§ Motion made, and Question proposed, That this House do now adjourn.—[Vernon Coaker.]
§ 2.5 pm
§ Mr. Calum MacDonald (Western Isles)
I had hoped that the hon. Member for Banff and Buchan (Mr. Salmond) was going to participate in this debate, and I invite him to stay.
§ Mr. MacDonald
I am delighted that the hon. Gentleman will because, as I am sure that he acknowledges, both as a Scottish MP and as a former employee of the Scottish banks, this important issue affects hundreds of thousands of loyal bank customers across Scotland. Many of those customers have been loyal to Scottish banks throughout their entire lives. I opened my first bank account on my first day at university when I was 18, and continued to maintain an account with a Scottish bank while I lived abroad for eight years on the west coast of the United States. Today, although I spend at least half of the year in London, I bank only with a Scottish bank.
§ Mr. Salmond:
I am delighted to assure the hon. Gentleman that I have signed both early-day motions on this important matter. Moreover, I am happy to support his initiative in this Adjournment debate, and I congratulate him on securing it.
§ Mr. MacDonald
I am grateful for the hon. Gentleman's support and for the support of Scottish colleagues from all parties who signed the two early-day motions.
The Scottish banks rely on the loyalty of customers throughout Scotland who bank with them because they are, first and foremost, Scottish banks. Although those customers are unfailingly loyal to the Scottish banks, I am afraid that those same banks are grossly disloyal to their Scottish customers. The Government have invested huge sums in installing in every post office, however remote or small, technology that enables anyone to go into any post office branch—I am sure that the Minister for Energy, E-Commerce and Postal Services will give us further details—and access their bank accounts, check their statements, make deposits or withdraw money. That is a huge step forward in post office customer service provision, and it is also a huge step forward for customers of the various banks.
For the first time ever, people are within easy reach of ordinary banking services, which are just a short walk from their homes. For pensioners, people in remote and rural areas, small businesses, hard-pressed mothers looking after children at home, and people trying to juggle their finances and lives, the change has the potential to make their life a great deal easier. One would have thought that the banks would leap at this opportunity to provide a useful and welcome service to their customers, and some have done so. Currently, the Post Office has agreements with the Alliance and Leicester, Barclays, Lloyds TSB and the Co-operative bank, as well as well as new internet banks such as 420 Cahoot, Smile arid First Direct in Scotland. Already some 20 million customers in Britain have access to an automated service through their local post offices. Those banks are to be congratulated on putting the needs and the convenience of their customers first.
Sadly, however, although the Post Office has sought to reach similar agreements with the Royal Bank of Scotland, the Halifax Bank of Scotland and the Clydesdale group. those three Scottish banks have each refused so far to make any kind of similar arrangement. Their customers continue to get a second-class service. If the Post Office had been unable to reach agreement with any banks whatsoever, there would be a case for saying that perhaps the shortcomings were on the Post Office side of the negotiations, and that it was trying to achieve too lucrative a deal for itself. But when so many other banks have signed up and are already co-operating with the Post Office, the only conclusion that can be drawn is that the Scottish banks are putting their profits before service to their customers and leaving their customers short-changed.
There can be no question that the post office network can provide a vastly superior service to that provided even by the banks that try to maintain a wide network of local branches. We know that banks find it harder and harder to maintain a network, but the Post Office has more than 16,500 branches throughout Britain. Not only is that more than any other postal service in Europe, but it is more than the combined total of the six biggest banks in Britain. Even if one added to that the combined total of the four biggest building societies, the total number of branches would still be well short—by some 2,000 branches—of the size of the post office network.
The superiority of the post office network is most apparent in scattered rural communities, such as in the constituency that I represent, where we have a small handful of bank branches scattered throughout the islands, but they are concentrated in local population centres that are very many miles, and long, expensive driving distances, apart. By contrast, in my constituency the Post Office has a branch in every rural district. Across Britain, the vast majority of people—85 per cent.—who live in rural areas live within 1 mile of the local post office. That is a network second to none in Britain or in Europe, and it is intolerable that the Scottish banks are refusing to take advantage of it at a time when they are making very healthy profits.
A great deal of patience has been shown during the lengthy discussions that have taken place between the Post Office and the Scottish banks. Customers have been waiting patiently for an agreement to be reached, sub-postmasters have been waiting patiently for an agreement to be reached, and politicians such as ourselves have been happy, so far, to let the banks get on with their negotiations without undue intervention. However, I know that I speak for the great majority of my Scottish colleagues from all parties when I say that that patience has run out. When even the Bank of Ireland has struck a deal with the Post Office to provide a full range of banking services, including throughout Scotland, there is simply no excuse for the Scottish banks still to be dragging their feet.
The banks should be warned. When people see tourists from England and Ireland coming to Scotland this summer and being able to withdraw their cash from the village post office, while Scottish customers living in 421 the same villages have to get into their cars or make long bus journeys to access the same services, there will be an angry backlash against this disparity and inequality of treatment.
Earlier today I received a fax from the National Federation of Sub-Postmasters, informing me that they are commencing a campaign to alert their post office customers to the present state of affairs. Colin Baker, the general secretary, stated in the fax:The National Federation of Sub-Postmasters has launched a campaign to harness the power of customer pressure to persuade banks that there is a strong customer demand for access to all types of account via the Post Office pin-pad technology.He continues:We are targeting, in particular, Royal Bank of Scotland Group and HSBC.The National Federation of Sub-Postmasters has sent a pack to every postmaster, including envelopes addressed to the chief executives of both those companies and pre-printed cards that customers will be invited to complete and sign. That is the start of a campaign that will be well supported throughout Scotland, and to which the banks would be well advised to pay attention.
As the hon. Member for Banff and Buchan (Mr. Salmond) said, there are two early-day motions on the subject before the House, signed, at the latest count, by 44 Scottish Members of Parliament, as well as by a good number of sympathetic, Union-minded English colleagues. Excluding Scottish Members on the payroll vote who obviously cannot sign because of that, practically every Scottish Member has signed one or the other of the motions. I know that a number of colleagues from Scottish constituencies will participate in the debate, and I am delighted that the early start of the debate did not catch them short, although their presence may have something to do with the fact that all the flights from Heathrow have been cancelled.
I know that there will be calls from colleagues in the Chamber and from my Scottish Labour colleagues for the banks to come down to Westminster to explain themselves to us. I encourage the Scottish Affairs Committee to take an interest in the issue, and I am confident that it will. The banks cannot be allowed to carry on abusing the loyalty of their Scottish customers in this way. I therefore ask my hon. Friend the Minister to say what steps he is taking to assist the Post Office to reach agreement with the Scottish banks. Will he undertake to convey to the banks the sentiments of the House, as expressed today?
§ Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)
I congratulate the hon. Member for Western Isles (Mr. MacDonald) on presenting the subject for debate. It is topical and timely that we put pressure on the banks to recognise the needs of their customers. Although there is a market out there, inertia among customers gives the banks a great opportunity to make considerable profits out of their customers.
The quality of service to the community from which the banks make their money depends, in part, on the public perception of the banks and the climate in which they operate. They have a golden opportunity to step in at a vital time for the Post Office, which is the last 422 remaining focus for many communities—the last remaining source of a service in that community. The banks have an opportunity to provide a service to rural communities that they are at present unable to provide.
Last Friday I visited Strathdon in the constituency, where there is a shop and post office, and right next door is a Clydesdale bank, which is open one day a week. The customers of that bank could access their money five days a week if it had a deal with the Post Office. The Clydesdale bank should think carefully. It has quite a large rural network, which it is looking to rationalise. The public relations advantage and the benefit of the message that it would send about its commitment to rural areas if it maintained a deal with the Post Office would be vital.
These issues arise at a time when the Department for Work and Pensions is seeking to migrate pension and benefit claimants into receiving their payments by direct payment, rather than through the giro book at the post office, as they have traditionally done. Many people who have a bank account that they traditionally use only for savings purposes are being pressurised or persuaded to give the account details to the customer migration centre, and then finding that their payments are going via their bank. At the moment, they are not clear whether they can still get their money through the post office. They are led to believe that they can, but that would be the case only if they opened a basic bank account.
Most of our constituents' bank accounts are not basic bank accounts, so there is no access through the post office. Ministers and the banks sometimes tell us that constituents who want to access their money through a post office can do so if they have a basic bank account. However, that is an illusory account that exists only on paper—anybody who tries to open one will find themselves rapidly steered towards opening a standard traditional bank account. People who tend to use their bank account only for savings use their benefit book to collect the money from the post office for their day-to-day living expenses—they need ready access to that cash—and will be in for quite a shock when they find that cannot do that any more. So there is a timely and significant pressure on the banks to provide this transfer service and to do the necessary deal with the post office.
Although these are Scottish banks, they are also major banks throughout the United Kingdom, and I think that colleagues south of the border will be behind us because if we are successful it will make a big difference.
I should like the Minister to address two matters. First, although many hon. Members approach the issue from a rural angle, from the point of view of the future of the Post Office the deal would be most effective if it applied across the whole post office network. Is there any technology that would enable those in areas not served by the banking network to deal with the post office? I suspect that that would not be possible, given the way in which the banking system works, but perhaps the Minister could consider it.
Secondly, the banks often use the defence that they have made their public service commitment by investing in setting up the basic bank account. However, if that exists only on paper, so that if customers try to open one they find themselves steered towards another kind of 423 account, it is not delivering the public service commitment that it was supposed to. The Government should make it clear to the banks that far more effective would be a straightforward, effective connection with the Post Office so that the conventional accounts that people are using, and being persuaded to get their pensions paid into, can be accessed through the post office.
That would benefit not only customers, who would get a better service, but the banks, which would maintain their customer network for the other products that they want to offer. It would also provide a vital lifeline to the Post Office at this crucial time when it is losing income from conventional pension books and there are only a few years left of the guarantee provided by the Government to try to keep rural post offices open. New forms of business are required that will bring income into those sub-post offices and help to sustain the range of services that they provide, such as shops.
I urge the banks to listen carefully to the growing concern and to pre-empt the need for this campaigning by getting on with negotiating with the Post Office to come up with a sensible deal whereby our constituents, especially in rural areas, can have ready access to bank accounts on the same terms as those in urban areas.
§ Mr. Alex Salmond (Banff and Buchan) (SNP)
The hon. Member for Western Isles (Mr. MacDonald) rather alarmed me by saying that all flights from Heathrow are cancelled, as I am booked on to the 5.40 pm to Aberdeen. I booked that flight when I realised that the Adjournment debate was going to take place slightly earlier. If we use up the full time until 6.30 pm, that flight will go by the board as far as I am concerned, whether it flies or not.
As the hon. Gentleman said, I was formerly an economist at the Royal Bank of Scotland. I do not know whether that constitutes declaring an interest as a Royal Bank pensioner—if so, I willingly do so. My former colleagues are fond of telling me that the bank, which is now the fifth or sixth largest bank in world, depending on how it is measured, has grown rapidly since I left its employment. I like to think that the foundations were well laid before that date.
This is an important debate. We should understand more about the misgivings of all three Scottish banks, who argue that in seeking to maintain and develop local post offices, we might be jeopardising rural banks. However, as the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith) sensibly points out, those banks often open only for one or two days a week. The priority should be to ensure proper banking services, particularly in rural communities. I hope that the matter can be resolved, because for the life of me I cannot see why an element of good will in negotiations could not bring about a satisfactory settlement.
As regards bank closures in rural communities, the Bank of Scotland and Clydesdale bank have been particularly innovative in looking closely at the provision of services such as cashline machines, or other money dispensers, in community centres, but it has to be said that those initiatives have been quite limited. When 424 I worked at the Royal Bank of Scotland, all the Scottish banks had portable rural banking services; I seem to remember that the service in the Western Isles was operated by plane. Those services were well advertised by the banks as part of their community facilities. Now, they are not provided at all, or certainly not to anything like the same extent. As a result, many rural communities throughout Scotland have a post office that offers only basic financial transactions and some rural communities have no banking or money transaction services available to them.
The initiative to set up money dispensers in post offices is somewhat limited by the continuing confusion about the charges that are made depending on the type of account that one has. Although a warning is displayed on most machines, it is certainly not clear to me whether I am being charged, and I suspect that many people are in the same position. Money dispensing machines are therefore very limited for that purpose.
It would be ideal if an arrangement could be reached between the Scottish banks and the Post Office. That would consolidate the position of the Post Office and make a right for rural customers much more widely available than it is at present. It is strange, in a new century in which technology is widely available in so many forms, that a basic banking facility that many of our constituents still wish to conduct on a person-to-person basis is being denied to so many of them. I wish the hon. Member for Western Isles, and other hon. Members who are pushing this issue, well in forcing it to a satisfactory settlement that could be in the interests of the Post Office and the Scottish banks, and which would certainly be in the interests of our constituents.
§ Mr. Alistair Carmichael (Orkney and Shetland) (LD)
I, too, congratulate the hon. Member for Western Isles (Mr. MacDonald) on securing the debate. I apologise to him, and to you, Mr. Deputy Speaker, for not being in the Chamber for the first couple of minutes. I had anticipated that the Adjournment debate might start earlier than is normally the case, but I had not realised just how much earlier. Those of our number who are responsible for ordering the business of the House may wish to reflect that, not for the first time, it will be rather more substantial than the main business of the day.
§ Mr. Carmichael
Indeed: on this occasion, it is a happy circumstance, but that is not always the case.
It will surprise nobody that I agree with almost everything that the hon. Member for Western Isles and others said. The provision of banking facilities in remote communities, especially island communities, is not new. Over the years, the number of branches in remote and rural communities has declined. However, as my hon. Friend the Member for West Aberdeenshire and Kincardine (Sir Robert Smith) said, several banks maintain a facility in smaller communities that is available on a restricted basis. I know from flying round my constituency that one can find oneself on a plane to Westray on the same day as someone from the Royal Bank of Scotland travels to open the branch for one day.
425 I have sympathy for the difficulties that the clearing banks experienced in maintaining facilities in smaller communities. Those facilities are not big earners for banks and there is a considerable cost in maintaining them. It is therefore all the more puzzling that the clearing banks in Scotland have adopted such a difficult attitude in the negotiations with the Post Office. I do not know whether that is brinkmanship or some sort of hard-ball negotiating technique, but it is regrettable. Any pressure that the Minister can bring to bear so that the negotiations reach a swift and satisfactory conclusion would be welcome.
As other hon. Members said, the banks have taken different approaches over the years. When I worked for a firm of solicitors in the constituency of the hon. Member for Banff and Buchan (Mr. Salmond), it operated an agency for the Woolwich building society and the Trustee Savings bank. That was a common setup at the time. Indeed, the arrangement ended only in the 1990s, but by the time I experienced it, it was becoming exceptional rather than common. It appears logical to develop a sort of agency status for something as substantial as the Post Office, given the technology that exists for providing access for people to their money through post offices. The Post Office appears to be the sensible successor to the agency arrangements.
I want to emphasise the point of my hon. Friend the Member for West Aberdeenshire and Kincardine about the difficulties that post offices anticipate as a result of the migration of benefits and pension payments to bank accounts. The fears that that engenders are genuine. If the facility of getting money from the Post Office were available to the public, many of the fears of Post Office employees, sub-postmasters, pensioners and benefit claimants in our constituencies could largely be allayed.
I commend the hon. Member for Western Isles for raising this matter. I was pleased to sign his early-day motion and I invite the Minister to make every effort to engage his Department in bringing negotiations to a swift and satisfactory conclusion.
§ The Minister for Energy, E-Commerce and Postal Services (Mr. Stephen Timms)
I welcome the opportunity to air the issues in the House. I warmly congratulate my hon. Friend the Member for Western Isles (Mr. MacDonald) on his important initiative. I also welcome the support that the hon. Members for Banff and Buchan (Mr. Salmond), for West Aberdeenshire and Kincardine (Sir Robert Smith) and for Orkney and Shetland (Mr. Carmichael) expressed. My hon. Friend made a telling point about the almost unanimous support of Scottish Members for his case through the early-day motions.
I listened with great interest to all the speakers. I was especially interested by the point that the hon. Members for West Aberdeenshire and Kincardine and for Orkney and Shetland made about the potential benefits for the Scottish banks in replacing costly one-day-a-week operations with six-day-a-week Post Office access to accounts. Indeed, I had discussions about the matter with sub-postmasters in Inverness last year. They were keen, for obvious reasons. My hon. Friend referred to his correspondence with the National Federation of Sub-Postmasters, and the group that I met in Inverness 426 was greatly looking forward to the opportunity to serve a much larger group of local residents and potential customers through access to other bank accounts.
In opening the debate. my hon. Friend referred to his first account with a Scottish bank that he maintains to this day. I used the post office regularly to obtain cash when I was a student and when I first started work. I looked at my Post Office book the other day and I noticed that the last transaction in it was conducted in 1983, which was when I switched to using a bank card. I had not used the post office to obtain cash for 20 years until my bank opened its current accounts to Post Office access. I can now obtain cash in the Members' post office and I often use the post office on the High street in East Ham near where I live. I hope that it will not be long before every current account can be accessed in that way.
Let me outline some of the background to the debate. In June 2000, the performance and innovation unit report on the post office network concluded that the business had not kept pace with change and was not exploiting the highly trusted status that the Post Office enjoys as a provider of financial services. All sub-postmasters are business people. They have found it increasingly difficult to make a living and they have been leaving the network in increasing numbers. It was clear from the PIU's work that doing nothing was not an option and that that would lead to the unmanaged decline of the network, leaving deeply damaging gaps.
The network's problems are apparent to many of us. They include past under-investment, but people's increased mobility, changes in shopping habits, more choice—including through new technology—have all played a part. The business needs to face up to those challenges and make itself more relevant to modern customer needs, or it will not survive. The task that faces the post office network is to continue to serve its existing customers with excellence but to attract new customers and have access to expanding banking markets, not simply dwindling markets, as in the past. That is the key to success.
My hon. Friend rightly made the point that the Government are investing substantial sums in supporting the transformation of the entire network. We are spending £2 billion in total, including £500 million on implementing a network that links every branch in the country. We have established a strong management team at the Post Office and given it the task of turning the business round. It continues to develop and introduce new products and services. Recently, as my hon. Friend mentioned, plans for a range of financial products, available in all post offices through a joint venture with the Bank of Ireland, have been announced. That can only be good news for the network, for sub-postmasters and their customers. A major advertising campaign for travel insurance and bureaux de change services features ants. That contributes to making the Post Office the sort of service that customers want to use.
Banking is central to the Post Office's future strategy. It has the Government's full backing. We all want the post office to become the sort of place where people do their banking so that they get access to cash in a familiar and convenient place. All the high street banks and the Nationwide building society are already making a positive contribution to universal banking services because they provide customers with free access to basic 427 bank accounts at post offices as well as making a significant financial contribution of £180 million between them to the cost of running the Post Office card account.
I want to put on record that all those institutions, including the three Scottish banks that my hon. Friend mentioned—the Royal Bank of Scotland, the Bank of Scotland and the Clydesdale group—have worked with us in a positive and constructive way, including making financial contributions to ensure that universal banking was delivered on time, on 1 April last year, despite what some people had predicted in the lead-up to that date. Without a doubt, the initiative has technically been very successful. It has worked successfully right from day one, and I want to acknowledge the support that those three Scottish banks have provided by offering basic bank accounts that can be accessed at post offices and by providing financial support for the initiative.
In addition to basic bank accounts, the Post Office provides access to a range of other bank accounts and is seeking to expand these with all the major institutions. It is already providing electronic access to their accounts for all current account holders at the Alliance and Leicester, Barclays and Lloyds TSB—some 20 million ordinary current accounts in total. The Post Office wants to expand that number, and rightly so. I would like to add my voice to what has already been said in this debate by making it clear that I would like the customers of the Scottish banks to be able to access their accounts at the post office. However, I believe that that decision properly rests with the individual institutions, particularly in view of the support that the banks have already given to the introduction of universal banking. Nevertheless, I hope that all those banks will move in the direction that my hon. Friend and the other hon. Members who have spoken in this debate have called for.
I have had discussions with the Scottish banks on this issue. I have spoken to representatives of Halifax Bank of Scotland and the Royal Bank of Scotland. Yesterday, I received a letter from the Royal Bank of Scotland setting out its position, and it might be useful if I quote from it. The letter states:We recently looked again at our policy on this issue, and decided to make no change. This took into account a number of factors. We have detected no significant demand among our customers.It goes on to talk about the size of the bank's network, and finishes by saying:While we have no plans at present to extend this particular facility to all our customers, we keep the question under regular review.I hope that all account holders at the Scottish banks will be able to access them through the post office, but it is right, as that letter suggests, that the key should be whether there is a demand for that from the banks' customers. The Royal Bank of Scotland says at the moment that it has detected no significant demand, although my hon. Friend suggested in his speech that that might be about to change. If that is the case, we could well see a change of heart from the bank. That will depend on the impression that the banks form of the level of demand for this facility from their customers.
428 The Government remain absolutely committed to ensuring that those who wish to continue to do so can collect their benefits at post offices, in full and free of charge, after the move to direct payment. We have provided nearly £500 million to automate every post office branch. That has provided the technical infrastructure to support electronic banking, which gives the Post Office the opportunity to widen its customer base by increasing its offering of banking products. I welcome the fact that this debate helps to draw attention to the substantial benefits to Post Office customers that will result from the investment that the Government have made, and I am grateful to my hon. Friend for drawing attention to that point.
Under the new arrangements for benefits payments, customers have three account choices when deciding how they want to be paid. The first is a standard bank or building society account, some of which—although not yet all—can be accessed at post offices. The second is a bank or building society basic account, many of which can be accessed at post offices. All the Scottish banks offer such an account. The third is the Post Office card account. The customer chooses the account that they want.
§ Sir Robert Smith
The Minister has mentioned the various bank accounts available. What monitoring are the Government carrying out as part of this social contract with the banks to ascertain how easy people are finding it to open a basic bank account, and how many are being opened? Is there any monitoring of those statistics?
§ Mr. Timms
I do not have those figures with me this afternoon. There is certainly monitoring of the number of basic bank accounts that are being used. I am not sure that we have data on the number of accounts, but there is certainly information on the number of transactions. There are also data on the number of Post Office card accounts being applied for and opened. It is fair to say that the number of basic bank accounts opened so far remains quite modest, and that strengthens the case for opening up access to other current accounts. We are keeping a close eye on how that is developing.
In the past, Post Office income has been heavily dependent on benefit payments, but that business has been dwindling. It is worth making the point that, before the Government made the decision to switch to making all payments through direct payment, more than 43 per cent. of benefit recipients already received their cash directly into their bank account, compared with only about a quarter in 1997. Sixty-two per cent. of all new child benefit recipients and 68 per cent. of all new pensioners already have their benefits paid directly into their bank account by choice. So the direction in which things were moving was already clear, even before the transition to direct payment commenced.
The old order bock system needs to be modernised to keep in step with changing customer needs and to reflect the fact that owning and using a bank account is now the norm. About 90 per cent. of pensioners now have access to one, for example. A business built on serving people who do not use bank accounts will clearly be serving a shrinking market. Instead, we all want the Post Office to serve an expanding market, and banking provides that opportunity.
429 I welcome the initiative that my hon. Friend has taken, and the support that he has attracted in this debate and through the early-day motions. I also welcome the keen interest that Members on both sides of the House and people across the country have in the future of the Post Office. The hon. Member for West Aberdeenshire and Kincardine pointed out to me a number of post offices in his constituency when I visited it last week. I want to make it clear that the Government share the commitment to the Post Office that hon. Members have expressed. We want to help to ensure that it can move forward with confidence and that sub-postmasters and sub-postmistresses can look forward with confidence to the prospects for their business.
430 It is clear that the business could not prosper if it stood still. The challenge is to adapt and to meet the changing demands of customers and society. The status quo is not an option; the future lies in banking and the Government hope that all banks will provide their customers with access to their accounts through post offices. The critical issue, however, will be whether customers demand post office access. I certainly hope that they will.
§ Question put and agreed to.
§ Adjourned accordingly at twelve minutes to Three o'clock.