It is a pleasure once again to serve under your chairmanship in Westminster Hall, Mr. Cook.

I am very grateful that this important topic has been selected for debate today, because the future of the rural post office network is vital to rural communities, not only in my constituency, but throughout the highlands and islands of Scotland and the length and breadth of the United Kingdom.

As the Minister knows, I requested the debate after his answer to my question to him during Trade and Industry questions on 1 December, which led me to have real concerns about the Government's intentions for the future of the rural post office network. What is the Government's commitment to the network, and are they willing to consider more broadly how its value should be assessed? That assessment should not simply be a crude financial one; it should consider much more broadly the social and economic value of the rural post office network.

The Minister's answer followed Postcomm's advice, which was published earlier this year after requests made under the Freedom of Information Act 2000 by my hon. Friend Mr. Carmichael. That advice on what should be the future of the rural post office network called, in effect, for a rural reinvention scheme to mirror the urban reinvention scheme that has already taken place. It postulated that some 1,600 rural post offices should be closed.

How should we assess the Government's record on post offices so far? To be fair, the social network payment of £150 million a year to support the rural post office network is a significant item on the credit side, and is worth noting. On the other hand, of course, it is equally worth pointing out that that is due to run out at the end of March 2008, subject to the funding for the period 2006 to 2008 securing the appropriate European Union clearance. Perhaps the Minister will mention that in his response.

Furthermore, Post Office Ltd has a duty to prevent avoidable closures of post offices in rural areas. That requirement, too, expires at the end of March 2006, and the Government have yet to say whether it will be extended or what will take its place.

I congratulate the hon. Gentleman on securing this important debate, which, as he rightly says, is relevant up and down the country. I draw his attention to Naseby post office in my constituency, which closed as a result of an armed robbery. Mr. Steane of the local "The Fitzgerald Arms" wanted to reopen it, but the Post Office has refused him leave to do so. I do not believe that avoidable closures are being dealt with as the Government say they should be.

I am very grateful for that intervention. The point is that, as well as preventing avoidable closures, we should also consider reopenings, where appropriate.

On the very same point, my office received a note from the Post Office only five minutes ago telling me that the post office in the village of Isham in my constituency, the only post office for miles around, is now to be considered permanently closed. There seems to be a difference between what is being said and what is actually happening.

I am grateful for that intervention, which again serves to underline the point that despite the duty to prevent avoidable closures, there are closures. Indeed, they number some 100 a year, and are gradually eroding the breadth of the rural post office network. That in itself is a significant concern.

Does the hon. Gentleman believe that the Post Office needs to be imaginative about its network, particularly in rural areas? I suspect that there are few villages without a pub. Rural post offices may have been closed, but is it not time that the Post Office started actively to consider how many pubs in rural areas could double up as post offices? Some already do, including "The Eagle and Child" in Hurst Green; the post office there was closed but it has been reinvented in the pub. That is the sort of reinvention that we want to see; we want openings in rural areas, not closures.

Order. I am not in the business of encouraging bad habits. As I am partially deaf, and because Hansard writers have to hear precisely what is being said, I would appreciate it if hon. Members directed themselves to the Chair and to the microphones.

Thank you, Mr. Cook. I am grateful to the hon. Gentleman for that intervention. The point about imagination is important and I shall return to it later. As for the duty to prevent the avoidable closure of rural post offices, I would be grateful if the Minister spelled out what the position will be beyond March 2006.

On the downside when assessing the Government's record on post offices is the urban reinvention scheme—a title that conceals more than it reveals. In effect, the scheme closed a substantial number, several thousands, of post offices in cities throughout the country. In my constituency, three post offices in Inverness were closed under that scheme. All those who passed the main post office in Inverness during the run-up to Christmas will have seen queues stretching out on to the streets, with people having to wait for 40 or 45 minutes; they will have seen at first hand the consequences of those closures and the additional pressure brought to bear on the post offices that remain. That scheme was by no means a unalloyed benefit—I see hon. Members nodding. It significantly eroded the post office network.

Another major issue is the direct payment of benefits. People who used to collect their pension from the post office using their pension book have been encouraged, or even persuaded through aggressive telephone sales campaigns, to switch to having their pension paid into their bank account.

Does not my hon. Friend think that it is particularly regrettable, given the lack of footfall that that decision has caused post offices, that the Government did not look creatively at the delivery of their own services, perhaps using post offices to deliver those services?

I am grateful for that intervention. The point is very sensible. A much more innovative consideration of what Government services could be delivered through the rural post office network would help increase the footfall—the number of customers coming to post offices for a variety of services. I intend later to suggest some of the services that could be extended to rural post offices to help sustain the network. Direct payments is one.

It is important to understand why rural post offices are so important. Put simply, they are the heart of our rural communities. At the end of June 2005, there were 8,001 rural post offices in the UK, of which 1,144 were in Scotland; 170 of those were in the Highland council area within which lies my constituency. The rural network currently serves about 12 million customers, and provides communities with about 170 products, including, in some places but not all, new services such as mobile phone top-ups and foreign currency exchange. Indeed, over two thirds of villages with populations of between 500 and 1,000 have a post office.

I congratulate my hon. Friend on securing this debate. It gives us the chance to emphasise again to the Minister that in many villages the post office is the last available public service, and the last point of contact for public services generally. That is why the Government should be obliged to come forward with a safety net—one that will keep those services going—especially given that their decision on direct payments created the crisis in the first place.

I agree. One example of such a post office, which is the only remaining public service in the community, is in the village of Foyers, in my constituency, between Fort Augustus and Inverness on the banks of Loch Ness. Through creative and sensible business practices, opening a café and shop alongside the post office, the post office has been maintained, but the income generated through it is vital to ensure that all those services can continue in that village. There will be hundreds or thousands of similar examples up and down the land.

The public view is that the rural post office network has a special value as a focal point for our communities, forms a social function and is a trusted source of guidance and advice. The post office provides vital financial services to the 15 per cent. of rural households that do not have a car and the 49 per cent. of people living in rural settlements who do not live within walking distance of a bus stop with a daily service. Post offices are essential for vulnerable people. The people most dependent on post offices are the elderly, the disabled and people living on low incomes. Those are also the people who are least able to adapt if a post office closes. As Citizens Advice says,

"the closure of rural Post Offices has a profound impact on the local community and hits vulnerable groups such as the elderly, the disabled, and those with mobility problems particularly hard."

Of course, post offices are economically important, too. They support village shops and other businesses—cafés, pubs and even petrol stations—where they are co-located. As I mentioned earlier, the post office combined with a shop is often the last remaining retail outlet. If the post office side of the business is removed, the private retail business may lose customers, threatening its viability. In rural areas, only 4 per cent. of villages have a bank but 60 per cent. have a post office branch. Rural post offices provide for many people the only method of accessing financial services on their doorstep.

Local post offices have environmental benefits, too. Carbon emissions are reduced because people can walk down the road to their post office rather than driving 10, 15 or 20 miles to the next town or village. We talk a lot about building sustainable rural communities. There are many elements to that: affordable housing, good health and education services and so on. However, a community is much less likely to be sustainable if basic financial, communication and retail services are not provided within it. That is what post offices provide and support, and it is why they should be seen as a cornerstone of rural policy, not to be dispensed with lightly as a financial burden.

If rural post offices are so great, what is all the worry about? There is uncertainty about the funding for the rural network from 2008 onwards. The Minister will, I hope, acknowledge that the lack of certainty is causing problems for all concerned. Without a clear Government policy that goes far into the future, sub-postmasters and Post Office Ltd cannot plan for the future or ensure that rural services are maintained.

Post Office Ltd is a company with financial responsibilities, and the nearer it gets to 2008 with no decision taken on what funding will be available from that date, the more it will have to take steps to reduce the service. It has been made clear to me by Post Office Ltd that

"changes to the funding would inevitably mean changes to the network—but the extent and timing would depend on the detailed nature of the funding change."

In plain English, if funding is cut, branches will be closed. Postcomm says that 1,600 branches face closure, but it has also said that only 10 per cent. of branches are financially viable, so a purely financial measure could mean even more closures. Indeed, the Minister has hinted that he considers the issue in such financial terms with his remarks about 800 post offices serving an average of only 23 people.

I am grateful to the Minister for his letter prior to the debate, but I am not convinced that it offers a great deal of reassurance. He writes that

"we must look beyond the number of outlets and focus more closely on the accessibility of service provision."

Indeed, he goes on to say that

"it is clear that many existing Post Offices have too few customers to be viable"

I urge the Government to put away their slide rule and bring their social conscience to bear. The fundamental driver of Government policy towards the rural post office network should be its social and economic value to the communities that it serves, not just the Treasury bottom line. I would argue that £150 million is a relatively small price to pay for a network of 8,000 branches serving 12 million people in rural communities across the country. With a bit more innovative thinking on the part of the Government, as my hon. Friend John Thurso suggested earlier, much better use could be made of that network.

Let us take a comparative example; it may not be perfect, but I will use it just the same. My constituents are among the taxpayers from all over the country who contribute every year to the £2 billion Government contribution to the London transport network. The post offices in Aviemore or Foyers in my constituency are as important to the social cohesion and accessibility of services in those communities as the tube is to London.

Does the hon. Gentleman accept that many people who live in rural areas do not benefit from the expenditure of taxation in urban areas on services such as swimming pools and libraries? They are not able to access those as much as people living in urban areas, so expenditure on the rural post office network is giving some of that money back to support those in rural areas. It is basically giving them their fair share.

I share the sentiment of that intervention. Public spending needs to be spread throughout the country in different ways and there has to be a balance. I urge the Minister to give us his estimate of the overall social and economic value of the rural post office network. I am sure that it is hundreds of millions of pounds more than the funding provided by the Government.

The Minister will no doubt tell us that the Post Office is piloting innovative new ways of delivering its services. Indeed, it is, and I welcome those pilot schemes. I would be grateful if the Minister told us of any assessment he has received on the success of the pilot schemes and whether he will publish any such reports. I know that some have been relatively successful—those using the hub and spoke method—but new ideas also include the use of mobile units. I hope that the Minister will be honest about what he finds from the pilots. According to one report that I have received, a scheme to provide post office services through a mobile unit in Caithness has been "a disaster" with technological problems proving to be a real "nightmare" and causing difficulties to many individuals.

I gave my hon. Friend that report, so perhaps I should first draw to his attention the fact that the scheme has suffered from considerable difficulty with the technological support that was promised. Secondly, post offices that were open daily or for several days a week are now open for half an hour or one hour per week. Thirdly, I extracted from the Post Office a promise that if the scheme failed, it would revert to the status quo. Perhaps in his questions to the Minister my hon. Friend would like also to ask whether such a promise will be valid in light of the fact that the guarantee expires in 2006?

I am grateful for that intervention. My hon. Friend has put the question more eloquently than I could and I trust that the Minister will answer it during his response.

It is also worth pointing out that the trials have their limitations. Postwatch has expressed its disappointment that the different types of services were not piloted in each region or in any remote island communities. The pilots only address how the service is delivered; they do not look at what service is delivered. Through direct payments, the Government have taken away a large chunk of income from rural post offices. What about looking for new services that could provide income and help the Government?

A joined-up approach by the Government could find a wide range of additional services to be provided through post offices. For example, the Government are currently embarked on a process of opening 70 new passport offices, to which every new passport applicant will have to travel for an interview. How absurd, when there is a perfectly serviceable network of local offices throughout the country that could do the job perfectly well: post offices.

In Fife, local police have worked with the post office to allow local residents to report low-level crime and lost and found property at the post office. Witness citations may be served and people required to produce driving documents may do so at their local post office. That not only improves access to police services, but helps to safeguard post offices in those rural communities. The scheme has recently been extended to Newburgh and Tayport. Why not consider rolling it out throughout the country?

In my constituency, pensioners are having real difficulty booking bus tickets. That will be even more of a problem as free bus travel for pensioners is rolled out. Why not enable post offices in rural areas to take such bookings? The technology is already available to make that happen. Other examples include locating lottery ticket machines in post offices, which will help to encourage footfall, and providing vehicle licensing, which is currently available in some post offices but not in others. In my constituency, there was a temporary switch of DVLA services to the Kingsmills post office in Inverness because another post office had closed, and a dramatic boost in services took place as a result. Spreading that to rural post offices throughout the country would bring real benefits.

The Government must acknowledge the importance of rural post offices to the community and to vulnerable people in particular. They must take decisions on future funding based on the social and economic value of that service. The Minister will know that Professor John Farrington and his team at Aberdeen university received Treasury funding to develop a tool for measuring the impact of policy changes on social inclusion in rural areas. Why has that not been used in this case? Currently, the risk impact assessments that are undertaken when considering where money should be spent do not include the social impact that rural post offices have on their community. The Government should have a statutory requirement to maintain the rural network. Will the Minister consider legislation to introduce such a duty before embarking on any further change to the network?

Will the Minister also explain how he is working with other Departments and the devolved Governments to put together a joined-up plan for the rural network? For example, is the Department of Trade and Industry willing to continue funding the rural network from its budget, or is the Minister currently seeking financial support from other Departments? Given that the DTI does not necessarily have a social remit, is it necessarily the best place to make decisions about vital community services?

The Minister will understand that there is real concern that the urban reinvention scheme that led to the closure of several thousand urban post offices is soon to be followed by a rural reinvention scheme that will do the same. Let us be clear what that means. In many cases, it means reinventing rural communities without post offices. I do not want that to happen, and the attendance at this debate shows, I hope, that many hon. Members from all parties do not want it to happen either. Let us have a Government policy that ensures a flourishing and sustainable rural network long into the future, because that is in the best interests of rural communities, vulnerable people and the country as a whole.

I congratulate Danny Alexander on securing the debate and thank him for sending me a letter, also congratulating him on securing the debate, that he received from some constituents in my area who are part of the ongoing rural postal pilot.

This is about the delivery of the service. For many years—we have already heard this mentioned this afternoon—we have seen postal services delivered through village shops. My previous constituency had a post office in the village pub. I do not know whether that meant that people were picking up their pension and then spending a fair amount of it. There are also post offices in garages. The issue is about the service, not necessarily the structures and methods of delivery.

We are talking about the rural network. I want to mention something that happened 12 months ago in my constituency, in the town of Dumfries. When Safeway changed to Morrisons, Morrisons immediately decided that it wanted the post office out of the supermarket. There was quite an outcry, because it was a busy post office. However, I was quite astonished to discover that over 50 per cent. of the business being transacted through that post office came not from the townspeople of Dumfries but from people from further afield—from villages and some of the smaller towns. We are now looking at what some people would deem to be the Crown post office in Dumfries—the directly managed service—being franchised out to Spar supermarkets. To a certain extent, it has come as a bit of a surprise—although I am not totally astonished—that only 15 per cent. of the business transferred from Safeway to the main post office. The big question is: where has all the other business gone? I suspect that it has gone to a couple of the other urban sub-post offices, but some of it may have gone back to the rural localities from whence it came.

The public want a service and, in general, they do not worry too much about how it is being delivered—whether it is in the village shop, the pub or wherever. We have to ask ourselves what we are being asked for. Is it a public service, a social service, or a combination of both? In rural localities, it is a combination of both.

As I indicated, my locality is one of three in Scotland where a rural postal pilot is ongoing. It is what is deemed a hub and spoke service. In other words, from a centre—the town of Castle Douglas—the sub-postmaster operates the post offices in three villages. That started back in mid-September, and there was an outcry because the first thing that happened was that the hours were reduced. All three of the post offices operate out of shops. I visited two of them and asked the sub-postmasters, as they still were at the time, whether they believed that the significant reduction in hours—one of them had gone down from 21 hours to 10—was reasonable. Both of them believed that their new opening hours reflected the amount of custom that came through their doors.

The big difficulty was the way in which the hours were configured. A Post Office member of staff goes from one of those post offices to the next to provide the service. Like anybody else, that individual can be in only one place at a time. People wanted the post offices to be open for more hours in the morning, and there was a great demand for Saturday opening. I went to a meeting in one of the village halls and by pure chance, nothing more, a retired sub-postmaster and his wife were there when the public were demanding Saturday opening. The guy stood up and said, "People can make these demands, but the reality is that when I was running the post office nobody used it on a Saturday morning, so why do people want it open then?"

I will not paint a rosy picture; difficult decisions have to be made. Because there was an outcry, I asked people for feedback about whether the hours suited their needs. In general, the answer was no. I am a townie, and I was surprised to find that some people used the post office every day. That might well be the case. I even had people writing to say that they did not use the post office at all, but that the new opening hours were not right. I think that we would all agree that one has to respect people's views.

The pilot is to run for 12 months, and it requires the co-operation of the shopkeepers. I have made the point on the two occasions on which I have attended public meetings, one of them last night, that if there is no shop there is a difficulty: from where should we deliver the service? We could use the local pub, or whatever the case may be, but we need co-operation, especially when we are running a pilot.

I do not want to have a go at anybody, but I must be honest. Two of the villages seem to be operating fairly well. The other one has been something of a problem, and that is putting it kindly. From day one, one individual has been turning up at the post office with a clipboard and pen. I know that I said, "Keep me posted on any problems that arise," but that is harassment and intimidation, and it is not required. The gentleman has become a prolific letter writer and he is trying to drag me along.

That is more business for the post office.

The hon. Gentleman is quite right, and that point was made to the gentleman last night by a representative of the Post Office. Let me give hon. Members an indication of the situation. I wrote to the constituent in question on 16 December, and he wrote back on 17 December. Regrettably, I did not get a reply away to him until 27 December. I went into my office on 28 December to discover that he had written to me on Christmas eve asking for a response to his letter of 17 December. I responded to him on 29 December and, lo and behold—I appreciate that the man has moved into the area and is not a Scot—he found time on Hogmanay to write me another letter. I have responded.

The local newspaper has been filled with nasty letters having a go at the Government and at me. I do not have a problem with that. However, I do object when the sub-postmaster and her staff are being harangued by a few individuals. That is not fair on them. They are public servants and they have been doing their best to keep the service running. During the initial two to three months, the position was reviewed. That demand from one village for morning sessions resulted in a change of hours on 5 December. That gave it two morning sessions, a late morning to early afternoon session and an afternoon session. It was admitted last night at the public meeting that some of the problems have died down. It did not help that, in the first week after the introduction of new hours, the machine for giving receipts broke down, but therein lies a problem with IT.

The new hours were introduced on 5 December. I visited two outlets on the previous Friday with the Under-Secretary of State for Scotland, my hon. Friend David Cairns. As far as I was concerned, the good news at those outlets was that business in the shop had not diminished in any shape or form; in fact, those involved were quite pleased with what was happening, and I suspect that there might have been a little additional business. If those shops closed, we would need to find a new base for the post offices, so I am relieved that business is going well.

I mentioned my constituent, the prolific letter writer. Among the things that he has written to me about is the fact that only 860 mm of counter space was negotiated. In the same letter, he even talks about the payment that the shopkeeper gets from the sub-postmistress. I have had to write back to him to say that that is neither his business nor mine, but a business transaction between two parties.

Some of the problems, I have to say, are being stoked up by the previous sub-postmaster. Nobody has been forced out of their position. There has been co-operation, although—this may have been the same with the urban reinvention programme—some sub-postmasters may not be too happy to tell their customers that they have co-operated in what is happening.

There is a great fear that there is an alternative agenda on the part of the Post Office. In another village in my constituency, the sub-post office operates out of a portakabin—there is nothing else there. The lady who runs it is getting on in years and decided that she wanted to call a halt to the whole thing. Fortunately, the Post Office moved in, knowing that it probably would not get anyone else in the area to run the post office. It went to the lady, looked at the hours that she operated and at the amount of business going through the post office and said, "You really need to be open only three sessions a week." On hearing that, the lady decided to stay with it and open only three sessions a week. We need to be conscious of just how much business goes through some of these places.

About 50 people went to the meeting that I attended in my constituency yesterday on what we in Scotland would call a dreich winter's evening—it was wet and windy to say the least. All but three or four of those people were elderly. We need to recognise that all ages use the post office, but there is a clear indication that the elderly value post offices more than the generations that are coming through.

At the meeting, the public were able to air their views. The Post Office rep, Steve Miller, who is a tremendous guy, said—this comes back to the point made by the hon. Member for Inverness, Nairn, Badenoch and Strathspey about the customer base—that one post office in the highlands had eight or nine customers a week. The cry in the village hall yesterday evening was, "Close it! We in this village are paying the price for that." I would say, however, that we should not close it down, but look at delivering the service in some other way. If people need a service, let us ask what other structure we can put in place to provide it. It is always the same: everyone believes that everything in their patch is fine and that everyone else is to blame. One person commented, "We just want the Royal Mail the way it was," but I sincerely hope that colleagues in this Chamber accept that it is 2006, that life has changed and that people carry out their business in a different way.

One of my great frustrations as regards the postal pilot is that the sub-postmistress is unable to do what she wants to develop, promote and market products. The one respect in which we have problems is that she is constantly tied up doing other things. She appreciates more than anyone else that she has to build the customer base—the opportunity is there, and she sees it. Last night, the Post Office representative pointed to the full range of products that were available, and it was astonishing that people were simply not aware of them. The fact that the sub-postmistress's efforts to promote those products are frustrated creates difficulties.

Others will learn from the postal pilots and from the experiences that my constituents are going through. Last night, I was asked how much longer the sub-postmistress wanted to promote products—was it a week or two weeks? I had to say that it is a 12-month pilot. I look forward to further debates in this Chamber and the main Chamber once we have a report about the pilots, just to see how we might deliver services to people. I emphasise again the importance of this debate, and repeat my congratulations to the hon. Gentleman. The future is about the services and the way in which we deliver them, not the structures.

I congratulate Danny Alexander on securing the debate on this important issue, in which I have taken some interest as the Member for North Shropshire.

A couple of years ago, in the summer, I drove 150 miles around my constituency. The Minister bumped into me in the Tea Room and asked whether I represented a rural seat; the fact that my constituency is a 150-mile drive around shows that it is rural to an extent. I visited 28 post offices—I apologise to the four that I did not get to on that day—and found an extraordinary, consistent pattern. At that time the Government were being, quite frankly, brutal in ramming through a change in the way benefits were paid. The proportion of turnover in relation to benefits then was extraordinarily high in my post offices: it was 60 per cent. in Gobowen, 80 per cent. in Treflach, 70 per cent. in Pant, 60 per cent. in West Felton, and 50 per cent. in Baschurch and Prees. There was a real feeling that, unfortunately, the Government had not pursued the outgoing Tory Government's plan to pay benefits by card, which would have been just as secure but would have kept a proportion of the £400 million annual income going through the sub-post office network.

The current problem is very much of the Government's making, and is partly because they are an urban Government. I do not think that there is a single rural Member in the DTI team—they are all urban Ministers. I sympathise with the hon. Gentleman who secured the debate, and I want to get across the point today that this is a real problem in rural areas.

I draw attention to one particularly hard-working sub-postmaster, Colin Doyle, who has just retired after 25 years of working, probably seven days a week, in Knockin. His marketing has been to allow those who do not come from Shropshire to pronounce Knockin "Knockin", and he has a large sign over his shop saying "The Knockin Shop", which attracts large numbers of tourists on their way to Wales, who buy merchandise from his shop. He knows an awful lot about post offices and was very helpful when I went to see him. Following my tour, I took him to see the Minister's predecessor, Mr. Timms, to try to ram through to him the problems with what the Government were doing in so brutally forcing people to receive benefits by direct payment.

Colin Doyle had done everything one could ask for: he acknowledged the importance of benefits as the core of the post office business, which attracts customers in for other post office products, letter-writing materials and other stationery, he had a fresh food business and a fruit business, and, like many other post offices that I visited, he had diversified into having an off-licence. In fairness to the comments made by hon. Member for Dumfries and Galloway (Mr. Brown), I take my hat off to the sub-postmasters in my constituency, who have bust their guts to diversify and get into general merchandise.

I have a great quote from Colin. He said, "If the post office goes, the shop goes, and if the shop goes, the village goes." There is a real social benefit in keeping that focus of activity in the village, because the post office is not just about postal activities and other products that are sold; it becomes a focus for information. There is a village notice board for advertising jobs and so on. There is a real social dimension to the post office in an area such as mine, where large numbers of elderly people live on their own. It is noticed if they do not come into the shop and pick up a pint of milk or a loaf of bread.

Does the hon. Gentleman agree that older people are among the most vulnerable and often the most isolated groups in rural areas who depend on post office services? On my last trip to a rural post office, an elderly gentleman visited, and it was the first time that he had left his house for two years; it was the major social event of his day. Does the hon. Gentleman agree that the Government should accept and recognise the important social role that those village post offices play for many older people, in particular?

Yes, I entirely agree. That was a most helpful intervention.

The point that I was trying to get across was that the activity of rural post offices is not just commercial and postal, and it cannot just be replaced, as the hon. Member for East Ham said when Colin Doyle went to see him, by the universal bank—which we have not heard much about, I must say—and other banking services. Those are all welcome, and the hon. Gentleman was hopeful that insurance products and foreign exchange products, which have taken off, would be of real benefit. However, I must be brutal with this Minister: it was a terrible error to rip out £400 million of benefit payments. As Julia Goldsworthy said, the majority of people claiming those benefits were elderly. It brought them to the post office, but now there is no need for them to go, because the benefits are paid directly. That was a major error, and it has got the Government into a mess on the issue.

Following all that, I have become secretary of the all-party group on sub-post offices. I do not expect everyone to stand up and sing "Ode to Joy", but it is a most interesting role that I enjoy, under the splendid chairmanship of Kate Hoey. We intend to hold a series of regular meetings, to which all Members of all parties are invited. My neighbour, Lembit Öpik, is the treasurer, but I think that he may be otherwise occupied, as many Liberal Democrats may be this week.

I invite all hon. Members to attend meetings of the all-party group, and I hope that the Minister will come along. I am indebted to the National Federation of Sub-Postmasters for statistics showing what an important sector of activity rural post offices are. There are 8,000 post offices in rural areas, which are defined as areas with a population of fewer than 10,000 people. The rural network serves about 12 million customers a week, and 84 per cent. of the rural population live within one mile of a post office. The other interesting figure, which I found surprising when I received it, is that the 14,500 sub-postmasters each provide jobs to an average of 4.6 people, 83 per cent. of whom are part-time. That ties in with other comments that were made earlier, about the social aspect of the activity, which provides part-time employment in thinly populated rural areas.

To get themselves out of their muddle, the Government put up the £450 million, which was due to run at £150 million a year. I find it hard to see how sub-postmasters can gain access to the money. How is it available? How do sub-postmasters get at it? Most of those in my constituency find it difficult to do that. As I understand matters, it was originally scheduled to run from 2003 to 2006. That is what the hon. Member for East Ham told me at our meeting. I understand that it will now continue to 2008, but that it is subject to EU approval, because it might count as state aid. What is the exact position? The issue ties in with the comments made by the hon. Member for Dumfries and Galloway: is the matter in question a social activity or is it a state-funded activity, and how does it qualify, if it counts as a social activity, under EU state aid rules?

We have had trials of hub and spoke, mobile vans and so on, carried out by Post Office Ltd. I understand that they were due to be completed in December 2005. Is that correct? Will the Minister tell us when Post Office Ltd will report, and what the Government's reaction will be?

What does the Minister see as sub-post offices' role? How does he see the future? We cannot keep stumbling on. We have ripped out the £400 million of benefits, and that presents a huge threat unless we obtain other viable activity. I strongly support all the attempts to bring in banking and foreign exchange, but according to the National Federation of Sub-Postmasters there is a £140 million a year deficit—a gap between income and cost—in the activity. I should like to know the Minister's long-term strategic view.

While we are trying to work out exactly what the role of the rural post office is—and we know that it has a social role for those in receipt of its services—will my hon. Friend also pay tribute to the men and women who staff rural post offices? Some of them do not earn much money; they are on marginal incomes. They offer a social service to their community, and they should be rewarded, not spurned.

I thoroughly endorse my hon. Friend's comments. When the previous Government were in power, many of those people took a big risk, made the post office the activity for the latter part of their working lives and sank their pension into it, trusting that there would be a steady income stream based on benefits, around which they could build a range of other activities, as I tried to explain. As my hon. Friend said, those men and women work extremely hard and they are exasperated.

I quote the postmaster for Prees, which the Minister will not like—I could quote some much ruder comments, which would not be parliamentary—who described the Government's attitude to sub-post offices. He said:

"They are totally clueless. They are destroying the infrastructure of country life."

That sums up the frustrations of sub-postmasters. Perhaps the Minister will tell us his long-term view, so that we do not just stumble from crisis to crisis.

I remind the House that the common protocol in these debates is to call the first of the three Front-Bench speakers at 3.30 pm.

I am grateful to have had the opportunity to catch your eye, Mr. Cook. I came into the Chamber with the intention of supporting my hon. Friend Danny Alexander. Having listened to the excellent way he presented the case and to the other excellent contributions, I am moved to make a short contribution myself.

It may not need to have been said, as it is obvious, but it is worth repeating how important rural post offices are to the whole of rural life and to sustaining the communities. They are important for two distinct and different reasons, both of which have come out in the debate. The first is the provision of services to people who need them, who are often the most vulnerable in society, whether through age or infirmity, and who would not otherwise have access to those services. Secondly, the point must be made in relation to the highlands about the provision of services to people on low incomes and without access to a car who live in areas where there is very little public transport. We assume these days that everyone will be able to use a car or other transport, but many people cannot do so, for a variety of reasons. Therefore the simple provision of a service is important.

A wider point made this afternoon is that a functioning post office is often the last service to remain in a village, after the shop, the pub and so on have gone. It is the post office that keeps going. It is a point of contact, somewhere that people who do not often see other people go to see the sub-postmaster or postmistress. Sometimes that is how they signal that they are still around, alive and well. It is not uncommon in villages for people to notice that somebody has not been into the post office for a day or two and to go and check that they are all right. The wider good of the community is important in this debate.

We would all like the rural network service to be kept and, if possible, enhanced, and I want to consider where the responsibilities for that lie. It would be easy to slam the Post Office and say that there is a vast conspiracy to get everything wrong, but we must be clear that in the climate that has been created for the Post Office, the commercial realities are inescapable. We cannot expect the Post Office to be a profitable organisation and at the same time to provide traditional services, as it has always done.

For that reason, I welcome the pilot scheme that is under way in Caithness. When I was consulted about it I pointed out the pitfalls. In my meetings with those who were responsible for setting it up, I said that the number of hours being offered was likely to be so small that the outcome would be that people would fall out of the habit of using the post office at that time. That seems to have been the case. However, we should not criticise the Post Office for seeking to be innovative in putting forward solutions, and it should not be the whipping boy in this exercise.

I am worried about what is happening in Caithness. The John O' Groat Journal, a fine paper that I can recommend to anyone, drew attention in its issue of 30 December to the severe problems that are being encountered through lack of service. They are not helping the Post Office's case.

I had an interesting conversation with the chairman of Postwatch about a month ago when he told me of innovations in America, which has gone for the opposite solution of a fixed, unmanned station in rural communities. By using a card people can post a letter and extract things. I shall be meeting the chairman to find out more about that because it is another innovation that the Post Office may be interested in.

The Government have a clear responsibility in these matters, and opportunities have been missed. One was the opportunity with the migration of benefits. We warned the then Minister what was likely to happen to footfall. We received assurances that the marketing would be even-handed, but my correspondence with every sub-postmaster and postmistress told me that they were unable to compete with the heavy marketing and telephone campaign that took place. We have a huge range of Government and local government services that we want to deliver more closely to the population. We have a network of offices with some fine equipment which are capable of delivering some of those services. Can the Government not put the two together so that delivery to our citizens could be made through the Post Office in a profitable way?

My hon. Friend is quite right about the importance of post offices to rural communities and the need for Government support. Does he agree that unless the Government give a commitment soon to provide more funding through social network payments or more services, post offices will close? They are businesses, and if the people running those businesses do not have a guarantee of long-term security they will not continue to invest in them.

My hon. Friend is quite right. That is precisely what happened in the town of Golspie where the gentleman who ran the business decided to quit because he could not see a way ahead. My comment to the Government is that there are two requirements. The first is a long-term vision and the second is a bridging plan to get to that.

I commend some of the private sector. For example, Clydesdale Bank is now using post offices to distribute cash and front-line services for the bank. There are opportunities. Will the Government please understand how necessary post offices are to our communities and that if we do not act reasonably quickly those post offices will not be there to be saved?

I did not intend to speak either, but I was also enthused enough to have my two-penn'orth. I shall make a short contribution; it is not worth going over the same ground as we are all much of the same mind on the importance of rural post offices. It is difficult to put a price on their service because of all the various components that make up the worth of post offices to people in rural communities. We all recognise that they will not be profitable and that they require support because without it they will close—it is as simple as that. I cannot envisage how many rural post offices could ever be profitable.

I want to speak about matters such as the ageing population. We all know that this country has an ageing population, which will get worse—that is not the right way to put it. The ageing population will increase as more people remain alive longer. [Interruption.] At least I corrected myself. Many elderly people come into my retail convenience store in Swansea. I can see that that is a bit of a social thing for them and I wonder what will happen to people in rural areas. At least the location of my shop is urban; in rural areas, the situation is much more difficult. Going to the post office may be the only time when some people get out of the house during the day, and mixing with other people in the post office and with the postmaster or postmistress is important.

My hon. Friend Mr. Paterson mentioned that the postmaster or postmistress knows if people have not been in. In my village, Pendleton, the postmistress once told me, "I have to nip out. Mrs. Jones hasn't come in for her pension and I want to see if she's okay." That is exactly what she did, and what a fantastic social service it is. I therefore ask the Minister to consider carefully what will happen in such areas to people and disabled people. How will they be looked after? Not everyone will be able to access everything on the internet. I know that the future is rosy as far as new technology is concerned, but it is good now and again to value what we have. I suspect that if we let it all go, some bright-spark politician in 50 years' time will try to reinvent and reintroduce everything that we have lost, but we know how much more difficult that will be.

There was mention of the experiment with a mobile unit, which is interesting. I am thinking of large urban areas in the United States. I have seen mobile units operating in New York and I suspect that they work fairly well there, but to have one turn up for half an hour once a week is pretty pointless; it means the loss of the social aspect of the post office and the convenience of its being there when people want to use it.

The Government can be imaginative in the sense of putting post offices into pubs, which already happens, and perhaps into some garages, village halls and other places. Perhaps they could even be put into people's living rooms in certain villages, but we should not let everything go and just have a mobile unit. I do not think that it would work. In addition, because the postmaster or postmistress knows the people, they help to cut down on fraud in the post office. The value of the fact that they know the people who are turning up should not be underestimated.

We want the Minister to answer all these questions and we are putting many challenges to him, but the call must also go out to the 12 million people in our communities who can make use of the post offices to do so more often. "Use it or lose it" is a message that everyone knows, but we cannot over-emphasise it. When people go into the post office and use it time and again, they are doing their little bit to ensure that the service that they are receiving will continue for future generations.

I congratulate my hon. Friend Danny Alexander on securing this important debate. I shall now try to confine myself to describing him as my hon. Friend. I am not nearly as brave as Mr. Paterson, who tried to say the name of my hon. Friend's constituency and performed extremely well.

My hon. Friend has been very active and effective in campaigning for rural post offices, and I applaud him. As I said, this is an important debate, and valuable contributions have been made by hon. Members on both sides of the Chamber. Why is there so much concern about maintaining the network? It is a remarkable network. We have heard that 60 per cent. of villages across the country still have a post office. The relevant figure is massively higher than that for all the banks put together. The network is a precious resource. My great frustration is that much more could be done with it but is not being done; it could be exploited much more effectively. Several hon. Members have made that point, to which I shall return.

The hon. Member for North Shropshire and others have said that the network serves 12 million customers a week. That is a very large number of people throughout rural areas in this country. It is an essential service and that is how it needs to be seen. It is essential for elderly people, disabled people and people without access to a car. There is often a fear that the Government do not fully understand the problem of rural poverty. Government Members largely represent urban areas, and sometimes there is a failure to recognise hidden poverty in rural areas and the problem of isolation that goes with it.

If the public transport system is no good, as my hon. Friend John Thurso mentioned, and there is no post office or shop in the village, one really is stuck. More and more frequently, carers who look after loved ones are completely isolated in small rural communities. My hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey also referred to the dramatic loss of business through the transfer to direct payments and the aggressive pressure on people to transfer.

It has not been mentioned that the core function of post offices, the dispatch of letters and parcels, is important for rural businesses as well. I have been fascinated by the potential growth area whereby more and more people are trading on the internet through eBay. When I visited two small sub-post offices in North Norfolk and asked whether they were seeing any growth of business from eBay, they pointed to two people in their 20s or 30s who were there to dispatch goods that they had traded on eBay. The fascinating thing is that those people were much younger than the average age of customers that we have become used to in post offices. We should not ignore that potential for growth.

The other point that has been made is that often, the post office is part of the only shop left in the village, and it helps to keep it going. Without the post office, the shop goes. As a note of dissent from the other Opposition party present, I have to say that the decline has been going on for a long time—the challenge dates from long before 1997. One big problem with Royal Mail is that it has had no investment for 20 or 30 years, and that has affected the post office network as well as the delivery of services.

What is the Government's strategy? I find it hard to define or identify it. In October 2004, Postcomm urged the Government in a report to be clear about their objectives for the network. Postcomm referred to the "pressing need" for the Government to decide what they want from the rural network. In a report way back in June 2000, the performance and innovation unit said that by 2006—now—there should be a framework in place to ensure "continued convenient access" to post offices. The year 2006 has arrived, but sub-postmasters and postmistresses are still waiting. An air of depression hangs over the network and those people running small businesses. No one has any confidence in the future, and we are still waiting for the Government to decide their strategy.

In March, in seven or eights weeks' time, the obligation on the Post Office to prevent avoidable closures of rural sub-post offices expires. That could open the floodgates for closures unless something is put in place. To make matters worse, the £150 million subsidy of the rural network runs out in 2008. Post Office insiders say that if the extension is not confirmed soon, they will have to embark on a wholesale closure programme. Small businesses need certainty, and many sub-post offices will be worthless in terms of their saleability without the renewal of the subsidy. Still, however, there is no announcement from the Government.

I want to highlight a couple of structural problems that pose a bigger threat to the network. Responsibility within the Government rests with the DTI, a Department that can hardly be said to have a core social remit. When it asks other Departments whether they are interested in supporting the network in some way, it gets a flea in its ear. Every Department's budget is already committed. There is no objective reason why Royal Mail, which is required to make a profit, should want to maintain the social network. It is a drain on the resources of Royal Mail, but it has an interest in keeping competitor mail delivery companies away from the network. The danger is that Royal Mail will preside over a declining network that it has no real interest in maintaining, and that it will deny business opportunities to small sub-post offices that are desperately in need of a break.

That all points to a fairly bleak future—no wonder morale is low—but things could be so different if the Government had vision, if they were determined to exploit this remarkable network to the full, and if post offices were able to develop new business opportunities in the competitive mail market. How could the network be exploited? My hon. Friend mentioned the crazy fact that the Government are opening 70 new passport offices—an obvious opportunity for post offices goes begging. There are also real opportunities for local authorities and Government agencies to work in partnership with post offices, which would give them reach into so many deprived and remote communities. The police are conducting some interesting pilots in Scotland and Norfolk. There are also the Learning and Skills Council and health services. All those bodies could use the local post office to provide information and to establish links with communities.

I mentioned internet trading and shopping over the internet. Post offices ought to be free to develop new business opportunities with other mail and delivery companies. These days, many goods are delivered to people's homes. The post office is the obvious deposit point if the person is out, but that real business opportunity is denied to them unless the goods are being delivered by Royal Mail.

Sub-post offices often complain about tight restrictions on their right to enter other business arrangements; for example, the sale of pre-payment cards for electricity. I have nothing against their finding new, innovative ways to deliver post office services—I positively support such experimentation—but can the Minister confirm when he will receive the report from Post Office Ltd? I admit that I am confused. In a letter to my hon. Friend dated 5 January, the Minister says that he is still waiting for it, but the chief executive of the Post Office states in a letter dated 4 January that he has already delivered it. Perhaps it has been lost in the post—I do not know—but I urge the Government to change their mindset from one of contraction to one of taking advantage of this far-reaching network to help in the delivery of services to remote and deprived communities.

I wish to conclude by posing some questions to the Minister. I would be grateful if he could answer them in this debate or in writing. Of most pressing concern: will the no avoidable closures obligation be extended beyond March, and, if not, what will be put in its place? Secondly, will he confirm whether the rural subsidy will extend beyond 2008, given the serious concerns of Post Office Ltd? Thirdly, what assessment has he made of the number of post offices that would exist if the subsidy were ended, given that 90 per cent. of rural post offices are already unprofitable, according to Postcomm? The east of England would be left with 88 post offices if 90 per cent. closed.

Fourthly, given the structural problems that I referred to, will the Minister consider introducing a statutory obligation on the Government to maintain the network? The framework could be set for fixed periods, giving some certainty to post offices. Fifthly, will any pool of money be available at any stage for investment in the network, so that sub-postmasters and postmistresses can take advantage of the opportunities that could be available to them to help them make their business profitable?

Sixthly, serious concerns have been expressed about rumours that the Post Office card account will be phased out in 2010. Can the Minister give an absolute undertaking that that is not the case? What steps will he take to enable sub-post offices to build new business opportunities by working with other mail and package delivery companies? Finally, will he conduct a comprehensive review of the true social and economic value of the network, which still has not been done?

To conclude, the post office network faces an uncertain future. Morale is low, and there is a sense of terminal decline. The Government give no impression of having any effective strategy to turn it around and reinvigorate the network. I hope—but doubt—that the Minister will be able to reassure us on that.

I join others in congratulating Danny Alexander on securing this debate and on the way in which he introduced it. Can I link that with a plea that there should be no further boundary changes in Scotland? Every time that that happens, the name of his constituency gets longer and longer. I remember when it was Inverness, then it became Inverness, Nairn and Lochaber and now it is this hugely lengthy constituency name. I cannot imagine what his letterhead is like, because there cannot be any room for writing any text on it after he has printed the constituency name on the top. However, I warmly congratulate him on the way in which he introduced the debate, which has been extremely useful and constructive.

It is disappointing that, with the honourable exception of Mr. Brown, there has not been any Government contribution to the debate. They were claiming before the election that they were a rural party, but when it comes to a key rural issue that affects all of us with rural constituencies, they could not find Members, from south of the border at least, to take part in the debate.

As has been made clear, post offices are the lifeblood for many small rural communities. They are not just a source of stamps, or from where people collect their pensions. All too often, it is the sub-post office branch that ensures the viability of other local services, particularly village shops. If the village post office closes, so too does the only other shop in the village. We have often seen that if a post office closes, it never reopens, and examples have been given during this debate about where that has been the case.

There is an example in my constituency: the shop in Hadlow Down closed, and when it was found that someone wanted to reopen that facility, they were refused permission by the highways authority, which said that it was not safe to park there. We had a village shop there for 100 years, and after it was closed, somebody said that they were prepared to put in the hours and effort to make it work again, but they were denied the opportunity to make it work.

We should recognise the tremendous dedication of the sub-postmasters and sub-postmistresses who run village post offices, who work many more hours than they are paid to do, and who provide a tremendous social service to make their communities work cohesively. In introducing the debate, the hon. Member for Inverness, Nairn, Badenoch and Strathspey talked about the range of other services that can be provided through post offices. I introduce a note of caution when he talks about the national lottery, because it can compound the problems. There is a recent example of Buxted village shop where, because a pedestrian crossing was introduced outside, that reduced the number of people stopping outside the shop and using it. Because of that, the turnover of the national lottery was reduced, so the shop had the lottery taken away. That has compounded its problems as a village shop, so we should not always see the lottery as a solution. It is a hard-headed business making hard-headed decisions about where it wishes to be.

The rural post office network is the largest retail branch network in Europe. About 84 per cent. of people living in rural areas, as has been said, live within a mile of a post office branch. Other ideas have been suggested, notably by my hon. Friend Mr. Evans, who suggested that we could put post offices in pubs. That would lead to 24-hour post offices. How convenient that would be: every time that someone needed another pint, they could draw out a bit more of their pension. However, we must look creatively at how we go down that route. As my hon. Friend also said, the solution is also partly in our hands. If we and our constituents do not support the rural post office network, it will close. Although we recognise that the Government have a role to play in that, so do we as individual consumers.

rose—

I will not give way to the hon. Gentleman, if he will forgive me, because I know that we are tight on time and the Minister wishes to address many points.

It is clear that the Government do not have a long-term strategy for the rural post office network. Without a strategy, sub-postmasters, sub-postmistresses and Post Office Ltd cannot plan for the future or ensure that rural services are maintained after 2006. The Government have made comments that ostensibly show a commitment to the rural post office network, and in an answer to a parliamentary question to Mr. Drew, the Under-Secretary of State for Trade and Industry, Mr. Sutcliffe said:

"The Government recognise the importance of the rural post office network to local communities and will not take any decisions on the future of the network without a proper assessment of those needs. My officials are working closely with Defra and the devolved Administrations to identify future options for sustaining access to post office services for rural communities. This work is still at an early stage, but I am sure that they will seek the views of bodies representing parish and town councils at an appropriate point."—[Hansard, House of Commons, 21 December 2004; Vol. 428, c. 1616W.]

The Government have made a firm commitment to prevent avoidable rural closures until this year. Perhaps that is not so much a long-term commitment as one to get them past a general election, but to do it they made available a £2 million fund to support community post office initiatives.

As has also been said, the Government made available £450 million—£150 million a year for three years—to help to continue to provide access to services in rural areas when they could not otherwise be sustained commercially. They have announced another £300 million to help rural post offices until 2008, but they do not continue to provide that duty to avoid closures, which is what so many people have called for in this debate.

That may sound all well and good, but it masks the frightening decline in the number of village post offices. The total number of post offices has fallen by 17 per cent. in the past 10 years, but the figures are even more dramatic for sub-post offices. The number of sub-post offices has declined by 35 per cent. since 1997. That is a drop of 4,600 sub-post offices in eight years. Norman Lamb said that this had been a longer-term trend, but we need to get it into perspective. The 4,600 small post offices that have closed in the lifetime of this Government are more than have closed in the previous 22 years. That is an extremely worrying decline.

The closures are partly a direct consequence of Government policy. The Government's decision to introduce pensions and benefits to be paid directly into bank accounts has removed 40 per cent. of post office income, causing many smaller rural post offices to close. As has also been said, the Government were not passive in all this, but actively encouraged people to switch to that system while saying that they were neutral.

As my hon. Friend Mr. Paterson said in a notable contribution, they were brutal about the policy; they recognised what the consequence would be. Indeed, when the Conservatives considered the matter back in the 1980s, when I was a special adviser at the Department of Trade and Industry, we rejected that change precisely because of the implications for small post offices. We decided that it was sufficiently important to support the Post Office network not to go down that route then.

Direct debit payment was not supported by the National Consumer Council, which said:

"The end to cash benefits just hasn't been thought through properly," and that the new arrangements

"take little account of people's real needs".

Direct debit payments were also criticised by the National Association of Citizens Advice Bureaux, the National Federation of Sub-Postmasters, the trades unions Amicus and the Communication Workers Union, the National Federation of Women's Institutes, which should frighten the Prime Minister, and Age Concern, which expressed concern at the considerable hurdles that seem to be put in the way of opening Post Office card accounts.

We believe that the Government have been hasty in pushing the policy forward, and we recognise, just as the Countryside Agency has done in a survey that it recently carried out through MORI, that these changes have had a negative impact, and are likely to lead to mass post office closures.

What is needed is for the Government to have a clear vision of the future of the rural post office networks—a genuine plan for stopping closures—to ensure the longer-term prosperity of post offices. As my hon. Friend the Member for North Shropshire has said, not one member of the ministerial team at the DTI represents a rural constituency. The team represents Hull, Croydon, Dudley, Cardiff, Bradford, Brent, and Sheffield, and it is unsurprising that the interests of rural consumers are being overlooked when no one in the entire ministerial team at the Department that is driving the policy represents a rural post office.

The Government should consider allowing post offices to offer more services. At present, post offices are not allowed to offer services that would compete with the Royal Mail, but independent parcel delivery firms such as DHL and UPS would welcome the opportunity to sell their services through post offices. Indeed, postmasters and postmistresses are in favour of that prohibition being lifted. It would be lifted for all post offices, but it would be of particular benefit to rural post offices.

As well as expanding the financial services that post offices can offer, the Government should also be more imaginative in expanding the role of post offices as a banking portal. They would then become places where people can access banking services from high street banks in the way that it is suggested that they can have access to the postal services of companies other than the Royal Mail. That would be more relevant for postal services that may not have a high street bank than for post offices in towns and cities.

The Government have thrown some money at the issue, but they have shown little vision. While they dither, the post offices that are so central to the economic life of villages throughout the country quietly slip away. The key issue which the Minister must answer is the one posed by my hon. Friend the Member for North Shropshire: what is the Government's vision for rural post offices? We have had an excellent debate and I hope that we can now have some answers.

I begin by saying that our debate has lasted one hour and 20 minutes and I now have 10 minutes in which to attempt to respond, which is completely inadequate. I want to assure you, Mr. Cook, and all hon. Members present that I will write to all those who have spoken in today's debate, ensuring that all the questions that were raised and are recorded in Hansard receive a full and proper response.

Danny Alexander is not only the Member for the parliamentary constituency with the longest name, he is also the Member for one of the largest geographically and most beautiful constituencies—I say that as someone who has holidayed in Glen Affric—in which all but six of the 42 post offices are classified as rural. The reason for his interest in the future of the rural post office network is therefore self-evident.

The future of the post office network is an issue of relevance to every member of the House, whether our constituencies are rural, urban or a mixture of both. We all share concerns for the future provision of post office services to our constituents. Most of us recognise that there had been underinvestment in the business for decades until the Government reversed the decline with our sustained programme of investment since 1999. Some £500 million was injected to create a fund for new IT infrastructure and since 2003 the Government have committed £150 million a year up to 2008, subject to state aid clearance, to support the rural network. On top of that, the Government put £210 million towards the urban reinvention programme.

That represents an investment of £1.41 billion of taxpayers' money from the Government. Yet on the website of the Highland Liberal Democrats the hon. Member who initiated the debate is quoted as saying:

"There has long been a suspicion that Mr. Blair's Government is not committed to the rural post office network".

The hon. Gentleman should perhaps take a leaf out of the book of his colleague Dr. Harris, who told me following a recent debate that the more research he carried out, the more he realised just what the Government had done.

Advances in technology, greater mobility and changes in shopping and financial habits have resulted in a growing proportion of people not using post offices in the way that they did in the past. Custom across the network has sharply declined creating the spectra of the spiral of decline. If the post office network is to survive and thrive it needs to change significantly. The Government want to see a post office network that can prosper, but on the basis of today's needs and those of the future, not those of 20 or 30 years ago. In doing so we also must face present reality.

Major sectors of the network are losing substantial amounts of money. The rural network is making losses of about £150 million a year and the directly managed Crown offices are losing in the region of £70 million a year. Clearly the status quo is not sustainable. Several important steps to restructure and revitalise the Post Office have been taken but the future of the network rightly remains an issue of national debate, and it is clear that there are still considerable challenges to be faced.

The decline in transaction volumes is not just about the changes in benefit arrangements that were completed last April. The decline started well before the move to direct payment. Even before the migration from order books started in April 2003, 43 per cent. of the Department for Work and Pension's customers had opted to receive all of their benefits by direct payment. By last October, 97 per cent. of customers were receiving direct payments with 76 per cent. opting for payment in a bank account and 21 per cent. for payment into a Post Office card account. That is an example of an efficient Government delivering benefit more cost effectively, reducing the burden on the taxpayer at the same time as being more convenient for the recipient and cutting out the potential for fraud. However, Mr. Paterson portrays us as a mean Government plotting to reduce the profit margins of sub-postmasters.

Will the Minister give way?

I will give way to the hon. Gentleman if he will rise and commit his party to reversing policy so that that profit margin does flow back to sub-postmasters. If he were prepared to rise to do that, I would happily give way, but I see that he is not.

The trend of declining transaction volumes applies not only to benefit payments but to a—

Will the Minister give way?

No. I must answer some of the points that have been made.

On a point of order, Mr. Cook. Is it right for a Minister to name an hon. Member twice, but not to allow him to respond in order to make the point that the Government have taken £400 million a year from the network?

That is not a point of order for the Chair; it is a point of debate, and it is possible for it to be answered in other ways.

Thank you, Mr. Cook, for that clarification. Of course the hon. Member for North Shropshire is refusing to respond to the proper issue. That is clear; it is that the Government have acted entirely responsibly in delivering the service more cost effectively. The Public Accounts Committee would have something to say if they did not. The hon. Gentleman's party will not pledge itself to row back that policy because it knows the truth of what I am saying.

The trend of declining transaction volumes applies not only to benefit payments but to a much wider range of services, including Girobank and national savings transactions, telephone bill payments and postal orders. We must also recognise that 96 per cent. of the nation's post offices are run by sub-postmasters. They are private business people who have invested in their businesses not only their own money but, as has been mentioned particularly by Charles Hendry, a great deal of care, which has helped the post office network to achieve its highly regarded status.

However, with declining profitability in the network as a whole, the viability of many individual offices has taken a severe knock. Decisive action, in the form of the urban reinvention programme, was taken to restructure a sector of the network in which there was extensive over-provision, with the aim of better matching supply to demand, and of creating the viability necessary for a network that would be sustainable into the future. That is why we backed the plans of Post Office Ltd for managed restructuring of the urban network, which involved almost 2,500 office closures but ensured that, nationally, 99.3 per cent. of people in urban areas still live within 1 mile of their nearest post office. Lest anybody should forget, each one of those 2,500 closures happened in a place where the sub-postmaster wanted to close and volunteered for closure. Nobody was forced out of business by POL or Government. They closed because they chose to do so.

We now need to address the issues facing the social network of sub-post offices in rural and urban deprived areas. That part of the network is no longer financially sustainable in its present form. That is a problem, but it is not the only problem. It is no longer clear that the needs of those communities, or of the most disadvantaged, are best served by the present traditional costly and inflexible fixed office network structure. Those who believe that financial sustainability does not matter, and that Government should simply pour more money in to sustain the network come what may, are failing those of their constituents who are not getting the service that they deserve because somebody else in a village down the road is keeping an inefficient physical structure.

The social network payment of £150 million a year from the Government was introduced in 2003–04 as a transitional measure against the background of migration to direct payments of benefit. It was intended to provide a financial breathing space in which POL would develop new products to replace lost income from traditional business, and would identify more cost-effective ways of delivering its services. It is becoming increasingly urgent that we find innovative and more cost-effective ways of delivering post office services to rural and many urban deprived communities. We cannot ignore the fact that many rural offices have an impossibly low customer base, with some 1,600 offices averaging fewer than 100 customers a week. The 800 smallest offices are averaging 23 customer visits a week and generate—

Order.