My Lords, with the leave of the House, I shall repeat a Statement made by my right honourable friend, James Purnell, in the other place. The Statement is as follows:

"With permission, Mr Speaker, I shall make a Statement on the future of the Post Office card account.

"This Government created the Post Office card account in 2003. We announced that there would be a successor in 2006 and, based on the legal advice we received at the time, we put the contract out to tender. During that process, I have been unable to comment publicly or privately on this matter. I know that that has been frustrating to honourable Members, and I thank them for their understanding.

"I know that all honourable Members would agree that the post office is at the heart of their community. It reaches the places and people that no one else does. That is why the Government have invested £2 billion in the Post Office since 1997; that is why we have for the first time set out access criteria to guarantee its reach; and that is why we will invest another £1.7 billion between now and 2011.

"There is no doubt that the Post Office card account is central to maintaining a viable post office network. It not only generates a key part of the Post Office's income but brings with it vital footfall to individual sub-postmasters. Post Office card account customers have shown how much they value the service through the postcard campaign over the past few months, which has resulted in the large postbags of honourable Members.

"It is also clear that maintaining a viable post office network is even more critical now than it was two years ago. The financial turbulence that began with the American banks, and the string of consequences which followed from it, have understandably made many people, particularly the most vulnerable in our society, more concerned about financial transactions. The Post Office, with its trusted brand, is seen as a safe, secure and reliable provider of services.

"Now cannot be the time for the Government to do anything that would put the network at risk, particularly as post offices are often the only providers of banking services in both rural and deprived urban areas. The Post Office also has a proven track record of being able to move billions of pounds in cash safely around the country to ensure that the money is there when customers need it, and prides itself on meeting the needs of vulnerable customers. Sub-postmasters know their customers and provide a social service as well as a banking service.

"Delivering that vital social service for groups in our communities who need it most is not only an objective of the Post Office. It is an objective shared passionately by the Government as well.

"To safeguard that service, we must help and support a viable post office network. For that reason, I can announce today that the Government have now decided to cancel the current unfinished procurement exercise and to award a new contract for the continuation of the Post Office card account directly to Post Office Ltd, within the terms of the relevant EC regulations. The contract will run initially from April 2010 to March 2015 with the possibility of an extension beyond that.

"I recognise, of course, that this decision will disappoint those other bidders who had reached the final stage of the competition. I emphasise to the House, as I have done personally to the companies in question, that my decision does not reflect in any way on their ability to have provided the services in question. Nor is that a step that we have taken lightly. We recognise the importance of competition in the awarding of public contracts, but we have concluded that, in the current circumstances, protecting vulnerable groups by preserving a viable post office network justifies the award of a contract outside the competitive process. These are exceptional times, and we believe that this is a proper and proportionate response.

"The Post Office considers that this decision, along with the extra money invested by the Government, will ensure a commercially viable future for the post offices that will be in place after the modernisation programme is complete.

"I said that I would make a decision as soon as I could. I said that I would not rush the decision. I said that what was important was that we made the right decision. I believe that this is the right decision. This decision is good news for our constituents; it is good news for Post Office Ltd; and it is good news for sub-postmasters. I trust that it will be welcomed by honourable Members and I commend the Statement to the House".

My Lords, that concludes the Statement.

My Lords, I am grateful to the Minister for repeating this long overdue Statement made in another place literally seconds ago. He must be aware that it contains a fiasco with a happy ending. It has been awaited for a very long time. We were told by the Government that it would come before the Summer Recess. The Summer Recess came and went. Then we were told that it would come in October. October came and went. Then we were told that it had been held up by the Glenrothes by-election. That came and went. Now, at last, we have it.

It comes as a great relief to post offices and to the many people—in particular, pensioners—whom they serve. Five thousand post offices have already gone since the Government started dithering on the matter. If the Post Office card account had not been re-awarded to post offices, there is no doubt that that would have led to an even greater number of closures. Indeed, we heard during Questions today of an estimate of one-third of post offices being lost by the time of the next election, had this happy event not occurred. So why does the Statement say:

"There is no doubt that the Post Office card account is central to maintaining a viable Post Office network"?

What led the Government, kicking and screaming perhaps, to reach this conclusion—a conclusion which the public and their MPs have been telling them for months? We have even had debates in your Lordships' House, led not least by my noble friend Lady Byford on this exact subject.

The Statement appears to blame this fiasco on lawyers. I suppose the Government have to blame someone when considering the future of the Post Office card account. Lawyers apparently said that it would have to go out to tender. This is indeed what happened. However, the Statement says that,

"the Government have now decided to cancel the current unfinished procurement exercise".

Have the same government lawyers pronounced on that? If so, this advice is not really consistent.

The announcement today is not permanent relief for post offices or their millions of customers. It amounts to an extension of the current arrangements for, in the first instance anyway, only five years. Did the lawyers advise on this, too? What is the significance of "the relevant EC regulations" in the Statement? Where do they fit into all this? How much has all this abortive tendering exercise cost?

Finally, DBERR is at last grappling with the undoubted problems of the Post Office, and I congratulate the Secretary of State, who I am afraid is absent. I rather see his hand in much of the Statement, such as the bit about the Post Office's potential role in becoming even more involved with financial products, because the Post Office is seen as what the Statement quite rightly calls,

"a safe, secure and reliable provider of services".

That remark stands out.

Exactly those thoughts were in a letter from the Secretary of State to the Prime Minister, which was leaked to the Guardian on Tuesday. I do not know whether the Minister heard the maiden speech of the noble Lord, Lord Mandelson, the other day, but he was here,

"to toil, not to spin".—[Hansard, 16/10/08; col. 861.]

We all thought that at the very least he would have remained in the House this morning either to give or to hear the Government's Statement, given his new-found great interest in the future of the Post Office. Had he been at the Dispatch Box this morning, I, or perhaps my noble friend who is his opposite number, would have asked him whether he would institute a leak inquiry. I therefore ask the Minister whether there will be one.

In the past two years, the Government's handling of the Post Office has undermined its business and has caused painful turmoil and growing pain for postmasters and communities. Post offices, communities and many of the country's most needy people will today breathe a sigh of relief that the Post Office card account has been re-awarded to the Post Office.

My Lords, be cheerful.

My Lords, I am more than cheerful, I am delirious, but I am sorry that it has taken so long for this happy result to occur.

My Lords, we on these Benches also welcome this news. This is the week for memories of 11th hours. This decision seems to be another. Post offices, as noble Lords will know, have been closing all around the country and have been the subject of the most terrific campaigns by those on our Benches and the opposition Benches. It would have been disastrous for more post offices to close, particularly in this climate, and we are very pleased that the Government have understood this. We therefore welcome this decision, although it is very late in the day.

We all want to know whether this is a permanent change or whether we will have to come back to the House to see what is going to happen in a few years' time. I will not reiterate the points that the noble Lord, Lord Skelmersdale, has made, but I want to ask about the bidding process. Are the Government going to compensate bidders for the costs that have been incurred so far? We need to know. Will the Government take any other steps to ensure the viability of the Post Office network, which is so important to its future? All in all, this is a very happy day, so I thank the Minister for repeating the Statement.

My Lords, I am grateful for the support of both noble Lords who have spoken. I should say to the noble Lord, Lord Skelmersdale, that this not a fiasco at all; it is about taking the right decision at the right time, particularly given the turbulent financial circumstances that we face. It is bizarre to suggest that we somehow deferred this decision until after the Glenrothes by-election. We were able to win it without this good news. Goodness knows what we would have done if we had announced this earlier.

The noble Lord said that we blamed this all on lawyers. That is not so. As the Secretary of State has made clear, being able to call a halt to the procurement process was key, and it was the advice of lawyers in the current circumstances to proceed without a competitive process. The previous advice, which was clearly based on the circumstances at the time, was that we needed to go out to competitive tender, which we did. The Secretary of State again requested advice, given the turbulence that we face and the importance of the Post Office brand and the stability that it is seen as providing in communities up and down the country. The advice came back that we did not, in these circumstances, have to proceed by competitive tender, which is why we have been able to take this decision. Tendering is obviously subject to EC regulation, but no requirements are imposed on us with regard to state aid under those provisions.

The noble Lord also asked about cost in all this. All the bidders who were left in the competition made proposals that were below current terms, and clearly the end result will mean a better deal for the taxpayer.

The noble Lord challenged the absence of my noble friend Lord Mandelson. I was not present when he answered a Question today about the future of the Post Office, but I did watch him on the screen and he seemed to be very clear about his and DBERR's commitment to a viable and sustainable Post Office and to ensuring all that can be done to develop financial services in particular through that substantial outlet. The noble Lord, Lord Hunt, challenged him on that, so to criticise my noble friend for not being here today is entirely unfair.

I have no idea who leaked what to the press. It is not how I do business, but regrettably these things happen in a number of instances.

This is a happy day for the noble Baroness, Lady Thomas of Winchester, and I am really pleased about that. She asked whether this was a permanent change. We have made it clear that the award is a contract to 2015, with the possibility of renewal. She also asked whether we will compensate bidders for their costs. We are certainly prepared to entertain reasonable claims for costs for bidders who remained in the final process. This will add to the viability of the Post Office network. At Question Time today, my noble friend Lord Mandelson explained his focus on this and his determination that the Post Office should be sustainable and viable for the future.

My Lords, I think the Minister said in one of his responses to me that the lawyers were originally consulted in the circumstances pertaining at the time. Can he go a little further and tell us in what respect the circumstances have changed?

My Lords, the noble Lord will know full well that it is the convention of the House not to disclose the processes by which legal advice is sought on behalf of the Government or the detail of that. The point to bear in mind is that we are in turbulent financial circumstances in which particularly vulnerable people question the use of bank accounts or accounts of any sort, and whether they should have faith in the financial system. Given the strong brand that the Post Office has, it seems to be increasingly important that we do everything we can to make sure that its viability is sustained. It will be an added opportunity to encourage people into bank accounts, quasi-bank accounts and accounts such as the Post Office card system, which is different from where we were a couple of years ago. That fundamental backdrop and focus on the overriding public policy issue has generated this change.

My Lords, I assure my noble friend that we on these Benches at least are more than happy for him to make the Statement. We are aware that the Statement in the other place was made by the Secretary of State for Work and Pensions, and it seems very fitting that my noble friend should be here, particularly since his noble friend and mine answered my Oral Question little more than one hour ago. Perhaps the noble Lord, Lord Skelmersdale, did not hear that exchange, but he could have spoken to his noble friend Lord Hunt who asked my noble friend Lord Mandelson a number of the questions which he raised a few moments ago.

Without going over the ground that we covered earlier, first, now that the Government have saved the Post Office card account, will they give urgent attention to looking at other ways in which the Post Office can play a greater part in the lives of the people of this country with the people's bank and offer other services at branches? Secondly, is it not also sensible for them to look at the future of the Royal Mail and ensure that its activities are not cherry-picked by competitors, and that as part of the new approach towards the Post Office a lot of the Royal Mail services are protected as well?

My Lords, my noble friend will understand that these questions come more directly under the responsibility of BERR rather than the DWP. I believe that my noble friend Lord Mandelson was very clear on that first point at Question Time today in response to my noble friend's questioning. Issues around the Royal Mail are subject to review at the present time. I think that we share a desire to make sure that the Post Office and the Royal Mail are sustained in a robust form.

My Lords, since 2000 several Members in the Chamber today have sought to establish the future of post offices. It is a common drive, which I first raised during the passage of the Pensions Bill. The noble Baroness, Lady Hollis, is nodding. I have two direct questions. Will this announcement require the Post Office to look at those post offices whose future has already been put under jeopardy and will they be reviewed again? In his response earlier, the noble Lord, Lord Mandelson, said that he will talk to various government departments about ways in which they could get more trade going through post offices. Will the Minister particularly pay attention—the noble Baroness, Lady Hollis, will not agree—to the way in which the DWP does business? Clearly, the pensions and benefits department put enormous pressure on anyone who is entitled to a benefit to have it paid through their bank if they have one. That is not fair to post offices. I hope that the Minister will say that that practice will not continue.

My Lords, perhaps I may deal with that second point first. Although I think that it was an omission the first time around, in leaflets now being prepared to notify people who are paid by cheque or giro about the alternatives to bank accounts, the Post Office card account has been added to that list of facilities which people are encouraged to use. The statistics are that, of the payments made by the DWP, something like 78 per cent are made into more mainstream bank accounts, 20 per cent into POCA accounts and 2 per cent are still made by giro. Under these new contractual arrangements, there are improvements to the Post Office card account. Card account holders can access their accounts through ATMs and the opening of such accounts will be more streamlined. That has been a bit bureaucratic and has deterred people. People will also be able to have the benefit of the fast-track payment system that is part of the financial services system.

The noble Baroness asked me about the current closure programme. We do not believe that there will be an impact on that. Decisions on the last of the 42 area plans in the network change programme were announced on 29 October. If that decision had been made earlier, would more post offices have been able to stay open? We believe that the answer is no. Post Office Ltd has been making unsustainable losses and lost £500,000 a day last year. The network change programme reflected the need to restructure the network to reflect changing customer demands and habits. The programme has improved the viability of remaining offices through migration of customers from nearby offices which have closed.

My Lords, the Minister rightly referred to the turbulence in the banking sector, and the solid and reliable service that post offices give in this country, which is why we welcome the announcement today. But I should like to press the point made by my noble friend that this solution for the five-year period will develop into a permanent solution. In response to the question asked by the noble Baroness, the Minister seemed to imply that the closure programme would carry on even had this agreement been instituted before today. That makes me very worried that the Government are not committed to a permanent answer for post office services as more businesses depend on the local post office for their transactions. An experiment was carried out which delivered services of one sort or another—it could extend to the services for small businesses—through the post office system, and it was abandoned. We are looking for a permanent solution.

My Lords, we should recognise that many sub-post offices are small businesses in their own right. I do not think that I could put it more eloquently than my noble friend Lord Mandelson did at Question Time on the Government's determination to build and sustain a viable network for Post Office Ltd. The noble Lord asked again about the term of the award of the contract. It is a five-year contract. The current contract ends in 2010, but with the prospect of renewal thereafter. That does not seem to be an unreasonable length of time for a contract and would give some assurance to Post Office Ltd.

My Lords, like everyone else, I am delighted, for social grounds, particularly in rural areas, that we are going to sustain the post office network. I hope, as I am sure that other noble Lords will do, that, as a result, sub-postmasters take the opportunity to build their businesses to ensure that they are used. A sizeable chunk of the post offices that closed in the past year had fewer than 20 transactions a week. Consequently, if we do not use post offices and if they cannot or do not provide the services that we all want to see, they will not survive and enjoy the footfall rightly referred to by my noble friend.

I was concerned when the noble Baroness seemed to suggest that it was the DWP's responsibility to pay over the odds, if necessary, for transactions in order to keep afloat an institution which we all want to see stay afloat for social grounds. Perhaps my noble friend would remind the House of the cost per transaction of a DWP benefit payment, whether it be a pension or whatever, into a bank account, via POCA and a paper transaction. Perhaps he could give us a steer as to the relative costs, which used to be very alarming.

My Lords, I am afraid that I cannot give my noble friend the specific detail, but I shall write to her. It is right that the comparative cost of paying people by cheque or giro is significantly greater than doing so through bank accounts and the Post Office card account. As I indicated, all the bidders in the final stage came forward with terms that were, in a sense, more favourable than the current arrangements, although obviously those are contractual terms between DWP and Post Office Ltd. How those terms translate into the cost of individual transactions is not something I can respond to specifically at the moment, but I will follow up the point and give my answer in writing. What is absolutely clear is that encouraging people to be paid by means other than through the giro system is safer, more secure, more flexible and generally better for them and considerably cheaper for DWP and HMRC.

My Lords, first I should declare a long-out-of-date interest as a former Minister of posts and telecommunications. The Statement refers to the completion of the modernisation programme. Can the Minister assure the House that the Post Office has now secured more sensible manning and handling practices by the unions concerned? Will he also confirm that this Statement, welcome as it is, means that the plans that had been in existence for the closure of sub-post offices will no longer go ahead?

My Lords, I cannot give an assurance on the latter point. I have made it clear in my previous two answers that this announcement does not affect the change programme that has been under way and is now heading towards a conclusion. We certainly believe that if the announcement had been other than that which I have been able to make today, there could have been a further impact on the network, but it will not change the restructuring proposals that are in place. They have been consulted and deliberated on over a considerable period of time.

On what the announcement means for the Post Office in the future, my Statement included a welcome from Post Office Ltd and an acknowledgment that together with the other government funding that has gone in, another £1.7 billion between now and 2011, a considerable difference is being made to the continuing viability of Post Office Ltd.

My Lords, I forgot to declare my usual interest as a former postman when I spoke earlier during the Question put by my noble friend Lord Faulkner of Worcester.

I welcome the Government's decision today—indeed, it would be churlish not to do so—but at the same time I draw attention to the fact that over the past six years a number of noble Lords on all sides of the House have been trying to guide the Government into understanding the need for a public service. Today we have seen, perhaps rather belatedly, the Government coming to the same conclusion. I am tempted to respond to an earlier comment about cherry picking, but that is for another day. The prophecies made on both sides of the House have all come true: we have seen the Post Office slip down and down and, of course, the Government have taken away a lot of its work.

I have some specific questions to put to my noble friend. First, can he put to bed once and for all the idea that Post Office workers and sub-postmasters serving behind counters are not allowed to promote Post Office business? There have been instructions not to talk about the Post Office card account and to refer to other forms of banking. Secondly, building on what the Minister said at Question Time today, does my noble friend consider today's decision to be a building block on the way to getting a people's bank, something to which I referred earlier? There is no need to reinvent the wheel. We need only to take down the file for National Girobank, when the bank was given to the Alliance & Leicester Group, and start it up again. It would be as successful as it was during the 22 years of its existence. Specifically, I ask my noble friend this: when the Secretary of State says, "Let us look at all these products", will that be taken into account?

My Lords, I thank my noble friend for his support for the announcement. He referred to the Government taking business away from the Post Office, but we live in a changing environment. In the debate just last week reference was made to the fact that many more people are now doing business via the internet, which has driven some of the changes that have been necessary in the network.

On the proposition that Post Office employees and sub-postmasters are not allowed to promote Post Office business, I simply do not believe that that is the case. The market for the Post Office card account has declined from its peak of 4.3 million cardholders down to around 3.9 million at the moment. One development is that some people are moving from the Post Office card account, which has the advantage of simplicity as a channel for benefit payments—that is quite important in relation to the current legal advice that we have received—on to more traditional, mainstream bank accounts. By doing so, they can use the facility of direct debit, which as we know is one route to getting discounts on utility bills. Obviously we want to encourage that opportunity.

My noble friend also raised the issue of the people's bank. This is a matter for colleagues in the Department for Business, Enterprise and Regulatory Reform, but again the remarks made this morning by my noble friend Lord Mandelson were as clear as they could be on his determination to explore a range of options in the financial sector and possibly others to enable the Post Office to flourish.

My Lords, I thank my noble friend for the Statement, which I welcome because I know that millions of post office users up and down the country will join me in doing so. I was particularly interested in the declaration in the Statement that in the future there will have to be more involvement in financial services. Perhaps I may return yet again to the suggestion that has just been made. We will never achieve real success until we get more support from the centre for the idea of a central people's bank. Is it not the right of every adult citizen to have a bank account? However, some of the most disadvantaged people—those who need it most—are not able to get an account with a commercial bank. Will the Minister look again at the proposals made 10 years ago for the Post Office to offer a deposit-based savings bank account for every citizen in the country who wants it?

My Lords, again I welcome the support of my noble friend for the announcement and for the proposition about further involvement in financial services. I am sorry that I cannot give as full an answer as I might like in relation to plans around a people's bank and broadening the business opportunities for Post Office accounts. That is simply because those issues are not the responsibility of DWP. I know that I answer for the Government today and I apologise for the somewhat restricted presentation I have made. However, I take the point that it is right that everyone should be able to have a bank account. In many ways, it is the best route for the most vulnerable, for the reasons that I have just set out—lower utility bills and the assurance that their finances are as secure as anyone else's. A range of bank accounts and bank facilities can currently be accessed through Post Office Ltd—I have forgotten the exact percentage, although it is in my brief—and there is the basic bank account, which must be provided through the Post Office network. There is much to build on and I will liaise with colleagues in DBERR to ensure that the issues raised by my noble friend are rightly pressed.

My Lords, my noble friend will take from this discussion the strong desire from all parts of the House that we should take advantage of the present difficult economic situation to create and develop a people's bank and certainly to develop further today's Statement on the Post Office card account. That should be the first of many developments. Will my noble friend comment on the point, not so far mentioned, that Her Majesty's Government is, at least in part, responsible for a reduction in choice for the consumer in banking services by allowing rather rapidly a merger between Lloyds TSB and HBOS, which will reduce the number of clearing banks from five to four? The reduction in choice for customers could be made up for if, out of this crisis, the development of the Post Office becomes a government objective.

My Lords, I thank my noble friend for his questions and for his support for the Statement. It is interesting that the Post Office can add some diversity to the financial services system, which has been made less diverse by current arrangements. My noble friend will understand why the merger was proposed and is proceeding and why other arrangements have been put in place to recapitalise the banks and to provide liquidity in the financial services sector. This is not to support those institutions in themselves but because the banking and financial services systems underpin everything else that we do in our day-to-day living and the trade and commerce on which we all depend. I note again the comments about a people's bank. I am sure that that issue was recognised by my noble friend Lord Mandelson earlier today.

Let me highlight one point on the Post Office card account. We need to be careful about broadening the remit of that instrument because, as I said, its particular benefit is in its simplicity if it is perceived as a channel for the payment of benefits, particularly in the current climate. That proposition was key to the legal advice that we received. The announcement, the restructuring that preceded it and the review that is under way in respect of Royal Mail provide a real opportunity for the future.

My Lords, I am aware that the time for questions on the Statement is over; I am not trying to intervene in that time. The Minister has answered the questions with his customary skill. However, there have been frequent references to the Secretary of State. The reason why the Works and Pensions Secretary made the Statement at the other end is that the Secretary of State responsible is at this end. If the Lord President were in her place, I would ask her—as I certainly shall—to raise this issue. When a major Statement is made where the Secretary of State is a Member of this House, it should be made by the Secretary of State.

My Lords, I should make it absolutely clear that the department responsible for dealing with the Post Office card account is not BERR but DWP. The Secretary of State with responsibility for it is the right honourable James Purnell, who is making the Statement today in the other place. I do not want any misunderstanding on that point.

My Lords, so that there is no misunderstanding, it is important to recognise the validity of the point made by the noble Lord, Lord McNally. The Secretary of State, the noble Lord, Lord Mandelson, chairs the Cabinet committee that is responsible for the Post Office network and on which sits James Purnell, the Secretary of State. It would clearly have been possible for the Secretary of State, the noble Lord, Lord Mandelson, to have come here and made the Statement, because he chairs the relevant Cabinet committee.