HL Deb 12 July 2001 vol 626 cc1250-60

8.26 p.m.

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville)

rose to move, That the draft order laid before the House on 25th June be approved [First Report from the Joint Committee].

The noble Lord said: My Lords, the network of Crown and sub-post offices plays a vital role in our society. Many of the vulnerable and elderly rely on it to deliver services to them, as well as it being a convenient place for the community as a whole to access government services, financial products and, of course, postal services.

The network is much more than just a retail outlet, especially in rural areas. It is also a public service. The local sub-post office represents vital human contact for many of its customers. Sub-postmasters know their clients by name, and can often be the first ones to raise the alarm if an elderly customer fails to collect their pension. They are a trusted point of contact with government. And the local post office is often the only place where the community can easily access cash.

I am sure noble Lords will want to join me once again in placing on record our thanks for the service to their communities that sub-postmasters and sub-postmistresses perform. This is a network built on the dedication of individuals. Yet ironically, that can also be one of its weaknesses. When an individual sub-postmaster decides to retire, Consignia is in a position where it must find an alternative person to take on that business. A new sub-postmaster must be found.

Consignia has begun to make setting up as a sub-postmaster more attractive—for example, by dropping the initial payment sub-postmasters were required to provide before taking on an office. The Government are also committed to ensuring that the network is a viable business and that running a sub-post office is and remains an attractive business proposition.

For example, new life will be injected into the network through two business streams identified following last year's Performance and Innovation Unit report: Universal Banking Services and the Government General Practitioner scheme. The GGP scheme will be piloted from this month in Leicestershire and Rutland. A further range of new services, including access to stakeholder pensions and entering into the fast-growing market of e-retailing and home shopping is being added to this.

The Government recognise the need for both short-term and longer-term support to assist the network as it seeks to build these new income streams. We are supporting the network through the introduction of three specific schemes. The first two look to the future. One will implement the PIU recommendation that in urban and suburban areas there should be better, brighter offices. The second will provide transitional funding to cover the gap between the payment of benefits direct to bank accounts (ACT) and the new income streams coming fully on line. The third, a short-term measure, is the subject of this order which has been brought forward to address the very specific circumstances that I will outline.

Often, someone can be found to be the new sub-postmaster and the existing premises will still be available to be used as the post office, but that is not always the case. Sometimes, although someone may be willing to become a sub-postmaster or a group of volunteers may want to preserve an important local service, there may not be an available facility. The retiring sub-postmaster may not be willing to make the premises available, or, if he or she is willing, alterations may be required to separate living and retail accommodation. Alternative premises, such as a church or a community hall, may be available, but may need to be made suitable by, for example, upgrading security.

Post Office Counters has an established team dedicated to preventing the closure of rural sub-post offices. The team is often frustrated to see a worthwhile and well-thought out community initiative to save its post office fall at the last hurdle for the sake of a relatively small amount of start-up capital funding. A. few thousand pounds may be needed to improve security or access to the premises, or to install a counter. Those are small sums, but to a small community seeking to raise funds on a voluntary basis, they can seem like mountains to climb. The plans get put on hold, and so the community loses its post office.

The scheme set out in the draft order addresses this problem. It will make available funding for the preservation of existing post offices in rural areas or their replacement. This scheme was first announced in another place by my honourable friend Alan Johnson on 15th February 2001. Following its announcement, my department wrote to all 12,000 parish and community councils across the country to draw their attention to the fact that we planned to make this funding available. The response has been very encouraging. We have received many expressions of interest and a number of specific suggestions and ideas as to how the money could be applied. Indeed, Post Office Counters has already signalled that it is prepared to fund two local schemes where the need is particularly urgent on the understanding that the Government were to bring forward this order for debate.

Before I give some details of how the scheme would work, I believe it would be helpful to give an example of the kind of communities that may benefit from this fund. A typical example is Capel le Ferne in Kent, where the community wants to re-establish its post office in the village hall. Modifications to improve access and security and to extend the hall are planned; the villagers have raised £3,000 towards the cost with a "buy a brick" campaign and the local authority has also promised to give assistance. However, there remains a gap that this scheme should be able to fill.

I now turn to the detail of the scheme. The scheme is established under Section 103 of the Postal Services Act 2000, which allows the Secretary of State to make a scheme for the making of payments for the purpose of, assisting in the provision of public post offices". The scheme itself will establish a £2 million fund to make available subsidy in respect of the costs of establishing a sub-post office in settlements with fewer than 10,000 inhabitants where an existing sub-post office has recently closed or is likely to close. We used the Countryside Agency definition of a rural settlement, which was also used by the PIU last year. We have deliberately targeted rural settlements, because in such settlements the loss of a sub-post office has the greatest impact on the community and often a convenient alternative is unavailable.

That new commitment underpins the PIU conclusion that the Government should place a formal requirement on the Post Office to maintain the rural network. We have done so, and the scheme backs up the policy with carefully targeted capital funding.

We have worked closely with Post Office Counters and we have involved the National Federation of Sub-Postmasters, PostComm, PostWatch and the devolved administrations in the development of these proposals to ensure that the scheme targets deserving cases effectively.

The scheme provides for subsidy of up to £20,000 to be paid in any particular case. Post Office Counters advises us that in many cases the amount of money needed to save a post office is small. We expect the fund to help to secure the future of up to 200 community-based sub-post offices. It is not intended to be an ongoing source of funding. The scheme is part of the package to bridge the "confidence gap" in the network until the longer-term finances of the network, with new income from Universal Banking Services, the Government General Practitioner and the other income streams and a framework for government funding of the rural network, are in place.

It is essential that the scheme dovetails with the existing arrangements within Post Office Counters to preserve the rural network. The business has appointed a senior manager to oversee the work and has established a dedicated team of rural transfer advisers. That is why we have proposed that the scheme is administered on our behalf by Post Office Counters. Subject to agreement to establish this scheme in this House and in another place, the Secretary of State will write to Post Office Counters to appoint the company to operate the scheme and to set out in detail how the scheme is to be run.

Post Office procedures for seeking a replacement sub-postmaster are well established and documented in a code of practice agreed with the postal services consumer council, PostWatch. The scheme before this House integrates with those existing processes, so that potential new sub-postmasters will be able to liase with a single unit in the company rather than being passed around between the company and the Government.

The company seeks, first, to find a commercial solution, advertising the post office business widely. Where no candidates come forward on a commercial basis, local authorities and local community organisations are approached to see whether a community-based solution can be found. Many communities succeed not only in devising a means of saving their post office, but also in securing funding from local sources. It is important not to stifle such initiatives, so this scheme is designed as a top-up scheme, either to make good a shortfall in funds raised from other sources or, where it is clear that the community has tried to raise funds but has not been successful, to fund the full cost of the work.

Noble Lords may notice that the scheme avoids pinning down in great detail the circumstances in which a payment may be made. Paragraph 4 sets out the circumstances which the scheme is intended to cover, but we have been conscious that every case for funding will be different and we have sought to avoid a scheme which inadvertently rules out a payment for a good case just because we had not thought of that particular solution. Therefore, the scheme builds in some discretion in Paragraph 6 which will allow those on the ground to reach sensible decisions, on a case by case basis, on whether they should be funded. The Post Office Counters team evaluating the applications will take into account attempts made to raise funding from other sources, value for money and the proximity and convenience of alternative post office facilities.

This is an important scheme. It is a key element in our strategy to support the network of rural sub-post offices through a transitional period and to see it thrive. It will allow rural communities to save their local post office or to make arrangements to have an alternative. More than that, it recognises the vital role that post offices play in our communities.

I, therefore, commend this order to noble Lords and I hope that this House will be able to give it, and post offices in rural communities, its support. In doing so, it is the practice for a Minister inviting Parliament to approve a draft statutory instrument to volunteer a view regarding its compatibility with the convention rights as defined in Section 1 of the Human Rights Act 1998. In my view, the provisions of the draft order are compatible with the convention rights. I am extremely pleased that the noble Lord, Lord McNally, is present to hear me say that. I beg to move.

Moved, That the draft order laid before the House on 25th June be approved [First Report from the Joint Committe].—(Lord Sainsbury of Turville.)

Baroness Miller of Hendon

My Lords, last February the Government announced new initiatives for the sub-post office network by encouraging new entrants. Those initiatives are welcomed by the National Federation of Sub-Postmasters on the basis that all contributions are gratefully accepted. The initiative that we are discussing today, and the one described by the Minister as the third, according to the DTI press release was: a new Government fund to help with the costs of relocating and refurbishing rural post offices". The brief went on to say that the aim is, to help support initiatives by volunteers and community groups to maintain or re-open post office facilities where the traditional post office is closing". This is a massive exercise in bolting stable doors— and precious few stable doors at that, according to the same press release, because the Minister confirmed that we are talking about establishing up to 200 community post offices in the UK and no more.

Rural post offices are closing because they are invariably housed in the local community shop which is currently suffering from the fierce competition from the giant supermarkets. The changed shopping patterns of the public mean that these days they often go to the out-of-town shopping centres for what they call their weekly "big shop" and simply use the village shop as a convenience store for when they run out of something or want to buy their newspapers. For people without their own cars, the disappearance of the village shop is an absolute disaster.

For many, the local shop is their only means of getting their hands on cash. But the threatened discontinuance of the payment of benefits via the post office—is not only a source of direct income to the post office but means that customers drawing their pensions or other benefits are likely to spend some of the money in the shop—is a major reason why so many sub-post offices are closing.

The Government's scheme will save the Treasury a theoretical £400 million a year. That is money taken directly out of the pockets of small businesses and out of the local economy. I say "theoretical" because an untold number of businesses will close; thousands of people will be thrown out of work in rural areas where there is no other employment and the taxes paid by the lost businesses will cease.

The short-term gains by the Treasury will be outweighed by the costs it will have to bear. And meanwhile small businesses will have been destroyed, the public put to enormous inconvenience; and they will have suffered the loss of essential amenities.

What do the Government offer in return? All they can offer is jam tomorrow from the income streams that they hope will become available in 2003 to keep sub-post offices open. That is a long time ahead and the sub-post offices are closing at an alarming rate. One of the streams which the noble Lord mentioned is the so-called "universal bank". The commercial banks are seemingly not falling over themselves to bail out the Treasury from the problems it has caused by strangling the sub-post offices.

By 2003, if the average decline continues at the same rate, another 1,000 post offices—more than 5 per cent of the present depleted network—will have closed their doors forever. All the Government can do is to offer this miserly one-off sum of £2 million.

Naturally, I welcome the assurance given in the other place to my honourable friend the Member for South West Hertfordshire that benefit claimants will be able to receive cash over the counter. However, to that I must add the qualification, "So long as there is still a counter there for claimants to use, which seems increasingly unlikely".

I have to add another observation about this subsidy scheme. I invite your Lordships to take a look at the annex to the order which lists the items for which the subsidies will be paid. They include all capital costs for items such as building and decorative work, legal and professional expenses and so on. But where is there any assistance with the actual running costs of these do-it-yourself post offices? The Treasury expects them to be run by unpaid volunteers in unheated, unlit premises. presumably provided rent and rate free by some local benefactor.

The scheme was rightly described by my honourable friend as.

a sticking plaster over the gaping wound that the Government have slashed across the face of our sub-post offices". The wound is the removal from the sub-post offices of 30 to 40 per cent—and in some cases as much as 70 per cent—of their income. That is the money which a government, who have little knowledge of business and who habitually shed crocodile tears for small businesses in particular, do not seem to realise comes straight off the bottom line.

I spoke earlier about the bolting of stable doors. Continuing with the same metaphor, I am certainly not going to look a gift horse in the mouth and we are certainly not going to vote against the order today. However, I want firmly to put on the record that we believe that it is too little to resolve the problem which the Government have themselves created.

I was pleased to read in the accounts of Consignia that in the year 2000–01 there is a £66 million post-tax profit, which was a turnaround of a loss from the previous year of £264 million. But I say to the Minister that the dividends the Government will receive from Consignia for that amount to £93 million. With all our worries about sub-post offices, it seems to me that it would have been far better if the Government had intended to plough that back into the network rather than the miserly sum of £2 million. However, that is better than nothing.

8.45 p.m.

Lord McNally

My Lords, the noble Baroness, Lady Miller, has given a powerful indictment of the order. It is a small and ambitious piece of government action.

She highlighted the concern that as regards the hoped-for new business—the seventh cavalry for the rural post offices which the universal bank and other initiatives will bring—we are doubtful about when they will arrive and what they will deliver.

Here is a perfect example of "not joined-up" government. There is evidence that the Government are addressing the real problems of rural areas and of keeping communities together. For example, the figure of 10,000 inhabitants is extremely small because much larger communities are losing their post offices.

Furthermore, there is an absence of lateral thinking. As the noble Baroness indicated, the proposal is characterised by the local community initiative, do-it-yourself-post-office approach and I strongly doubt whether that is a real solution to the problem. Part of the problem relates to the different changes of retailing patterns; some of the old familiar retailing outlets had enough foot-fall. I may be using some retailing jargon with which the Minister is not familiar, but the general through-put which kept a butcher, baker or candlestick maker no longer exists.

There is more hope in looking at joint enterprises which may take on a range of duties in a local community; for instance, part of pub, laundrette, chemist or garden centre premises used as a post office. However, I am not clear whether such lateral thinking would benefit from what is offered in the order and whether the subsidy can take effect if other economic enterprises are related to it. Are the Government determined to keep to the do-it-yourself approach, which might squeeze through as justifying the application? If so, I do not believe that the communal effort in the village hall realistically meets the needs of rural communities or is likely to happen in the real world in all but a few isolated cases.

Will the Minister tell the House whether the lateral-thinking approach, which would allow other enterprises to take on the role and still benefit from the subsidy, still applies? Why have the Government set such a low target? A community of 10,000 is very small and does not reflect the problem faced by larger but definitely rural communities.

Finally, the sub-post office also plays an important part in inner cities where some of the closures have an impact on communities that can be just as isolated as those in rural areas. I should also like to see some signs of joined-up government in terms of the impact of closures on those areas.

Like the noble Baroness, Lady Miller, although we shall not oppose this measure we should like some recognition by government that this small scheme is very limited in its ambition and, we suspect, its impact.

Baroness Byford

My Lords, perhaps I may add a few words to this important short debate on the order. I declare my interest as a patron of VIRSA, of which I believe the Minister is aware. VIRSA is an education charity that has done an enormous amount of work with rural sub-post offices within the community. I shall comment on that shortly. I also declare an interest in that I live in Leicestershire and look forward to seeing how the trial proceeds. I understand that the scheme is due to start in June of this year. Is it to run for six months; and, if so, will it be evaluated immediately thereafter? How soon will we know the results? That is important in the wider context of this order.

I understand that the £2 million that is to be made available is not a gift but is to be repaid. I do not see in the order, unless I have missed it, the time-scale over which repayment is to be made. Paragraph 6(1)(b) of the order refers to "reasonable value". Perhaps I may double-check with the Minister—he almost answered the point in opening—who decides what is "reasonable value". The noble Lord referred to the input of the local authority and of Post Office Counters which would run the scheme, but the position is not clear. Can we have greater clarity as to who assesses whether giving money to one particular sub-post office amounts to "reasonable value"? In addition, how long will it take for help to be given; in other words, will it occur within a month, two months, or more quickly?

I reinforce the observations of my noble friend Lady Miller. I too am very concerned that the sum of money involved is too little. The establishment of new sub-post offices in, say, village halls is likely to be much more costly than support of existing sub-post offices. Perhaps the Minister will comment on that.

I should like to put a question to the Minister which is not directly linked to the order. However, it is hugely important that we clarify the two matters that we are considering in looking to the future survival of sub-post offices. One is the setting up of universal banking services, which the Minister, my noble friend Lady Miller and I often debated during the passage through this House of the Postal Services Bill. I remain extremely apprehensive that a year later we still have no idea of what is to be put in its place, but that is another matter.

As to universal banking services, I understand that some 66 million could qualify to use the system. Can 66 million people use it? Has sufficient money been put aside for that, or has only so much money been allocated to universal banking services? One wonders what the Government's thinking is on that matter.

I add my concern about the change of benefits payments. Most sub-post offices receive between 40 and 70 per cent of their income from welfare payments. I listened long and hard to the Minister about the schemes that the Government had in hand. We are told not to worry and that the change will not happen until 2003, but there is very real concern among sub-postmasters who cannot see a secure future and remain worried about it. Perhaps the Minister can also clarify the position.

Finally, I return to the point with which the Minister started. The noble Lord said that rural sub-post offices were an important part of the community, and I reinforce that point. Rural sub-post offices perform a vitally important role in the community, and human contact is enormously important.

I agree with the noble Lord, Lord McNally, that the amount involved is small. However, we are grateful for anything. The noble Lord did not believe that the community would be able to make an effort. The work done by VIRSA with local sub-post offices is an example of what can be done. Although I echo the noble Lord's concern, I do not share his total pessimism in that respect. I believe that it is possible to do it, but to enable this to happen requires a great deal of commitment and support from the Government and the sub-post offices themselves. I am sorry that I have put some direct questions, but I hope that before the House passes the order the Minister is able to comment on them.

Lord Sainsbury of Turville

My Lords, I am very happy to try to deal with some of these points to which it is very important to provide answers. This is targeted investment to deal with a particular problem and is one of three schemes. The noble Baroness, Lady Miller, referred to the Government trying to shut the stable door after the horse had bolted. I remind the noble Baroness that under the previous Conservative government there were 3,500 closures and no attempt was made to bolt the door. On the contrary, we are trying to do something about it in a targeted way that invests money to achieve a purpose. It is important both to be prepared to invest resources but also not to assume that an unlimited amount of money is the way to solve the problem.

I also remind the noble Baroness that it is not until 2003 that ACT starts to become the method to be used. I also reassure the noble Baroness that there has never been any question about whether people will be able to obtain cash from the post office under this system; nor will they be required to pay any fees for that. I also remind the noble Baroness that the reason for the huge loss in the Post Office last year was the substantial write-off of all the expenditure on the benefits payment card. That was probably one of the most ill-conceived projects ever to take place in this field, and it is the ACT banking system which will replace it. This is one of three schemes. Although it is not a huge sum of money, it is directed at a very specific target and must be looked at with the other schemes.

I turn to the points raised by the noble Lord, Lord McNally. We have taken the figure of 10,000 because it is necessary to have a definition. That definition is used by the Countryside Agency and appears to make a good distinction between a rural and urban community. I also remind the noble Lord that later this year we shall bring forward a scheme for urban sub-postmasters which essentially does the same thing for them.

The noble Lord dealt with the whole question of retailing in local communities. The major issue here is not to do with supermarkets but the arrival of the car. Previously, people did all their shopping locally or made an occasional bus journey to the nearest town. All of the dynamics of that have been changed by the car. Cars, plus fewer people in many rural communities, have put pressure on sub-postmasters, because people can drive to shops in larger towns. The problem is that those without cars become vulnerable, which is why we are so concerned about this issue.

I can also reassure the noble Lord that places such as pubs and other commercial businesses as well as community halls will be included in this provision if they fulfil the criteria set out in the statutory instrument. We have deliberately given this matter a great deal of flexibility so that we can respond to particular circumstances, rather than trying to put everything into "one size fits all".

I turn to the other points raised. The trial is for six months. It is, however, a grant rather than a loan. Therefore, there is not a repayment period. It is a straightforward grant. It will be assessed by Post Office Counters Limited people. The reason is that they are already involved in the whole process of whether one can set up a commercial post office. It therefore seems right that it should be integrated into that process. That will mean that the people who really know the situation can make the decision and that the sub-postmaster or community group does not have to keep turning to different arms of government in order to get an answer on the decision. One cannot give an easy answer to the question about time because that would be integrated into this process of decision-making.

I am not certain what figure the noble Baroness was referring to when she talked about 66 million people. Clearly there cannot be 66 million accounts. If the figure was 16 million, that could be the people who receive benefits. Obviously, many people receiving benefits do not get them through the Post Office; they get them through their normal bank accounts. Whatever the number is, the new system will be able to deal with it.

I hope that I have answered most points raised. The order ensures that postal services can be provided in some of the most isolated and rural communities where there is a real desire in the community to keep them. It will be of benefit to thousands of people living in hundreds of villages and small settlements up and down the UK.

Baroness Miller of Hendon

My Lords, before the Minister sits down, the noble Lord commented on how many post offices closed during the last Conservative Government. I do not have the figures with me, but, from memory, I believe that it was an average of 99 per year, whereas during the last Labour Government it was 351 per year and this year, alone, it was 541. I only say that because it is on an escalating basis. While we accept that this is just the first of three initiatives, as pointed out by the Minister, the other two initiatives do not come on stream until 2003, by which time there may not be any sub-post offices left.

The Minister need not comment on this matter now, but perhaps he could write to us. At paragraph 7(2) the order states: A payment of subsidy under this Scheme which becomes repayable shall be recoverable as a debt".

Lord Sainsbury of Turville

My Lords, I can give the answer to that. In the case of fraud it can be recovered as a debt.

Perhaps I may say that the figure was 3,500 post offices, and, as under the present Government, there were wide variations between different years, with some years closures being as high as 475 and some years much lower. I simply wanted to make the point that in spite of all those closures no action, was taken to do anything about it. I simply contrasted that with what we were doing.

On Question, Motion agreed to.

House adjourned at five minutes past nine o'clock.