HL Deb 26 July 2000 vol 616 cc416-9

2.52 p.m.

Baroness Byford asked Her Majesty's Government:

Whether there have been any contacts with European Union officials about the legality of government financial assistance for the universal bank recently proposed to assist rural post offices; and, if so, when the first contacts took place.

The Minister for Science, Department of Trade and Industry (Lord Sainsbury of Turville)

My Lords, the European Competition Commissioner was informed on 4th July about the new package of measures to modernise the post office network. As the detailed projects are developed, officials will consult with the European Commission to ensure compatibility with state aid rules.

Baroness Byford

My Lords, I am grateful to the Minister for that reply. However, I am also somewhat concerned. In June, when we discussed in Committee the Post Office Bill, the Government gave an assurance that there was no possibility of not supporting rural post offices. However, I understand that the proposal to set up a universal bank has been made without approval being sought and in advance of legislation that is currently moving through this House. Can the noble Lord clarify matters for me?

Lord Sainsbury of Turville

My Lords, in such cases it is the usual practice to apply to the commissioner, especially when a detailed proposal has been made. That is the normal procedure. We believe that our proposals will be in accordance with the relevant competition issues. Given that the universal bank is to be established jointly with the banks and that it will cover areas where there is an absence of banking services, it is difficult to see that the proposals will infringe on competition policy. However, that is for the European Commission to establish.

Lord Clarke of Hampstead

My Lords, my noble friend will recall the cautious welcome I gave to the concept of the universal bank when we discussed the Postal Services Bill. Is my noble friend now in a position to give us further details of the functions and services to be provided by the universal bank? Have the proposals been progressed to the point where they are ready to be presented to those people who are likely to use the universal bank?

Lord Sainsbury of Turville

My Lords, the broad outline of the services of the universal bank is clear. It will not offer overdraft or borrowing facilities. It will offer basic bank accounts, along with a direct debit facility which will enable many customers to reduce their gas and electricity costs. Furthermore, a cash card facility will be offered to enable cash to be withdrawn from ATMs. The business case will be developed further over the period up to September, by which time details of the services to be offered will be complete.

Baroness O'Cathain

My Lords, can the Minister confirm whether it is true that no informal contacts were made with the commissioner before these proposals were made? Generally, it is the case that ongoing relationships with the Commission allow people, in particular those involved in industry, to gauge the temperature of the water, as it were. It seems rather strange that we do not yet know, at least informally, whether we may be 100 per cent or even 90 per cent certain that these proposals will be approved. I should be grateful if the Minister could answer that question.

Lord Sainsbury of Turville

My Lords, I hope that I have indicated that it seems clear that the broad outline of this proposal is unlikely to infringe competition policy. I cannot confirm specifically whether informal contacts were made. I shall look into it and write to the noble Baroness.

Lord Bruce of Donington

My Lords, can my noble friend indicate to the House why it should be necessary to consult the European Commission at all on this matter? Furthermore, can he give the House an assurance that the costs of these representations will be included in the impact cost assessment, in accordance with Foreign Office instructions in connection with such matters?

Lord Sainsbury of Turville

My Lords, because the possibility exists that this could conflict with competition issues, it is clearly right that we should put the matter before the commissioner. So far as concerns the costs involved, I cannot believe that these will be particularly significant in relation to the size of the total project.

Baroness Miller of Hendon

My Lords, can the Minister clarify for me two small, simple and specific matters? Further to the Minister's comments to my noble friends, can he confirm that, at the point when the Performance and Innovation Unit announced its rescue plan for rural sub-post offices, stating at that time that one element would be a universal bank, and at the point when the Minister repeated a Statement made by his honourable friend the Secretary of State in another place announcing the Government's total commitment to ensuring a network of rural post offices, the Department of Trade and Industry at that stage had not sought the approval of the EU? If that is the case that would mean that, when the Statement was made, it could not have been possible for the Government to confirm their plans.

Lord Sainsbury of Turville

My Lords, I am always worried about a specific question, particularly when it is described as being "small". I did say categorically that we made information available to the European Commission subsequent to the publication of the PIU report.

Baroness Miller of Hendon

My Lords, can the Minister respond to the second part of my question?

Lord Sainsbury of Turville

My Lords, we are committed to these proposals. We shall try to get them agreed with the European Commission. Furthermore, we shall ensure that the financial assistance to be offered will be compatible with state aid regulations.

Baroness Byford

My Lords, many noble Lords are unhappy with the Minister's response. It does not seem right to take legislation through this House which suggests proposals that the Government cannot then fulfil. We now find ourselves in that situation. Perhaps the Minister would like to comment on the article published in the Sunday Telegraph headed, "EU may block plans to save rural post offices"? I do not think that the Minister has answered fully my original Question.

Lord Sainsbury of Turville

My Lords, this is a matter that the noble Baroness and I have discussed on many occasions. The idea of a universal bank has nothing whatsoever to do with the legislation, which related to the status of the Post Office. This is a separate issue concerned with the services that will be offered. It in no way relates to the legislation, which, so far as I remember, does not refer to a universal bank.