Sub-post Offices

HC Deb 14 December 1992 vol 216 cc214-30

5.5 am

Mr. Archy Kirkwood (Roxburgh and Berwickshire)

I am grateful for the opportunity to address the House in this short debate and apologise to the Minister for causing him some lost sleep.

The Minister for Trade (Mr. Richard Needham)

I am always awake at this time in the morning.

Mr. Kirkwood

I am pleased to hear that. The Department is obviously making the Minister earn his pay.

The subject is important and I do not apologise for detaining the House at this late hour because not just hon. Members are losing sleep tonight; owners of sub-post offices throughout the country are losing sleep as a result of the future that they face. Small businesses, particularly sub-post offices, have had a tough time in recent years, partly because of the current economic context in which they must operate. The commercial world has been under considerable financial strain recently because the recession has been deeper and has lasted much longer than any of us expected.

Moreover, rural and peripheral communities have been under stress for many reasons. Agricultural subsidies have been, are being and will he reduced. Last week's announcement about the hill livestock compensatory allowances, for instance, will badly affect the sheep rearing industry, particularly in my constituency. The uniform business rate has had an adverse effect on small businesses and rural post offices. If my hon. Friend the Member for North Cornwall (Mr. Tyler) catches your eye later, Mr. Deputy Speaker, he may expand on that problem.

There have been significant reductions in the rural transport available in agricultural communities throughout the country. The changing character of villages in the past five or 10 years, as they become dormitories of bigger satellite towns rather than self-supporting communities, has contributed to the problem. It is not a new problem but has been an increasing trend in recent years. It is now becoming critical and it is worth while spending some time looking at the current position.

Sub-post offices and their future must be considered in the context of services provided by Post Office Counters. The Government's plans are clear: they intend to privatise the concern at some stage. That in itself creates the uncertainty with which owners of small sub-post offices must contend.

I have the 10th most rural seat in the entire United Kingdom, according to the reference books on those matters. It is therefore clear to me in my constituency work that sub-post offices provide a vital element in the existing rural framework. Hon. Members on both sides of the House have seen the closure of many Crown post offices. The network has been reduced and Post Office Counters as a business has been rationalising its structure and moving away from the provision of Crown post offices towards the provision of sub-post offices on an agency basis. There is much uncertainty.

My attention, and that of other hon. Members, was drawn to the subject by the benefit uprating statement made by the Secretary of State for Social Security on 12 November. He said that he was trying to save money by trimming administrative costs, which is a laudable objective. He said that it was more expensive to pay giro payments across post office counters than to make automated credit transfers, which is true. However, the Secretary of State made a worrying comment. He said: I therefore propose to encourage more customers to accept payment of benefits directly into their bank or building society accounts. In the exchanges following his uprating statement, the Secretary of State said:

only those who have bank accounts and can be persuaded to use the facility will do so. There can be no question of claimants in rural areas who use the Post Office or whose bank is a long distance away switching from the Post Office. There is, therefore, no threat to rural sub-post offices."—[Official Report, 12 November 1992; Vol. 213, c. 1015–24.] As a result of that statement, I wrote to the Minister of State at the Department of Social Security. In an interesting reply written on 11 December, the Minister helpfully explained that the new approach that the Department was adopting to giro payments was part of the move to a citizens charter. He said that it would make more choices and services available to the public, which is laudable. He also said: Nowadays around 40 per cent. of new pensioners, and 33 per cent. of new mothers claiming Child Benefit, ask to be paid by ACT. The Minister said that the research conducted by his Department showed that more than 70 per cent. of all claimants had suitable bank or building society accounts and that 74 per cent. of those approaching pension age had had their wages paid into their bank account. The implication is clearly that new generations of claimants and pensioners will take a different approach to accepting state payments, and substantial numbers of those who became accustomed to receiving direct payments might opt for the new service offered by the Department.

The Minister's letter said that the Department was continuing a system of research and that, after the appropriate research and piloting, in 1993 the Department would introduce its new system, with new forms and information. The system would encourage people to consider the possibility of using automated credit transfer.

The letter contained two other items of significance to tonight's debate. The Minister mentioned the Government's commitment to post offices and the rural sub-post office network. He said: The Government remain committed to a nationwide network of post offices in which the rural sub-post offices will continue to play a very important part. Indeed the Post Office were consulted in advance about the proposal and I understand that they do not expect any post offices to close as a result. The Minister also said:

we do not expect a significant effect on the viability of rural sub-post offices as a result of this change. That is an interesting letter, which makes it clear that the Government are founding their arguments on a series of propositions, one of which is that no significant effect on the viability of sub-post offices is to be expected from the changes. The Minister of State clearly stated that the Post Office had been consulted and did not expect any post offices to close. The Government seem to be committed to a national network of post offices. More people have bank accounts now, and it was clear from the Minister's letter that automated credit transfer provides more choice—that is the objective set out in the citizens charter. According to the Government, it is a more secure method of payment and it will save money.

Will the change threaten the sub-post offices in any way? In my submission, it will, at least superficially. The Minister of State at the Department of Social Security does not admit to understanding the structure or finance of the post office network. There are 20,000 post offices, but only 1,000 of them are owned and run by the Post Office as Crown offices. The rest are run as agencies by sub-postmasters, who generally combine their post office activity with a retail business. Sub-postmasters undertake 70 per cent. of all business transacted across post office counters, so the vast bulk of the Post Office's work is conducted in that way.

According to the National Federation of Sub-Postmasters, services provided by the state—driving and television licences, and so on—account for more than 70 per cent. of all business. The work done for the Benefits Agency represents 34 per cent. of that work. The Government do not seem to allow for the fact that the future of rural offices is directly linked to the future of the urban offices, because the Post Office negotiates an overall fee with the Benefits Agency which it then redistributes to the sub-postmasters. The money is not distributed evenly; larger urban post offices are paid less per transaction than are the small, mainly rural, offices. The smaller offices are paid almost eight times as much. That cross-subsidy ensures that the rural network survives.

Any action which threatens the urban post offices will directly or indirectly threaten the viability of the rural network. If the size of the cake is reduced, there will be pressure to change the payment ratio and to pay urban offices more because that is likely to be seen as a way of preserving the maximum number of offices, and the rural offices will be at greatest risk of closure. If the ratio is unchanged, a reduction in benefit transactions will clearly cost rural offices more per head.

The National Federation of Sub-Postmasters takes the view that any action that reduces the urban network will threaten the viability of the rural network, making it even more difficult to maintain it. I have consulted the Post Office on this matter. It takes the view that benefits payments in post offices act as a magnet for the customers who make the private business of the sub-postmasters viable. Thirteen million people visit post offices every week in connection with benefits payments. That represents nearly half the total number of Post Office customers. If the Government succeed in encouraging a large slice of Post Office business to move to banks, the continuing viability of thousands of post offices will be undermined.

The Post Office's view contradicts the Minister's letter, which claimed that the viability of post offices would not be directly undermined. That might mean that the Post Office does not think that any of its own 1,000 Crown offices will close. Five per cent. of the network will be safe thereby, but it would help if the Government explained their statement that they do not believe that the viability of the post office will be undermined by this change.

The closure of post offices in small communities obviously has a knock-on effect on the whole local economy. If people have to travel to the nearest town to withdraw cash, it is likely that they will spend their cash there, thereby removing that cash from the local economy.

Will the change benefit the customer? The Government claim that the citizens charter, and all that it brings in its train, is motivated by a desire to offer greater convenience to the customer, as well as by savings. The Government claim that the increased use of automated credit transfer means more choice. The problem is that if increased use of ACT results in fewer post offices, that will present benefit recipients with less choice and convenience.

How are recipients in rural areas to obtain cash? They will have to travel to the nearest branch of their bank, which will nearly always be farther away than their local post office. Many of the people forced to do that will be pensioners and mothers with small children.

The reduction in the number of rural post offices comes at the same time as a rapid reduction in the number of bank branches. The latest available figures show that sub-post office closures in 1991–92 totalled 288—nearly one every working day. However, that rate was surpassed by the number of bank closures. In 1990, 304 local bank branches closed—again, one nearly every working day. In 1991, 664 closed—nearly two every working day. In the first six months of 1992, 542 bank branches closed—nearly 3.5 every working day.

Mr. Needham

If the hon. Gentleman is right about that, surely the effect will be to strengthen sub-post offices. If there are fewer banks, more business will go to them.

Mr. Kirkwood

I am talking about communities that are 20 miles from the nearest bank. Bank closures might increase the distance to 40 miles.

Mr. Needham

Exactly.

Mr. Kirkwood

The Minister can develop that point in his own speech.

Most banks envisage further cuts and closures—and most of them will occur in smaller communities. If those closures are compounded by the closure of rural post offices, customer service will be substantially cut.

Increased automated credit transfer could lead to more inconvenience in other respects. Many sub-post offices are the only shop in their community. Those businesses are already under threat, for reasons that I explained earlier. If they go bust because of increased ACT, that will hardly improve convenience. The front page of yesterday's Daily Mirror reported that the village shop in the Prime Minister's own village has gone bust, with debts of more than £150,000. Mr. and Mrs. Doug Belcher in Great Stukeley, near Huntingdon in Cambridgeshire, have quite a lot to say about the economic situation in the Prime Minister's constituency. I thought that was a very apposite report in the context of this debate. If the Prime Minister cannot save small village shops in his own constituency, what hope is there for the rest of us in the current economic climate?

Another sector to lose out in convenience terms will be mothers. At present, they collect child benefit from post offices, but in the absence of a local post office, they will be forced to switch to automated credit transfer. When that happens, there is less of a guarantee that the benefit will be used for the correct purpose. If a mother has a joint bank account or must receive the money via her partner, she could lose the valuable direct control over her child benefit that the current systems offer.

Also, a great deal of information about benefits and other Government services is distributed via local post offices. How will the Government replace that facility? Will they pay the banks to do that work, or for large-scale advertising or direct mailings to those whom they think need the information? Or will they not supply the information?

The Minister of State's letter mentioned reducing the time that people spend queueing in post offices. First research shows that 90 per cent. of post office customers are served within three minutes; secondly, and perhaps more important, many people whose benefits are paid by automated credit transfer will still have to queue to withdraw cash at their banks. According to the September issue of the Consumers Association's magazine Which?, independent research has shown that queueing times in post offices are shorter than those in banks and building societies.

How much could the Government save through the new technique? At present, 95 per cent. of benefits are paid by order book or giro through the post office and 5 per cent. by automated credit transfer. Use of ACT is increasing as more new recipients opt for it. It offers three methods of saving. First, savings can be achieved by combining the payment of different sorts of benefit that may be going to the same recipient. Secondly—I do not underrate the importance of this—the incidence of fraud can be reduced, because fewer cash order books can he stolen. I know that the DSS worries about fraud, and it is right to do so.

Thirdly, ACT payments are made four or 12 weeks in arrears rather than weekly in advance, like giro payments. That last saving is clearly made at the cost of claimants, who will lose five or 13 weeks' use of their money, depending on which system they choose. According to an article that I read on, I think, 25 September, payment in arrears is already saving the Government some £40 million a year.

Other Departments' responsibilities overlap those of the DSS: the Ministry of Agriculture, Fisheries and Food is an example. A series of Departments are involved in supporting the rural economy, and they must address a number of important questions. New uncertainties have arisen as a result of the benefit uprating statement made by the Secretary of State for Social Security. The two questions that I am asked most often are "Who is the new policy supposed to benefit—the Treasury or the recipient?" and "How will the Government fund their commitment to the national network if they are to remove some of the income that they provide?"

I think that the answer to the first question is that the Treasury will gain: a significant increase in ACT will certainly result in less choice and convenience for the customer, and in damage to rural economies in particular. Only the Government can answer the second question, the Minister of State's letter to me of 11 December states categorically: The Government remain committed to a nationwide network of post offices in which rural sub-post offices will continue to play a very important part.

Mr. Needham

Is the hon. Gentleman saying that he is against the customer's being able to use ACT if he chooses?

Mr. Kirkwood

No, I am not. I think that savings are important, and that the DSS is right to examine the possibility of developing this system of payment. I am merely saying that the Government do not seem to be giving proper consideration to the consequences of such a policy. Of course I am in favour of extending choice—and the Minister of State's research seems to suggest that that will be the trend in future. The Government must understand, however, that they cannot make such savings without striking at the potential future viability of the rural sub-post office network. That is why I felt it necessary to initiate this debate.

The Government will have to examine the situation closely. They owe the House assurances about the future viability of rural post offices. We need to hear not just that the Government are committed to such post offices but how they propose to sustain them financially.

We need assurances, too, that the research to which the Minister referred in his letter to me of 11 December will be carried out and published. The research findings must be reported to the House, and if Benefits Agency staff are setting targets for signing people up to automated credit transfer, we must be told what those targets are. We also need to know whether post offices will be able to sell national lottery tickets.

The Government must make public statements on a whole series of matters to alleviate the uncertainty among the ranks of those who run sub-post offices in particular. If they do not do that, the Post Office will find it more and more difficult to replace staff who at present are working for next to nothing, whose businesses are unprofitable and who are in effect providing a local public service. The staff are committed to the work that they do, day in, day out, often being denied the public holidays that other people can expect to enjoy. The Government owe those people a statement that will make them more confident that they have a future. Many of them are committed to the service that they provide, but they are not prepared to provide it and go bust like Mr. and Mrs. Belcher in Huntingdon. The people who provide that service and who do valuable work from which we can all benefit deserve far more support and consideration from the Government than they seem to be enjoying at present.

5.31 am

Mr. Paul Tyler (North Cornwall)

I am delighted to be able to support my hon. Friend the Member for Roxburgh and Berwickshire (Mr. Kirkwood) because he and I share an enthusiasm for community village life. As the House will know, the focal point of the modern village—the epicentre of the community—is the post office. There we celebrate our triumphs and there we mourn our losses, as my hon. Friend and I are mourning a loss today.

We are concerned at the remorseless removal of the service from many rural areas. For that reason, my colleagues in Cornwall and I undertook a comprehensive survey of the sub-post offices just two years ago, in 1990. It was the first of its kind, although since then a number of authoritative surveys by the Rural Development Commission, Action with Communities in Rural England and others have taken place.

Our survey produced some remarkable results. For example, we found that 42 per cent. of the owners of sub-post offices were thinking of giving up, frequently citing the combined effects of the uniform business rate and the poll tax as their reason. Of those who had a general retail store alongside the post office, more than half—56 per cent.—were thinking of giving up.

Since then, the uniform business rate has increased—in some cases quite dramatically. Depending on whether someone was taking over an existing business or maintaining a business, those changes could be quite devastating to the viability of the business. Throughout the following 12 months, my colleagues and I worked with the present chairman of the Post Office, Sir Bryan Nicholson, to try to persuade Ministers that the rural sub-post office was not a conventional profit-making commercial enterprise and should therefore be given special treatment. Sir Bryan thought that he had obtained a concession or exemption for very small post offices—those which were situated in private domestic residences, those which did not have major structural changes to the buildings in which they were placed, and those which did not have a general store alongside. Sadly, after months of negotiation, the then Minister at the Department of the Environment, the hon. Member for Salisbury (Mr. Key), wrote to say that he could see no case for waiving the payment of rates by rural post offices". Such was the effect of that announcement on the viability of a great number of sub-post offices that my colleagues and I decided to undertake a second survey—this time one that was more concentrated but in more depth—within my constituency of North Cornwall.

In December 1991, I visited a large number of post offices. At that time, there were 72 sub-post offices in my constituency. I suspect that my hon. Friend and I have that unusually large number in common, too, as we have scattered rural communities in our constituencies. Of those, 68 were able to give me detailed information on their circumstances and four were very dependent on seasonal holiday trade or were otherwise unable to give reliable data. Two thirds—67.6 per cent.—had a general store alongside for the hamlet, the village or the part of the town that they served. Thirty five—three quarters of those that had a general store—had the only retail facility serving the people in the area.

One must bear in mind that in that part of the country the average distance to the next retail outlet is at least two miles. Of the people served by those offices, just under 16,000 were retirement pensioners who relied on those sub-post offices to collect their pensions and a further 6,000 were obtaining various other benefits and allowances.

At that moment, the average uniform business rate was about £900. For most, it was expected to rise to £1,000. Despite the moratorium on UBR, of course, there have been rises, and since then it has increased much more. Since the original 1990 survey in that one area of Cornwall, four sub-post offices have closed, leaving their communities without that service and with considerable distances to cover. In each case, the UBR was cited as the last straw that broke the camel's back. In two other cases there have been closures for other reasons, but the majority of closures were a direct result of the totally unrealistic level of UBR.

There is also the difficult problem of community hours. The Post Office has been seeking to restrict a number of sub-post offices to community hours—that is, a reduced service on the ground that that is all that can be justified in a certain village, hamlet or suburb. The effect of that is unfortunate because it is totally unremunerative to sub-postmasters or sub-postmistresses to run a community hours service. Of course, they are under pressure from their customers to try to maintain a wider, longer and more substantial service. If they do so, they do it, in effect, at their own risk.

Obviously, neither survey involved precise scientific samples—they could not—but we have every reason to believe that they were nationally representative. Hon. Members will recognise the problem for being a general one.

I will give one or two specific examples to bring the figures up to date. In the past week or so, I have been in touch with several post offices. I refer to Higher Bore street, in the town of Bodmin, at the top end of the range in my constituency. More than 1,000 pensioners draw their weekly pension from that post office, which is a large one in comparison with others in rural areas. Even that post office has felt the dramatic impact of recent changes. Not only does it face a huge UBR bill, which will increase again next April, but it has suffered a reduction in business as a direct result of the problems to which my hon. Friend the Member for Roxburgh and Berwickshire referred. That town happens to be home to a large number of elderly people who receive a pension from the national health service—they were employed at the large local hospital —and the health authority is currently persuading all its pensioners to transfer their pensions to bank accounts so that no pensions are paid over the counter.

That gives the lie to the Minister's suggestion that it is a matter of choice. For many pensioners, there will be no choice—they will he forced to use a bank. I accept that there are banks in Bodmin, so that will not cause too many difficulties, but at the top end of my constituency the sub-postmistress at Wainhouse Corner near Bude told me that the nearest bank is 13 miles away. Who can travel such a distance without private transport? In the scattered rural community which focuses on Wainhouse Corner there are some 190 old-age pensioners.

At the lower end of my constituency, the sub-postmistress at St. Issey, Mrs. Grubb, told me that she has 87 old-age pensioners, 39 child benefit claimants, seven invalidity benefit claimants and eight people drawing unemployment benefit, which is less than the local unemployment average. I happen to know that community very well and that sub-post office offers a highly prized service. It is having to cope with difficult circumstances. The nearest town which offers a bank and other services is about six miles away. That post office also offers an additional necessary retail outlet which, if lost, would never be replaced.

What is to be done? We must try to maintain, encourage, endorse, strengthen and support the sub-post office network. The current policy of taking services away from rural post offices must be reversed. Rural services should be concentrated on such post offices and they should be properly remunerated for providing them. My hon. Friend the Member for Roxburgh and Berwickshire has already referred to services such as social security payments and I have referred to the payment of pensions from previously nationalised services and industries—hon. Members may wish to cite other examples.

We believe that other new services should be concentrated at post offices. The licensing of vehicles is now permitted at a small number of rural sub-post offices and my hon. Friend and I know of no reason why that service should not he extended to other such post offices. Those post offices also seem the natural place for insurance services to be offered through a national network. There is no reason why the Giro system should not be used as the national back-up service for the provision of insurance advice and agency services in villages. In rural areas the operation of the national lottery, should it be introduced —there are differing views about that—should rest exclusively and properly with the sub-post offices.

The principal issue, and the one on which we look to the Government for leadership, is relief from the UBR. There is no logic in imposing the UBR on that part of the premises which is used exclusively for post office purposes. No one can pretend that a rural office, particularly if it only operates community hours, represents a commercial service which makes a profit. Those post offices provide an uncommercial, social service. It would be simple to isolate that part of the premises which is used for the sub-post office and to exempt it from the UBR.

Alongside that UBR, an unrealistic valuation is often made of the retail business which sits cheek by jowl with the post office. The UBR valuation system is extraordinarily anachronistic and takes little account of the commercial viability of a business. The calculation of an area is a false criterion on which to base a financial calculation. Worst of all in an area such as the south-west, no regard is paid to seasonal variations.

Anyone who lives in a village—I am not sure whether the Minister does—must know that if a sub-post office network did not exist the Government would have to invent one to provide the facilities, services and information back-up that any sensible Government must provide for its citizens, whether there is a citizens charter or not. Although the majority of Conservative Members tend to represent cities and suburban constituencies, they must understand that rural areas deserve and need this network of services.

It is unusual for us to be working at 5.45 am, but for many people in the Post Office—in Crown offices, sorting offices, on the road or in sub-post offices—it is a normal working hour, especially in the run-up to Christmas. It is entirely appropriate, therefore, that we should be debating the problems faced by this great national public service. We should take this opportunity to pay tribute to the service, which all too often we take for granted. As someone said to me outside the village post office in St. Issey, near Wadebridge and the Camel estuary in the most beautiful constituency in the country, "If we take it for granted, it will be taken away."

5.46 am

Mr. Jim Cousins (Newcastle upon Tyne, Central)

I congratulate the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) on choosing this topic. It was a pity that we were not given the benefit of a little tour of Roxburgh and Berwickshire. I should have enjoyed a trip around the Whiteadder and Blackadder, which might have been appropriate to this hour of the morning.

The problems to which the hon. Members for Roxburgh and Berwickshire and for North Cornwall (Mr. Tyler) drew attention are not confined to rural areas. It is worth reminding ourselves that the subject chosen for the debate was simply sub-post offices, not exclusively rural sub-post offices. Many of the problems to which they drew attention—the uniform business rate, the training, recruitment and remuneration of sub-postmasters and sub-postmistresses and floating the so-called community post office, with its limited hours and equally limited remuneration—apply to urban areas. I take slight issue with the hon. Member for Roxburgh and Berwickshire, because he should not assume that all urban post offices are large. Many are small and offer a village-style service.

We should bear it in mind that we are debating a substantial business. The sub-post office network—I exclude the Crown post offices—has some 19,000 or 20,000 outlets. It is as extensive as the entire network of banks and building societies combined. It employs some 40,000 people in addition to sub-postmasters and sub-postmistresses. It is a substantial employer. Some 7 per cent. of the business of Post Office Counters Limited is done through the sub-post office network.

The hon. Members who have spoken have correctly pointed out that the Government have no choice about that network of services, if they are to take their pledge of a universal post office service obligation seriously. While there will always remain a proportion of benefit users who choose to receive their benefits in cash, the Government must be committed to the present network or something very much like it. It would be nice if the Minister would assure us that that is indeed the case—that we can expect a network of approximately the present size to be a permanent feature of the Post Office Counters system.

We must now explore some of the difficulties caused by the Government's policy towards the Post Office, and the limitations on the development of post office services that make the object far more difficult to achieve.

I shall refer briefly to payments of benefits—a matter which perhaps occupied too much of the two speeches that we have heard so far. Because of the limitations of technology, benefit customers are faced with the choice of receiving their payments either automatically through the bank or in cash through a post office. We should look forward to a time when people will be able to choose to have a proportion of their benefit—which they will be able to determine—paid in cash, and the rest paid through the bank. Through the introduction of smart cards—and perhaps the installation of smart card points in the Post Office Counters network—that could be achieved, and it would mean full flexibility and real freedom of choice between payment in cash and payment through the bank. That is one of the ways in which we could seek to develop the Post Office Counters network services.

The hon. Members for Roxburgh and Berwickshire and for North Cornwall were right to refer to the fact that the internal finances of the Post Office provide for a substantial cross-subsidy to the sub-post office network—about £25 million a year. In an article in the Financial Times last week the chief executive of the Post Office said that under a system of pure market forces there would be a substantial reduction in the Post Office Counters network, especially in the number of small sub-post offices. The internal cross-subsidy in the present financing arrangements floats the present large network of sub-post offices.

It would be of advantage if the Government would assure us that, whatever proposals they may make for the Post Office, that necessary cross-subsidy will still be available to the Post Office—or to whatever organisation is operating post office services. If the future finances of the Post Office were structured so as to make that cross-subsidy impossible, there would be a serious problem, leading to a collapse of the network. We would all be most concerned about that.

We should look towards a considerable development of the business potential locked up in the Post Office Counters network. With an extension of legal powers—or even without one—it would be possible to introduce a new range of services. The national lottery has been mentioned, and the sale of various tickets. It would be nice to think that if the Government are shortly to arrange the sale of a further tranche of British Telecom shares, some of them could be marketed through the network, perhaps on an experimental basis. If the Government truly believe in share-owning democracy, it would be perfectly appropriate for them to use the Post Office Counters network as a method by which to extend dealing in shares.

It would also be helpful if modern telecommunication points were opened in post offices so that electronic mail systems and fax systems were widely available in rural and urban areas that might not otherwise benefit from them. Expensive services, now only available to people in their homes or through a limited commercial network, could be available universally.

The Post Office Users National Council has expressed grave concern about the future of the sub-post office network. It has referred to rumours of another 1,000 closures of post offices in addition to the previous 1,000 closures of sub-post offices which we have seen over the past four years. That would be grave news indeed.

We are all concerned about the sudden hike in the Post Office's external financing limit projected over the next three years in which, not content with having taken a profit—that may not be quite what it is, but let us call it a profit—of £750 million out of the Post Office over the past seven years, the Government now propose to take £500 million out of the Post Office over the next three years. There is no doubt that meeting such a stiff external financing limit will put many of the current financial arrangements now operated by the Post Office under considerable strain. It is important to have an assurance that, however that external financing limit is to be achieved, it will not be achieved at the price of a collapse or of a substantial reduction in the network of Post Office Counters services.

The investment programme that the Post Office proposes, in extending modern automatic cash-handling systems to about one third of the Post Office Counters network, to be achieved over three years, again would greatly increase the scope of the business that sub-post offices could undertake and would greatly add to their potential as deliverers of financial insurance services along the lines described by the hon. Member for North Cornwall.

All these are matters which could be seriously put at risk by privatisation. It could lead to a disintegration of the organisation of the Post Office. It could lead to a further raising of the external financing limit through the taking of profit and it could also put at risk the cross-subsidy system inside the Post Office's financing arrangements which floats the present substantial network of sub-post offices.

All of us want not simply to retain the existing network of Post Office Counters and the 19,000 sub-post offices, but to use the network of 19,000 contact points for the community greatly to expand the range of services, both public and private, that are provided. We look forward to the Minister's reply on that point.

5.58 am

The Minister for Trade (Mr. Richard Needham)

I also congratulate the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) on his success in getting the topic debated. If I do not congratulate him on the time, I am sure that he will understand. The hon. Member for North Cornwall (Mr. Tyler) said that we were undertaking work. I am not sure that all those who work in sub-post offices would agree that listening to one another is actually work.

To fill in the hon. Member for North Cornwall on my own background, I tell him that I was brought up in Budock Water, which is not far from his constituency. I moved to Broadwindsor, then to Newton Poppleford and then to Somerford Keynes, so I have some vague idea about village life, if not in the constituency of Roxburgh and Berwickshire.

The hon. Member for North Cornwall referred to the very smallest post offices and the uniform business rate. As I understand it, the Inland Revenue has already agreed to exempt those post offices. I listened to the hon. Member very closely and with considerable interest—

Mr. Tyler

indicated dissent.

Mr. Needham

It is no good the hon. Gentleman shaking his head; that is a fact. I listened to his comments about the UBR with great interest. There was no mention in the manifesto of the Liberal Democrats or of the Labour party of a commitment to a nationwide network of post offices.

The policy of the hon. Member for North Cornwall may have changed; the Liberal Democrat change their policies fairly regularly. However, at the time of the Liberal Democrats' manifesto, their policy was for an annual revaluation. If anything is going to undermine and damage the small business sector, not including the smallest post offices, it is the concept of allowing Labour or Liberal Democrat-controlled councils to set whatever UBR they like. I can think of nothing more horrific for the consequences to local businesses than to allow the UBR to be determined by local councils.

One need only consider the wish to free up the UBR—and that was in the Liberal Democrat manifesto—to allow it to be settled by local councils to realise the effect and damage that that would have on local post offices and other small businesses.

Mr. Tyler

I have fought a case on behalf of a small post office against the UBR valuation. It is clear that the Minister's statement that exemption has been conceded by the Revenue is simply not true. It is impossible for many post offices, even for those that fall within the qualification of being in a domestic premises, without a major structural change or a general store alongside, to obtain an exemption. The security needs of a post office require that there is at least a permanent allocation of space to a post office counter. In those circumstances, the concession is totally meaningless.

Mr. Needham

The hon. Gentleman is obviously well aware of the fact that the UBR is the responsibility of the Department of the Environment. Nevertheless, as I understand it, the Revenue has agreed to exempt the very smallest part-time post offices; I can write to the hon. Gentleman about that. However, that does not alter the fact that the hon. Gentleman has not responded to my point about his policy on the UBR as a whole, the annual revaluation and the effect of allowing local authorities to determine the UBR.

Before the hon. Member for North Cornwall responds to that point, he had better be careful about this. He and I know that there would be a substantial increase in the UBR. It would not be uniform; instead, it would be a business rate to small business people. That is where the charge would lie for the spending plans which the hon. Member for North Cornwall and his colleagues, as they constantly remind us, would like to increase.

Mr. Tyler

The Minister is very gracious to give way a second time and I am grateful to him. If he has read our manifesto—as he obviously has—and our detailed policy documents, he will have read that we support the complete exemption of sub-post offices from UBR as a social service to the community. From his careful reading of our policy papers, the Minister will also recognise that we are in favour of more generous central Government support to enable the UBR to be paid at a lower level.

Mr. Needham

The hon. Gentleman is in favour of an even higher public sector borrowing requirement than the Labour party. Furthermore, if the hon. Gentleman wants to find exemptions for sub-post offices, the money will have to come from other business premises. Therefore, the point made by the hon. Member for Roxburgh and Berwickshire about the shop in the constituency of my right hon. Friend the Prime Minister—which, by the way, is not a post office—would have made the position even more difficult. However, at this hour of the morning, I do not want to antagonise or provoke anyone. Nothing could be further from my mind.

There are many areas of agreement on the matter and I will try to reassure hon. Members because we all accept the need for as much of a nationwide network of urban and rural post offices as we can achieve. Sub-post offices are the backbone of the counters network and the 19,000 to 20,000 offices serve a large majority of the 28 million customers who use counters every week. As I said, we made a commitment in our manifesto to the nationwide network. Such a commitment was not so clearly stated in the manifestos of the Liberal Democrat party and the Labour party.

Whatever solution we adopt for the Post Office and its constituent parts, whether in the public or private sector, we will ensure that the nationwide network is secure. That does not mean that we can guarantee that every post office will stay open for ever. Much as I should prefer that to be the case, for personal reasons and reasons of upbringing, the precise number and location of offices change with the shift in population and the changes in the requirements of clients and customers. We have accepted that the question of choice and what people are entitled to is important. But our commitment, as stated in the Post Office legislation, is to maintain a readily accessible network which fully satisfies the social, industrial and commercial needs of the United Kingdom.

The main concern of the hon. Member for North Cornwall—I accept that his concern is genuine—is in the future of the rural sub-post office. There are more than 8,000 rural sub-post offices. As the hon. Gentleman correctly pointed out, the sub-post offices in far-flung rural areas—and, I am glad to say, the one which I represent —still maintain a vital role not only in paying benefits but as a point of local contact. Rural sub-post offices are also crucial places to which people can go to shop when they do not have transport. Many sub-postmasters provide an essential part of the economic infrastructure of local business communities. As we all agree, many of them run the only shop in the village.

The Post Office fully accepts its responsibility to those communities. Changes in rural life, transport patterns and so on have, inevitably, made a number of village shops uneconomic. The shop in my own village became uneconomic. The economic viability of some village shops depends to some extent on how far the village is from the nearest town. Regrettably, some sub-post offices have closed as a result.

Hon. Members have said that the Post Office, together with the Rural Development Commission and other such bodies, is giving advice on display and lay-out and how to diversify in imaginative ways to make sub-post offices more viable. The hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) mentioned fax machines. Fax machines as well as estate agencies, dry cleaning facilities, tourist information offices or whatever is appropriate are being installed in sub-post offices. Recently, Post Office Counters Ltd, together with the Rural Development Commission, ran a series of training seminars to serve as an induction package for new village sub-postmasters and sub-postmistresses. The hon. Gentleman raised some interesting ideas. At a time when the matter is under review, I am sure that his ideas will be considered.

Recently, Post Office Counters have been inventive in finding ways to keep facilities running in areas in which the sub-postmaster has retired and we have not been able to find a replacement. In the past four years, the Post Office has opened 1,600 community offices which operate limited hours. There is such an office in the Swan with Two Necks which is in Pendleton in Lancashire, in a Portakabin in Whitson in the constituency of Roxburgh and Berwickshire and in various annexes to village halls. When the village post office in Croglin, Cumbria closed, it was difficult to find a replacement. Eventually, a community office was placed in the local toy manufacturer. Croglin Toys agreed to operate a community post office from the front of the factory for two days a week.

That spirit of innovation is necessary if we are to keep the services going. We all agree that the services are highly valued by local communities, but their viability is marginal unless they are combined with other local facilities. If the Post Office, local authorities and other providers of public services continue to act in that spirit, I am sure that this valuable part of our rural heritage will be saved. I make the point again and again that we are committed to a nation wide network. The cross-subsidy from the larger post offices to the smaller units will and should continue. Of course, that is right.

The point about automated credit transfer is an important element in the debate. The hon. Member for Roxburgh and Berwickshire has expressed his anxiety about it and continues to do so whatever letters or replies he receives. I am sure that he will continue to express his anxiety about it long after I have sat down. As he says, ACT has been available for the payment of pension and child benefit—the majority of all benefit transactions—for many years. There is nothing new in that. It has recently been made available for other benefits such as family credit and disability living allowance. We were right in the citizens charter to commit ourselves to extending that method of payment to recipients of other benefits, if they wish.

There is nothing new about encouraging recipients to use ACT. We do not expect to see any sudden decline in the use of sub-post offices for the collection of benefits. The hon. Gentleman quoted the letter of my right hon. Friend the Minister for Social Security and Disabled People to him. My right hon. Friend said that the Post Office had said that it did not expect any decline either. The hon. Gentleman also quoted the National Federation of Sub-Postmasters. However, we have been told by the Post Office that no decline in the use of sub-post offices for the collection of benefits is expected.

The number of people who ask to be paid by automated credit transfer has risen slowly and steadily over the years. I shall deal with the hon. Gentleman's concerns. He sets the fox off; then he shoots the fox; then he sets the fox running again. I think that I am right in saying that the number of new beneficiaries who come into the pensions system each year is some 15 per cent. The hon. Gentleman reported from my right hon. Friend's letter that 70 per cent. already have a bank account. So clearly the upward trend will continue and people will want to make use of the ACT facility.

I could not be clear from what the hon. Member for Roxburgh and Berwickshire said whether he was against people being allowed to use the facility, against encouraging them to use it, or did not want the Post Office to encourage them to use it. We are simply making more widely available an option which is secure for the client, cost efficient and, as the hon. Gentleman fairly admitted, involves a saving for the public purse. But we are not forcing people to use bank accounts if they do not wish to do so. We are not giving them a financial incentive to switch from one method to the other.

As the hon. Gentleman said, people may opt for ACT. He went on correctly to point out that bank branches are closing. If bank branches are closing everywhere, there will surely be more business about for the rural or urban sub-post offices. The giro may be a more effective way of doing things. I do not know whether my wife would be particularly pleased to have her personal dealings with the Post Office divulged in the House of Commons at 13 minutes past six in the morning, but her view is clear. She does not want to cash her child benefit through the bank. She certainly does not want to put it through any joint bank account with me. How right she is in that respect.

So there will always be people who, for good and sound personal reasons, will want to continue to use the system as it is. But, equally, there will be others who will want to switch to ACT. We must then consider the total volume of business at post offices. I also accept that many people value highly their regular visits to the post office to collect their pension or child benefit. As the hon. Member for Roxburgh and Berwickshire rightly said, in rural communities the nearest bank may be many miles away. So I have no doubt that for those reasons alone people will continue to prefer the rural post office to the bank. I repeat that we are not taking that option away.

The hon. Member for Roxburgh and Berwickshire asked what forms of encouragement my right hon. Friend the Secretary of State for Social Security intends to use to increase the uptake of ACT. I understand that he will simply improve information to benefit recipients about the availability and the advantages of ACT, and he will make it easier for new and existing customers to use that method for all types of benefit in due course, but no pensioner is being forced to accept it.

The issue needs to be put into perspective. The number of people—mainly pensioners—claiming benefit has increased at a greater rate in the past few years than the rate of take-up of automated payment mechanisms. During the past few years the Post Office has performed an increasing number of transactions on behalf of the Department of Social Security, in spite of the gradual increase in automated payments. By 1994–95, after the encouragement that the DSS will give to claimants to have their payments made by ACT, the DSS expects that the volume of payments made through post offices will be about the same as it is today.

I understand the concern of the hon. Member for Roxburgh and Berwickshire, but he is considering the matter purely on the basis of those who decide to move to ACT, without taking into account the increasing number of new claimants. The evidence shows that even if more people move gradually to ACT, with a 15 per cent. addition each year, the DSS does not expect the volume of payments to decrease. That is why the Post Office made that point. That is the essence of this debate and it allows the hon. Gentleman to have his cake and eat it, which is what he has been asking for.

Mr. Kirkwood

I have listened carefully to the Minister and I understand his argument. However, demographic changes come and go. If research started to show that the financial viability of post offices would be affected substantially, would the Government accept that it was a part of their responsibility to make good that loss?

Mr. Needham

I do not accept the premise. The hon. Gentleman is again setting out his fox to shoot it when—judging by the evidence that the Government have—what is running is not a runner. The hon. Member for Newcastle upon Tyne, Central mentioned new business. However we look at the issue in the long term, those of us who live in country areas have to accept that the rural sub-post office network has declined. That is why we have been discussing the 1,600 new community post offices, which have arrived because it has been impossible to keep village shops open.

In time, we shall have to consider what to do. As the hon. Gentleman rightly said, new facilities are coming in, including the smart card. In many areas of Europe all benefits are paid automatically, but we do not have that system; we do not want it and we will not have it. I suspect that demography will not eat away at the problem, but improvements in information technology, greater mobility and greater wealth will. We therefore come to the key issue of new business, which will offer the way forward.

The Post Office has had to face numerous apparently grave threats to its business, and we have mentioned the increased use of direct debits, and the wider availability of stamps in non-post office premises. Post Office Counters' turnover has grown steadily despite the predictions. During the past five years, automated credit transfer for benefit payments has taken root, but Post Office Counters' turnover has increased every year and is one third higher than it was five years ago. That is the most important point. It has happened partly because the Post Office has taken up new business and entered new markets. The Crown offices, for example, have successfully expanded into retailing a wide range of stationery and greeting cards, imaginatively building on their core business. We have also recently announced that the Post Office will be granted powers to bid for work on the national lottery. That could become a valuable new source of earnings for the Post Office, and particularly useful to sub-offices as a way of getting customers through the door.

I hope that I have dealt with the main points raised in the debate. The hon. Member for Newcastle upon Tyne, Central asked about the external financing limit. In recent years, the Post Office has been successful in increasing its turnover, service levels and returns. The contribution that it makes to the Government must take account of a range of factors, including the interests of customers and taxpayers. There is great pressure on the public sector borrowing requirement and a return of less than 4 per cent. of turnover is not over-exacting, given the enormous size and importance of the business.

To sum up, I wish to make two things clear. First, the Government and the Post Office value highly the service given by sub-postmasters throughout the country, in both urban and rural areas. That includes rural, small community and larger urban offices, all of which have a vital role to play. Secondly, we are committed to maintaining a nationwide network of offices, whether or not the Post Office remains in public ownership.

I am grateful to the hon. Member for Roxburgh and Berwickshire for giving me an opportunity to put the record straight and for a debate which, even at this hour of the morning, I hope sub-postmasters throughout the country will have found useful and reassuring.