Postal Services

HL Deb 28 January 2004 vol 656 cc226-57

4.19 p.m.

Baroness Gardner of Parkes rose to call attention to the Post Office and the postal services; and to move for Papers.

The noble Baroness said: My Lords, I am privileged to have the opportunity to bring this debate to your Lordships' House today. The postal services have always been of great interest to me personally and have played a significant part in most of our lives.

In July of this year it will be 50 years since I arrived by ship from Australia to live in London. I remember the excitement and wonder of seeing for the first time the famous buildings and the sights of this great capital city. As for so many throughout history, letters were my link with home and always eagerly awaited. I could hardly believe it when my letter came through the letter-box slot on to the hall floor in the flat right inside my own dwelling. I wrote to my mother to tell her of this wondrous happening.

As a child in Sydney, it was often my turn to collect the post from the letter-box when the postman blew his whistle. The box was always at the front gate, usually some 100 metres from the front door. I would put my hand very gingerly into the letter-box as Sydney had many venomous spiders and they sometimes lurked in the box. So you can see that the British delivery of post right into the home, taken for granted by those who have always enjoyed this, was something amazing indeed for me. In Australia the recipient of post had to do more work and the postman less. In blocks of flats, the letter-boxes are all together downstairs.

I remain a devoted fan of the British postal system. I consider it essential to ensure the continuance of the universal post, which benefits everyone in this country. The Royal Mail Group plc is the official name for the Royal Mail, Post Office Ltd and Parcelforce with about 200,000 employees and a turnover of over £4 billion in the last half year's published accounts. I shall deal with the whole group and individual sections in this debate without losing time in identifying separate parts.

I must, however, remind your Lordships of the disastrous and costly failed name change to Consignia—stoutly defended by the Minister at the time—now consigned to the dustbin. The present heading of "network reinvention" sets my Australian "anti-conman" alarm bells ringing. I see why, when I read that it is to deal with, an oversupply of Post Office branches in order to encourage the migration of customers to nearby Branches".

Progress is inevitable and desirable. We would not want to prevent that. Letters to Australia, which took six weeks by sea in the 1930s and a week by air in the 1940s, can now be received almost instantaneously by e-mail, but there is still a place for the posted communication. The prediction that we were to become a paperless society has proved quite untrue.

It is not only new technology that has damaged the Post Office. Sadly, the self-inflicted wounds of strikes in past years have been damaging and have accelerated the change-over to alternative means of communication. I recall earlier strikes, with solicitors having to set up methods of clearing documents. Later, faxes became the answer and now e-mail is everyday. Strikes have disrupted both deliveries and counter services. Every time people deprived of their normal postal service find another way to manage it means a loss for ever of some users of the postal service.

The postal services remain very important to this country. The Post Office has the largest retail branch network in the UK, with some 17,000 post office branches. It is bigger than the major building societies and banks combined—14,000—and is the largest post office network in Europe. Every week, 42 million customers visit post office branches—51 million transactions. Counter services are so convenient for people—to get TV licences, register their cars, draw cash, pay bills and buy stamps—and are widely used. Special delivery costs more but is a guaranteed next-day delivery to any part of mainland UK.

Daily, 82 million items of mail are handled. I could go on quoting figures but they are meaningless to the man in the street who simply wants to retain and, if possible, improve the postal services and certainly to have them readily available and easy to reach.

In spite of these impressive figures and the claim that in urban areas people have access to a post office within a mile, there can be real difficulty in finding a post office.

When in London, I have lived for 18 years opposite a Crown post office, of which there are only 576 of the 17,000 post offices. Two years ago this large post office was relocated around the corner. Every day I am asked: "Do you know where the post office is?" Its invisibility is seriously damaging its turnover and certainly creating difficulty for customers. The local council is about to permit the erection of notices on the main road directing people to this somewhat obscure position, as they have had so many complaints about the disappearing post office.

But a large number of sub-post offices are disappearing due to a closure programme; 3,000 urban post offices are to be closed by the end of this year. Many have already gone, originally without consultation and now with token consultation. Sub-postmasters are usually private business people using their own premises and staff who have a contract with Post Office Ltd. People are losing their local services, their needs are being ignored and they usually know nothing about it until the decision to close has been made.

The closure of rural sub-post offices is even more serious. At least in urban areas, transport is available to get people to a post office somewhere. There is often no such transport in rural areas. For vulnerable, elderly and disabled people the village post office, often within the village shop, is a lifeline. Only 9 per cent of villages have a bank; 60 per cent have a post office branch.

The village post office is a meeting place and a social service and while I accept that the Social Network Payment will help continuance until 2006, I personally am very disappointed that the Government are talking about ending the right of pensioners to draw their benefits in cash. Drawing cash from pension books is a long-established habit and comfortingly familiar to the elderly who may not accept new methods easily. Habits gradually change but the Government are unwilling to allow time for this change. Post Office card accounts sound like a good idea. If people saw that such accounts meant little change, they would gradually accept them. Why are the Government making it so difficult for people to open these accounts? Some counter staff have told me that the application form is so complex that they doubt whether they would even be able to complete one themselves, much less assist customers to do so.

Rural Australian post has huge distance problems. Post boxes have to be raised on posts and are usually large open boxes so that the postman puts the delivery in from his car window. He delivers bread—usually one baker supplies a radius of 100 miles—and other essentials at the same time. In this densely populated island there are still remote parts and I was a keen campaigner for a practical service of this type. So I was delighted when the post bus was introduced. It brings the mail, takes passengers and delivers goods. I went with a parliamentary group to travel in a post bus in the north of England. I understand the service is still going and meeting the special needs of the areas of this country where the population is very sparse.

The post train has gone as electronic sorting has become the norm. The Post Office tells me that the whole delivery system is based on the sort code. I am therefore surprised that telephone books do not show sort codes with addresses and telephone numbers. I know you can buy a special postcode book and you can find the information on the Internet but very many individuals will never have access to these means. It should be simple to include postcodes with any listing in the phone book. Could the Post Office not come to some agreement with BT over that?

For years I was keen to see regulators appointed in various fields—energy in particular—and I think these early regulators worked well. I now find that we are becoming over regulated and I am quite shocked by Postcomm's A Review of Royal Mail's Special Privileges. I am never opposed to improvements but I am horrified by some of the changes being considered. I do not want to see change in the exemptions, particularly from VAT, and the right for Post Office vehicles to pull up and empty post boxes, or deliver post.

On VAT, the consultation document published this month states: Postcomm considers that the evidence clearly supports the view of private postal operators that this privilege distorts competition in postal services. Postcomm also considers that, whatever may have been the case in the past, there is now no universal service justification for it I emphasise the words, supports the view of private postal operators Postcomm's remit is, to exercise its functions in a manner which it considers is best calculated to ensure the provision of a universal postal service

Any talk of competition is only secondary in its remit.

Universal service means anyone getting their post anywhere in the country, and is very important to the individual, whereas Postcomm seems to be more interested in competition than anything else. VAT at 17.5 per cent on stamps could add 5p to the cost of a first class stamp. Even a reduced rate of, say, 5 per cent would add more than the rate of inflation.

I am unimpressed by the fact that businesses could reclaim that VAT. Ordinary people sending and receiving post could not. That would be just another nail in the coffin of the personal post—the universal post. It would be yet another stealth tax for the ordinary man. I would prefer to see an honest extra penny on a postage stamp than go down the VAT road, which widens but never narrows. VAT is a matter for the Chancellor. Will the Minister today rule out ever applying VAT to stamps?

The Post Office tells me that a penny on first and second class post represents an estimated £170 million in a year. The last penny increase brought the Post Office back into profit. At 28p, our current price for a first class stamp is cheaper than in almost every other European country. The average is 34p. In Germany it is 37p; in Italy about 50p; and in the Netherlands, 54p. For the Post Office to add one penny to the stamp value here, Postcomm must authorise it. To add VAT does not require that. It is important that the Government continue to resist any suggestion of VAT on postage stamps.

I turn to parking. The red Post Office van is entitled to pull up at the post box with impunity. That is under threat because it is not allowing competition the same rights—that is according to Postcomm again. What rubbish. Thank heavens police and ambulance vehicles are not within the Postcomm remit. I consider the postal service to be a public service too. I appreciate that the Royal Mail is now a corporation, but it has only one shareholder: the Government. Will the Minister assure the House that that nonsense will be rejected? We cannot risk loss of the universal post by allowing the Government to remove the Royal Mail's special privileges.

We all tend to take for granted the many excellent counter services provided at post offices: licences, premium bonds, car registration and parcel post—all involving lots of form-filling. Am I alone, however, in thinking that some of the procedures are unnecessarily bureaucratic and laborious for both staff and customers?

The Post Office plays a very important part in all our lives, be it in town or country. I must pay tribute to the splendid postal service—counter and delivery— provided by the dedicated and helpful staff in this House.

The Minister, the noble Lord, Lord Sainsbury, said: it is very difficult … for Ministers and civil servants to try to control the operational arrangements of an industry of this scale and complexity".—[Official Report, 8/7/03; cols. 129–130.]

That may well be so, but at times I feel that the Minister gives the House the impression that the Government do not really mind about the quality of service or care provided to people in our post offices.

The Royal Mail is a vast enterprise and it is important for the nation that it should be a successful one. Let Postcomm support the universal post, not threaten it. Royal Mail delivers letters and parcels to all 27 million UK addresses, no matter how remote, at a uniform affordable price. Long may it continue.

I beg to move for Papers.

4.34 p.m

Lord Hoyle

My Lords, first, I thank the noble Baroness for giving us this opportunity once again to debate something that, as she rightly said, affects all of us. I must declare an interest, because I am a member of Amicus, one of whose sections is the Communication Managers' Association.

I shall say a little more about rural post offices. The noble Baroness was right to talk about the importance to a community of having its own rural post office. Closures that have occurred under governments of both parties—3,000 under the previous government— mean that many communities have been deprived of the last place to which they can go and, often, the last shop in the village.

I know that the Government are committed to preventing unnecessary closures; nevertheless, the noble Baroness was right to say that that is being undermined in other ways. For example, benefits are no longer paid over the counter—or, at least, all the emphasis is on them going through bank accounts. I could not agree more with the noble Baroness about the difficulty of obtaining a Post Office card. Why do we have to have the complex form to which she referred? Why can people not just walk into their local post office and open an account there and then? They can do that at the bank; why can they not do so at the post office? There appears to be undermining by another department. When my noble friend replies, perhaps he will explain why it appears that one department is against another. One department is recommending that people go for a bank account instead of using the post office. Yet most people prefer to use the post office, which gives them an opportunity to meet other people, get out and about and use the local store.

If we are promoting in-town and in-village shopping, it seems silly to deprive the one centre that can offer that service of part of its revenue, because 40 cent of post offices' revenue comes from payment of benefits. If they are to be deprived of that, they need other resources on which they can fall back and all the help they can get.

It is not much good our saying that according to the most recent available statistics, closures have fallen considerably and are probably at their lowest since 1994–95. That is not helpful if those running post offices feel insecure, see their actual returns dropping and find it difficult to dispose of rural post offices— which means that as they come to retire, the post office closes and the community is deprived of that service. Will my noble friend tell us why we cannot have that simple method: going into a branch and obtaining a card there and then? If we cannot, why not?

It is right to say that in many urban areas post offices have joined together to try to make themselves viable, but that again deprives people who have been near to a post office, as it moves further away from them. The people who suffer in all of this are pensioners and those with disabilities. We ought to take them into account all the time.

I am pleased that Post Office Ltd is, as has been said, becoming a major player in the financial services field. It provides personal loans, credit cards, motor insurance and bureaux de change —one of, if not the, largest networks in the country. However, again, I could not agree more with the noble Baroness—we seem to be agreeing a great deal on this occasion. Why cannot post offices be made more attractive? Why cannot people know more about them? Why is it so difficult sometimes to discover them when they can offer all these services? That issue needs attention.

I turn to the Royal Mail's industrial relations with its employees, a matter which concerns me greatly. I asked a recent Starred Question on the 3,000 managers who were being made redundant. I pointed out that there had been no consultation with the Communication Managers' Association. The first it knew about the matter was when it was told that once again there was to be a further review of managers— the fourth review in four years. How can people feel secure against that background?

On 20 November, the union was told that there was to be another review. On 2 December that was confirmed verbally. On 11 December, a letter stated that there would be 3,000 redundancies. No consultation had taken place and Section 188 had not been complied with The answer given by the Minister with responsibility for science, the noble Lord, Lord Sainsbury, to my Starred Question was not completely accurate. I asked about the fact that the partnership was not working. He replied: As for the partnership, I think that I am right in saying that it was the unions that withdrew from the partnership arrangements. It would be highly desirable for the two sides to come together again to drive forward the change".—[Official Report, 8/1/04; col. 250.] Since then the Minister has received the letter from Peter Skyte, the National Secretary of the Communication Managers' Association, pointing out that that is not completely accurate. It is true that CWU suspended its involvement in the partnership; but against that the Communication Managers' Association has never withdrawn and has continued to play a part in the process. I hope that my noble friend will take the opportunity of putting the record straight in that regard.

Managers and other employees are its most valuable asset. I do not understand why it is treating its staff in this way. Someone who is now a director of the Post Office may move from Royal Mail to another company but many of the staff have worked for Royal Mail for a lifetime. Their security and the welfare of their families depend on the good relationship with Royal Mail.

I agree with the noble Baroness that Postcomm is behaving in a shabby way towards the Post Office. I fail to understand how we shall maintain a universal service with the cherry picking which is being allowed. Equally, if the Royal Mail is to meet increased competition and the changes required in the liberalised future which it faces, how can it do so without working in partnership and consultation with its employees? Why cannot it be more open with them? Why cannot it disclose to them their future plans for investment, how it sees the corporate plan coming about and how it intends to meet the increased competition. I fail to understand why it does not seek more co-operation from them and why it is not working with them.

At the end of the day all of us—I do not refer simply to those who work for the Post Office or are the managers of the Post Office—have a stake in maintaining that high standard of service we have received in the past. I say this to my noble friend. We shall not receive that if employees are treated in this shabby and disgraceful way.

4.45 p.m.

Lord Clarke of Hampstead

My Lords, I, too, am most grateful to the noble Baroness for giving us this opportunity to discuss the Post Office. When preparing these notes, I had intended to say that I was particularly grateful to the noble Baroness because as recently as 6 June of last year I had raised an Unstarred Question about the role of Postcomm which did not take place. It had not arisen again by the time the House prorogued. In my innocence. I thought that it might do so but it has not. However, we have this debate today.

In my time in this House, I have never enjoyed a speech so much as that of the noble Baroness today. I say that because of my emotional attachment to the Post Office. The noble Baroness said that she arrived here 50 years ago. Fifty-eight years ago I joined the Post Office. I declare my interest as a former telegraph boy, postman, sorter, the deputy general-secretary of my union and a trustee of the Post Office pension fund.

Having been directly associated with the Post Office for over half a century I feel a sense of deep sadness when I see what has happened to what was, and I believe could still be if it were given the chance, the best postal service in the world. The noble Baroness touched a range of emotions in me when she described postal conditions in Australia. All I experienced were squirrels in Kenwood, Hampstead, biting my fingers and the odd fox running in front of the mail van I was driving down to the Iveagh estate.

For many years the Post Office was contributing large financial surpluses to the Exchequer. I recall that in my maiden speech in your Lordships' House I drew attention to the success story the Post Office could tell. I said at that time—December 1998—that it was not just in 1998 that the Post Office had met the financial target set by the Treasury. During the preceding 20 years the Post Office had achieved subsidy-free profits. It had exceeded the external financing limit target set for it in 13 of the previous 16 years. At that time in 1998, in the 16-year period I referred to the Treasury benefited by more than £2 billion, on the backs of good, dedicated servants of the Post Office.

There were hopes among many that the coming of commercial freedom would herald a new dawn in Post Office finances. It was widely hoped that the successful public service would be able to build on its successes and meet the challenges that it would face as a result of the Postal Services Act 2000.

The Act came into being and this House has from time to time been reminded—by me, among others— that the hopes I have referred to have been dashed. The biased hand of Postcomm has rested heavily on the Post Office management. The long protracted discussions on the sensible rate to be charged for downstream access by the competitors of the Royal Mail is but one example of a waste of money.

It is worthwhile informing the House of the way in which Postcomm is funded. Postcomm is funded by the fees it charges to the companies it licenses to provide postal services. The licence fee increases with the volume of mail the company handles. By far the largest contributor to Postcomm's running expenses is Royal Mail which handles 80 million items of mail a day. Postcomm's annual budget is around £7 million. It has a staff of around 40 people. How on earth did we manage to be such a successful business without this wonderful group of people sitting in judgment, day after day, on what the Post Office should be doing?

There are many post offices that I would like to speak about during this debate. I will attempt to deal with just a few. A few issues cause concern, not just to me and the people with whom I have worked all my life, but to the public. This concern is felt by people in the Post Office, and people outside; the customers and the clients—both business and domestic—who rely on the maintenance of a reliable service.

The first issue is the role of Postcomm. I have not altered my view of this unnecessary organisation since I first described it as the vehicle by which the get-rich carriers would cream off profitable business, then dump their work on the Royal Mail, which, by the terms of the Act, must deliver the final mile to the addressee.

Just before Christmas, on 17 December, Postcomm's Graham Corbett welcomed the announcement that Royal Mail and UK Mail were likely to reach a voluntary agreement over the prices and conditions under which Royal Mail will carry its rivals' letters over that final mile. The announcement came as a result of Postcomm being asked to determine access prices, after talks between the companies originally broke down. Following the initial proposals as long ago as last May, Postcomm's final proposals were due for publication prior to Christmas, but we now are told that they will be published by the end of this month.

It is reported that Postcomm has agreed to postpone this publication to enable both parties to finalise the details of their agreement. If a final agreement is reached, Postcomm said that it would issue a paper giving its views on an appropriate framework for other firms whose business model requires access to Royal Mail's delivery network. If an agreement is not finalised, Postcomm's proposals will be published in their original form shortly afterwards. Can the Minister inform the House of the current situation?

I share my union's view of Postcomm's liberalisation and competition agenda. It is fundamentally in conflict with its primary duty to protect a universal service at a uniform tariff. Since its creation, the competition proposals from Postcomm have introduced too much competition, too soon, in the wrong form, at the wrong time. They directly contradict the measures and timetable being introduced by the European Union. Postcomm's interpretation of competition and postal services is that it will bring major benefits to customers without putting at risk the maintenance of the universal service at a universal tariff. That is unsustainable. That interpretation puts at risk the universally provided service. There is a belief in many countries and postal administrations that the postal industry is a unique and natural monopoly, which can be maintained only by preserving a system of cross-subsidisation, on which it depends.

The general principle of allowing third party access to Royal Mail's pipeline will undermine the simple business model of cross-subsidisation, on which the universal service depends. Allowing the development of this form of third party access would threaten Royal Mail's long-term viability, hit the company's revenues, undermine the recently determined pricing structure, and prevent Royal Mail from effectively meeting its universal service obligations.

It is my firm belief that access determination is being used to accelerate the introduction of competition in the postal market, by allowing competitors to take advantage of Royal Mail's economies of scale in delivery. Setting the access price at a level less than half the price of a first-class stamp amounts to a green light for mail operators to cherry pick profitable mail and thus threaten Royal Mail's ability to maintain the universal service obligation.

I am confident that anyone who believes in the British Post Office wants it to be an expanding postal industry that provides a first-class service to the public. At a time when mail volumes continue to grow, and the number of delivery points is increasing, the future of the industry can be built only by greater investment in staff and capital, a delivery service that concentrates on customer needs with a more customer-focused range of products and services, and constructive industrial relations. I will mention industrial relations again at the end.

On financial, operational and legal grounds, the proposed access arrangements will prevent Royal Mail from fulfilling its primary statutory duty to preserve the universal service obligation and a uniform tariff. In the light of the damaging impact that the current arrangements will have on the future provision of services, I have asked the Minister to look again at the role and actions of Postcomm, with a view to getting it to withdraw its existing proposals on access and to allow the matter to be looked at afresh by the new postal regulator.

It will not satisfy me to be told, as I have been told so many times in this House, that this is a matter for the Post Office and the regulator. This Government, whom many worked so hard to get elected, created Postcomm. They brought in the Postal Services Act 2000. They should not walk away from their responsibilities to the public.

The noble Baroness and my noble friend Lord Hoyle referred to post office closures. I will not mention names, but an 86 year-old lady living in south London rang her daughter miles away to ask her to come and help her, because she had been to the post office three times and had three forms. She did not understand what was happening, and she wanted to get her money. My noble friend Lord Sainsbury of Turville has told me many times in correspondence that people will always be able to get their money.

The Post Office is being encouraged not to provide post office cards and accounts—people are being directed to banks. It is no good for the Government to say, "This is a matter of understanding". This lady sat in tears in her kitchen, and her daughter had to travel a long way and take a day off to sort out the matter with the post office clerk, who, under pressure, probably said, "Just fill in the form and bring it back". It is a bit much for the Minister to say that it will all come right in the end, and that people will get used to it. It will not. Some people are vulnerable.

It is no good asking Ministers about how many sub-offices and branch offices have closed since the Government were elected. They are closing at a rapid rate. Many so-called "local consultations" about closure are just a sham—I use that word advisedly. I come from Hampstead, where I was a postman for many years and emptied post boxes outside foreign offices. Mansfield Road, South End Green, Finchley Road and Belsize Village are all due for closure.

Do not take my word for it being a sham. Take the response of the local paper, where a Post Office spokesman spoke at a public meeting. He told the meeting that the Post Office's only shareholder, the Government, expected him to plug a gaping £200 million hole in the annual budget caused by a decline in business. 'We are not as professional retailers as we ought to be', he told me in a frank admission. He added 'the Government will not allow us to operate at a loss. We have to make changes' I draw the Minister's attention to the Early-Day Motion tabled in the other place about the relationship between the Scottish banks and the Post Office. In the United Kingdom generally, there have been agreements to get benefits paid through banks, but the banks in Scotland will not co-operate. I commend Early-Day Motion 397 to him. Perhaps he will let me know his views on it in due course.

On 8 January, this packed public meeting was told the usual line—that there were post offices within a mile. Let me dispel a rumour. In Hampstead, they are not all running about in four-wheel drives, racing around corners. Vulnerable, elderly, sometimes handicapped people, are trying to get their pension from the post office. They are not all in a position to drive that mile. In some cases, that mile can be stretched, as it was in Loudoun Road, on the other side of Finchley Road—but I am getting too parochial. This is not the first time that I have drawn attention to the fact that it is not the fault of the Post Office that these closures are taking place, not just in Hampstead. In almost every community in the country, people are losing their local offices. When I say that the consultations are just a sham, do not take my word for it. Read what other people are saying who have no real connection.

The urban reinvention programme has a wonderful title—it is another one to put in the box, from the Carter committee 40 years ago onwards. Some £210 million has been allocated to this programme, among other moneys. Some £180 million of that money is going on compensation for people who want to give up their post offices. We wonder why they are closing, but it is being made so easy for them. The odd bit of money is going on refurbishment of the offices that remain.

I said that I would like to talk about industrial relations. I share the noble Baroness's view of the damage that has been done over years by industrial relations in the Post Office. In 1971, when we had 47 days of strike, I swore that I would do everything in my power to avoid people having to go on strike again. Sometimes, I was successful—and criticised for it— and, sometimes, I was not. Today, there is an agreement. The agreement is a testament to the success of negotiations after the sad events just before Christmas. Agreements are possible.

In the agreement is the key to a lot of the Post Office's problems. It is balloted on at the moment. The ballot closes tomorrow, and I am confident that the agreement will be endorsed. If the House will forgive me for speaking for 30 seconds more, I must say that I believe that the agreement contains the key. It allows for five-day weeks. People who work for the Post Office have had to get up in the early hours of the morning six days a week, year after year. If that change comes about, the agreement will be worth the effort put into it by the chairman of the Post Office, whom I have had the pleasure of meeting a few times. I do not know whether he was added to the list. I was told that the DTI wanted him added to the shortlist. Perhaps the Minister could tell us whether he was. The rumour is going round that Allan Leighton got the job because his name was put on afterwards. I wish him well, and I hope that, when he leaves the Post Office—I hope that that will not be for a long while—he leaves it in better shape than he left Leeds United.

5.1 p.m.

Baroness Byford

My Lords, I too congratulate and thank my noble friend Lady Gardner of Parkes, who has brought this important topic before us today. The Post Office has been debated here and in another place on several occasions recently. Like many others, I have persistently asked questions about the Post Office and sub-post offices and about the wider service given by sub-postmasters in their local community. I agree with my noble friend that we should retain and improve postal services, services that are currently taken so much for granted. It is rather like having electricity and thinking that the lights will never go out.

I suggest to the Minister that the course that the Government are taking is putting severe strain on our postal services. The people who are most likely to lose out on all of that are the elderly, the disabled and people with young children, particularly those without transport. That affects us particularly in rural areas.

No doubt, others will talk about urban post offices; I shall feature two particular aspects. One is the way in which benefits are paid to clients. The second is the future of rural sub-post offices. At this stage, I declare that I am a patron of VIRSA, which does a lot of work with the Post Office to sustain post offices and prevent closure.

The Minister will not remember it, but his colleague the noble Lord, Lord Sainsbury of Turville—he is not in his place—would remember how, when we took the Postal Services Bill through the House, I tabled several amendments relating to the way in which welfare benefits would be paid to clients in future. The changes proposed in the ending of the book system caused several heated—perhaps that is not the right word; they were passionate—debates in Committee and at later stages. The concerns that I expressed at that time were wafted away as being over the top. I was told that the new system would be welcomed and that there would be no problem. That is not, in fact, how it is turning out, as other noble Lords have already said today.

The apprehensions are real, and I have many examples from CABs around the country highlighting cases like that just mentioned by the noble Lord, Lord Clarke of Hampstead, who spoke about an 86 year-old who could not get help. They are coming in thick and fast. I suggest that, if the Minister does not get the CAB's very good bulletin, he should do, as he would realise the difficulties that people have to cope with.

First, I shall speak about benefit payments. Secondly, I will say more on rural sub-post offices. In its excellent briefing, the National Federation of Sub-Postmasters has reminded us again that, in 2000, two-thirds of benefits in Britain were paid over a post office counter and around 18 million benefit recipients used the post office to get access to their payments. The federation goes on to say: Not only are people being forced to change the way in which they collect their benefits, despite the fact that 'there is little evidence that [claimants] have an unmet need for simple, trusted and secure means of accessing their benefit income'; but the Government has"— as others have said— made it difficult for people to choose the post office based product The NFSP has serious concerns that the way in which the direct payment programme has developed will continue to undermine the ability of the national post office network to sustain itself. The federation says: We have internal memos from the Department for Work and Pensions which prove … staff are instructed to encourage customers to choose a bank account at every opportunity and that they 'should be aiming to get 9 out of 10 new customers paid into bank accounts with a small proportion of these paid through Post Office card accounts I encourage the Minister to believe that people applying are being leant on to go through their bank, rather than use the three options that are open to them.

Other noble Lords have referred to the closure of post offices. The figures speak for themselves. Between 1992 and 1997, 1,089 sub-post offices closed; between 1998 and 2003, the total rose to 1,769. So, the Government recognise that there was a problem when they were in opposition, but the problem has become worse. The Minister should apply his mind to the continuing closure of sub-post offices. Perhaps he is not particularly interested in that at this time.

The Government's response to the closures has not been encouraging. In April 2000, when the problem reached a pinnacle, millions of protesters came to London. I was there among them when they handed in to Downing Street a petition against the proposed changes. They were anxious and had reason to be. In response to the mass lobby, Labour introduced a provision in the Postal Services Act 2000 that gave the Government power to pay subsidies to sub-post offices. We believe that sub-postmasters are looking to their long-term future; they do not want hand-outs. They need security. One must remember that it is the sub-postmaster who owns the shop and organises what happens in his post office. If sub-postmasters feel insecure because of the changes, it is not surprising that more sub-post offices are closing.

On 17 July, the House of Commons Trade and Industry Select Committee published its report on the impact of direct payment on post offices, about which the CAB had given oral and written evidence. The Select Committee concluded that, for benefit recipients who preferred to conduct their day-to-day financial affairs through bank accounts, the introduction of direct payment would provide a more convenient means of receiving their benefits. However, the Select Committee also felt that there was a significant group of people for whom payments by order books was the best option and that the needs of those people had not been properly taken into account when those direct payments had been concluded.

I turn to slightly more up-to-date figures and refer the Minister to a House of Commons Written Answer published in Hansard for 21 January 2004 at col. 1338W. The Government had been asked how many clients had opted to use the three schemes. I shall share the figures with your Lordships. The number of those using direct payment into bank or building society accounts was 9,052,037. The figure for direct payments into card accounts at post offices—the thing that we are encouraged to use—was, on the date of the reply, only 175,269. That is a tiny number. The figure for those who were still being paid through the order book was 9,566,221. If you add together the first and second figures, they come to less than the third. We are told by the Government that the new payment systems will have to be up and running by April 2005. How does the Minister think he will achieve that if more than 9,566,000 people are still not choosing to use one of the Government's systems?

I turn very briefly to the rural areas. The distance might be within a mile in urban areas but certainly in rural areas the distance is greater. I still find it extraordinary that the average comes down to one mile away. I suppose that that is as the crow flies—perhaps it is rather a large crow with large wings which covers a mile in different ways. But that is by the way.

Certainly, there is great concern in rural areas about the continuing uncertainty for the future of rural post offices. I hope that I have demonstrated to the Minister that people are still opting to use their post office—9 million are still doing so. There is a long way to go before those rural post offices have any certainty that their future is there and they will be able to continue.

The post offices have tried to diversify and to bring added benefits to help the people using them, whether that means paying car insurance or electricity bills. Trialled in Leicestershire—it appeared in my own post office—was Your Guide. It was a computer by which people could access government information or local information, and the system ran for a year. Why was it suddenly dropped? Has it been reviewed? Was it considered not to be of benefit? It ran and then it died, and we have not heard back about what success it had. If it had possibilities for the future, why has it been allowed to die, because it was another way of bringing additional income to that post office?

All I can do is tell the Minister that the fears expressed by Members on all sides of the House—the noble Lord, Lord Dearing, will follow me and will, I suspect, have his own concerns to express—are very real. There is concern not just within the House—I am sure that many of my colleagues at the other end of the building feel the same. Working with VIRSA I know only too well of the very grave difficulties facing sub-post offices and sub-postmasters, particularly in rural areas.

I hope that the Minister will give us some words of encouragement and that he will answer those questions. The way in which we pay benefits is so crucial to long-term success, whether it be through the post office card account although, as others have said, it is a nightmare to access. I do not know why it is made so difficult. Leaning on the public to use banking facilities when many of them cannot even get access to bank accounts because they do not qualify is a waste of time and not very fair to them.

I have three questions. What will happen on the future of the welfare benefits payments? What will happen to the longer term future of rural post offices? Why was Your Guide suddenly dropped and lost after it was introduced?

I thank again my noble friend for making this afternoon's debate possible.

5.14 p.m.

Lord Dearing

My Lords, I declare an interest as a post office pensioner. May I presume, as a former chairman, to congratulate the noble Baroness, Lady Gardner of Parkes, on her deep knowledge of these affairs, and the passion and enthusiasm with which she has spoken of personal service?

When I read the last annual report and accounts of the Post Office, I was in some despair. It shows a loss for the year of £600 million. It expressed concern for a possible loss of £1 billion worth of business. It said in the notes to the accounts, which not many people read, that it had had to borrow £1 billion from the banks so that it could do its accounts on a going-concern basis—rather an unusual thing to happen.

When I came to the half-year accounts, I saw, for the first time, signs of welcome progress in remedying the fortunes of the Post Office. I saw, for example, that for the first time in five years, it had managed to break even. In the same six months last year, it lost £500 million. More recently, as the noble Lord, Lord Clarke, said, there has been a really valuable, important agreement with the Communication Workers Union of a pay deal of 14.5 per cent over 18 months and new working arrangements, which will be paid for by efficiency gains. That is really epoch-making—a transformation. We should acknowledge the work of the noble Lord, Lord Sawyer, in developing a better climate within which negotiations could take place.

The noble Lord, Lord Clarke, was talking about the deal with UK Mail. I think we are right in saying that heads of agreement have been reached, and it is the final dotting. I hope that the regulatory body can be kept out of it. I share the concerns of a body that seems to see as its goal and the only relevant criterion competition rather than a good postal service at a fair price, available to us all, which will continue. The objective is not to compete but those three factors. I regret that the Post Office has not seen its role in a fuller way.

I want to concentrate on the Post Office's network, which has been referred to by all speakers. When I was looking at the half-year accounts, and although I had great pleasure in seeing that the Post Office had broken even, on trading, Post Office counters had had a loss of £91 million. It was better than the previous year, but not much. I began to think about the environment within which these counters are trading and, of course, I came straight back to the change in the way in which benefits will be paid.

In the past, there was a choice. People could use their building society or their bank or they could go to the post office with their pension book or benefits card. It seemed to me a simple thing to say, "We're going to change things; you can still go to your bank or your building society, but instead of having a pensions book, you will have a post office bank card. It is very simple—there is no complexity, nothing new. In fact, you will find it easier". But what do I find? Complexity.

The House of Commons Trade and Industry Select Committee reported last year on the Post Office network, particularly the counters. It referred to the complexity of opening up a card account, and said: We do not accept that this requirement … means that the procedure must be more complicated than opening an ordinary bank account. The Government should consider again why a card account cannot be opened at a Post Office using the same basic procedure as employed by the banks". All I hear is complexity in this.

My local sub-postmaster tells me the same as the noble Baroness, Lady Byford, has said. The whole system seems to be loaded against the pensioner—the beneficiary—changing over to post office card accounts. The pressure is all one way. There is the complexity and the push.

What is happening? We have lost 3,000 post office counters in urban areas. The thing that I find most surprising in the context of this change to new ways of paying benefits is that there was no cost-benefit calculation of the transformation. Those are not just the words of a prejudiced former chairman of the Post Office; I am quoting from that self-same report from the Select Committee in the House of Commons. The committee said: In the absence of a proper study of the costs and benefits of Direct Payment, it is difficult for us to comment on the merits of the Government's case that it represents value for money". We are talking about big money here, however, not the odd million. The package involves £450 million over three years to maintain the rural network, which is £150 million a year. It involves £210 million for the urban network, £180 million to pay for sub-office closures and £30 million for modernisation. One does not spend £600 million without a little thought. The Select Committee said that it could not find that a cost-benefit analysis had been undertaken. I am a touch surprised at that, but perhaps the Minister—although not today—will drop me a line. I like getting letters; it helps my pension. Will he tell me whether it is the case that there was no cost-benefit analysis? If he finds that there was one, he should drop me a line.

Everybody seems to have three wishes. My first wish is that the Government will look into the issue of the complexity of opening one of those Post Office card accounts and see that the Department for Work and Pensions is helping pensioners by enabling and facilitating them to get one of those accounts. Secondly, I refer to the matter mentioned by the noble Lord, Lord Clarke, which is also the subject of a debate on an Early-Day Motion tomorrow, signed by 55 MPs. The Motion is to encourage a number of banks—and I say this with the hesitation of an Englishman, but they happen to be Scottish banks— which have not entered into an arrangement with the Post Office, to have some felicitous discussion that may help that process along.

My third wish is a point raised by the noble Baroness, Lady Byford. Yes, money has been put on the table for three years to sustain the rural network— £150 million a year. What happens after the three years? Does the rural network go to the wall? Do the people who run the little businesses need to be kept in suspense as to whether they will be scrapped, or will the Government seek to clarify the position? I know that they will not do that this afternoon, but I hope that they will sense the feeling in this House about the Post Office network, its value to society and its familiarity. It is something that needs to be conserved.

5.23 p.m.

Lord Kimball

My Lords, I am most grateful to my noble friend for giving us an opportunity to have an update on this problem. Over many years we have discussed the basic needs of a rural community. A parson is nowadays run off his feet, with too many churches and not enough money. Physicians are all now withdrawn into group practices. Then there are primary school teachers. Rather like my noble friend Lady Byford, both in Lincolnshire and Leicestershire we have succeeded in having some fairly sensible amalgamations so that they have not been withdrawn too far from the local communities.

Pubs have also been affected, and then there are policemen, who have all been withdrawn from rural areas. In fact, all that a policeman is able to do now is, when there is some form of rural crime, to give one a number that allows one to ring up the insurance company so that the police do not have to do anything more about it. The matter is between oneself and the insurance company, which may pay out. However, above all—and by far the most important thing in the rural area—is that we should maintain our post office.

There is no better indication of the duplicity of this Government than the question of rural post offices. They say one thing, and once upon a time some of us believed it, but we now know that they always do the opposite. The Prime Minister said on more than one occasion that he valued the rural network—it was a sort of spin about the countryside. But he has authorised his Government to do the very opposite and to remove as much business from the Post Office as possible.

A person applying for child benefit is told that the only way they can get their money is by having it paid into a bank account. They were not advised about the option of drawing it through a Post Office card account until quite recently. An elderly person now receives a letter from the Department for Work and Pensions which says: We are now changing the way your attendance allowance is paid". Right across the top of this letter, in big print, it now says: Direct payment—giving it to you straight". I am referring to a person in our own village who has no bank account and no transport and wants the benefit paid into the post office.

The Government go out of their way to make it difficult for such a person to have future payments made to the Post Office card account. In the first instance, the Department for Work and Pensions asks the person to ring them up, at no cost to themselves, so that they can be persuaded that their allowance should be paid into their bank account. If they insist that, like many older people, they want to collect their allowance from the post office and want to have it paid into a card account at the post office, they have to fill in an elaborate form. It has to be filled in with a black ballpoint pen, they have to use capital letters, and they have to produce some form of identity to go with the form. That makes it as difficult as possible.

There is only one way in which to keep the rural post office open, and that is by the number of footfalls entering the post offices. Whatever they may say, the Government are doing their best to drive business away. As my noble friend Lady Byford said, over the past two years 80 per cent of all closures have been in rural areas. Despite the social network payment, most of the rural offices cost the postmaster money to maintain. In December 2002, a £450 million package was announced, but it has a run-out date of 2006. The package contains £190 million for the sub-postmasters and money for the new forms of business. Even so, the Post Office is finding it hard to find replacements for sub-postmasters.

One must admire the business that postmasters have built up around the central business of the post office, including newspapers, food, off-licences, cards and sweets. That is all done to support an essential service, which is needed and should be properly funded. The business of the Post Office should stand entirely on its own feet. The Government are driving more business away because of their prejudice against the Post Office card account.

5.29 p.m.

Lord Razzall

My Lords, I join other noble Lords in thanking the noble Baroness for introducing this extremely timely and relevant debate. It is worthy of note that her Motion calls attention to the Post Office and the postal services. In this debate, only the noble Lord, Lord Clarke, has really addressed the postal services aspect. When we have discussed these matters in your Lordships' House on previous occasions the noble Lord, Lord Clarke, has endlessly repeated the same mantra; namely, that the Government must take responsibility for postal services. I fear that however often he repeats that, the Minister will still give him the same answer; that is, that most of the issues that he raises are management issues for the board of the Post Office and for Allan Leighton, when he is not occupied saving Leeds United.

However, as I have said to your Lordships on other occasions, I have some sympathy with the noble Lord as there seems to be a tendency for the Government to claim the credit when things have gone well but to say that it has nothing to do with them when things have gone badly. However, I shall pass from that to touch on the issues that other noble Lords have raised which relate to the changing face of the post office network, which is of significant concern to your Lordships and, indeed, to the country at large.

Over the past 30 years the number of post offices and the profitability of the post office network have obviously been in serious decline. As a number of noble Lords indicated, changes to the way in which benefits and pensions are paid will—and already have—significantly reduce post office footfall, to use the retail jargon. It is estimated that paying benefits directly into people's bank accounts will mean that individual sub-postmasters are likely to experience a drop of 40 per cent in their incomes as a direct result of the loss of those transaction payments. I suspect that figure will be generally accepted by the Minister. In response to that the Government introduced a modernisation programme for the post office network.

As well as the proposed introduction of the universal bank, there is to be—the noble Lord, Lord Clarke, quite rightly drew our attention to the wonderful phraseology here—the reinvention of the urban network. The policy of Her Majesty's Government is that rural closures are to be avoided wherever possible. However, the direct result of that policy is that the Government have had to make huge financial commitments to guarantee, or attempt to guarantee, an arrest in rural sub-post office closures and establish a massive compensation programme that far exceeds the investment programme in urban areas, as the noble Lord, Lord Clarke, indicated.

As the noble Lord, Lord Clarke, indicated, £210 million was allocated to the urban reinvention programme by the Government. In an answer to a Parliamentary Question on 17 December 2003, the Minister in another place, stated that the Government were, investing very substantial sums in supporting the transformation of the network—some £2 billion in total over the next five years".—[Official Report, Commons, 17/12/03; col. WA984.] So the Government clearly have a very significant financial interest in what is happening in both the rural and the urban sub-post office areas. As regards the rural network, even after the £2 billion has been spent, the network will still need to support itself in the future. I believe that Postcomm has recommended that additional funding to deal with the gap in funding for central support costs for the rural network after the loss of the Benefits Agency income—a contractual amount of £400 million—should be negotiated by the Government as shareholder and purchaser of services from Post Office Ltd. I should welcome the Minister's comments on that.

Clearly, after investing all this money in the rural post office network, the Government must encourage development of an alternative income model for post offices if they are to become viable post-2006. The noble Baroness, Lady Byford, rightly said that no indication of what this revenue stream might be has been forthcoming from the Government. The noble Baroness rightly drew attention to the fact that the trial of "Your Guide", which I believe cost £35 million and was generally well received, was quashed by the Government without any apparent explanation. I hope that the Minister will expand on the Government's proposals regarding how that alternative income model for post-2006 for rural post offices can be developed.

The Government have received advice from Postcomm that they should provide direct revenue support to sub-postmasters using Post Office Ltd. as the delivery channel. The amount would obviously have to be negotiated between the Government and the Post Office. Postcomm has argued that funding administered independently from the Post Office should stimulate ways of providing post office services that ensure continuing provision of post office services in rural areas during the transitional phase, that maintain or improve the quality of those services and their wider benefits to the local community—a number of noble Lords said that the Post Office is really the only viable commercial enterprise in a village—and that funding should be provided to encourage the post office network to be self-sustaining from 2006 to 2007. I should be interested to hear what the Government have to say about progress in that area.

The policy for the either aptly or inaptly named urban reinvention programme is clearly to compensate sub-postmasters as they close what are regarded as unnecessary urban post offices. However, the intention was that the rationalisation of the urban network was to be a managed process rather than what we have at the moment which is an unmanaged decline and an, up to now, haphazard closure of post offices. The intention was that if one relocated offices into busier stores the Post Office would be able to capture more customers in one place thereby reducing the need for such a large number of outlets in urban areas. The Government, at the request of Post Office Ltd, made the £210 million available over a period of three years. However, as the noble Lord, Lord Clarke, drew to our attention, £180 million of that is intended to be spent on compensating sub-postmasters for closing their post offices and only £30 million on the matched funding for improvements to the remaining offices. Those are the figures that I have. Other noble Lords may have more up-to-date figures. However, I believe that under the consultation programme, proposals received by Postwatch for closure aggregated 1,522 urban post offices—the figure may be higher now— and that 759 urban post offices have actually been closed.

One of the problems that a number of noble Lords have touched on is that closure proposals are coming from the local level; that is, the sub-postmasters, rather than as a result of strategic targeting by Post Office Ltd. In other words, closures are almost entirely driven by sub-postmasters who volunteer to close their own businesses. With sub-postmasters fully aware that they face a significant fall in revenue through the move to direct payment and with £180 million set aside for compensation if they were to close their business, is it any wonder that a number of turkeys are voting for Christmas?

In addition, a number of sub-postmaster volunteers identified for closure are required to sign a binding contract, which includes a figure for compensation, before the consultation period begins but which is subject to its outcome. That obviously increases the pressure within the consultation period for that sub-post office to close.

I should like the Minister to respond to a number of points regarding the urban reinvention programme. Does he agree that all of the following suggestions— every one of which I believe has emanated from Postwatch—should apply? First, sub-postmaster preference should not be the sole determinant of post office closures. More emphasis is required regarding the adequacy of what remains post closure.

Secondly, if we are to have a properly rationalised closure programme, does the Minister think it is necessary to identify weak and potentially unviable offices which need to close, but where the sub-postmaster has not volunteered to go in order to ensure adequate coverage? Thirdly, does he agree that area plans ought to contain a genuine mechanism to mix and match those people wanting to leave with offices that need to stay open to achieve proper coverage?

The £180 million compensation fund, funded by the taxpayer, usually far exceeds the commercial value of the offices to be closed. That distorts the market, even though there is a genuine commercial interest in taking over a branch that would otherwise close. Does the Minister agree that that distortion needs to be removed? Does the Minister agree that Post Office Ltd. needs to engage much earlier in open consultation with MPs and local authorities to include local issues, such as regeneration, in area plans for closures? Does he agree that Post Office Ltd. ought to explain fully after consultation its decisions and respond to the issues raised?

Does he agree that the DTI should not release funds to Post Office Ltd. for sub-postmaster compensation until after the public consultation and that no funds should be released for a branch that remains contested after the consultation period until the matter is resolved satisfactorily? The overarching question is whether the Minister will urgently clarify the policy for urban deprived offices.

A number of detailed questions have been asked by myself and other noble Lords. I thank the noble Baroness for raising a worthwhile debate and I look forward to the Minister's answer.

5.41 p.m.

Baroness Miller of Hendon

My Lords, I join other speakers in thanking my noble friend Lady Gardner of Parkes for initiating the debate and for giving us a short insight into the difference that she found in the Post Office when she arrived here from Australia. My noble friend made an excellent speech which the noble Lord, Lord Clarke of Hampstead, also enjoyed. I listened with great interest to all the speeches made in the debate. If one looks at the list of speakers, it was not a question of quantity but of quality. I hope the noble Lord, Lord Razzall, will forgive me for not including him and myself, as we have the privilege of responding from the Front Bench and my noble friend Lady Byford has special responsibility for countryside matters. All noble Lords spoke from experience, especially the noble Lord, Lord Dearing.

My noble friend mentioned how many times we have debated the subject. Today we have the 69th debate on the crisis affecting the Post Office since Labourcametopowerin 1997. Between 1992 and 1997 it was necessary for our party to debate the subject on only five occasions because at least we knew where we were going. Unfortunately, we are now in a right mess. On the occasion of the 67th debate, which took place in the other place on 13 January, there was, simultaneously, a debate being held in Westminster Hall.

The contempt in which the Government hold the concerns of honourable Members in the other place and their constituents on the steady erosion of post office facilities is starkly illustrated by the fact that the Secretary of State did not attend the debate in the other place. In fact, she gave Mr Stephen O'Brien notice of that only a few minutes before it began. It was replied to by the Minister of State, Mr Stephen Timms, whose portfolio includes energy, which from my experience—I am sure noble Lords opposite will agree—is virtually a subject on its own. It was difficult for him to deal with the matter properly.

The smug complacency with which the Government regard the subject is also illustrated by the amendment put down in the name of the Secretary of State, who did not bother to come to Parliament to support it. No doubt candidates of all opposition parties will remind people of the words contained in that amendment. I expect that the constituents of the 326 honourable Members who voted with the Government will also take note of that fact. The Government's amendment to the resolution in the other place claimed that the Government were committed to keeping post offices, easily accessible to all customers".—[Official Report, Commons, 13/1/04; col. 789.] The amendment went on to claim that 95 per cent of the urban population lived within a mile of a post office. That is a typical piece of government statistical smoke and mirrors. The Government measure that mile as the crow flies. But customers, including pensioners and those on disability benefits, are not crows and cannot fly. Many are disabled, elderly and so forth; and post offices, particularly in rural areas, are not easily accessible. In the country they may have to negotiate country lanes and hills.

It is significant that in what my honourable friend the Member for Eddisbury called a "nauseatingly self-congratulatory amendment", the Government did not deign to mention the plight of rural and semi-urban communities over the relentless loss of their local post offices. My honourable friend, Mr Roger Gale, the Member for North Thanet, a constituency of which I have the privilege of being patron, made nonsense of the Government's accessibility claims when he spoke in that debate.

It has been said many times, both today and in earlier debates—I do not apologise for repeating it, because it is necessary to do that—that the closure of a village post office, which is vital to the life of a community, often and usually means the closure of the only village shop. That results in enormous inconvenience and hardship to local residents, especially those without their own transport. Every noble Lord who has spoken in today's debate mentioned that.

The Post Office has more than 17,000 outlets and is the largest retail network in Europe. Only 600 of those outlets are Crown post offices. The rest are run as private businesses by sub-postmasters and sub-postmistresses who are people who have entered into the business by investing either their redundancy money or hard-earned savings for their retirement. A large number are hard working members of the Asian community—people who really believe in the entrepreneurial spirit. Those businesses depend on Post Office work to subsidise their other trades, which is often as newsagents or convenience stores that supply the needs of those who live in the villages and the local areas.

Other noble Lords have spoken of the 44 million visits a week to a post office. The Government promised to protect rural post offices, but in the past two years 80 per cent of closures have been in rural areas. The noble Lord, Lord Dearing, and other noble Lords mentioned that point. Now Post Office Ltd. is turning its unwelcome attention to the urban branches. It has announced a further programme to close 3,000 out of 9,000 urban branches by December—one-third of the total. That will entail shutting at least 140, possibly 250, offices every month.

On a personal note, my title included the London Borough of Barnet. In my home borough, there are no fewer than nine sub-post offices currently under threat of closure, which will take place after a so-called "consultation period". I was interested to hear the comments of the noble Lord, Lord Clarke, because all of the areas that he talked about, where the same is happening, adjoin my borough. It means that we are surrounded by the problem wherever we look.

The closure of local offices throughout the country is compounded by the Government's insistence on the introduction of the automatic credit transfer system affecting some 14 million people. Before that, benefit payments accounted for 40 per cent of Post Office business. The loss of that business will reduce revenues across the Post Office network by some £400 million a year. On 2 December 2002 the Government announced a package of £450 million in aid to sub-post offices. I noted that the noble Lord, Lord Dearing, nodded his head because that agrees with figures that he mentioned. The National Federation of Sub-postmasters has expressed concern that none of the money will go to sub-postmasters and sub-postmistresses, even though many rural post offices are already barely viable. We do not know what funds will be available to sustain them after 2006 when that branch of funding will cease.

My honourable friend Mr O'Brien asked the Minister how the Government intended to sustain the rural post office network in the long term—my noble friend Lady Byford is most interested in that. In his perfunctory nine-minute reply to the debate, Mr Timms did not even condescend to answer that very important question, which was central to the whole discussion in the other place. Perhaps the Minister, who presumably has had a little longer to think about it, will manage to give us some sort of answer today.

Despite the widespread concern that vulnerable pensioners and disabled and blind people will have problems in using the poorly designed PIN pad, the Government are still pressing on with this project. As recently as last Monday, the National Pensioners Convention launched a campaign against forcing pensioners to accept direct payments into their accounts or accepting plastic payment cards on the grounds that, they are unpopular; they are unfair; and they are unsustainable". But possibly that is the reason the Government are pushing on with it.

In his brief reply to the debate in the other place, the Minister smugly claimed that 62 per cent of pensioners are requesting and getting card accounts. That complacent reply disguises the simple mathematical corollary to that statistic; which is that 38 per cent are having nothing to do with them at all. This is not surprising when your Lordships recall that some pensioners are finding it very hard to master the cards. I am pleased that my noble friend Lady Gardner of Parkes elaborated on that difficulty. It seems to me impossible to expect people to cope with the system— indeed, the noble Lord, Lord Clarke, and my noble friend Lord Kimball said that they had received letters from people to that effect. Others have difficulty in accessing pay points, sometimes miles away. My noble friend Lady Byford spoke about the difficulty in rural areas. Despite all efforts, the Government have not met with unbounding enthusiasm from the commercial banks to handle what in many cases will be troublesome, uneconomic and petty accounts.

In April 2000, a petition bearing no fewer than 3 million signatures was handed in to Downing Street opposing the rapid escalation rate of the closures. It is clear, however, that the Government's so-called Big Conversation is merely turning into a one-sided dialogue. The local consultation processes are just an exercise in window dressing as a preface to rubber-stamping the decision that has long since been made.

In August 2003, the Post Office proposed the closure of its branch at 69–71 City Way, Rochester. Note the date—August 2003. Two months later, following the mock consultation, the Post Office distributed a leaflet confirming that the branch would close on 23 November. I say "mock consultation" because that leaflet was marked "Printed in March 2003", five months before the proposed closure was even announced.

But the staggering losses suffered by the Post Office at one stage—I understand more than £1 million a day—are not due to the sub-post offices and the Crown post offices. It is regressively due, perhaps, to the mail operation itself. It is with much regret that I mention that the Post Office today is nothing like the Post Office I used to deal with in the 1970s and 1980s when the success of my former mail-order business was entirely dependent upon it.

The union still has the silver salver with which I presented it to mark the delivery of my 5-millionth package. It delivered it on my behalf. When I first came into the House, the noble Lord, Lord Clarke, told me that he was responsible for looking after that silver salver for quite some time. As we are on different sides of the House, I am not to describe the noble Lord, Lord Clarke, as "my noble friend", but I wish I could do so. I can say that only outside the Chamber.

In those days, the Post Office was outstandingly helpful and most efficient. It was so anxious to please that when I moved my mailing operation from the south coast to Sunderland the local postmaster telephoned to ask me what had he done to offend me. Nothing. What a contrast today—and I say that because my personal office is right in the heart of the West End along with all the professional people and businesses in the area. We do not receive our mail until 10.30 a.m. or 11 a.m. When you are running a business, that is hopeless and it is no wonder people start using other systems.

The recent increases in postal rates has momentarily stemmed the tide to the extent of turning in a profit of £3 million as opposed to the figure we mentioned a few moments ago. But that is only a palliative and is subject to the law of diminishing returns. Opening up the mail's delivery service to outside competition, document exchanges, coupled with the rapid increase of electronic mail and texting, clearly will reduce the number of letters that are posted. Even more dramatic is the fax. In my office, fax is the preferred method of mailing because it is quicker, more reliable and, above all, substantially cheaper both in the costs of the stamp and because of the absence of an envelope and the quality of the stationery that can be used. Repeat that over hundreds of thousands of businesses, and you have some idea of the erosion of the mail service.

My honourable friend the Member for North Thanet, whom I have already quoted, reminded the other place of what the Under-Secretary of State for Trade and Industry had said as recently as 11 December 2003: A viable post office is important to all honourable members". Indeed it is. And equally so is the need for an efficient, timely and effective postal collection and delivery service.

However, as my honourable friend the Member for Eddisbury rightly pointed out to the other place, the manner in which the Government have discharged their responsibility for the post office network is undermining the future of that vital service".—[Official Report, Commons, 13/1/04; col. 736.] The same can be said of the way that the Government, as the sole shareholder, are allowing the postal service, first created in the reign of Charles II, to be eroded.

The noble Lord, Lord Hoyle, mentioned the difficulties that workers sometimes have with management and the lack of consultation. Whether it is that way around, or whether it is the lack of co-operation that managers feel they get from the workers, I say now that that is not the issue that matters most to me. But it must be solved. I want to tell the Minister that because of all the help I received in the past from the Post Office and the postal services, I want to ensure that it survives. The noble Lord, Lord Clarke, spoke with as much emotion as I feel on the subject.

The Labour Party, in its 2001 manifesto, said: Labour is committed to … a dynamic post office". In answering everyone's questions, will the Government put that manifesto pledge into practice?

5.57 p.m.

Lord Davies of Oldham

My Lords, we are all grateful to the noble Baroness, Lady Gardner of Parkes, for introducing a debate on which there have been a range of extremely constructive, not to say challenging, contributions. Let me assure the noble Baroness, Lady Miller, that I will seek to establish that the Government not only have faith in the Post Office but have provided resources for it in order that it can fulfil its role in contemporary times.

However, it will not do for us to wade in nostalgia. Like many other noble Lords who have spoken today, I have fond memories of working for the Post Office for a considerable period during the summer months and Christmas time as a student. We always enjoyed that feeling of being Post Office workers and contributing to a common endeavour that is scarcely paralleled elsewhere. That is why I say straightforwardly that the great strength of the Post Office is its dedicated staff. We must build upon that resource and do our best to ensure that the recent industrial relations difficulties are set behind us.

Let me make it clear that the Post Office has been changing since the 1960s. To hear the Opposition spokesperson's contribution to the debate you would think that throughout the 1980s and 1990s no post office closure ever occurred. I would hate to go down all 18 years and detail the numbers, but suffice it to say that well over 3,000 post offices were closed.

Baroness Byford

My Lords, I thank the Minister for giving way. I clearly stated the closure figures when we were in government and also stated those for the past five years. It is not fair to suggest that we were not giving the figures. I declared there were more than 1,000 closures, which was bad, but the problem is that they have continued and got worse.

Lord Davies of Oldham

My Lords, it is not the case that they have got worse. The figures reached a high level in the 1980s. I thought that the noble Baroness spoke from the Back Benches. I was referring to the Front Bench spokesperson, the noble Baroness, Lady Miller of Hendon, who, I believe, castigated the Government for closures without offering any recognition at all of the programmes which preceded the current one. I believe that my point still holds although I accept the point made by the noble Baroness, Lady Byford. At that point I was not pressing the issue with her.

I want to emphasise that the Post Office faces an enormous challenge, and that is why in the past financial year Post Office Ltd., which runs the network, has had to face up to the fact that it lost £194 million before exceptional items. In the previous year it lost £163 million. It has reported a loss of £91 million in the first half of this year. With declining profitability in the network as a whole, the ability of sub-postmasters to sell on their businesses as they did in the past has taken a severe knock. Therefore, decisive action is needed to ensure that we maintain a sustainable countrywide network for the future. That is the action which the Government are taking.

I also point out to the noble Baroness, Lady Miller, that we were not talking about people in urban areas being within one mile of a post office as the crow flies. We are measuring a mile on the ground because we want to take into account those who often will not have access to an office because they find a journey of one mile a real challenge. That is why that situation is specified as the maximum distance we want between post offices. That requires a very substantial injection of money and development of resources.

My noble friend Lord Clarke pointed out that Postcomm had made various proposals as regards increased competition for the Post Office. I recognise the details he identified, but I do not believe that we should exaggerate the challenge to the services provided by Postcomm. For instance, the study of the letter market suggests that less than 0.25 per cent of traffic is controlled by companies other than the Royal Mail. I recognise the anxieties he expressed.

Lord Clarke of Hampstead

My Lords, would my noble friend tell the House where I exaggerated? My comments about Postcomm concerned stopping the erosion and the acceleration of competition without looking at the possibility of maintaining a universal service.

Lord Davies of Oldham

My Lords, I was reflecting on the point that my noble friend made. I was merely indicating that one should not exaggerate the extent to which competition had made incursions into the service at present. I appreciate my noble friend's anxieties: I am trying to put them into the context of how much they represent problems for the Post Office and a real threat to its obligation to be a universal provider.

As regards the urban reinvention programmes to which a number of noble Lords referred, the Government considered providing funding to compensate adequately sub-postmasters affected by the loss of their business. That is to help movement where that is necessary and to get some rationality into the structure, which is there to serve the public. We recognise that points have been made from all sides of the House on the importance of the Post Office network.

Post Office Ltd. has begun its urban network reinvention programme. I associate myself with the noble Lord, Lord Razzall, in saying that there are more felicitous terms for such a concept. The introduction of that programme has meant that 16,000 post offices have been involved in evaluation. One recognises that the Post Office has had a very dense network indeed. Before the programme started over 1,000 urban sub-post offices had at least 10 other post offices within one mile. There is insufficient business to sustain so dense a network of offices in an urban area. That is not to gainsay the fact that we recognise that a proportion of Post Office customers who are very dependent on it feel aggrieved and have a sense of loss when a post office closes.

The density of the network related to a rather different age from the present. There is simply not the business to sustain such a density of offices. That is why sub-postmasters have been finding it increasingly difficult to earn a reasonable income. They have shut up shop and left of their own accord. We need rationalisation of the process otherwise it would merely reflect the individual decisions by sub-postmasters without us being able to guarantee a proper, structured service to the community at large. That is why we are keen to a have general target in urban areas of post offices being within one mile. That is sustainable.

Under the urban reinvention programme, closure proposals were focused on offices known to be most at risk of closure because of poor viability. It was important that there was some rationalisation of the issue, and that is why an area-wide plan for the post office network brings a clear view of the level of service provision at the end of the programme. Discussion of the plan provides the Post Office with an opportunity to understand the views of Members of Parliament, local authorities and communities about the future shape of the organisation.

I accept the point made by the noble Lord, Lord Razzall, that certain aspects of the consultation process are open to criticism. That process is being reassessed. I could go into a lengthy refutation as regards the Rochester post office which the noble Baroness, Lady Miller of Hendon, introduced. There are technical elements concerning the form. The process started in 2003. It is the same form that goes out for all post office closures and did not apply specifically to Rochester. I accept her chiding and her anxieties. The consultation process could be improved and we are looking further into it. The Post Office is examining ways in which the form of consultation would meet the anxieties expressed over past consultations. My noble friend Lord Clarke referred to the process of consultation as a sham. I do not agree with him. There has been genuine consultation in a number of areas. I recognise that he has substantiated a case that the process could be improved, and that is being undertaken at present. I give him that assurance. He has added his voice to those which have been heard elsewhere for more effective consultation prior to a closure.

An additional element of the urban reinvention programme is £30 million that the Government have provided for modernising and adapting those offices which remain in the network. The key to improving standards in these offices will be the increased volume of business to be expected. We expect those post offices which continue to trade to improve their services to the public in a range of ways. The fact is that many post offices are not being used as they were. Customers have changed the ways in which they access services. Rationalisation is the only way to proceed against such a background.

As regards the rural network of post offices, I recognise the point made by the noble Baroness, Lady Byford, the noble Lord, Lord Kimball, and others. The post office in rural areas plays a particularly significant role. There is the additional difficulty that when one closes another may be a great distance away. That is why the Government placed on the Post Office an obligation to maintain the rural network and prevent avoidable closures of rural post offices in the first instance until 2006. We financed that requirement by making available £450 million over the years to April 2006. We are now considering what kind of network will be required in rural communities after 2006 and how the provision of that network can be funded. The work is being informed by Postcomm's advice on the long-term shape of the network beyond 2006.

I can therefore assure noble Lords that we recognise the particular difficulties relating to rural post offices, to which strategic thought needs to be given. The Government are requesting the Post Office to take significant account of those difficulties. Of course, it will be recognised that that will involve a considerable sum of money—£450 million is a significant allocation, which I am sure will be welcomed by both sides of the House.

Reference was made by the noble Baroness, Lady Byford, and by the noble Lord, Lord Razzall, to the "Your Guide" pilot study with regard to electronic kiosks in post offices. That pilot study showed that a publicly-funded national scheme would not represent value for money, and that is why we have not continued with the proposal. It was always billed as a pilot scheme to test the waters and to establish whether new services could be provided.

In response to the point raised by the noble Lord, Lord Dearing. I am unable to place the conclusions of the study in the Library of the House. However, the details were put before the Trade and Industry Select Committee in the other place and are therefore already in the Library. There was a very clear examination of why the pilot study did not produce the positive results that many of us would have welcomed for the Post Office.

The question of direct payment of benefits was raised during the debate. Noble Lords will recognise that the payment of benefits into an account is not a new concept. Before the move last April by the Department for Work and Pensions to migrate benefit recipients towards direct payments, over 43 per cent of benefit recipients already had their cash paid directly into their bank accounts, compared with 26 per cent in 1996. That is a very substantial percentage increase, which reflects the changes to the ways in which people organise their finances. Of course, I recognise the laments that have been expressed that that has a consequential detrimental effect on the Post Office. However, we are the servants of the consuming public, not their masters, and when people express their preferences for such changes, it us for us to ensure that public services are congruent with those changes, despite the fact that they represent a real challenge to post offices.

Under the new arrangements for benefit payments, customers will have three choices of how they are paid: first, a standard bank or building society account, some of which can be accessed at post offices; secondly, a bank or building society basic account, many of which can be accessed at post offices; and, thirdly, a post office card account. Those who have spoken so positively about the Post Office have criticised the post office card account as presenting rather more challenges than are desirable to the ability of people to enrol. I am not sure that we can make too much of that point. It seems as though we may be guilty of being somewhat patronising towards our fellow citizens. Two million people have already said that they want to open postal card accounts, which suggests that customers are fully aware of the availability of such accounts and how to open them. I have listened to the descriptions of what is demanded of individuals with regard to card accounts. However, we all know that, against the background of all the issues concerning security of money and fraud, in financial transactions today greater requirements are placed on those who want to open accounts.

The points that have been made forcefully in the House today will be taken on board. It is in the interests of the Post Office to produce a system for enrolling as easily as possible for the postal card account, but there are certain requirements with regard to such significant transactions.

I return to the point that I made at the outset and assure the House that we all value the service provided by the Post Office and the sense of commitment of its workforce, whether postmasters, sub-postmasters or the people involved with the delivery of mail and services. We look forward to improved industrial relations in the Post Office. We recognise that there have been difficulties in recent months, which set back the conspicuous work done by my noble friend Lord Sawyer in seeking to achieve better relations in the industry. However, we look forward to improvements in that respect.

I should like to take this opportunity to deal with the direct challenge that at Question Time on 8 November my noble friend Lord Sainsbury did not express himself with the conspicuous accuracy for which he has a very high reputation. On that occasion my noble friend Lord Sainsbury said that the postal unions had withdrawn from the partnership arrangements with the Royal Mail. However, he would like me on his behalf to emphasise to my noble friend Lord Hoyle that only the Communication Workers Union had withdrawn from those arrangements, which had been set up after my noble friend Lord Sawyer's efforts to improve industrial relations. I hope that my noble friend will accept that correction in response to his very important question.

I hope that noble Lords will recognise that the Government are committed to the postal services in a period of very significant change. We all recognise that consumer patterns with regard to financial arrangements have changed quite significantly. The nature of post offices and their roles as corner shops is also subject to enormous change in the market, and we therefore expect to see adjustments made to reflect the changes in consumer demand. Of course, all the issues that have been raised today will be studied very carefully by all those responsible for the services that we want to provide. I thank the noble Baroness once again for introducing such a stimulating debate.

6.19 p.m.

Baroness Gardner of Parkes

My Lords, I thank the Minister for his reply. However, I am disappointed that, in his delightfully disarming manner, he has totally ignored my request that he should confirm that the Government will not put VAT on stamps. That is a very important matter.

Lord Davies of Oldham

My Lords, as noble Lords will recognise, I am in no position to prejudge any Budget. I have never heard of a proposal to introduce VAT on postage stamps. Therefore, I merely give the assurance that nothing that I have in my possession would give any substance to the point that the noble Baroness makes.

Baroness Gardner of Parkes

My Lords, I appreciate that the Minister does not feel that he can give a commitment. He says that he has not heard anything about that matter, but I suggest that he reads the points that Postcomm made in the consultation document. It is all there in the text. Postcomm comes out very strongly in favour of removing the exemption from VAT which the Post Office now has. It is very important that this issue is resolved.

I do not believe that the Minister answered satisfactorily the questions about the post office card account. People are being pushed into using bank accounts rather than the post office card account. I cannot agree with the suggestion that it might be patronising. Surely we are all looking for plain English awards in government documents. We certainly do not have one in this respect.

I shall not go on at length, although there are many points that I should like to take up following the many valuable comments that were made. I thank all those who took part in the debate. I am sure that I could come forward with several suggestions for nice, profitable lines for Post Office Counters Limited, but all that is for the future. Again, I thank everyone for their contributions, and I beg leave to withdraw the Motion for Papers.

Motion for Papers, by leave, withdrawn.