SUBSIDY FOR PUBLIC POST OFFICES

HC Deb 18 April 2000 vol 348 cc837-97

'.—The Secretary of State may by order make a scheme for the making of payments for the purpose of—

1. (a) assisting in the provision of public post offices or public post offices of a particular description, or
2. (b) assisting in the provision of services to be provided from public post offices or public post offices of a particular description.

(2) A scheme under this section which provides for the making of payments for a purpose falling within subsection (1)(b) shall ensure that no such payments may be made unless the person deciding whether to make the payments considers that the provision of the services concerned from public post offices or public post offices of a particular description would assist in the provision of public post offices or (as the case may be) public post offices of that description.

(3) Payments under a scheme under this section shall be made by the Secretary of State or by another person out of money provided by the Secretary of State.

(4) A scheme under this section shall specify—

1. (a) the descriptions of payments which may be made under the scheme,
2. (b) the descriptions of persons to whom such payments may be made,
3. (c) the person by whom such payments may be made,
4. (d) criteria to which that person is to have regard in deciding whether to make such payments, and
5. (e) the amounts of such payments or the basis on which such amounts are to be calculated.

(5) A scheme under this section may, in particular, provide for—

1. (a) payments under the scheme to be made subject to conditions specified in or determined under the scheme (including conditions as to repayment),
2. (b) the delegation of functions exercisable by virtue of the scheme (including the delegation of any discretion conferred by virtue of the scheme),
3. (c) the modification of the functions of a body established by an enactment, or the functions of the holder of an office created by an enactment, for the purpose of enabling the person concerned to exercise any functions conferred on that person by virtue of the scheme,
4. (d) the payment by the Secretary of State of fees to any person in respect of functions exercised by that person by virtue of the scheme.

(6) The power to make a scheme under this section shall not be exercised without the consent of the Treasury.'.—[Mr. Byers.]

Brought up, and read the First time.

3.54 pm

The Secretary of State for Trade and Industry (Mr. Stephen Byers)

I beg to move, That the clause be read a Second time.

Madam Speaker

With this it will be convenient to discuss the following: Amendment (a) to the proposed new clause, in line 1, leave out "may" and insert "shall".

Amendment (b) to the proposed new clause, in line 35, at end add— '(7) The Secretary of State shall make an order under this section within three months of the commencement of this Act'. Amendment No. 71, in clause 41, page 27, line 14, at end insert—

'and— (c) their financial viability'. Government amendments Nos. 34, 42, 44 and 46.

Mr. Byers

The hon. Member for West Derbyshire (Mr. McLoughlin) was right to say that on Second Reading I said that we wished to introduce a clause to provide the opportunity for a subsidy to be made available to the post office network. I said that I hoped that we would be able to do that in Committee, but we did not table a new clause in Committee, and I apologise to the House for the fact that we did not have an opportunity to do so.

I took the decision—some hon. Members may criticise me for it—that a new clause providing a subsidy would be so significant that it would be better for it to be debated on Report by the whole House. More hon. Members will be able to debate the matter on Report than would have been able to debate it in Committee. I was trying to provide as many opportunities to participate in the debate to as many hon. Members as possible. That is why the new clause is being debated on Report.

Mr. Patrick McLoughlin (West Derbyshire)

I am grateful to the Secretary of State for being so open and honest with the House in saying that this debate should be an opportunity for the whole House to discuss the provision. However, as the matter was so well thought out and so much in the Department's mind, will he just remind the House when the Government tabled the new clause, so that we could consider it properly? Was it tabled in good time to allow us to consider it, or not until after last week's Opposition day debate, which put more pressure on him?

Mr. Byers

Considerable pressure was, of course, caused by last week's half-day Opposition debate, but that pressure was perhaps not so great as that caused by the 3 million signature petition organised by the sub-postmasters, or the very effective lobby of Parliament that they conducted last Wednesday. That probably brought far more pressure to bear on the Government than did a three-hour debate on these important issues.

As the hon. Gentleman will know, new clause 1 was tabled with all the other Government new clauses and amendments. It was prepared earlier, but, as is often the custom, the Government tabled all the new clauses and amendments in one batch. We have consistently dealt with this matter in that manner.

I shall now deal with the substance of new clause 1.

Mr. Peter Lilley (Hitchin and Harpenden)

Is the right hon. Gentleman saying that he did not table new clause 1 before Parliament debated the matter because he thinks that parliamentary debates are so irrelevant and ineffective that Parliament should be ill informed and not consider the relevant clauses when it considers the matter—as it did last week, both in Westminster Hall and in this place?

Mr. Byers

No. The right hon. Gentleman, perhaps deliberately, misunderstands the point that I am trying to make. I felt that it was more appropriate that the whole House should have the opportunity of debating a subsidy for the post office network on Report, rather than my reserving the debate for hon. Members who happened to serve on the Standing Committee. Many hon. Members who are now in the Chamber did not serve on that Committee, but may wish to participate in the debate. I feel that they should have the opportunity to do so.

Mr. Simon Burns (West Chelmsford)

The Secretary of State is saying that Parliament should have the opportunity to debate this important issue. Although he may rely on that reason, he made a commitment on Second Reading. He may have decided just after Second Reading that the matter was too important for the Committee alone to deal with, but he has had plenty of time since then to table the new clause. Why did he not, as my hon. Friend the Member for West Derbyshire (Mr. McLoughlin) said, table the new clause before last Wednesday, when the House had the opportunity to debate the matter both in Westminster Hall and on the Floor of the House? The House could have fully debated the issue twice—both in last week's debates and, today, on Report—thereby having two bites at the cherry.

Mr. Byers

The record will show that my comment on Second Reading came in reply to a very specific question from the hon. Member for West Dorset (Mr. Letwin), who asked whether the Bill would provide for a subsidy. I answered as truthfully as I could. I said that we had hoped that we would be able to table a new clause to that effect.

I think that the hon. Member for West Dorset would agree that last week's debates in Westminster Hall and in the House were on the broad principles of the support that should be given to the post office network, not on the detail that we are now considering on new clause 1. I think that it would be far better for the House if we were now to consider the detail of the new clause, rather than wondering whether it would have been better to deal with that detail in Committee, in Westminster Hall or in last week's Opposition day debate.

Mr. John Bercow (Buckingham)

Will the right hon. Gentleman give way?

Mr. Byers

Not on that point, as I should like to make some progress. The hon. Gentleman will undoubtedly try to catch the eye of the occupant of the Chair in this important debate.

4 pm

New clause 1 is significant. As I said in the House on 12 April: The power is a safeguard, intended to keep open the option of financial assistance.—[Official Report, 12 April 2000; Vol. 348, c. 385.] We feel that it is appropriate to have such a safeguard, for two reasons. First, it is not every year that the House has the opportunity to debate a Bill on postal services, so it seems appropriate that we should use the opportunity to provide the Secretary of State for Trade and Industry with the power to establish the type of scheme outlined in new clause 1.

Secondly, there is concern among sub-postmasters and mistresses in rural communities and inner-city areas about the effect of moving to a system of automated credit transfer between 2003 and 2005. The Government acknowledge the concerns that exist following the adoption of that policy. It may be that, at some future date, it would be appropriate to establish such a scheme, and that is what new clause 1 seeks to do.

Mr. David Prior (North Norfolk)

If the Secretary of State were considering buying a post office and he was told that the Government were keeping open the option of providing financial assistance at some unspecified date in the future, would that give him the confidence that he would need before going ahead?

Mr. Byers

Yes, it would. For the first time, we will have in statute the power for the Secretary of State to make such payments. At the moment, the Post Office has a degree of social responsibility and is prepared to make a subsidy available to the post office network. It has done so in the recent past. We are giving the Post Office a new commercial freedom. Within that context, it may feel that it does not have the responsibility to meet social obligations, and that it would rather the Government, or some other agency, had that power or responsibility.

New clause 1 supports the clear distinction that is being made between the commercial role of the Post Office in future and the social and wider role that the post office network can play. That raises the important issue of who should fund the post office network to meet those social obligations, or any new services that the Government may feel the network is suited to provide. Our vision for the post office network in the future is that it begins to broaden its role, responsibilities and functions. I know that postmasters and mistresses are keen to develop a new role for the post office network, and perhaps a subsidy could be the appropriate way of supporting such a role in the future.

Mr. David Chidgey (Eastleigh)

Does the Secretary of State recall giving a commitment that it was the Government's intention to continue to maintain a national network of sub-post offices? Does the right hon. Gentleman recognise that many post offices—particularly in my constituency—depend on the service we are discussing, and that 30 to 40 per cent. of their work is wrapped up in it? Does he envisage a subsidy of that level to maintain the network?

Mr. Byers

We will want to discuss with the various interested parties the nature of any scheme that might be introduced. I know that there is concern about the implications of ACT. That is why we have said clearly that pensioners and benefit recipients who now get cash over the counter at post offices will continue to have that choice—not just until 2003, or between then and 2005, but thereafter.

It is for postmasters and mistresses to say to people that they must make it clear that they want to continue to have their benefit or pension paid in cash at the post office, and that that choice will remain. Many are doing that. There is real potential for people to maintain a high level of income and support for the post office network and the way in which benefits are paid.

Mr. Bercow

I am grateful to the right hon. Gentleman for giving way, because he is a trifle opaque in his presentation of the argument. Who is the mysterious person referred to in new clause 1(2)? Will the Secretary of State confirm, notwithstanding what he said in the Opposition day debate last week, that the clause is purely permissive, not prescriptive, and offers no guarantee to beleaguered post offices in Stewkley, Marsh Gibbon and elsewhere in my constituency? Will he therefore tell the House now whether any regulations flowing from the new clause will be subject to the negative or the affirmative procedure?

Mr. Byers

The hon. Gentleman is being slightly opaque in raising some of those issues. My understanding is that the regulations will be dealt with under the affirmative procedure, and I hope that I will be able to confirm that point in due course. We will be able to have a useful debate and constructive dialogue about the important issues concerned. The scheme will be permissive and there will be no obligation to introduce it. However, when the power to introduce such schemes lies on the statute book, I have no doubt that the Secretary of State will be under considerable pressure between now and 2003 to introduce one. It is appropriate that such pressure should be brought to bear, and whoever holds the office will no doubt respond positively to those developments.

Mr. Ieuan Wyn Jones (Ynys Môn)

Does the Secretary of State understand the concerns of sub-post office owners who are deciding whether to expand and invest or sell up and retire? On the one hand, they have the certainty that in 2003 they will lose a substantial proportion of what they are paid for the service they provide in making pension and Benefits Agency payments. On the other hand, they have the uncertainty about whether a subsidy will be paid. What advice would the Secretary of State give to people in that quandary?

Mr. Byers

For the first time we are providing a power for the Secretary of State to introduce a scheme. We will want to discuss the nature of any such scheme with interested parties, including representatives of sub-postmasters and mistresses. We will debate later whether it would be appropriate to provide that any such scheme should be introduced within a particular period; I do not think that it would. However, I recognise that arguments will be made in favour of establishing a scheme, and after the Bill has received Royal Assent, we will want to work out the details of such a scheme with interested parties.

I should stress that in the interim the Post Office will still have the power to provide support for the network, and that support is given in different ways. For example, Government support is provided to ensure that the Horizon system is put in place.

Mr. Tony Baldry (Banbury)

The Secretary of State is in danger of undermining the Committee system, because hon. Members will not gaily volunteer to serve assiduously on Committees if Ministers keep the most interesting clauses for Report stage.

The right hon. Gentleman keeps referring to discussions with interested parties, but those discussions will be pointless unless people have some idea of what sums might be allocated to the schemes. The new clause specifically states that The power to make a scheme … shall not be exercised without the consent of the Treasury. Therefore, the Secretary of State will have to make a bid for a scheme under a public expenditure survey line. Will the Secretary of State confirm that the money will come from the Department of Trade and Industry PES line? When would such a bid be put in and what sums would he envisage bidding for? If he is opaque about that, the suspicion will arise that the new clause is a smokescreen to buy off sub-postmasters and mistresses.

Mr. Byers

The hon. Gentleman shows that he has been out of ministerial office for several years, because PES lines no longer exist. We now live in the world of DEL and AME—the departmental expenditure limit and annually managed expenditure. The scheme would come under DEL, but all Government expenditure is controlled, in one way or another, by the Treasury. The right hon. Member for Hitchin and Harpenden (Mr. Lilley) certainly knows that. That is the situation in which we exist. When a scheme such as this is being established, it is not unusual to specify in legislation that any expenditure linked with it would be subject to Treasury approval.

Mr. David Drew (Stroud)

My right hon. Friend is being very generous in giving way; he appreciates how important this matter is for many hon. Members. I do not want to press him on the detail, as I know that the scheme needs proper negotiation and consultation, but it is clear that there will have to be a test of the viability of bringing sub-post offices into the scheme. I am especially interested in those offices where sub-postmasters and mistresses receive a salary because of the difficulties involved in a pro rata return. What advantage or disadvantage will the new scheme bring for those people?

Mr. Byers

My hon. Friend has been a strong campaigner for the post office network, both in his constituency and more widely. The services offered by a post office and its role in its community will be among the key factors that we will want to take into account when considering whether a subsidy is appropriate. Such matters would need to be considered in the context of any scheme that is brought forward.

For the benefit of the House, and in response to the earlier question from the hon. Member for Buckingham (Mr. Bercow), I can confirm that orders under new clause I will be made under the affirmative procedure. We will therefore be able to engage in the debate to which the hon. Gentleman so looks forward.

Mr. David Heath (Somerton and Frome)

I welcome the fact that the Secretary of State is moving in the right direction, as he has recognised that a problem exists. He has said that he can give no time scale for the subsidy, and that he cannot say what amount of money will be involved, but can he offer a time scale for the talks leading to a subsidy? The Government must engage with sub-postmasters and mistresses, and with the Post Office, to see what can be done—either by the Post Office or through Government subsidy in due course—to resolve the problems that those people face here and now.

Mr. Byers

I take the hon. Gentleman's point. This is an important moment in the development of the post office network. I do not want a long period to elapse between parliamentary approval for this proposal and the finalisation of the details of the scheme.

I would be slightly reluctant to start work on those details before the Bill receives Royal Assent, as difficulties might arise in another place if it were thought that the Government were acting before proper parliamentary approval had been given to setting up the scheme. However, I think that there will be informal opportunities to discuss the form and nature of the scheme, and we could begin that process very soon. If the Bill were to receive Royal Assent by the summer recess, that might be the time to engage formally with the National Federation of Sub-Postmasters about the details of the scheme.

Mr. Brian Cotter (Weston-super-Mare)

I thank the Secretary of State for giving way so frequently. We welcome the proposed subsidy, although the opacity of the proposal has aroused much concern. On Second Reading, the right hon. Gentleman said that it was likely that the Cabinet Office's performance and innovation unit would produce a report while the Bill was being considered. That report would have helped enormously this afternoon. When will it be available?

Mr. Byers

My understanding is that the unit is still considering some details in the report. It hopes to report to the Prime Minister soon after Easter, and he will then announce his view of its work. The unit is addressing a number of key issues, and the question of access criteria is the most relevant to the Bill. I would have preferred the House to have the opportunity to look at the unit's findings. That would have been appropriate given that access criteria are provided for in the Bill, and I regret that the report is not available at present.

I think that the report has proved to be a far more comprehensive look at the network than was originally intended. That is welcome, because this is an important moment for the post office network. There is a chance to consider a new way for it to develop. The performance and innovation unit report will provide us with the opportunity of looking in some detail at how the network will look, not simply in six months or six years, but in the foreseeable future in the 21st century.

Mr. Bercow

I am grateful to the Secretary of State, who has been customarily generous in giving way. Does he agree that transparency is of the essence here? Given that the new clause refers to payments being made by the Secretary of State or by a person on his behalf, is there not a legitimate anxiety that, unless the access criteria are abundantly clear and specific, the new clause could be used for partisan purposes to provide much needed finance to struggling post offices in marginal constituencies that concern the right hon. Gentleman rather than going to constituencies on the basis of commercial need?

4.15 pm

Mr. Byers

I apologise to the hon. Gentleman, because he has already raised the issue of who this mysterious person might be. It could be a number of people, or it could be a body. It could be the Secretary of State, officials designated by the Secretary of State or an organisation such as the Countryside Agency—it depends on the nature of the scheme. Whoever it is will have the authority to make payments under the scheme if that is the way in which the scheme is developed. There is a degree of flexibility. I was going to say, "It could be you"—I did not mean you, Madam Speaker—but unless the electorate changes dramatically, I cannot see the hon. Gentleman being Secretary of State for Trade and Industry for a little while yet. However, he is young, and who knows? His chance may come.

Mr. Gerald Kaufman (Manchester, Gorton)

I was reflecting on the intervention of the hon. Member for Buckingham (Mr. Bercow). In view of the leak to The Mirror on Monday, I assume that he was referring to marginal Conservative constituencies, because of our prospect of winning a considerable number of them at the next election.

Mr. Byers

I think that that is right. When I saw the leaked document, I was not sure whether it was a deliberate ploy by the Conservatives to lull Labour supporters into a false sense of security. However, as my right hon. Friend knows, Labour supporters are never lulled into a false sense of security—a false sense of insecurity, perhaps.

I now turn to the details of new clause 1, which may answer some of right hon. and hon. Members' questions. The new clause allows the Secretary of State to establish a scheme or schemes for making payments for the purpose of (a) assisting in the provision of public post offices or public post offices of a particular description, or (b) assisting in the provision of services to be provided from public post offices or public post offices or a particular description. The reason for that distinction is that some post offices will, by their very nature, deserve financial support. With other post offices, the services that they provide will be worthy of public support. That touches on the point about the Post Office of the future, in which services might be provided on behalf of the Government. If we wish the Post Office to offer those services, it may be appropriate to provide a subsidy for it to do just that. The new clause allows us to make the distinction between a post office that may be deserving of financial assistance, and a particular service that is provided by a post office.

Mr. McLoughlin

I am uneasy about subsidies that will, by their very nature, mean rules and regulations whereby some post offices will qualify while others will not. Did the Secretary of State consider the possibility of ensuring that sub-postmasters were paid the national minimum wage, which is not currently the case?

Mr. Byers

That is a separate issue, which relates to people who have a contract of employment. I am pleased that the hon. Gentleman is now a strong supporter of the national minimum wage. He voted against it at every opportunity during its legislative passage through the House, so I am glad that, like the right hon. Member for Kensington and Chelsea (Mr. Portillo), the shadow Chancellor of the Exchequer, he now recognises its benefits. It is a matter of regret that we do not have the hon. Member for Rutland and Melton (Mr. Duncan) with us. I understand that he is in hospital—it is unfortunate that he is not in the Chamber to take part in the debate.

Mr. Bercow

My hon. Friend is listening.

Mr. Byers

If he is listening to our proceedings, he will know that I recognise that he remains a strong opponent of a national minimum wage. However, I am pleased to hear that the hon. Member for West Derbyshire recognises its importance. The answer to his question is that sub-postmasters are not covered by the minimum wage provisions because they are not under a contract of employment.

In addition to the new clause, Government amendment No. 44 makes it clear that the scheme must follow the affirmative procedure, which will allow debate to take place. There are other minor Government amendments, too, that will ensure that the scheme is effective.

I turn briefly to the amendments in the name of the hon. Member for Weston-super-Mare (Mr. Cotter). I think that he seeks to introduce a time limit by which the scheme should be introduced. I do not think that it is appropriate to try to restrict us to three months. We need effective and proper dialogue with all interested parties to ensure that any scheme that is introduced is effective and has broad support among those who are likely to be affected by it.

I am aware that the real concern has arisen in relation to the effects of automated credit transfer. That process will not start until January 2003. There will then be a phased approach to ACT on the part of the Benefits Agency, lasting until 2005. If there is to be a scheme, it is important that we have in place one that can meet the requirements in those circumstances. We will seek to address that possible mischief by developing a particular scheme.

Mr. John M. Taylor (Solihull)

I am grateful to the Secretary of State, who has indeed been generous in giving way.

Before we leave behind us the question of subsidy for certain post offices and the point made by my hon. Friend the Member for West Derbyshire (Mr. McLoughlin) that there will be a disparity between those who are subsidised and those who are not, let us consider the European dimension. Is the right hon. Gentleman aware that many of us are concerned that the Post Office cannot compete as freely as we would like with, for example, German operators? If he is to introduce subsidies to the British arm of that competitive game, will he have to clear them with Brussels? Will we have a long wait while competition issues are deliberated upon?

Mr. Byers

There are two specific matters, both of which are covered in the Bill. The first is the post office network. I would like to think that most right hon. and hon. Members recognise that the power to have a scheme that can provide a subsidy is appropriate in the circumstances. A separate issue is how we can make the Post Office more competitive in the services that it operates. I have no doubt that the measures that we are introducing through the Bill will ensure that the Post Office becomes increasingly competitive. That is the only way in which it will survive in an increasingly competitive European postal market. That is the challenge that it will face. I have no doubt that it must become more commercially minded. It must be prepared to recognise that it will need to begin to compete in areas that are presently reserved as part of its monopoly. I have no doubt that the situation will change.

When the Postal Services Commission begins to consider these issues, I hope that it will recognise the importance of providing competition that will raise standards so that the public have better service provision. Obviously that needs to be compatible with the universal service obligation, and I am sure that it will be. I am sure that competition will be highly effective.

Mr. Oliver Letwin (West Dorset)

rose—

Mr. Byers

I knew that that would have an effect.

Mr. Burns

Will the right hon. Gentleman give way on a different point?

Mr. Byers

If the hon. Gentleman wants to make a different point, I shall give way first to the hon. Member for West Dorset.

Mr. Letwin

I have an entirely different point, too, and have sat patiently in the hope of hearing it answered so that I need not ask the question. Will the Secretary of State explain what the subsidy is intended to achieve? Does he intend it to cover the transition period during which there will be a lack of investment in new technology, is it intended to be a permanent subsidy, or has he not considered which of those objectives he intends to achieve?

Mr. Byers

I had intended to discuss how the subsidy might be used when I addressed the amendment tabled by the hon. Member for Rutland and Melton. Essentially, it is intended to ensure the continued viability of a sub-post office, and it can take a number of forms. A post office may be commercially viable without subsidy, but we might none the less feel it appropriate to provide financial support because we wanted it to provide an additional service on the Government's behalf. In effect, we would pay that post office for doing that, possibly through a subsidy. A range of different reasons might apply, all of which are covered by the wide-ranging provisions of new clause 1, which will allow the Secretary of State to introduce a scheme that will meet those obligations. That is why new clause 1 distinguishes between support for a post office, which will probably have to do with its commercial viability, and subsidy for a particular service that a post office might provide.

I said that I would give way to the hon. Member for West Chelmsford (Mr. Burns).

Mr. Burns

As a former Chief Secretary to the Treasury, the right hon. Gentleman may understand more than most how the Treasury works. I note that new clause 1(6) says that no scheme can be exercised without the consent of the Treasury. From the right hon. Gentleman's speech, we have learned that the scheme envisaged in the new clause is highly nebulous. No one, not even the right hon. Gentleman himself, knows how much the subsidy will cost the taxpayer. The Secretary of State must know that the Treasury will never give him an open-ended commitment to provide unlimited public funds. The amounts involved in his two-pronged approach to subsidy could be massive. What discussions has he held with the Treasury, and what assurances or restrictions has the Treasury given him, regarding the circumstances in which it will or will not consent to the scheme?

Mr. Byers

The fact that we can lay a proposal for the scheme before the House is the result of many and various discussions with the Treasury. The Treasury supports the giving of a power for such a scheme to be established, but we shall have to work on the details. The hon. Gentleman is quite right to say that there should never be an open-ended cheque; that would be no way to deal with public finances, and no one would expect the Treasury to offer one. We seek targeted financial support to help with the viability of a post office or to encourage it to provide services of benefit to the Government.

Through amendment No. 71, the hon. Member for Rutland and Melton asks that information about the viability of specific post offices should be given to the commission. That would extend the remit of the commission to providing advice to the Government on the financial viability of public post offices. I ask the House to resist the amendment because I do not feel that that is a correct role for the commission, whose central role is to regulate licensed postal markets and the operators who are licensed, and to give them a primary duty to ensure the universal provision of postal services at a uniform tariff. We should not wish the commission to be diverted from that challenging and important responsibility by having an additional responsibility to provide advice to the Secretary of State on the commercial viability of individual post offices.

I hope that the hon. Member for Weston-super-Mare will not press his amendments to new clause 1, and that amendment No. 71 will not be pressed, either. I hope that all Members can support new clause 1. It will provide the Secretary of State with the power to introduce a scheme to provide a subsidy. Sub-postmasters and mistresses throughout the country will respond positively to the way in which the House has listened to their concerns and has noted the 3 million strong petition that was received last week. The House and the Government are prepared to listen and to respond positively; new clause 1 does precisely that. I ask the House to accept it.

4.30 pm

Mr. Richard Page (South-West Hertfordshire)

May I tell the House—especially the Secretary of State and the Minister—that I am sorry that my hon. Friend the Member for Tiverton and Honiton (Mrs. Browning) is not in the Chamber today? Her absence is unavoidable, as she is either collecting her husband from hospital or taking him there. The absence of my hon. Friend the Member for Rutland and Melton (Mr. Duncan) has also been mentioned; as we speak, he is undergoing the attentions of a surgeon who is removing his appendix. No one regrets his absence at this moment more than me.

As the Secretary of State has pointed out, the new clause would enable payments to be made to assist in the provision of public post offices or of the services that they offer. We welcome the measure. I can give the Secretary of State some comfort, because I shall not recommend that we vote against it—although what my hon. Friends do is up to them. However, I should be disappointed if they voted against the new clause.

I am certain that the new clause will receive a widespread welcome; it addresses issues of long-standing concern to people throughout the United Kingdom—in inner cities as well as in rural areas. We make much of the rural problem, but the difficulties are just as acute in some inner-city areas.

Those worries were generated by the Government's thoughtlessness in introducing the automated credit transfer system before establishing how an income for sub-post offices would be provided. The matter has been the subject of innumerable debates in the House; indeed, last Wednesday, there were debates in both Westminster Hall and in the Chamber.

The House will remember Corporal Jones from "Dad's Army"; he was the one who rushed around, saying "Don't panic, don't panic". If the Secretary of State were a little greyer and wore a little moustache, he would look rather like Corporal Jones. Recently, he too has been rushing around saying, "Don't panic"—whether over the money for Rover, when that matter went sadly wrong; over the money for energy that was announced because the coal industry is going wrong; or over new clause 1, which was introduced because of worries in the Post Office. I am sorry to say that the new clause well merits the title of a "Corporal Jones" clause.

Mr. Baldry

At least in yesterday's statement on energy, the House was told how much money would be involved—there will be £100 million for the coal industry. The Secretary of State has given us no indication as to whether the subsidy for the post offices is £10 million, £50 million or £100 million, or whether the whole £400 million savings from the move to ACT will be included. We have been told neither how substantial that subsidy will be, nor what will trigger it. Discussions will apparently be held with a person; we know that that person could be anyone in the world apart from my hon. Friend the Member for Buckingham (Mr. Bercow). In the light of those points, can we be satisfied as to the validity of the new clause?

Mr. Page

My hon. Friend served on the Standing Committee, so he is well aware of all the Bill's provisions. He makes a valid point. Despite the Secretary of State's protestations, unfortunately, the new clause should have been tabled much earlier in the Bill's proceedings. We could then have taken more detailed advice and gone into greater depth on the matter. We could have held consultations—especially with the National Federation of Sub-Postmasters, and obtained more detailed information on their views.

Mr. Bercow

Will my hon. Friend give way?

Mr. Page

If my hon. Friend will hold his horses for 30 seconds, I will of course give way. I believe that the expression "a blank cheque" is a valid and accurate description of the new clause.

Mr. Bercow

As my hon. Friend knows, I am of a naturally suspicious turn of mind. Given the latest demonstration from the Secretary of State of pork-barrel politics that we witnessed yesterday afternoon, does my hon. Friend agree that, whatever the merits of the proposed new subsidy, we simply cannot be certain about its impartial distribution? Is there not a danger that it could be used by a Secretary of State, if not the present incumbent, as a slush fund to bail out beleaguered Labour Members in marginal constituencies?

Mr. Page

My hon. Friend makes his point in his usual delicate fashion. It will not have escaped the Secretary of State's notice that my hon. Friend has a few concerns in this area. I believe that those are justifiable concerns, because the new clause uses the following phraseology: Payments under a scheme under this section shall be made by the Secretary of State or by another person. It would really help if we could discover who that "another person" might be. That is another failing that results from the tabling of an amendment of this nature at so late a stage.

Surely the Government would have had no difficulty in tabling the amendment in Committee. It could then have been debated in Committee and it would not have been above the wit and wisdom of the serried ranks of officials that the Minister and the Secretary of State have at their beck and call to devise some small amendment that would have provided an opportunity for the clause to be fully debated on the Floor of the House.

I believe that the new clause is a panic measure. The cost is as long as a piece of string—I might mix all the metaphors and bring in the "blank cheque" introduced by my hon. Friend the Member for West Chelmsford (Mr. Burns). The only time when I felt that the Secretary of State was speaking from his political heart was when he said that the lobby of a couple of thousand postmasters, and the thought of 3 million signatures dropping into the foyer of No. 10 Downing street, helped to concentrate his mind on the matter.

Mr. Chidgey

If I remember correctly, the hon. Gentleman said at the start of his address that he was in favour of a subsidy, although he has now described it as something rather different. Would a subsidised Post Office be part of his party's vision of a privatised Post Office?

Mr. Page

Although it is understandable that the hon. Gentleman wants me to outline our party policy on these measures, he has been in the House long enough to know that it is a remarkably naive shadow Minister who starts to make up policy on the hoof without knowing the exact position that the party that is successful at the general election will face when it takes over and looks at the books. To place such a hostage to fortune on the record now would make me seem greener than I may already be. I certainly will not give that commitment, but I will say that, in view of the mess that the Government have got themselves into, we welcome this provision in the short term until we find out what the true position will be.

I put it to the House that the Bill is being introduced at completely and utterly the wrong time. It should not have been introduced before we knew the contents of the report by the performance and innovation unit, or before the guidelines on the social and environmental issues had been decided. We should not have been looking at this before knowing exactly the whole question of social exclusion and the problems that will face some rural and urban areas.

Mr. Prior

Is it my hon. Friend's understanding that the subsidy is to replace the income forgone by post offices as a result of the change to automated transfers, or will it be made available for post offices that are undertaking social and community services?

Mr. Page

My hon. Friend makes the flattering assumption that I am a Government Minister and will be able to answer. It is because we have such an opaque new clause before us that my hon. Friend asks the question. I cannot answer it; I do not know. I hope that when the Secretary of State responds he will pick up this point, that perhaps a message will come from afar and he will be able to give my hon. Friend an answer. My hon. Friend makes a legitimate and justifiable point, but I have to fail to give him a response.

Mr. Letwin

Does my hon. Friend agree that at least one definite response can be given to my hon. Friend the Member for North Norfolk (Mr. Prior)? It is that, if the subsidy were intended to replace the entire income, given that it is ungeared and is bringing about no footfall, unlike the current system of benefit administration, it would have to exceed £400 million in order to make good the shortfall.

Mr. Page

I do not know whether that is strictly correct, because the saving of the £400 million involves some administrative costs, such as those for printing the various benefit books. Therefore, I wonder whether the figure would run to £400 million. The calculation becomes a little more delicate and complicated, because pensioners and benefit claimants who go into the post office obtain cash and spend some of it in the shop. I know that sub-postmasters and sub-postmistresses are concerned about losing that extra revenue. I think that my hon. Friend is over-egging it with a total of £400 million, but the loss of revenue in the form of money that will not be spent in the shop is another calculation.

Mr. Letwin

I accept my hon. Friend's well-measured adjustment of my terms. I agree that the sum need not be in excess of a total of £400 million, but does he agree that it is almost inconceivable that the Treasury would ever accede to a continuing subsidy of that order of magnitude in order to try to replace, on a permanent basis, the amount lost? Does he also agree that the Secretary of State notably refused to reply in a clear-minded way when asked whether this was intended to be a temporary, transitional subsidy or a permanent one?

Mr. Page

One of the delights of answering interventions in my stumbling and humble fashion is that

doing so pulls out of order the comments that I shall make in my few, short, immortal words to the House. Therefore, I ask my hon. Friend to relax—[Interruption.] No, not to shut up; my hon. Friend is making a perfectly valid and highly intelligent point, but it is one that I should like to deal with a little later.

Mr. McLoughlin

Will my hon. Friend give way?

Mr. Page

When one's Deputy Chief Whip asks one to give way, one does not have much alternative.

Mr. McLoughlin

Does not this show that the Secretary of State has, to a degree, treated the Committee and the House with contempt? Had it been possible to discuss the matter in Committee, we could more easily have put these questions to the Minister, obtained the answers and had a fuller debate when we returned to the Floor of the House. It is partly because we have not had time to look at the new clause and question the Minister in great detail that we shall be unable to have answers to many of the questions to which we want answers today.

Mr. Page

My hon. Friend puts the point much more forcibly than I have. I simply said that I felt that it would have been better if the whole matter had come before the Committee. As I said, I am sure that a small amendment could then have been made to put it in order for it to be discussed more fully on the Floor of the House. However, the truth is that—I was not joking when I described it as a Corporal Jones clause—nothing happened until 2,000 sub-postmasters and sub-postmistresses descended on the House and on Downing street with their petition. Lo and behold, out came an opaque new clause that might provide the money to help them.

4.45 pm

I endorse the view that it would have been much better to discuss this issue in Committee. Outside of this rather formal setting, we could have had a much more casual and relaxed talk about how the new clause might operate. I wonder whether the Government know how it will operate. I have the horrible feeling that it was made up on the hoof and that only later will we discover exactly how it will work.

This point has been raised, but I wonder whether there have been difficulties in the discussions between the Department of Trade and Industry and the Treasury over the scale of the financial support to be given. Has the DTI, in any shape or form, given the Treasury an idea of how much that support might be? If it has, the Secretary of State will be able to explain why the provision was not introduced when the Bill first came to the House or in the Chancellor's Budget statement. The Secretary of State makes much of annually managed expenditure—AME—but is that extra money or is it already provided for? If it is already provided for, we should know. If it is not, the new clause very much represents legislation on the hoof.

I was going to spend some time saying that it was a disservice and a discourtesy that the provision was not considered in Committee. However, my hon. Friends—particularly my hon. Friend the Member for West Derbyshire (Mr. McLoughlin)—have already made that point. When the Committee discussed the guidelines on social and environmental matters, I stressed several times how important it was that we knew what would be in them, so that we could help to frame the legislation. However, there was a rush to legislate and the country's requirements were deemed to be just something else to worry about.

The new clause has raised considerable expectations among those who run sub-post offices and their consumers. I hope that those expectations will not be disappointed, but the Government do not have a good reputation on that. They have a good reputation for spinning a good story, but, once the mists have dissipated, we find that real improvements have not been secured. It is up Ministers to ensure that they are and that those expectations are not disappointed.

Mr. Roger Gale (North Thanet)

Does my hon. Friend think that this late offer, with no sign of how long it will last, will repair the damage that has been done to the potential sale of sub-post offices to new owners? Will it prevent the closure of sub-post offices that is taking place at the moment?

Mr. Page

I am afraid that it will not. We must remember that £2 billion of privately owned money is in sub-post offices.

The Minister for Competitiveness (Mr. Alan Johnson)

The figure is £1 billion.

Mr. Page

The figure has obviously depreciated considerably since I last heard it, but the hon. Member for Weston-super-Mare (Mr. Cotter) has also touched on this issue. Until the Government put more flesh on new clause 1, no one will want to consider buying or exchanging a sub-post office, unless they are remarkably rich or remarkably brave.

As the Secretary of State pointed out, nestling among the Government new clause and amendments is our amendment, No. 71, which would introduce the concept of financial viability. Had we known that new clause 1 was to be tabled at such a late stage, and had we known about its contents, we might have redrafted our amendment. The future of the post office network has been a concern of right hon. and hon. Members on both sides of the House for many years, as my hon. Friend the Member for North Thanet (Mr. Gale) said. Post offices' survival is critical to the well-being of people not only in rural areas but in inner cities. That is why Ministers of successive Governments have been called to the Dispatch Box many times over the years, and never more frequently than in the past few months, when there have been debates on the subject not only on the Floor of the House but, last week, in Westminster Hall. There is no reason for me to apologise for going over the ground again.

When I first read new clause 1, I thought that my hon. Friend the Member for Rutland and Melton and I might have to apologise for having charged the Government last week with lacking a coherent structure for the future of sub-post offices. When I read the new clause again, I realised that although, as my hon. Friends have pointed out, it makes welcome gestures towards the support of public post offices, it is remarkably lacking in substance and the House cannot assess the merits of the scheme in detail. Nothing that the Secretary of State said at the Dispatch Box has given us further insight into how the scheme will work.

As my hon. Friends have pointed out on several occasions, the Secretary of State will take the powers necessary to subsidise those post offices and support the services that they provide. He—or, perhaps in future, she—will be able to prescribe what payments will be made for those purposes, to whom they will be made and the criteria to be adopted in making them. The amounts have yet to be determined. The right hon. Gentleman may delegate those roles to a subordinate body.

My hon. Friend the Member for Buckingham (Mr. Bercow), who has left the Chamber for a moment—no doubt he has gone to recharge his batteries—pointed out that those provisions might be a substantial source of party political bias. I hope that the Secretary of State will ensure that there is a proper arms-length method for applying those criteria and making payments. Hon. Members on both sides of the House must be satisfied on that point because the wheel will turn, the Conservative party will be back in government and the Secretary of State will be on this side of the Chamber with his nose pressed against the window of government. He will want to be sure that he has put in place a system that is seen to be fair, open and accountable. As I said, it would have been sensible to establish the scheme in Committee, rather than on Report.

I genuinely want to try to help the Secretary of State to fulfil his good intentions. Ever since his unfortunate experience with BMW and the Rover car company, I have thought of him as sharing the view of the famous playwright, Eugene Ionescu, that one can predict the future only after it has happened. The Secretary of State tends to take action when he should be planning ahead.

My hon. Friend the Member for Rutland and Melton and I tabled amendment No. 71, which would require the Postal Services Commission to advise the Secretary of State on the financial viability of public post offices serving communities throughout the country. It is pointless devising schemes to subsidise the network if accurate information is not available to the Secretary of State about the financial state of the post offices in our cities, towns and villages.

I had to smile slightly a moment ago when the right hon. Gentleman distanced the role of the commission from all this. Having read the Bill and taken part in the debates, I believe that the commission and, to a lesser extent, the council will have a pivotal role in deciding which post offices provide a vital service and should be kept in place. The amendment would place an explicit requirement on the Postal Services Commission to collect financial information and provide advice to the Secretary of State on its findings. That would be done after the commission had consulted the Consumer Council for Postal Services.

I fully expect that other bodies, such as the National Federation of Sub-Postmasters and the Countryside Alliance, will make representations to the Secretary of State before he comes to any decision about the scale of assistance that he is prepared to offer. I hope that he will answer the point made by my hon. Friend the Member for Solihull (Mr. Taylor) when he asked whether EU approval was necessary. The Secretary of State has rather fallen foul of EU approval on various announcements that he has made recently.

It would give encouragement and hope to sub-postmasters and postmistresses if they knew that the money was definitely coming and would not be subjected to the machinations of another organisation. That would go some way towards mitigating the concern of my hon. Friend the Member for North Thanet about the viability of sub-post offices.

The Secretary of State will certainly need information about financial viability if he and the House are to take a well-judged view on the future of the post office network. Collecting the information should cause no difficulty to the Postal Services Commission, which will collect plenty of information anyway. It has a duty to collect information if required, and it can do so of its own accord.

I hope that the concerns of those who provide and use postal services are truly to the front of the Government's mind, and that the Minister will have second thoughts about a sensible amendment that will help him to achieve the objectives which I am sure he seeks.

As a matter of principle, it is fair to put it on the record—this may help the hon. Member for Eastleigh (Mr. Chidgey), who asked whether the Conservative party was in favour of subsidies—that we share the view of the National Federation of Sub-Postmasters in its desire for income, not subsidies, for post offices. The new clause is needed only because the Government are proceeding with their disastrous policy switch to ACT, which threatens the survival of thousands of sub-post offices across Britain. As we know, the 3 million signatures on the petition were not calling for subsidy.

I shall put on record the reaction of the National Federation of Sub-Postmasters to new clause 1. It stated: subpostmasters want to have a commercial living in viable and vibrant post offices. The prospect of existing on a subsidy therefore will not be a very pleasant one for them. We are however encouraged that the Government are looking for ways of supporting a network of post offices and if matters get to such a point then clearly subsidies, particularly temporary ones, may help to get the network through a very difficult phase. The statement continues: We would set our face completely against local authorities giving subsidies because we think that we would rapidly lose control over the network as different local authorities will most certainly deal differently when faced with the need to subsidise and we must not forget that different local authorities may be under different political control. We cannot therefore work up any enthusiasm for that prospect. We would say the answer to the network is investment, not subsidy, allowing us time to get through this difficult period and out the other end. As they say, give a man a fish and he will eat for a day, give him a fishing rod and teach him to fish and he will eat for a lifetime. Do the Government intend subsidies to be paid by local authorities? Will they give sub-postmasters that fishing rod, so that they can have financial viability and independence?

5 pm

On Second Reading, the Secretary of State said: We should not jump to the conclusion that we should always look for a subsidy from central Government. Other public organisations such as local authorities may want to invest if they think it is appropriate to provide a subsidy but, as we are introducing a Bill that we would like to think will be on the statute book for a good number of years, it is sensible to cover all possibilities.—[Official Report, 15 February 2000: Vol. 344, c. 805.] In the event of subsidies' being paid, how will the Government ensure equity, so that one post office is not disadvantaged by another's receipt of subsidy? I believe that that balance—that equity—is most important.

Although at the outset I welcomed the new clause in principle, it is not apparent why a new clause drafted in such general and unspecific terms was not included in the Bill at the start. It would have been preferable for us to be able to examine it more closely in Committee, and to hear from the Secretary of State or the Minister the details that lay behind it. Is it, in fact, such a last-minute panic measure that Ministers do not know what the back-up will be, and how the new clause will work?

Perhaps the belated appearance of the new clause is due to a disagreement between the Treasury and the DTI about the scale and terms of the financial support that will be offered to the post office network. Perhaps, like my hon. Friend the Member for Aylesbury (Mr. Lidington), I am unduly suspicious, but the Minister has still not given a good explanation of why the provision was not announced on Second Reading—or, indeed, of why the Chancellor of the Exchequer did not mention it in his Budget statement. The sums involved are surely of a size to merit some attention in a Budget statement.

The new clause will have raised considerable expectations throughout the country among those running sub-post offices. It will also have raised expectations among customers hoping that their post offices will be saved. I hope that those expectations will not be disappointed. It is one thing to enter into broad, vague, nebulous commitments of the kind envisaged in the new clause; it is a quantum leap to carry them into positive effect.

Once the mist engendered by this exercise has dispersed, those people will want to see real results. They will want to see post offices that have been threatened with closure saved, and new ones opening. It is up to Ministers to ensure that, if public money is used for this purpose, such benefits occur. If they do not occur, and are not seen to occur, the House and the country will know that this has been little more than a public-relations exercise.

Mr. Drew

Unlike Conservative Members who have given the new clause a curmudgeonly welcome, I give it, along with the Government amendments grouped with it, a warm welcome. This is an important initiative and, if the Government are accused of having listened, so much the better. There has been a major campaign, led—dare I say—by the Western Daily Press in my area, and taken up by many other newspapers and media outlets. It has touched a raw nerve. We all know about the problems from which sub-post offices suffer. There is a wonderful irony in being lectured by the Opposition. They accuse us of precipitate action yet they failed to tackle the problems. They had 18 years in which to act, but they did not intend to pursue the policy that the new clause outlines. It is mildly amusing that they will vote in favour of it—or, at least, not against it—while Conservative Front-Bench Members maintain that they support privatisation. I do not know how they resolve that contradiction.

Mr. Lilley

In welcoming the new clause as a major step forward, does not the hon. Gentleman tacitly admit that Government policy of compelling people to have benefits paid into bank accounts instead of a post office potentially threatens the post office network, thus making the subsidy necessary? Without the policy, the new clause would be neither necessary nor a major initiative.

Mr. Drew

We have held that debate so often in the past, I hoped that the right hon. Gentleman would have got it right by now. There is no compulsion; people from the Prime Minister down have the right to choose the way in which they wish to draw their benefits. That will remain the case. If we changed that, it would not stop the decline in the sub-post office network. The new clause gets to the root of the problems. We need some form of subvention, for which the details need to be worked out. The Government are pledged to do that, and we should therefore welcome the new clause and consider its implementation.

I agreed with the hon. Member for South-West Hertfordshire (Mr. Page) that having the performance and innovation unit report would help. It would tease out some of the details that we require. The report is a major piece of work for which we have waited for some months. The longer we wait, the more detail it will hopefully contain. It will then better be able to show the way in which new clause 1 can be implemented.

Mr. Letwin

Like me, the hon. Gentleman has participated in many debates on the Bill. Does he support permanent subsidies to sub-post offices as a way forward in principle?

Mr. Drew

If the hon. Gentleman will allow me to advance my thoughts, I shall explain my approach. I do not oppose the idea that the Government should provide more income to help the sub-post office network, which clearly needs additional income. I do not mind whether the money is a subsidy or in a different form. The campaigns and speeches of hon. Members from all parties have alerted us to the problem, and the new clause presents a method of dealing with it. I hope that I can explain that briefly.

Mr. Peter Bottomley (Worthing, West)

The question of payment—subsidy or not—arises because decisions between Departments have resulted in the withdrawal of £400 million from the sub-post office network. How much of that sum should be replaced by payments under new clause 1?

Mr. Drew

I cannot give a categorical answer about the money because that is up to the Government Front Bench, but I hope that we will think ahead about the extent to which we can help individual sub-post offices while maintaining the overall network.

I believe that the Minister for Competitiveness agreed with the view that I expressed in an Opposition day debate last week. We must strike a balance between the amount that we grant individual sub-post offices to help them through temporary difficulties or to find methods to build for the future and the way in which we help the whole network. My answer is to increase the speed of the evolution of smart cards. I do not believe that that will be achieved entirely by the public sector, but it might be done by the public and private sectors in harness. I should like that to happen.

The Opposition have created difficulties for us. There is nothing wrong with that in some respects, but they have sold their view that our policy is ACT or nothing, and that has made it more difficult for us to present our case to the sub-postmasters and mistresses. Some of us have always believed that ACT should be considered in addition to the obvious answer: the evolution of the smart card. My right hon. Friend the Secretary of State can speak for himself, but we heard clarification on that matter during the debate initiated by the Opposition last week.

Mr. Letwin

Will the hon. Gentleman give way?

Mr. Drew

If the hon. Gentleman will please excuse me, I must continue.

The nub of the debate is the degree to which the Government can support investment in the smart card as we would want it to be and the way in which they can help individual sub-post offices. We must decide how best to use our money and how to influence the sub-post office structure to keep the universal service obligation. I have already said that I wish that I knew how the official Opposition would keep it if they followed their route of privatisation. We must keep the entrepreneurial spirit of individual post offices alive while giving support through the pay structure and the other ways in which payments are made already.

Such matters are complicated, but a considerable number of community sub-post offices already rely—not exclusively, but to a large extent—on a subsidy or a salary payment. That is what I was trying to get at in my question to my right hon. Friend the Secretary of State. We can enhance and extend that system, but our proposals must be clear. The discussions need to be based on that fact and taken forward from there. The detail will emerge from the consultations and negotiations, but, as well as providing stability and value for money, the system must be fair and transparent. All those issues are important. They must be talked through with the various organisations that will have both a part to play and a view on the proposals.

I welcome new clause 1. We should recognise that structures will change, but that is not the only way forward and in no way do I wish to denigrate the many thousands of businesses that make up the sub-post offices network. Some people or businesses already own a succession of sub-post offices, which may provide stability, but I want to see the community enterprise idea alive and well. That may be a way to retain services in villages and suburban areas, but it may also allow us to reintroduce them. That is happening in villages in my constituency. The village shop in Whiteshill has close links with the sub-post office and Coaley provides an example of how services—the most important of which is the postal service—could be reintroduced. If a village shop can work in harness with the sub-post office, there is much more chance of the service being retained.

New clause 1 represents an important new dimension to the discussion and the proposals cannot be introduced soon enough because we are losing sub-post offices. That is nothing new and there are no quick fixes. If there were, I presume that the previous Government would have produced some, but they failed lamentably. It is important to guarantee the universal service obligation, which is what the Bill is largely about. We have put on record the fact that we want a network of sub-post offices, for now and the future, and the proposals constitute the way in which that should be done.

It is important to strike a balance in the debate. Some of us have watched it assiduously and have made suggestions and it is good that the Government have listened not only to the campaign outside, but to what hon. Members on both sides of the House have said. That is why new clause 1 should be welcomed unreservedly. Rather than go on the defensive, we should begin to enhance the chances of our sub-post offices so that they have a genuine future.

Mr. Cotter

I am sorry to hear that the hon. Member for Rutland and Melton (Mr. Duncan) is unwell and I am sure that we all wish him well. The hon. Member for South-West Hertfordshire (Mr. Page) made up for the hon. Gentleman's absence—he spoke for two, given the time that he waxed lyrical. I thank the Secretary of State for introducing new clause 1, which represents a welcome gesture for sub-post offices.

As the hon. Member for Stroud (Mr. Drew) has said, we have had many debates on the matter. I could rehearse all the arguments, but I shall not do so because they are on record. There is still a serious issue about sub-post offices. I am glad that the Secretary of State accepts that the performance and innovation unit report is key. I hope that it will advance the debate quickly, once we have it.

5.15 pm

I congratulate the Secretary of State on the open way in which he was so opaque. His opacity and openness have been the striking part of the debate so far. He achieved a delicate balance, and he did it extremely well. In tabling the amendments, the Liberal Democrats are endeavouring to strengthen the new clause. We welcome what the Government have come forward with, but we need a much clearer answer from the Secretary of State. It has been a rather rushed job. The decision had to be made to come forward with something, but we need the detail.

Confidence is the clear and concerning issue for those small businesses, the sub-post offices. Without confidence, customers will find other routes, as they are doing, to meet their needs, but, most particularly, sub-postmasters and mistresses do not feel that they can invest in something that will be viable and there in the long term. The new clause leaves an area of uncertainty. More precisely, we had the feeling that the introduction of the subsidy could not start before 2003, or at least it seems that it could not. Our amendment would oblige the Secretary of State to make an order under the section within three months of the commencement of the Act.

We ask just for an announcement. We do not necessarily expect such a scheme to start within three months of the commencement of the Act, but it is not unreasonable to look for an announcement, which could reassure people. No doubt an indication of the date would be part of it. I do not wish to labour the point, but that is very important because, unless people feel that something significant will happen, and unless something is done in good time, it will be a case of shutting the stable door after the horse has bolted.

Mr. Letwin

I wonder whether the hon. Gentleman believes that the confidence that he seeks to engender would be brought about if sub-postmasters believed that their future depended exclusively on subsidy.

Mr. Cotter

No, I do not, but we are saying that the Secretary of State should come forward with an announcement soon after the commencement of the Act because clarity would come from that. Other things would be coming forward, particularly the performance and innovation unit report; we are all waiting for that great thing to come from above. I hope that, when it does so, all sorts of other things will become apparent and reassure people, but we wait with bated breath to see what will come forward. I am bating my breath all the time, in fact.

Mr. Graham Brady (Altrincham and Sale, West)

rose—

Mr. Cotter

I will bate my breath again and allow the hon. Gentleman to intervene.

Mr. Brady

What specific level of subsidy and what criteria for the application of that subsidy would the hon. Gentleman like to see in that announcement, which must be made within three months under his proposal?

Mr. Cotter

I am delighted that the hon. Gentleman has asked that question. It is precisely the question that I wish to ask the Secretary of State in a moment. We all await the answer with great hope.

I hope that, following my point about confidence, the Secretary of State will consider the matter very seriously. Sub-post offices are closing at the rate of about 500 per year, so we need something to stop that.

The Secretary of State could also acknowledge that—as has been said in so many debates—many sub-postmasters and mistresses are abandoning their sub-post offices because of their concerns about new technology. The matter of the pace at which new technology is introduced will have to be clarified. Many people with a certain age profile are very concerned about the introduction of new technology and feel that they should stop operating a sub-post office before they have to face up to that technology. As the Minister has said, high-tech training is needed. However, reassurances are also necessary.

Mr. Prior

Could the hon. Gentleman give us some idea of the size of subsidy that he and other Liberal Democrat Members would like to be provided to sub-post offices, given that their loss of income is predicted to be £400 million annually?

Mr. Cotter

That is a time-wasting question. Clearly, Liberal Democrat Members do not have information on the costs and nature of the problems. We cannot possibly answer that type of question. I am sure that Conservative Members could not answer that type of question. I could ask the hon. Gentleman the same question. Later in the debate, I might ask a Conservative Member whether he or she would like to come up with such a figure. The question is ridiculous. We are not in government, and therefore have no idea of the financial problem in terms of pounds, shillings and pence.

I shall not speak much longer, so that the Secretary of State will have bags of time to deal with the issue. Our time for this debate has already been eaten into. I am sure that all hon. Members are looking forward to learning from the Secretary of State whether a lump sum will be paid, at a specific time, to sub-post offices, or whether sub-post offices will receive a minimum income guarantee. If there is such a guarantee, for how many years will it operate? Is the subsidy intended to be a long-term solution, or only a short-term means of plugging a hole?

Hon. Members have mentioned the Postal Services Commission, the regulator and the consumer council. We should like to know whether the commission will be able to make an input into the subsidy. It will certainly have a significant job in identifying the requirements. We are worried not only that we shall not be told the figures today, but that the Treasury will, as usual, be left holding the purse strings.

Although it is all very well for Conservative Members to make soundbites about subsidy and encouraging people to run post offices, those are only soundbites. Conservative Members are in an extremely weak position on the issue, because they are proposing privatisation. They are on the back foot on the issue.

Mr. Page

The hon. Gentleman has stunned me into making an intervention. May I delicately point out to him that, with the exception of a few hundred Crown post offices, sub-post offices are already privately owned, and that it is a little difficult to privatise something that is already privately owned?

Mr. Cotter

I am sure that the hon. Gentleman will recollect the proposals made, in 1994, by the previous Government, that the whole post office service should be divided into 11 regions—very much as the rail service has been divided, so that no division knows what the other divisions are doing. Sub-post offices could go just as branch lines went. I am sure that the hon. Gentleman will want to address the issue later, when he tries to convince us that there is no problem with the Conservative party.

Today, we have to have some answers from the Secretary of State. I very much look forward to hearing what he has to say to provide a little more clarity and confidence, and to provide our sub-postmasters with a little more security for the future.

Mr. Lilley

I agree with the hon. Member for Stroud (Mr. Drew) that new clause 1 is a major provision. The new clause changes the Bill's character and exposes the flaw in the Government's policy on sub-post offices. It should have been included in the original Bill. The need for it was foreseeable, and foreseen by many people, when the Government's policy on forcing people to have payments made through the banks was announced.

The failure to foresee that need and to make any precautionary moves was characteristic of this Secretary of State, whose head is always so deeply buried in the sands of wishful thinking that he makes ostriches appear far seeing by comparison. We have a Secretary of State whose hallmark is not foreseeing the inevitable. He could not see that there was a possibility—for which he should have had contingency plans—that BMW might close Longbridge. Almost every car buyer in the country took that into account when they bought cars. I bought a Rover last October, and I was asked whether I had taken into account that Rovers might not be made in a year or two. I was patriotic enough to go ahead and buy one. However, I could foresee what might happen, even if the Secretary of State could not.

Likewise, everyone could foresee the need for subsidies if one took away the main revenue stream from post offices. I have told the House previously that, when I was Secretary of State, I was given advice that, if we were to make compulsory the payment of benefits through bank accounts, it would lead to the collapse of the post office network, and that the only way to prevent that collapse would be to introduce a subsidy for post offices. The only problem was that that subsidy would use up and absorb the bulk of the savings that one intended to make by introducing the policy.

Ministers have refused several times to confirm that they were given similar guidance, but I am sure that they were. Anyway, they have now tacitly admitted—by introducing the clause—the first two elements of that syllogism; that their steps to remove the DSS contract from post offices will put at risk the post office network, and that the only way to ensure that the network does not collapse is to introduce subsidies. Hence the power that the Government propose to take in the clause.

The tragedy is that the Government have not seen through the absurdity of their policy; namely that it will not save the money that they think it will. They should rethink their policy, start again from stage 1, and ensure the viability of the post office network by paying it to provide a service, rather than subsidising it to do other things than those that the Government require.

Mr. Letwin

Does my right hon. Friend agree that we anticipate, in the near future, some Secretary of State—possibly the present one—coming before the House to tell us about the subsidies that will need to be paid also to the banks?

Mr. Lilley

That is a good point to which I shall come in due course. The clause makes provision for such subsidies; rightly so, given the path upon which the Government have embarked.

The Opposition can at the very most give the clause a very reluctant and conditional welcome. We do not believe that the post office network ought to survive and exist on subsidy. We do not believe that it is necessary to embark upon a path that will make that essential. We agree with the National Federation of Sub-Postmasters, whose members do not want to live off subsidies—certainly not permanent ones, and preferably not even temporary ones—and want to restore a system where they are paid by the Government to deliver a service to the Government and to those whom the Government need to provide with benefits near the places where they live.

Mr. Gale

I wanted to intervene after my right hon. Friend's first sentence, but I thought that it would be discourteous so to do. I share his view that this clause is anathema in its content simply because we do not believe in subsidies. However, we are engaged in damage control, and it is not my job to make the case for the Liberal Democrats that they so signally failed to make for themselves. The new clause says not "shall" but "may", and states: The power to make a scheme … shall not be exercised without the consent of the Treasury. First, the Secretary of State does not have to act. Secondly, the Treasury could say no. How does that help sub-post offices?

5.30 pm

Mr. Lilley

My hon. Friend makes a powerful point that leads me to ask how the Government got into this mess. As I have mentioned before, I have come across this issue in previous incarnations as Secretary of State for Trade and Industry and as Secretary of State for Social Security. In this context, my experience as former Treasury Minister is even more valuable. As a Treasury Minister, I wanted to see savings made, but I learned in seven years at the Treasury—four as parliamentary private secretary to the Chancellor and three as a Treasury Minister—that the Treasury has a structural weakness. It is inherently prone to seek savings in one Department even though that may result in costs in another that more than offset the savings.

That approach is even adopted consciously and willingly and has been enshrined in a doctrine by a distinguished Treasury mandarin, Nick Monk. He said that the doctrine should be, "Take any savings from any source when possible." The Treasury does so, because even if there are offsetting costs in another Department, it hopes to be able to cap that spending or force that Department to find other savings to offset the extra costs in turn. That is a weakness of Treasury spending controls and I have always thought so. I thought so when I was a Treasury Minister and when I was Secretary of State for Social Security, which is why I resisted the proposals before us. The result of the policy of trying to make savings by eliminating the £400 million contract for the DSS to pay Post Office Counters Ltd. to deliver benefits through post offices would inevitably be a rise in the costs of the DTI as it introduced subsidies to uphold the post office network throughout the country.

The Treasury was able to proceed with that policy—and it has always eyed the possibility of a saving of £400 million and tried it out on previous Secretaries of State, including the predecessors of the present incumbents at both Departments—only because it had installed two fresh-faced, wet-behind-the-ears former Chief Secretaries to the Treasury as the Secretaries of State in the relevant Departments. It was a necessary precondition that the DSS and the DTI be in the hands of former Chief Secretaries who had not yet learned how their Departments interacted and how the consequence of savings in one would be increased costs in the other.

As soon as a problem emerged with the Horizon project, the Treasury seized the opportunity and told its old boys to go into action to clobber the contract with Post Office Counters Ltd. and impose payment of benefits through banks, as it had often wanted to do before. The problem with that policy is that it removes from the post office network a third of the income of sub-post offices. The underlying problem that the Government have is that, if they remove that income, they will render many sub-post offices—probably a third of the network—non-viable. Indeed, many sub-post offices receive more than half of their income from the DSS contract.

There are only two solutions to the problem. One is to provide alternative sources of revenue for the sub-post offices and the other is to provide a subsidy. Today, the Government are taking the first step towards subsidies. However, Ministers will have been given permission to introduce new clause 1 only with extreme reluctance on the part of the Treasury. It had hoped to get away without a subsidy clause and that is why it was not in the original Bill. The Secretary of State was forbidden from including a subsidy clause at that stage—if he even asked to do so—and it was only when uproar began to grow in the sub-post offices that he had to announce on Second Reading that he was considering introducing such a clause. He did not dare announce it before the two debates last week, for fear that those protesting would have realised that the new clause was permissive rather than prescriptive because it uses the word "may" rather than the word "shall".

Mr. Letwin

Is not another reason why the Secretary of State might not have wanted to present the new clause to the 2,000 sub-postmasters is that they want not subsidies but a viable future?

Mr. Lilley

My hon. Friend is right. That is central to the Opposition's case about the fallacy of what the Government are doing.

Initially, the Secretary of State would have met stalwart resistance from the Treasury, as I am sure he would confirm. The Treasury would have opposed the introduction of any power enabling the right hon. Gentleman to subsidise the post office network. It is almost certain that the right hon. Gentleman would have had to enter into an agreement with the Treasury that the proposal was being introduced only for cosmetic reasons, to placate the sub-postmasters, sub-postmistresses, pensioners, young mothers and disabled people who were frightened that the post office network would collapse without subsidy.

The Secretary of State is sniggering in a complacent and self-satisfied manner. I hope that the Government's freedom of information legislation will mean that we will be able to learn the terms of the agreement with the Treasury that has enabled him to introduce the new clause.

The right hon. Gentleman may be sniggering now because he thinks that the Freedom of Information Bill is also a cosmetic exercise and that he will not have to reveal the terms of that agreement. However, I rather think that he will. Advice to Ministers may be precluded from the Freedom of Information Bill, but agreements between Ministers are not. If he were candid, he could tell the House today the nature of his agreement with the Treasury—or at least whether such an agreement exists, even if it remains secret.

Mr. Letwin

If my right hon. Friend pursues this line of inquiry, is he not worried that the Secretary of State will bring forward further measures in another place to amend this Bill to prevent the Freedom of Information Bill applying to it?

Mr. Lilley

I would not put it past the Secretary of State to wish to do that, but I am confident that he would find the option outside the terms of the long title of the Bill. However, the Freedom of Information Bill has not completed its passage through the House and the Government may try and amend that instead.

Mr. Bercow

The clause is imprecise and does not specify the sums that would be available, or the circumstances in which they would be allocated. Does my right hon. Friend agree that that means that the Secretary of State has no defence on grounds of commercial confidentiality?

Mr. Lilley

I am certain that that is the case. It is alarming for Parliament to agree a clause such as new clause 1. It is open ended and not specific, yet it gives the Secretary of State enormous powers. The Secretary of State can delegate those powers to other people, of unknown provenance, and they enable money to be allocated in ways that we have no guarantee would be fair, equitable or above board.

I suspect that the Secretary of State has got away with all that because he has promised not to use the provision. Therefore, the House faces a dilemma. We do not want the clause to be exercised or subsidies used to support the post office network. The network should be paid for providing a service, not subsidised in lieu of that. However, the Government took the first false step and we need a mechanism for subsidising the network until a Conservative Government can get back in office and restore it in a more sensible and fundamental way.

Mr. Prior

If we were looking at a one-off, measurable change that reflected a change in technology, I could understand the argument for a subsidy of a given amount and for a given amount of time. However, as I understand it, we are looking at a permanent diminution of income, amounting to perhaps 50 per cent. of the revenue of a sub-post office. How can that possibly be rectified by anything in new clause 1?

Mr. Lilley

My hon. Friend is absolutely right. The Government have created a black hole and are now creating a rather circumscribed mechanism—conditional and tentative—for filling it up. As I shall show in due course, even if they filled up every cubic inch of that black hole, they would still leave the network in difficulties. If they replaced every penny of revenues that the post offices and sub-post offices currently receive from the Department of Social Security contract with a subsidy, the sub-post offices would still lack the necessary footfall—that is, the trade generated by pensioners, young mothers, disabled people and others who collect their benefit and spend a little of it in the sub-post offices, which thereby generates additional income over and above the fees paid by the DSS for the task of distributing its benefits.

The value of that trade must be significant. I believe that my hon. Friend the Member for West Dorset (Mr. Letwin) will be discussing that issue. If so, I shall leave it to him.

Mr. Letwin

indicated assent.

Mr. Lilley

As we do not want to hold up the House unnecessarily by repetition, I shall leave that interesting issue to my hon. Friend.

My hon. Friend the Member for North Norfolk (Mr. Prior) questioned whether it is a permanent black hole. The alternative to subsidy is other sources of revenue. If the post offices can generate alternative revenues to replace the DSS fee, they might be able to restore viability. The question is whether they can do that. Is it realistic to suppose that they will be able to generate enough revenues to replace a third of their income by 2003–05, when this calamity will hit them? I think that that is manifestly impossible, as doing so would require a rate of growth in other revenues that would be extraordinary and unprecedented, and the Government have given no indication of where it would come from.

The Government have indicated that they are going ahead with the truncated Horizon project, implying that that has the potential to generate massive revenues. When we originally introduced the Pathway-Horizon project to automate the delivery of benefits, we saw one of the virtues of computerising all the sub-post offices as enabling them to build on that computer link to deliver other services. However, we never imagined that that was more than a by-product. The Government have cut away the core, central purpose of the project—the delivery of benefits—and left the by-product on a stand-alone basis.

It is a very costly project—the Secretary of State's estimate is £800 million to £900 million; so not until it has generated £800 million or £900 million worth of revenues will it be able to contribute a penny to filling the black hole created by the absence of the DSS contract. When will that be? When will that project have repaid £800 million and started filling the black hole that is created by the removal of the DSS fee?

I asked the Minister for Competitiveness that question in last Wednesday's debate in Westminster Hall, but he did not answer it. Apparently, it is the tradition in Westminster Hall not to answer questions from other people. It is not supposed to be a controversial, adversarial place in which people ask difficult questions, and I was out of order in doing so. Perhaps he will answer the question today. When will that project generate a penny of extra revenues? Of course, the Government say, "We are subsidising part of the contract and £500 million will come from Treasury machinations and will not be expected to come from the Post Office." It will still have to come from the taxpayer, so it is an alternative form of subsidy. Only £400 million will have to be paid off by sub-post offices to pay for the contract. It is a funny business to enter into a scheme that is designed to save money and then conceal the fact that it will cost money by subsidising half of the scheme.

5.45 pm

In any event, the Horizon project so far is primarily an internal accounting and management tool for sub-post offices. The existing functionality is designed—doubtless it is useful—to improve the management of sub-post offices and to bring some centralised accounting and other functions to them. As yet, the functionality does not exist. It has not been written and it is not in place to engage in commercial business, particularly banking business, in which the Prime Minister and the Secretary of State have asked us to put much faith.

Mr. Drew

I think that the right hon. Gentleman is talking historically. I have talked to Post Office Counters Ltd., and I understand that it has a pilot project up and running, which means that it can do business with the banks. The issue now is negotiating rates, which is to be expected, but it is important to get it on the record that the scheme is feasible.

Mr. Lilley

Indeed, mechanisms and relationships exist between the existing sub-post office network and the banks, but that is not through the Horizon project. The Government will go out to tender later this year to seek companies that are willing to write the software and to produce a package that will enable post offices to receive and transmit money automatically from the banks, and carry out the banking function of Lloyds, National Westminster, Barclays and HSBC. They will act as a local link, and basically fulfil the Secretary of State's pledge that everybody having by compulsion had his or her money paid into a bank account, can have it transmitted to the local post office, from which he or she can draw it out. That system is not yet up and running. Indeed, it is not even out to tender.

I visited a post office in the constituency of the hon. Member for Stroud before he temporarily became its Member of Parliament. The early stage Horizon project is operating there, and 300 other post offices a week are coming online. It is essentially performing an internal management function. For the record, it does so using a smart card rather than a swipe card. The original project was designed for smart cards rather than swipe cards, but that is an aside.

It is unlikely that Horizon will enable extra revenues to be generated in the time scale that is being forced upon it by the Government through the abolition during 2003–05 of the Post Office contract. Subsidy is inevitable if the Government are to protect and preserve a national network of sub-post offices. However, will the subsidy necessarily go to post offices? The new clause allows the Secretary of State to make by order a scheme for the making of payments for the purpose of assisting in the provision of public post offices … or assisting in the provision of services to be provided from public post offices. That would enable the Government to subsidise the provision of banking services from sub-post offices, which would effectively subsidise the banks.

The Government propose to transfer the cost of distributing benefits from sub-post offices to banks. They have provided some misleading figures suggesting that it costs, on average, 49p per transaction to deliver a payment by the order book system through sub-post offices, but allegedly only 1p through the banks automated clearing system. The automated clearing system will charge the Government 1p for transmitting money from the Benefits Agency to a local bank. However, that is not the same as the cost of withdrawing money from a bank account or running a bank account. As I mentioned last week, the Government—at least, another Department of this unjoined-up Government—have helpfully issued a report on the competitiveness of the banking sector. Members who have read as far as page 283 will have found appendix D4—

Mr. Bercow

Hear, hear.

Mr. Lilley

My hon. Friend, like all my hon. Friends, has of course done so—[Interruption.] He has committed it to memory, as we may all be sure. Anyone who has read that far will know that the average cost of withdrawing money by cheque is £1.09 and that the average cost of drawing money from a hole-in-the-wall machine is more than 30p. The Government expect the banks to absorb the costs that will be incurred when people draw their benefits from the banks.

Banks, of course, will not bear the cost. Customers of banks always bear the costs of banks, and they, including benefit claimants, will do so. The Treasury proposes to transfer the costs from the taxpayer, who meets the costs of using the sub-post office system, to the customers of banks, who will meet the costs of using the banking system. Banks are not philanthropic organisations. They do not exist to deal with the problems of the general public, or even the problems of the Government—unless they are compelled to do so. Even if they are so compelled, they will be reluctant to take on people who represent an unremunerated cost.

If banks are unable to levy any charge on those who withdraw money from hole-in-the-wall machines or by cheque, they will be reluctant to accept as customers pensioners, disabled people and others who depend on benefit. The Government will be able to persuade the banks willingly to take on those people only if they are prepared to subsidise the banking system. When the Minister for Competitiveness winds up—[Interruption.) Apparently the Secretary of State will wind up: the big guns are before us, or at least the temporary pop guns.

In his wind-up, will the Secretary of State confirm that the new clause will permit subsidies that will effectively subsidise the banking system so that it may transmit money through sub-post offices? Only by that mechanism will the Government persuade the banks to take on such customers, let alone enable those customers subsequently to withdraw money from sub-post offices.

Mr. Letwin

May I press my right hon. Friend a little further on his ingenious exegesis of new clause 1(1)? Is he suggesting that it would give powers to the Secretary of State to make payments to the sub-post offices in order that they should make payments to the banks for the service of providing cash tills, or that the same route should be followed for the purpose of paying the banks for providing the connection so that sub-post offices may deliver money across the counter? Finally, is he suggesting that they might be able to make payments to the banks to subsidise them for taking on customers whom they do not want?

Mr. Lilley

My reading of subsection (1)(b) is that the Secretary of State is taking powers that will enable him to subsidise the provision of services provided from public post offices, but that he need not pay the subsidy direct to the post offices. He could subsidise the banks for providing that onward transmission to the sub-post offices. The new clause is phrased in a way that would allow him to do that, and it may be necessary for him to do so if the scheme is to be viable and he is not to end up with bankrupt post offices, with pensioners and others being refused bank accounts.

A whole array of questions remain unanswered about how the Government propose to deal with the problems of people who do not have, do not want or are not legally permitted to have bank accounts. That is a separate issue, and I appreciate that you, Mr. Deputy Speaker, would urge me to return to it on another day if I attempted to deal with it at length. I shall not try your patience. I have demonstrated that the Government have taken a route that may necessitate subsidising banks as well as directly subsidising sub-post offices.

What is the alternative to the mess that the Government are in? We could provide post offices with an income, not a subsidy. The Department of Social Security has always felt—rightly—that if the sub-post office did not exist, we would have to create it. The DSS, unlike banks, deals with people who are often immobile, who may not own cars and who cannot easily travel long distances to pick up their money. Those people want to be able to collect their money from a reasonably close outlet—namely, the sub-post office. Banks, by contrast, want people to be rich, have cars and be mobile. Banks expect people to go to a bank in town or use the internet or some other means. Hence, banks are closing branches.

Bank branches have always been fewer in number than the branch network of the Post Office. The sub-post office has been unique in dealing with the most vulnerable, immobile and often disabled people who need us to get money to them. That does not mean that we should not seek the most efficient and cost-effective ways of getting money to people. We must pay the sub-post office network to exist as an outlet in most of the parishes of this country, but if we can cut unnecessary costs in getting the money to the sub-post offices, we can make significant savings for the taxpayer.

As I recall, half the cost of the annual £400 million contract between the Benefits Agency and Post Office Counters Ltd. went on the latter's costs for warehousing, storing, printing and distributing order books, which are the most inefficient and insecure means of distributing money known to man. That is why we began a project to automate that element of delivery, so that money could go electronically to the post offices and be delivered to benefit recipients who would hold a benefit payment card. That would have cut out £140 million of fraud a year, which would have gone a long way to paying for the change.

That is a big task, but not unprecedentedly so. A similar project was successfully introduced in Ireland, which, for historic reasons, has a network of sub-post offices and a benefits system rather like ours. The people who introduced the system in Ireland were in fact contracted as part of the consortium to introduce it in the UK. Parts of the scheme are complicated, such as the so-called CAPS programme—the customer automatic payment system—that the Benefits Agency has been developing in-house. Although that was the most complicated part of the scheme, I am told that it is not what has gone wrong with it. Commercial add-ons are being retained.

Problems allegedly arose at some stage of the contract. It would be astonishing if that were not so. No major computer project anywhere in the world has not had problems of some sort. However, problems must be managed. It is the responsibility of Departments and, ultimately, of Ministers to sort them out: to simplify the system, if need be; to remove unnecessary complexities; and to deal with the apparent management quagmire that—rather than any technically insurmountable difficulties—lay at the heart of the matter. Ministers did not do that; indeed, they denied that there were any problems serious enough to delay the completion of the project by 2001. They told the House repeatedly that the project would be finished on time.

6 pm

The then Secretary of State for Trade and Industry, now the Secretary of State for Northern Ireland—doubtless he was sent to Ireland to find out how things really work—told the Select Committee that he was confident that the project would be satisfactorily completed. The Government were subsequently condemned by the Select Committee for being less than candid—a pretty damning criticism. Their defence was that it was commercially difficult for them to tell the truth. That might be described as the BMW defence, which, paradoxically, the present Secretary of State for Trade and Industry uses to excuse his predecessors for not having told the House the truth.

It would be interesting to hear from you, Mr. Deputy Speaker, or from Madam Speaker, whether it is acceptable for Ministers to say that, in future, they will deceive the House if they believe that it would be commercially inconvenient not to do so. Will we be able to accuse Ministers of misleading the House, of telling lies, or of being less than candid for commercial reasons? After all, that is what they said they did and it is what the Select Committee accused them of doing.

Ministers should have sorted out the problems that arose, rather than pretending that they did not exist. They could have introduced a newer project to deal with the problems of automation so that the money got through to the sub-post offices and savings were made during the interim process, thus ensuring that we had a network of sub-post offices that were paid an income for performing a valuable social service—the provision of benefits in their communities to those people who cannot be expected to travel long distances to collect them.

Mr. Bercow

As the debate progresses, it seems increasingly clear that the new clause represents a bale-out for the Secretary of State, rather than support for the post office network. Given that point, does my right hon. Friend agree that it would be helpful to know the exact nature and scope of the Treasury's day-to-day involvement with the proposed subsidy scheme, and in what circumstances it would be open to the Treasury to stop or restrict the application of the scheme?

Mr. Lilley

That would indeed be helpful. Of course, the new clause includes the bare-faced assertion that the Treasury has the right to prevent its implementation—there are no caveats in that provision. It would be interesting to know the modus operandi that was agreed between the Secretary of State and the Treasury.

I am grateful to the hon. Member for Stroud for endorsing the idea of a benefits payment card—a smart card to ensure the payment of benefits through a post office. I am glad that he supports the Opposition on that. I hope that he persuades Ministers to go back to that scheme.

Will the subsidy be worth while? We should subsidise sub-post offices only if the money is available and if the cost of the subsidy does not exceed the savings that were expected under the policy that made its introduction necessary in the first place. It is unlikely that the net savings—after giving the post office network enough subsidy to maintain it—will be significant; they could even disappear entirely.

Is the money available to make such subsidies? From the Prime Minister's response the other day, we got the impression that there is as much money as necessary to bale out the Government from the problems that they have created through their policy. In Westminster Hall last Wednesday, I asked the Minister whether those who were required to have their payments made through banks after 2003—pensioners and everybody else—would be subject to the same terms as those who currently volunteer to have such payments made through a bank. The payments are made monthly, four weeks in arrears.

The Minister looked distinctly fraught when I asked that question and he did not answer it. He was well aware that if millions of pensioners had to wait for four weeks to receive their pensions, instead of collecting it weekly, the poorer pensioners would experience a large gap in their cash flow. That is why the bulk of low-income pensioners, who depend primarily on the state pension, do not opt for payment through the bank, but collect their money weekly from a sub-post office.

Mr. Desmond Swayne (New Forest, West)

My constituents have pointed out that the forms are not clear. Because of their design, many elderly people do not realise that they have a choice—they think that once they have opted for the ACT system, there is no way back.

Mr. Lilley

When that point was put to the Minister of State, Department of Social Security, he said, in effect, that no one would be stupid enough voluntarily to opt for monthly payment by ACT through a bank, four weeks in advance, if they primarily depended on the basic pension. Some people may have been misled, as my hon. Friend suggested, but the Minister thinks that they are stupid if they take that course.

The Minister for Competitiveness did not answer my question last week; he obviously realised—as I could see from his expression—what a huge problem there would be if we suddenly required all pensioners to receive their payments monthly and up to a month late. There would be a gap of about four weeks when they would be without income.

When my right hon. Friend the Leader of the Opposition raised the issue of post offices at Prime Minister's questions last week, the Prime Minister, who had clearly been alerted to the problem during the two hours between the Westminster Hall debate and Question Time, gratuitously blurted out that he wanted to make it clear that pensioners would be entitled to receive their benefits not just in cash from the post office, but weekly rather than monthly. A bit of policy had been made on the hoof; the Prime Minister committed the Government to making pensions payments weekly, rather than four-weekly in arrears. In future, people can receive those payments through the post office.

I tabled a written question about what would happen if such weekly payments were extended to all the pensioners who currently have their pensions paid monthly, three or four weeks in arrears. The answer was that, by advancing everybody's payments by three weeks, there would a cashflow effect on the Treasury of £550 million. The Prime Minister has made a commitment that could cost the taxpayer up to £550 million in the year of its introduction—it would be a one-off cost, resulting from advancing the payments of those who, because they do not need continuity of payment, currently delay their payments and have them made monthly through a bank.

The actual amount would depend on how many people exercise that right; however, as it is an attractive one, we might assume that many people would choose it and that it would cost the Treasury a large amount. One has to wonder whether the Prime Minister had discussed that matter with the Secretary of State for Social Security during those two hours. Was he aware of the cost? When I tabled the question to the Department of Social Security, officials from the Department telephoned me to clarify the issue, so I had to explain to them how the system worked. They then confirmed in their answer that it would indeed cost £550 million. My estimate had been £600 million, but it was pretty close to the mark.

The Prime Minister, endeavouring to avoid a difficult headline, has committed the Treasury to paying up to £550 million in a one-off payment to get the Government out of a hole that they have created by a policy intended to save a couple of hundred million pounds a year at most. We have already heard how the Government have committed themselves to writing off £500 million of Post Office obligations to meet half the cost of the Horizon project. Therefore, a policy designed, notionally, to save money is already costing upwards of £1 billion before it has saved a penny, and before payment of any of the subsidies introduced by today's measure.

The policy is a disaster—a disaster that was waiting to happen. It has happened because two newly arrived former Treasury Ministers did the Treasury's bidding without working out what the implications were for their Departments—the Department of Social Security and the Department of Trade and Industry. Now, the only way that the Government can bail themselves out is to introduce an open-ended subsidy by means of the new clause.

We need some answers from Ministers today. Is that subsidy intended to be permanent or temporary? Will it be discretionary or automatic if, as a result of post offices closures, the access criteria are not fulfilled? Will the subsidy be to banks or just to post offices? Will it be a large subsidy—and, if so, how large—or small and insignificant? Above all, will it be sufficient to keep the post office network alive and vibrant, or will it be insufficient to do more than to slow its inevitable collapse, which the Government set in train when they announced that people would have to have their benefits paid, in the first instance, direct into bank accounts?

I hope that the Government will think again about the need for the new clause.

Mr. Mike Wood (Batley and Spen)

I may not speak as briefly as did the right hon. Member for Hitchin and Harpenden (Mr. Lilley), but I shall speak in support of the new clause, because I accept that the automated credit transfer proposals will place under threat the core work of many sub-post offices. It seems to me that the Government are right to proceed with their plans, as, to coin a phrase, doing nothing is not an option. If the experience of the previous Government does not show that, nothing does.

The Conservatives said that they would not vote against the new clause but then spoke for a considerable time, and with considerable force, about its failings. They seem to forget that in 18 years, while Conservative Governments did nothing, thousands of sub-post offices went out of business. Therefore, doing nothing is not an option, and in the face of that history—in the face of the continuing closures of sub-post offices—it would not be sensible for the Government to retreat from this plan. Extra uncertainty will help nobody—certainly not sub-post offices in my area.

The Horizon project—to be completed by next spring, in spite of what the right hon. Member for Hitchin and Harpenden said—will open up new areas of business potential for sub-post offices. Of course there is a cost, but no one could argue that it will not open up that potential.

We look to the tripartite working party set up by the Government with the National Federation of Sub-Postmasters and the Post Office to find new work for sub-post offices—not just to re-arrange what is already there, or to make available to sub-post offices the work that is currently available only to Crown post offices. The potential of the network is woefully under-used. Surely, with the will of all the parties, extra work can be found.

6.15 pm

If we are to talk about subsidy for the community benefits of post offices and the community contribution that they make, the subsidy will need to be considerable. In my area, at least, many sub-postmasters and sub-postmistresses spend much of their time on the wrong side of the counter, as it were, helping pensioners with problems not directly related to their business, reading things for them because their eyesight is not terribly good, and taking people on one side when they have problems. If we suggest that there should be a subsidy to compensate for that dimension of the work, the subsidy will undoubtedly be considerable.

I stress to Ministers the scale of the threat that ACT can pose to sub-post offices, not only in rural areas and inner cities, but in areas such as my constituency, which is neither rural nor in an inner city. At least two of the 25 post offices there depend on the payment of benefits over the counter for more than 75 per cent. of their work. As always, averages hide the full extent of the story, but almost all the business of some post offices—not only rural or inner city ones—comes from the payment of benefits over the counter.

Therefore I hope that in his final remarks, the Secretary of State will give two assurances to postmasters and postmistresses such as those that I have mentioned, not only in my constituency but throughout the country, whose business depends on the payment of benefits.

First, I hope that my right hon. Friend will give an assurance that any subsidy offered by the Government to cover the transitional period as ACT is bedded in will not be restricted to rural offices or to those in inner cities, but will apply throughout the country, and that offices will be treated on a case-by-case basis. Secondly, I hope that he will assure us that if all the efforts of all concerned, not just in the tripartite group but throughout the industry, to find alternative sources of income have not been successful by any objective criteria by, let us say, the end of 2001, consideration will be given to postponing the introduction of ACT until enough progress has been made to ensure that the changes, inevitable though they are, will not be introduced until we are sure that they will strengthen the post office network.

If the Secretary of State gave those two assurances at this stage, there would be a collective sigh of relief throughout the network, and there would be much greater willingness to work with the Government to revitalise the sub-post office network, which has for so long been lamentably ignored and left out of proper consideration. If he does so, we shall be well placed to push the changes through.

Mr. Baldry

I am pleased to be able to contribute to this debate, as I was one of just four Conservative Members who sat on the Standing Committee considering the Bill.

First, may I say how sorry I am that my hon. Friend the Member for Rutland and Melton (Mr. Duncan) is not here today. He led for the Opposition in Committee and did an excellent job, being vigorous in cross-examining Ministers on the Bill's shortcomings. It is a cause for great sadness that he is today in hospital with, I understand, a ruptured appendix. Indeed, he appears literally to have bust a gut in his opposition to this measure.

The debate may well take a little time, not least because there is absolutely no reason why the new clause should not have come before the Standing Committee. The Secretary of State today seems to have introduced an interesting new constitutional convention: if Ministers are particularly interested in a new clause they do not have it discussed by the Standing Committee, but reserve it for Report and Third Reading. That undermines the whole purpose of Standing Committees, which is to scrutinise, rationally and deliberatively, measures brought forward by the Government, doing so line by line and clause by clause.

On the face of it, the Secretary of State is today telling the House "We always intended to bring forward this clause. We deliberately did not put it before the Standing Committee, because we thought it should be scrutinised by the House as a whole." The House as a whole will not have known that, but I question whether that is the truth and accords with the facts.

As one of those who sat on the Standing Committee, I know that much of the Committee's time was taken up with the concern about maintaining the integrity of the post office network in general and sub-post offices in particular. I suspect that during that time we visited practically every post office in my constituency, and the post offices in the constituencies of other hon. Members. I understand that the Minister himself was dispatched by his private office to visit rural post offices in north Wales.

At no time during the Committee's deliberations did the Minister tell us "Don't worry chaps. There is no problem. We shall sort it out, and come Report and Third Reading we have a wizard wheeze: we shall come up with a new clause which will provide for a subsidy, so you can curtail these discussions." I for one would have been very grateful for that, because as well as being one of only four Conservative Members on the Committee, I was one of only three Conservative Members on the Trade and Industry Select Committee. The records of the House will show that on many days I was in both places at the same time, often on the Select Committee having to cross-examine the Secretary of State and others about their total incompetence in handling the Rover fiasco. So I would have been very grateful if we could have short-circuited proceedings in the Standing Committee.

If the Minister for Competitiveness—for that is his title—could have told us "Much of this discussion can be curtailed, because we shall bring forward a new clause on Report", I suspect that many of us would have said that we would look at it, and the Standing Committee procedures could have been much shorter, but we never had a scintilla of a hint of that.

Moreover, the Minister for Competitiveness—because he clearly recognised that he was under considerable pressure from colleagues on his own side of the House, like the hon. Member for Batley and Spen (Mr. Wood), who urged him to consider delaying the introduction of automated credit transfer—decided to send out a "Dear Colleague" letter. We all know "Dear Colleague" letters; they are letters that Ministers send to every hon. Member, so that they cannot be accused of being partial, but they are really meant to give succour to their own Back Benchers and be sent to constituents who are raising problems. We had one today on pensions. It included charts, and I was surprised that it even included a video programme, on what the Government were supposedly doing for pensioners.

We had a "Dear Colleague" letter on the Post Office network. There was not a scintilla of a shadow of a suggestion of a subsidy in the letter and not even a hint that the Government might table a new clause on Report. Indeed, the Minister said: The Government has put its money where its mouth is. That is not a term I would use as a Minister, but this is new Labour, new jargon. There was not a whisper or a hint of a subsidy.

That must cause the House to consider the vigour with which the Government are advancing the new clause today. Having heard the Secretary of State, one must have more than a suspicion that what really happened was this. Ministers hoped that they could brazen it all out, that by the time the Bill went through Committee the sub-postmasters and sub-postmistresses would have been bought off, and that the Minister for Competitiveness could visit sufficient sub-post offices throughout the country and reassure them that there was no problem. But, of course, the Government could not do that, because the sub-postmasters and sub-postmistresses knew that there was a problem, and they would not let up. What is more, customers of sub-post offices around the country were determined that their voice would be heard.

In every village in my constituency, and I am sure in all the constituencies of my right hon. and hon. Friends, people signed petitions. The petition of 3 million that was delivered to Downing street last week was but the tip of an iceberg, only part of all the petitions that had been signed. Many were produced through local newspapers and regional newspapers, such as the Western Morning News I suspect that huge numbers of people signed petitions.

I am sure that if we could see the minutes of Cabinet meetings held a couple of weeks ago, we would find that the Secretary of State for Trade and Industry presented a paper to his Cabinet colleagues explaining that they were in some difficulty, that they were coming up to Report and Third Reading and that there was about to be a substantial lobby of Parliament by sub-postmasters and sub-postmistresses. What was more, local elections were coming up. In the local elections on 4 May the Labour party will defend many district council seats in rural areas and other parts of the country. I am sure that the Secretary of State is conscious that it is not particularly popular at present.

So the Secretary of State prevailed upon his Cabinet colleagues to allow him to table a new clause. I have no doubt that minutes went between the Department of Trade and Industry and the Treasury, with the Treasury saying "Of course, you can do that, provided it makes no commitment whatsoever and makes it absolutely clear that no subsidy will be introduced without express Treasury permission."

When one looks at what the Secretary of State said last week in response to the lobby by sub-postmasters and sub-postmistresses, one sees that his line to begin with was very robust: Next week we will table a new clause to the Postal Services Bill when it is debated on Report. It will enable me to set up a financial scheme to ensure that essential services can still be delivered through a nationwide network of local post offices. Our key target is a viable future for the network. We want to ensure that the Bill covers all possibilities. I pause there. Clearly there seems to be a recognition of the fact that what the Government are doing in the Bill may well mean that unless they take some action there will not be a nationwide network of local post offices.

The Secretary of State then said "It may"—that is the crucial word— well be that in future, because of changes that are being introduced. financial assistance should be offered to the network.—[Official Report, 12 April 2000; Vol. 348, c. 385.] There is no guarantee from this clause that anything at all will happen as a consequence. There is no guarantee that the Treasury will put its hands in its pockets to the extent of one penny as a consequence of this new clause. It may well be that all that we are seeing in this debate is an almighty con of sub-postmasters and sub-postmistresses, who may think that as a consequence of the new clause there will be a rescue—some help—offered to them, but who in reality will discover that none whatsoever is forthcoming.

We support the National Federation of Sub-Postmasters in its desire for income, not subsidies, for sub-post offices. The clause is needed only because the Government are proceeding with their disastrous policy of switching to ACT, which threatens the survival of thousands of sub-post offices across Britain. Of course, the NFSP is not unaware of the fact that the new clause offers sub-postmasters no guarantee in the future. At the very best, it may offer them only an unspecified subsidy.

6.30 pm

Colin Baker, the federation's general secretary, yesterday said: sub-postmasters want to have a commercial living in viable and vibrant post offices. The prospect of existing on a subsidy therefore will not be a very pleasant one for them … We would say the answer to the network is investment, not subsidy allowing us time to get through this difficult period and out the other end. As they say, give a man a fish and he will eat for a day, give him a fishing rod and teach him to fish and he will eat for a lifetime. Several colleagues have made the point that sub-postmasters want some certainty. My hon. Friend the Member for North Norfolk (Mr. Prior) made the pertinent point that sub-post offices are private businesses and that those who run them need to have an idea of what lies ahead. The Government's new clause gives them absolutely no idea of what will happen in the future, and the Secretary of State has provided no figures on the extent of the subsidy or the conditions under which it might be introduced. To whom will the subsidy be paid, how will it be paid and in what circumstances will it be paid? Will it be paid to all post offices, will it be paid on the basis of transactions or will it be paid to some post offices when they fall below a certain threshold? There has not been a scintilla of substance in anything that the Secretary of State has said on any of those matters.

Neither has the Secretary of State provided any vision of how he sees the post office network developing. That is a pity. If he had simply read The Guardian the other day, he would have seen sound advice in an editorial. It observed: Rural post offices must be kept open. They are the arteries of country living and of the rural economy. It is very sad that the government has only been forced into devising a strategy for survival because it failed to see the obvious consequences of its decision to pay benefits directly into bank accounts instead of over PO counters by 2003. Many sub-post offices rely on money from this source for 40 per cent. of their incomes. But at least the government is at last thinking about a long-term solution, under pressure from public opinion, including this week's 3,000 strong demonstration of sub-postmasters in London and the outcry against Barclays' decision to close outlying branches. This problem will not be solved by leaving it to market forces. Companies and banks will not rush in to fill the rural gap because the profits are simply not there. Nor can a single post office do much because it is only one spoke in a solution that must involve the underlying strength of post offices: the fact that they are a network and there are 19,000 of them. The seeds of survival are waiting to be planted. The Secretary of State has given no clues about the long-term survival prospects of post offices. He has merely said that if certain unspecified conditions arise, he may introduce an unspecified and unknown subsidy to help some unspecified and unknown post offices in the future. We did not hear in Committee and have not heard in this debate any suggestion of how the Government might turn around their mindset and stop thinking of sub-post offices as part of an old economy. In fact, they can be part of the infrastructure of a new economy.

We are moving increasingly into the age of the internet and of online shopping and communication. When that happens, goods will still have to be delivered. Vibrant post offices are ideal collection points and new technology can do much to assist the rural post office network. One hopes that the Government will turn their mind to thinking positively about how we can enhance the post office network rather than closing it.

We must not forget just how essential sub-post offices are to the life of England as a whole. I suspect that my constituency is not unusual, because practically every parish council in it has written to me expressing concerns about the Government's proposals. I shall share with the House the thoughts of some parish councils on their concerns about the threat to the rural post office network.

Bodicote parish council says: We believe that the loss of this business is likely to have a deleterious effect on smaller Post Offices, particularly in local areas and may well threaten their livelihood. We believe that closure of these smaller Post Offices would in turn have a retrograde effect on local communities … Our Post Office currently stocks a range of basic items; this is the only place in our village where such things can be bought—the alternative is to travel to the supermarket in the next town. We believe our local Post Office plays a vital role in the local community, not least as the only focal point in our village apart from public houses. We wish to urge the Government to make a commitment to maintain the existing network. Middleton Stoney parish council says that it is concerned at the potentially adverse effect on rural post offices of the proposed changeover to payment of benefits by ACT. Many rural post offices depend on the revenue from such payments and there can be little doubt that such a change would cause many such post offices to fail. At a time when the banks are intent on closing branches, the concurrent loss of rural post offices would cause considerable hardship, particularly to the more elderly rural population who are often ill served by public transport. Many could face a situation where they have no local access to either post office or bank. New clause 1 refers to a scheme, but clearly not all sub-post offices will be affected in the same way. The hon. Member for Batley and Spen expressed disquiet about the Government's proposals and said that there were at least two post offices in his constituency where more than 75 per cent. of their business comes from paying benefits and making other social security payments. Such post offices will be hit early by the changeover to ACT. When the Secretary of State responds, will he tell us whether any scheme that the Government intend to introduce will be graded so that it responds to the sub-post offices that run into difficulties earlier than the others? Alternatively, will the Government seek national coverage and wait until the position nationally gets desperate? That will inevitably mean that a few sub-post offices will go to the wall before the Government have introduced any scheme if, indeed, they genuinely intend to do so.

The users of sub-post offices are, by definition, often the most vulnerable in our community. As Milcombe parish council says, the proposal envisaged by the Government will hit the most vulnerable members of the community, i.e. senior citizens, those on benefits, single/young parents unable to travel, disabled, those without their own vehicles living in villages without public transport. The majority of these people do not have bank accounts and have no access to the nearest town. Remember also that banks in rural areas have also been closed down. Mr. Holloway, the sub-postmaster at Steeple Aston, sent me a cogent letter summing up the views of all of those postmasters involved: The nearest bank to our village is twelve miles distance and with limited public transport, banks are largely unavailable to a large section of our community. Most of these people are elderly, disabled, poor or disadvantaged in other ways and rely on their local Post Office and village shop. Modern technology is beyond them and of little help. He continues: if we lose the Post Office or if the income generated from it is greatly reduced, the viability of the shop comes into question. Secondly, if people go into town to obtain their money, costing them nearly £3.00 return bus fare, or for the luckier few, a similar amount for petrol and parking, then they will shop in town (while they wait several hours for the return bus) again, affecting the income of the shop. My right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) made a telling point about that. The general footfall of business resulting from the fact that post offices presently pay benefits is crucial to many businesses. Post offices want customers, not subsidies, and if customers stop coming for whatever reason, they will lose the post office business and the business of the village shop.

Mr. Holloway says: If we lose the Post Office, it is more than likely that the shop will be forced to close. If that happens the heart of the village will be lost. Steeple Aston is "still" a village community. The shop supports most of the activities, by acting as the ticket office for many events, a collection point for information on activities, advertises events and activities and promotes many clubs and village organisations. The shop also acts as a meeting point, many villagers meet at the shop, by arrangement, or largely by chance, which helps them keep in touch. Many of the older villagers find it an important social focal point, without it they will be largely isolated. We keep a look out for the old and infirm, if someone fails to come to the shop, we arrange for a neighbour to call and check on them. We also act for the Health Centre (a couple of villages away) by handling the issue of repeat prescriptions, for people on regular medication, if the prescriptions are not collected, we can again check on the well being of the recipient. It is difficult to put a value on these services, but without them the quality of life in our village will be greatly reduced. The huge number of people throughout the country who have signed petitions makes it clear that the people of the United Kingdom have no doubt about the value of post offices and sub-post offices in villages as well as in towns and on the edge of towns.

We could accept—or at least have greater confidence in—the Government's commitment to maintaining the integrity of the post office network if the Secretary of State was not quite so opaque. The new clause is not a simple amendment, but contains a number of subsections and paragraphs, ending with a damning conclusion that nothing will happen without the express permission of the Treasury.

Under those circumstances, no one can have any confidence that any money will be forthcoming. Whatever acronyms are used for sorting out the public spending round, such as DELs—or even Delboys—nothing will happen unless the Department of Trade and Industry makes a bid for funds from the Treasury. The Secretary of State has made no commitment today that might demonstrate that he is prepared to do even that. Indeed, as Hansard will show, remarks do not contain a single sentence that might give the House an indication of the precedent conditions on which such a scheme may be introduced. There has been no indication whether a scheme will be introduced based on the number of post offices being closed or the viability of failing post offices.

Imagine someone coming to one of our constituency surgeries on Friday or Saturday saying, "You were in the House and heard the Secretary of State first-hand. I am running a village post office and want to know whether I should sell it or invest to expand. Can you explain the circumstances in which I might be entitled to a subsidy to run my business?"

None of us in such a position would be any the wiser, as the Secretary of State has given the House no information giving us confidence that money for any particular sub-post office would be forthcoming, and he has not mentioned the terms or circumstances of such a grant.

6.45 pm

Of course, the fact that we have got this far is greatly to the credit of people throughout the country, including many Members of Parliament, parish councils, post offices and communities involved in the campaign to save village post offices. At the last moment, the Government have been willing to make a nominal concession, even though they were not prepared to make any concessions in Committee. The Secretary of State in his reply must give the House better guarantees than he did when opening the debate, and reassure us that the subsidy will be genuinely forthcoming and is not simply a sop to get the Bill through Report and Third Reading or, more significantly, to get the Government through the haemorrhaging of Labour support in the local government elections on 4 May.

The Government Whip, the hon. Member for Plymouth, Devonport (Mr. Jamieson) may laugh, but like my colleagues, I have spent the greater part of the past two weeks knocking on doors in my constituency. When one has been a Member of Parliament for as long as I have, one has walked the streets many times before. I can tell the hon. Gentleman that he need not look forward to waking up on 5 May.

Announcing a subsidy would be pitiful if it were simply a sop to get the Labour party through a massive loss of seats in local elections in rural areas on 5 May. On the other hand, it could be a genuine attempt to address what the Government now accept as a real problem resulting from the introduction of automated credit transfer, which would undermine the long-term viability of the rural post office network. The Secretary of State owes it to the House and the rural post office network to give Parliament and the country much more information about how the new clause will operate than he has done so far.

Of course, had the new clause been introduced in Standing Committee—as it should have been—we could have spent some time cross-examining the Secretary of State or the Minister for Competitiveness; we could have tabled parliamentary questions and fleshed matters out. Introducing what the Secretary of State himself admits is one of the most important clauses in the Bill on Report is a discourtesy to the House—although that is neither here nor there—and, much more importantly, avoids proper scrutiny, giving the impression that the new clause is not a matter of substance, but a sop. By such means, the Government hope to convince people that they are doing something for rural post offices when, in truth, they have little intention of doing anything to protect the integrity of the rural post office network.

Mr. Howard Flight (Arundel and South Downs)

As my hon. Friend the Member for Banbury (Mr. Baldry) has just pointed out, the debate has exposed the fact that new clause 1 is of no value in addressing the problem. Whether it is con or sop, it fails to make explicit specific sums of money, periods of time or circumstances, and therefore will not help a retiring sub-postmaster sell his post office and will make no difference to his position. I hope that the Government are not deliberately intending to mislead the public and sub-postmasters in presenting the new clause purely as a piece of window-dressing. Whether or not that is their intention, the new clause does not solve the problem.

The whole House, I believe, thinks it essential for post offices to develop new business corridors. Recently, I had a long conversation with a sub-postmaster in my constituency, who spoke enthusiastically about Horizon and how he would sell people tickets for theatres, travel and so on. The closure of branches by clearing banks provides a great opportunity for the post office network to do the grassroots job of banks and to pick up banking business. I shall focus on the latter point. Sub-post offices are a network in the banking business, serving the underprivileged community whom the Government like to call the socially excluded. Massive effort has been expended by the Government in focusing on the socially excluded and the fact that they do not have banking services; we have also heard lots of humbug, talk and waffle about credit unions.

The network of sub-post offices is the ideal network to provide banking services for the socially excluded. Its banking business should be supported, and the proposed version of ACT should not be introduced. I have a vision of the post office network of the future providing banking services to people who currently do not have them, in the more depressed areas of Liverpool and other rundown cities. The future of the sub-post office is not just a rural issue but an urban one.

A huge opportunity is being lost, and I urge the Government to think again and to postpone the introduction of ACT. They should plug in their social exclusion unit, which is advising them that the 20 per cent. of the community who do not have bank accounts should have them. Those people will not get accounts from the clearing banks, which are closing their branches. The Government should work with sub-postmasters—that splendid body of self-employed small business men—under the umbrella of what is in essence a public sector body. They are just the job to provide what is missing in banking services for our community.

Why waste the time of the House? Why try to mislead postmasters with the empty promise of new clause 1, which will not stop the collapse of the sub-post office network? It is at best honestly intended, and at worst purely a con, but it will not make post offices saleable when postmasters retire. The Government must think again, delay ACT and think constructively about how the sub-post office network can be rebuilt in the future.

Mr. Prior

At the beginning of the debate, my hon. Friend the Member for South-West Hertfordshire (Mr. Page) described new clause 1 as the Corporal Jones clause. That was an accurate description. The new clause has been forced on the Government at short notice in response to 3 million names on a petition, pressure from the Opposition, the forthcoming local elections, and a realisation that the introduction of ACT would have a dramatic impact on many thousands of sub-post offices around the country.

This evening we have heard that up to 75 per cent. of the income of a sub-post office can come from the payment of benefits and pensions. In my constituency, the level of income from that activity can be well over 50 per cent. It can be a great deal more when one takes into account the footfall impact if there is a village shop alongside or within the post office.

The most objectionable aspect of new clause 1 is the thought behind it—the assumption that commercial activity can be replaced by Government handouts. It is assumed that the entrepreneurs—the decent men and women who run sub-post offices—will be happy with handouts from the Government on an entirely discretionary basis.

Mr. Letwin

Was it not remarkable that when we asked the Secretary of State whether he intended a temporary subvention to enable viability on a commercial basis thereafter, or a permanent discretionary subvention, he produced what can best be described as extremely elegant waffle?

Mr. Prior

My hon. Friend is too kind. It was cosmetic flannel. The new clause is designed as a sop, as my hon. Friend the Member for Banbury (Mr. Baldry) said, to enable the Government to get through a few difficult weeks. It will become increasingly apparent to sub-postmasters and mistresses as time goes by that, under the new clause, they will be exchanging a commercial business and an income stream for which they have worked diligently over many years for handouts from the Government. No one who has been in receipt of handouts from the Government will consider that a reasonable swap.

I do not believe that the savings of £400 million a year identified by the Treasury will be realised. As my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) said, there is a maxim in the Treasury that savings in one Department must take into account the extra costs in another. It is clear from new clause 1 that there will be costs in other Departments to offset those savings.

Post offices will not be able to replace the loss of income with Government subsidies, and the post office network will be increasingly vulnerable. The new clause is wholly unsatisfactory, a fact that the Opposition view with a great deal of suspicion. As time goes by, sub-postmasters and mistresses across the country will realise that they have been sold a pup by the Government. I hope that the Government will think again carefully about delaying for a long time the introduction of ACT.

Mr. Brady

I am pleased to have an opportunity to speak briefly in the debate on new clause 1, especially as I want to flag up the importance of the sub-post office network, not just in rural areas, which have been alluded to at length, but—

Mr. David Jamieson(Lord Commissioner to the Treasury)

indicated assent.

Mr. Brady

I see that I have some support from someone on the Government Front Bench, for which I am grateful. As I was about to say, the network is also important in urban and suburban areas.

Mr. John M. Taylor

On the point that my hon. Friend is developing—the assumption that we are speaking of a rural problem, whereas in fact it is an urban problem—will he speculate whether those who do not have a bank account and are unlikely to have one are predominantly in rural or urban areas?

Mr. Brady

I suspect that they are in both but that there is a large concentration of those people, whom the Government sometimes choose to refer to as the socially excluded, in the urban areas and in suburban areas. In parts of my constituency, some fairly large council estates at present have the benefit of some local shops and post offices, which are being placed under threat by the Government. I am sure that that is the case also for many Labour Members. There is widespread concern that the facilities that are currently available for people in those circumstances may be removed.

Mr. Letwin

Will my hon. Friend allow me to say that the right hon. Member for Birkenhead (Mr. Field) who is, alas, unable to be in his place, but who is the chairman of the all-party group of which I am the secretary, specifically asked me to mention in the House that he believes that it would be a disaster if measures were taken exclusively for the rural areas, because as my hon. Friend said, it is classically in the urban areas where a great part of the problem lies?

Mr. Brady

I am grateful to my hon. Friend for making that point, and for the opportunity to pay tribute to the right hon. Member for Birkenhead (Mr. Field), who speaks a great deal of sense on many matters, and who shares my determination to defend the excellent grammar schools that we have in some parts of the north-west—another issue on which I have considerable sympathy with the right hon. Gentleman.

The hon. Member for Weston-super-Mare (Mr. Cotter) paid a rather bizarre compliment to the Secretary of State, by suggesting that he had been both open and opaque in his presentation. Presumably that was intended to be at least half a compliment, but the only translation that I could come up with was that the hon. Gentleman was accusing the Secretary of State of being transparently evasive in what he is doing.

Mr. Taylor

Would it not be more appropriate to say that the right hon. Gentleman was incandescently obscure?

Mr. Brady

I am grateful to my hon. Friend. No doubt the creativity of our hon. Friends could produce many other variants.

New clause 1 provides no certainty whatever. It sets out no ground rules for determining whether there should be a subsidy, when there should be one, or how it should be applied. Important issues arise for sub-post offices in urban and suburban areas, where the market circumstances may be rather different from those of isolated rural sub-post offices. There are conceivably many instances when a town, village or community in an urban or suburban setting might have more than one post office. It is quite possible that both, or all, those post offices would be threatened, because they might all depend heavily on the income that they currently derive from the payment of pensions and other benefits.

7 pm

New clause 1 contains no criteria or ground rules suggesting how the Government would conclude whether one, both or all the post offices in question would be supported. Presumably, if their principal objective is to preserve a community service, the logic can extend only to support for one post office, because that would achieve the aim of securing the service on whose protection they wish to spend public money; but how are they to decide the way in which the subsidy is granted? Should they divide it between the post offices in an attempt to protect them all, and in so doing perhaps risk losing them all? The Secretary of State has been utterly opaque, and I can only assume that he has been deliberately opaque.

Mr. Swayne

May I suggest a reason for that opacity? Last Wednesday most Labour Members had a very disagreeable day. Anyone who was downstairs in the canteen and saw them buying tea for their constituents in order to salve their consciences will realise that new clause 1 is an emergency measure tabled by the Secretary of State to deal with the consequences of that disagreeable day, and that its lack of clarity results from the fact that none of it has been thought out.

Mr. Brady

I am always delighted to hear that members of the public have received some benefit from their Labour representatives. Even if it only runs to a cup of tea, that is a considerable improvement on what might otherwise be on offer—although, in this instance, the cup of tea seems inadequate compensation for the loss of a vital public service.

I hope that when he responds the Minister will put some flesh on the bones of new clause 1 by informing us of at least some of the criteria that are intended to apply to the distribution of subsidy to the post office sector as a whole, and to the distinction between different types of post office. I assume that the Secretary of State hopes to retain the public service benefit; what "map" has he in mind, in terms of the density, or distribution, of sub-post offices? What would the Government regard as the minimum requirement? How far does the Secretary of State think it reasonable for a pensioner or recipient of other benefit—perhaps a disabled person—to have to travel? What travelling time does he consider appropriate?

As in other contexts, some Members may be more concerned with the interests of large rural areas. As only a small part of my constituency is rural, I tend to turn my mind to the suburbs. It may take a person living in a suburb or city just as long to travel to a sub-post office as it takes someone in a rural area to traverse what is, in absolute terms, a greater distance. I should like to hear what criteria the Secretary of State would consider necessary to trigger, or justify, subsidy in such circumstances.

Mr. Bercow

I am sorry to pursue my hobby-horse again, but does my hon. Friend agree that it is vital in terms of confidence for us to have information confirming that the criteria are specific and precise and lend themselves readily to objective assessment, so that we can be assured that decisions will not be made—either by the Secretary of State or by his agents—according to arbitrary fiat or political preference?

Mr. Brady

I entirely agree. It is important both for steps to be taken to ensure that the subsidy—if there is any—is distributed fairly, and for a clear rubric to be set out explaining how it will be distributed and in what circumstances. Sub-post offices and those who depend on them must have some guarantee that new clause 1 will actually deliver.

The fairness and clarity called for by my hon. Friend are particularly important in view of the disproportionate effect that the proposals may have on certain social and demographic groups. According to recent newspaper reports, the Labour party has now decided that it has no intention of targeting the elderly, because it does not think they are likely to vote Labour in the future.

Mr. Bercow

And it thinks that they are all racists.

Mr. Brady

Indeed.

Admittedly, I hope that most people who have achieved a certain age will have the wisdom not to vote for the Labour party; but given that Labour has said in internal strategy documents that it has no intention of appealing to the pensioner vote, we are forced to ask again what exactly is the purpose of new clause 1.

If any substance were given to the new clause—if the Government acted to protect sub-post offices—many pensioners would benefit. As my hon. Friend suggested, it would be entirely wrong for the funds, if there are any, to be distributed according to party advantage. That surely would not happen under the present Government, but I venture to make another suggestion.

The new clause was introduced at a late stage. It is a panic measure, tabled in response to a large petition, a lobby of Parliament and the sudden realisation that this was a matter of great public concern. Given that the whole project was conceived as a response to obvious public dissatisfaction and worry about the closure of post offices, we must be left with the suspicion that if the new clause is adopted, and if the Treasury ever agrees to provide funds to back it up, what decisions are made may well depend on who is prepared to shout loudest and make the biggest row about the possible loss of post office services in their communities.

Let me now say something about the concern caused by the Government's general policy of moving towards a subsidised system of provision.

Mr. Bercow

Before my hon. Friend embarks on his new point—which I await with beads of sweat on my brow, and with eager anticipation—let me ask him this. Does he agree that, in view of the Secretary of State's opacity, and the uncertainty about the final form of the scheme, it is important that the regulations—subject to the affirmative procedure—should also be subject to a minimum consultation period of three months?

Mr. Brady

My hon. Friend makes a wise point. I was not, of course, going to comment on the beads of sweat that are apparent on his brow. It is indeed important that there should be proper consultation and an appropriate period for consideration of the detail of any proposals that the Secretary of State may present at some point in the future. Those who have a legitimate interest or anxiety, whether they run sub-post offices or depend on their services, should be able to express their views before the affirmative resolution procedure is implemented. We can hope for a truly fair, clear and reasonable system only if that happens. Even if all those criteria are fulfilled, we are left in an unfortunate position. The Secretary of State claims that his objective is to encourage greater commercialisation of the Post Office and greater entrepreneurship in sub-post offices, yet all his actions and proposals will achieve the opposite. Far from encouraging entrepreneurship or persuading sub-post offices to explore methods of maximising their income by providing services, the Secretary of State will lead them to dependence on public subsidy. By following that unfortunate path, he may achieve the reverse of his intentions, discourage entrepreneurial endeavour and proper commercial activity in sub-post offices and push them towards a model of employment status, or even the status of a nationalised service.

It is bizarre that some Liberal Democrat and some Labour Members have tried to link the new clause with privatising the Royal Mail. That argument is entirely bogus because, as my hon. Friend the Member for South West Hertfordshire (Mr. Page) pointed out, sub-post offices are already predominantly in the private sector. New clause 1 is far from being a proposal for privatisation of post office services; indeed, it is a proposal for the potential nationalisation of part of the network.

New clause 1 would discourage entrepreneurial activity, commercialisation of the network and the independent small businesses that have served communities so well for many years. I repeat the caveat that we do not know whether new clause 1 will be accepted. However, if it is to have substance and revenue to support it, or if it is to be effected meaningfully, it will encourage a state, nationalised post office service. If that happens, the fears of my hon. Friend the Member for Buckingham (Mr. Bercow) will be realised. We are considering a planned economy and the ability of Ministers and their officials to decide how to provide services by determining the number of post offices, their location and the sort of communities they should serve.

The problem is of the Government's making. The Government have put in train changes in the payment system for pensions and benefits that will cost the sub-post offices an enormous sum. As my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) said, the Government's proposals do not have the benefit of a saving to the Exchequer. The tabling of new clause 1 is an admission that an administrative development, which will cause real suffering and difficulty for many people, has no true financial benefit.

7.15 pm

Mr. Stephen Day (Cheadle)

That is modernisation.

Mr. Brady

People are beginning to understand that modernisation sometimes causes genuine problems. It damages their communities and the provision of public services. It may be an attractive buzz word for those on the Treasury Bench, but it means nothing and provides no benefits for ordinary people.

I hope that the Secretary of State will make some concrete commitments. If he stands by new clause 1 and has genuinely acted in good faith by tabling it to try to rectify some of the problems that the Government are creating for sub-post offices, we need to know how its provisions will be implemented.

What are the financial implications? We want to know not only the cost but how the subsidy will be distributed between different sub-post offices, and on what criteria. Will the subsidy go to rural, suburban or, urban areas? What priority will be given to ensuring that the elderly have their post office services protected? What priority will be given to ensuring the provision of sufficient post office services in areas of deprivation, or places with large populations, which depend on benefit payments through post offices? We can have confidence in new clause 1 and the Secretary of State's good faith in trying to save post offices from Government attack only if he can provide concrete assurances and make genuine commitments this evening.

Mr. Eric Forth (Bromley and Chislehurst)

I want to explore the key word of the debate—opacity—in the context of new clause 1, and link it to a potent point that my hon. Friend the Member for Banbury (Mr. Baldry) made. He pointed out that, through accident or incompetence—it does not matter which at this stage—we are in an invidious position. We have been presented with a comprehensive new clause—which, according to the Secretary of State, forms the core of the Bill—not in Committee, where it could be properly scrutinised and amended, but on Report when there is an element of time pressure. That speaks volumes for the way in which the Government go about their business. Their actions, taken in a panic and at the last minute, are ill thought out and poorly understood—and that applies to the Secretary of State's actions, let alone to those of anyone else. In the limited time available, we must attempt to discover from the Secretary of State what lies behind the new clause.

New clause 1 is shot through with incongruity and phrases that mean little if anything to me. We want to ascertain whether they mean anything to the Secretary of State. Our old friends "may" and "shall" are the subject of other amendments in the group. The new clause would provide that the Secretary of State "may", if he sees fit, implement its provisions. It contains no guarantee for the sub-post office network. We are therefore considering a discretionary matter. The provisions may or may not be effected, depending on the whim of the Secretary of State of the day. The current Secretary of State's successor may be in place more quickly than even he can imagine. Does he feel that he can commit his successors to such a provision?

The use of the word "may" is significant. I hope that the Secretary of State can reassure us and the sub-post office network that "may" will be replaced with "shall". That will at least make clear the intention of new clause 1, and show that the provision is not discretionary. I hope that the right hon. Gentleman will comment on that when he winds up.

Difficulties arise with paragraphs (a) and (b) of subsection (1). They make an interesting distinction between assisting in the provision of public post offices and assisting in the provision of services to be provided from public post offices … On the face of it, that may seem to make the most comprehensive provision of all. If that is the intention, it deserves our limited support. However, subsection (1) could contain an important distinction that may cause much confusion and uncertainty as to whether the Secretary of State truly intends to assist in the provision of public post offices … Does that not imply the possibility of new sub-post offices being provided, were they to be deemed necessary?

We want to know about that because until now, the process has been seen as one of irreversible decline. If the Secretary of State can tell us that there may be circumstances in which a new sub-post office could be brought into being by the provision, some rural areas in particular might take encouragement from it. That needs to be clarified.

There is also doubt about who would implement the proposal as the new clause provides that that may be done either by the Secretary of State or by someone else on his behalf. That is an important distinction. Were it to be the Secretary of State and were he prepared to give undertakings to the House now, that, too, might be somewhat reassuring, but if we were told that he at least had in mind the possibility that some other person or agency would deliver the mechanisms—the new clause would allow that—we would already be at one remove from what has been said during these proceedings. Whatever reassurance he may be able to give us, how could he guarantee that his agent or agency, or any other person acting on his behalf, would have the same commitment to doing what we have been told would be done? That is always supposing that we get some commitment from him; we have had none yet.

The new clause appears to describe the scheme in detail, but it turns out that that is not the case at all. The scheme shall specify …the descriptions of payments … which is fair enough, and the descriptions of persons to whom such payments may be made… We can all imagine that they would be sub-postmasters or someone of that kind. It shall also specify the person by whom such payments may be made … which refers back to the possibility that that may be someone other than the Secretary of State—but we then come to the matter of criteria, which has already been touched on in this short debate.

My hon. Friend the Member for Buckingham (Mr. Bercow) made a plea in an intervention. He said that to be meaningful, the criteria should be clear, concise and well understood. One can see what he means. However, he will recall that my hon. Friend the Member for Banbury pointed out in his excellent contribution that in many ways, sub-post offices perform a social service in their community and often provide support, advice and help to their customers. How could one express that in the criteria to which the "person" would have regard in deciding whether payments had to be made? The matter seems straightforward on one level. However, on another, if the Secretary of State ever accepts that sub-post offices have a crucial social and community function to perform, how will he factor that into the criteria so that payments will be made under the scheme? These matters are not trivial; they are of the greatest importance.

If we were told that the Secretary of State had no intention of paying any regard to social matters, that would give rise to suspicion that what appears, on the face of it, to be a comprehensive scheme was cobbled together late in the day without sufficient thought. No one—least of all, regrettably, our excellent sub-postmasters and sub-postmistresses up and down the country—should imagine that the proposal is the solution to their problems. Would that it were otherwise. If we had had a proper chance to examine the new clause, we might have been able to make more progress in that regard.

Subsection (5)(a) refers to "conditions as to repayment". That strikes me as an important and potentially sinister provision. For the first time, there is a reference to repayment being made, which clearly implies that it is in the Secretary of State's mind that any moneys paid to sub-post offices under the new clause may have to be repaid in some circumstances. We must know an awful lot more about what "repayment" means before we can give our approval to the new clause. It could mean any number of different things, and repayment could take many different forms. We need to know what "conditions as to repayment" could mean before we can feel reassured by the new clause.

Mr. Bercow

My right hon. Friend is very experienced in these matters and he is right to smell a rat. Is not his suspicion reinforced when he reads subsection (6), about which there has been considerable commentary? It refers to the requirement for the consent of the Treasury. Does not it appear that the Chancellor has agreed to the proposal only on the basis that it might never happen? If it does, the cost will be recouped, as usual, in the old stealthy Labour way.

Mr. Forth

That, of course, suggests itself not only to my hon. Friend, but to most of us who have taken even a brief moment to study the new clause. I shall come to subsection (6), but time is pressing and I do not want to delay the House unnecessarily. I simply say that we have all spotted the Treasury's grubby hand on the throat of the new clause—it cannot be concealed. We need to know what the Secretary of State thinks his relationship with the Chancellor is, what guarantees he has or has not received from the Chancellor, and whether he thinks that the payments that he envisages being made will be both adequate and guaranteed. If they will be neither, the measure is worthless.

Mr. John M. Taylor

Is not the proper interpretation of our constitutional affairs that a Government are collectively responsible? There are no separate Ministers in that sense; all are part of an entity. Is it not therefore curious and extremely offensive that one part of the Government has to seek the permission of another?

Mr. Forth

My hon. Friend, who has enormous experience of those matters, knows that what he says is literally true, but I fear that the entity that matters in this regard is that referred to in subsection (6)—Her Majesty's Treasury and the Chancellor. We need to hear a lot more from the Secretary of State about his relationship with the Chancellor, with specific reference to what the Secretary of State will no doubt claim are the reassurances in the new clause.

Mr. Bercow

rose—

Mr. Forth

I give way for the last time.

Mr. Bercow

Does not my right hon. Friend agree that it is important, not least for the self-respect of the House, that we should be assured that we are not debating the matter in a vacuum? Would it not therefore be helpful to know whether the details of the scheme and the extent of the Treasury veto over them have already been determined, but, for political convenience, will be rolled out later, or whether the Government simply have not got round to thinking them out at all?

Mr. Forth

That remains to be seen. The debate may or may not be taking place in a vacuum, but our great fear is that the new clause is vacuous.

Mr. Brady

Will my right hon. Friend give way?

Mr. Forth

Yes, but then I must conclude.

Mr. Brady

I am most grateful to my right hon. Friend. Does he agree that it would be more convenient for the House, and that a lot of difficulties in the Government would be avoided, if the power to make the decision were given straight to the Treasury instead of the Secretary of State? We could cut out the middle man.

Mr. Forth

My hon. Friend has stumbled on an important answer. Subsection (3) refers to "another person"; obviously, that is the Chancellor. We may not need an answer from the Secretary of State; my hon. Friend has given it to us, which is very helpful.

My final question to the Secretary of State relates to subsection (5)(c), which contains a typically opaque reference to the modification of the functions of a body established by an enactment … What on earth can that mean? Either it means nothing at all—the parliamentary draftsman must have been suffering from his now customary flu—or it is a sinister provision, the meaning of which has been completely, cleverly and subtly hidden by the parliamentary draftsman and sanctioned by the Secretary of State. We need to know what it means.

The new clause will not do, unless the Secretary of State is prepared and able to give detailed, specific and reassuring explanations and guarantees that it contains much more than any of us has hitherto been able to identify.

7.30 pm

Mr. Letwin

I find myself in the unusual position of joining my hon. Friend the Member for South West Hertfordshire (Mr. Page) on an unaccustomed Front-Bench team. It is all the more unusual because I have a certain fellow feeling for the Minister for Competitiveness—in the past little while, we have both spent a large part of our waking hours thinking about post offices. The difference between us is that I dream about them, whereas I suspect that he wakes up having had nightmares about them.

New clause 1 has been introduced by the Secretary of State with all the appearance of a matter of settled policy. It would be fine if it were. As my hon. Friend the Member for Arundel and South Downs (Mr. Flight) eloquently mentioned, all hon. Members on both sides of the House attach huge importance—I do not exempt the Minister—to the post office and sub-post office network. That is common ground. If the new clause were an example of a clear-minded and settled policy to deal rationally with the future of our sub-post office network, we would all be happier.

What has come out in this debate often comes out in debates, even on Report, and I share the sentiments of many of my hon. Friends in decrying the fact that the new clause has been introduced only on Report: there is a great lack of clarity of purpose. As my hon. Friends the Members for Altrincham and Sale, West (Mr. Brady) and for North Norfolk (Mr. Prior) pointed out, when the Secretary of State was pressed and pressed again to state whether the new clause is a single, simple measure to enable sub-post offices to do what I think we all want them to do—invest in the technology that will give them a viable future alongside ACT—or whether the measure will permit the continued subsidisation of sub-post offices as a substitute for a viable future, the Secretary of State refused point blank to answer the question in a fashion that would have satisfied the House.

I suspect that the Secretary of State refused to answer for the reason to which many of my hon. Friends have drawn attention, not least my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth) because the new clause is not a matter of settled policy. It is something that the Secretary of State introduced at a late hour to solve the problem of having to face 18,000 birthday cards, 2,000 sub-postmasters and 3 million signatures. That is not the way in which to conduct public policy on any matter, let alone a matter that is as important to the nation as the maintenance of the sub-post office network.

As my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) pointed out, many of us predicted months ago that introducing ACT without a proper pause for reflection and without taking time to introduce alongside it the proper technology, which would enable sub-post offices to engage in activities that keep their footfall and revenues aloft, would result in subsidies. When I first mentioned that in the House, the Secretary of State looked as if someone had said something that was rather impolite. Apparently, it was far from his thoughts that he would end up spending the money that the Secretary of State for Social Security was ostensibly saving but, some months later, what do we have? We have a new clause with the vaguest and widest possible permissive powers to administer subsidies and to make up for some unknown deficiency, through the administration of an unknown quantity of grant. Our predictions were wholly fulfilled.

The ingenious interpretation of subsection (1) by my right hon. Friend the Member for Hitchin and Harpenden, which showed that, at least on a prima facie reading, the new clause could be used to subsidise banks as well as sub-post offices, points us in the direction of something that, either by the means in the new clause or by other means, we will in due course see. The Government will need not only to keep the sub-post offices alive, but to subsidise the banks.

From the beginning of the saga, the Department of Social Security never properly considered whether the banks could willingly take on as customers a very large number of people currently in receipt of benefit and pension. That deficiency will have to be paid for through taxpayers' money. If the Secretary of State thinks that that is an impolite thing to say, I challenge him to come back and to admit to the House, in due course, when he or another of his colleagues introduces a positive proposal to subsidise the banks, that we were right, just as our predictions earlier that sub-post offices would need to be subsidised have proved to be right.

What do we have here? We have what is becoming a familiar and important theme of the Government. First, action is taken which, although not necessarily ill-intentioned, is ill-thought through. Secondly, a major industry or service is adversely affected. Thirdly, a Government who came to power telling us that they had learned the lessons of free market economics engage in solving, or in attempting—usually unsuccessfully—to solve, the problem through increased subsidy. We have seen it in agriculture, in the car industry and in the coal industry; now we see it in sub-post offices. It is a lamentable rhythm, but it is beginning to become extremely familiar.

In the case of sub-post offices, it is highly ironic because the only reason for the adverse effect on sub-post offices is that the Secretary of State for Social Security thought that he was going to please his former master, the Chancellor of the Exchequer, by saving £400 million. That £400 million is an extremely mysterious entity. No one knows how much of it is due to payments that go to the sub-post offices, how much is due to payments that go to Post Office Counters and how much is absorbed in internal administration. However, let me take a guess that, at present, at least half of it goes to sub-post offices by one means or another.

Let us imagine that everyone who would come in to collect a benefit or a pension—who, in that case, will not spend, on the Secretary of State's figures, roughly 50p of taxpayers' money on having that benefit or pension available for collection at the post office—is also not going to spend at least as much again in gross profit contribution: he or she is not going to buy things in the post office. I do not know whether that is the right or the wrong number. The Secretary of State undoubtedly knows, but he has long since forsworn any effort to tell us.

As my hon. Friend the Member for Altrincham and Sale, West and my right hon. Friend the Member for Hitchin and Harpenden said, we need to know the answer. Let me speculate that the answer that I have given is approximately correct: £200 million will be directly lost by the sub-post offices, and about another £200 million will be lost through lack of customers. What, then, would the subsidy need to be wholly to replace that lost revenue? Amusingly, it would be £400 million. That is why we believe that, if the Secretary of State is continuously to re-subsidise the post offices to the point that they were at before the Secretary of State for Social Security began his attack on them, he will need to spend about £400 million a year of taxpayers' money.

The Secretary of State has not said so. He has not said a word about how much he will spend. He has not said whether it will be a large or small amount, but we are justified in assuming that the cost of the injudicious measures of the Secretary of State for Social Security will be enormous.

During the debate, two problems have emerged in relation to that enormous sum of money. First—my hon. Friend the Member for Altrincham and Sale, West made the point clearly—when subsidies are administered on a continuing basis, they create subsidy dependence. They divert the attention of the business man—in this case, the sub-postmaster or postmistress—from running the business and towards maximising subsidy.

That is a danger to the sub-post office and to any industry that suffers from it. It is a danger about which we thought the Government had learned because, before they came to power, they preached the virtues of a market that was not subsidised. However, it turns out that, when it comes to sub-post offices, the Government's knee-jerk reaction is to create the very subsidy dependence that we all suffered from for so long and so deleteriously.

As my hon. Friend the Member for North Norfolk said eloquently, another reason why we should worry about continuing subsidy is that the subsidies themselves are vulnerable. As many of my hon. Friends pointed out, the new clause is permissive. It will go on being permissive because subsidies are never given as a matter of contract. Governments always, under all regimes, take great care to ensure that no one can ever claim a subsidy as a right. Therefore, subsidies are necessarily tenuous.

In the terms of new clause 1, the subsidy is described as "a scheme". It is indeed a scheme. It is a scheme to avoid a principal problem, and it is a scheme that could be as quickly undone as it has been established. Every sub-postmaster the length and breadth of the country will know that. Consequently, they will know that they are constantly under the threat of the subsidy being removed. Therefore, their attention will be focused in the wrong place, and their livings will be precarious. That is in no way a satisfactory result for sub-post offices; nor is it the result that they have been seeking. Sub-post offices have been seeking long-term commercial viability—not a subsidised or precarious existence, but a well-founded existence.

There is, however, a way. That is why Opposition Members have not been arguing against new clause 1, but have merely been drawing attention—as my right hon. Friend the Member for Bromley and Chislehurst did notably—to its drafting deficiencies.

Mr. Alan Johnson

Where is he?

Mr. Letwin

I am sorry that my right hon. Friend has departed the Chamber, but he lent much eloquence to us when he was here. He certainly drew attention to the lack of drafting. We have complained about that, and about many other matters.

We do not wish, however, utterly to oppose the new clause because it contains a better possibility—the germ of a decent idea. Rather than a continuing subsidy, there should be a pause—a delay and a reflection. In that time, the Secretary of State could use the powers provided in the new clause and by other means to install in sub-post offices proper technology, parallel—although perhaps different in character—to that which my right hon. Friend the Member for Hitchin and Harpenden tried to install when he was Secretary of State, but which the new Government disrupted.

Mr. Johnson

No.

Mr. Letwin

Yes, the Government did disrupt it. I know that the Minister thinks that they did not, but he has forgotten that the previous Secretary of State for Trade and Industry was very clear in his statements that the project would be delivered, after which it was cancelled. I do not know why it was cancelled. I am sure that it was not Ministers' fault, and that they did not go round to destroy the computer. However, the fact is that, under this Administration, that project failed. It had not failed before. It did not seem to be failing, but when it did fail, the future of sub-post offices was put under threat.

There is now a chance that, if the Secretary of State uses new clause 1 not in the wrong way but in the right way—not to go on subsidising post offices permanently, but to inject, once for all, sufficient funds to provide them with the technology to enable them to go on providing benefits and many other services—post offices will keep their footfall and, therefore, their financial viability. If the new clause is used in that way, of course we would welcome it.

It is a sorry thing, however, when a Secretary of State—who is perhaps one of the more intelligent members of the Government—comes to the House with a new clause that is ostensibly derived from public policy and not merely a sticking plaster to deal with a political problem, but cannot answer the fundamental question: "Is this something that you intend to use as a means of permanently and unsatisfactorily subsidising sub-post offices into a gentle oblivion? Or is it a bold manoeuvre to try to give them, once for all, the modern technology that they need?" Why cannot he answer the question? He cannot answer because he has not decided.

In the past few weeks, to my certain knowledge, Ministers have had no fewer than six occasions in the House on which to announce their answer, and six times they have failed to announce it. That is why the new clause has been drafted in a manner that is—as many of my hon. Friends have said, using a polite word—opaque.

Mr. Bercow

Risible.

Mr. Letwin

Perhaps. However, the new clause's problem is not its opacity of drafting, but that the mind behind it is intentionally opaque because it has not yet been made up. It is a mind unmade. That is no way in which to introduce legislation.

I hope that, as a consequences of this debate, Ministers will go back to that dreadful place that they are forced to inhabit, think to themselves a little harder, and be able—perhaps in their Lordships' House—to include provisions in the new clause that tell us whether it is a devastating and disastrous piece of permanent subsidy or a perfectly sensible move to do what we have all been asking for for many months now.

Mr. Byers

This has been a debate of some interest, and I shall try to address the issues raised in it by right. hon. and hon. Members. It is worth reinforcing the point now, however, that new clause 1 simply gives the Secretary of State for Trade and Industry the power to establish a scheme. The new clause is not about the details of that scheme or the form that it might take. It is purely about including in the Postal Services Bill a power for the Secretary of State to establish a scheme.

7.45 pm

I can understand the concerns that hon. Members have expressed about the details—such as whether the scheme will be temporary, whether it will be operated by means of a lump sum, and whether it will be a continuing obligation. The House will be able to consider all those details. New clause 1 makes it clear that the matter will be dealt with by the affirmative process. Therefore, there will be a debate, and there can be a vote on the scheme when it is introduced by the Secretary of State—if there is a decision to introduce such a scheme.

As I have consistently made clear, the provision is permissive; it is a matter of "may", not "shall". It is permissive because we do not know what the future will bring. I hope that the Postal Services Bill will receive Royal Assent and be on the statute book for many years. As I said on 12 April, when speaking on the issue, it is right that we should have a safeguard in the Bill providing the Secretary of State with a power to introduce a scheme. That is exactly what new clause 1 does.

My hon. Friend the Member for Batley and Spen (Mr. Wood) raised the issue of whether the scheme could be tailored, dealing with post offices individually. Yes, it can. I think that the scheme will be able to do that, so that there will be some flexibility and some targeting of support. However—to reassure the hon. Member for Buckingham (Mr. Bercow)—it will not be adapted, evolved or produced in a way that is politically partisan in any particular form. It will be based on the support that needs to be given to individual post offices, either for a post office itself as an entity, or for the continuation of certain services offered by a particular post office that the Government wish to support.

The right hon. Member for Bromley and Chislehurst (Mr. Forth) raised the issue of repayment. I appreciate the concerns that he expressed on the issue, and it is a shame that he has not stayed to hear me try to answer his questions. Nevertheless, I shall try to reply to the relevant points that he raised. As he missed my opening speech, he missed some of the reasons that I gave for the new clause. He then asked questions about some of those reasons. However, he did raise the important issue of repayment. Other hon. Members, too, may be concerned about the circumstances in which repayment of a subsidy or financial support may be appropriate. The matter should be considered very much within the context of provision of services.

Many of us hope, looking forward to a vision of post offices in the future, that post offices will offer services that go way beyond the services that they currently offer. Although more diverse services may be offered, some of those services may be offered at a loss to sub-post offices. I think that most people would say that, in those circumstances, if they are services that the Government wish to support, and if they are offered on behalf of the Government, it is appropriate for the Government to make a financial contribution towards the cost of offering them. Therefore, effectively a contract will be reached between the Government and the individual post office.

I believe that "subsidy" is a pretty poor description of that arrangement, as it is not a subsidy, but payment given for a service offered by the sub-post office. Because of the way in which the parliamentary draftsman has arranged the clause, the arrangement is called a subsidy. However, we will be paying for a service that the individual post office can offer.

If we pay for that service, but for some reason the service is not offered—if there is effectively a breach of the contract—repayment would be appropriate, as the Government would not be receiving the service that we paid for. In those circumstances, a power to seek repayment of the subsidy is an appropriate one for the Secretary of State to have.

Mr. Bercow

I understand the scenario that the Secretary of State has just depicted, and his explanation is helpful. However, under the regulations, could a sub-post office face a demand for repayment if it were granted a subsidy for one service, but made a modest profit on another service? Would the Treasury use the profit on the latter service as justification for demanding repayment of the subsidy paid for the former service?

Mr. Byers

We are talking about support for a particular service, and the arrangement would involve the finance coming from the Government to provide that service. Provided that that service is delivered, the sub-post office will have delivered on its side of the agreement, and there will be no question of money being clawed back because of a profit that the post office may be making somewhere else. That is why new clause 1 makes the distinction between the entity of a post office as opposed to a particular service that the Government may wish to offer financial support towards.

Mr. Brady

Is the Secretary of State guaranteeing that the measure will in no circumstances be used to allow this to be a loans scheme, under which payments would be expected to be repaid?

Mr. Byers

I am pleased to be able to confirm to the hon. Gentleman that nothing in new clause 1 would lead to that outcome.

On the matter of Treasury consent, whether hon. Members feel comfortable with it or not, we all know how government works. Individual Departments do not have their own budgets, and government works because of funds provided by the Treasury. There are many examples of legislation passed by this Government, and by the previous Government, where Treasury consent has been required before a particular scheme has been funded. That is not unique—it is a common arrangement.

The hon. Member for West Dorset (Mr. Letwin) referred to a continuing subsidy for the network. Clearly, he is unaware of the way in which the post office network operates, as there is effectively a subsidy at the moment. Rural post offices get up to eight times as much as urban post offices per transaction from the Post Office. There is a recycling of finance within the network at present and, effectively, many rural post offices are subsidised in this way.

I agree with the hon. Gentleman that we do not want post offices to rely heavily on subsidies for the services that they offer. That is why it is important to ensure that people do not automatically assume that the power within the new clause will be implemented for every single post office. Hopefully, we are talking about exceptional circumstances. We want to use the new Horizon project and the diverse range of services that can be offered following the computerisation of the network to allow new customers to come into the post office network.

We want the network to diversify into new Government services, so that problems over footfall can be addressed by the new customers. If we can get that diversity, any loss as a result of the introduction of ACT can be more than accommodated in terms of the new customers using the post office network.

As a result of the Government's commitment that any individual pensioner or benefit recipient who still wants to have his or her pension or benefit paid in cash at a post office will be able to do so, a lot of the scare stories about a large loss of customers should come to nought. Post offices will be able to convince pensioners or benefit recipients that they should remain as they are and continue to have their cash paid at the post office.

The hon. Member for Weston-super-Mare (Mr. Cotter) said that, last year, there had been about 500 closures. That is not the case. There were fewer than 400 closures last year, and that is not the highest number that we have seen. In 1984–85, 389 sub-post offices closed. The number of closures last year was below that figure.

Mr. Cotter

The Secretary of State may be correct, but there were 392 closures in the first nine months of this year, with the expectation that there would be about 500 for the year. The right hon. Gentleman can correct me if I am wrong.

Mr. Byers

The hon. Gentleman is wrong. The figure for 1999–2000 is 383. The way in which the figures are calculated is that we have the figures for last year, which will be updated. However, it is incumbent on all of us not to talk the post office network down. There are many thriving small businesses in the post office network, and they should be congratulated. It is important that people do not get an overall view that the post office network in total is experiencing difficulties, although I accept that some sub-post offices are.

The right hon. Member for Hitchin and Harpenden (Mr. Lilley) asked whether the power in new clause 1 allows the Government to subsidise banks. It does not. It allows for services to be subsidised, provided that they would benefit public post offices. It is worth reminding the House that many banks are already providing customers with access to their accounts through the post office network. The Alliance and Leicester, Lloyds TSB, the Co-operative Bank and Barclays provide access to their accounts through the post office network, and do so without any financial support. The Post Office is in fact making a profit from those schemes.

Mr. Letwin

Will the new clause allow the Secretary of State to subsidise a bank for providing a service through a post office?

Mr. Byers

It will allow the Government to support a service, provided that it benefits the Post Office. That is clear. It may be that the right hon. Member for Hitchin and Harpenden was not as clear as he could have been—some might say that he was opaque—in talking about a subsidy to the banks. New clause 1 does not give the Secretary of State that power. We are providing subsidy support for a service that will be of benefit to the Post Office.

The principle is so important. Many post offices will welcome the fact that the Government, with foresight, are providing in the Bill a power for the Secretary of State to establish a scheme that can provide a subsidy. No one wants the post office network to rely on subsidies coming in year after year, but there will be occasions when the needs of a community will require the Government to make a financial contribution and to give support. New clause 1 gives that power to the Secretary of State.

The new clause is highly appropriate, and will be welcomed by postmasters and postmistresses up and down the country. It is not a replacement for new services—Horizon and computerisation will provide that, and we are spending £500 million to achieve that objective. Diversity into new Government services will bring new customers into the post office network. If need be, there should be a scheme in place to provide a subsidy. New clause 1 does precisely that, and I commend it to the House.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

8 pm