§ Order for Second Reading read.
§ 4.43 p.m.
§ The Minister of State, Department of Industry (Mr. Gregor Mackenzie)
I beg to move, That the Bill be now read a Second time. [Interruption.]
§ Mr. Deputy Speaker (Mr. Oscar Murton)
Will hon. Members who wish to leave the Chamber kindly do so quietly?
§ Mr. Mackenzie
As hon. Members will know from the White Paper "The Development of National Giro", which was published at the same time as the Bill and which, I hope, was helpful, the Bill is concerned with only one element of the Post Office's wide range of activities: namely, the National Giro. The National Giro is not a separate legal entity. It is part of one of the Post Office's main businesses, and its assets and liabilities are held by the Post Office. This is why the Bill in conferring powers, imposing obligations and cancelling liabilities does so in terms of the Post Office.
The decision to introduce a National Giro service in the United Kingdom was announced in the White Paper "A Post Office Giro" presented to Parliament in August 1965. The service was intended to provide a cheap and speedy money transfer system which would provide an easy way of settling bills, sending money and receiving pay. For the business community the speed in clearing transactions and the frequency and detailed nature of the accounting data which Giro would provide at modest cost were seen as attractive propositions. Also, it was considered that the introduction of Giro would provide the Post Office with the opportunity to modernise its remittance services, which had remained virtually unchanged for nearly a century.
The National Giro service went into operation in October 1968. In three short years of preparation it had built up from scratch an elaborate system involving one of the largest and most advanced computer systems in Europe.
1164 Our 1965 White Paper forecast 1.2 million account holders in five years. This forecast was based on the best available evidence, including European experience and market research. In fact the evidence of this research pointed to an even greater number of accounts than 1.2 million. But it was, properly, cautiously interpreted. With the benefit of hindsight we might have been more cautious. But the decision had to be taken without that benefit, and the results of having planned too small a system would have been very serious.
Judgments had to be taken and forecasts made in a difficult area, and to some extent the expectations were not fulfilled. Giro built up more slowly than had been hoped, and although initial losses had been expected these were both larger and lasted longer than our forecasts had allowed. Last financial year, for the first time, it made a profit after paying interest on capital, although the amount was small, and some specially favourable factors contributed to it. Welcome though this profit is, it would be wrong to build too much on it.
More important for the future of Giro is the fact that trading results have steadily improved. Giro is fulfilling a useful role. I trust that I take hon. Members with me because it is a fact that the Opposition recognised when they decided in 1971, after a long and searching review, that it should continue. The mere fact of that review put the future of Giro in doubt and slowed its progress. In the meantime competition from the banks has proved more severe than expected, especially as they are able to offer—as they did not when Giro started—current account facilities on favourable terms, as a result of profits made on other services.
I would at this point, having visited them recently, wish to pay tribute to the staff of Giro, who by their efforts in the difficult early years have brought Giro to the healthier position in which it now stands.
§ Mr. Nicholas Ridley (Cirencester and Tewkesbury)
Will the Minister also pay even stronger tribute to the banks, which have been more successful in competition, if he is paying tribute to people who succeed?
§ Mr. Mackenzie
I am talking about the Giro Bill. I know that the hon. Gentleman holds sincere views on this and that he does not agree with a word that I am saying. He did not agree with Mr. Christopher Chataway or with his hon. Friend the Member for Bridgwater (Mr. King), and I do not seriously try to persuade him.
§ Mr. Ridley
Will the Minister not be so partial? He has just paid a tribute to the staff of Giro, which on the whole has been a failure. It is right that he should acknowledge the extraordinary commercial strength and acumen of the private sector banks, which have beaten Giro in the competition.
§ Mr. Mackenzie
I do not understand why the hon. Member wants to make such a fuss about my paying tribute to the staff of Giro, who have brought it to a much healthier position. If he wishes me to pay tributes all over the place I shall do so, but I think it right to pay this small tribute to 2,000 or 3,000 people who work hard in the Giro interests. I do not think I can persuade the hon. Gentleman that Giro is a useful service. Christopher Chataway could not do it, although the hon. Gentleman was a member of the Government when the review was going on. He had nothing to say about it then.
I turn now to the Bill. Under present legislation Giro is able to offer a limited range of banking services, in particular loans and overdrafts, but if Parliament agrees the Bill will enable Giro to extend those services to include others offered by the banks, thus stimulating competition. Giro is now an established institution and the Bill removes certain handicaps which have denied it its full potential. This extension of its range of activities was anticipated by the statement of my right hon. Friend the Paymaster-General on 31st July 1974, when, in outlining the Government's decisions on the recommendations of the Page Committee, he said that so as to provide a more complete banking service for Giro's customers the Government were in principle ready to see an extension in its facilities which would be comparable with those to be afforded to the Trustee Savings Banks.
Although the 1965 White Paper saw Giro as meeting the banking needs mainly of lower income groups, experi- 1166 ence has shown that it is handicapped in attempting to do this without a profitable base of other business. Giro's competitive position in the personal sector has been weakened by the free personal account facilities now offered by the banks.
In order to achieve the financial target set by the Government in 1972 of breaking even in 1977–78—which was achieved last year ahead of schedule—Giro has concentrated its efforts on those segments of the money transfer market most likely to provide early profits. But experience has shown that if this strategy is to be fully successful and if the money transmission service is to become viable Giro must also be able to build up an integrated range of banking services to its personal customers and to the corporate sector so as to encourage the retention of balances within the Giro system.
The basic money transfer service remains the primary rôle of Giro, but it is important to permit Giro to offer a more balanced range of services. This will involve making full use of the system. By expanding its facilities so as to provide a total service, Giro can attract more customers to make use of its transfer service. While there has, as the White Paper describes, been a growth in the number of Giro's corporate customers, it needs more of their high-value business. By offering corporate customers wider facilities, Giro will be in a stronger position to persuade them to make greater use of their accounts instead of using Giro for in-payments and then withdrawing balances for credit with other banks for making payments.
In short, the Giro must be able to offer an attractive package of facilities under the one roof. Clause 1 of the Bill therefore seeks to extend the powers of the Post Office to provide banking services.
§ Mr. Tim Renton (Mid-Sussex)
Clause 1 of the Bill simply refers in very loose terms to "banking services". The Minister has been using cliche-ridden phrases like "total banking facility". Could he enlighten us by saying more specifically what new functions Giro will be offering through its banking sector?
§ Mr. Mackenzie
The hon. Member anticipates my comments by just a few 1167 paragraphs. I am sure he will not mind waiting until I get deeper into my speech.
Giro has already, from 2nd June 1975, begun to offer personal loans to account holders who have their pay credited to a Giro account and it has been agreed that Giro can also make limited overdrafts available to local authorities and nationalised industries. These new facilities are being operated on a modest and experimental scale. Thereafter it is our hope and intention that Giro, as circumstances permit and in the light of experience, will expand to offer new services like overdrafts for businesses, overdrafts for personal account holders, both of which it can provide under existing legislation, cheque guarantee cards and so on.
New services will be introduced, but on a phased basis with the precise timing and terms of their introduction subject to the usual controls exercised by the monetary authorities and to consultation with the Government. The loan funds available for personal loans and overdrafts, the first facility to be introduced, will be carefully controlled and initially kept to a modest level.
The intention generally—not only with those facilities—is to proceed with prudence, testing the market, carrying out the detailed studies and building up the expertise needed to handle the new business. In some cases pilot schemes will be introduced first and progress will be carefully reviewed. There is, I repeat, no question of quick, dramatic change in the range of Giro's activities.
The Government believe it is socially desirable that a full range of banking facilities should be available to all, particularly to weekly-paid people, who are the largest sector of the community without bank accounts. Giro, with its countrywide network of post offices, has an excellent opportunity for achieving this. Apart from the socially desirable aim of increasing the availability of bank accounts to the man in the street, Giro has great potential for reducing the amount of cash in free circulation, with considerable benefit to security. About two-thirds of the working population are paid in cash. This generates more cash transactions than would otherwise be the case.
The weekly-paid tend to form the "unbanked" section of society, despite 1168 the large numbers of deposit accounts which this section of society owns. The weekly-paid include some of the more highly-paid industrial and skilled workers who, for reasons of convenience or choice, do not use branches of the clearing banks. Hon. Members will appreciate the advantage for all sections of the community in reducing the volume of cash payments. Its use is expensive and has serious security problems. The weekly cycle of wage and other payments represents a cost to the economy which could be reduced by a conversion from pay in cash to pay by credit.
§ Mr. Ray Mawby (Totnes)
The hon. Gentleman will remember that in 1963, when I reported to the House what I had found on the Continent, I pointed out that even where Giro systems had been started in the 1920s the majority of wage earners, although they might use the system to pay bills, were not generally holders of Giro accounts. I agree that it would be a good thing if ordinary wage earners had Giro accounts and did not take cash, but is there any new way which the hon. Gentleman or the Post Office has found to convince these people, in this country and on the Continent, that they ought to do this? Is there any sign that they would do it even if Giro set out to meet their needs?
§ Mr. Mackenzie
I recall the hon. Gentleman making this point when we last discussed the issue on the borrowing powers Bill some time ago. We took note of it then. This Bill allows the Post Office to fulfil the functions that it wishes to have. The Post Office has made a judgment and I am simply here to ask that it shall be permitted to go ahead. It is a matter for the commercial judgment of the Post Office. Knowing the sales force within Giro as I do, I am sure that it will take the opportunities afforded to it by a Bill like this as a real challenge to get out and sell as it has been doing very successfully recently.
§ Mr. Tom King (Bridgwater)
Is the Minister really saying that he is merely acting as a postbox for the Post Office? It is stated in the White Paper that the Government have authorised the Post Office to extend this service. A judgment has been made by the Government, and the Minister cannot simply wash his 1169 hands of the matter and say that he is merely a reporter to the House.
§ Mr. Mackenzie
The hon. Gentleman knows perfectly well why I am coming to Parliament to seek these powers for the Post Office. As I have often told him, I am no longer the Postmaster-General. The question asked by the hon. Member for Totnes (Mr. Mawby) related to the marketing effectiveness of Giro. Nobody expects me, as a Minister, to go out and do the selling for Giro. I simply wish to ensure that the Post Office has the power to do it effectively.
The removal of the existing restrictions on Giro's operations will enable it to compete on equal terms with the banks. It is important, therefore, to ensure that its position as an entity within the Post Office does not involve any element of subsidy. Competition with the banks will be fair.
It is the intention that the new Giro credit operations will be self-supporting—that is, Giro does not expect to seek further capital from the Government to finance those operations. We do not intend that Giro's public sector status or its position as an entity within the Post Office should in itself be employed to affect Giro's competitive standing.
Giro will not be subsidised by the rest of the Post Office. It will continue to pay on a commercial basis for its use of Post Office services, and it will continue to publish separate accounts so that its performance can be properly maintained and assessed. Giro will be subject to the same guidance from the monetary authorities on, for example, credit controls as that applied to the banks. It is also our intention that Giro will satisfy the requirements of monetary policy as it extends its services.
I now turn to the financial provisions of the Bill, namely, the writing-off of losses and the introduction of public dividend capital under Clauses 3 and 4. Whilst Giro's losses until last year had a number of causes, a major one was the restriction on its freedom of action. We believe, therefore, that it would be right for the removal of these restrictions to be accompanied by a fresh financial start and a firm base on which to build.
Since the review by the previous Government, Giro has concentrated its efforts 1170 on those segments of the money transfer market most likely to lead to early profits. By its marketing initiative and containment of costs Giro progressively reduced its losses until it achieved a modest profit last year, despite a heavy burden of interest on past losses. With its present capital structure, however, it cannot hope to overtake the accumulated losses within the foreseeable future. We have, therefore, decided to recommend to the House a level and form of write-off which we consider properly suited and related to Giro's future profitability and which is pitched at a level which gives Giro a reasonable prospect of servicing its remaining capital.
The capital reconstruction provisions in Clauses 3 and 4 can be summed up as follows. Giro's capital base will be reduced by about 40 per cent—that is, from £42.5 million to £25.8 million—the reduction of £16.7 million constituting half of Giro's accumulated losses to 31st March 1975 of £33.4 million. In place of the existing capital, which consists entirely of long-term loans from the National Loans Fund, Giro's new capital of £25.8 million will be half in the form of public dividend capital and half in the form of National Loans Fund loans.
I have described the effect of the financial provisions of the Bill, namely Clauses 3 and 4, in what may be described as practical accounting terms. The actual presentation in the Bill is rather different as it had to be framed in terms imposed by the form of the parent Act of 1969. Clause 4 provides for reduction in Post Office indebtedness of £29.7 million subdivided between the reduction in the commencing capital debt—namely, £8.48 million—and the reduction in subsequent indebtedness to the National Loans Fund. £13 million of the £29.7 million reduction in debt will be re-created in the form of public dividend capital. Clause 3 provides for a payment of dividends on this public dividend capital by the Post Office to the Secretary of State.
As hon. Members are aware, PDC is a form of equity which makes up part of the capital structure of certain public sector trading bodies. It has already been provided to some nationalised industries. While Giro is not subject to cyclical trading conditions it is, as a member of the banking community, 1171 affected by changes in monetary conditions, which can have a significant effect on Giro's profits. Hence, Giro qualifies in principle for PDC.
There is no question of PDC being introduced as a soft option to relieve Giro from repaying interest on loan capital. In order to ensure a proper return on the dividend capital, Clause 2 requires the Secretary of State to set Giro a financial objective. Although the Bill does not require this to be set until three months after enactment at the latest, I believe that the House, in considering the Bill, would wish to know what objective we have in mind as a material consideration in discussing these proposals.
The financial objective is that over the three years 1975–76 to 1977–78 Giro will, after paying interest on its remaining loan capital, earn an average annual return of 12½ per cent. on its public dividend capital plus retained profits. I trust that any fair-minded Member will accept that this is realistic, though demanding. This objective will call for a successively better performance in each of the three years in question and constitutes a genuine discipline for Giro to reach.
There is also the linked but separate question of dividend policy, which in accordance with Clause 3(3) will be the subject of discussion with the Post Office and the Treasury each year. The Secretary of State will be concerned to secure dividends consonant with the profits earned and the capital requirements of the business. In the foreseeable future capital requirements are expected to be small. We have in mind, taking one year with another, that the dividend return on the PDC should not be less than the interest which would have been paid on the equivalent amount of loan capital.
We are, as the House will see, proposing in Clause 4 to repeal the powers still available to the Secretary of State under the Post Office (Borrowing) Act 1972. These powers were sought by the then Minister to enable him to release the Post Office from the liability to repay debt incurred in respect of the postal and remittance services up to March 1973, subject to an overriding maximum of £200 million. By virtue of that provision the Post Office has already been released from approximately £177 million 1172 of debt, leaving the power to release approximately £23 million more of its debt not exercised. Those powers were sought in respect of the postal and remittance businesses of the Post Office. That is why they are not being used for the writing off of Giro's losses.
The White Paper, with the further explanation I have offered this afternoon, will, I hope, have set out clearly the nature, purpose and motives of our proposals. They are made not in any doctrinaire spirit but to establish a satisfactory basis on which Giro can build for the future. That Giro is now an established and valuable institution is not a matter of dispute. When their party formed the Conservative Government, hon. Gentlemen opposite considered whether Giro should continue and decided that it should. We are taking a further logical step—to secure that it should continue more effectively than we can fairly expect it to do while its freedom to compete is restricted and while it carries its present burden of debt. No one is compelled to use Giro, and it will not be subsidised. We believe that it will succeed by its own competitive efforts.
In short, in asking the House to give the Bill a Second Reading we are recognising that Giro has the potential to make a very effective contribution to society.
§ 5.10 p.m.
§ Mr. Tom King (Bridgwater)
We are grateful for the Minister of State's conscientious presentation of the Bill. Opposition Members have some sympathy with him because of the task that he has had to perform today. However, there is a slightly uncanny coincidence, because once again the Secretary of State for Energy has graced this area of the Post Office with his presence, laid down the plans, and departed to another area.
If we consider the history of this measure we find that one of the biggest liabilities against which Giro has had to fight since the beginning has been its disastrously optimistic launch by the then Postmaster-General, the right hon. Member for Bristol, South-East (Mr. Benn). I do not understand why, as the Secretary of State for Energy, the right hon. Gentleman is a sponsor of the Bill, but his sponsorship is symbolic. He was responsible for telling the House that the 1173 forecasts of 1 million private accounts and 200,000 commercial accounts within five years showing an 8 per cent. return were merely conservative estimates of the likely prospects and that they were likely to be much greater than that. I admire the Minister's ability to talk clearly and lucidly with his tongue deep in his cheek when he refers to the earlier forecasts made for Giro.
§ Mr. Gregor Mackenzie
I think that the hon. Gentleman does me less than credit. He will recall the exchanges we had during the passage of the Post Office (Borrowing) Act 1972 when his right hon. Friend the Member for Bournemouth, West (Sir J. Eden) was the Minister of Posts and Telecommunications. I am sure that he will recall that I put what I thought to be a fair case and a fair wind for Giro. I have not changed my views. My views are reflected in the Bill that I am presenting to the House today.
§ Mr. King
I accept what the Minister says. However, I was referring to the rather hazy gloss that was nut on the earlier launch of Giro. That is also mentioned in the White Paper where it rather rapidly speeds over the point by saying:there has been a growth of business not foreseen when the service was launched".The existence of Giro today is due to the fact that it has taken directions different from those indicated by the then Postmaster-General, the right hon. Member for Bristol, South-East. My then right hon. Friend, Christopher Chataway, described that peculiar mixture of social euphoria and self-deception which the the right hon. Gentleman brings to most of the measures he tackles.
Some of us, including my hon. Friend the Member for Totnes (Mr. Mawby), did our homework on the history of Giro. I did not go back as far as my hon. Friend, but I read the debate which took place in 1965. Mr. Hynd, the then hon. Member for Accrington, initiated the debate on the postal Giro.
The debate was answered by the right hon. Member for Bristol, South-East who, at the beginning of his involvement in this matter, made a quite extraordinary remark. He said that he saw the Post Office as the Ministry of Communications and he thought that this transfer of money was 1174 concerned with spreading the good news that a man is rich, but concealing as far as possible the bad news that he is poor. If that is to be the basis upon which the overdraft facilities have been planned, and if the Post Office is to be engaged in concealing as far as possible the fact that someone cannot afford an overdraft, it is a strange basis on which to begin.
It is clear that the right hon. Member for Bristol, South-East made the greatest contribution to killing the Giro system before it had even started. In view of the measures before the House today, it is interesting to note that he made it clear when the proposals were originally announced and he launched the scheme that Giro must not in any circumstances give overdrafts. Times have changed. We have moved on.
The next stage in the history of Giro occurred when the Conservatives were returned to office. I am sorry that the Minister of State accused Christopher Chataway of putting the future of the service in doubt by instituting a review. What put the service in doubt was the fact that when we took office, we found that Giro had lost £12 million in the previous two years. It was rapidly heading downhill.
It would have been an act of total irresponsibility merely to have allowed it to continue without seriously reviewing the situation. As the Minister knows, Cooper Brothers conducted an urgent review and made a number of recommendations. They recommended better management, stronger financial control and improved marketing, and those recommendations were implemented.
There is no doubt—and the Minister was right about this—that since then Giro has changed course and has had much better success. Its trading results have improved steadily. We are particularly conscious of the success that it has had with commercial agents' deposits. Where it undoubtedly provides a most useful service, a social service and, I hope, a profitable service, although one does not have full information, is in connection with local authority rent collection. Undoubtedly this service is of major social benefit by eliminating the risk of violence to local authority rent collectors.
It would be right to pay tribute to what has been done by those in Giro, 1175 and particularly to the work of Mr. Singer, who has led the operation. His work has been especially directed towards restoring the fortunes of a service which had been launched on a quite disastrously optimistic basis and in quite the wrong directions. By going for those areas where there was a clear market need and profitable business, he has been able to achieve far better results for Giro.
I was about to say that under these new measures it is proposed to offer overdrafts. However, it is clear that they have already been authorised by the Government. It is also proposed to write off £16.7 million of previous loss and to convert a further £13 million to public dividend capital. For reasons that I shall spell out, we have substantial reservations about the Bill, and we shall certainly be opposing it in the Lobby tonight.
Our first reservation concerns the evidence of any need for the Bill at all. The Minister of State has read some fairly bland statements such as "The Post Office was convinced" and "It could be, it should be and it looks as though there might be a market". However, we have had no concrete evidence. We have had no specific evidence about how much market research has been done. I have not received a single letter from my constituents saying that they find it an appalling hardship that Giro cannot offer them an overdraft. I do not know whether other hon. Members have discovered a burning need in their constituencies for such a service. There is one feature for which we can be thankful—no one has tried to suggest that these proposals were in the Labour Party manifesto. To have done so would have been the ultimate insult.
It is claimed that the growth of private accounts—about 480,000 after seven or eight years, and well below a million within the five years originally intended—is being handicapped by the inability of Giro to offer the full range of banking services. However, I wonder what evidence there is for putting forward that case.
Anyone with commercial experience knows that when people are trying to sell something and not succeeding, they always have excuses and will claim there is some obstacle stopping them from 1176 breaking through and doing extremely well.
The commonly alleged handicap of Giro is that it cannot offer the full range of banking services. What evidence is there for that? I understand that Giro will not be offering overdrafts, for example, at any more attractive rates than the banks. In fact, its rates are likely to be slightly higher than the bank rates. In the light of that, what is the evidence that there will be a flood of new private accounts going to Giro?
The Minister of State talked about the shape of the banking services and the facilities that are available, which again seemed to indicate the theme of a people's bank for the weekly wage earner. The hon. Gentleman will be aware of the Bill, now going through the other place, with the object of widening the facilities available through the Trustee Savings Bank. Does it make sense at this time, when Government policy is to extend the range of services of the Trustee Savings Bank, to allow Giro to expand in the same direction?
Giro has been successful in the corporate commercial area. The strength of the Trustee Savings Bank lies more with the private account area. The TSB has 11 million accounts. At the moment, Giro has fewer than 500,000. It seems strange that, with the expenses that will be involved in these new measures, the Government should authorise both to proceed at the same time.
§ Mr. John Golding (Newcastle-under-Lyme)
Has the hon. Gentleman considered the position of many people living in communities where there is neither a Trustee Savings Bank nor a joint stock bank, and the advantages that Giro has to offer them?
§ Mr. King
I do not know whether those people have made representations to the hon. Gentleman. I have a whole range of constituents living in fairly remote places, some of which do not even have a post office either, and I have had no representations about the lack of Giro providing a full banking service being a great hardship. The hon. Gentleman may have evidence to the contrary and will no doubt tell the House about it.
Our next great reservation is about the basic ability of the Post Office management to cope with a development of this 1177 kind. It is easy to give authorisation to widen the range of banking services, but that will move Giro into a completely new area of activity. Instead of the speedy transmission of funds, which was the original concept, Giro will be involved with sophisticated banking services.
The Minister of State made it clear that Giro is an integral part of and comes under the overall management of the Post Office. I seriously wonder whether, when there is considerable concern about the organisation, structure and management of the Post Office, it is wise to proceed with a measure of this kind. The Government have conceded and recognised the worry about the present situation in the Post Office, because they have just set up a review. Mr. Carter, the Vice-Chancellor of Lancaster University, is to chair the review, the appointments to and terms of reference of which the Minister announced. Without question, Giro and its position within the Post Office will come within the terms of reference of that review. The review is to be fairly urgent. I understand that the report is expected within a year. It seems extraordinary to set Giro off on a new course without waiting for the outcome of that review.
There are those who consider that there is an argument for separating Giro from the Post Office. Others suggest that it could become a subsidiary of the Treasury rather than be involved with the Post Office and the Department of Industry. It seems extraordinary that the Department of Industry should be launching Giro in one direction and that at the same time the Government should be setting up a review to decide what should happen to it.
Apart from the capacity of the Post Office to cope with the timing of the move, there is the question of expertise in banking services and overdrafts. The Minister said that this measure would enable a full range of banking services to be built up by Giro. The strange thing is that it will apparently be done with no extra public service employees. That seems a remarkable achievement. When hon. Members read the Bill, they will find that it indicates nodirect effect on the number of public sector employees".We should like to know whether the people whose productivity is mounting 1178 steadily on the processing of the various documents connected with Giro are automatically to become assessors of credit and manage the other banking services which are offered. Looking at this idea to extend the range of Giro services, I question whether it is equipped to move into the complicated area of banking services. I am not a banker. I think that it will have to deal with some of the more difficult areas of credit assessment and control. This could be a complicated and costly area.
I turn now to Giro's performance. It has incurred losses to date of £33.4 million. The Minister claimed that Giro had matched its target on the criteria set by my right hon. Friend in 1972. One is entitled to query whether that is a fair statement. If, as the White Paper states, in 1974–75 it had already met its target for 1977–78, which was the full recovery of costs, I should point out that that is achieved only by adding back unrealised losses on investments, which are due to a favourable position on the Stock Exchange. The Minister cannot have it both ways. That factor was disregarded in the achievement of the target in 1972–73 because it was adverse at that time in establishing that Giro had matched that target. Therefore, there is some reason to query whether it has achieved the target set for 1977–78.
The Minister of State fairly tackled the point that Giro would compete with the banks and that the Government were determined to ensure that competition would be fair. However, he was less than clear about what areas would be covered by this total comparability. The hon. Gentleman referred to reserve ratios. Will he clarify whether they will be subject to such things as special deposits? Will they be subject to qualitative guidance from the Bank of England? What is the situation regarding the liquidity of resources?
A serious allegation has been made, according to information which I have seen, about the way that the capital structure has been set up. It is suggested that there are negative or minus free resources in Giro, as defined under the Bank of England rules, and that no commercial bank with a balance sheet as set out in the White Paper would be allowed to trade. That allegation, if true, is extremely serious. On that basis, 1179 Giro would be unable to protect depositors by its own reserves and it would need recourse to the Government, which would perhaps involve a further writing off of losses.
The Minister of State told us, as I suppose endless Ministers of State have told us in bringing forward measures of this kind, "We intend that Giro shall be self-supporting. It will not be subsidised." Those are brave words. However, the hon. Gentleman knows that even if he believes them he has covered the position in Clause 3(1) by writing inThe Secretary of State may from time to time pay to the Post Office … such sums".That has an awfully familiar ring about it. We were told that Giro would not be subsidised and that it would be entirely self-supporting. None the less and predictably, there is this power to ensure that Giro can continue to receive funds from the Government.
The Government in this measure are relieving Giro of up to £20 million of loan charges in the next five years. That is being replaced by a possible public dividend capital payment of about £8.75 million—that is, if the Post Office pays a dividend. Everybody knows the history of PDC. It started with great intentions, but it has an alarming habit of not being paid. In Clause 3(3) there is the standard waiver that excuses the Post Office from having to pay PDC if circumstances do not permit it.
It is important to recognise what could be meant by fair competition in this area. It has been calculated that a trading profit of about £10 million a year would be required to enable Giro to service its capital and loans, to build up proper free capital resources to the level required of ordinary commercial banks by the Bank of England, and to protect those resources against inflation. Its last trading profit was £3.9 million, which shows how far it is from making the sort of recovery which is needed.
Is it only Giro itself which will be competing with the banks? My hon. Friend the Member for Mid-Sussex (Mr. Renton) fairly said that the wording of the Bill would enable the Post Office to go into banking services. We should like this point clarified and, if necessary, corrected in Committee.
1180 I am pleased that the Minister of State spelt out the financial objectives of Giro. Considering that this matter was notified to the House last March, it would have been preferable if we had had this information before the debate. But at least we have not had to wait until three months after the Bill becomes law. On an admittedly hasty first consideration, we are not particularly impressed by a target of l2½ per cent. pre-tax when inflation at its lowest is running at 14 per cent. Something nearer 20 per cent. would be more realistic.
Our next objection to the Bill is its retrospective nature. We had a White Paper in November after a statement in March, and we are told that overdraft facilities have already been authorised and are already being implemented on a trial basis, that the Bill is intended only to remove any doubt about the powers of the Post Office to introduce new facilities and that the capital write-off and the conversion of the loan to PDC will take effect from 1st April 1975. It is intolerable that we should be invited to consider this matter so long after the event. The House is being treated with considerable contempt.
A more fundamental and perhaps philosophical point concerns us. The House should consider carefully before extending State control into such an intimate and vital area as the citizen's own money. This might seem a frivolous and exaggerated point, and under a Government of a different party that might be true. But we know the present Government's policies and their attitude to the clearing banks, so we are entitled to have the gravest doubts.
The Home Policy Committee of the Labour Party has said in turbid words:… the party is already committed to public ownership of the banking system by Composite 33 at the 1971 annual conference".It went on to say:Given the dominance in British banking of the 'big four' clearers, the nationalisation of these four as separate banks, as in France and Italy, could give the same result in terms of public ownership".It is against the background of fatuous statements of intent like that, which we hope will never materialise but in which some elements in the Labour Party still believe, that we should be irresponsible if we did not face the fact that there is 1181 this intention to spread the activities of a State corporation yet wider into the public banking services and to create some sort of people's national bank.
It is against that background, and against the background of the conflict with the Trustee Savings Banks and the lack of any evidence of a clear need for such a service—and recognising that Giro has been rescued once from the machinations of the present Secretary of State for Energy and we do not want to have to do it again—that we shall oppose the Bill tonight.
§ 5.36 p.m.
§ Mr. John Golding (Newcastle-under-Lyme)
I declare my interest, first as one Giro account holder who very much welcomes the prospect of Giro overdraft facilities and, second, as an Assistant Secretary of the Post Office Engineering Union.
Although the major unions involved are the Union of Post Office Workers, including those who work on the counters, whom I have consulted, and the Civil and Public Services Association, the Post Office Engineering Union represents some key workers in Giro business. My hon. Friend the Member for Thornaby (Mr. Wrigglesworth), if he catches you eye, Mr. Deputy Speaker, among the pressure of Labour Members, may like to speak for the CPSA.
I should like, on behalf of the POEU and the UPW, to congratulate the Government on bringing the Bill forward. We must be grateful to the Ministers concerned and also for the vision of the present Foreign Secretary and Secretary of State for Energy in creating Giro in the first place. We should also acknowledge the part which the hon. Member for Bridgwater (Mr. King) played, as PPS to Mr. Christopher Chataway, in reprieving Giro. Since the uncertainty created at the time by the Cooper Brothers inquiry, it has been extremely successful. Indeed, if every business in which Conservative Members are involved were equally successful, we should have no economic crisis.
I echo the tribute by the hon. Member for Bridgwater to the management of Giro, particularly to Mr. Singer. Perhaps he did not follow up that tribute by expressing the confidence for the future which one might have expected, but I 1182 echo his earlier sentiments. Each year since 1971–72, Giro's trading position has improved from a loss of £5.6 million to a profit, admittedly before interest, of £1.3 million in 1974–75.
Christopher Chataway set the target dates in March 1972. He wanted Giro to make a positive contribution to Post Office finance by March 1973 and to break even by July 1977. As has been said, Giro has achieved both those targets well before time—it has achieved the second target two years early. That is a sufficient reason for the Government to introduce the Bill now. Had Giro not achieved its targets and had not the hopes of Christopher Chataway and the hon. Member for Bridgwater been fulfilled, we might have been critical of the Government for bringing the measure forward.
§ Mr. Tom King
I do not want to press the point but I know that the hon. Member for Newcastle-under-Lyme (Mr. Golding) will appreciate that Giro can claim to have achieved its target two years ahead of time—which he believes is fair justification for the Bill—because of the performance of the Stock Market. It is because the Stock Market has recovered that Giro is able to report the figures that it has.
§ Mr. Golding
As I understand the position, Giro's possible previous poor performance was itself related to poor performance of the Stock Market. This is a question of swings and roundabouts. If Giro is to be castigated when the Stock Market is doing badly, it is worthy of praise when the Stock Market does well.
Additionally, Giro has provided useful business across post office counters. It is important that we take into account the fact that Giro created a £1.5 million credit for the postal service. That should be added to the profitable side of the Giro service. It has also made the admittedly small net profit of £0.1 million.
The financial results have been good and have been made possible by impressive increases in productivity. The hon. Member for Bridgwater did not stress sufficiently the contribution of the staff in achieving that productivity. Since 1969–70 there has been a doubling of productivity in the Giro service. All hon.
1183 Members must pay tribute to that. I am sure that my hon. Friend the Member for Bootle (Mr. Mahon) would want to tell his many constituents who work at Giro that the House sincerely recognises their efforts.
Giro has done well and we want it to do even better. However, in relation to the original White Paper there is room for the criticism that Giro has tended to concentrate on the business user and has, perhaps, paid too little attention to the individual. Although its business deposits have shot up from £600 million in 1972 to £3,500 million in 1975 and rent payments, covering 100 local authorities and 750,000 tenants, have increased from £500,000 to £19 million, the total of transactions, although doubling, has not grown to anywhere near the same extent.
The number of transactions has grown too slowly and certainly more slowly than the unions connected with Giro would have liked. That may be due partly to the management's pre-occupation with achieving the financial targets set by Christopher Chataway. It has been easier to make money by concentrating on the commercial market than by attracting individual accounts. To that extent the strictures of the hon. Member for Bridgwater are justified.
If Giro is to fulfil its social purpose, it must further expand the number of individual accounts. It has to find a way of increasing the number of salaries and wages paid into it. This needs to be done for social as well as security reasons. Giro is already very attractive to customers such as me because of its counter opening hours, which are matched only by the Trustee Savings Banks and the Co-operative Bank Ltd. Perhaps it is significant that the private sector is unable to give the standards of service in terms of the opening hours of its counters that the public sector gives at present.
§ Mr. Michael Marshall (Arundel)
I am most interested in what the hon. Gentleman has said, because he has great experience in these matters. I am sure it would help the House if he told us his view about the recent Press report that the Post Office as a whole is considering Saturday afternoon closing in its search for economy. Will not this move tend to 1184 make matters more difficult, in view of the argument that he pursues?
§ Mr. Golding
I asked the Union of Post Office Workers about this matter. It has said that it would discuss the problem with management, which proposed the idea. It is interesting that this is a management proposal and that there has been no pressure from staff to restrict the hours during which Giro counters are open to the public. Even if Giro counters were to close on Saturday afternoons, Giro, like the Trustee Savings Bank and the Co-operative Bank Ltd, would still provide a valuable and useful Saturday morning facility. It is still possible to withdraw money after a shift at work.
The Saturday morning facility and at present the Saturday afternoon facility, together with the ability to withdraw money after three o'clock in the afternoon, provide a most valuable service to the customer. It is bettered only by the service extended to hon. Members by the House of Commons Post Office, from which we can withdraw money day and night when the House is sitting.
Despite this valuable facility, there are drawbacks for those who are customers of Post Office Giro. The hon. Member for Bridgwater may not need an overdraft facility—he may be so readily recognised that he does not need a bank guarantee card. I assure him that for those of us who are more humble the fact that Giro cannot provide the normal overdraft facilities, loans and bank cards is a disadvantage.
There is one particular disadvantage. When one draws a cheque on one of the joint stock banks—one of the members of the Committee of Clearing Banks—one does not have to be particularly neurotic about whether there is the precise amount of money in one's current account. With Giro one has to be very precise in this matter. This must be and is a drawback to the Giro account holder. I believe that Giro account holders will welcome this facility. Perhaps I may comment more on that matter later.
I turn from the hon. Member for Bridgwater to my hon. Friend the Minister of State. I say to him that while Giro must strive to obtain more individual customers, the Government themselves should give it more support. I have 1185 listened patiently this afternoon to suggestions that there might be unfair competition. I do not think that there has been any evidence that the Government have smiled particularly sweetly on Giro over the last two years. Giro's share of the Government's money transmission business at present is, I understand, only about 4 per cent. The Government, through their Departments of State, must give it more business. They have not fulfilled their obligations to Giro.
One drag on Giro has been the Paymaster-General's Department running its own banking service. I am always happy to receive the drafts drawn on the Paymaster-General's Department, but I think that it is a nonsense that there should be a Government Department providing banking services alongside Giro. The Treasury should transfer this aspect of the Paymaster-General's Department to Giro and create a single Government banking unit. I have raised this matter previously. At the time of the creation of Giro I said that it was a nonsense for the Paymaster-General's Department to be duplicating the facilities with a similar computer.
I have the impression that the Treasury has made things difficult for Giro not only by providing duplicate facilities in the Paymaster-General's office, but by siding too strongly with the private banking sector. Opposition Members may be surprised to hear me advancing this argument, but I believe that in order to develop Giro to the full, in order that we can attain the most efficient service, it is important that Giro be accepted, as the Co-operative Bank has recently been accepted, into the Committee of Clearing Banks. There is no reason why this should not be done. The Government must use all their influence to see that the publicly-owned Giro is given a place within the established banking system. That ought to be the Government's aim.
The Treasury, too, must be careful about not asking too much of Giro in its early stages. I pick my words carefully, because although there is not a Treasury Minister on the Government Front Bench this afternoon, I suspect that these decisions have been taken in the Treasury. I should be very surprised indeed to learn that my hon. Friend the Minister of State had been allowed to take them on his 1186 own. The Treasury must not ask too much of Giro at present.
The Bill represents no more than what should have been done in 1972 when the then Government told Giro to carry on. The deficit with which we are dealing was accumulated partly because of the uncertainty created by the inquiry established by Christopher Chataway and conducted by Cooper Brothers. Incidentally, I was horrified to hear the hon. Member for Bridgwater suggesting that further doubt be cast on the future scope of Giro by waiting for the results of another inquiry which we know to be predominantly into the postal letter and parcel service. I should be appalled if the Government were to say that they would hold up the progress of Giro for yet another year while this inquiry was carried out. Giro came to prosper only after Christopher Chataway gave an assurance to its potential customers that it would continue. All of us who were involved in the debates at the time would acknowledge that that was so.
The Bill will still leave Giro with an accumulated deficit of £16.7 million. I should like the deficit wiped out altogether and a fresh start made. I declare again my interest as a Post Office Engineering Union Assistant Secretary. It could well be in the interests of Giro that there be intensive investment in computerisation when the 1968 computers see the end of their useful life. I assume that this will require at least £2 million, and it would seem logical to integrate this re-equipment programme with that of the Paymaster-General's office. That is the very least that ought to be done in public sector banking.
The Union of Post Office Workers sees the desirability of creating direct links from post office counters to the Giro computer centre and I am pleased to see my hon. Friend the Minister of State, Civil Service Department, who has more direct links with the UPW than I have, taking a personal interest in the debate.
I was surprised by the size of the target that the Government announced for Giro with its new financial reconstruction. The Minister described it as "realistic but demanding". I put the emphasis on the word "demanding" and I ask, with some respect, whether it is 1187 realistic. Can the Minister assure me that this target is not too high for Giro's early years? Can he tell me from where the funds for investment will come? Has he considered how Giro can meet this target while expanding its individual business, with all the cost of promotion and preparation that that might entail? The Minister will know the importance that I place upon the nationalised industries paying their way. I have argued for many years that telecommunications should do that. However, I wonder whether the target set for Giro is not too ambitious and whether in failing to reach the target, some sense, of disappointment may be created later, some sagging of morale. I wonder whether the Minister is not creating an early opportunity for hon. Members opposite to taunt Giro with having failed to achieve a target, giving them an opportunity to knock it very hard indeed.
I do not want to leave my hon. Friend on a critical note. He knows that the Post Office trade unions hold him in the highest regard and respect. That regard will be enhanced by the manner in which he introduced this measure. The Bill will be warmly welcomed by all the Giro staff.
We do not share the antagonism expressed by the hon. Member for Bridgwater from the Opposition Front Bench. Although I have said "antagonism", I thought that by his standards the hon. Gentleman made a relatively mild speech.
He asked what evidence there was of demand. I do not know whether the hon. Gentleman is a Giro account holder, but I am, and I talk to fellow Giro account holders. In the Post Office many of the staff have taken advantage of the opportunity to have their salaries paid into Giro, but they want the facilities offered by the other banks.
There are many Giro account holders who hold two bank accounts—a Giro account to take advantage of the open-counter facilities and the efficient monthly account that is rendered, and an account in another bank so as to avail themselves of facilities such as bridging loans and overdrafts. This means a loss of finance to Giro as well as being inconvenient to Giro account holders. However, I declare that after the Bill is passed I shall retain 1188 my account in the Co-operative Bank as well as my Giro account.
§ Mr. Peter Viggers (Gosport)
In view of the hon. Gentleman's expert knowledge and experience of Post Office staffs and the Giro staff, will he comment on the passage in the Bill which suggests that the Bill will have no direct effect on the number of public sector employees? Does he think that the service can be operated with no increase in their numbers?
§ Mr. Golding
That is a question that should be directed to my hon. Friend. We must consider the precise meaning of "public sector employee" as set out in the Bill. The normal expression is "public service manpower". I am not absolutely certain whether the Government are saying that there will be no increase in staff in the responsible Department, or whether they are saying there will be no increase in staff in Post Office Giro.
§ Mr. J. W. Rooker (Birmingham, Perry Barr)
Surely the distinction that my hon. Friend has just made is a consequence of the Sex Discrimination Act in that we now refer to public sector employees and not public sector manpower.
§ Mr. Golding
That may be so. If all these new facilities are created, and given that all things are not equal, as productivity is rising very rapidly, I shall be surprised if there is no increase in employment in Post Office Giro. However, I leave the Government to take up that theme. I do not consider it a decision for me to have to defend.
I was surprised to hear the hon. Member for Bridgwater argue that basically Post Office Giro had no knowledge and no expertise of creditworthiness or credit rating. One of the problems that has been faced by the Post Office unions has been that some of their members have objected because Post Office Giro has refused to allow them to become account holders, without giving any reasons. We know that this has been because of the lack of creditworthiness of the individuals concerned. Whether the decisions have been right is another matter. Post Office Giro now makes an assessment of the credit worthiness of every one of its new customers. It would not be a new departure for it 1189 to do so in respect of the extended facilities.
The hon. Member for Bridgwater implied that there had been no market research behind this proposal. In fact, market research has taken place. The Post Office unions would be bitter if they thought that decisions of this sort were taken and recommendations made to Government without any inquiries having been made.
§ Mr. Michael Marshall
The hon. Gentleman has touched on an important point which I am sure many of my hon. Friends will wish to probe. Perhaps we shall hear more about market research from the Minister, but no doubt the hon. Gentleman, with his special connections, can help the House now. It would be valuable if he would tell us more about the market research that has taken place.
§ Mr. Golding
I understand that there have been studies by Lancaster University, Marplan and other organisations.
I do not want to speak for too long—indeed, I may be criticised by some of my hon. Friend for speaking at such length. I believe that the hon. Gentleman has raised a Committee point. No doubt it is a matter that we shall explore in Committee, if I have the misfortune of being selected.
The hon. Member for Bridgwater said that he had briefed himself well, but I do not think that he did his homework in investigating the present state of the business. I thought that his speech was a political knockabout. It seemed that he was trying to score debating points from previous debates and previous White Papers. It did not appear to be an Opposition speech based on a serious and critical analysis of the present state of Giro.
At one stage the hon. Gentleman asked why we wanted to expand Giro when at the same time we were giving the Trustee Savings Bank a firmer basis. The answer is that in one sense Giro is carrying on the tradition of the old Post Office Savings Bank. It is cashing in on the availablity of a great number of Crown Post Offices and on the availability of buildings and competent staffs.
It is not an alternative for the people who live in the small communities in my 1190 constituency who cannot always get to the Trustee Savings Bank very easily and who cannot get to a normal clearing bank. In any case, some may feel quite uncomfortable and uneasy in them. They should not be told that they must go to the Trustee Savings Bank or a normal clearing bank.
It is most important that the Post Office should continue to give a banking service. I believe that that service should be provided not merely via the old Post Office Savings Bank facility, but through the most modern and efficient facility the Post Office can give.
I shall not take odds with the hon. Member for Bridgwater about the retrospective nature of the legislation. It is a nit-picking criticism. We should instead be debating whether the Bill is in the interest of Giro and of our constituents. The hon. Gentleman referred to philosophy and said that we were here dealing with the citizen's own funds, but nobody is forcing a person to open a Giro account. Each and every individual will be free to bank with Giro, the Trustee Savings Bank, or with one of the joint stock banks.
I want to be free to put my money in a bank that will use those funds in the interests of the community. I do not want to bank my money with a private bank so that a private banker will use the money in his private interest. That is why I strongly support Giro. That is why, while keeping my Co-op account, which also fulfils the condition of using my money in the community's interest, I shall continue to bank with Giro. I give the Bill my full support.
§ 6.12 p.m.
§ Sir Paul Bryan (Howden)
The Minister of State in opening the debate was more humble in his salesmanship of Giro than I expected. The hon. Gentleman has plenty to be humble about. Giro has not been as big a disaster as many schemes fathered by the Labour Party, but as a private concern Giro would have been adjudged bankrupt some years ago. The scheme began by losing £12 million in two years.
Then came the stage when the Conservative Government more or less stopped the service in its tracks for a couple of years. Following an investigation by Cooper Bros, the service was put 1191 on sound lines and under sound management; it was given commonsense objectives which have been successfully met. We now come to the present situation where the rot has been stopped. Giro has found itself a reasonable role and can hope to break even.
Although providing what is in some ways a unique service, it will take a long time before it makes up its losses, but it must be said that the Bill does not require it to do so. The Bill does not talk with modest appreciation of the achievements with which I have dealt. The Bill aspires to new ambition for the Giro. This legislation will launch Giro into new banking activities. At the same time it takes the opportunity to sweep the financial mess under the carpet. Obviously it is hoped that the past will be forgotten for ever.
I have been active in business all my life, apart from the time when I was a Minister. I am a director of three companies and I know from my experience of business that from time to time a company must assess its success and decide whether to expand. In reaching a decision two questions must be asked. The first question is "Exactly what have we done well?" The second question, which is far the harder to answer, is "Why exactly have we done well?" We are all vain and wishful thinkers. We do not like to say that part of our success is due to luck, or the geographical position of the company, or whatever it may be, but it is important that that question should be properly answered before launching into new activities.
In answer to the first question "What has Giro achieved?", I say straight away that it has achieved an effective transfer of money. A good many of the 50 per cent. of the population who do not have cheque books are now using Giro to good effect. It is good for the customer, convenient, takes money off the road and in that way takes temptation from criminals. I think that is a good thing.
I understand that Giro is used very much more these days for the collection of rents. Manchester, for example, now has its rents collected by Giro. That has released 150 rent collectors—but, typical of the Labour Party, what has happened is that those gentlemen have been retained as estate management officers. Therefore, 1192 there has been no saving in staff. It is the old game at work once again. However, let us concede that the Giro is a useful, and in some ways a unique, service.
I come to the question why it has succeeded. I must give full credit to Mr. Singer. I always give credit to good management because it is always a major factor in a successful operation. An inherent advantage of Giro is that it began as a banking service with 21,000 ready-made outlets, an advantage that cannot be over-estimated. Any private bank with such a start would think that it could not go wrong.
What is more, those 21,000 outlets are familiar to the very customers for whom the banks are looking. I know from conversation with directors of joint stock banks that they have great difficulty at present in getting the public away from the idea of the marble hall image presented by banks—an image foreign to a person who has not had a bank account before. Giro now has a perfect image as a place familiar to everybody, high or low, who uses the Post Office. In addition, Giro at its 21,000 outlets has staff trained in handling money. That is another enormous advantage.
Yet another advantage is the fact that Giro is open at hours unfamiliar to any bank. Furthermore, the Government take every opportunity to press the nationalised industries to use Giro. Therefore, all these items add up to a huge asset on the side of Giro.
§ Mr. John Ovenden (Gravesend)
The hon. Gentleman stressed the point that the Government show preference to Giro. Will he say how successful the Government have been in transferring their own business to Giro rather than to the Paymaster-General's office? Is there any evidence of preferential treatment? I suspect that the boot is on the other foot.
§ Sir P. Bryan
I am merely saying that the Government are in a position to encourage the nationalised industries to use Giro. I do not press that point very hard, but it cannot be a disadvantage.
Giro has used its great assets with diligence and skill, but we must face the fact that it has never had to use any 1193 banking judgment. It has never had to take any risks or to assess anybody's credit or credit potential. Using these assets, I am all for it expanding in its present area. There is a long way to go.
One of the areas of business with which I am familiar is that of television rental. There are throughout the country millions of sets on which rental has to be collected. On the whole that is done by people calling in at the shops. Millions of payments could be taken up by Giro. Yet at the moment only a fraction of such payments is made in that way. I do not doubt that, even given its present remit, Giro could expand its business if only it kept within the bounds of its advantages, on which it has shown such good form.
But now Giro is moving into this new area of loans. I see no inherent advantage for it at all. It is at a disadvantage when compared with its competitors for the first time. In an article in The Times about the joint stock banks there is mention of the Trustee Savings Banks which are going into the loan business. The article says of them:Getting permission to lend money is only the first step. They then face the formidable problem of teaching the managers of 1,560 branches all over the country the lending skills which are second nature to the clearing banks. And while the TSBs are already operating a range of ancillary financial services, they generally lack the sophistication and breadth of the clearers.This is what Giro is now—not presuming to do—risking. How will it tackle this? How does it know about credit? To whom will it give credit—individuals, firms, businesses? The secondary banks which got into such trouble in the past few years did so because they did not lend the right amount of money to the right sort of people. This is exactly the area into which Giro is venturing to go. It is at a great disadvantage.
Even in a Second Reading debate we should know more about what further areas Giro hopes to enter. The White Paper talks of bridging loans. That suggests housing loans. Is Giro going into that world? The building societies will say that it is necessary to be very wise when dealing in that area.
I say all of this in an entirely nonpartisan way. This is a business assess- 1194 ment of Giro. I believe that it is entering an area about which it does not have the necessary knowledge.
Consider the situation in my constituency—in, say, Driffield, a small town of 5,000 to 6,000 inhabitants. If someone wants a loan he presumably goes to the bank. The banker will know the person and his business. He will probably know his accountant. He may know where the person lives and may even know him socially. The banker is in a strong position to say how much credit that man should have. Under the proposals in the Bill someone can go into the Post Office in Driffield and say "I want a loan". Who will judge whether he is creditworthy? The postmaster would be highly embarrassed to be asked to do such a thing. He does not know. Will there be extra staff trained to do this?
§ The Under-Secretary of State for Industry (Mr. Neil Carmichael)
I am not suggesting that this is necessarily the way it will be done, but the hon. Gentleman will surely acknowledge that a large number of loans are made not on a personal basis—which is probably the right way to do it—but on a points system. Many large and respectable credit companies use this method and never see the person who asks for the loan.
§ Sir P. Bryan
I do not claim to know the banking world from within. I can merely point to this article in The Times which speaks of the great difficulty which the Trustee Savings Banks recognise as their main stumbling block in getting their scheme under way. It seems that Giro will have even more trouble because the new category of loan seekers at whom it will be aiming are the sort of people about whom there will not be many records. I may be wrong about this. I shall be interested to hear the Minister's reply.
There is the question, therefore: Why is Giro moving in this direction? We on the Conservative side of the House are suspicious about the whole question of nationalisation. My hon. Friend the Member for Bridgwater (Mr. King) cited the Labour Party's actions in this respect. We fear this. The latest cutting I have on the subject is dated 29th December.
1195 I read that the Home Policy Committee of the Labour Party under the chairmanship of the Secretary of State for Energy has made certain recommendations. The article says, speaking about the public ownership of the four main clearing banks:The most favoured proposal, apparently, is to nationalise all four banks, forming them into a British banking corporation.That is from a leading member of the Government and a leading committee of the Labour Party. The article also said that the committee had been reminded thatthe party conference has been patient for four years, but a statement has been promised for the 1976 conference.I am not going back into quotations of years ago. This is something which we Conservatives genuinely fear. I believe that Giro is getting above itself and it ought not to do so.
On the monetary side we need to expose some of the cosy verbiage in the White Paper. There is for instance the reference to "cancellation of debt". The debt is not being cancelled; it is being horribly "un-cancelled". The debt remains, and someone, somewhere, has to go on paying the interest. This is simply a transfer of debt. Off it goes into that well-known borrowing requirement for which we all have to pay. This is not a cancellation: it is getting rid of it under the carpet to no great advantage.
There is also the marvellous phrase "public dividend capital". This is not an interest-free loan, but a loan which Giro can have and upon which it need not pay the interest unless it has the money. That is a lovely situation. Anyone in business would love to have a loan of that sort, one that need only be paid when convenient. By any standards in private enterprise that is a straight subsidy. It is an advantage that no private enterprise could possibly enjoy.
In Committee we shall try to maintain the service as it is at the moment and develop it. I believe that that can be done. I will resist an expansion of the service, not because I am hostile to Giro—I have already said I believe that it can be greatly expanded on its present tracks—but because I believe it is moving into an area foreign to it and in which it will make another mess.
§ 6.27 p.m.
§ Mr. Simon Mahon (Bootle)
I do not suppose that there is any need for me to declare my interest. My interest in Giro has been absolute since its early days. I represent what was the county borough of Bootle and is now the area of Sefton. Giro has been a considerable boon to my constituents. Any hon. Member who represents the town where Giro is situated has to be honest and say that he is speaking predominantly in the interest of his constituents.
Let me try to give my reasons for doing so. I support the Bill. I shall take two words, both from the speech of the Minister today, and enlarge upon them. One word was "prudence" and the other was "non-partisanship". The hon. Memmer for Howden (Sir P. Bryan) and I have been in this House long enough to have a little altercation now and again. He and the hon. Member for Bridgwater (Mr. King) spoke about private banks and private enterprise generally. I have no antipathy towards such things. However, when I think of my youth—it was a long time ago—and the days when I was on Liverpool docks as a boy of 14 and then hear people eulogising about the capitalist system, I simply do not recognise it as the one I knew then.
I am reminded of a story my father told me about a wake in Ireland. They had laid out the farmer and his fellow farmers were coming in and saying eulogistic things about him. The widow sent her daughter over, saying to her "Will you make quite sure that is really your father in that coffin?"
We all suffer a little from original sin. I do not know anybody born without it. I can recall many terrible things that happened in the past in the private banking world, to which I shall not refer today except to say that vast profits were made. I do not think that any right hon. or hon. Member would support that kind of operation today. It would now be regarded as completely and utterly immoral. Indeed, it was the right hon. Member for Sidcup (Mr. Heath) who, when he was Prime Minister, spoke of the "unacceptable face of capitalism". Of course this side of capitalism exists, and we should all recognise it. We are not living in a perfect world, and we are all capable of doing less than justice to the interests of our own country.
1197 It is for these reasons that I support the Bill in what I hope may be regarded as a prudent and moderate way.
§ Mr. Tom King
There may be less between us than the hon. Member for Bootle (Mr. Mahon) appreciates. He was very actively concerned and represented his constituents very conscientiously during the period of the review of Giro. The purpose of that review was to attempt to rescue Giro from some very imprudent measures that it had taken. The hon. Gentleman is pleased to state that it is now running on more satisfactory lines. Our concern today is that Giro does not step off again in an imprudent direction which could once more put it in peril.
§ Mr. Mahon
I welcome the hon. Gentleman's intervention and understand exactly the sentiments expressed by him. If I thought that Giro was extending itself beyond its prerogative I would be perfectly honest about it, but I do not think that is the case.
I should not have needed to be reminded of the opportunity that I now have of thanking the hon. Gentleman for the very courteous way in which he and the Minister of his Government treated me during the troublesome days when I was full of anxiety about the future of Giro. I was always treated with kindness and the utmost consideration.
I am equally grateful to the Minister of State, the Under-Secretary of State and their officials for giving me so much of their time recently and for coming to my constituency. I have represented my constituency for 21 years, and I was born in it. Having been born in one's constituency, one feels rather more keenly and immediately what happens to people one knows. It is possible to get too close to events and to become too emotionally involved with what happens in one's home town, especially when it gets an opportunity which it could never have anticipated.
Never in our wildest dreams did we think that a great banking establishment would one day come to Bootle. We never imagined that the President of the Board of Trade in a Conservative Government would take a step of this sort. There were also other Ministers who gave us great consideration at a time when we had lost certain types of industry. They, as well as those in subsequent administrations, 1198 were responsible for bringing about a great social change in what had always been a very industrialised and working-class town.
With the advent of a large number of Government officers in the Inland Revenue and the Health Department, together with others, my constituency has become what could be termed middle class, although I object to the use of the word "class". The simple fact is that our people are living today in much greater dignity, and I am all for that.
I have only one lifetime, and most of it has gone. I have worked all the time in Bootle in the interests of my constituents. I have never taken a partisan line. I have only wanted what was best for them, because basically what is good for them and good for Merseyside must inherently be good for the country—at least, I hope so.
In Bootle and the Sefton district we have not only Giro. We have gone to tremendous trouble to bring in other great banking establishments. We have the Trustee Savings Bank computer centre only 100 yards away from the Giro centre. We have the Midland Bank computer and computer training centre. We went to great trouble to attract them.
Reference has quite rightly been made to the skills that are needed. I do not want these skills that we are producing in my constituency to be available only to nationalised industries or nationalised banking systems, neither do I want them to be used only in private enterprise and private banking. I believe that skill is a great national asset.
I do not believe—every hon. Member knows this—in wholesale nationalisation. I have never done so. I was not elected on that premise. I was elected as a moderate man who believed in a mixed economy. I cannot say less than the truth. I want nationalisation when it is in the best interests of the country. Perhaps the banking system is one such item, but it requires a lot of consideration.
I do not want to be accused of asking for opportunities for Giro that I am not prepared to afford to anyone else, but what is wrong with a prudent, calm, measured approach on the part of Giro to try to improve its situation? I know how very hard it has been for Giro, but when we are dealing with public money 1199 we have to be terribly tough, and I want that approach to be maintained.
If the Bill is to provide, as my hon. Friend the Minister of State has said, for a modest approach so that we can extend slowly and carefully the obligations and facilities of Giro, I think that will be for the good of the country. With my previous experience very much in mind, I urge that we may progress slowly. I have always believed in the Latin phrase "festina lente". It is a question of making haste slowly. In all my years in public life it has been my experience that the faster we have tried to do things, the slower we have been in achieving them. We must go forward with as much prudence as possible, and I suggest that that is the policy to be applied in relation to the Bill.
Giro is not only a banking system. It has had social effects within the confines of Merseyside. This has to be understood. If Giro had failed, what would have been the position? Suppose that there had been other Ministers at the time who took a harsher view. What would have been the position on Merseyside? It would have been said that our people had failed, as well as the Giro system, and that would have caused great anxiety.
In my area we have just emerged from a strike which has lasted five solid years. It should never have lasted five minutes. The people who kept that strike going, whether managers, employees or workers, deprived my constituents of 3,500 Civil Service jobs. They would have been an important backing to bring prosperity to the town, alongside the Giro. But I ask hon. Members to imagine what would have happened. The same would have happened as happened when Sir Arnold Weinstock called into my constituency. These are the anxieties of a Member of this House who is a modest fellow trying to represent his constituents and who was not sent here because he was building houses or visiting hospitals. That is why I was sent here.
Right behind the Giro, I and my colleagues in my local government days built a great grammar school. People talk about the difficulties in education. I believe in all kinds of education. I believe 1200 in the comprehensive system, but in my time I have built two grammar schools right alongside the Giro. We thought that people leaving those schools would go into the Giro. It was well and truly planned. At the back we also had a great engineering factory on 90 acres of land providing 5,000 jobs. After we had made 8,000 houses available for its key workers, however, along came General Electric, and those jobs disappeared overnight. It is understandable, therefore, how I felt as I waited to be told that Giro had been saved from the fate which I thought might befall it.
Giro has made modest progress, and it has been steady progress. The figures are relatively modest. It has increased its turnover to a level of £25 billion a a year, the level of its transactions, its balances and to a smaller extent—reflecting the strategy adopted to secure the financial objectives—the number of accounts. It has made very real growth in a progressively more difficult economic and financial climate in the market in which it has been operating. Everyone—private banking, private citizens and the Government—has been working in one of the worst economic climates that we could possibly have. We had the stop and go and the Cooper inquiry. I believe that my people have not yet had a fair opportunity to show what they can do.
This may bring some encouragement to people who worried about whether we could start the Giro and whether we had people to manage on this level. We found that girls from the modern secondary school were ideally suited to the computerised world just as in other days Lancashire girls were ideally suited to the cotton industry, and that pleased us no end. So when people ask, as right hon. and hon. Members have asked, "Where will you get your staff?", I ask them where the private banks get their staff and where the universities get theirs. What have I been doing all my life on an education committee if I have not produced people able to go into private banking or private enterprise? When people have got PhDs or economics degrees, I have not said "You will not work for ICI" or "You will not work for one of the nationalised industries". I believed when I helped them in my younger days that they would work in the interests of the country.
1201 Let no one claim the prerogative of producing the country's financial brains and say that they must work only in private enterprise or in the nationalised industries. People can work where they like. If we can attract them to Giro, we shall be able to extend its services and make them pay. I should much prefer to look into the activities of the National Giro, with all its troubles, than into some of the activities of other finance houses. However, I do not want to allow myself to be side-tracked into that argument.
A good point was made by the non. Member for Howden (Sir P. Bryan) about rents. We are not doing enough in Giro with local government. It is an ideal situation, but we have only just over 100 local authorities using the rental system. That figure could be increased greatly. However, I must point out that a rent collector should not only be a rent collector. We heard about Manchester's rent collectors not being reduced in number. When I first went into local government, there was an organisation called the Octavia Hill system of housing. If such a system had existed in conjunction with Giro, it would have resulted in the social uplift of people combined with a financial obligation in respect of the payment of rent.
When I was a boy, living in a terraced house, the first charge in our house was a sum of money placed on the end of the sideboard which every child could pay. That was working-class custom and practice. I could pay the rent for my mother when I was about six years old, and I paid the rates as well when I left school. That was the system of payment. Working-class people lived by cash, and too many still do it. I agree that we must extend the present acceptable norm of custom and practice inside the Giro.
The Bill says that there will be no increase in personnel. In my view that is wrong. This massive headquarters is in my constituency. If we extend our business, I hope that we can extend profitably and usefully the number of people engaged and so bring in people who at present are out of work. What is the idea of trying to diversify industry? What have we been shouting for years on these Benches about diversifying industry? We do not shout just because 1202 we want a change of industry, because we want to get away from the match works, the dye works and the tanneries into these white-collar jobs, or away from the docks, because they are not quite respectable, and into something else. We are trying to create an entirely new system.
What we have to do is change the public mind about how to utilise money. Most working-class people still live from week to week. There is a saying in Liverpool even today that people who are better off are only a month away from the workhouse. If some of us examine our consciences, we shall probably think that we are not all that secure. I hope, therefore, that the system that we intend to bring into the Giro by virtue of the Bill will be such that, if anyone decides to have a bank account and he walks into a post office, the same range of facilities will be available under that single roof as is available from the National Westminster, Barclays or the Midland Bank. I ask only for the same range of facilities.
I do not want to push anyone on one side. It is not the greatest priority in the world. This is merely a Bill extending the facilities of the banking world to the National Giro. People are still conservative. They are conservative in the way they buy their clothes, in the way they wear them and about money. They do not want to spread it all over the world, despite my hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) hanging on to his Co-op account and his Giro account. Most people like to keep their money under one roof. The bank manager gets to know them and advises them on how to avoid the difficulties which may arise. Why, therefore, should not the facilities which are available in these excellent establishments be available to those who use Giro?
The right hon. Member for Taunton (Mr. du Cann), who is famous for his financial activities, did not say that he was against Giro. He said:It may be of assistance if I explained that I have never been opposed to Giro cheques. As a believer in the expansion of the banking habit and a believer in savings, I welcome any improvement in the facilities for money transfer. I am exactly the antithesis of what the hon. Member for Newcastle-under-Lyme (Mr. Golding describes—I am a supporter of the Giro system."—[Official Report, 13th Jan., 1975; Vol. 884, c. 84.]1203 I appeal to the House not to approach the Bill in a partisan manner but to seek a proper balance. It is no less than my duty to plead for more of this sort of employment to be directed to Merseyside. Any hon. Member faced with the closing down of a business in his constituency could gain little comfort from today's unemployment figures. I am horrified that in spite of all the capital investment in Merseyside by both Governments—Giro was a good example and so was the Gladstone Dock, which cost £50 million—there is unemployment of 11.2 per cent. there. The unemployment figures were 63,805 males and 18,475 females, giving a total of 82,280. That figure has gone up by another 6,000 today. That gives some idea of the need on Merseyside for the extension of the sort of employment we are discussing tonight.
A eulogy has been offered to those who work in Giro. I accompanied my hon. Friend the Minister of State on a most encouraging visit that he paid to Giro. He saw the beauty of the girls of Merseyside, and they were charmed with him. We should consider what these people are doing with their wages. They are buying homes and motor cars, and they are trying to uplift themselves. That is what the Giro has done for my constituents.
I thank Governments of both parties for the way they have helped my constituents during the 21 years that I have represented them. In particular I thank the Minister for introducing this measure, because I hope that in a modest way it will bring to even fuller fruition an excellent banking system.
§ 6.55 p.m.
§ Mr. Neville Trotter (Tynemouth)
Everyone recognises the sincerity of the hon. Member for Bootle (Mr. Mahon). I hope that he will have full and frank discussions with the Prime Minister and the Secretary of State for Employment about the present sad state of employment in his home town.
I approach the debate with no feeling of antagonism towards Giro, but rather in an attempt to be realistic. I recognise the good work done by Mr. Singer which has been commented upon by other hon. Members. I do not object to the continuation of the work for which Giro has 1204 shown itself to be suited, but the Bill represents a completely new venture. The White Paper contains a prospectus for a new public banking system. A prospectus normally sets out the past financial and management records—I shall come to those shortly—and the forecasts for the future. Here there is none of the latter. It is the only prospectus I have seen which contains no such forecasts.
We are told by the Minister that the aim is a 12½ per cent. return, but we are given no evidence to suggest that this aim can be achieved and no independent report has been produced to this House about the venture. Some Labour Members have suggested that there has been market research. If that is so, why has the House been kept in ignorance of it?
Let me now deal with the financial record. The annual report and accounts of the Post Office show a loss in the first year, 1970–71, of £6 million. For the second year they show a loss of £6.4 million, but now confusion arises as the White Paper shows a loss for that year of £7.8 million. In 1972–73 the accounts represented a loss of £5.1 million, whereas in the White Paper the loss was put at £7.1 million. It seems that a mere £2 million or so does not matter to the Government.
The original accounts for 1973–74 showed a loss of £4.1 million but the following year's accounts, which give comparative figures for 1973–74, put it at £6.5 million. The White Paper has chosen to show £5.1 million—perhaps because it is half-way between the other two. I hope that we may have an explanation from the Minister about the extraordinary way in which these figures vary between official documents. The 1974–75 report shows a splendid profit of £60,000. That figure is the same both in the accounts and in the White Paper. Much has been made of the way in which Giro has returned to profitability, but a very different picture emerges when account is taken of provisions for unrealised losses on investments. As an accountant I know that this factor must be included so as to reach the true figure.
§ Mr. Arthur Lewis (Newham, North-West)
I did not know that the hon. Member was an accountant. As such he may appreciate my interjection all the more. Is he aware that the figures he 1205 has quoted may or may not be correct? We hear almost daily that civil servants and Ministers are uncertain whether the figures they produce are correct today or will be wrong tomorrow. Almost every day of the week a Department or Minister confesses that wrong or false figures have been issued. How can we be sure of these figures?
§ Mr. Trotter
As an accountant I fully share the hon. Gentleman's concern.
The true figure in the 1974–75 accounts should be a loss of £2.5 million. Normal accounting practice adopted by any normal concern would have revealed the result thus. The treatment of this writing back of a provision was shabby and, indeed, somewhat shady. There is a note on page 23 of the 1973–74 accounts carefully pointing out that £3.1 million of the loss for that year was due to the need to create the reserve. There is no such note in the 1974–75 accounts to point out that the so-called profit came from the writing back of most of this provision. If we allow for the creation in one year and the writing back in the following year, which had nothing to do with the trading results, we find that the loss has actually gone up. The adjusted true loss in 1973–74 was only £2 million, whereas that for 1974–75 was £2½ million.
Therefore, it is not right to say in the last accounting period that Giro has been trading at a profit. Although there is confusion about the exact losses, there can be no doubt that there have been trading losses every single year and that last year was worse than the year before. The financial record is bad.
Let us now look at the management record. The Post Office, which is the overlord of the Giro, has a bad management image. Those concerned are not the best people to put themselves forward to be bankers using public money.
I turn as an accountant to the extraordinary qualifications on the auditors' report of the Giro which go back to the start. In 1969–70 the auditors pointed out that a satisfactory system for control of Giro operations had not been established. The next year they said that further improvements in the Giro controls were necessary before a satisfactory system was in operation. The next year they said that weaknesses remained to be overcome before the level of control 1206 could be considered satisfactory. In 1972–73 the auditors' report said that the level of control could not yet be considered satisfactory. In 1973–74 it said that until the new Giro accounting and control system was shown to be operating effectively a satisfactory level of control would not be secured. In 1974–75 they still talked about reconciliation problems persisting. That is not a very happy picture of the internal control and management of a public corporation of any sort and certainly not of one which is attempting to come into the field of banking.
I now turn to the new facilities which are suggested, beginning with personal overdrafts. The only advantage I can see of personal overdrafts would be the social gain of attracting new banking customers. It is, of course, easy to secure new business if one is handing out money, and I suggest that the first customers will be those that the joint stock banks are glad to see the back of. The Giro's loans will be cheaper than those of their competitors only if they are subsidised by the taxpayer.
We have heard about the services being available through 21,000 post offices, but who is to do the interviewing? Will it be the sub-postmaster or the sub-postmistress? Is there to be a separate loans counter, or would one queue up with customers waiting for stamps in order to obtain a loan? With the present cost of stamps, that might be a happy arrangement. One could perhaps negotiate a loan for the purchase of stamps for Christmas cards.
Has any thought been given to the administrative arrangements in the Post Office buildings? Is there to be a whole set of new offices? The Trustee Savings Bank, of course, already has buildings for such purposes. Is a new office to be opened by the Giro in every High Street?
Where is the expertise to come from? The hon. Member for Bootle spoke of the skill of his constituents in computer operations. It seems as if Bootle has become the centre of the computer industry. No doubt people there are very skilled, but I do not believe that they can hold themselves out to be judges of creditworthiness, which is a very personal matter acquired by experience over the years by those working in the joint stock banks. We shall, I fear, see a large number of bad debts if there is to be a 1207 system, which seems likely, for introducing overdrafts over the Post Office counter.
§ Mr. Ian Wrigglesworth (Thornaby)
The National Giro has been providing loans for its customers since 1971. This is not such a radical new departure as the hon. Member suggests.
§ Mr. Trotter
I inquired at the Post Office in the House and found that Giro loans were available to people whose wages or salaries had been paid through a Giro account held for not less than a year. That is different from someone coming in off the street to borrow. Secondly, I have read that an overdraft of, I think, £2,000 has been given to one gentleman in circumstances in which it seems that there might be some difficulty in recovering it. Thus, where there have already been a few overdrafts, they have not always been very well handled.
What social reasons can there be for making business overdrafts? What knowledge has anyone in the Post Office about how to judge a loan to a business? When I consider the wide range of services now offered by the banks, I wonder whether Labour Members really believe that the Post Office should provide the same range of services as the banks. We accountants are not always happy about the way in which banks are ready to complete income tax returns. They act as trustees and do insurance work. Is it suggested that Post Office staff should start filling in income tax returns? The matter has not been thought through by the Government.
It is suggested that credit cards should be introduced by the Giro. But there are already too many credit cards. I use one of mine to clean the frost off my car windscreen. It is perhaps not appreciated that the costs of starting such a scheme are enormous, running into millions of pounds. At the existing rate of interest the present schemes find it hard to attract enough business.
§ Mr. Ovenden
I have not heard, certainly not from this side of the House, any suggestion that the Post Office should go into the credit card business. The suggestion, as I understand it, is for cheque guarantee cards. There is no question of introducing credit cards.
§ Mr. Trotter
I refer the hon. Gentleman to paragraph 16 of the White Paper, which reads:It is also accepted in principle that Giro should be authorised to provide other banking services such as credit cards.In 1969–70 it was said in the report of the Post Office that market research had indicated that there was a heavy potential demand for the new Giro service, but, sadly, the initial response had been very disappointing. This time it seems that there has not even been any market research. If there has, I hope that we shall be told about it.
It has been decided to write off half the accumulated losses at a cost of £16.7 million to the taxpayer. Why was half chosen? Who thought of half? Why not one-quarter, two-thirds or all of it? It is a very arbitrary figure. The figure might well have been none, because the taxpayer is, in effect, being asked to pay the cost of the past inefficiency of the Giro service. Alternatively he is being asked to subsidise it through writing off the initial costs of setting up the new venture. That, not being possible for a private firm, will mean unfair competition.
I turn to the question of the management of the economy. Where is the additional money to come from? Is it to come as new credit, which will create further inflation? I do not believe that the Treasury would be very keen on that. Or is it to come out of present credit limits? If the latter is the case, that must harm the competition which is already giving good service to the public through its banking facilities. The 1974–75 report talks of there being intense competition. Why get involved in a field where there is already very intense competition, competition which benefits the public?
In this new venture the Giro is trying to run before it can walk. One comes across people who say when times are difficult that if only their organisation was bigger all would be well. The most likely result at the end of the day is that they are in an even worse situation than they were at the start. One does not organise one's way out of trouble by getting bigger. Size for size's sake is not a wise venture, especially in the field of banking. Let Giro make a complete success of its present venture first.
1209 There have been some muddled motives behind the Bill. There has been the suggestion that a State bank would be popular among certain Labour Members. Perhaps they see this as a way towards that ideal. It has also been suggested that the Bill will help Giro. We do not want to harm Giro, but why should we want to help it grow? We have created a State creature and now we are being asked to find more for it to do for its own sake. Why must we help it to get bigger just because it is a State creature? There is also the argument that it will help Bootle. No doubt if Giro was in my constituency I would like the jobs, but this is not a reason for going into a State banking service.
We have here a bad financial record, a not very good management record—there has been a most extraordinary series of qualifications in the auditors' reports—no forecast for the future and no independent report on whether the proposals are viable or wanted. It would be wrong for the House to pass the Bill.
§ 7.11 p.m.
§ Mr. Arthur Lewis (Newham, North-West)
I apologise for not being here during the earlier part of the debate. I had to attend several Committees and I missed the opening speeches. I have grave doubts about supporting the Bill, though for different reasons from those of the hon. Member for Tynemouth (Mr. Trotter).
My hon. Friend the Member for Bootle (Mr. Mahon) made an excellent speech, as always, both about the Bill and on behalf of his constituents. Of course, I support his claim for help and I believe that assistance should be given to workers in Bootle and, indeed, in all distressed areas where there is high unemployment. Giro has done an enormous amount to help my hon. Friend's constituency and it has now reached the stage where customers do not have too many problems. In the early days, it was the most shocking set-up one could imagine. Perhaps we could call those teething problems.
I am not as much concerned about whether there should be banking services or whether Giro should be expanded as about why it should be controlled by the Post Office. When the right hon. Gentleman the Member for Walsall, North (Mr. Stonehouse) introduced the Bill to 1210 set up the Post Office Corporation, I opposed it for reasons which have since been fully substantiated. I said that this giant corporation would be a bureaucratic, mishandled blot on our country. Yet it is to be this most inefficient, badly run, deplorable Post Office, overburdened with top-paid executives, which is to run this new banking service.
§ Mr. Roger Stott (Westhoughton)
I do not normally rise from this Bench because I am normally precluded from speaking. I have to tell my hon Friend, however, that I have been employed in the Post Office all my working life and that what he has said is completely and utterly untrue. If he wishes to make a constructive contribution to Post Office debates, he should acquaint himself more fully with the conditions and the facts in the Post Office before denigrating the people who work there.
§ Mr. Lewis
My hon. Friend has just made a statement which is completely untrue. He should have been here long enough to know that the rules and procedures of the House do not preclude anyone from speaking in a debate. Only Mr. Speaker can do that. These new boys come in crawling around to get PPS jobs—these great PPS jobs. The hon. Member has not been here long enough or in the Post Office long enough. My first job was in the Post Office—long before he was born.
I remember being able to post a letter for a penny. In those days we had five collections a day, with six or seven collections in central London. There were five deliveries every day, and if one posted a letter up to 7.30 p.m.—or even up to 9 p.m. in London—it would arrive at its destination in the first post the following day—and that was before the time of fast trains and vans and electronic sorters. Now we are told that we may have to pay 2s. 1d. for a first-class letter and 1s. 5d. for a second-class letter and we shall not be sure that they will be delivered the following day. As I said, the Post Office is overburdened and overstaffed with overpaid top executives.
When the hon. Member for Westhoughton (Mr. Stott) says that I have no experience in these matters, he should ask Sir William Ryland. I went to see Sir William in his office. My hon. Friend should ask him how many flunkies and 1211 top executives were waiting there, standing about doing nothing. Sir William Ryland has whole files of complaints.
In case my hon. Friend the Member for Westhoughton has not been here long enough to find out, County Hall is on the other side of Westminster Bridge from this House. The Clerk of the Greater London Council sent a first-class letter to this House and marked it "Urgent Priority". It took from Monday to Friday—yes, that is right, five days—to arrive. I took up the matter but I never got an answer as to why it had taken so long. I told Sir William Ryland that if the letter had been dropped in the gutter outside County Hall some kind person would have found it and delivered it quicker. This is not an isolated case. I have had thousands of such cases.
My hon. Friend the Member for Westhoughton should read the article by Christopher Brasher in the Observer last Sunday when he wrote about his difficulties with telephones. My hon. Friend should ask some of his own constituents, as I have done, about this so-called efficient Post Office. If you put 2p in a telephone coinbox, Mr. Speaker, and, through no fault of your own, lose the money and then ring the operator to connect the call, she will say that the call which you could have got for 2p will cost 50p if she connects it. One told me to try to get my 2p back. I said I was unable to do so. In such cases, after a long rigmarole, the operators tell you to write and claim your money back. You have to pay 81-p or 62p to get 2p back. That is the efficient Post Office. Sir William Ryland tried to be difficult and sarcastic with me by having 2p delivered to me at the House of Commons Post Office after I had complained about this problem. There is no private or public firm in the country which expects a person to pay four times as much as he lost to get back his money.
§ Mr. Lewis
I do not have to use vending machines. I do have to use the Post Office.
It is the Post Office, this grossly inefficient service, that is to run Giro. My 1212 first job was with the Post Office. I challenge any hon. Member who remembers what happened 50 years ago to defy me when I say that the service then was faster, more efficient, more expeditious and more reliable than it is now. That applies to both the telephone and the postal services. Each day last week there were quarter-page advertisements in the newspapers telling people that they could telephone to Hong Kong and Timbuctoo and what it costs to telephone friends and relatives in Australia and New Zealand. Thousands of pounds were spent on these advertisements in the Daily Telegraph, The Times and other newspapers. It is unnecessary to spend that amount of public money to tell people who want to use the telephone what they already know. That is the inefficient body that will run Giro. I am not sure that the right hon. Member for Walsall, North was right when he set up Giro within that organisation.
The Post Office has lost £300 million. Just before Christmas Sir William Ryland said in a BBC phone-in programme that the Post Office revenue would be up to the level of last year and that the Post Office would lose nothing. As soon as the House was in recess for the Christmas holiday, the Post Office released the information that it had made a loss. An inefficient service can be made to work without a loss if it prices itself out of existence. If there is no service, there will be no loss. That is what is happening.
Firms are collecting and delivering their own mail, and I read that Sir William Ryland is to do the same. By all means let us have an efficient Giro service under an efficient administration but not under an inefficient one. I guarantee that 12 months hence the figures will be found to be wrong, just like the false figures we get daily from civil servants and Government Departments on immigration and other matters. The Minister said that the Bill would have no direct effect on the number of public sector employees and subsequently said that he hoped it would. "No direct effect"—I shall make a prophecy. There will be many top-paid executives, and jobs for the boys will come along. Large fees and large salaries will be paid and no doubt another lord will be appointed.
1213 There is a rule in the House that a Member of Parliament must not hold an office of profit under the Crown, but every lord who wants a job gets one on a Government board either full-time or part-time. Age and nationality do not count. Provided that a person is a lord, he can be a chairman or a vice-chairman and earn on a part-time basis far in excess of what the average full-time worker earns. Invariably such people have vast incomes in addition. The Government say that they want to cut down Government expenditure to overcome inflation. My constituents who live in hovels and rat-holes are told that they will have still longer to wait for a house because of cuts in the housing programme. The poor kids who cannot get a decent education because of the lack of classrooms will have to wait still longer for their education because of cuts in public expenditure. Yet the Government appoint a dear lady at …10,000 a year as Chairman of the Equal Opportunities Commission and, to make it fairer and so that there shall not be any opposition, they appoint Lady Howe as deputy. She does a part-time job at …7,000 a year.
The Government are suggesting the same set-up for the administration of a Giro banking service. I am not against a banking service for Giro and I am not against the development of Giro, but I object to the Post Office and the Post Office officials—who admitted that they made a complete hash of the postal services and have almost done the same with the telephone service—being in charge of it, in the knowledge that it will mean additional staff at extra expense to the taxpayer and jobs for the boys, when there are to be cuts in other public expenditure.
By all means let Giro go ahead, but let it not be controlled by Sir William Ryland. The Post Office has not been a great success. I know that he received his knighthood during the Christmas before last when he made such a mess-up and letters were not delivered. I know that he will get his peerage and probably, when he does, another Government job. He will retire on a pension of …10,000 a year. It is that set-up to which I object on principle.
§ 7.28 p.m.
§ Sir George Young (Ealing, Acton)
Like the hon. Member for Newham, 1214 North-West (Mr. Lewis), I am an ex-employee of the Post Office. I deplore the ill-considered, bitter, personal attack that he launched on the Chairman of the Post Office. When he reads in Hansard that he referred to Post Office employees as abysmal staff—
§ Sir G. Young
—I hope that he will agree that his criticisms were unjustified and that he will withdraw them.
The only part of the hon. Gentleman's speech with which I agree is that in which he referred to the plush jobs. I only wish that they applied to baronets as well as to peers. Much of what the hon. Gentleman said related not to Giro but to the telephone service and posts, and we are debating a Bill relating to Giro—
§ Sir G. Young
No. I have heard enough from the hon. Gentleman.
I begin by declaring two interests. First, as a previous economic adviser of the Post Office, I saw and commented on some of the long-term plans for developing Giro. Secondly, as a Giro accountholder, I am interested in the service provided. I look at the Bill from three viewpoints—as an ex-employee, a customer and a Member of the House responsible for scrutinising legislation.
As a customer, I have found Giro inexpensive and reliable but inflexible, remote and restricted in the service it provides. In the five and a half years that I have had a Giro account, it has operated 3,735 transactions at a cost of £69.73. Hon. Members will already have calculated that that is an average cost per transaction of 1.86p, which compares favourably with charges made by clearing banks, especially when one takes into account the small average balance that appears in the bank acocunts of most hon. Members.
It is a most inflexible system. There is no question of ringing up the friendly local bank manager and trying to fix an overdraft for a few hundred pounds to deal with an exceptional purchase. The computer at Bootle decrees that no one shall overdraw, and it ruthlessly rejects any cheques drawn which exceed the 1215 current balance, whatever the circumstances, as I know to my cost.
In addition to being inflexible, the system is somewhat remote. As it is located in Bootle, the only contact is by telephone or letter. Telephoning Bootle can take a long time as the lines often seem to be congested. Moreover, it is hard to build up any sort of relationship with the girls who answer the telephone as they are interested only in one's Giro account number. Writing to Giro is also a rather impersonal business, as signatures at the bottom of letters have the characteristic illegibility of the signatures of nearly all civil servants.
Therefore, the service is inflexible, remote and, at present, it is also restrictive. This is where the Bill comes in. Customers of Giro are currently denied facilities that most other bank customers can expect. They have no cheque guarantee card and there is no way of persuading suspicious shopkeepers to accept a Giro cheque, because there is no equivalent of a banker's card to put forward in support.
Mention has been made of the absence of credit cards. I understand that at present they are unprofitable. If Giro proposes to move into that area, perhaps it could do so by arrangement with one of the existing two companies rather than by branching out on its own. The procedure for obtaining traveller's cheques, for example, is cumbersome and complicated and could usefully be simplified.
Giro customers are denied the means of placing any money on deposit, a valuable facility that all the other banks provide. My hon. Friend the Member for Tynemouth (Mr. Trotter) mentioned other services that Giro does not currently provide. It would be helpful if the Minister could say whether Giro proposes to move into the areas of trustee services and financial advice on unit trusts, insurance and so on.
As a customer, I welcome the proposed extensions of services. However, by its nature Giro will remain a centralised and computerised system in Bootle and will therefore be remote and inflexible. In my view, this is inherent in the concept of Giro. I know that many of my hon. Friends would prefer Giro to remain a money transmission service and not to 1216 poach on the banks. However, I hope to refer to that argument later.
The hon. Member for Newcastle-under-Lyme (Mr. Golding) looks forward to obtaining a loan through Giro. I remind him that the Post Office can be very restrictive. When I worked for the Post Office as an economic adviser—a job with a modest remuneration—I applied for a loan through the Post Office but was turned down. Therefore, the hon. Member for Newcastle-under-Lyme may be disappointed. The credit control system, if it has not changed, is extremely tight.
As someone who was involved at one stage in looking at the plans for Giro, I view the White Paper and the Bill in a slightly different light. In effect, Giro now wishes to compete for custom with the clearing banks. I find nothing philosophically objectionable about that, so long as some important safeguards, which I shall mention later, are given. I believe in competition and choice. It seems that enabling Giro to compete on equal terms with the banks will widen the area of choice. It is worth recalling that when Giro was set up the banks responded by cutting some of their own charges to their customers and by improving the range of services. Therefore, one can argue that the extension of Giro will prompt the clearing banks into providing a better service for their own customers. I am all in favour of more competition along those lines.
I accept that the original concept of Giro as a pure money transmission service has had to be modified in the light of experience. It now wishes to provide a wider range of services enabling it to be profitable and to try to increase the number of accounts with which it deals. Given that Giro has been accepted by both major political parties and that it is here to stay, it makes sense to allow it to provide a wider range of services and to seek to be more profitable so that it is no longer a burden on the taxpayer.
However, my interest as a customer and as an ex-employee of the Post Office must take second and third place to my interest as a Member of Parliament examining legislation passing through the House. I should like the Minister to clarify some key questions already mentioned. Will the Minister say when he 1217 proposes to move to the new system, which he outlined in his speech, whereby Giro will be treated identically to the clearing banks when it comes to using the banking systems as instruments of monetary policy?
Secondly, is the Minister satisfied about giving wider powers to Giro when it is technically bankrupt? Even when its balance sheet has been reconstructed, Giro will still be technically insolvent. Clearly, this is not a satisfactory situation for any company, let alone a bank.
Is the Minister telling the House that Giro is now on a proper financial footing and well placed to dabble in the dangerous world of banking where it is all-important to have adequate reserves? As my hon. Friend the Member for Bridgwater (Mr. King) said, the Bank of England would not allow a commercial bank with Giro's capital structure to start trading.
According to the two different assumptions that one can make, Giro has a negative equity of between £3.7 million and £10.5 million. I do not think that the Minister's reply in his speech dealt with Giro's totally inadequate capital structure. We shall be looking for clarification on this subject when the Minister winds up the debate. Perhaps he will also tell the House whether, in the light of the criticisms of my hon. Friend the Member for Bridgwater, he proposes to restructure Giro's capital in the near future in order to provide the protection that depositors are entitled to have and to enable it to compete with the commercial banks. Does he propose to write off further accumulated losses, or to convert more of the loan capital to public dividend capital?
What will be Giro's position if for any reason it finds itself in trouble? Will it be entitled to go to the Government through the back door, or will it be in the same position as other clearing banks and have to apply to the Bank of England or the "Lifeboat Committee" should it need a sudden injection of funds?
Another vital feature is the financial target. The Minister recognised the lack of courtesy to the House in the failure to set out the financial target in the Bill. He has now given us some indication. I am bound to say that, unlike some hon. 1218 Members, I found the target not nearly high enough. If no further reconstruction is to take place, Giro must recognise that it must make a sufficient return on capital and build up free capital resources to the appropriate level for a bank.
It must also increase the amount of free capital resources in the light of the current rate of inflation. I am not sure that a return of 12½ per cent. on public dividend capital in any way measures up to those objectives. I wonder whether the Government have considered Giro's objectives bearing in mind that it is a bank. It is said that the Government wish Giro to make a return of 12½ per cent. on assets. That is the type of target that has been set for other nationalised industries.
However, I am not convinced that this is the right target for a bank. I wonder whether the target should not be expressed more in terms of assets or turnover rather than capital. I am not sure that we have the right sort of target. What will Giro's profits have to be over the next few years if the target of 12½ per cent. is to be obtained? Can the Post Office achieve that target without putting up its tariffs for Giro?
I turn to the way in which Giro accounts have been presented. My hon. Friend the Member for Tynemouth made some penetrating criticisms in this respect. It would be helpful to the House if in future Giro's accounts were presented on the same commercial accounting practice as other banks. In that way one could make a crude comparison of like with like and try to isolate the one-off transactions that now confuse any analysis of the Post Office.
Finally, perhaps the Government could state more clearly how they expect Giro to develop. Reference has been made to the social rôle of Giro.
Does the Minister see Giro as having a welfare role justifying subsidies that might merely assist it to undercut its competitors in its commercial role? Will he give us an absolute assurance that no social obligations will be devolved on Giro that in any way prevent us from treating it as a commercial operation?
Will the Minister tell us whether he proposes to separate Giro entirely from the rest of the Post Office to eliminate any cross-subsidisation that might be now 1219 taking place? That would be helpful for taxation reasons, because it would not enable the Post Office to offset any profits it might make on Giro against losses on the postal side.
I listened carefully to the perceptive speech of my hon. Friend the Member for Bridgwater. I hope that he will accept that I am not as hasty as some of my colleagues to condemn the Bill, in view of my past association with the Post Office. But I look to the Minister for substantial reassurances on the subjects that I have raised if he is to entice me out of the "No" Lobby when the vote is taken at 10 o'clock.
§ 7.42 p.m.
§ Mr. John Ovenden (Gravesend)
It is a pleasure to follow what has probably been the most constructive speech on this subject made from the Opposition Benches today. The tone of the rest of the comments by hon. Gentlemen opposite was summed up in the immortal phrase uttered by the hon. Member for Howden (Sir P. Bryan) that Giro should not be allowed to get above itself.
I agree with the hon. Member for Ealing, Acton (Sir G. Young) about the speech made by my hon. Friend the Member for Newham, North-West (Mr. Lewis). I thought that his speech had the degree of sensationalism and the characteristic lack of any constructive suggestion which we have come to expect from his comments upon the Post Office. I regard those comments, as did the hon. Member for Ealing, Acton, as a gross slander on the people who work at all levels within the Post Office. I believe that that is the manner in which those comments will be taken by Post Office staff.
I welcome the chance to commend the Bill to the House. The main purposes of this meaure have been amply justified. The first purpose is to extend to Giro the power to provide the services given by its competitors. No one on this side of the House is asking for any privileges for the Giro system. We are merely asking that it should have the right to compete on equal terms with its main competitors, the clearing banks.
The second purpose is to give the Giro system a proper and sound financial basis from which it may move forward. It is a great pity and source of regret to most 1220 people in the Post Office that over the years Giro has been the victim of so much political football and the subject of so much ill-informed and often malicious comment.
The decision taken by the last Labour Government to set up the Giro system has been justified because it has brought immense benefits to a wide range of people who would never have entered into the traditional banking system. It must surely be the aim of all of us—certainly it must be the aim of Opposition Members—to encourage as many people as possible into the banking system to avoid the problems and dangers which cash transfers and the consequent cash-carrying processes involve.
Giro has enabled the Post Office to make greater and more efficient use of its other services—for example, the postal services and post office counters. It is true that in many areas, were it not for the Giro services which are provided over post office counters, many smaller offices would no longer be commercially viable and might be threatened with closure.
I think we all accept that these offices provide an essential public service not only for postal sales and normal Post Office business but for the payment of pensions, family allowances and other social benefits. They are often useful to Governments in times of emergency as outlets for such things as petrol coupons and other campaigns of that kind. As I said, if it were not for Giro many of those offices would no longer exist.
It is because of the number of outlets which the Post Office has that Giro is so convenient for its users. It provides the ability to obtain cash from any one of thousands of post offices for "gold card" holders. The Giro system is more convenient to the majority of working people than the strange and almost inexplicable hours which the banks appear to keep in this country.
It is not only the number of outlets which is important but the areas in which they are located. In most villages, including the one in which I live, there are no branches of any clearing banks, but there are post offices, most of which conduct Giro transactions. It would be uneconomic for banks to provide facilities in such areas. It is only the wide range of services provided by the Post 1221 Office from each of these outlets which enables the Giro system to be operated.
The hon. Member for Totnes (Mr. Mawby) made the point that far too few working people—weekly-paid people—were entering into the banking system. In the past, many unions representing large sections of the work force—manual workers in local government and agricultural workers in particular—have steadfastly refused to accept the payment of wages by cheque on any large scale. The reason has been the difficulty which their members have had in cashing cheques, particularly in rural areas. The establishment of Giro goes some way towards overcoming those objections and will inevitably lead to an increase in the number of weekly-paid people who are paid by cheque. Now that we are to have a wider range of services provided by Giro, the system will be very attractive to people who at the moment resist the pressures to have their wages paid by cheque.
The Giro system has enabled millions of people to pay their bills for things like gas and electricity either by post, if they are account holders, or, if not, conveniently at local post offices. It is far more convenient for most people, particularly in isolated areas, than trudging along to join the long queues at banks or at the offices of nationalised industries. It often saves them the appallingly high cost of bus fares.
As has been said many times today, Giro has also provided local authorities with the opportunity of introducing rent collection schemes. That system is convenient for the tenants involved, it is certainly cheaper for the local authorities and it avoids the dangers which exist in the collection of large amounts of rent through the system of rent collectors.
We must also consider the benefits which Giro has brought to many voluntary organisations by enabling them to secure easy methods of collecting subscriptions. A number of organisations have taken advantage of this system, but perhaps not as many as could have done so. I am sure that many organisations, when they look into the benefits provided by Giro in this direction, will take up its services.
It can fairly be stated that Giro has been a welcome and worthwhile improve- 1222 ment to the banking services of this country. After taking account of all the advantages which exist for Giro account holders, however, there have still been difficulties for many of its customers, particularly those who rely exclusively on Giro and do not have separate bank accounts. These have been dealt with in some detail today, but I want to go over them again because they are important to any proper consideration of the Bill and the extra services which it proposes to give to the Giro system.
The Post Office Giro has so far been prevented from permitting personal overdrafts. Therefore, cheques issued for very small amounts have to be bounced, even if the accounts manager knows that within a few days he will receive a payment into the account of a salary many times greater than the amount involved in the cheque. This has deterred a number of potential customers from joining Giro, even those who do not normally overdraw, because they fear that, through some inadvertence, they may do so and subsequently face great personal embarrassment through a cheque being bounced. I am not suggesting—I do not think anybody has suggested today—that the Post Office should allow its account holders to behave in a manner of financial irresponsibility and abandonment. We are suggesting only that it should be permitted to exercise the same kind of discretion as the banks in respect of customers.
It has been suggested that the Post Office cannot gain the skill of assessing creditworthiness that the banks possess. I do not know what it is about the banking profession which makes its members believe that they are a separate breed, born to the life, and that no one else can be trained to do it. I have no doubt that people in the Post Office could be trained in that sphere and that the Post Office can attract people who can exercise that responsibility. There is no special mystique about banking which makes it understandable by only a tiny group of special people and a mystery to the rest of us.
§ Mr. Tom King
The hon. Gentleman is speculating, and I suggest that the reason why he is speculating is that the Minister has given no indication of how this can be done. Many banks recently have had trouble over giving credit and 1223 have incurred real losses. Now, a public body will undertake the same function and, remarkably enough, without recruiting any of the people to whom the hon. Gentleman refers. The Bill makes it clear that there will be no increase in public service manpower.
§ Mr. Ovenden
I said that the Post Office could probably recruit these people in time and I am sure that it already has people who could be trained. But it is wrong to suggest that the Post Office has never been involved in assessing creditworthiness. Giro already operates the "gold card" system, which gives certain account holders the right to cash cheques up to £30 at any post office. That system is open to abuse. Therefore, the Post Office must ensure that the cards are issued only to people with a reasonable credit rating, who are likely to behave responsibly.
Consequently the Post Office is already involved—to a more limited extent, I agree, than personal overdrafts would involve—in assessing creditworthiness. I see no reason why it cannot expand that service. It has also been involved in granting personal loans in co-operation with a finance company. Presumably it has had to satisfy its partner that it will take on only creditworthy customers.
I accept that the Post Office needs to gain more skill in this respect, but it is wrong to say that it has no expertise or experience. It is even more wrong to suggest that this expertise cannot be acquired by a public body. It is always implied that this sort of mystery and skill is beyond public industry but comes naturally to people in the private sector. It is that sort of suggestion that those working in the public sector would deeply resent and completely refute.
The inability of Giro to grant personal overdrafts has deterred many potential customers. Equally, the absence of cheque cards has occasionally caused great difficulty to account holders. Under its present powers the National Giro cannot issue such cards, because it cannot give anyone accepting the cheque a financial guarantee which would put its customer, even temporarily, into debt.
One Opposition Member has told me that the White Paper refers to credit cards, but of course it refers only to powers that 1224 the Post Office could take, not those that it will take under the Giro system. I would not want the Post Office to enter the credit card business, which has resulted in so many people running into financial difficulty and has contributed, through its charges to retailers, to an increase in prices. I wish that the banks had never entered that business, but it is too late to put the clock back. I just hope that the Post Office will not repeat those mistakes.
The Giro is also debarred from giving bridging finance for house purchase. This is hardly a risky venture: in fact, it is one of the safest fields in which the banks operate. There is great security and sufficient collateral. It is particularly galling to a Post Office account holder to have to go to the clearing banks even for the 10 per cent, deposit that he may require on his new house, particularly when he can offer rock-solid security and has an impeccable financial record with Giro. When will Giro be allowed to move into these free areas—overdrafts, cheque cards and bridging loans? An early statement would allow Giro to attract the extra customers it needs. Any delay in such an announcement would adversely affect Giro's efforts to obtain extra customers.
In March 1972 the previous Government reprieved Giro and set certain targets. Giro has excelled in meeting them. It is strange now to hear the hon. Member for Tynemouth (Mr. Trotter) carping about its achievements. I did not hear him say that it had not met the targets laid down by Mr. Chataway, but he seemed to be seeking to change the ground rules. He seemed to be saying that, although it had met the objectives laid down by the last Conservative Government, those objectives were not a realistic way to measure Giro's financial performance. I hope that some Conservative Members will be magnanimous and recognise that Giro has achieved those targets. Most of us would be prepared to give the Conservative Government credit for the realistic targets they set if the Conservative Party was prepared to give Giro credit for meeting them.
The first target was to make a positive contribution to Post Office finances, which was met four months ahead of schedule in July 1973. The second and more 1225 onerous target of covering its own overheads, including depreciation and interest on both assets and liabilities, was achieved at the end of the financial year 1974–75, two years ahead of the target of July 1977.
It has been said that Giro's profit of £100,000 is small, even derisory. But it is important to improve the contribution of Giro to the postal services, which also helps Post Office finance. It is realistic to estimate that at £1½ million—a much larger profit.
§ Mr. Eddie Loyden (Liverpool, Garston)
Would not my hon. Friend agree that the benefit of this method of paying electricity, water and rates bills cannot be assessed in terms of money but must have meant a tremendous saving to the bodies involved and avoided many unpaid bills? This tremendous service by Giro has not been mentioned tonight.
§ Mr. Ovenden
I am grateful to my hon. Friend for raising that point. It is important to realise how much Giro has contributed to the electricity boards, the gas boards and the local councils, whose money is now collected not only more cheaply but also more promptly. Therefore, Giro contributes towards the financial viability of those bodies. Certainly it assists local authorities in reducing the amount of money they have to borrow on the market to meet their obligations. That is another feather in Giro's cap and should be recognised.
One other point which should be recognised but which has not been widely mentioned in the debate is the record of productivity within the Giro system, which is a credit to the staff involved. The number of transactions processed each week per person employed has risen from under 400 in 1969–70 to over 750 five years later. In those circumstances, and if one takes account of the increases in productivity and the meeting of the financial targets ahead of time, the Government's proposals concerning the accumulated deficits are not overgenerous. In some ways they are a recognition of the efforts of the Giro staff and their achievement—an achievement which would have been greater had it not been for the uncertainties caused by the political controversy which has unfortunately plagued Giro throughout most of its life.
1226 I turn to the proposals for financial reconstruction. I hope that the burden of interest which it is proposed to place on the public dividend capital will not hinder Giro in its need to re-equip itself. We must accept that before very long it will be necessary for Giro to replace its 1968 computers if it is thought to be in a position to compete effectively with the banks. I hope that the financial restraints which the Minister is placing on Giro will not hinder it in being properly equipped and kept up to date.
Finally, I want to express one regret. I was disappointed to hear no reference in the Minister's speech to any proposals for transferring more Government work to Giro. The duplication of Giro's equipment by the Paymaster-General's Department is a ridiculous waste of resources. Perhaps in his reply the Minister will tell us what discussions have been held with other Government Departments about the transfer of business. In particular, is he satisfied that the costings of the services provided by the Paymaster-General's office are realistic? Is he satisfied that those costings take full account of the true costs incurred by the Paymaster-General's office?
The Minister spoke about fair competition between the Post Office Giro and the banks. Is he completely convinced that the competition between the Paymaster-General's office and Post Office Giro is on the basis of fair competition? It has been suggested by at least one Conservative Member that the Government discriminate in favour of Giro. I wish that were true. I wish that in recent years there had been a sign from Governments that they were doing all they could to support the new venture of Giro. However, I suspect that the evidence is to the contrary and that Giro has in many respects been discriminated against by Government Departments in favour of giving their business to the Paymaster-General's office.
I should like there to be a full examination of the reasons why we need separate departments within what is virtually a public sector banking set-up and why we need the Paymaster-General's office, National Giro, the Department of National Savings and the Trustee Savings Banks. Virtually all of them are public bodies involved in banking services. Could 1227 they not be brought together to form a unified and comprehensive public sector banking system? Their total assets and the volume of money they handle are sizeable, and if they were brought together they could provide a formidable base for launching an effective and successful publicly-owned bank. I realise that that is a long-term objective and that what concerns us tonight is the Bill.
I commend the Bill to my hon. Friends. I hope that it will be given full support because it is vital to any proper development of the Giro system. We have reached the position with Giro where we cannot stand still. Giro cannot continue to provide merely the limited services that it provides at present, otherwise many of its loyal account holders will move back to the clearing banks where they can enjoy a wider range of services.
We are not asking in the Bill for preferential treatment for Giro. We are asking that Giro should be allowed to compete for customers on the same terms as the clearing banks, that it should be allowed to provide the same services to its customers as those provided by the clearing banks and that it should not be hindered by unnecessary restrictions which are at present placed on it by the Act of Parliament under which it functions.
§ 8.5 p.m.
§ Mr. Tim Renton (Mid-Sussex)
This has been a moderate debate, apart from the intemperate contribution by the hon. Member for Newham, North-West (Mr. Lewis). That is as it should be, because this afternoon we are discussing a statutory corporation which in its last financial year suffered a loss of £306 million and which has an actuarial deficiency on its pension fund of £1.1 billion. Therefore, it is right that all hon. Members should seriously consider how they can help the Post Office to improve its profitability and build it up to a more successful future.
However, none of the arguments advanced this afternoon has convinced me that it is appropriate for the Post Office to move from its present quite successful money transmission scheme—the present Giro—into a fully-fledged banking services operation. Apart from the fact that it has an embryonic scheme in existence, no argument has been 1228 advanced that justifies the Post Office becoming a true competitor of the clearing banks. Would it not be better to try to improve the efficiency of the mail distribution service and get mail more cheaply and quickly in particular to business users in large cities? Why not try to get more customers for the telecommunications side? Would not these be better roads back to profit for the Post Office than for it to become a bank?
The first sentence of last November's White Paper says:In his statement of 12th March 1975, the then Secretary of State for Industry told the House of Commons that the Government had decided upon a number of measures designed to set Giro on a surer foundation.This afternoon it has been questioned—and properly questioned—whether going into banking would set Giro on a surer foundation. The hon. Member for Gravesend (Mr. Ovenden) poured a good deal of scorn on what he called the "mysteries and skill" of banking. Here I declare an interest as a director of a bank, though one with its business largely overseas, and I doubt that we shall find ourselves in much competition with Giro.
The fact of the matter is that the whole trend in the world at present is to be worried about banks and to be cautious about the very basis on which banks are built. The Lombard column of the Financial Times today quotes:If it is in the public interest to relax direct regulation of risks that banks may assume and yet keep their failure rate low, one appropriate change in policy would be to begin charging each bank a deposit insurance premium based upon the risks that it assumes."Failure rate of banks" and "deposit insurance premiums for the risks they asume" is the language in which banks are being talked about at present. That quotation, as one Labour Member recognised, is from the current issue of the bulletin of the Federal Reserve Bank of St. Louis. It emphasises the worry about the banking system in the United States of America.
Fortunately we do not have the same worry about the leading banks in this country. However, the discussion here is also about the future regulation of our banking system. The banking system here was liberalised early in the 1970s, most notably by the Bank of England's own paper "Competition and Credit Control". This led the Section 123 banks 1229 to proliferate, to bid for deposits and to increase their advances very substantially. Now, as we all know, that upsurge of the secondary banks ended in tragedy, and the whole thrust of the movement is reversed by the Bank of England.
Banking is not a triple "A" business into which Giro can venture in the total certainty that it is going to make money. It is against that background that my greatest worry about the extension of Giro is set.
Quite simply, I am worried that if Giro goes into banking in a wholehearted way it may lose a very great deal of money. Of course, I hope that this will not be so. However, let us look back for a moment at the secondary banking crisis. It is often said that that was primarily caused by the secondary banks going into property lending, but the fact of the matter is that the large clearing banks, either directly or through their subsidiaries, went into property lending as well. So did the large American banks. They had the strength to withstand the shocks when they came. The secondary banks did not. Often the secondary banks had much more prudent balance sheet ratios than some of the large clearers, but what they lacked was the confidence of the public and they also lacked really experienced bank men running their operations.
This is what I fear will also happen with the Giro: that the quality of lending, when Giro really starts to try to lend in a massive way, on both personal overdrafts and corporate lending, will not be good enough, because it will be run by non-bankers who do not know the business.
I am told that the way that personal overdrafts will be set up initially will be very much on the lines of a hire-purchase type operation, concentrated on Bootle, and that an applicant for a personal overdraft will probably be assessed on a number of points on a computer. If he has enough points he will get the overdraft, but if not, his application will be rejected.
That all sounds fine in theory, but what happens when the bad debts begin? Who will go and collect them? The man from Bootle cannot go all over the country to collect the bad debts. Will it be the sub-postmaster who gets on his bicycle and 1230 pedals down country lanes to tell someone whom he has known for years that he is behindhand in regard to his Giro overdraft? These men are not trained to do this job, yet it is precisely in success in keeping down bad debts that the secret of banking lies. I do not see where the necessary expertise and the necessary control in the Giro system to deal with bad debts is to come from.
If that is true on the personal overdraft side, how very much more true it is as regards corporate lending.
§ Mr. Leslie Spriggs (St. Helens)
We must respect the hon. Gentleman's knowledge of banking, and he has declared an interest in banking. However, is he not aware that sub-postmasters all over the United Kingdom are in close touch with the communities around them? There is a great under-used capacity in our sub-post offices all over the country. Does not the hon. Gentleman realise that sub-postmasters could be of great assistance not only in a new type of Giro banking but also to the public generally?
§ Mr. Renton
I accept what the hon. Member says to the extent that obviously sub-postmasters throughout the country have a great knowledge of their customers. However, I make two points in reply to the hon. Member. First, the actual granting of the overdraft, as I understand it, is to be done on a totally computerised basis in Bootle. Secondly, I do not believe that most sub-postmasters, when they applied for that job, ever envisaged having to go out on their bicycles and collect bad debts from their friends and neighbours in the village. I do not think it is on that basis that they sought the job or will seek it in the future.
I return to the subject of corporate lending. Here, experience with all banks has shown that it is not possible for this to be centralised. For corporate lending to be successful it is essential that the customers are known and that their business is understood. This can be handled only on a county or regional basis.
The Minister of State ducked detailed questions about the operation of Giro in this respect. He told my hon. Friend the Member for Bridgwater (Mr. King) that it was not for him, the Minister, 1231 to act as if he were running the Post Office. However, in my judgment that reply is not good enough. I could never vote for the Second Reading of a Bill setting up a banking operation in a nationalised industry when it is unclear that it would be professionally run, and when I have grave doubts about how the losses will be limited.
I should like to ask the Under-Secretary some specific questions that the Minister of State left unanswered in his opening remarks. I hope that these questions will be dealt with in the winding-up speech. The Minister of State mentioned that Giro would be set a financial target of 12½ per cent. May we be assured that this will be monitored and that the House will be told regularly about how Giro is performing in relation to this financial target?
We were told that there would not be unrealistic pricing subsidies, but may we be assured that there are no hidden subsidies from the Post Office in relation, for example, to telephone bills or to the data processing service? I mention these two points purposely because between them they account for £13½ million of Giro's costs last year, against a total expenditure of £24½ million. This shows the degree, therefore, to which Giro, as a Post Office department, is dependent on the prices charged to it by the Post Office for the basic services that it is using.
§ Mr. Wrigglesworth
Perhaps I may help the hon. Gentleman on that point. If he studies the Post Office accounts for last year a little more closely, he will find the profit on the amount paid for this service stated there. It is a profit of some £2.7 million, which, on the £31 million that he has mentioned for this service, is a rate of profit of about 10 per cent., which seems to me to be a fair commercial rate.
§ Mr. Renton
That is not quite the point I am making. My point is that in any banking service a great deal of money is spent in communication charges, on telephone bills and the transfer of information. What I should like to be assured of is that these things have been costed on a totally independent basis, so that if a clearing bank, for example, were also using the computer at Bootle it would be 1232 charged on the same basis as Giro is being charged. I am not saying that historically the prices are not fair. However, a large part of Giro's expenditure is in transfer payments to the Post Office. Hon. Members on both sides of the House would like to know that these are being costed on an independent basis.
I should like to be assured also that Giro will be given identical treatment—I stress the word "identical"—to that given to the clearing banks in terms of monetary and credit controls.
I take up a point made by my hon. Friend the Member for Bridgwater. We should like to know that Giro was subject to identical treatment to that of the clearers in the future as regards reserve asset ratios, special deposits, interest-bearing eligible liabilities and qualitative guidance, and what the time span during the transition from a non-banking operation in this respect to a banking operation would be.
It is also important that the House should be assured that Giro will take no deposits from the public sector at subsidised rates. Giro should bid for its deposits in the open market. This is particularly important because, of its present deposits of £145 million at 31st March 1975, £27 million came from the Government and £40 million from public corporations.
It is essential if Giro is to be in fair competition with the banks, as the Minister of State suggested, that it should quote alongside the banks for public sector business and not be in a preferred position.
We should all like to know the forward forecasts of business for Giro and how it will reach the targets that the Minister of State has set for it. I should particularly like to know what allowance is being made in these forecasts for bad debts. If I may give a hint to Giro, an allowance of less than ½ per cent. of its advances for this purpose is a good deal too low. If it succeeds in keeping down its bad debts to ½ per cent. of its advances, it will have done a good job.
We all accept that the Post Office wishes to make money and that it needs to make money, but banking is not a blank cheque towards that route. We would like to know the Government's real intention in moving Giro in this 1233 direction. Is it that the Government still have in mind nationalising one or all of the clearing banks? Is this their means of finding out more about the banking business before they take that step? It is too much to ask the present Government for honesty in declaring whether that is their intention, but let us recognise that the process of Giro learning about the banking business could prove very costly for the taxpayer.
§ 8.22 p.m.
§ Mr. Ian Wrigglesworth (Thomaby)
I begin by apologising to the House for not being in the Chamber for the opening speeches. I was unavoidably detained on other duties. I also declare an interest, which I have previously declared, as a former Post Office employee and as an adviser to one of the trade unions which has a substantial representation in the Post Office, especially in National Giro. My job in the Post Office was as Press and public affairs manager of National Giro. Therefore, I have a deep interest in this subject. But that is not my only experience in banking. I have worked for the Midland Bank in the private sector. I therefore know a little of both sides of the coin.
The hon. Member for Mid-Sussex (Mr. Renton) spoke of the possibility of nationalisation and queried the Government's intentions towards banking. We must recognise that banking has been going through a period of unprecedented change and unprecedented difficulty in post-war years. One of my criticisms of the Government is that their banking responsibilities between different Departments are split too widely. The Treasury has responsibility for the Bank of England and for overall supervision. The Department of Trade is responsible for supervision under the Companies Acts and the Department of Industry is responsible now for the banking part of the Post Office. I wish that the three different Departments responsible for the different sectors of banking could work in closer harmony.
This is not a matter that has suddenly arisen under the present Government. It has been with us for a considerable period. At times, there is not the direction and supervision of banking that many people in the industry, quite apart from people in the parties, would like 1234 to see. In considering the Bill we must set it against that background and against the developments in the Trustee Savings Bank. We must also bear in mind current discussions and the proposals, to be brought forward shortly, for licensing banks, as well as all the prudential regulations that the Paymaster-General and the Chancellor of the Exchequer have spoken about.
The development of a third force in banking started with the publication of the Page Report in 1973. It was rather disappointing that that body was a little vague about including National Giro in its investigations. It would have been much better if it had done so. Its principal objective was to review the position of the National Savings Department and the Trustee Savings Bank. It also considered National Giro. In recommending the wholesale reorganisation of the trustee sector and building it up into a third force, it suggested that National Giro should have closer links with the National Savings Bank than then existed.
I am much in favour of the development of the third force and the development, enshrined in the Bill, of National Giro. I hope that we shall also see closer links between National Giro and the National Savings Bank so that there is a deposit side to its operations, so that it will be even more comprehensive in the facilities it provides for the public than is proposed in the White Paper and the Bill. I want to see the development of a strong public sector, because, like the clearing banks, I think that it is good to have a lot of competition in banking.
That is possibly the answer to one of the questions posed by the Opposition. They have asked why Giro is being developed. It is being developed to provide a wider range of services for the public and to provide increased competition within banking. I should have thought that Opposition Members would have applauded greater choice, greater freedom and greater competition. But they can be provided only by extending the range of facilities provided in the public sector by the Trustee Savings Bank, National Giro and the National Savings Banks.
Another development that I should like to see take place was referred to by my hon. Friend the Member for Gravesend 1235 (Mr. Ovenden)—namely, a link between the Paymaster-General and National Giro. It seems ludicrous that we have two matching computer services in the public sector. The Paymaster-General's office makes millions of payments for Government Departments which could be adequately dealt with by one organisation. I hope that the Government will consider the possibility of amalgamating the services, thereby saving this duplication and saving public funds. That would be to the benefit of the Government in providing a more efficient service and saving public expenditure.
As the White Paper recommends, it is right to proceed with prudence. It seems that some Opposition Members have overlooked some of the paragraphs in the White Paper, and particularly that referring to the prudential development of the service. Paragraph 17 of the White Paper says:Commercial prudence and the need to build up financial and administrative resources and expertise to handle the new business dictate that the expansion of Giro's services should be gradual.The White Paper then sets out the way in which that expansion is to be achieved.
Great play has been made of the lack of expertise available in National Giro for vetting loans. National Giro has now been in existence for some years and has built up considerable expertise. Indeed, as a result of bad debts it has made considerable, well-publicised losses. The system of vetting accounts for creditworthiness had to be introduced. No organisation can give somebody a cheque book with the facility to cash up to £30 without imposing a system of credit vetting. The ability of National Giro to be able to undertake such vetting has been clearly shown by the success of its trade operations in the last three or four years.
There were teething troubles in the early stages and the National Giro administration has learned from them, but it is not good enough to suggest that the Giro staff has no experience of vetting account holders. It is a grave responsibility to give somebody a cheque book, with which, at the stroke of a pen, he can buy goods and services. National Giro undertakes that responsibility 1236 responsibly and its staff has done so with considerable success in the last three or four years. I wish to emphasise that the expertise is there.
There has also been the relationship of National Giro with Mercantile Credit—a link that has existed since 1970. Again, National Giro has learned a considerable amount from that relationship, particularly about the credit vetting necessary to provide people with loans—bridging as well as personal loans. That experience is there and it is backed by the undertaking in the White Paper and by the prudence of the management of National Giro. Therefore, it is reasonable that the House should agree to this extension of facilities so that the Post Office may be able to come to the Government to discuss proposals, to be implemented first on a pilot basis and then, if successful, to be extended to a wider range of people.
We must not get the Giro operations out of perspective. It must be emphasised that the number of account holders in the Giro operation is tiny compared with account holders in the Trustees Savings Bank—and certainly very much smaller compared with the clearing banks and the National Savings Bank. Therefore, in dealing with Giro we are dealing not with another Midland Bank or National Westminster Bank, but with a very small organisation. I repeat that we should not get the matter of size out of perspective, although we hope to see the organisation grow rapidly in the coming years.
I hope that the Government will encourage Giro by re-examining the way in which it offers Government business on tender to the banks. In a number of instances it has not been possible for National Giro to be able to tender for the banking business carried out by Government Departments. The present situation is not good enough. It would be unfair if any bank had a monopoly of the business engendered by Government Departments. On the other hand, it would be unfair if all the banks, including Giro, were not given an opportunity periodically to tender for the business put out by Government Departments. I hope that the Government will give Giro a fair wind, that they will examine the banking services, and provide an opportunity for Giro to tender alongside the banks.
1237 I should like to say a few words about the rôle developed by National Giro in the last few years, a role that the Bill will help develop even further in the next few years. We must congratulate National Giro on the way in which it has developed. It began as a people's bank—a great concept involving a mass banking organisation to provide accounts for people who did not already possess them. When National Giro found that it was not successful in terms of the number of accounts originally envisaged, it found new, profitable markets to dovetail in with the services provided by the clearing banks and other banks. Therefore, in that respect, we should pay tribute to Giro.
It was able to see, for instance, that the cash collection service provided for retail organisations could give those organisations something which the clearing banks could not provide. That is because the Giro is open from 9 a.m. to 5 p.m. six days a week. The clearing banks do not have the speed of transmission possessed by the centralised accounting system of Giro. Here was a market in which it could clearly provide a profitable service that could not be rivalled.
The same is true of the rent collection service for local authorities. This has been developed over the years, but it was not envisaged in the White Paper published in the 1960s. It was a facility needed by the local authorities. There were problems about collecting rents. Rent collectors were being attacked—one or two were killed—while collecting vast amounts of money from tenants. The authorities needed to get the money into their accounts as rapidly as possible.
What better way to do it than through the Post Office? Families need to go to the Post Office at least once a week to collect pensions and social security benefits, to purchase stamps and postal orders and to make use of a whole range of other services. This was a service for which Giro was ideally suited. It has gone for it with great vigour and success. That service is proving profitable to Giro and of benefit to the community.
We should congratulate Giro on seeing these opportunities, grasping them firmly and developing them, so making its trading operations profitable. I want these services to be developed even more. The 1238 two bull points of the Giro are these 21,000 outlets around the country open from 9 a.m. to 5 p.m. and for six days a week, and the speed of transmission. Money that is put into the system on one day is at the centre the next day and available for use the day after. The amount of time that money lies in the account can be negotiated with Giro management if speedy transmission is not required.
These key factors can be developed in providing services for a wide range of organisations. These social benefits as well as the economic benefits have to be taken into account. In addition, the services provided under the Bill, like the cheque cards and the credit cards and the other current account services, will extend the range of facilities.
These are all essentially current account facilities. There is no intention expressed in the White Paper or the Bill of Giro providing services of the kind suggested by some Conservative Members. The hon. Member for Tynemouth (Mr. Trotter) spoke of income tax advice and trustee services. I do not think that there is any intention of providing such services. It is purely a question of providing current account services to modern standards.
I turn now to the Bill. I believe that we can easily justify the restructuring of the capital of Giro and the write-off of the debts if we look at the wounds inflicted on Giro during the early 1970s—the period of the review carried out by the last Conservative Government. I can think of nothing worse for a bank than to have its whole future called into question. The great enemy of any banker is lack of confidence in his services. This has been mentioned by hon. Members earlier in the debate. One need only consider the example of the building society in Derby, when there was some question whether deposits could be repaid. Immediately there was a rush on the building society by depositors wishing to withdraw their money.
In 1971 there was the dreadful period when the whole future of Giro was called into question. It is remarkable that not only did National Giro manage to keep its head above water during that period, but it continued to grow, albeit not at anything like the rate envisaged. It did not, as might have been expected, wind 1239 up its operations solely as a result of the enormous question mark hanging over its future. That question mark inevitably affected the morale of the staff as well as the confidence of customers.
Some anxiety has been expressed about cross-subsidisation. The accounts show that the services provided for National Giro by other parts of the Post Office are paid for in full, and there is an adequate rate of return on the services provided. It is stated quite clearly in the White Paper that there will be no cross-subsidisation, and I am sure that the Minister will be only too pleased to repeat that assurance. It is down in black and white in the White Paper. I do not know what further reassurance hon. Members want.
Hon. Members who criticise National Giro for cross-subsidisation might ask themselves about cross-subsidisation in the clearing banks. The payment of 15p for National Giro services often irritates people when they pay money into an account, but it is here that the true cost of using counter services is seen. The clearing banks run their credit transfer services at very little cost, so who is paying for the banks' credit transfer services? Is there not an element of cross-subsidisation there?
We are told that the credit card services of the clearing banks have been in difficulties for some years and making losses. Who is paying for the losses of the credit card services run by the clearing banks? Does not the service exist because by using credit cards the clearing banks are saving money on the number of transactions going through the very expensive branch and clearing system? It is not only National Giro that might be accused of cross-subsidisation—although I do not accept the charge and, clearly, nor does the White Paper.
We have also heard comments about the unfairness of the competition provided by National Giro and likely to be provided in future. If there has been any unfairness, it has surely been the other way round, because National Giro has been operating with one hand tied behind its back. There has been a tight restriction on the services it could provide, and particularly on what it could 1240 do with its funds. It could not lend funds at 18 per cent.—or whatever the going rate might be—to the holders of credit cards, or people with overdrafts. There has been a tight restriction on the markets in which it could lend its money.
In addition, it has been tightly retricted in its liquidity ratios, and will be restricted for some time in the future in this respect, placing it at a disadvantage in relation to the clearing banks. If there has been any disadvantage, therefore, it has been suffered by National Giro. The unfair competition has been from the other direction. So I hope that the charge of unfairness will be taken back by those hon. Members who have made it, because clearly it is not possible to operate fair competition between two organisations one of which is not even allowed to provide the full range of services that the other has.
As for the accounts published by the Post Office and by the clearing banks, the 1974–75 Post Office accounts give more information about the activities of the National Giro than the clearing banks' accounts give about clearing banks. They are much fuller in many respects than those published by the clearing banks. I wish only that the clearing banks would give the same degree of information as that contained in the last accounts in the Post Office Annual Report and Accounts for 1974–75.
But we need to ask ourselves whether the National Giro in the public sector needs to have the same prudential controls and free reserves as the commercial banks. By its very nature, as a public sector organisation, does not it have the guarantee that depositors require? What is the need for prudential regulations? What is the need for free reserves? Surely it is not to give guarantees to customers.
Surely the case for them is that of fairness between the two sides and so that we shall have the means to monitor the progress of the organisation and to compare it with its competitors in the private sector. That is the real justification, and if anyone says that the clearing banks have these prudential regulations to cover the fears of their customers, we might ask about the "Lifeboat" operation.
1241 Surely the implicit argument of the "Lifeboat" operation, in which £1.5 billion has been put in to rescue banks in the private sector and property companies, is that without it 30 banks in London today would not be in operation. Surely that is also a form of State guarantee. The money has come from the clearing banks and from the Bank of England, but does anyone believe that the Bank of England would allow one of the clearers to go down with massive losses against the background of the "Lifeboat" operation which has rescued all the secondary banks? Clearly, the same sort of guarantee exists there. But the argument for restructuring Giro is so that it can be monitored by this House and by the public to see that it is developing in the way that we have laid down in the White Paper and so that a degree of fairness can be exercised as between the private and the public operations.
The Opposition have been schizophrenic in their attitude, and I was disappointed to hear that they intended to vote against the Bill. They want more competition, but they do not want to encourage it. They do not want losses, but it is they who have been responsible to some extent for creating the losses in the National Giro by carrying out their review. They want nationalised activities to be run on a commercial basis, but, by voting against the introduction of a commercial basis, apparently they are opposed to the National Giro being run in that way. They set targets for the organisation to achieve, but they ignore them when they have been achieved and they do not give the organisation a fair run when it has achieved those targets not only on date, but even before they were due.
This is a very irresponsible attitude for the Opposition to take. It is the attitude of a group in opposition rather than of a group taking the responsibility of the running of an organisation. It is a complete about-turn on their previous attitude to Giro, and I hope that, some of them will reconsider their decision to vote against the Bill. If they stand by what they decided when they were in office, they will not do so.
If we pass the Bill tonight, it will be to the benefit of the Post Office, the taxpayer and the public who wish to use these banking services.
1242 People will have a greater option of services. There will be greater competition and that is a wholly welcome development that will receive the support of the vast majority.
§ Mr. Deputy Speaker (Mr. George Thomas)
Before calling the next speaker, I remind hon. Members that the Front Bench speakers wish the winding-up speeches to begin at 9.10 p.m.
§ 8.51 p.m.
§ Mr. Peter Viggers (Gosport)
It is a pleasure to follow the hon. Member for Thornaby (Mr. Wrigglesworth), although I cannot support his arguments, rooted as they are in a misconception. I do not understand the purpose of the Bill. I have tried hard to understand exactly what it is meant to achieve, but I cannot. I feel in all humility that as a solicitor, a director of a merchant bank and a director of a company which is a licensed dealer in securities, I should be able to understand it, but I have failed.
The Bill deals with two subjects—banking and the Post Office—and whether they should be joined. I have no doubt that the clearing banks are inefficient in many ways. They are extravagant in the use of premises and they should have grasped the halls are expensive and insufficiently productive. The clearing banks are unadfact years ago that their palatial banking venturous in the services they provide, and they appear reluctant to innovate. Their hours compare unfavourably with banking hours in other countries. They advertise some ancillary services which they perform not wholly well, and these include trustee services where the bank takes a fee, as does the solicitor who handles the estate, and the provision of advice on investments, when they usually call in a stockbroker who advises a client to go into unit trusts, and there the fee is split with the stockbroker and the unit trust managers.
Often the senior management of the clearing banks is of high calibre, but the banks work together so closely that they are insufficiently competitive. The public suffers because of this lack of competition, and there should be scope for the Government, through the Office of Fair Trading or the Monopolies Commission, to consider whether there are ways in which the clearing bankers could be encouraged to 1243 develop a greater sense of competition. We have to consider whether this competition should come from the Post Office.
In turning from banking to the Post Office one is confronted with a comparatively lifeless and dull sector. The queues at post office counters are an eloquent testimony to inefficiencies in the system. I have not found that the standard of courtesy at post office counters is of the highest level. The postal service is in the throes of a vicious downward spiral of services, which is the obverse of a vicious upward spiral in prices. It seems clear from rumours and leaks that the 101p post will be with us before long. The postal service was slow to put through its post code system, which is not working particularly successfully. The telephones are expensive.
The Giro system was slow to build up its activities. It now has a better turnover but it must be a bitter disappointment to its protagonists. Giro compares unfavourably in terms of turnover with its European counterparts. I could understand why it is now sought to develop the service by expanding it. The traditional cry where a service is not being overwhelmingly successful is that it should be allowed to move into pastures new so that it may develop more profitable activities.
More than anything the Post Office needs a breath of competition, and I believe that there is a great deal to be said in favour of and not very much against a modest and controlled experiment in selected areas to allow the private sector to take over some of its activities, perhaps the telephones or the postal delivery. Almost everything that has been said in favour of Giro has been a defence of its service as a method of money transmission, but the Post Office is not fulfilling its present rôle successfully, and it does not need new duties.
The Bill says:The Bill will have no direct effect on the number of public sector employees.That is a remarkable statement. The Ministers presenting the Bill must feel that banking services can be carried on without extra staff. That can mean only that the duties of existing staff will be increased, leading to even longer queues 1244 in post offices and even less efficiency in the Post Office's activities.
I understand that at 31st March 1975 the Post Office Giro staff totalled 4,401, including 3,019 in the computer centre. There are 21,000 post offices. How on earth can that staff handle banking services? I do not think that Ministers understand the nature of banking if they believe that no new staff will be needed.
There has been no attempt to deal with the important points made by my hon. Friend the Member for Mid-Sussex (Mr. Renton), who asked how bad debts were to be collected. Is the sub-postmaster to get on his bicycle and collect them? The question must be answered. It is obvious that 4,000 staff cannot control banking activities in 21,000 branches.
Giro is at present a transmission service for money. It is a revolution that we are discussing, not just a mild extension allowing holders of Giro accounts to have modest overdrafts. It is a new system of operation dealing with the commercial world of banking, a completely different concept and not just the shunting of money from A to B. It means entering the viciously commercial world of credit banking.
It is obvious to everyone except the Government Front Bench that if the Post Office is to engage in banking activities it will need to recruit expert staff. Where will it recruit them from? It will get them from existing banks. How will it do it? Will the sparkle and lustre of working for the Post Office be reward enough to encourage people to work for Giro, or will it need to pay recruits rather more than it does now?
The new banking operation will be expensive and inflationary, because the staff will need to be paid more if they are to be recruited from the banks where they are currently working. Those trying to keep down prices and wages may be interested to know that staff joining the Post Office will be free to accept much more than £6 a week in excess of their current wage.
The Minister said that the extension of Giro banking services would enable the amount of cash in movement around the country to be reduced. That is a laudable aim, but the way to achieve it is to eradicate the remaining effects of the old Truck Acts, which make it difficult 1245 to pay people by cheque instead of in cash, rather than to extend the Giro. I do not understand how the Minister's point can be valid to support the extension of the Giro.
When this measure to allow the Giro to move into banking is allowed, will it compete efficiently? Experience with the Post Office makes it clear that it will not. Herculean efforts to encourage the use of Giro have not been particularly successful. Nearly all our experience of State industries is that they do not like competition to be fair.
I draw a parallel with which the Minister will be familiar. When the British National Oil Corporation was created it was said that it would operate fairly, but the first thing the Government did was to relieve it from the payment of petroleum revenue tax. They then allowed the oil investments of the National Coal Board in the North Sea to be sold to the Corporation at cost, not commercial value.
I do not believe that the Government understand the meaning of fair competition. The siren voices from the Eack Benches calling upon the Giro to take a greater share of Government business must be an indication that there will be immense pressure to encourage State corporations and institutions over which the State has authority to use the Giro rather than the commercial banking system.
§ Mr. Gregor Mackenzie
The hon. Member's own right hon. Friends, when they were in office, went to a great deal of trouble to let the facilities of Giro be known to Civil Service heads and nationalised industries in precisely the same way as we are doing.
§ Mr. Viggers
I take the point. I am sure it is a fair one, but at present only £2,000 million out of the £50,000 million of Government transmission of money goes through the Giro system and there has been considerable Back-Bench pressure from the Government side during this debate for more money to be transmitted through the system. This pressure would increase if Giro operated banking services and we would see pressure, both overt and covert, for nationalised industries to use the system for the transmission of money.
1246 I do not think that the Government understand the meaning of truly fair competition. It can be proved. The capital structure of Giro is completely inadequate for a banking operation. No banking operation with a capital base of £13 million could rise to more than modest size. My hon. Friend the Member for Tynemouth (Mr. Trotter) made some important points about qualifications in the accounts of Giro. No bank would be allowed to operate with such qualifications in its accounts. Quite apart from the fact that we are writing off large sums of money, the Bill has been conceived in unfairness and will operate in unfairness.
Lloyd's Bank International, a commercial bank, sustained losses which, if I remember correctly, totalled £33 million as a result of unauthorised dealings by its branch in Lugano. Is anyone telling me that if Giro, through some malfunction of operation or misuse of power, sustained a £33 million loss, there would not be a Minister here late one night putting through a little Bill to relieve Giro of the loss? Of course there would be. We have recently had an Act to relieve the Crown Agents of losses. It is obvious that we would have a Bill to relieve Giro of any such loss. The whole concept of a Giro banking system is conceived in unfairness.
If the Post Office engages in banking activities we can expect the Government, through the use of their tentacles of power, to draw in business for the Post Office banking sector.
The Bill is one of two things. It may be a comparatively small measure to write off debts and inject new capital—a use of resources which cannot be justified at this time and which would be a burden on the Post Office. If that is the case, Giro is under-capitalised and short of staff and we must know where the new staff will come from. Alternatively, the Bill could be the thin end of the wedge to set up a State bank to satisfy those on the Government Benches who wish to expand State control for its own sake. I believe that there are different people within the Government who have different views about what the Bill is meant to achieve. I do not know which force will eventually be predominant, but, whichever it is, the Bill should not be passed.
§ 9.4 p.m.
§ Mr. Douglas Crawford (Perth and East Perthshire)
I am grateful to the Government and Opposition Front Benches for enabling me to make a brief contribution to this debate from the Scottish National Party Bench. The House will not be surprised to hear me say that the Scottish banking system is, to a certain extent, different from the English system. The Scottish system is, dare I say it, more efficient. It is also at least as old as the English system. The Bank of England was formed in 1694 and the Bank of Scotland in 1695.
The House will also be relieved if I do not go into the question of the relationship between the Scottish pound and the English pound—the petro-groat and the petro-merk—after independence except to say that I believe that the Scottish pound will become stronger than the English pound.
I am concerned with the mechanics of banking in Scotland. There are two main differences between Scotland and England which are relevant to the Bill. The first concerns the position of the Trustee Savings Bank, which in Scotland is stronger than it is in England. The Trustee Savings Banks in Scotland have recently been reorganised and are developing well. The second difference is the position of the clearing banks. The recent history of banking in Scotland has been one of mergers, as in England. There have been more mergers in Scotland than there have been in England. There have been mergers between the Bank of Scotland and British Linen, National Commercial and Royal, and Clydesdale and North of Scotland.
§ Mr. Carmichael
Which is the parent company of the Bank of Scotland? Which company holds the biggest share? Surely it is Barclays Bank.
§ Mr. Crawford
Barclays Bank does not have a majority shareholding in the Bank of Scotland. The Midland Bank has an almost total control over Clydesdale. To my knowledge, Barclays Bank does not have a controlling interest in the Bank of Scotland.
I am speaking here purely about mechanics. My experience is that one seldom finds queues of people in Scot- 1248 tish banks waiting to perform transactions. In England—certainly in London—queues are longer. I agree entirely with what the hon. Member for Gosport (Mr. Viggers) said about queues at GPO counters.
I agree with the hon. Member for Gravesend (Mr. Ovenden) that Giro as it stands is not a bad system. My constituents in rural areas who pay rents via Giro would be in difficulty if it did not exist.
I agree with the Minister of State, Department of Industry that Giro needs a better financial base, so that transactions carried out by people who are not dealing with large amounts of money can be profitably processed. Perhaps a self-governing Scotland will have a Scottish Giro linked to the English Giro, although there may not be enough people in Scotland to sustain that system.
Does the Bill mean that there will be a build-up of jobs in Bootle Presumably it does. If so, will competition from Giro take job opportunities and employment from Scottish clearing banks? If this proposal, in the words of the hon. Member for Gosport, is the thin edge of the wedge and leads to nationalisation of the banking system on a United Kingdom basis, the SNP will be against it. That would lead to still more centralisation of commercial decision-making in London, and we have had enough of that.
Scottish clearing banks and Trustee Savings Banks in Scotland are as good as any in the world. My party is not happy with certain implications of the Bill for employment in the Scottish banking system, especially in the Trustee Savings Banks. The Bill does not pay sufficient attention to the differences between the banking systems in Scotland and England, and for that reason we shall vote against it. It seeks, directly or indirectly, to take even more decision-making away from Scotland.
§ 9.8 p.m.
§ Mr. Michael Marshall (Arundel)
I welcome the debate, though not for obvious personal reasons. We have heard many useful contributions from both sides of the House. Without being invidious, I mention the speech made by the hon. Member for Newcastle-under-Lyme (Mr. Golding), who has a long connection with 1249 the Post Office Engineering Union, the brief intervention of the last Assistant Postmaster-General, my hon. Friend the Member for Totnes (Mr. Mawby), the speech of my hon. Friend the Member for Mid-Sussex (Mr. Renton), who spoke with all his knowledge and experience as a banker, and the trenchant comments of the hon. Member for Thomaby (Mr. Wrigglesworth), although he rather spoilt his case by indulging in attack as the best form of defence. Finally, we had two useful speeches, one from the hon. Member for Perth and East Perthshire (Mr. Crawford), whom I am glad to see with us tonight—despite the events of the past few days, the United Kingdom is still intact—and last, but not least, my hon. Friend the Member for Gosport (Mr. Viggers), drawing on his professional and business experience, made a signal contribution.
Having made those observations, it is only right that we should immediately decide what this debate should be about. There has been great difficulty and perhaps a temptation for many hon. Members to regard this as an opportunity to justify the existence of Giro. Basically that is not what we have been present to discuss today.
I welcome the debate because fundamentally we are looking at a commercial proposition. We are, as my hon. Friend the Member for Mid-Susesx said, considering whether Giro should go into secondary banking. That is a massive subject and one of the greatest importance. Therefore, we must approach it in that spirit.
Equally, it is perhaps a relief to hon. Members on both sides of the House that we are considering a commercial proposition rather than yet another rescue operation in which we simply talk about saving jobs at any cost. To that extent I recognise the progress which Giro has made. I shall return to that matter later.
We have heard many important contributions during the debate and, therefore, I should like briefly to highlight one or two matters which have been raised. I am sure that the Minister has noted these points but I should like to add to them because a number of them are extremely important. Moreover, during this debate the anxieties and genuine concern for 1250 the future of Giro were properly reflected, and therefore they should be answered by the Minister.
First I shall deal with one of our basic worries about the White Paper and the Bill. Frankly the White Paper is extremely thin, and there is no disguising that fact. When the Minister of State opened the debate he was prepared to admit as much. Indeed, I think he went even further with his characteristic directness and, if I may say so, the very honest approach that he brings to our proceedings. He as good as said that he was transmitting to us today what the Post Office had put to him. In my view that is a fair account, but it raises the great problem about the way that we conduct business in this House when considering proposals of this kind and anxiety as to whether within the Department of Industry there are people of the right calibre and experience in banking to vet proposals of this kind. I hope that the Minister will say a word about that matter.
I turn to the points made by my hon. Friend the Member for Bridgwater (Mr. King). It is important that the Minister should try to set our minds at rest on the important question of whether Giro should be allowed to trade within its present capital structure granted, as has been stated and certainly has not challenged so far, that no commercial bank would be allowed to trade with the debt ratio envisaged even under the capital reconstruction contemplated by the Bill.
The hon. Member for Newcastle-under-Lyme, in view of his intimate connection with the Post Office, is to be especially congratulated on making a fair speech. His observations about failure to identify markets accurately in the original estimates are timely and true and reinforce the need for us, in any agreement which might be reached in this House, to be equally clear about what we are doing for future forecasts. I support the argument, which I understood the hon. Member to advance, that the Government should be seeking to expand existing business from within Government customers with the proviso of my hon. Friend the Member for Gosport that it must be on a fair basis and not through undue coercion. The hon. Gentleman's point seemed valid. There is a great deal of scope. Perhaps 1251 the Minister will tell us the Government's view of that matter.
We have heard a number of arguments about the evidence of demand. We should try to encapsulate the problems which lie ahead for Giro as it hopes to move into secondary banking. The hon. Member for Newcastle-under-Lyme frankly told us that he had two accounts, one with Giro and one with the Co-operative Bank. I do not believe that the hon. Gentleman is in any way untypical. I wish that we were able to produce the figures. We are all to some extent working by hunch and on the basis of the inquiries that we have been able to make in a limited time.
The hon. Member for Newcastle-under-Lyme said that he would wish to maintain both his accounts despite the move into commercial banking. I regard that as a prudent and sensible course. I am sure that it will be followed by many people who use both Giro and the commercial banks.
That brings back what is to my mind the basic worry that, in a sense, there is contradictory thinking behind this proposal. We all remember, without getting too emotive over Benn's Bank and the people's bank, that the whole notion of Giro has changed dramatically. The original idea of handling large numbers of personal accounts has been superseded largely by the money-making advantages of a relatively small number of commercial accounts. The idea that we should in some way see a complete change yet again cannot be entered into without the greatest care and consideration.
Before moving to my summary of how I see the arguments we have heard tonight, I cannot leave out mention of the speech made by the hon. Member for Bootle (Mr. Mahon). I hope that he will not regard it in any sense as a patronising remark from one relatively new to this position on the Opposition Front Bench, but I thought that the hon. Gentleman made an admirable, indeed a model, constituency speech. He spoke with great sincerity, and we all respected him for that. I should like to highlight the hon. Gentleman's speech not only because of its sincerity, but because of its great realism. I noted 1252 carefully the words that he used. He said that Giro had made modest progress. I agree. That is a fair summation.
I fully recognise the temptation of the hon. Member for Thornaby, being so intimately concerned with these affairs, to claim too much credit for what has been happening in Giro. This is a matter to which I shall return.
I turn now to my own conclusions as we reach the end of what has been a valuable debate in which the House has been able usefully to bring to bear expert views from both sides. I put it to the Minister that we are concerned with two main questions: first, can the financial reconstruction of Giro be justified; secondly, what are the prospects for success? In effect, we are rubber stamping the proposals in the White Paper which would give Giro the opportunity to offer personal loans and overdrafts, to extend overdrafts to commercial customers, to local authorities and to nationalised industries, and the much wider opportunities made clear in the White Paper, which states:It is also accepted in principle that Giro should be authorised to provide other banking services such as credit cards, cheque guarantee cards and bridging loans, subject to detailed discussions with the Government.Those are very wide, indeed massive, prospects. If we were to give the Bill our blessing, we should be making an open-ended commitment on Giro's behalf that would allow it to move not only into secondary banking, but into areas which, as many hon. Members on both sides of the House have pointed out, have been fraught with difficulty and which raise many of the worries of some of us over the whole economy.
I turn now to the justification for the financial reconstruction of Giro. I need not labour this subject. My hon. Friend the Member for Tynemouth (Mr. Trotter) gave us a first-class professional assessment based on his vast accountancy experience. My hon. Friend the Member for Ealing, Acton (Sir G. Young), in a different context, given his connection with the Post Office, while supporting the activities of Giro, equally touched on our concern about financial reconstruction.
Whichever way we try to slice this, when we talk about the cancellation of debt, as my hon. Friend the Member for Howden (Sir P. Bryan) pointed out, we 1253 are, in effect, saying that we are prepared to make £30 million available to Giro. of which £16 million is a write-off which, in the normal course of events, the taxpayer is entitled to see repaid and of which another £13 million has been used for the notional investment of public dividend capital, as it is described.
Like many hon. Members, I get a little tired of the jargon with which we belabour ourselves. Public dividend capital is a fraud, simply a way of writing off debts and saying that money will be put in as a fresh investment when that is not true.
§ Mr. Marshall
One might equally quote the British Steel Corporation where the return on so-called public dividend has been very limited. The Minister knows the problems that lie ahead if we ever hope to see a return on that dividend.
In this case, we are saying that we have lost so much that, in addition to cancelling half Giro's current debt to the nation, we might as well forget any chance of the taxpayer's being paid on a quarter of the remaining debt and treat it as an investment on which he may receive dividends. In case the taxpayer gets too excited at that prospect, we say "You must not expect too much. We are keeping the right for Giro to discuss how much of its retained earnings should go back into the business. Out of what is left, you might receive notional dividends—that is, some payment back to the Treasury." As my hon. Friend the Member for Howden said, what we are really saying is "Pay when you can." This new form of business is hard to justify.
This financial restructuring means a £30 million minimum investment in Giro. Apart from the £16 million cancelled out, we must recognise that the £13 million, which is now a commitment to the National Loans Fund, is pre-empting resources that could be used more effectively. All hon. Members must be able to think of causes close to their hearts for which £30 million would come in handy.
All that paragraph 11 of the White Paper promises is that dividends are expected to be "not less than" interest 1254 earned on the £13 million. What is the prospectus upon which we are to determine whether we should agree to this tiny return and which should encourage us to move into new business?
What are the prospects for success? All hon. Members tonight have admitted the difficulty of considering such a limited White Paper, which gives no details of market research and scanty information about the basis on which these decisions have been reached, about what bits of business Giro is thinking of moving into, why it rejected the possibilities of building up its existing business and why it has not considered other avenues.
We do not oppose free competition from the nationalised industries or anyone else, provided that it is completely above board and not subsidised secretly. But we equally accept that competition in this instance will be wide open. The clearing banks have not sought to thwart Giro. I applaud that public-spirited approach, but to be realistic, is it not true that they are themselves unenthusiastic about what business Giro will pick up? I shall return to that point shortly. When we speak of secondary banking we have to be clear about what is now available.
What is Giro's current track record? Some hon. Members tried to overstate their case when they made the general argument for Giro. We are concerned only with the extent to which the Giro track record is appropriate to new business. We are not talking about the justification for Giro as such. There has been widespread agreement tonight about the need to let Giro get on with its development. So far it has made modest progress. It is particularly hard to follow the notion of loss that is being written off at a time when we are told that if Giro continues on its present course without taking on any other extra business, it will be into clear profit by 1977, even leaving aside the repayment of debt interest. If that is the case, we should be far better advised to see Giro get totally into the clear and to put forward proposals before it goes into new business.
Aside from the particular needs of Giro, we face an important question of principle. Are we simply to accept that from time to time yet another nationalised industry can come to the House, particularly if it wants to compete or is 1255 competing in the commercial world, and say "Things did not go very well, but if you will write off our past losses, we shall do very well in the future"? The precedent is very important. It makes it much harder for those concerned about the levels of public expenditure in this country to say "No", when yet another cause is put to us.
That is why we have brought the searchlight pretty sharply to bear on Giro's record. I share the view that in the last year or two Giro has made great efforts to improve its position and under the new management there has been progress.
The tributes paid to my hon. Friend the Member for Bridgwater and to Christopher Chataway for the work that they set in hand—tributes naturally accepted with pleasure by Conservative Members—show that there is a common commitment that is a basis for our discussions. Therefore, when I criticise Giro in its present situation, it is because I am concerned about whether it is ready and right to move into new business.
The answer to that has been given again and again tonight. We are told—and I should be interested to hear whether the Minister wishes to deny it—that Giro is technically insolvent. It carries a debt ratio that would certainly prevent its operating as a commercial bank under the rules of the Bank of England as now drawn. We have to face the fact that Giro has been running at an average loss of £6 million a year and that it made a tiny profit of £100,000 only in its seventh year of operation.
Although I am willing to accept that there is a more optimistic tone about Giro moving into continued profit within its present framework, there is also another school of thought, as typified by the Economist's banking survey last August. The article was not critical of Giro as such, but regarded this profit as a flash in the pan. As has been explained by some of my hon. Friends, that profit has to be looked at hard in relation to the adjustment by which provision for losses in a previous year was transferred back to give Giro a profit in the last year for which we have results.
1256 Therefore, Giro's earnings record is poor. The attempts that have been made to improve it are certainly commendable, but this is no basis upon which to launch new business.
We also have to ask ourselves precisely what we mean by new business. This presents some difficulty. We have no breakdown of the way in which market research has gone and how far Giro expects the personal business in loans and overdrafts to be a major part of its business as compared with corporate business, that is, the business with local authorities or nationalised industries. We understand the commercial confidentiality of these matters, but if the Minister could give us a breakdown in rough percentage terms, it would help.
However, I believe that all hon. Members can agree that if this development is allowed to go ahead the chase will be on for the personal loan and overdraft business. It is this kind of new business that is particularly tough. My hon. Friend the Member for Howden pointed to the article of 9th December in which Christopher Wilkins, a correspondent of The Times, described what he calledthe banks' 10-year fight to mop up the market".I shall return to that article shortly, because it was written from the standpoint of the Trustee Savings Banks and the problems that they would face, and it could not in any sense be regarded as a biased piece against Giro. However, it highlights the very tough and difficult conditions that will apply in getting this share of personal banking business.
I believe that we cannot divorce the prospects for Giro from Giro's image. That point has been brought out fairly. The hon. Member for Gravesend (Mr. Ovenden) put it as fairly as anyone when speaking of the problem that people have experienced with cheques bouncing. Working with a computer, that is the way that it works—bang—down goes the stop and one's cheque is stopped. I believe that many existing Giro account holders will think very carefully before approaching the question of an overdraft if they have had this kind of experience. The use of a computer, which is part of the Giro image, rather than the friendly bank manager will be a serious hurdle that 1257 all hon. Members must recognise from their own experience in money matters.
Furthermore, we have had a very vague discussion tonight. We have been told so little in the White Paper. Perhaps the Minister can help us. What are these "term loans"? We know that they are at present allowed for between £150 and £1,000 and are repayable over three years. We have a certain amount of information of this kind, but the kind of business which is currently being taken on and the kind of business that is envisaged is not at all clear.
There is some reference in the various write-ups on these matters—not in the White Paper; I am thinking of Press comments—to the possibility of giving preferential types of personal loans connected with house improvements. It is clear that if this business is to develop in any meaningful sense, the £150 to £1,000 range will bring Giro, if it has not already brought it, into the consumer durable field. We therefore get off to the whole subject of whether repossession facilities are to be made available and whether sub-postmasters come into the scheme of things. Seemingly, we are to accept in faith that the whole apparatus will be constructed. There is no positive indication that any of it is there.
The mind boggles at the thought of post offices at which we may find ourselves unable to pick a way through the doors because of repossessed motor cars, or unable to clamber over a mountain of repossessed television sets originally owned by people unlucky enough to be unable to meet the payments. That is the kind of possible development. I take the point when hon. Members say that these are matters for discussion in Committee, but I urge upon the House that we have an opportunity to look at these matters now and not simply to treat this occasion as the normal rigmarole and away we go to Committee.
These are some of the real difficulties. I have mentioned increased competition and the article in The Times of 9th December, which I shall not repeat at length, because my hon. Friend the Member for Howden read out the appropriate extract. However, a number of other points appear in the article. The argument was on the question of Trustee Savings Banks, and the correspondent of The Times said, 1258Much depends upon how quickly the TSBs can react … for during the past two or three years the clearing banks have become noticeably more concerned ….with the so-called "great unbanked." The figures and the whole basis upon which that article is drawn up are very interesting. The article suggests that half of our population are now banking with the clearers, and that another 10 per cent. split their business between Trustee Savings Banks and Giro, and that 80 per cent. is regarded as saturation point. That means, in other words, that there is another 20 per cent. of the market to shoot for.
The same article, based on detailed research of individual clearing bank figures, shows that clearing banks are gaining personal accounts on overdraft business at a rate of between 4 per cent. and 5 per cent. per annum. That is on their own turnover. If that rate is continued, the market will be mopped up within the next eight to 10 years. That is precisely the period when, by any normal scheme of things, Giro, if it is to be successful in commercial banking, is expected to achieve success.
There are obvious questions which follow. The suggestion that there will be no increase in public service manpower is one that I find totally staggering. I cannot believe that that proposal can be put forward seriously. I am the last person to want to see an increase in the public sector by the massive recruitment of top level bankers to help Giro to get into the banking sector, but if it can be done from within good luck to Giro.
We must all know that what has been said about manpower requirements cannot make sense. Let us have a clear answer from the Minister. Let him remember the manpower requirements within his own Department to vet these matters. Let him remember the mechanism that will have to be established from within Giro.
It has been claimed that this kind of business can be carried through because of the special advantages of Giro. The evidence is not as clear cut. It will be recognised that sub-postmasters throughout the country are highly independent. We know that not all of them open their branches for business during weekends. Control and staffing 1259 pose massive problems and will need careful consideration.
In conclusion, I highlight two points that stem from the debate. First, there is the notion that we shall give a rubber stamp to a blank cheque of a White Paper. That is a notion that should be resisted from both sides of the House. It is fair to say that in the past few days we have had the opportunity on a matter of great constitutional importance to take not necessarily a party line. I recognise the great call for party loyalty, but in a matter such as this it would be the height of folly to let that be the overriding consideration. We are people whose time is money. The contributions that we make cost the State money. For us to refer the Bill to a Committee, despite the total lack of information and despite all the fearful signs that are evident from not only the history of secondary banking, but future problems, would be a dangerous course.
Anyone who hopes to see Giro succeed must ask himself carefully whether this is the best way for Giro to proceed. We must ask ourselves whether we would advise a constituent to put money into Giro if he were free to invest. Anyone who can answer in the affirmative to both those questions is completely confusing his thinking on this project. We wish it well, but we do not wish it well in the way now proposed.
§ 9.38 p.m.
§ The Under-Secretary of State for Industry (Mr. Neil Carmichael)
First, I congratulate the hon. Member for Arundel (Mr. Marshall) on his first duty from the Dispatch Box. I think that he brought to it a great deal of knowledge and understanding. As well as being a great honour it is also a duty to be put in the position he has occupied tonight. I am sure that we shall hear a great deal more from the hon. Gentleman from the Opposition Dispatch Box.
Having listened to the debate, I have learned a great deal from contributions made from both sides of the House. A great deal of expertise and understanding has been displayed from different angles on the whole question of Giro and banking. It is perhaps a little sad that the hon. Member for Bridgwater (Mr. King) and myself are both engaged in another Committee. Unless we can substantially 1260 speed up the progress in that Committee, it is hardly likely that we shall be able to take part in the Committee proceedings on this Bill.
In dealing with some of the questions that have been raised, I begin with those of the hon. Member for Bridgwater. He made an extremely exhaustive and meticulous speech in going through the Bill and posing the various questions that arise from the Opposition's point of view.
A number of hon. Members made quite a bit of play with the competition of the Trustee Savings Banks. On 31st July 1974 the Paymaster-General announced that the Government had agreed after discussions with the Trustee Savings Bank Association that its banks should be given power to provide a full range of personal banking services, including personal loans to depositors.
A Bill is being brought forward alongside the present Bill to implement the majority of the Page Committee's recommendations. The effect will be to increase the range of banking services available to the public. The timing of the Bills is not coincidental. It is right that the extension of services envisaged for Giro and the Trustee Savings Banks should be in harness.
I cannot accept that it is unfair on the Trustee Savings Banks—and it is far less so on the clearing banks—that Giro should also operate a banking service. I maintain that it is unfair on Giro customers not to have access to such services if they want them. It is not our primary aim to set up Giro in competition with the Trustee Savings Banks or other financial institution but rather to give Giro customers wider facilities.
Giro will retain its primary function as a money transmission service. For their part Trustee Savings Banks will for some years to come concentrate on their traditional savings rôle but, like Giro, their role will expand to cover a wide range of personal banking services. We have no intention to give Giro any advantage over the Trustee Savings Banks. In terms of what is fair or unfair, it is part of our case that Giro's growth and financial performance has been handicapped—unfairly, so it might be said—by its inability to provide the banking services we now propose.
1261 A great deal was said by the hon. Member for Bridgwater and his Conservative colleagues about management expertise. Many hon. Members have rightly paid tribute to the role of Mr. Singer in leading the Giro team. I remind the House that Giro has been in the banking business since 1968. I know that in normal banking terms it is fairly young, but it is no longer a fledgling. It has carried out its banking tasks under the scrutiny of the monetary authorities, has acted with due prudence and has demonstrated that it can provide wide-ranging services for business and personal account holders. As the White Paper recalls in respect of the business deposit services, the value of such transactions by March last year had reached a level of £3,500 million a year.
Giro has proved that it can meet the sophisticated needs of business. More recently, on 2nd June last, the personal loans service was launched on a basis agreed with the Treasury. The rate of lending since June is in line with the £2 million ceiling agreed with the monetary authorities for the first year of operation of the service. I am confident that the results of the pilot scheme will show that the fears of Conservatives about Giro and its lending rôle are groundless. The extension of the Giro service will be gradual. No sudden explosion is intended.
Some hon. Members have mentioned the question of additions to staff. Some people have painted a picture of little Mrs. Marples, the postmistress, riding on her bicycle to repossess a television set. We believe that there will be no addition to senior management levels. Fourteen additional staff, headed by the loans manager, have been employed to operate the personal loans service. It is expected that that number of staff will be capable of administering a personal loan portfolio of £2¾ million.
§ Mr. Tim Renton
If Mrs. Marples on her little bicycle is not to repossess the television set, who is to do so? Who is to collect bad debts? This point has often been raised but has still not been answered.
§ Mr. Carmichael
I thought that that question had been answered by my hon. Friend the Member for Thornaby (Mr. Wrigglesworth). He spoke about the comparison between Giro and groups 1262 like UDT and the kind of credit given by them. In an intervention I said that many lending services do not work on a purely face-to-face basis. The idea put forward by some Conservative Members of the local postmaster making an assessment is a bit fanciful. We know that large sums are given without anyone ever seeing the person to whom the loan is made. It is done on a points system. I am sure that Conservative Members, who know a great deal more about banking and loan services than I do, know a great deal about this.
§ Mr. Tom King
The Minister has announced that the average loan for the loan portfolio will be of the order of £2¾ million. I am not sure where that figure has come from. It is not in the White Paper. We have not had it before. If we take an average loan of £1,000, this means that there will be 2,750 people obtaining an overdraft. That means that one in 200 of the customers of Giro in future will obtain an overdraft. Is that the purpose of the Bill—to give an overdraft to only one in 200 of Giro customers?
§ Mr. Carmichael
I shall give figures making a comparison of Giro with the clearing banks. Much is being made of this. When the figures are looked at—they are in the White Paper—it will be seen that we are not dealing with some definite threat. The figures I am talking about involve the total for Giro as against the total for the clearing banks. We are dealing with a relatively small but expanding section.
§ Mr. Tom King
The Minister has said that 14 people under a manager will administer the loan portfolio of £2¾ million. These figures are not in the White Paper. We have never seen them before. Can the hon. Gentleman amplify them?
§ Mr. Carmichael
I have already lost five minutes of my speech. I have dealt with the question of staff. A total of 14 additional staff headed by a loans manager have been employed to operate the personal loan service. That is in terms of Giro. The Post Office may have to take on additional people, but this would be if the banking service expanded. It would therefore be a profitable organisation.
My hon. Friend the Member for Bootle (Mr. Mahon) said he hoped that 1263 there would be a sufficient expansion of total business. The Financial Memorandum stated that there would be no effect on manpower in respect of the Civil Service—not in respect of Post Office staff. As the Post Office banking service expands, more staff will be needed, but only to a modest degree. Giro's banking services will be profitable. Therefore, hon. Members have no right to criticise the employment of more people, particularly in the Bootle area.
There has been some concern on the Conservative Benches that the proposals for Giro may lead to unfair competition. Conservatives appear to be worried about the provision in Clause 3 (1) which empowers the Secretary of State to provide further sums of dividend capital. How, they ask, can this be reconciled with the statement that the banking operations of the Post Office undertaken by Giro will be self-financing? No future advances of dividend capital are expected in the foreseeable future. Any provision of further Government investment would be solely of working capital to advance Giro's capital investment and not to finance its banking operations.
A great deal has been made about the horrors of a State bank. I have tried to explain the relative size of Giro as against the rest of the banking world. Conservative Members are trying to make our blood curdle with pictures of Giro as a State bank driving out of existence all the other banks and establishing itself in a monopoly or dominant position as the national banking corporation.
I shall make no comments on the merits or demerits of the involvement of the State in banking in the sense in which the Opposition are raising it. That simply is not what we are talking about here. Ours is a much more modest proposal, namely, to enable the Post Office to improve and expand on a basic service which is already being provided and which is appreciated by individuals and business concerns.
There is nothing in our proposals—they are explained fully in the White Paper —which could possibly justify the exaggerated fears of Opposition Members. The figures for the clearing banks' customers' balances, liquidity, capital structure and profits amply demonstrate this. 1264 Opposition Members know this well enough. For the immediate future, Giro's extension of facilities will be on a limited and experimental basis.
At present Giro provides certain elements of a current account system, Giro-cheques being much the same as bank cheques. It provides facilities for standing orders and for in-payments by non-account holders. Latterly it has been offering personal loans on a limited scale to certain account holders. It hopes to offer overdrafts to local authorities and to nationalised industries during the coming year—again, on a limited and experimental basis. Thereafter, other services will be introduced on a phased basis.
§ Mr. Tim Renton
How are overdrafts to be offered on a limited basis? Surely they are either to be offered to Giro customers or they are not. If, as my hon. Friend the Member for Bridgwater (Mr. King) has said, they are to be offered only to one customer in 200, how will Giro differentiate between those who are to get overdrafts and those who are not?
§ Mr. Carmichael
Obviously, the banks must have their methods of doing this. Many people come to me who are not able to get bank loans or credit. The money will obviously be loaned on the basis of the creditworthiness of applicants. It has already been explained by one of my hon. Friends that before getting personal loans customers must have banked their wages with Giro for a year and must have been using Giro for a year. Ultimately—I am looking several years ahead—Giro could be offering the full range of banking services as normally understood.
In addition to the services that I have mentioned, Giro sees personal overdrafts, cheque guarantee cards and business overdrafts as items for early implementation on an experimental scale. The overdrafts will be designed to cater for unforeseen and convenience overdrawings rather than to provide credit to individuals or working capital for companies. The introduction of these facilities and their timing will be dependent on discussions with the Government against the background of the requirements of monetary policy.
I can see nothing sinister or doctrinaire in this, and I see no reason to be defensive about the Post Office as a public 1265 institution extending its banking facilities. As long as the competition with other banking institutions is fair, I can see no ground for complaint.
I am surprised by the attitude of Opposition Members on two grounds. First, they habitually preach the virtues of competition in other contexts, and, secondly, their concern for the mighty banking institutions seems to be grossly overstated. To suggest that these institutions, with their vastly greater resources and numbers of account holders, need to be cosseted and protected from competition in the way that hon. Members are implying hardly seems to be complimentary to them. [Interruption.] I should not have thought that it was in Giro's interest—
§ Mr. Carmichael
The hon. Member has taken five minutes of my time already. I am not criticising him. I had hoped to have half an hour for my speech but I have only 20 minutes. I certainly do not believe that it would be in Giro's interest, in banking terms, to provoke the retaliation of these very powerful institutions with, for example, something like a price war.
I shall deal with the points made by the hon. Member for Tynemouth (Mr. Trotter) if I have time and with the question of the auditing. This is a very important point, and I have not yet had time to deal with it.
The accounts will be separate. There will be commercial negotiations with the Post Office for the use of its counters, standard rates of interest on loans and overdrafts, and self-financing for the banking operations. In extending Giro's banking services we are not doing it for the purpose of competing with the banks, though competition may well be to the benefit of their customers. We have three main reasons. First, we think that it is wrong to deprive people who prefer to use Giro of the opportunity of availing themselves of a banking service. Secondly, we think that Giro as a banker will be attractive to people who do not want to use other banks and so spread the socially desirable banking habit. Thirdly, we want to assist 1266 Giro in getting more business and thereby increasing its profitability by complementing its money transmission services.
The figures that I was speaking about earlier to the hon. Member for Bridgwater are as follows. Customer balances in the clearing banks are £25 billion. In Giro they are £147 million. The number of accounts in clearing banks is 20 million. In Giro it is 460,000. The profits of the clearing banks are £200 million. Those of Giro are £64,000. It is not a matter about which the Opposition need get too excited. It is a service which we are extending to people who so far in the main have not been involved in the banking system. It is a service complementary to the money transmission services of Giro. We believe that this is a relatively modest little Bill.
During the debate we have heard a wide range of comment about the rôle and the usefulness of Giro. Some of the comment has been helpful and constructive. Some of it has represented the substitution of prejudice for thought—that has been exemplified especially in the more recent interruptions—always disguised as reasoned interruptions which have been politely delivered.
The House has recognised that this measure is sensible and useful. It is not an extravagant measure. It is a carefully weighed proposal, tailor-made to relieve Giro of just so much of its indebtedness to enable the employment of its banking powers and the continuance of its money transmission services to be financially viable. We could have proposed a much higher level of write-off, but in our view this would not have been right. We do not want to present the Giro management or its staff with an extreme change in its fortunes. It will still have a serious challenge to meet after the capital reconstruction. Some hon. Members have argued that we are writing off too much and that the Government should not invest public dividend capital in Giro for its banking services. That, too, in our view, would have been wrong.
The Bill presents a challenge not to the big banks but to Giro. It will set a demanding target for future performance. How Giro develops its banking service will be open to scrutiny, and separate accounts will ensure this.
1267 I recommend the Bill to the House, and I hope that when it goes into Committee those who serve on the Committee will be as expert as many of the hon. Members who have spoken during this debate. I am sure that we have enough hon. Members on the Government side
§ of the House who are expert in these matters of give the Bill a very thorough scrutiny.
§ Question put, That the Bill be now read a Second time:—
§ The House divided: Ayes 288, Noes 249.1271
|Division No. 27[...]||AYES||[9.68 p.m.|
|Allaun, Frank||Ennals, David||Latham, Arthur (Paddington)|
|Anderson, Donald||Evans, Gwynfor (Carmarthen)||Leadbitter, Ted|
|Archer, Peter||Evans, loan (Aberdare)||Lee, John|
|Ashton, Joe||Ewing, Harry (Stirling)||Lestor, Miss Joan (Eton & Slough)|
|Atkins, Ronald (Preston N)||Faulds, Andrew||Lewis, Arthur (Newham N)|
|Atkinson, Norman||Fernyhough, Rt Hon E.||Lewis, Ron (Carlisle)|
|Bagier, Gordon A. T.||Fitch, Alan (Wigan)||Lipton, Marcus|
|Barnett, Rt Hon Joel (Heywood)||Fitt, Gerard (Belfast W)||Litterick, Tom|
|Bates, Alf||Flannery, Martin||Loyden, Eddie|
|Bean, R. E.||Fletcher, Raymond (Ilkeston)||Luard, Evan|
|Beith, A. J.||Fletcher, Ted (Darlington)||Lyon, Alexander (York)|
|Benn, Rt Hon Anthony Wedgwood||Foot, Rt Hon Michael||Lyons, Edward (Bradford W)|
|Bennett, Andrew (Stockport N)||Ford, Ben||Mabon, Dr J. Dickson|
|Blenkinsop, Arthur||Forrester, John||McCartney, Hugh|
|Boardman, H.||Fowler, Gerald (The Wrekin)||McElhone, Frank|
|Booth Albert||Fraser, John (Lambeth, N'w'd)||MacFarquhar, Roderick|
|Boothroyd, Miss Betty||Freeson, Reginald||McGuire, Michael (Ince)|
|Bottomley, Rt Hon Arthur||Freud, Clement||Mackenzie, Gregor|
|Boyden, James (Bish Auck)||Garrett, John (Norwich S)||Mackintosh, John P.|
|Bradley, Tom||Garrett, W. E. (Wallsend)||Maclennan, Robert|
|Bray, Or Jeremy||George, Bruce||McMillan, Tom (Glasgow C)|
|Brown, Hugh D. (Provan)||Gilbert, Dr John||McNamara, Kevin|
|Brown, Robert C. (Newcastle W)||Ginsburg, David||Madden, Max|
|Brown, Ronald (Hackney S)||Golding, John||Magee, Bryan|
|Buchan, Norman||Gould, Bryan||Mahon, Simon|
|Buchanan, Richard||Gourlay, Harry||Mallalieu. J. P. W.|
|Butler, Mrs Joyce (Wood Green)||Graham, Ted||Marks, Kenneth|
|Callaghan, Jim (Middleton & P)||Grant, George (Morpeth)||Marquand, David|
|Campbell, Ian||Grant, John, (Islington C)||Marshall, Jim (Leicester S)|
|Canavan, Dennis||Grimond, Rt Hon J.||Marshall, Jim (Leicester S)|
|Cant, R.B.||Grocott, Bruce||Maynard, Miss Joan|
|Carmichael, Nell||Hardy, Peter||Meacher, Michael|
|Carter, Ray||Harrison, Walter (Wakefield)||Mendelson, John|
|Carter-Jones, Lewis||Hayman, Mrs Helene||Mikardo, Ian|
|Cartwright, Ivor||Healey, Rt Hon Denis||Millan, Bruce|
|Cocks, Michael (Bristol S)||Heffer, Eric S.||Miller, Dr M. S. (E Kilbride)|
|Cohen, Stanley||Hooley, Frank||Miller, Mrs Millie (Ilford N)|
|Coleman, Donald||Horam, John||Molloy, William|
|Colquhoun, Mrs Maureen||Howell, Denis (B'ham, Sm H)||Morris, Alfred (Wythenshawe)|
|Conlan, Bernard||Howells, Geraint (Cardigan)||Morris, Charles R. (Openshaw)|
|Cook, Robin F. (Edin C)||Hoyle, Doug (Nelson)||Morris, Rt Hon J. (Aberavon)|
|Corbett, Robin||Huckfield, Les||Mulley, Rt Hon Frederick|
|Cox, Thomas (Tooting)||Hughes, Rt Hon C. (Anglesey)||Murray, Rt Hon Ronald King|
|Craigen, J. M. (Maryhill)||Hughes, Mark (Durham)||Newens, Stanley|
|Cronin, John||Hughes, Robert (Aberdeen N)||Noble, Mike|
|Crosland, Rt Hon Anthony||Hughes, Roy (Newport)||Oakes, Gordon|
|Cryer, Bob||Hunter, Adam||Ogden, Eric|
|Cunningham, G. (Islington S)||Irvine, Rt Hon Sir A. (Edge Hill)||O'Halloran, Michael|
|Cunningham, Dr J. (Whiteh)||Irving, Rt Hon S. (Dartford)||Orme, Rt Hon Stanley|
|Davidson, Arthur||Jackson, Colin (Brighouse)||Ovenden, John|
|Davies, Bryan (Enfield N)||Jackson, Miss Margaret (Lincoln)||Owen, Dr David|
|Davies, Denzil (Llanelli)||Janner, Greville||Padley, Walter|
|Davis, Clinton (Hackney C)||Jeger, Mrs Lena||Palmer, Arthur|
|Deakins, Eric||Jenkins, Hugh (Putney)||Pardoe, John|
|Dean, Joseph (Leeds W)||Jenkins, Rt Hon Roy (Stechford)||Park, George|
|Delargy, Hugh||John, Brynmor||Parker, John|
|Cell, Rt Hon Edmund||Johnson, James (Hull West)||Parry, Robert|
|Dempsey, James||Johnson, Walter (Derby S)||Pendry, Tom|
|Doig, Peter||Jones, Alec (Rhondda)||Penhaligon, David|
|Dormand, J. D.||Jones, Barry (East Flint)||Perry, Ernest|
|Douglas-Mann, Bruce||Jones, Dan (Burnley)||Phipps, Dr Colin|
|Duffy, A. E. P.||Judd, Frank||Prentice, Rt Hon Reg|
|Dunn, James A.||Kaufman, Gerald||Price, C. (Lewisham W)|
|Dunnett, Jack||Kelley, Richard||Price, William (Rugby)|
|Dunwoody, Mrs Gwyneth||Kerr, Russell||Radice, Giles|
|Eadie, Alex||Kilroy-Silk, Robert||Rees, Rt Hon Merlyn (Leeds S)|
|Edge, Geoff||Kinnock, Neil||Richardson, Miss Jo|
|Edwards, Robert (Wolv SE)||Lambie, David||Roberts, Albert (Normanton)|
|Ellis, John (Brigg & Scun)||Lamborn, Harry||Roberts, Gwilym (Cannock)|
|English, Michael||Lamond, James||Robertson, John (Paisley)|
|Roderick, Caerwyn||Spearing, Nigel||Walden, Brian (B'ham, L'dyw'd)|
|Rodgers, George (Chorley)||Spriggs, Leslie||Walker, Harold (Doncaster)|
|Rodgers, William (Stockton)||Stallard, A. W.||Walker, Terry (Kingswood)|
|Rooker, J. W.||Steel, David (Roxburgh)||Ward, Michael|
|Roper, John||Stewart, Rt Hon M. (Fulham)||Watkins, David|
|Rose, Paul B.||Stoddart, David||Watkinson, John|
|Ross, Stephen (Isle Of Wight)||Stott, Roger||Weetch, Ken|
|Ross, Rt Hon W. (Kilmarnock)||Strang, Gavin||Wellbeloved, James|
|Rowlands, Ted||Strauss, Rt Hon G. R.||White, Frank R. (Bury)|
|Sandelson, Neville||Summerskill, Hon Dr Shirley||White, James (Pollok)|
|Sedgemore, Brian||Swain, Thomas||Whitehead, Phillip|
|Selby, Harry||Taylor, Mrs Ann (Bolton W)||Whitlock, William|
|Shaw, Arnold (Ilford South)||Thomas, Dafydd (Merioneth)||Wigley, Dafydd|
|Sheldon, Robert (Ashton-u-Lyne)||Thomas, Jeffrey (Abertillery)||Williams, Alan (Swansea W)|
|Shore, Rt Hon Peter||Thomas, Mike (Newcastle E)||Williams, Alan Lee (Hornch'ch)|
|Short, Rt Hon E. (Newcastle C)||Thomas, Ron (Bristol NW)||Williams, W. T. (Warrington)|
|Short, Mrs Renée (Wolv NE)||Thorne, Stan (Preston South)||Wilson, Alexander (Hamilton)|
|Silkin, Rt Hon John (Deptford)||Thorpe, Rt Hon Jeremy (N Devon)||Wilson, Rt Hon H. (Huyton)|
|Silkin, Rt Hon S. C. (Dulwich)||Tierney, Sydney||Wise, Mrs Audrey|
|Sillars, James||Tinn, James||Woodall, Alec|
|Silverman, Julius||Tomlinson, John||Woof, Robert|
|Skinner, Dennis||Tuck, Raphael||Wrigglesworth, Ian|
|Small, William||Urwin, T. W.|
|Smith, Cyril (Rochdale)||Varley, Rt Hon Eric G.||TELLERS FOR THE AYES:|
|Smith, John (N Lanarkshire)||Wainwright, Edwin (Dearne V)||Mr. James Hamilton and|
|Snape, Peter||Wainwright, Richard (Colne V)||Mr. Laurie Pavitt.|
|Aitken, Jonathan||Dykes, Hugh||Jessel, Toby|
|Alison, Michael||Eden, Rt Hon Sir John||Johnson Smith, G. (E Grinstead)|
|Amery, Rt Hon Julian||Edwards, Nicholas (Pembroke)||Kaberry, Sir Donald|
|Arnold, Tom||Elliott, Sir William||Kershaw, Anthony|
|Atkins, Rt Hon H. (Spelthorne)||Emery, Peter||Kilfedder, James|
|Awdry, Daniel||Eyre, Reginald||Kimball, Marcus|
|Bain, Mrs Margaret||Farr, John||King, Evelyn (South Dorset)|
|Baker, Kenneth||Finsberg, Geoffrey||King, Tom (Bridgwater)|
|Banks, Robert||Fisher, Sir Nigel||Kitson, Sir Timothy|
|Bennett, Sir Frederic (Torbay)||Fletcher-Cooke, Charles||Knight, Mrs Jill|
|Bennett, Dr Reginald (Fareham)||Fookes, Miss Janet||Knox, David|
|Benyon, W.||Fowler, Norman (Sutton C'f'd)||Lamont, Norman|
|Berry, Hon Anthony||Fox, Marcus||Langford-Holt, Sir John|
|Bitten, John||Fry, Peter||Latham, Michael (Melton)|
|Biggs-Davison, John||Galbraith, Hon T. G. D.||Lawrence, Ivan|
|Blaker, Peter||Gardiner, George (Reigate)||Lawson, Nigel|
|Boscawen, Hon Robert||Gilmour, Rt Hon Ian (Chesham)||Lester, Jim (Beeston)|
|Bottomley, Peter||Gilmour, Sir John (East Fife)||Lewis, Kenneth (Rutland)|
|Bowden, A. (Brighton, Kemptown)||Glyn, Dr Alan||Lloyd, Ian|
|Boyson, Dr Rhodes (Brent)||Goodhart, Philip||Loveridge, John|
|Bradford, Rev Robert||Goodhew, Victor||Luce, Richard|
|Brittan, Leon||Goodlad, Alastair||McAdden, Sir Stephen|
|Brotherton, Michael||Gorst, John||MacCormick, Iain|
|Brown, Sir Edward (Bath)||Gow, Ian (Eastbourne)||McCrindle, Robert|
|Bryan, Sir Paul||Gower, Sir Raymond (Barry)||McCusker, H.|
|Buchanan-Smith, Alick||Grant, Anthony (Harrow C)||Macfarlane, Nell|
|Buck, Antony||Gray, Hamish||MacGregor, John|
|Budgen, Nick||Grieve, Percy||McNair-Wilson, M. (Newbury)|
|Bulmer, Esmond||Griffiths, Eldon||McNair-Wilson, P. (New Forest)|
|Butler, Adam (Bosworth)||Grist, Ian||Madel, David|
|Carlisle, Mark||Grylls, Michael||Marshall, Michael (Arundel)|
|Carson, John||Hall, Sir John||Marten, Neil|
|Chalker, Mrs Lynda||Hamilton, Michael (Salisbury)||Mates, Michael|
|Channon, Paul||Hampson, Dr Keith||Mather, Carol|
|Churchill, W. S.||Hannam, John||Maude, Angus|
|Clark, Alan (Plymouth, Sutton)||Harvie Anderson, Rt Hon Miss||Maudling, Rt Hon Reginald|
|Clark, William (Croydon S)||Hastings, Stephen||Mawby, Ray|
|Clarke, Kenneth (Rushcliffe)||Havers, Sir Michael||Maxwell-Hyslop, Robin|
|Clegg, Walter||Hawkins, Paul||Mayhew, Patrick|
|Cockcroft, John||Hayhoe, Barney||Meyer, Sir Anthony|
|Cooke, Robert (Bristol W)||Heath, Rt Hon Edward||Miller, Hal (Bromsgrove)|
|Cope, John||Henderson, Douglas||Miscampbell, Norman|
|Cormack, Patrick||Heseltine, Michael||Mitchell, David (Basingstoke)|
|Corrie, John||Hicks, Robert||Moate, Roger|
|Costain, A. P.||Higgins, Terence L.||Molyneaux, James|
|Crawford, Douglas||Holland, Philip||Monro, Hector|
|Critchley, Julian||Hordern, Peter||Montgomery, Fergus|
|Crouch, David||Howe, Rt Hon Sir Geoffrey||Moore, John (Croydon C)|
|Crowder, F. P.||Howell, David (Guildford)||More, Jasper (Ludlow)|
|Davies, Rt Hon J. (Knutsford)||Howell, Ralph (North Norfolk)||Morgan, Geraint|
|Dean, Paul (N Somerset)||Hunt, John||Morris, Michael (Northampton S)|
|Dodsworth, Geoffrey||Hurd, Douglas||Morrison, Hon Peter (Chester)|
|Douglas-Hamilton, Lord James||Hutchison, Michael Clark||Mudd, David|
|Drayson, Burnaby||Irvine, Bryant Godman (Rye)||Neave, Airey|
|du Cann, Rt Hon Edward||Irving, Charles (Cheltenham)||Nelson, Anthony|
|Dunlop, John||James, David||Neubert, Michael|
|Durant, Tony||Jenkin, Rt Hon P. (Wanst'd & W'df'd)||Newton, Tony|
|Normanton, Tom||Rossi, Hugh (Hornsey)||Thomas, Rt Hon P. (Hendon S)|
|Nott, John||Rost, Peter (SE Derbyshire)||Thompson, George|
|Onslow, Cranley||Royle, Sir Anthony||Townsend, Cyril D.|
|Oppenheim, Mrs Sally||Sainsbury, Tim||Trotter, Neville|
|Page, John (Harrow West)||Shaw, Giles (Pudsey)||Tugendhat, Christopher|
|Page, Rt Hon R. Graham (Crosby)||Shelton, William (Streatham)||van Straubenzee, W. R.|
|Pattie, Geoffrey||Shepherd, Colin||Vaughan, Dr Gerard|
|Percival Ian||Shersby, Michael||Viggers, Peter|
|Peyton, Rt Hon John||Silvester, Fred||Wakeham, John|
|Pink, R. Banner||Sims, Roger||Welder, David (Clitheroe)|
|Powell, Rt Hon J. Enoch||Sinclair, Sir George||Walker, Rt Hon P. (Worcester)|
|Price, David (Eastleigh)||Skeet, T. H. H.||Wall, Patrick|
|Prior, Pt Hon James||Speed, Keith||Walters, Dennis|
|Raison, Timothy||Spence, John||Warren, Kenneth|
|Rathbone, Tim||Spicer, Michael (S Worcester)||Watt, Hamish|
|Rawlinson, Rt Hon Sir Peter||Sproat, lain||Weatherill, Bernard|
|Rees, Peter (Dover & Deal)||Stainton, Keith||Wells, John|
|Rees-Davies, W. R.||Stanbrook, Ivor||Welsh, Andrew|
|Reid, George||Stanley, John||Wiggin, Jerry|
|Renton, Rt Hon Sir D. (Hunts)||Stewart, Donald (Western Isles)||Wilson, Gordon (Dundee E)|
|Renton, Tim (Mid-Sussex)||Stokes, John||Winterton, Nicholas|
|Ridley, Hon Nicholas||Stradling Thomas, J.||Wood, Rt Hon Richard|
|Ridsdale, Julian||Tapsell, Peter||Young, Sir G. (Ealing, Acton)|
|Rifkind, Malcolm||Taylor, R. (Croydon NW)|
|Rippon, Rt Hon Geoffrey||Taylor, Teddy (Cathcart)||TELLERS FOR THE NOES:|
|Roberts, Michael (Cardiff NW)||Tebbit, Norman||Mr. Spencer Le Merchant and|
|Roberts, Wyn (Conway)||Temple-Morris, Peter||Mr. Cecil Parkinson.|
|Ross, William (Londonderry)|
§ Question accordingly agreed to.
§ Bill read a Second time.
§ Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).