Benefits: Payment through Post Office

– in the House of Lords at 2:45 pm on 10th January 2000.

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Photo of Lord Ezra Lord Ezra Liberal Democrat 2:45 pm, 10th January 2000

asked Her Majesty's Government:

What would be the effect on the Post Office and its network of the ending of the payment of benefits through the Post Office.

Photo of Lord Sainsbury of Turville Lord Sainsbury of Turville Parliamentary Under-Secretary (Science and Innovation), Department of Trade and Industry, Parliamentary Under-Secretary (Department of Trade and Industry) (Science and Innovation)

My Lords, there will be no change to existing methods of benefit payment before 2003 when the migration from order books and giro cheques to payment by automated credit transfer will commence. In the meantime, the automation of the post office counters network, due for completion by the spring of 2001, will enable the Post Office to extend its arrangements with the high street banks to offer a range of banking facilities at post offices. This will mean that benefit recipients who wish to access their benefits in cash at post offices will continue to be able to do so, both before and after the changeover, while post offices will be able to offer more services to all bank customers.

Photo of Lord Ezra Lord Ezra Liberal Democrat

My Lords, I thank the Minister for that Answer, but does he agree that the first effect of this policy has been to push the Post Office into the red for the first time in more than 20 years? It has had to write off some £570 million expended on the Horizon computer system, which was originally devised to improve the payment of benefits and which is now no longer required for that purpose. Secondly, does the Minister also agree that approximately 8,000 post offices--getting on for half of the total--will have 40 per cent of their revenues eliminated as a result of this policy and that this will seriously jeopardise their future existence? Does not the Minister accept that it has been a little unwise to introduce such far-ranging changes and reductions in revenue for the Post Office at a time when it faces more intense competition than ever before?

Photo of Lord Sainsbury of Turville Lord Sainsbury of Turville Parliamentary Under-Secretary (Science and Innovation), Department of Trade and Industry, Parliamentary Under-Secretary (Department of Trade and Industry) (Science and Innovation)

My Lords, the loss to the Post Office is due entirely to what is, in effect, an accounting provision which has made it write off this very large sum of money. At the moment, the underlying profitability of the Post Office is extremely sound and it appears that it should remain so in the future. We have adjusted the external financial requirement and the profit target to take account of the fact that the Post Office will be paying for this project from gilts and assets held on its balance sheet. We should not think that the Post Office is in any financial difficulty at the moment. The change will not take place until 2003--it is not taking place at the moment--which is an extremely sensible timeframe for doing this. It is very difficult to calculate the exact impact on individual post offices. People have the right now to move to the ACT system and will presumably continue to do so. To calculate the exact financial impact we shall have to know what payments will be made by the Benefits Agency and the post office counters network to post offices, both in these circumstances and the new ones. The timeframe is a good one. It should not push people into immediate difficulties.

Photo of Lord Islwyn Lord Islwyn Labour

My Lords, does the Minister acknowledge that, up and down the country, there are many thousands of elderly people who do not have bank accounts? In turn, they regularly go to their local sub-post offices to draw their pensions and other benefits, to chat to friends and perhaps to seek a bit of advice. Can the Minister give an assurance that our Labour Government will do nothing to curtail this very reasonable practice?

Photo of Lord Sainsbury of Turville Lord Sainsbury of Turville Parliamentary Under-Secretary (Science and Innovation), Department of Trade and Industry, Parliamentary Under-Secretary (Department of Trade and Industry) (Science and Innovation)

My Lords, let me make it clear that, even with the new system, in the future recipients of benefits will be able to go to a post office to get cash in exactly the same way as they do at the moment. What we are talking about here is a systems change that will introduce an automated accounting system to the transaction and will ease the migration out of order books. It will still enable people to go to the post office to get cash in the same way as they have in the past.

Photo of Lord Elton Lord Elton Conservative

My Lords, is the noble Lord aware that the fact that something is to happen in three years' time does not make it any the less worrying? Is he further aware that the worry of many of us is that the last focal point in many rural communities will be extinguished if the average village post office ceases to be profitable, as suggested in the supplementary question of the noble Lord, Lord Ezra? Can the noble Lord tell the House whether the Government will look at the Post Office not only as a business--as was made clear in the first part of his Answer--but also at individual village post office counters as a matter of social importance and therefore political sensitivity?

Photo of Lord Sainsbury of Turville Lord Sainsbury of Turville Parliamentary Under-Secretary (Science and Innovation), Department of Trade and Industry, Parliamentary Under-Secretary (Department of Trade and Industry) (Science and Innovation)

My Lords, the Government are totally committed to the idea of maintaining a nationwide network of post offices. We are acutely aware that they play an enormously important role in the lives of the elderly and the less mobile. That is why the Prime Minister has asked the performance and innovation unit in the Cabinet Office to carry out an urgent study on the post office network to assess its contribution to the vitality of local communities, how it fits in with the objectives of the Government and what future objectives we should have for it. In the meantime, a great deal of action is being taken to help with the financial viability of individual post offices, including the introduction of the new pay system that gives postmasters fixed payments. Furthermore, we are working in conjunction with VIRSA to produce a leaflet which explains how local communities can support their local post offices. Lastly, action has been taken on rates so that very small post offices need only pay 50 per cent. These actions have been taken because the Government are well aware of the importance of the post office network within local communities.

Photo of Lord Peston Lord Peston Labour

My Lords, does my noble friend accept that we have no better example of the failure of the free market than the behaviour of the commercial banks? They seem either to provide seven or eight branches of different banks in the same locality or no branches whatsoever. Can my noble friend reassure noble Lords by stating that the Government support the view that, particularly in small rural communities, the Post Office should provide a basic banking service--which it is well set up to do--essentially for the purpose of cash transfer? That would deal with an area of business that the commercial banks are nowadays anxious to be rid of.

Photo of Lord Sainsbury of Turville Lord Sainsbury of Turville Parliamentary Under-Secretary (Science and Innovation), Department of Trade and Industry, Parliamentary Under-Secretary (Department of Trade and Industry) (Science and Innovation)

My Lords, for most people a credit account of that sort should not attract any charges. As the Secretary of State has made clear, we certainly wish to ensure that those on income support get the full amount of money they are entitled to from their benefits and that no deductions are made from those. That point has been actively considered in terms of setting up an appropriate service.

Photo of Lord Williams of Mostyn Lord Williams of Mostyn Attorney General, Law Officers' Department, Deputy Leader of the House of Lords

My Lords, we have entered the 18th minute and I know that the noble Baroness has tabled an extremely important Question.