The Post Office card account provides a basic payment service by which people who are without a traditional bank account may receive their benefits, pensions, allowances and tax credits. Although most people have a bank account, there are certain groups for whom that is not viable, and for them the Post Office card account provides an important lifeline. The account is used by around 2.5 million people, including over 1.3 million pensioners. It was introduced to support the move from order books to direct payment into an account, and it was due to come to its natural conclusion in March 2015.
I am pleased to announce that the Government have agreed a new £250 million, seven-year contract that will protect a key service for vulnerable pensioners and benefit claimants as well as helping to safeguard the future of the post office network. For those people who cannot access mainstream banking, the Post Office card account is a vital facility. Through this agreement, we are ensuring that their needs are met. The contract with Post Office Ltd will ensure that the Post Office card account remains available until at least the end of 2021. That long-term deal is good news for the users of the service, good news for the Post Office and for sub-postmasters and good news for taxpayers.
The new contract provides a minimum of 10% efficiency savings over the life of the contract, saving the taxpayer over £27 million, while protecting the income of sub-postmasters. That is an important contribution to reducing the costs of providing contracted services, and the savings are commensurate with what has been achieved in other service contracts.
The new contract will be provided through the FOCS—front office counter service—framework. FOCS was awarded to the Post Office in 2012 following a competitive tender, with the intention that other Government services could be provided through a framework in the most efficient way possible. FOCS provides the Post Office with a gateway to win future Government business. I am pleased that we have been able to use the framework to deliver the new Post Office card account contract.
The latest Post Office card account contract, which was signed by the previous Administration, was due to reduce the number using the service. However, that did not happen as planned, which means we are starting the new contract with more customers than originally anticipated.
The Post Office card account was always intended to be a stepping stone to mainstream banking. The new contract continues to support that important principle of movement into financial inclusion. I welcome yesterday’s announcement that banks will remove punitive charges from their basic bank accounts. Increased access to basic bank accounts is a huge step forward for those who have previously struggled to open an account, and it supports the delivery of universal credit, breaking down the barriers to financial inclusion and work.
Like most other bank accounts, those basic bank accounts are accessible at the post office. This means that those who prefer to collect their money at the post office can continue to do so, preserving footfall for sub-postmasters. The Post Office also has a range of financial products which are currently being trialled in various parts of the country, and are due to go nationwide soon. This contract allows a further seven years for the Post Office to develop these accounts and move to a secure and sustainable business model.
The benefits of financial inclusion cannot be overstated. Claimants who are paid into a transactional account are more likely to find long-term employment, and can more easily manage payment of utility bills and direct payment of housing costs to landlords. But we recognise that certain groups remain unable to access such services and the Post Office card account is designed to meet their needs, even if it is as a stepping stone to mainstream banking. The Post Office card account is simple and easy to use and is readily accessible. People with a POCA can collect payments and check their balance either over a post office counter or by using one of a network of almost 2,500 Post Office ATMs spread across the UK network. Such accounts can be opened without a credit check, which means, crucially, that they can be accessed without difficulty by people with a poor credit history.
The Post Office card account is invaluable for those people who rely on someone else to collect their money for them, for example because of a disability. Just over half of Post Office card account users are pensioners, including a significant number over the age of 80. This agreement means that they can continue to receive their payments into a POCA and collect them at the post office, as they do now. I know how important the sense of continuity and familiarity that comes from using their local post office is for many older pensioners. I also know how important the local post office is to local communities. This contract provides certainty for the Post Office and sub-postmasters and helps safeguard the future of the post office network. The new agreement will help sub-postmasters to retain footfall and generate income for their important local businesses.
In 2010 this Government committed £1.34 billion to maintain a national post office network, modernise branches and safeguard the future of the post offices that play a vital role in urban, deprived and rural areas. In 2013 we committed a further £640 million to support the modernisation of the post office network over the next three years. Since then, the post office network has been at its most stable for 20 years. I am pleased that the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend Jo Swinson, who has responsibility for Post Office and postal affairs, is here to support this statement.
To conclude, this £250 million, seven-year contract with Post Office Ltd for the Post Office card account represents good value to taxpayers and security for sub-postmasters, protects local services and ensures that we continue to meet the needs of the most vulnerable users. I commend this statement to the House.
This is a welcome announcement from the Government, especially for all those who rely on Post Office card accounts. Indeed, it is the only sensible decision for consumers, pensioners and small businesses and for the Government. After all, it was this Government who promised to make the Post Office the front office of Government, to the tune of contracts worth £450 million per annum.
In the context of that promise, today’s statement raises as many questions as it answers. This is a not a new contract, but the renewal of an existing contract. What is the value of this new contract to the Post Office relative to the current contract? Where will the £27 million of efficiency savings come from? Does this mean more money for the Post Office or less? Does this statement take the Government closer to or further away from fulfilling its broken promise to the Post Office of an annual income of £450 million from the provision of Government services?
Before this renewal, Government services accounted for about £130 million of Post Office income. What is the total amount of Government income through the provision of Post Office services which will be in place following the contract renewal? Again, does this mean more money or less for the Post Office and for sub-postmasters? The National Federation of SubPostmasters urges the Government to fulfil their promise to deliver £450 million of income per year. Can the Minister be clear to the House about whether the statement takes the Government closer or further away from delivering that promise?
As the Minister knows, the Department for Work and Pensions had several pilots under way, which the Post Office was undertaking on its behalf. Can the Minister update the House on the progress of those pilots? They involved, for example, verification for national insurance and verification of documents for the Pension Service. What stage have those pilots reached, and will they contribute to closing the gap between the promise made and not delivered to the Post Office during the botched privatisation of Royal Mail?
More widely, the Minister rightly reflects on the importance of Post Office card accounts to those with disabilities and to pensioners. The Post Office Local programme is part of the network transformation and can, in some circumstances, reduce the number of counters available that provide privacy to those undertaking POCA business. What is the relationship between the post office modernisation programme and the ability of Post Office card account users to continue to enjoy the privacy that they associate with post office transactions, especially pensioners and the large number of Post Office card account holders who are over the age of 80?
The Minister referred in his statement to the number of transactions undertaken through Post Office card accounts. Does he seek to arrest the decline in usage? Is he clear that there has been a decline both in the number of people using POCAs and the number of transactions? His statement is ambiguous on that point. Finally, will he be clear about whether the Government have a strategy to increase the usage of Post Office card accounts or whether they are happy to let the decline continue?
This is a welcome announcement for all those who use post offices, but as far as we can see, it takes the Government no closer to—indeed, it takes them further away from—meeting that broken promise to the Post Office about Government services and making it the front office of Government. Can the Minister provide clear answers about the value of the contract, what it means for the Post Office’s total income and what it means for all those who care about the Post Office and Post Office card accounts?
I am grateful to the hon. Gentleman for his characteristically enthusiastic welcome for this very important announcement that will help to safeguard the post office network. The big contrast between the past four or five years and the preceding 13 years is the hours that hon. Members are not having to spend running “Save our post office” campaigns. The hon. Gentleman talks about decline. The policy of the previous Government was to have rounds of post office closures, this Government have invested £2 billion in preserving the network. This contract will be a further fillip for postmasters.
The hon. Gentleman asks what we are doing to reverse the decline in Post Office card account use. Back in 2005 there were 4.2 million people using POCAs, and in 2010 there were 3.4 million. Under Labour the number of people using POCAs fell by 800,000, so the idea that continuing decline in the use of POCAs is a new phenomenon is news to me. What is happening is that older pensioners, sadly, die and do not use a POCA any more. Newly retired pensioners tend to be more familiar with banking, so the number of pensioners using the POCA will gradually decline, but when Labour set up the previous POCA contract, it asked the Post Office to migrate 700,000 working-age people off these accounts to save money. In fact, this did not happen. When Labour set the contract, its intention was to reduce the scope.
I made it clear in my statement that we believe we will keep the POCA over the next seven years for pensioners. People of working age, as they come within the scope of universal credit, will need a transactional bank account, so although the most vulnerable universal credit recipients will continue to have access to POCAs, we will seek to ensure that wherever possible people of working age have a transactional banking account that will allow them to benefit from direct debits, budgeting and so on. That is where they want to be.
The hon. Gentleman asked about post office locals. I am advised by my hon. Friend the Minister with responsibility for postal services that customer satisfaction, which is presumably the yardstick in these matters, is up in post office local branches. The hon. Gentleman asked about privacy. Presumably, when customers decide whether they are satisfied or not, privacy is one of the things they consider. In answering our questions, they say that they are more satisfied than they were before the investment went into these post offices.
The hon. Gentleman asked about efficiency savings in the contract. Unlike the previous Government, we do look to make those savings, but we have not reduced the price that sub-postmasters get for each transaction. We could have said to Post Office Ltd, “Save us some money—give the sub-postmasters less”, but we did not do that because the sub-post offices are our priority. He asked about the figure of over £400 million. That is not a target that the Government have set for ourselves.
The hon. Gentleman asked about other services. We are exploring the use of identity-related services at the post office. We run a cross-Government service called
Tell Us Once for customers to report births and deaths, and we are looking at whether that can be carried out at the post office and linked with ID verification. There is plenty of potential for new services. Driver and Vehicle Licensing Agency counter services have gone into post offices, as has Check and Send, an excellent service from the Passport Office. The crucial thing about this seven-year agreement is that it allows plenty of time for new services to be developed so that our post offices have a long and prosperous future.
Between 1997 and 2010, under Labour, Pendle lost 17 sub-post office branches. I am therefore delighted by this statement on the Post Office card account, with £250 million of support and a new seven-year contract. Will my right hon. Friend confirm that the front office counter service framework will allow the Post Office to bid for, and win, more Government business in future?
Yes, my hon. Friend is right. The front office counter framework was competitively tendered. The Post Office won because of its unrivalled network and what it was offering, and that meant that the contract could be awarded much more straightforwardly. Using the framework, we have already been able to award other contracts for DVLA counter services, for example, and the Post Office will be able to bid for other Government contracts as they arise.
In his statement and his reply to my hon. Friend Gregg McClymont, the Minister made it clear that the POCA will not become a transitional account, and it is therefore less likely to be suitable for people who have been moved on to universal credit. The Government promised that jam jar accounts would be developed. Clearly, the POCA is not going to be a jam jar account, as some people had hoped. What are the Government doing about this? Who is going to provide these jam jar accounts, because as yet we do not know of any?
I am grateful to the Chair of the Work and Pensions Committee. We have not added features to the Post Office card account because, for example, adding direct debit means that the credit check threshold suddenly gets much more serious. Instinctively, I am with the hon. Lady on this. My approach would have been that the POCA is a good thing, so why should we not add nice things to it? We have not upgraded it, however, because one of its attractions is that people who have poor credit histories or who would struggle with some of the identity checks can be enabled to access it. In developing universal credit, my right hon. Friend the Work and Pensions Secretary is working with local authorities and the banking industry to look at different sorts of accounts, including, as the hon. Lady suggests, budgeting accounts. The basic bank accounts that were improved yesterday will be part of a suite. We intend that there should be the right sort of accounts for the right people.
I am delighted by today’s news that the Post Office will be able to serve customers using the new POCA well into the future. As the Minister said, that will enable the Government to achieve their commitment to protecting the post office network, unlike the previous Labour Government, who closed thousands of branches in every single constituency across the entire country. How many customers does he estimate will access the new accounts, which will bring trade into these post office branches, and how many are unable to access bank accounts at the moment?
I am grateful for the work that my hon. Friend has done on this. As she will recall, we met to discuss how we could deliver this contract when she was postal services Minister. About 4,000 people in her Cardiff constituency currently have Post Office card accounts, and they will welcome this announcement. She is right that we have to work out how we can develop and expand this in future. We are trying to make sure that we have the right accounts for the right people. The number of pensioners with these accounts will gradually decline. For people of working age, we want, where possible, financial inclusion and transactional accounts. Many people with POCAs do have other bank accounts—for various reasons, they hold both—but we will make sure that the most vulnerable people have access to their money at the post office.
I am sure that it will be a great relief to many people running post offices to know that the contract is going to be extended in this way, because there was uncertainty for some time. On being able to move from the Post Office card account to a basic bank account, I understand what the Minister said about credit checks, but would it not be possible for the Post Office to establish a basic bank account to which people could migrate, because that might speed up the movement of people into proper transactional bank accounts?
Post Office Ltd is coming up with a range of accounts, some of which have monthly charges and other different features. The basic bank accounts of the largest nine clearing banks, among others, are all Post Office-accessible. The key thing is that Post Office Ltd is a business that can develop accounts of different sorts, as it is now doing—perhaps it has taken a bit longer than we might have wished—and customers can choose between them. For us, the crucial thing is that people will, if they wish, be able to get their cash at the post office, whether from a POCA, a basic bank account or a Post Office account.
This announcement is vital for customers in our local post office network. The previous Labour Government presided over more than 6,000 post office closures. Labour MP after Labour MP queued up to have their photograph taken before coming down to Parliament to vote to close those post offices. To what extent will this announcement protect our existing network?
My hon. Friend is absolutely right. There has been a sea change. Of course, nobody notices something that does not happen. For the past four years, we have not seen these mass organised closures. It was not just attrition, but at least two rounds of organised post office closures. This Government, despite difficult financial situations, have made it a priority to address that. Not only have we have invested in upgrading the network, but the post office local model means that people will be able access their cash on a Sunday morning if the shop is open, and that will be good for business. This is a seven-year contract, so it covers a very long period. The intention is to give the post office network breathing space to develop new products for the longer term.
As deputy vice-chairman of the all-party group on post offices, I greatly welcome this announcement on the Post Office card account. Because of the new local branches across my constituency, we now have over 300 extra post office opening hours every month. Does the Minister agree that this signals an end to the 13 years of decline in our wonderful post office network?
My hon. Friend is right; 2010 marked a sea change in the attitude of central Government towards the Post Office. I pay tribute to him and to the all-party group for their work on this issue. I recall attending a meeting of that group. The coalition parties have shown persistently, in very concrete terms, their commitment to the post office network in a way that the previous Government did not.
I am grateful to the hon. Gentleman. We set great store by credit unions. As he knows, we have invested about £38 million in the credit union expansion project. Previous Government interventions in this space were well-meaning but did not create a new sustainability for the credit union movement. [Interruption.] Helen Goodman, who is a former Minister, says, “Rubbish.” The previous Government put up money for loans, the money got lent, and the credit union was no more sustainable at the end of the process than it was at the start. We are taking a different approach whereby we are trying to ensure that there is an infrastructure that makes running a credit union cost-effective. We are also very open to the possibility of a link with the post office network.
As chair of the all-party group on credit unions, I was going to ask almost exactly the same question as Mr Jones. I commend the Minister for this statement, which is good for pensioners, good for consumers, and good for our post office network. Under this Government, seven local branches in Worcester have been upgraded; under the previous Government, our last Crown post office closed. That is quite a contrast.
I am grateful to my hon. Friend for his work on the crucial issue of financial inclusion. I stress that we see the Post Office card account as being particularly suitable for vulnerable people such as elderly pensioners. Over the next few years, people of working age will move from these types of accounts to more transactional accounts. The credit union movement is clearly an important part of this financial inclusion agenda. The crucial thing is to ensure that whether it is through a POCA, a basic account or any other sort of account, people can, if they wish, go to the local post office for their money, and they cannot do that if it has been shut.
It might be the Christmas spirit, but I find myself in the unusual position of actually welcoming a statement from the Minister. The Post Office card account is welcome, but I have to say that the Minister is wrong in what he says about Post Office modernisation. Many of the post offices in my constituency are suffering changes, with stand-alone post offices being closed in favour of local post offices. There is real concern about the lack of positions for POCAs in local post offices, where queues can build up—many quite large communities have only one local post office to serve the whole community—and banks are beginning to close some of their branches. In those circumstances, how can he be certain that the POCA will be a stepping stone to mainstream banking?
I will take what I can get: I am grateful to the hon. Gentleman for his enthusiastic response. The 3,760 POCA holders in his constituency, as of last year, will welcome this announcement. On the issue of post office locals, each proprietor has to think what works in their premises, but I am advised by a normally reliable source—the Minister with responsibility for postal services—that queuing times are falling in the local model.
I really welcome today’s statement about real investment in this vital public service—our local post offices. May we have a bit more information on how soon POCA customers who do not already have a basic bank account will be able to pay their bills by direct debit and therefore secure the best deals on their utility bills?
There is a real tension between an account that is easy to open—limited identity checks; designed for people with poor credit histories—and an account that is sophisticated and transactional, and we feel that basic bank accounts offer a bridge between those two accounts. I was delighted by yesterday’s announcement by my Treasury colleague, the Economic Secretary: one of the things putting people off basic bank accounts is getting hammered with fees, say if a direct debit fails or something like that, and the fact that those fees are no longer in place is an important step forward for people making the transition to more regular sorts of accounts.
The Post Office card account was always intended as a stepping stone to a transactional bank account, which is a gateway to other financial services. The basic bank account agreement with the nine banks is to be welcomed, but there is still incredible suspicion in the marketplace about transactional bank accounts. What more will the Minister do to persuade POCA holders that it is in their interests, as well as in the interests of everyone else, to move to a transactional bank account?
The hon. Gentleman makes an important point. We are testing and trialling approaches to try to work out which sorts of accounts are most suitable for which people. It is important to understand the revolution that universal credit will bring in, because people will get the whole of their benefits—tax credits, and potentially help with housing—and they will have to budget from that one relatively large sum. An awful lot of work is going on to trial which sorts of accounts work best for which sorts of people, but over the coming years we will clearly contact people of working age to indicate to them the merits of a transactional bank account.
Malcolm Fuller, the sub-postmaster of Eaton post office in my constituency, will step down from his role in the new year after decades of service to the local community. How will today’s announcement support initiatives to encourage new sub-postmasters to come forward, and to encourage existing businesses to deliver post office services in their communities?
My hon. Friend is a doughty campaigner for the more than 5,000 POCA holders in his constituency. He is right that one reason why we are delighted to make the announcement is that sub-postmasters have told us they want an end to the uncertainty. For example, if they were selling a business, the person thinking of buying it needed to be confident that the business had a long-term future. We believe that the seven-year horizon gives sub-postmasters that confidence. We hope that it may unblock some sales, and enable new people who are prepared to move on to the next generation of services to plan for the future. Crucially, to respond to my hon. Friend’s question, it will give post offices the breathing space in which to do that, which they lacked in the past.
I thank the Minister for his statement, because the POCA clearly provides accessibility for many people, particularly elderly people, who rely on the service. In that context, what other Government financial services does the Minister contemplate treating in that way, particularly at a time when many of the mainstream banks are closing many of their branches and people do not have accessibility?
We are trying to ensure that a range of Government services, not just financial ones, can be accessed at post offices. I recently renewed my family’s passports. The Post Office Check and Send service before the passports went off provided peace of mind and meant that they came back quickly. The Post Office is very good at providing that very valuable service. Identity verification will become increasingly significant: as Government services move online, the way in which someone proves their identity online will become important. As a trusted brand, the Post Office could play an important role as one of the potential providers of those services. Not only will services that Post Office Ltd is willing to offer on a commercial basis be available at post offices, but so will a range of Government services.
The Minister referred to the fact that the Post Office card account includes the facility to enable someone to allow another person to collect their money for them, which is particularly useful for the disabled. Under the new contract, will the account still provide for the issue of a second card for someone who wants one?
Yes, I can confirm that. There is a system called simple payment for some of the most vulnerable people, who used to have giros, but for those with Post Office card accounts we will continue the facility of a second card for a family member or a carer.
Last week, Charlotte Leslie had an Adjournment debate in the Chamber on a LINK project to try to put ATMs in locations, such as villages, where there are not any ATMs already. For that reason, I very much welcome the Government’s announcement, which is really good news. Will the Minister confirm what the changes are in using the new system at post offices, and will the Government work alongside the LINK project to reduce or nullify charges for usage of the Post Office card account?
As the hon. Gentleman knows, it is clearly already possible to access cash from a Post Office card account through the network of Post Office cash machines fee-free. As the number of Post Office card accounts drifts down and working-age people move to transactional banking accounts, one danger was that cash machines in rural and deprived urban areas would become unviable and be withdrawn from the network. One of the things we have specifically done through the new contract is to ask the Post Office—this is ensured as a term in the contract—to retain cash machines in rural and deprived urban areas.
I congratulate my right hon. Friend on his announcement. It is good news for all the village post offices in my constituency and the pensioners who use them. It guarantees the long-term future of such post offices, and it is a contrast with the attitude of both the previous Government and the banks that are shutting rural branches. For the long-term survival of such post offices, the Post Office needs to develop its own basic bank account. Will my right hon. Friend encourage it to do so?
I pay tribute to my hon. Friend as an officer of the all-party group on post offices and, indeed, as a persistent thorn in my side on this issue, which he recently raised at Business, Innovation and Skills questions. He has shown his commitment to post offices, and I know that his constituents will respect the work that he has done.
We have left Post Office Ltd, as a commercial organisation, the freedom to design bank accounts of the sort it feels appropriate. It has come up with a series of accounts; for example, some have a monthly charge, and others have different features. It is obviously testing the market, starting—if I remember rightly—in the east of England. That is clearly a commercial issue for it, but we are keen to make sure that a range of accounts are available to people to meet their needs.
To be absolutely clear, the amount we pay sub-postmasters per transaction will be the same. We have protected that. The number of Post Office card accounts has been falling and will continue to fall, because older pensioners die, new pensioners have a tendency to use banks more and the working-age population generally moves towards other forms of transactional accounts. However, if someone moves to a bank transactional account that is accessed at a post office, they can still go into the post office and the post office will still get the footfall. The volume of POCAs is clearly going down, but the value that we are paying in the contract per transaction is staying the same.