HC Deb 28 June 2000 vol 352 cc907-21 3.30 pm
The Secretary of State for Trade and Industry (Mr. Stephen Byers)

With permission, Madam Speaker, I wish to make a statement on the post office network. Post offices are a vital part of the fabric of our country. They serve 28 million people every week, performing a vital role in local communities, whether they be rural or urban.

However, the Post Office also faces challenges. Its traditional work needs to respond to the changing requirements of customers, to changes in society and to the opportunities arising from new technology. Last October, my right hon. Friend the Prime Minister asked the performance and innovation unit to draw up a strategy for the future of the post office network. The PIU's report is being published today. Copies are being placed in the Library of the House and will be available from the Vote Office. The Government accept all the report's 24 recommendations. Working with the Post Office and the National Federation of Sub-Postmasters, we will implement the measures proposed in full. We will back them with financial support—we will be setting aside ring-fenced funding as part of the spending review to be announced in July.

The Post Office is the largest retail network in Europe. More than nine out of 10 people live within a mile of a post office. However, for too long the post office network has been a neglected national resource. Now is the time to harness its full potential and to develop it in totally new areas.

The PIU report identifies three such areas where developments should take place, made possible only by the investment by this Government of £500 million in modern online computer systems for every one of the 18,500 post offices throughout the country. The three developments are, first, to establish a universal bank; secondly, to provide internet access and exploit e-commerce; and thirdly, an enhanced role in government services.

First, the Government are aware that our decision to move to a system of automated credit transfer between 2003 and 2005 has caused concern. However, people were already voting with their feet and choosing to have their benefits paid into their bank accounts. Today, I can guarantee that, even after the move to ACT, pensions and benefits can still be paid in cash in full at a post office if that is the choice of the individual pensioner or benefit recipient.

The universal bank outlined in the PIU report would provide the means of achieving that objective. It would ensure that all benefit recipients and pensioners, now and in the future, could continue to use post offices to receive their cash. It would be a post office-based solution, as called for by the National Federation of Sub-Postmasters.

Today in Britain, about 3.5 million adults have no bank account. The universal bank would bring those people into the banking mainstream by providing basic banking services. Customers of the universal bank would be able to get out cash at any post office and use cash machines to take out money. They would be able to set up direct debits to pay bills, enabling them to benefit from discounts on gas, electricity, telephone and other bills. That would be a real bonus to people on low incomes who, at the moment, are the unbanked.

Secondly, we want to provide internet access and to exploit e-commerce through the post office network by installing internet terminals in front of the counter and ensuring that post office staff are trained to provide assistance. Post offices also have an opportunity to market themselves as a convenient local place for people to collect goods that they have ordered over the internet. Thirdly, we want an enhanced role in government services for the post office network. Post offices have traditionally been places where people can do a range of government business, from renewing a car tax disc to getting a fishing licence. That role will be further strengthened with the PIU's recommendation that post offices become one-stop shops—general government practitioners—for advice and information on government services. We shall support pilot projects on this and on internet access.

This vision of the 21st century for the Post Office applies to the entire network. However, the PIU report also identified the particular needs of the network in urban areas and in rural communities. The rural post office network has been slowly contracting over the past 20 years; the Government are committed to ensuring that it is maintained. The importance of rural post offices cannot be underestimated. Often, they are the last remaining local shop, providing a vital service and also acting as a focal point for the local community.

The maintenance of such services is, above all, a tribute to the invaluable role of sub-postmasters and mistresses, who often provide to their communities much more than is required or expected of them. The Government have already made provision through the Postal Services Bill to provide financial assistance to post offices, where necessary. In order to protect rural post offices, the Government will place a formal requirement on the Post Office to maintain the rural network, and also to prevent any avoidable closures of rural post offices. Our commitment is clear: to maintain the rural network and prevent any avoidable closures in that network.

An unavoidable closure would be when no one was prepared to take over from a departing sub-postmaster, or where an associated retail business was no longer commercially viable. Otherwise, the network will be maintained. The PIU report recommended that the requirement to maintain the rural network should apply in the first instance for a period of six years. We accept that recommendation. During this period, the Postal Services Commission, together with the Consumer Council for Postal Services, will monitor the network, and the commission will report annually to me on the rural network.

At present, the Post Office defines a rural post office as one which covers 6,300 inhabitants. Currently, 7,500 post offices are covered by that definition. However, the Countryside Agency defines a rural post office as one serving a settlement of 10,000 or fewer people. Around 10,000 post offices would come within that definition. I am pleased to inform the House that, for the purpose of the policy of protection from avoidable closures, we shall apply the wider definition and thereby cover nearly 10,000 post offices.

It is not just in rural areas that post offices play an important community role. We want to maintain convenient access and improve the quality of post offices in our towns and cities, as well as in the countryside. Under pressure from changes in the pattern of retailing, the quality of many post offices and associated retail business has declined in urban areas over the years. We believe that the best way to address that is for the Post Office, working closely with the National Federation of Sub-Postmasters, to build bigger and more extensive offices, reversing years of underinvestment. As the PIU recommended, we will encourage them to do so.

Post offices in deprived neighbourhoods and estates have a particularly important role, often providing the basis for the only local shop. Our aim is to ensure that people in these areas, where there are few other facilities, continue to have access to high quality post offices, preferably co-located with good shops. To support that, we will set up a new fund to improve the quality of post offices in deprived urban areas, thereby better serving the needs of the local community. Uses of the fund would include installing security measures and modernising premises.

These proposals provide a significant package for guaranteeing access to post offices and enabling them to provide new services which meet the changing needs of customers. By providing financial support for these initiatives, the Government are backing a viable, sustainable future for the post office network. However, the Post Office itself needs to respond to the challenges. The PIU report shows that much more needs to be done: to maximise the commercial potential of the network; to improve efficiency; and to raise the quality of post offices.

The vision set out in the PIU report, which we support, is closely in line with that of the general secretary of the National Federation of Sub-Postmasters, with whom we have been in close dialogue. The package announced today complements the measures in the Postal Services Bill. Post offices and their customers, in all areas, will benefit from the wide range of opportunities offered by a modern online computer system in every post office and proposals to establish the universal bank, internet learning and access points and general government practitioners.

Customers in all urban areas should benefit from bigger and more expensive post offices offering a wider range of services. Those in rural areas will also benefit from the requirement to maintain the rural network. Those in inner cities and estates will benefit from measures to ensure that post offices provide good local shops which serve the community.

This announcement will ensure that people throughout the country—in rural communities and in our cities and towns—have convenient access to a post office providing quality services. It will offer the opportunities that the Post Office needs to face the future with confidence, and to build a network that can thrive rather than just survive in the 21st century. I commend the statement to the House.

Mrs. Angela Browning (Tiverton and Honiton)

I welcome the fact that the Secretary of State is making a statement on the sub-post office network. It would have been so much better if he had found some solutions to the problem that he caused when he scrapped a scheme last year simply by circulating a letter on a "Dear colleague" basis. We know that his announcement means that £400 million of income will be removed from the sub-post office network from the year 2003.

As a result of the uncertainty that the Government have created among sub-post offices, over the past year there has been an escalation in sub-post office closures to about 500. That uncertainty has been demonstrated by the sub-postmasters themselves, who attended a rally on 12 April and presented one of the biggest petitions ever to a Government, when 3 million signatures were handed in at No. 10 Downing street.

We have devoted two Opposition days to debating this matter. The Secretary of State's statement is light on detail and particularly light on fact and financial detail. I hope that, when he comes to answer specific questions, he will not duck the issue but will say how much money is on the table as part of the package that he has announced. Can he guarantee that what he has read out will make up the £400 million shortfall that the Post Office will suffer from 2003?

On the universal bank, will the Secretary of State please explain—I have asked this before, and we really need to hear the detail now—where the charges will fall? Supposedly, 3.5 million new account holders will be members of the new bank. Do the charges fall on the customer, on the Post Office, on the bank or on the taxpayer? Who will bear the transaction costs of money from existing bank account holders who may still want to draw their money from their post office? He and the Government have given guarantees in the past that those people will not have to bear the transaction costs. Who will bear them?

The Secretary of State paid much attention to the rural post office network. Some of the most fragile post offices are in rural areas. What minimum number of sub-post offices will he guarantee to keep open in the network?

The right hon. Gentleman mentioned information technology. Conservative Members welcome the opportunities that IT offers the sub-post office network, because it was our policy to put computers into sub-post offices in the first place. Given the increase in e-commerce and, we hope. the rapid escalation of home deliveries—but to a population in which so many people are now out during the day—is it his intention to allow the sub-post office network to handle parcels from private sector parcels companies other than Parcelforce, as that would certainly increase the sub-post office income?

What additional government services has the Secretary of State already discussed in relation to this one-stop shop that he talks about? The Government are pledged to deliver electronic government by 2005–50 per cent. is supposed to be ready by 2003—so Departments must be well advanced in knowing what services they will deliver electronically. Rather than just giving generalities, will he tell us exactly what Government services the sub-post office network will be allowed to tender for, so that people can plan for their financial future and know where their income is coming from?

We have heard a lot from the Secretary of State about subsidies. Exactly what does he mean by the Government using subsidies? The National Federation of Sub-Postmasters, with which he says he has been in contact, has said in terms that it is looking not for subsidy but for genuine alternative forms of income. If he intends to subsidise individual post offices, what analysis has he made of the distortion that such a subsidy would create for either the next nearest sub-post office or, for that matter, for the village shop, which may not be a sub-post office but may sell products in competition with it? Is he not at all concerned about the small business aspect of creating artificial competitive distortions in the market?

I know that sums are not the Secretary of State's strong point, but he will have to address the figures eventually. The Post Office had to bear a £571 million write-down as a result of his policy change in this financial year's annual report. Will the sums that he is talking about, albeit in general terms, be another write-down in next year's accounts for the Post Office itself, or is this some new money that he has got from the Chancellor, which the taxpayer will have to provide through the Treasury?

Mr. Dennis Skinner (Bolsover)

Is she for it or against it?

Mr. Byers

Now we know why 3,000 post offices were closed while the Conservatives were in government. Are they for it or against it? Who knows from the hon. Lady's contribution?

The hon. Lady asked some specific questions. The wonderful benefit payments card has been held up as the way forward. When we came to office, it had already overrun by three years, was over budget and was set to be obsolete by 2007. The Conservatives may deny it, but that was the reality. The hon. Lady knows it, and the right hon. Member for Hitchin and Harpenden (Mr. Lilley) knows it too, because he was the architect of the chaos that surrounded the benefit payment card.

The hon. Lady is right to say that there is difficulty with delivering goods over the internet because fewer people are at home during the day. That is because 970,000 more people are in work as a result of our policies.

The hon. Lady talks about the views of sub-postmasters. We shall wait to hear what they say about this afternoon's announcement. I am confident that, as members of a reasonable organisation, they will warmly welcome my statement and the PIU report because they provide a real vision for the future of the Post Office.

The hon. Lady raises the important issue of transaction costs. We know that, at the moment, a transaction cost is paid by commercial agreement between the federation, the Post Office and the banks if they are acting as an agency. That will not change when a universal bank is introduced, but those bodies will enter into commercial negotiation.

Mr. Nick Gibb (Bognor Regis and Littlehampton)

What about the 17p?

Mr. Byers

The hon. Gentleman talks about 17p. In fact, for a pension the figure is 13p at the moment. He should get the facts right if he can. The figure will be part of the transactions entered into, and it is appropriate that that should be so.

We have made provision in the spending review to underpin the report's recommendations, and that will be made clear in July when we announce those proceedings.

The Conservatives' difficulties on the Post Office were very clear from the hon. Lady's response. Their policy was to privatise and break up the Post Office. We have given it commercial freedom and we will support modernisation and the development of new areas of business. The message for the Post Office and rural and urban communities that care about it is clear: neglect, decline and closures under the Conservatives; vision, investment and a future under Labour.

Mr. Frank Field (Birkenhead)

I warmly welcome my right hon. Friend's statement. Does he agree that the image that the media continuously put over of most vulnerable post offices being in the countryside is not totally accurate? Will he tell the House of his Department's analysis of measuring vulnerability by size of income that sub-post offices receive from social security transactions? On that analysis, do not the sub-post offices in his and my constituencies rank about 70th in the vulnerability league stakes? Will he therefore give an undertaking to those of us who represent inner-city areas that, when he gets down to the detailed implementation of his welcome announcement, he will pay particular attention to ensuring that inner-city post offices survive, as should rural post offices?

Mr. Byers

My right hon. Friend raises a very important point. In today's announcement, we draw particular attention to the important role that post offices play in deprived urban areas such as his constituency and mine, not just as a post office but as part of probably the only commercial retail outlet serving some of our most depressed estates. He is right to point out that they are the most vulnerable on the question of benefit transactions. We will be providing financial support to underpin post offices in those areas.

Many of my right hon. Friend's constituents and mine will be among the 3.5 million people who are unbanked and therefore cannot take advantage of direct debits and the cuts in bills for electricity, gas, the telephone and so on that that brings. The universal bank will, for the first time, allow those 3.5 million people to enjoy those benefits. The ability to enjoy the advantages of reduced basic utility bills, which many in this House take for granted, will make a huge difference to families and people on low incomes. Extending such benefits will be beneficial to individuals, communities and the Post Office as well.

Dr. Vincent Cable (Twickenham)

I welcome the elements in the statement which give a firmer commitment to both public subsidy and the preservation of the network, and identify useful new sources of income generation. A similarly comprehensive approach adopted 20 years ago at the beginning of Conservative rule might have prevented the closure of many of the 4,000 branches which have closed. How much of the lost £400 million income in 2003 will now be replaced by a combination of subsidy and new sources of income? I appreciate that the Secretary of State cannot identify the subsidy sum before the public expenditure review, but what will be the gap in the cash flow as a result of those two combined elements?

Secondly, can the right hon. Gentleman be more specific about his commitment to the preservation of the network? He said that there will be a guarantee for 10,000 sub-post offices. What will be the status of the other 8,000, many of which are loss-making? In particular, what is the status of those in urban areas, which have just been referred to? The right hon. Gentleman will have discovered in Tottenham last week that there is a lot of sensitivity about the closure of sub-post offices. Clearly, many of those will be modernised, but of those that are not, how many are likely to shut, and what provisions are there for preventing the closure of sub-post offices in inner-city areas?

Thirdly, will the right hon. Gentleman say more about what is meant by a jointly owned universal bank? What is the relative shareholding of the Government and the private banks? What will happen if a Barclays cash machine is installed in a sub-post office as part of the joint project? Will customers pay Barclays charges, which, as he knows, the bank is determined to impose in defiance of the anti-cartel provision of the Competition Act 1998?

Finally, I welcome the internet provision, particularly taking advantage of the logistics opportunities of the Post Office. But how will internet be provided in the many remote areas where there are no ISDN lines? How will the internet be universally available for the post office network?

Mr. Byers

The hon. Gentleman is right to say that, had our comprehensive approach been adopted some 20 years ago, the network would be in a far stronger condition than it is at present.

The hon. Gentleman raises a number of important questions. On the savings that will come from the movement towards ACT, clearly there will be an element of financial support to the network, which will be announced as part of the comprehensive spending review. We are confident that, coupled with the new areas in which the post office network will be able to develop—we mentioned three in particular on the basis of the PIU report—if there is any shortfall in the sums coming into the network, it can be made up by the new activities into which the post offices will be able to enter.

The hon. Gentleman made the point that some 10,000 post offices will be covered by the commitment that we have given to maintain the rural network. We calculate that probably 2,000 more will come within the category of urban deprived. The other areas will benefit from the new developments to which I have referred. There will be greater commercial opportunities for those post offices. In total, the package that we have put forward today has something to offer all 18,500 post offices presently in the network.

The Post Office and the major banks are discussing the detail of the universal bank. The Treasury, on behalf of the Government, has said today that high street banks that participate in the universal bank and make financial contributions towards its establishment would meet their financial exclusion obligations. That will make a big contribution to ensuring that the universal bank is a success.

I have asked the Post Office to present, by 1 September this year, a business plan giving details of how the universal bank will work in practice. In terms of internet access, once again I have asked the Post Office to present a report to me by the end of this year.

Several hon. Members


Madam Speaker

Order. More than 40 hon. Members are seeking to catch my eye. I shall not be able to call anywhere near that number. I ask for brisk questions and answers from now on.

Mr. Martin O'Neill (Ochil)

I congratulate my right hon. Friend on the report. Some of us were worried when the Horizon project was substantially altered. Today's statement has dealt with most of our anxieties, and those who run post offices in rural and disadvantaged areas will have some hope. The package of support, the encouragement of diversification and the announcement about the universal bank are heartening.

I want to make a point about the record of Post Office Counters in negotiating with external bodies about franchised services. We all know about the loss of Powercard in the past couple of years, and the great disadvantages that that created for many of our constituents. I hope that my right hon. Friend, commercial freedom notwithstanding, will keep an eye on the rather macho approach that Post Office Counters sometimes takes in negotiations. I hope that we will not lose the opportunity of gaining access to important services through the Post Office because of the simplistic approach that Post Office Counters sometimes adopts.

Mr. Byers

My hon. Friend raises an important point. There is no doubt that, as we map out a programme of genuine change for the post office network, we need Post Office Counters managers who will be able to take advantage of the new opportunities. Some new management has already been put in place, and we are beginning to experience benefits from that.

The Powercard problem was a Scottish matter, but it shows the way in which mistakes can adversely affect post offices, communities and individuals. They should not be repeated in future. We will therefore ask the Post Office, with Post Office Counters, to prepare business plans and make detailed proposals so that the Government can ensure that we are discharging our responsibilities to the post office network and the communities that it serves. If we can move together in a genuine partnership, we shall be in a strong position to meet the challenges that lie ahead.

Mr. Peter Lilley (Hitchin and Harpenden)

I am sorry that the Secretary of State chose to repeat a falsehood for which the Minister of State has already apologised to me.

Madam Speaker

Order. Perhaps the right hon. Gentleman will withdraw the word "falsehood" and select another word that is acceptable in parliamentary terms.

Mr. Lilley

I am sorry that the Secretary of State chose to repeat a statement for which the Minister of State has already apologised to me and the House. That statement conflicts with that made by his predecessor.

Let us now concentrate on the key issue. Will the Secretary of State tell the House whether sub-post offices will receive the same amount or less per transaction than they currently receive from the Post Office? Will the same number of transactions or fewer transactions be made? If sub-post offices receive the same revenues, from where will the savings come that the Secretary of State anticipates? If they receive less revenue, will not post office closures accelerate in future?

Mr. Byers

The right hon. Gentleman will know from experience the way in which the transaction costs are negotiated. He also knows that the Government are not involved in the details of the transaction costs of those commercial negotiations. There is no reason for post offices and sub-postmasters to receive less than they currently receive in transaction costs. Nothing in today's statement will lead them to receive less. It is a matter of commercial negotiation.

The right hon. Gentleman asked whether the number of transactions will diminish. That depends on whether the Post Office can persuade people to choose to have their benefits or pensions paid in cash at post offices. The individual will have that choice; that is perfectly appropriate. The right hon. Gentleman knows that the current order book system has massive potential for fraud. We calculate that approximately £100 million a year will be saved by preventing fraud through the introduction of the universal bank system. I hope that the right hon. Gentleman will be prepared to support that saving.

Mr. Gerald Kaufman (Manchester, Gorton)

I note that my right hon. Friend's statement today would have been impossible if the Tory Government's plan to privatise the Post Office had gone ahead and I also note that the welcome given to the statement by the hon. Member for Twickenham (Dr. Cable) contrasts starkly with the lies spread in Liberal Democrat "Focus" documents about the Government forcing pensioners to collect their pensions from banks.

Will my right hon. Friend accept from me, as a representative of an inner-city constituency, that my constituents will welcome the increased facilities that will be available to people on low incomes and benefits and will be grateful for the fact that the support structure in inner cities for local sub-post offices will continue?

Mr. Byers

My right hon. Friend makes an important point. The post offices in inner-city areas provide a valuable resource to many constituents who need the support that a local post office can offer. I am pleased that the announcement that we have been able to make today can both address the understandable concerns of the rural network and, at the same time, discharge our responsibility for those people who live in our cities and towns. The announcement is a balanced response to a good analysis of the state of the network, and will offer new opportunities and a totally new vision for the Post Office for the 21st century.

Mr. Archy Kirkwood (Roxburgh and Berwickshire)

As an officer of the all-party group, the importance of the core income of sub-postmasters was drilled into me at the recent lobby. Does the Secretary of State accept that the Government are likely to save annually between £400 million and £600 million? That core income must be replaced, somehow, after 2005. Like my hon. Friend the Member for Twickenham (Dr. Cable), I am prepared to give the statement a qualified welcome, but I was anxious about the answer given to the right hon. Member for Hitchin and Harpenden (Mr. Lilley) in which the Secretary of State said that the issue was nothing to do with him but with the Post Office. Does not he accept that if he does not drive Government business in the direction of the sub-post office network, it will wither on the vine whether he likes it or not?

Mr. Byers

The core income that sub-postmasters receive has been in decline for several years because people have voluntarily chosen to move to ACT. The announcement today will enable us to ensure a greater diversity, so that new sources of income will reach the post office network. The hon. Gentleman knows that it is not for the Secretary of State to negotiate the transaction costs, because that is a commercial matter. I do not negotiate the pay of those working for the CWU or the pay of sub-postmasters and mistresses, because that would be inappropriate. What we can do is to ensure that the post office network is attractive and that people will wish to visit it for their transactions. The statement I have made today will achieve that.

On the specific point of government business, I am able to announce today that whenever government services are to be provided, the Post Office will be entitled to tender for that work. That has not been the case in the past, but from now on the Post Office will automatically be on the list, and that will make a big contribution.

Mr. Martin Salter (Reading, West)

My right hon. Friend's statement is welcome news for many of the communities left high and dry by the decision of Barclays bank earlier this year to close 172 branches on one day, leaving 84 towns and villages bankless. The statement has the potential to provide a financial lifeline to communities facing financial exclusion. The all-party group on community banking, which it is my privilege to chair, has long argued for creative solutions to financial exclusion, using the existing post office network. In what way will the new and welcome universal bank differ from the Girobank, which was privatised by the Tories? If the Tories ever get their hands on power again, what guarantees will we have that the universal bank will not suffer a similar fate?

Mr. Byers

My hon. Friend has been a great champion of providing financial services to many communities, and he has done valuable work on exposing the actions of some high street banks. He is also right to point out that the strategy adopted by many banks gives the Post Office a golden opportunity to provide financial services to many individuals who are now denied them as a result of that strategy. The role of the universal bank will be quite different from that of Girobank, which has now been linked with Alliance and Leicester. Essentially, the universal bank will be geared to the 3.5 million people who are unbanked. Those who do not want to use it as a banking facility can simply access their benefits or their pensions at their local post office, but those who want to use it for a wider range of financial services will be able to do so. It will be a matter of choice and we believe that that is the appropriate approach.

Mr. Oliver Letwin (West Dorset)

The statement does indeed sound good, but the Secretary of State will be aware that sub-postmasters and others have come to realise that there is sometimes a difference between how Government statements sound and their real meaning. How much will it cost to install the new technology that will be required for the new services at sub-post offices? Who will pay those costs?

Mr. Byers

The hon. Gentleman is right to point out the importance of working closely with the National Federation of Sub-Postmasters, which is what we have been doing. That is why I hope that it will feel able to welcome the announcement this afternoon.

The hon. Gentleman asked about the costs of installing the new facilities. It will cost over £500 million to provide the modern online computer facilities that will be in every post office by the spring of next year. As he will know from last week's Post Office accounts, some of that money will come from the Post Office and some from the Government. In terms of the additional facilities over and above the online computer facilities, as I made clear in the statement and in reply to hon. Members, I am asking the Post Office to present me with a business plan for the universal bank by 1 September, and for the other proposals by the end of this calendar year, so that we can see exactly how much will be required to deliver those new opportunities to the post office network.

Dr. Gavin Strang (Edinburgh, East and Musselburgh)

I congratulate my right hon. Friend on rising to the challenge of creating a financial environment in which we can have a thriving and prosperous network of post offices. Is he aware that my constituents will particularly welcome the fact that he recognises that post offices in some of the less affluent urban areas are even more vulnerable than those in rural areas on the move to automated credit transfer? Those same constituents will attach huge importance to the potential of the universal bank which he has announced today. While recognising that the small print and the details of the agreement with the commercial banks will be produced later, is my right hon. Friend satisfied that he will reach an agreement with the private banks that will enable the universal bank to achieve its full potential to sustain the network? For example, will an individual who already has an account with a private bank be able to open an account with the universal bank?

Mr. Byers

My right hon. Friend is right to say that there are many aspects of today's announcement will be of real benefit to his constituents and to many other people living in inner-city areas. Much of the work conducted by the performance and innovation unit revealed that many of the 3.5 million people who do not have a bank account felt that a bank account was not appropriate for them for two main reasons: first, they felt that they were talked down to and they felt uncomfortable about going into a bank; and secondly, they did not want to get into debt as a result of having an overdraft facility. The reason why they liked the idea of a universal bank was that they trusted the Post Office and felt comfortable with it. They felt that they could trust the way in which the Post Office dealt with their affairs. People who already have bank accounts will be perfectly entitled to join the universal bank and they will be offered the whole range of financial services that the banking sector provides. Once again, that will be a matter of choice, but I am confident that the universal bank will open up a new direction in terms of offering financial services to many people who are presently excluded from many of the benefits that most of us take for granted.

Mr. Dafydd Wigley (Caernarfon)

The Secretary of State said that there would be a new fund to help post offices in deprived urban areas. Will he confirm that there will be a mechanism to give the same help to post offices in deprived rural areas? Does the ring-fenced money to which he referred apply equally to both urban and rural areas? Will he clarify conclusion 10 on page 89 of the report, which states that that ring-fenced fund will apply in England, but that similar arrangements in Scotland, Wales and Northern Ireland will be matters for the respective devolved Administrations? Will he confirm that any ring-fenced money will be additional for those areas, as it will be for England?

Mr. Byers

As to the position with regard to the devolved Administrations, I know that my right hon. Friend the Secretary of State for Wales is making an announcement this afternoon about how he intends to deal with these matters in Wales.

The ring-fenced funding has been negotiated in the context of the comprehensive spending review, and it will apply to Wales as well as England. The right hon. Member for Caernarfon (Mr. Wigley) is right to point out that targeted financial support must be supplied to deprived rural areas as well as to deprived urban areas, but that support will take different forms. The power to put subsidy into rural areas is contained in the new Postal Services Bill, but the fund for deprived urban areas is exclusively for those areas, and will be ring-fenced accordingly.

Dr. Lynne Jones (Birmingham, Selly Oak)

Proprietors of sub-post offices in my constituency are very worried about the declining value of their businesses. They tell me that they want not subsidy but proper recognition for the valuable service that they provide, much of which is on behalf of the Government. The measures announced today will go some way towards alleviating their concerns, but there is likely to be some delay in their implementation, and the report states that the universal bank concept needs more work.

In the meantime, business is being lost, and not only because people are choosing to move away from post offices. Sub-postmasters and mistresses in my constituency tell me that their customers say that staff at the Department of Social Security are misleading people into believing that their benefits must be paid into their bank accounts, even though they would prefer to have them paid at the post office.

I notice that the Minister of State with responsibility for pensions, my right hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker), is present, and I hope that he will talk to colleagues about how the Department can encourage its clients to opt for the universal bank. I hope, too, that the Department will recognise that there are security advantages to allowing people to collect benefits from a post office rather than from any branch of their bank.

Mr. Byers

My hon. Friend was right to say that postmasters and postmistresses do not want a subsidy. They want to make their businesses commercially viable by moving into new areas and diversifying into new facilities. The announcement that we have been able to make today will go a long way towards assisting them.

Today's announcement will also introduce to the network a new confidence that has been lacking over recent years. We have been able to lift the cloud of uncertainty that has hung over the post office network. People can now plan ahead with confidence, as they will know the direction the Government intend to take with the network.

With regard to what my hon. Friend said about the Benefits Agency, we will make sure that benefit recipients and pensioners are made fully aware of the options and the genuine choice available to them. The big change on ACT does not begin until 2003, so there is a period in which we can make sure that the various initiatives are in place and functioning effectively. That is the challenge of the next few months, but I hope that today's statement will mean that many sub-postmasters and mistresses in my hon. Friend's constituency feel that they can plan ahead with confidence, in the knowledge that the network has a viable future.

Mr. Patrick McLoughlin (West Derbyshire)

Since the House last debated post offices, I have been informed that the post office in Kirk Langley in my constituency is to close. Ten days ago, I was informed that the sub-postmistress at Brassington, who had her home converted to run the post office, has received a communication from the Post Office about reducing her wage substantially. What comfort will the Secretary of State's statement today bring to the proprietors of those two post offices?

Mr. Byers

If the Kirk Langley and Brassington post offices serve rural communities, they may well be covered by the proposals that I have introduced in connection with the protection and maintenance of the rural network. I cannot guarantee that, as I have not seen the details of the cases to which the hon. Gentleman refers, but people who read the statement will accept that there is much in it that will give reassurance to the rural network in the future. The problems being experienced by Kirk Langley and Brassington have nothing to do with our proposals to move to ACT from 2003 onwards. They are already having difficulties. That is one of the reasons why we wanted to make the statement today—to instil some confidence in the system. I hope that in the future the problems experienced in Kirk Langley and Brassington will be overcome, but I regret that it may be too late for those two particular post offices.

Mr. Alan W. Williams (East Carmarthen and Dinefwr)

I welcome the my right hon. Friend's statement, particularly the proposals for a universal bank for sub-postmasters and sub-postmistresses to carry out a Government general practitioner role. In that context, could they also have a role as welfare benefits advisers? Sub-postmasters are in touch with the poorer sections of the community. With regard to the elderly, sub-postmasters probably know more about care allowance, attendance allowance and the minimum income guarantee than, say, Thora Hird, and such a step could be very cost-effective. Could post office employees be paid to alert the Department of Social Security to benefit fraud?

Mr. Byers

When the role of a Government general practitioner is brought forward and we can see the detail, we will be looking at the areas mentioned by my hon. Friend with great interest. We will want to know to what extent sub-postmasters and postmistresses can be trained to give good quality advice about the welfare benefits system and a whole range of other issues. They are in an ideal position to act as the interface between the Government and individuals in many communities up and down the country. Post offices provide a network that can form the backbone of communication between the Government and citizens. They have not been used in that way in the past.

The report that we have today and the Government's response to it will ensure that the Post Office network can grow in the future and move in different directions, in a way that I believe will provide greater satisfaction to many sub-postmasters and postmistresses who want to develop a Government service role.

Several hon. Members


Madam Speaker

Order. We shall obviously be coming back to this subject. We must now move on.