed by more than 3 million people calling for the Post Office card account to be saved.

Even before the card is officially withdrawn, the Government have been trying to encourage benefit recipients to move from claiming their benefits in person at their local post office, for which the branch receives a payment, to having the benefit paid directly into their bank account. It is clear that the Government's decision to abolish the account poses a major threat not just to rural post offices, but to urban ones, which in many cases matter just as much. To make matters worse, the Government have not clarified what they intend to do to ensure that benefit recipients continue to receive a decent service at their local post office. If that is confusing for elderly benefit recipients, they should look at the economics of the POCA.

Photo of Michael Weir Michael Weir Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Trade and Industry)

Does the hon. Gentleman accept that the situation is worse than that? In many rural areas the banks moved out many years ago and there is no alternative to a post office, so when people no longer have access to POCA or a post office, they will end up paying more of their money to get their own money out of ATMs, if they exist, or to go into the local town by public transport, if that exists, to get their money.

Photo of Alan Duncan Alan Duncan Shadow Secretary of State (Trade and Industry)

Yes, there is a problem of rural isolation all over the country—in Scotland, and even to some extent in my own constituency. Essentially, people who do not have a car are stranded. Some might say that people have to go to shop for food, and if they can go to Sainsbury's they can find their way to a post office. However, that is not always true for the elderly at the time that they need to go to get their money. There are growing problems of rural deprivation. The modern world is leaving in a state of isolation a lot of people who cannot go as fast and as actively as many of us.

The Government claim that it costs £1 to pay into a POCA and only a penny to pay into a bank account, but Ministers have repeatedly refused to answer questions about the financial arrangements behind the scheme, so the real costs of the POCA remain unclear. The card account is hugely important to people who do not have bank accounts and at least 1 million of our most vulnerable people cannot get a bank account. They may have been in prison or do not have the necessary credit rating—there are many reasons. Such people are heavily, if not entirely, dependent on the POCA. Furthermore, the account is a vital source of revenue for post offices. If the Government choose to replace it only with a limited, targeted scheme, that may help those without a bank account. However, the financial cost to post offices will still be great. As Sir Robert Smith said, this is an urgent matter and decisions need to be taken now. If such a process is already in train by the time that we hope to be in government, the danger is that there will be nothing left for us to reverse. The solution is not to abolish the account—that is why we have been calling on the Government urgently to review their decision.

The Government have created this famous Cabinet committee chaired by the Deputy Prime Minister to look into the post office network, but despite the importance of the issue to local communities, it has not published any recommendations, and it was only this afternoon that we learned that it has met—once. Perhaps doing so on the croquet lawn does not really count, but we shall see. I can only hope, therefore, that the Government are taking the issue seriously and will accept that they have not done enough to protect the future of the post office network.

The Liberal Democrats have a policy document, but it does not mention the Post Office card account. In fact, all they have is a plan to part-privatise the Royal Mail, which is understandable, albeit that one of their own spokesmen described it as

"back of a fag packet stuff".

To be fair, it is more than that, but their proposal is a short-term answer to a long-term problem. It is a one-off injection of money for perfectly logical causes such as the pension scheme and investment in the sorting system, but it does not—despite the protestations of Mr. Davey—protect the long-term needs of the post office network.

We need a new direction—a new strategy to protect much-needed post offices. Here, at least, we have a lot of overlap and agreement between the Opposition parties. The solution has to be to reinvigorate the Post Office. We must give it new life by giving it new business. We must secure its future and that of individual post office branches by letting them open up to new markets, and new customers, with new products.

Photo of Henry Bellingham Henry Bellingham Opposition Whip (Commons)

My hon. Friend is making an excellent speech. Does he agree that it is staggering that an organisation that handles £90 billion in cash through its tills every year is in all this trouble? Surely the Government have to accept responsibility for not doing more to support it.

Photo of Alan Duncan Alan Duncan Shadow Secretary of State (Trade and Industry)

That is the case that I am trying to outline. Indeed, it is why we have been calling on the Government to rewrite sub-postmasters' contracts to allow them to act as agents for other businesses, including private mail services. Just as many pubs that were tied to one brewery are now free houses, so post offices should be released from their ties and made able to offer a broader range of services. The post office network plays an essential role in combating financial exclusion. If that role is to be preserved, the Government need to take urgent steps to give sub-post offices freedom to gain the new business that they so desperately need.

Conservative Members are prepared to give the business people who run our sub-post offices a chance and a future. We want to give them a framework in which they can develop their businesses and make profits where they are currently constrained and forced into loss. Unlike Labour, we will not limit sub-postmasters. We will give them the tools that they need to ensure that the post office network can thrive and continue to fulfil the important role that it plays in our local communities.

Photo of Kate Hoey Kate Hoey Labour, Vauxhall 5:50 pm, 16th October 2006

I welcome the Liberal Democrats' choice of debate for today. Some of us have been urging a debate in Government time for some time. We now have a debate in the main Chamber and that is good. The timing is especially appropriate given the huge lobby on Wednesday by the National Federation of Sub-Postmasters. It will not only take place in the name of the National Federation of Sub-Postmasters, but is supported by Citizens Advice, the National Pensioners Convention, the National Federation of Women's Institutes, Postwatch, Age Concern, Help the Aged and many people who will find their way to Westminster on Wednesday to tell us, as Members of Parliament, what they feel, especially about the Post Office card account.

The Under-Secretary of State for Trade and Industry, my hon. Friend Jim Fitzpatrick took some criticism. However, I believe that he genuinely has the interests of all those who use the Post Office card account at heart. He is doing his best within a machinery, which, as any of us who has been in government knows, cannot always do exactly what one would like. He has done his best and he has spoken to the all-party group on sub-post offices. However, I hope that we will get some definitive answers. I blame the Department for Work and Pensions for much of the mess because it devised the method of changing the way in which benefits were paid. The Minister who introduced the change left the Department when it was being implemented and is now in a different guise.

For me, the main issues are choice and the valuable service that the Post Office provides throughout the country. I shall not repeat the figures for the numbers of rural and urban post offices that are closing. Every closure creates a huge hole in the community that the post office serves and the provision of social benefits there. We want to find ways in which to prevent that.

I genuinely cannot understand why the Government allowed the BBC to get away with what it did. I pay my licence fee but I share some of the problems of Malcolm Bruce—I am sorry that he has left—with it. The BBC's behaviour, some of the programmes that it broadcasts and the way in which it has downgraded certain matters often makes me wonder why we have to pay a licence fee. The Government should have been much tougher with the BBC and made it clear that the criteria for the licence fee include its public service ethos. It should have been forced to give the people the choice of using the Post Office service.

Photo of Kate Hoey Kate Hoey Labour, Vauxhall

I shall give way to the vice-chairman of the all-party group.

Photo of Owen Paterson Owen Paterson Shadow Minister (Environment, Food and Rural Affairs)

The hon. Lady makes an important point. The all-party group holds endless meetings and we realise that individual units of Government make decisions in isolation, without consideration of the impact on the huge national network that we are discussing. The decision about the BBC was a classic. Action was taken strictly in the interests of the BBC and according to its remit, but there was no co-ordination with the Department of Trade and Industry or the Department for Work and Pensions. We need a Minister—it may be the Under-Secretary—to get a complete grip on the Post Office.

Photo of Kate Hoey Kate Hoey Labour, Vauxhall

I agree. I presume that the Under-Secretary would claim that that is exactly what "miscellaneous 33", or whatever it is called, which meets under the chairmanship of the Deputy Prime Minister—I believe that he is still Deputy Prime Minister—is meant to be doing. However, the hon. Gentleman is right. One Department was acting totally against the interests of another. The Department for Culture, Media and Sport should have got more involved.

Photo of Chris Bryant Chris Bryant Labour, Rhondda

I urge my hon. Friend to disagree slightly with Mr. Paterson. The decision that they have discussed was not in the BBC's interests. Sub-postmasters and sub-postmistresses have often explained to young people how they can pay £2 this week and £2 the next so that they can cover their licence fee. There are reports that only 30 per cent. of those who had a licence this time last year have one now. Many people in constituencies such as mine and that of my hon. Friend will go to court over the matter.

Photo of Kate Hoey Kate Hoey Labour, Vauxhall

The BBC will probably regret what it has done. There is a general feeling that it does not care about ordinary people and what they want.

Photo of Henry Bellingham Henry Bellingham Opposition Whip (Commons)

The hon. Lady is my London Member of Parliament and she has been assiduous in pursuing the issue that we are discussing. Does she agree that it is a pity that the Under-Secretary did not answer the question that Dr. Wright and I posed when we asked what discussions were held with the BBC, what pressure was applied and what information the BBC gave? Surely some dialogue took place between different Departments.

Photo of Kate Hoey Kate Hoey Labour, Vauxhall

Perhaps I shall leave my hon. Friend the Under-Secretary to send a little note to his colleague who will reply to the debate.

The Driver and Vehicle Licensing Agency is a Government service. Why was not it allowed at least to state on the relevant form that applications can be made in a post office? The Post Office staff in the House are kind, knowledgeable and helpful about where one has not put one's "x", ticked a box or got the right picture. It is sad that the DVLA has not told people that they can continue to use the Post Office. Will the Under-Secretary clarify whether licences can still be renewed in post offices? Is it simply a case of people not knowing that they can do that?

Ministers have tried to tell us that the Post Office card account was never meant to last for ever and that the contract was always intended to be short term. The problem is that people simply do not believe that. None of the 400 hon. Members who signed early-day motion 1531 believed that the contract was temporary and that it would end in 2010. When the Secretary of State for Health was Secretary of State for Trade and Industry in 2002, she said:

"We have already stated publicly and clearly that all claimants who want to get their benefit in cash at post offices will be able to do so. I want to stress a point that I have made both in the House and directly to the National Federation of Sub-Postmasters: the decision about what kind of account to use for benefit payments in future will be one for the claimant, but irrespective of whether claimants use their own existing bank accounts, new bank accounts, basic bank accounts, or the new post office card account, they will continue to be able to get their cash over the counter at post offices." —[ Hansard, 11 July 2002; Vol. 388, c. 1020.]

There was not much of a sense in 2002 that the contract would end in 2010.

Photo of Greg Mulholland Greg Mulholland Shadow Minister (Education)

Does the hon. Lady agree that, regardless of whether a definite decision was made to end the Post Office card account in 2010, all the distress that the announcement of winding up the contract has caused could have been avoided had the Post Office been allowed to develop an alternative solution before we went through the process? Consequently, we are expecting thousands of people to lobby us on Wednesday.

Photo of Kate Hoey Kate Hoey Labour, Vauxhall

The Post Office can develop however many new solutions and cards that it likes, provided that there is still a card that a pensioner or anyone else on benefit can use to get their cash out. Many people do not want all the extra frills. It was amazing to see a quote from the Government saying that

"the Post Office card account is far less user-friendly than other accounts—for example, you can't earn interest or pay standing orders out of it."

Never mind getting interest, many of my constituents cannot even make do with what they are getting out of the account each week. The idea that they should somehow be using it as a bank account that can earn them interest is just nonsense. Most people use the Post Office card account as a way of budgeting the income that they rely on, and we must continue to ensure that they can do that.

The National Federation of Sub-Postmasters is the only body that represents all the sub-postmasters, of whom there are about 14,500 in the United Kingdom. We must ensure that that network is valued and retained.

Photo of Peter Atkinson Peter Atkinson Conservative, Hexham

There is a wider issue attached to this problem. In many rural areas, the local village shop depends for its survival on the income from the post office salary. As that declines, the viability of the shop declines. The hon. Lady will be aware that, in many constituencies, village shops are worth less than private houses. There is therefore a temptation to seek to close the shop and to turn it into a private house.

Photo of Kate Hoey Kate Hoey Labour, Vauxhall

All of us here realise the value of the rural post office. There are new and interesting methods of delivering those services in rural and urban areas, but it will make a huge difference if the post offices do not have the basic back-up of the Post Office card account. I do not think that this Government, or any other Government, would want to go down in history for taking the decision to destroy huge swathes of the post office network.

Will the Minister give the House a commitment that, whatever happens, there will be a card that can be used by pensioners and other people on benefits to get their cash? It should not be part of a bank account, as many pensioners want nothing to do with bank accounts. They do not want to be involved with anything that might cost them money. For example, some pensioners find it difficult that, to get cheaper telephone bills, they have to pay them by standing order. They do not even want to do that. There are many reasons why older people, in particular, and many others, choose not to have a bank account, and they should not be forced to have one.

Will the Government make a commitment to undertake a thorough assessment of the social and economic roles played by post offices in all our communities, in both rural and urban areas? Will they also make a commitment that, where a post office might not survive through normal commercial means, they will find a way of retaining it through public subsidy?

Photo of Mark Williams Mark Williams Shadow Minister (Wales)

The hon. Lady and I share a common analysis of the importance of the village post office to the wider community. It would be easy for us to become poetic about that, but does she agree that the ramifications of losing those post offices in the wider rural community would be immense? In Wales, there is a fund that guaranteed 106 post offices, but its future is in jeopardy. We are awaiting an early decision by the Minister on the future of the social network fund. Would the hon. Lady welcome such a decision sooner rather than later?

Photo of Kate Hoey Kate Hoey Labour, Vauxhall

I am going to come to that point briefly in a moment. Clearly, everyone realises the crucial importance of post offices in rural areas.

Even if they have not done so in the past, will the Government from now on make a statement to all parts of government that, wherever possible, they should give preference to the post office network for the distribution of all information on government services? Will they also encourage all local authorities to offer their council services through that network? We should all encourage our own local authorities in that regard.

I am also pleading for a statement to be made sooner rather than later on exactly what protection is to be given to rural and urban post offices. We cannot afford to wait much longer for such a statement. I appreciate that this debate might be slightly untimely, in that the Minister might be going to make certain decisions fairly soon. However, I hope that, given the scale of the support for the Post Office card account, it will be his No. 1 priority to ensure that it stays, whatever else may happen to the post office network.

Photo of Robert Smith Robert Smith Liberal Democrat, West Aberdeenshire and Kincardine 6:05 pm, 16th October 2006

I congratulate Kate Hoey, who chairs the all-party group on sub-post offices, on making a strong case for an urgent decision by the Government on the social role that they envisage for post offices in urban and rural areas. Post offices still have a vital role to play, and if we lose that network, we will not be able to recreate it.

The hon. Lady also strongly reinforced the point about the Post Office card account and the need to ensure that there is a basic card account that satisfies the wishes of those who only want such an account. We do not need a one-size-fits-all arrangement in which the Government decree, "Thou shalt have a bank account, with all the bells and whistles", because that would involve accepting all the risks if things went wrong. Some people liked their old giro cheques and did not really want to change to the card account. However, they accepted that account because it at least offered the guarantee that it could not be overdrawn and did not carry the risk of bank charges or any other extra costs.

The hon. Lady mentioned that it might be difficult for the Minister to come up with any concrete answers at this stage, but the Government said that they would have some concrete answers by the autumn. I know that the Minister has been advised that the autumn will carry on until 12 December—or even 21 December—but it would be helpful to get the answers earlier than that. Many people do not realise that most sub-post offices are small businesses run by private individuals making investment decisions, and that they need to know the framework in which they are operating. They therefore need to know the Government's mind on these matters, when so much now depends on Government decisions. Postcomm has also challenged the Government to recognise that.

Last week, it was a matter of concern to hon. Members when the Leader of the House stated at business questions that the collapse of the postal market was a problem for the Post Office. Actually, the postal market is doing quite well at the moment. He talked about the internet and e-mail, but internet trading is resulting in the postage of a lot more packages and parcels. One of the social inclusion issues that is possibly not being properly addressed is the future role of the Post Office in receiving parcels and handling the postage of items for special delivery. The universal service obligation appears to require only about 4,000 post offices. A great deal of the debate about the future of the rural post office network has been about access to benefits and to the means to pay bills. However, if those other services are not there to support the post office, and the post office closes, the access to the postal network, to commercial transactions and to cash for small businesses will also go. The wider benefits of maintaining the network are therefore extremely important.

The most disappointing aspect of the way in which the BBC made its recent decision is that it did not take all its licence payers into consideration. It has said that PayPoint is a replacement for the post office for those who still want to pay for their television licence in person. However, it has not taken into consideration how sparse the PayPoint network is in rural areas. Its decision has therefore greatly restricted access for licence payers in those areas. The BBC should have used its imagination to work with the Post Office to develop a rural product that would allow people to continue to access the same service in rural areas to which it believes its urban licence payers are entitled. The BBC needs to look again at that decision.

Photo of Owen Paterson Owen Paterson Shadow Minister (Environment, Food and Rural Affairs)

I referred earlier to a letter from the director-general of the BBC. One of the reasons that he gave for the switch was that PayPoint could guarantee 15,000 outlets, rising to 17,000 in 2007. He also said that the Post Office could give no assurances on how many of its branches would remain open. That relates to the hon. Gentleman's first point: we are in a vicious cycle at the moment, and the longer the uncertainty continues, the more pernicious the decisions will be. People have to make rational decisions and plan ahead.

Photo of Robert Smith Robert Smith Liberal Democrat, West Aberdeenshire and Kincardine

The outside world needs to know what is going to happen, and that is why we need to know the mind of the Government on this matter. Some hints were given today at Department for Work and Pensions questions that a slightly more flexible approach might be taken towards card accounts. We have been here before, however, and people do not want to have a replacement product dangled in front of them, or to be put under pressure to access that replacement.

Active forces such as changing lifestyles are one thing, but if the Department for Work and Pensions continues to drive people away from the post office, and if the Government actively intervene and accelerate the process, it is far more difficult for people to plan. We therefore need to consider a planning horizon that allows the BBC, for example, to understand that there is a commitment to a rural network. As the hon. Member for Vauxhall also said, if the Government embrace that network, the message must go out about the importance of using it.

Photo of Paul Holmes Paul Holmes Chair of the Parliamentary Party, Cross-Portfolio and Non-Portfolio Responsibilities, Arts and Culture, Shadow Minister

I have listened carefully to my hon. Friend's speech, and have agreed with every word. He has just referred to the rural network, but he referred in his opening comments to the importance of the urban and rural network. Clearly, if a village, which has no shop or bank, loses its post office, it has lost everything. The same, however, applies in many urban areas. In my urban constituency, Chesterfield, whether in a large housing estate or the former pit villages of Poolsbrook and Duckmanton, residents who lose their post office and are told that they can catch the bus to Chesterfield or Staveley town centre might not actually have a good bus service, as privatised bus services often leave such areas stranded. Therefore, the post office network is just as important in urban areas as rural ones.

Photo of Robert Smith Robert Smith Liberal Democrat, West Aberdeenshire and Kincardine

My hon. Friend makes an important point. As I represent a large rural constituency, I am focusing on the rural network, but my hon. Friend Mr. Davey made it clear that the urban network also needs to be recognised for its social as well as its commercial role.

On the universal service and Royal Mail, the Minister talked about the importance of delivering such a service and he took an intervention on whether other mail users should subsidise that service. As my hon. Friend the Member for Kingston and Surbiton said, we need to monitor whether, as competition bites, the Royal Mail understands and defines the universal service more carefully and delivers to that basic minimum. We have already talked about how 4,000 sub-post offices would comply with the requirement for access points to the delivery network. Postcomm, the regulator, is now beginning to realise that it must consult on whether the current universal service obligation on collection and delivery is being observed in spirit as well as in practice. As competition bites, and as Royal Mail starts to look at efficiencies, it might start to consider how its product can still meet the universal service obligation even though the collections and deliveries are the wrong way round for the user.

Photo of Michael Weir Michael Weir Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Trade and Industry)

On that point, is the hon. Gentleman aware of the concerns raised by Postwatch in Scotland about the apparent tightening of the exceptions policy with regard to delivery in many rural areas, which could lead to a loss of service for many people?

Photo of Robert Smith Robert Smith Liberal Democrat, West Aberdeenshire and Kincardine

I am certainly aware of Postwatch's concerns. Postcomm is consulting on changing the wording of the exceptions policy. In all such processes, it is extremely important that the universal service is not watered down to make the service more cost-effective or, I suppose, more efficient for the majority. The universal service is about what everyone in the country can expect to be delivered to them. Therefore, its protection must be at the heart of how Royal Mail is treated by both the regulator and the Government. I urge the Government to take on board the point about ensuring that that service can be delivered and is not watered down. If collection comes before delivery in a particular area, there is no way to turn mail around on the same day. The protection of that universal service is vital and requires effective funding of Royal Mail and a recognition of how much Royal Mail has done to try to address the challenges of competition, how much the work force have done, and how much the work force deserve to be awarded and recognised for what they have done. A trustee share ownership scheme, in which shares are owned for the benefit of the work force and cannot be distributed outside that scheme, seems an excellent way of thanking the work force for what they have achieved and rewarding them further as the company continues to build and take on competition.

Photo of Michael Connarty Michael Connarty Labour, Linlithgow and East Falkirk

As secretary of the liaison committee for the Communication Workers Union, I am always wary of politicians who tell me what the workers want. The workers tell me that they want decent wages, decent conditions and more guaranteed employment, and they lobbied the Liberal conference to withdraw last year's conference motion talking about selling off shares, as they know that it is a halfway house to privatisation, just as happened with BT. Why does the hon. Gentleman not listen to the workers in their organised association?

Photo of Robert Smith Robert Smith Liberal Democrat, West Aberdeenshire and Kincardine

I have listened to some workers who have come to me and said that they would like such a share scheme so that they can take part in the success of the company in which they are working and investing. Individuals are entitled to their views, and it is important that those are taken into account in the debate. It is not necessary to have one collective view; people are entitled to individual views.

At this time of transition, I urge the Government to ensure that decisions made on the future of the Post Office will enable a viable, socially supported rural and urban network to continue to be accessible. It is an empty and hollow promise from the Government that people will still be able to collect their pensions and benefits from a post office if there is no post office that is accessible to them.

Photo of David Drew David Drew Labour, Stroud 6:16 pm, 16th October 2006

I welcome the opportunity to take part in this debate. I have taken careful note of the recent exchange, as I shall no doubt refer to the points made.

The debate is opportune, with the lobby on Wednesday, to which I am sure that some of my sub-postmasters and sub-postmistresses will come to talk to me. We have had the Postcomm document, which is an interesting read—it is rather long on analysis, but not so helpful on how matters can be taken forward. Nevertheless, it is a detailed document containing a lot of useful information, and I hope that the Government will respond to it formally in due course. Other reports have come forward, such as the recent Age Concern report, which highlights the importance of sub-post offices in rural and urban communities. As I represent what I call a semi-rural constituency, I see the implications for both.

The debate is also opportune because I had the good fortune to meet some of my parish councils and sub-postmasters and sub-postmistresses in Bisley in my constituency, and we discussed all the issues that have been raised today. The Minister was saying that sub-postmasters and sub-postmistresses were becoming more optimistic, but, without mentioning any names, that was not necessarily the view that I heard from those who were present, several of whom were either in the process of trying to sell or had already sold their post offices. Later, I shall refer to one glowing example of how things can be turned round. The post office concerned, in a small village community, has shown that it can move forward.

What should we be doing? Certainly, we should not be privatising Royal Mail as the motion suggests. That is the worst possible way forward, and I share with my hon. Friend Michael Connarty support for the CWU. It is the worst way forward for two clear reasons. First, how will taking away one of the network's most profitable parts, Royal Mail, help that network? Secondly, how can we then expect the Royal Mail to bail out that network? I do not know much about business and competition, but I would have thought that the one thing that that new organisation would not feel any obligation about would be moving more business towards the post office network, as it would be in direct competition with it.

Some would allege that that has been one of the problems with the business. In recent times, there has never really been an attempt to co-ordinate the three parts of the business. We saw that under the last Government, and sadly my own party has not done enough to bring Parcelforce, Royal Mail and Post Office Ltd together so that a wonderful organisation can be used properly. I remind Members that that organisation is held in the highest esteem, as has been demonstrated by opinion poll after opinion poll. People trust the Post Office. If politicians received some of the ratings that it has received, they might feel a little more confident on returning to their constituencies.

I know that there is a lot going on. I have had meetings with Alan Cook recently, and I am aware that there is a new broom trying to sweep away some of the debris. But although some may want us to think that the financial opportunities of becoming a bank in the community are the answer, it would be helpful if the banking system itself recognised the advantages of the postal network rather than seeing it merely as a competitor.

Time after time, I am told that if only all the banks would use post offices in the rural network as an opportunity for people to obtain money, we would begin to see them acting as I should like them to act—altruistically. Sadly, however, because they have had basic bank accounts foisted on them with their arms forced up their backs, they are taking their revenge by making it clear that they will offer the most limited service possible in post offices. That is wrong, unfair and unsustainable.

I hope that we shall see some new developments. Alan Cook has been quite impressed by the way in which the new savings bank has embarked on its link with the Allied Irish bank, which has begun to take hold and is doing well—again, in the face of stiff competition from the rest of the banking network. Foreign exchange business has been a boon to the Post Office, as has the reselling of premium bonds. It may seem very old-fashioned, but in this day and age it gives people security, and there is nothing wrong with that.

I challenged my hon. Friend the Minister about the universal service obligation, and was pleased to hear his response.

Photo of Michael Connarty Michael Connarty Labour, Linlithgow and East Falkirk

Before my hon. Friend moves on to that subject, may I raise another issue? My hon. Friend talks as though competition were a good thing, and I am sure that others will make the same point. Does he remember when "power cards" were taken away from post offices and—at least in my area—introduced in petrol stations? The service then collapsed. Now PayPoint has taken over the payment of television licences. I believe—because we have not been told the facts—that it is being used as a cost-cutter, to undercut and attack the post office network and ensure that PayPoint becomes the only option in town. What guarantee can we have that once it has won the business from the Post Office, it will continue to deliver it in a suitable fashion that benefits the customer? We have heard about the difficulties in rural areas.

Photo of David Drew David Drew Labour, Stroud

No guarantee whatever. That is the problem. I will not go into the case to which my hon. Friend alludes, but I will say something about the BBC and PayPoint. I do not intend to dwell on this for long, but it has not been mentioned so far. In many places PayPoint does not exist, and, like my hon. Friend Mr. Todd, I have evidence that post offices that have tried to open it have been prevented from doing so. Worse, they have been prevented in the very areas where pensioners in particular need a point of access to television licences. I heard what my hon. Friend Chris Bryant said about people having a justifiable reason for not obtaining licences. I will not go down that route, but I will say that unless it is guaranteed that people will be able to obtain television licences in all the areas where they could do so by means of the old service, by definition the service has been degraded and has deteriorated.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

I have just taken a travelling surgery around my constituency, visiting many of the villages where PayPoint services are being withdrawn. Although TV Licensing informs people that the nearest service is only a couple of miles away, there is often no bus service to the neighbouring village. A trip to buy a television licence at the nearest PayPoint may therefore involve a significantly longer journey than is being suggested.

Photo of David Drew David Drew Labour, Stroud

That was a helpful intervention. Like my hon. Friend Kate Hoey, I have my own problems with the BBC at the moment, although for slightly different reasons; but I issue this challenge. If the BBC cannot prove that it can offer at least the same quality of service, it must take some pretty drastic action in respect of the organisation to which it has offered the contract. That contract is not acceptable: it represents a deterioration, and it will cost the BBC dear because it will accrue less revenue subsequently.

In a sense, I have already poured cold water on the role of banking. I have doubts about the idea that we are recreating a banking network, although I wish that we were. My hon. Friend the Minister mentioned the problems with competition, and, as I have said, the Post Office has made some moves in that direction. But another issue has not been mentioned, although it is very important, particularly to the 2 million Post Office card account holders—a figure given to me by the Post Office—who are unlikely to be able to draw their money in other ways. I think that credit union opportunities should be linked to the savings that we could make. Everyone who would like access to a credit union should be able to do so through the network. Problems are identified too often, and this would be a good solution. After people had drawn their cash by means of whatever follows the Post Office card account—a similar arrangement, I hope—they could save through credit unions. That would provide all the advantages that the socially excluded do not currently have, and we ignore it at our peril.

Let me make a point about the changing nature of the network. When people talk to me about sub-postmasters and sub-postmistresses, I sometimes hear criticism of what they are trying to do. I only wish that more people understood what some of them run their businesses on. It is all well and good for us to say that they run an unprofitable business; at national level that means that millions of pounds are unfortunately going in the wrong direction, but it also means that the people who are trying to run the business are doing so for a very small return. That is the problem with the £150 million so-called rural subsidy. Very little of the money actually reaches the sub-postmasters and sub-postmistresses: it is off the bottom of the accounts, so to speak. Some of it, admittedly—although very little—is intended to help reorientate businesses, and some is intended to encourage people to change the nature of their businesses.

The business that I said I would mention is a very small post office, Oakridge, in my constituency. The idea was to reorientate it by moving it to a different site, investing in an internet café linked to an advice centre and arranging meetings there. Michael and Kim Gorney—Kim is the postmistress—were able to take advantage of rural renaissance funds, but it is interesting to note how many hurdles they have had to negotiate. The project is not yet assured, so I shall not say much about its being a great success story, but it demonstrates that things can be done if the attitude is right.

In many villages, however, there will be no private-enterprise solution. The only solution will be some form of social enterprise. In my view, the organisation that should be key to that in rural areas is the parish or town council. I declare an interest: I am still a town councillor. My town council bought the post office, so we have some expertise in keeping them going. There was a threat that the post office would leave the premises where it had been for many a year. The position is different in other areas, though. When I went to Bisley, I challenged the parish and town councils to have regular meetings with sub-postmasters and sub-postmistresses to establish whether there were services that they could provide jointly through the postal network. Again, that is not the basis of the entire solution, but it should help.

If we are sensible about how the common agricultural policy should be funded under pillar two—with money finding its way into rural service provision, which is a good thing—we have to find similar ways of matching local initiative with available money. Parish and town councils can, through the famous 3p on the rates, find some money, but we also need to lock in national money, as in the case of the CAP and the operations of the central Government.

I finish by emphasising that we need security, so the network must be supported, and also stability in that people must know exactly where their businesses are going. We need to recognise that the role of the state is crucial: there is no alternative.

Photo of Hywel Williams Hywel Williams Shadow PC Spokesperson (Education), Shadow PC Spokesperson (Work and Pensions), Shadow PC Spokesperson (Health), Shadow PC Spokesperson (International Development) 6:31 pm, 16th October 2006

My particular concern is rural sub-post offices, of which there are many in my constituency. Last week, I was pleased to meet representatives of the National Federation of Sub-Postmasters in Wales. We are, of course, talking about people working in the private sector, but we all acknowledge the importance of their adhering to the highest standards of public service. It was clear from talking to them that they are worried about the uncertainty of their investment decisions and the value of their businesses, which often are their retirement pensions.

The Minister provided something of an answer to those worries when he said implicitly that there were too many branches and too many sub-post offices: what that does for the social functions of the sub-post office, I do not know. Clearly, sub-postmasters and mistresses have their worries. Rural sub-post offices act as focal points for the community in paying pensions and benefits and providing other services. In some places, sub-post offices provide only a limited range of goods, but in others sub-postmasters and mistresses have taken the bull by the horns and provide a surprisingly wide range of vital, if low-key, goods and services. Many of those services would not be viable without the post office element. If that element goes, we face the closure not only of sub-post offices but of vital small businesses in rural areas.

There are multiplier effects, as people using the sub-post office to collect pensions or benefits are more likely to spend locally, and a pound spent locally tends to circulate locally rather than swell the profits of the large supermarket giants. At a time when we are all worried about the effect of supermarkets on small rural communities, here we see the Government going—perhaps by default—in the very opposite direction.

In my constituency, sub-post offices have closed and been replaced by the post office van. The Minister provided us with a long description of the pilot schemes that operate at present—it will be interesting to see how that reads in Hansard tomorrow—but what I see in my constituency is a van that visits for just an hour or two. Before, the sub-post office was open all day, all week, so the effect of the changes can be clearly seen, as the pilot schemes will show when the results are published. The closures have also forced people into their cars, but I am not going to pursue all the green issues this evening, as I want to keep my remarks brief.

Photo of Roger Williams Roger Williams Opposition Whip (Commons), Shadow Minister (Environment, Food and Rural Affairs)

I am sure that the hon. Gentleman will pay tribute, as I do, to the Post Office in Wales, which has supported the re-opening of post offices in many rural areas. We have also seen some innovative schemes, using village halls and other facilities. Even with the support that the Government now provide to rural post offices, 1,200 of them have closed in the past six years. That shows the scale of the problem, and many more will close unless the Government continue to provide support on a similar scale.

Photo of Hywel Williams Hywel Williams Shadow PC Spokesperson (Education), Shadow PC Spokesperson (Work and Pensions), Shadow PC Spokesperson (Health), Shadow PC Spokesperson (International Development)

The hon. Gentleman makes a very good point. As we know that further closures are likely, sub-postmasters and mistresses face that degree of uncertainty, which is corrosive. The hon. Gentleman will also know that while cars are a costly luxury in cities, they are a necessity—sometimes even two to a household—in his and my constituency. The coincidence in Wales of high car ownership and low wages is not surprising, particularly in rural areas such as ours. If local services disappear, we shall face rural depopulation—an issue that fails to secure the attention it requires. What we have seen is a rush towards concentration in the south-east of Wales as well as the south-east of England.

Other hon. Members mentioned TV licences. I met the federation last week and was asked to draw the House's attention to the Driver and Vehicle Licensing Agency, which advertises the fact that vehicle excise duty may be paid by phone or on the internet. I understand that it is printed on the envelope. It is very convenient for the DVLA, which fails to advertise the fact that the duty can be paid through the Post Office—a method convenient to customers. What comes first here: the customer or the DVLA? Clearly, it is the DVLA. Many people do not want to divulge information over the phone or down the line. It is a small point, but it is symptomatic of the corrosive effect of uncertainty on the morale of sub-postmasters. That was certainly the impression that I gained. People want to provide a good service, but they are worried and their morale is at rock bottom.

Photo of Tim Farron Tim Farron Leader's Parliamentary Private Secretary, Cross-Portfolio and Non-Portfolio Responsibilities

Does the hon. Gentleman accept that one of the major causes of the loss of post offices has been precisely that lack of confidence? There is a good example from Witherslack in my constituency, where the postmaster and mistress whose family has provided a service for nearly 100 years want to sell their business on to someone who can run the post office. They are incapable of doing so, because the market is so thin. There is no rural support grant and people lack confidence precisely because of uncertainty about the future.

Photo of Hywel Williams Hywel Williams Shadow PC Spokesperson (Education), Shadow PC Spokesperson (Work and Pensions), Shadow PC Spokesperson (Health), Shadow PC Spokesperson (International Development)

The hon. Gentleman makes a very good point. I refer him to my early-day motion on the support grant and encourage him and other hon. Members to sign it.

I want to deal briefly with the Post Office card account, which has been mentioned. There are 360,000 customers in Wales and 7,810 in my constituency, 3,960 of whom draw their state pension through the POCA. That is the measure of the impact on my constituency with 3,960 pensioners and 7,810 people in all, as I said. I also have a list to demonstrate the effect on other constituencies in Wales. I noted, for example, that 14,810 people use the POCA in Merthyr Tydfil and Rhymney—probably the poorest constituency in Wales apart from that of my hon. Friend Mr. Davies, which also has a high level of card use. If the POCA is to go, we must have a replacement. The Minister referred to one earlier, but if we are to have a proper replacement, it should be possible to use the Link system. I am concerned that the banks are closing out the Post Office, which is anti-competitive.

Finally, will the Minister clarify what Government Departments are doing individually to promote the Post Office in bringing services closer to people in rural areas? There is huge potential for using new technology in such areas. What is being done to support post offices in providing facilities such as face-to-face interviews for passport applications, for example? If we are to proceed in that direction, individual postmasters have to take decisions now. I hope that the Minister will respond to that point in his reply.

Photo of Henry Bellingham Henry Bellingham Opposition Whip (Commons) 6:39 pm, 16th October 2006

We have had an interesting and wide-ranging debate. There has been a great deal of agreement across the House about the state of the crisis. There is, indeed, a threat. In today's Financial Times, there is talk of large-scale branch closures. Adam Crozier has said that, if the £150 million a year subsidy under the social network payment is ended, 10,000 post offices could close. He also said that the Post Office could operate with only 4,000 post offices and that that would be enough for the Post Office to fulfil its obligations, yet the Minister and the Secretary of State say that they want to give the Post Office certainty. How can they possibly give the Post Office certainty when the chief executive himself is making such remarks?

We all know that the role of the Post Office in our constituencies, in the towns and villages, is absolutely vital. It is pivotal in many of the small communities. Often, as I go around my constituency, I see post offices that are at the heart of the village and pivotal in supporting the shops that are attached to them. They are very much part of the social fabric of villages, too.

After all, we have here an organisation with a unique brand. It is a powerful retail network. It has a massive head start with its 28 million customers. It is a huge cash handler—£90 billion a year goes through the tills of the Post Office, which is quite phenomenal. Why has it all gone so badly wrong? How can it be losing so much money? Why can it survive only on subsidy? Why is the rural network losing £3 million a week? Why have 3,200 post offices—17 per cent. of the network—closed since 1997?

The Minister with responsibility for employment relations in postal services wrote to me the other day. He said:

"The decline...is down to the failure of the Post Office to respond to the changes in the market place."

I put it to him and to the Secretary of State that part of the problem has been the actions, or inaction, of Her Majesty's Government.

I will not rehearse the saga of automatic credit transfer, for which the Government were responsible. It did save the Department for Work and Pensions many millions of pounds, but think of the extra cost through the subsidy and of the redundancy payments to so many sub-postmasters who suffered as a result of post office closures.

We have heard about the Post Office card account fiasco and about BBC licence applications being moved elsewhere. I asked the Minister what discussions he, the Department of Trade and Industry and the Department for Culture, Media and Sport had had with the BBC. It is largely independent under its charter, but are you telling me, Mr. Deputy Speaker, that Ministers did not have some say or influence in that?

We have heard about the many constraints that the Government have put on the commercial freedom of the Post Office and sub-post offices. We have also heard about the many other things that the Government could be doing to support the network. Why have they not shown a bit more imagination? Why is there not more initiative on the part of the Government? Why, for example, has the Post Office only recently told sub-postmasters that transaction payments, which they receive for automated council tax, gas, water and electricity payments, are being cut from 11.2p to 7p per transaction? What about the DVLA? Surely much more could be done to ensure that its service is firmly entrenched within post offices and sub-post offices. That is vital in terms of supporting businesses in post offices and sub-post offices.

Photo of Geoffrey Cox Geoffrey Cox Conservative, Torridge and West Devon

I wonder whether my hon. Friend is aware that the DVLA has recently sent all its customers a card that encourages them not to use the post office, but rather to register online. Surely that is an example of what should not be happening if the Government are properly to support the rural post office network.

Photo of Henry Bellingham Henry Bellingham Opposition Whip (Commons)

I am grateful to my hon. Friend. That is a good example of the Government saying one thing and doing something completely different. The Minister said that his Department was doing all it could to help the Post Office and its branch network to deliver more services, and to have more opportunities to build customer bases, yet the DVLA, which I understand is directly under the responsibility of a particular Minister, is doing exactly the reverse of what the Minister is saying the Government should be doing.

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

Does my hon. Friend agree that our Post Office service is at tipping point? We need a framework for the future. We want to see joined-up thinking, whether it has to do with the DVLA, television licences or whatever. That is all we are seeking from the Government.

Photo of Henry Bellingham Henry Bellingham Opposition Whip (Commons)

My hon. Friend is right. It beggars belief that, with this organisation, which has a vast network that is the envy of any competitor organisation—it is the largest retail network in Europe—the Government are not able to show a little more imagination, innovation and common sense.

Photo of Henry Bellingham Henry Bellingham Opposition Whip (Commons)

I give way to the hon. Gentleman, who knows a lot about this subject.

Photo of Michael Connarty Michael Connarty Labour, Linlithgow and East Falkirk

I have great respect for the hon. Gentleman, but he cannot surely be suggesting that we turn back time and should not encourage people to use Government services online. It is not only saving the Government money, which is sensible. I have used the service and I assure him that it is very efficient. It is sensible to go online—we all have broadband—to order one's tax disc, which arrives five days later, without having to find time to pick it up somewhere. I do not have anything against the Post Office—it is just common sense. No one can argue against technology in that way. Are we Luddites?

Photo of Henry Bellingham Henry Bellingham Opposition Whip (Commons)

I hear what the hon. Gentleman says. I have nothing against private organisations using their own money to launch advertising campaigns, but the Government are advertising one service to take business from post offices, which will in turn require more subsidy to keep the branch networks going, and more money for redundancies. The Government have to use a little more common sense. We have to have a bit more co-ordination and a bit more joined-up thinking.

Photo of Henry Bellingham Henry Bellingham Opposition Whip (Commons)

I will press on, if my hon. Friend will excuse me.

In King's Lynn and Gaywood, which is the main urban concentration in my constituency, four post offices have closed. They were meant to be part of an urban reinvention programme. Unfortunately, one of them is in the village of North Wootton. It has a village green, sheep and cattle grazing nearby and ponies trotting by, yet the Post Office decided to categorise it as an urban post office. It has now closed completely, which is bad news for people in that community.

In truly rural areas, we have seen numerous closures. We have seen a number of closures and then a welcome reopening. We have seen closures where the potential sub-postmistress or sub-postmaster was to reopen the sub-post office but is in tricky negotiations with the Post Office. I have one case in my constituency where everything is in place and lined up. The previous sub-postmaster was being paid £8,500, but the potential applicant is being offered only £4,000, a cut of more than £4,000 in the payment from the Post Office. Is that any incentive for that small sub-post office to reopen to provide a vital service?

Therefore, there are obstacles in the path of post offices that want to try to reopen. There are some bright spots. In a village called Syderstone in my constituency, there is a rotating sub-postmaster who is operating from the village hall, which shows imagination and initiative. I am all for that. However, the vast majority of those small post offices and their sub-postmasters and sub-postmistresses are hanging on by their fingertips. There is huge uncertainty. I do not believe that the future has ever been more uncertain or more bleak. What we need from the Minister is not empty rhetoric but action today, because not just thousands of sub-post offices are at risk. We are talking about tens of thousands of people who work in sub- post offices. We are talking about hundreds of thousands of people, particularly vulnerable groups such as the elderly and disabled, whose lives are being put at risk. Their quiet enjoyment of village life in constituencies such as mine will be put at risk if post offices close, because they are the centre of those villages.

As we have heard often today, we need proper joined-up government. Is the Minister going to listen? I am not holding my breath, but there is still a chance that he can prove me wrong. We are looking at a very serious situation indeed. I hope that, in his winding-up speech, he will not be complacent, and that we will have not rhetoric but proper answers to the many questions that have been posed today, because there is still a chance to save what is a great network.

Photo of John Leech John Leech Shadow Minister (Transport) 6:50 pm, 16th October 2006

I am delighted that we are having a debate on the future of the post office network and Royal Mail, not only because I have tried to secure an Adjournment debate on the future of Chorlton post office, but because the people of south Manchester have seen at first hand the damage that the Government have inflicted on the network.

In recent years, the post office network in Manchester, Withington, has been devastated by the closure of a number of sub-post offices across the constituency, including Beech Road post office in Chorlton, Burton Road post office in west Didsbury, Mauldeth Road West in Withington, Barlow Moor Road in Didsbury, and Parrs Wood Road in east Didsbury. More recently, Chorlton Crown post office was privatised—a decision made by Post Office Ltd without any consultation about the sell-off. It is outrageous that the Post Office can make such a decision to franchise post offices on purely commercial grounds, and that it need consult local people only on what services will be provided, and on at what times the post office will be open. Meanwhile, the Government stand idly by and refuse to intervene.

I draw hon. Members' attention to early-day motion 2687 in my name, which deals specifically with Chorlton post office, but which makes reference, too, to the future of the Crown post office network. I urge Members on both sides of the House to support it. Post Office Ltd is picking off Crown post offices to privatise, and unless the Government can be forced to intervene and put a stop to that, we will be lucky to have any Crown post offices left. It is worth noting, too, that a number of Crown post offices that have been franchised have quickly closed. We need to ask ourselves why those sub-post offices are closing, and why Crown post offices are being sold off, thereby damaging the future of the network. The answer is fairly straightforward: Government policy is systematically undermining the viability of the post office network. The post office reinvention programme should have been called the post office closure programme, because, effectively, that is all it did. Like Mr. Drew, I do not blame sub-postmasters.

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

Does the hon. Gentleman not agree that although the Government talk a big game—they talk about financial and social inclusion—their actions support the exact opposite? Many elderly people do not have the opportunity that Michael Connarty has to go online to buy their licences. We face the challenge of social and financial inclusion, and the Government are not doing anything about that.

Photo of John Leech John Leech Shadow Minister (Transport)

I agree that the Government talk a great deal about post offices but do little other than systematically remove business from them. As a result, it is increasingly difficult for sub-post offices to secure a long-term future. Similarly, it has been made more difficult for Crown post offices to be profitable in future. Post Office bosses admitted to me that one reason that they chose to privatise Chorlton post office was that the Government's decision to end the Post Office card account in 2010 will remove more and more business. Some sub-postmasters have suggested that the end of the Post Office card account will effectively be the final nail in the coffin. In Chorlton in my constituency, Merseybank estate is among the top 5 per cent. most deprived areas. The sub-postmaster there says that he has serious concerns that if the Post Office card account ends in 2010, he will not be able to make a living. It will be a major blow not only to him, but to all the people who collect their money at the post office through the POCA, and who use that money in the few remaining shops in the area. Those shops will face closure if the post office is closed.

If the Government really believe that post offices play an important role in local communities, why have they systematically deprived them of business and jeopardised their future? Surely it is time for the Government to take their head out of the sand and to take the necessary steps to secure the future of the post office network.

Photo of David Heath David Heath Shadow Leader of the House of Commons, Shadow Spokesperson (Cabinet Office) 6:54 pm, 16th October 2006

It is an extraordinary testament to the way in which the House works that although more than half of hon. Members have signed an early-day motion about the Post Office card account, we could not propose that motion on the Order Paper. It is only because an Opposition day debate has been introduced by my hon. Friend Mr. Davey that we have an opportunity to discuss these important matters.

I wonder how we have reached this position on rural sub-post offices—and, indeed, urban sub-post offices. We thought that we had won the battle in 2002, and that we had finally decided the future of the post office network for a generation. Certainly, no intimation was given that the Post Office card account was a temporary arrangement that would be removed after the contract had ended. As many hon. Members have said, we are concerned about the uncertainty that the network faces. I shall return to that in a moment, but having heard what the Minister said, I fear that that uncertainty is becoming the certainty that many of our smaller post offices will be lost.

I heard what the Post Office said about closing a very large number of post offices, and I heard, too, what the Minister said today. He cited with approbation a lady from Crewkerne in Somerset—a town not far from my constituency—who said that people think that they want post offices, but in fact they do not. What an insult to the postmasters and postmistresses across the country who know perfectly well how much communities value their post offices, and what an insult to the 3 million, perhaps 4 million, people who signed the national petition. What an insult to the people who put their name to the petition that I presented to the House just before the recess, and which was signed by more than half the residents in the village of Nunney. In addition, the Minister seemed to suggest that the customers were the wrong sort of customers. He suggested that we lived in inconvenient places, and that we persist in living in small villages where there are not enough people to use the post office. I am sorry, but that is the way we live, and that is why we want a service for the people whom we represent in our villages. It will not always be the most efficient arrangement, but it is a social good, and that is what the Government must recognise.

Earlier, the Under-Secretary of State for Work and Pensions, Mr. Plaskitt appeared to make a concession, when he suggested that there would be a range of products, whatever that means, to succeed the Post Office card account. We do not want a range of products—we want the Post Office card account, and we want a simple mechanism to enable people to go to the post office and collect their pension or benefits in cash. Ministers may have forgotten, but that is how many people live their lives in this country. They budget on a weekly basis with cash in hand; they do not want a bank account, and they do not want to go overdrawn. They want the opportunity to carry on as they have done—yet there is the threat of the end of the POCA contract, the loss of business from TV and DVLA licences, and changes in tariff in respect of utilities. In addition, the fact that the social network payment will end in March 2008 has caused uncertainty. The Minister cannot give us certainty on any of those issues. As a result, people cannot make investment decisions about their post offices. They cannot sell them, because no one can go to a bank with an adequate business plan to secure the money that is needed.

Photo of David Heath David Heath Shadow Leader of the House of Commons, Shadow Spokesperson (Cabinet Office)

I am sorry, but I do not have the time.

As a consequence, post offices are closing across the country, which is extraordinarily bad news not only for the people who want to use the post offices, but for the communities in which those post offices are situated, because it is not just post office services that are affected. When I presented my petition on behalf of the people of Nunney, they pointed out that their post office not only provides post office services, but offers dry cleaning, sells tickets for the local pantomime, and provides a social service for the elderly and infirm in the village. All those things will be lost if we lose our sub-post offices. We have already lost the Crown post offices, as my hon. Friend Mr. Leech said. I have lost a Crown post office in Frome; the postal services are now situated in Martin's newsagents, and instead of a Crown post office, we have an empty building that is soon to be a wine bar.

We are losing urban sub-post offices, but I have a bigger concern in my constituency. I went to 100 villages over the summer and I heard the same thing in every one. Some 30 people from the small hamlet of Curry Mallet told me their concerns about their post office. The people of Ditcheat are also concerned that they will lose their post office, and they think that the Government do not care about it. I find no reassurance whatever in a Cabinet committee chaired by the Deputy Prime Minister, which is supposed to be bringing things together. All the evidence is that Departments do not talk to each other, and the consequence is that we will lose our post office network. I will not stand for that.

Photo of Lorely Burt Lorely Burt Shadow Minister (Business, Innovation and Skills), Shadow Spokesperson (Business, Enterprise and Regulatory Reform) 7:00 pm, 16th October 2006

Much has been said in this excellent debate, but I wish to make a few points. The Liberal Democrats believe that two of our greatest national commercial institutions are under threat—the Royal Mail and the post office network. The Royal Mail is under threat from lack of investment, the relaxation of competition rules and overseas competition.

The post office network is being starved. The Government have taken away its business, as many hon. Members have described. With the pension book and benefits, the Government have taken away £400 million of business from post offices. The loss of television licence business is another huge blow, whether or not the BBC has been constrained by the Government's failure to provide network guarantees. Why has the Post Office not been allowed to bid for the 70 new passport centres? The loss of the Post Office card account is of great concern. Some 4.5 million people still prefer to access their benefits through POCA, including some 5,000 in Solihull.

Some 7,000 post offices have been lost under Conservative and Labour Administrations. Some 6,500 rural post offices are under threat. Why? Well, to borrow a phrase from "The Amazing Mrs. Pritchard", it is not rocket science. It is because the basic business of post offices has been systematically undermined. However, the solution is not simple.

Post offices and the Royal Mail have to compete in a national market and a global market. They are already exploring new commercial services, such as telephones, the internet, travel, insurance, and even flowers. I am interested in the Minister's thoughts about why it is not possible to extend vehicle excise duty services, passport checking and Government information services. As Mr. Duncan asked, why not allow post offices to offer the many additional services, some of which have been trialled, such as reporting crime and antisocial behaviour, or providing one-stop shops for councils, police, health services, the Government and others? Post offices want to be entrepreneurial. All they want is for the reins to be released so that they are free to provide such services.

I do not want to paint a rosy romantic picture of country post offices and the pensioner coming along with his POCA card. Hard economic decisions have to be made, and that is recognised on both sides of the House.

Photo of Philip Dunne Philip Dunne Conservative, Ludlow

Does the hon. Lady agree that the Government have a social responsibility? It is not only a question of hard economics. We all understand the importance of ensuring that the Post Office generates a proper economic return, but rural post offices are vital at a social level to the societies they serve. The Government are completely ignoring that.

Photo of Lorely Burt Lorely Burt Shadow Minister (Business, Innovation and Skills), Shadow Spokesperson (Business, Enterprise and Regulatory Reform)

The hon. Gentleman is right. We need to consider the social costs as well as the economic ones. The Government think that they will make short-term savings by stopping the POCA, but there will be long-term costs that need to be taken into consideration. Postmasters and postmistresses understand the value of their services. They work for long hours, often for little reward. They need support from the Government, which has been promised. We will be all ears listening to the Minister's reply to find out exactly when the promised £3 billion will actually be forthcoming.

The Liberal Democrats' proposals have received a mixed reception today, but they would invigorate the Royal Mail and post offices, without burdening the taxpayer. Our suggestions would modernise the Royal Mail and allow it to compete. They would also allow employees and others to have a service of which they can be proud.

Photo of Danny Alexander Danny Alexander Opposition Whip (Commons), Shadow Spokesperson (Work and Pensions) 7:06 pm, 16th October 2006

This has been a very good debate, which was opened in characteristically robust and persuasive fashion by my hon. Friend Mr. Davey, and with extremely good contributions from my hon. Friends the Members for West Aberdeenshire and Kincardine (Sir Robert Smith), for Manchester, Withington (Mr. Leech), for Somerton and Frome (Mr. Heath), and for Solihull (Lorely Burt). I also wish to single out the contribution by Kate Hoey.

Listening to the Minister's opening contribution, I detected a surprisingly Marxist line of thinking in the Government's approach to post offices. We are told that an inevitable tide of history is sweeping away the need for a post office network. Factors such as e-mail and lifestyle change mean that the post office network will naturally wither away. As my hon. Friend the Member for Somerton and Frome pointed out, the Minister also quoted with approbation a postmistress who apparently said that people may think that they need post offices but they do not; he also said that we have too many branches with too few customers. In other words, our villages are too small. I have to tell the Minister that the disappearance of the post office network and the closure of thousands of post offices is not inevitable. It is a choice being made by Ministers, and they cannot evade responsibility.

Many hon. Members have discussed the Government's attitude to the post office network, as exemplified by their actions. The Government say that they support post offices. The Minister confirmed that today. Indeed, it is fair to say that the social network payment is on the credit side of that equation. However, while that subsidy continues for the moment, the progressive withdrawal of Government services is fundamentally undermining the entire post office network. Postcomm reported that Post Office Ltd has lost £168 million of revenue from Government services in the past 12 months. That is more than the social network payment for a year. In other words, the Government are giving with one hand but taking away even more with the other.

The Post Office was told that it could not even apply for the contract for the new passport offices, to allow face-to-face interviews. We know that the Post Office's revenue from DVLA work is falling, and hon. Members have mentioned the efforts to ensure that people use the internet, not the post office, by failing to mention that option in publicity material.

The contract for the issuing of road fund licences is up for renewal next year. I hope that the Minister can assure the House that he will make every effort, as part of the new joined-up thinking that we are promised, to ensure that the Department for Transport gives that contract to the Post Office again. Many hon. Members have mentioned the Post Office card account, which is worth £1 billion to post offices over the term of the contract. It is used by some 4.5 million people, who now face uncertainty. Some 40 per cent. of benefit recipients who were invited to convert to direct payment when pension books were withdrawn chose to convert to a Post Office card account.

Photo of Geoffrey Cox Geoffrey Cox Conservative, Torridge and West Devon

Does the hon. Gentleman agree that the success of the Post Office card account has been despite the Government rather than because of them? He may have received in his constituency—as I have in mine—constant anecdotal evidence of the Government undermining, or trying to undermine, take-up of the card account; in fact, it is the efforts of postmasters and postmistresses that have made POCA such a success.

Photo of Greg Mulholland Greg Mulholland Shadow Minister (Education)

Does my hon. Friend agree that the Government have pulled the rug from under post offices? Susanne Duncan, the postmistress at Pool in Wharfedale post office said:

"We have all worked so hard to retain as many customers as possible...This news is another nail in the coffin...a scandal, an injustice and betrayal."

Does my hon. Friend agree with her words?

Several hon. Members:

rose—

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

Order. Danny Alexander should try to leave some space between interventions—this is beginning to look more like Question Time.

Photo of Danny Alexander Danny Alexander Opposition Whip (Commons), Shadow Spokesperson (Work and Pensions)

That is something I have not yet had the opportunity to take part in, but I hope that I will one day.

I agree with both interventions. One of the reasons why POCA is so popular is that it is a post office-based product; it is simple and easy to use. We now know from an answer given earlier at Work and Pensions questions that people will face multiple POCA options. In the light of the interventions made during the debate, will the Minister guarantee that pressure will not be applied to current POCA users about the option they should choose when the change is made? There must be a free choice and people should decide which option is best for them. If there is a repeat of what happened when the pension book was taken away, when enormous pressure was exerted through phone calls and mailings to persuade pensioners—against their better judgment in many cases—to move away from use of the post office, it will be a travesty of the sentiments the Government have expressed today.

We have heard about the television licence contract being taken away from post offices, but the Minister's response is, "It wasnae me." Apparently it is not his fault but that of the BBC. However, in a letter to me, Ms Pipa Doubtfire, the head of revenue management at the BBC, gave the lie to the idea that Government policy had no influence whatever on the decision. She said that

"the Post Office, which now has fewer than 15,000 branches, could not give us any assurance that its network would not continue to decline".

In other words, if the Government had made a clear commitment to the long-term viability of the network the BBC's decision might have been different.

Photo of Michael Connarty Michael Connarty Labour, Linlithgow and East Falkirk

On the hon. Gentleman's point about the reply from the Post Office, it is clear to members of the Communication Workers Union that those who run the Post Office, Mr. Leighton and Mr. Crozier, have no interest in the sub-postmistresses and sub-postmasters network. The reply to which the hon. Gentleman referred was made on behalf of people who have no interest in that part of the network. They indicated to the BBC that they could not guarantee that the network would not shrink, because they do not actually care about it. Like the hon. Gentleman, I want the Government to care about it.

Photo of Danny Alexander Danny Alexander Opposition Whip (Commons), Shadow Spokesperson (Work and Pensions)

I, too, want the Government to care about the post office network, but my quotation was not from the Post Office but from a representative of the BBC, which should also care about the future of the post office network.

If the Government had made a long-term commitment, the result might have been different. In the meantime, people in the highlands and islands and other rural areas sometimes face round trips of 50 or even 100 miles to buy a TV licence, whereas before they could have gone to their local village post office. One of my constituents received a letter telling her the location of the nearest PayPoint. She lives in Gorthleck, on one side of Loch Ness, and was told that the nearest place where she could collect her TV licence was "seven miles away" in Drumnadrochit. The letter failed to mention that the body of Loch Ness was between those two locations, and the round trip would actually be about 80 miles.

There is a huge lack of joined-up government. We have heard that a Cabinet Committee under the Deputy Prime Minister has been appointed to look into the problem, and I wish it well. However, there is no real appreciation of the value of post offices, especially those that serve rural and deprived urban areas. In many such places, the post office is the only access point for public services, where people can get access to cash and other basic financial services and, indeed, experience basic community interaction. The people who need those services locally—the elderly, the disabled and those without access to transport—will suffer most. It is no surprise that Age Concern found that 99 per cent. of older people in rural areas consider their local post office to be a lifeline service.

The Government make the point that it is not worth continuing to support post offices serving only a few people—but in many cases those are the people who need the service most. Like many Members, I too conducted a tour of villages in my constituency during the summer, and an old lady in the village of Tomatin, whose post office had closed three months before, said that she was now expected to travel 15 miles to Inverness to collect her pension. That may work when public transport is running, or in the summer months when there is no snow and ice on the roads, but in the winter it is almost impossible for her to collect her pension using her POCA.

Before Ministers kill off the so-called loss-making parts of the post office network, they should reflect on research that shows that every pound spent on rural post offices delivers £4 in measurable social and economic benefit to the communities that they serve. About £3.7 billion-worth of expenditure in rural communities is directly facilitated by having a local post office as its anchor. Closing post offices means closing local shops, increasing transport costs for vulnerable groups and, in some cases, threatening the long-term sustainability of the community as a whole.

The Government's policy seems to be to allow the life of the post office network to drain away rather than to kill it with a direct blow. Perhaps it is a Blairite conspiracy to make the first decision on Prime Minister Brown's desk the elimination of much of the post office network— [ Interruption. ] Or Prime Minister Hutton.

Today, the Financial Times said that the Government's plans, when they are finally announced, will involve the closure of thousands of post offices. When the Minister responds, will he confirm that? In his earlier remarks, he said that the figure would not be 6,500 post offices. As he knows what the figure will not be, will he tell us whether the actual number will be, more or less? What will be the import of his policy—when it is finally announced?

Either way, the British public deserve better. They deserve a full and open debate, where the Government put their plans openly on the table and people have a chance to comment on them. More than that, the British people, 4 million of whom have signed petitions, want a positive vision for the future of the post office network. As my hon. Friend the Member for Kingston and Surbiton said when he opened the debate, the Liberal Democrats have set out a clear, coherent and sensible plan for getting investment into post offices and the Royal Mail. We are the only party to have done so today; for example, we have not heard from the Conservatives what their policy would be.

We need the Government to see the broader social and economic value in a network of post offices across the country; the post office is often the only official presence in rural and deprived urban settings. We need to be willing to direct more Government services through those outlets, not fewer. Post Offices can help to decentralise services and allow direct engagement. They can help promote financial inclusion and they can be the hub of their communities. We need to end the spiral of decline in the post office network in which this and previous Governments have connived. We must provide investment to give hope to hard-pressed sub-postmasters and postmistresses and to the communities they serve. By supporting the motion the House will make it clear that thousands of post office closures cannot, will not and must not be tolerated.

Photo of Jim Fitzpatrick Jim Fitzpatrick Parliamentary Under-Secretary (Employment Relations & Postal Services) 7:18 pm, 16th October 2006

With the leave of the House, I will try to respond to some of the points made during the debate and make some concluding remarks.

Mr. Duncan, among others, asked about people who cannot use a bank account, or even open one. We have said that there will be a new Government-funded product for people who cannot pay into a bank account. There will be a successor to POCA and the Department for Work and Pensions is negotiating about it. I hope that also covers the point raised by my hon. Friend Kate Hoey.

The hon. Member for Rutland and Melton asked about the costs of POCA. He asked why every payment made into a bank account costs the taxpayer 1p but every payment into a POCA costs £1. The difference is because it costs only 1p to move money electronically from DWP systems to customers' bank accounts, while the POCA cost is £1 because it includes payments to sub-postmasters, Post Office central costs, marketing, call handling and call centres.

Sir Robert Smith pointed out that customers were worried that they might become overdrawn. The 17 basic bank accounts that can be used in post offices in the same way as POCA do not have overdraft facilities. If that does not answer his point exactly, I shall be happy to write to him if he wants to drop me a note.

The hon. Gentleman also asked about the universal service provision being watered down. I can assure the House that the provision of the universal postal service order remains at the heart of the Government's policy. The Government enshrined it in legislation for the first time that Postcomm's primary duty is to ensure the provision of the universal postal service. It has defined the USO, and where it proposes changes it is obliged to consult to ensure that the views of all interested parties are taken fully into account. As the hon. Gentleman might know, at present it is consulting on the concerns expressed on collection times, particularly in rural areas.

My hon. Friend Mr. Drew claimed that sub-postmasters are prevented from having a PayPoint terminal in the retail side of their business. There is no restriction on sub-postmasters having a PayPoint terminal. I will drop him a line as he does not appear to be in his place. He also asked about whether there is a restriction on sub-postmasters providing a PayPoint terminal at sub-post offices. There is no restriction on sub-postmasters having a terminal, provided that the terminal is not used for transactions categorised as key products and services. BBC licensing work has not, and never has been, covered by that restriction.

My hon. Friend also asked about credit unions. Benefits and pensions can be paid into credit union accounts. I think that he is aware that the Government are investing £36 million through the growth fund to help credit unions grow, and I am sure that he supports that.

Mr. Leech raised the question of a directly managed, or Crown, network. Let me clarify that there are fewer than 500 directly managed, or Crown, branches in a network of more than 14,000. The rest—some 97 per cent.—are sub-post offices that are already operated as franchises. Directly managed post offices represent only 3 per cent. of the network, yet they made a loss of some £50 million last year alone, and losses are predicted to rise to £70 million this year. That is money that could be better used for the benefit of customers, and it is absolutely right that Post Office Ltd take action to find a more cost-effective way of providing the main post office service.

Lorely Burt claimed that Post Office Ltd was prevented from bidding for the 70 passport authentication-by-interview offices. The Post Office was not prevented from bidding. Having reviewed what it could offer, the Post Office made the commercial decision to withdraw from the tender process. However, the planned interview offices will not take any existing business away from post offices or offer any alternatives to the passport check-and-send service available from selected post offices.

Danny Alexander said that I rejected the figure of 6,500 post offices in my earlier comments. What I said—I think the record will show this—is that I was not going to be tempted to make a comment on any number, and 6,500 was one of those that I was not going to comment on.

The post office network as it presently stands is unsustainable, and it must change to meet today's needs. People are choosing to access services in new ways, and to ignore that would be foolish. The Government recognise the important role that post offices play in rural and deprived urban communities, and, in drawing up our plans, we will take full account of their needs.

In response to Members who accused the Government of abandoning or neglecting the Post Office, the figures are clear and contradict that: £2 billion has been invested since 1999, including £550 million invested in the Horizon project, bringing modern computers into every office, and also including the £150 million spent per annum in 2003 to 2008 to protect the rural network. However, notwithstanding that investment, Post Office Ltd lost £2 million every week in 2005-06, and this year the loss is expected to rise to £4 million per week.

Sub-postmasters know the situation better than anyone, but even they recognise that things have to change. We are working closely with them to deliver the certainty that they are asking for: a long-term strategy that equips the Post Office for the future. The post offices run a number of experimental pilots. We discussed them earlier and I will not repeat what was said. But the results are positive and they are being examined.

Changing technology means that people are not using post offices as they once did: 8.5 million pensioners—out of 10.5 million—now get their state pensions paid into a bank account, and 98 per cent. of people making new state pension claims have chosen to have that paid directly into their bank, building society or post office account. An increasing number of people choose to renew their tax disc online——more than 3 million people have done that so far this year, compared with 860,000 in 2005. Nevertheless, the Post Office still provides one of a number of ways in which the Government can deliver services, and it still has an important role to play.

Members have raised questions about the Post Office card account. The Department for Work and Pensions is in discussions with the Post Office about what should happen after 2010, which is the year earmarked for the phasing out of POCA. The aim is to ensure that people have a range of choices about how they can access money at the post office. Labour recognises the important social role that the Post Office plays, and the Government will take that into account.

The Opposition parties have no credible alternatives. The Conservative party briefing for this debate is markedly light, as the hon. Member for Inverness, Nairn, Badenoch and Strathspey mentioned. The Tories' statement of aims and values, "Built to last", has nothing to say about Royal Mail or the post office network. The only idea that their leader has apparently had was confided to the East Anglian Daily Times during the Tory party conference. He is quoted as saying:

"Rural Post Offices could be saved under a future Conservative government by giving them lottery terminals".

There we have it. There are, in fact, no limits on sub-postmasters asking to have lottery terminals in their store.

At their spring conference, the Liberal Democrats voted in a brand new policy for Royal Mail and the post office network. They would separate Royal Mail from the post office network in order to privatise it. They say that they would use the proceeds of the privatisation to fund a string of additional programmes. That is the classic Liberal Democrat policy of assuming they can fund ongoing spending commitments from a one-off receipt. That is fairyland economics from the Liberal Democrats, and I think that they know that. They appear to have made no credible attempt to work out how much their programme would cost, and they are making an open-ended commitment to maintain, or even increase, the size of the network, irrespective of the changing world in which we live. The problems that we are trying to solve now would return in the years ahead—and not too far ahead either.

It is frequently stated that the network plays an important social role, and we agree. But rapid improvements in technology and wider changes in society have had a heavy impact on the many services traditionally seen as being the preserve of the Post Office. We have to accept that the Post Office operates in a commercial marketplace. The service that the network provides, including lottery tickets, foreign currency, telephony, bill payments and financial services, are all in direct competition with other retailers and providers. We have a strong management team in place at the Post Office and we have tasked it with turning the business around. The company is continuing to develop and introduce new services and business activities.

Members from all parts of the House have made clear their concerns for the future of the network. We recognise the calls for urgent decisions, and we are aware that there has been a prolonged period of uncertainty about the future direction of Government policy in respect of the network. I can assure Members that a funding support package of £150 million a year is in place to maintain the network until 2008, and we are carefully considering the options for the network beyond 2008.

There has been substantial activity behind the scenes in obtaining and assessing data on the network, and on how that feeds into possible options for future shape and size. We are not yet in a position where we can say that we have the answers, but I can tell Members that they should rest assured that we are listening and that their concerns will be reflected in our decisions.

The Government have an unprecedented track record of investing in the post office network and supporting Royal Mail, so we are not about to turn our back on them. Let me quote my Secretary of State, from a Financial Times article today. He said that we

"are determined to give the Post Office certainty"—

Photo of Adrian Sanders Adrian Sanders Opposition Deputy Chief Whip (Commons)

rose in his place and claimed to move, That the Question be now put.

Question, That the Question be now put, put and agreed to.

Question put accordingly, That the original words stand part of the Question:—

The House divided: Ayes 218, Noes 295.

Division number 304 Opposition Day — [19th allotted day] — Post Office

Aye: 218 MPs

No: 295 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Question accordingly negatived.

Question, That the proposed words be there added , put forthwith, pursuant to Standing Order No. 31 (Questions on amendments), and agreed to.

Mr. Deputy Speaker forthwith declared the main Question, as amended, to be agreed to.

Resolved,

That this House acknowledges the important role that post offices play in local communities, particularly in rural and deprived urban areas; recognises that the business environment in which Royal Mail and the Post Office network are operating is undergoing radical change with more and more people choosing new electronic ways to communicate, pay bills and access government services; applauds the Government's record of working closely with Royal Mail, Post Office Ltd and sub-postmasters to help them meet these challenges with an unprecedented investment of more than £2 billion made by the Government in supporting the network; acknowledges the important role post offices can play in tackling financial exclusion while recognising that the Government must also take due account of the need to deliver services efficiently; and acknowledges that the Government is committed to bringing forward proposals to help put Royal Mail and the Post Office network onto a sustainable footing.