Post Office Card Account (Hansard, 7 January 2004)

§ Mr. Frank Cook (in the Chair)
In a 30-minute Adjournment debate, it is normal to allow roughly 15 minutes for the Member introducing the debate to speak and 15 minutes for the Minister to respond, but today has witnessed a healthy development, with five Back Benchers seeking to catch my eye. Therefore, I appeal for contributions to be brief and pertinent so that everyone who wants to can speak. I hope that we will not waste time with interventions that require a response.

§ Mr. Andrew Turner (Isle of Wight) (Con)
I am grateful to you, Mr. Cook, for allowing other Members to contribute. I became aware of this issue when four sub-post offices on the Isle of Wight were threatened' with closure. One of the causes of that threat was the Government's policy of transferring payment from order books to a direct method. Closure of two of those sub-post offices has been confirmed, but Pan and Gurnard post offices are still open. Pan post office serves an estate containing many pensioners, young families and other benefit recipients. It is in the top 10 per cent. most deprived wards in the country, but the people there are likely to lose their post office and therefore any means of collecting their benefits locally.
The Post Office card account was introduced as a halfway house between the traditional order book and a bank account, following conclusion 15 of the performance and innovation unit's June 2000 report on modernising the post office network. The report described a post office-based solution as a cost-effective means of ensuring that benefit recipients can continue to access their entitlements in cash at post offices"— in other words, a universal bank. However, far fewer people than expected are transferring to the POCA.
According to Postwatch—the voice of the post office user—in November 2003, about 1.6 million people had asked to open a POCA and 600,000 had received their account number, but only 200,000 had activated their account. Those who supported payment modernisation reckoned against the determination of the Minister's agencies to ensure that people transfer from order books to bank accounts rather than POCAs. We have the extraordinary phenomenon of a Labour Government— a Labour Government!—discriminating against a product that enables people to draw benefits where they want, and in favour of big banks.

§ David Taylor (North-West Leicestershire) (Lab/Co-op)
Does the hon. Gentleman acknowledge that, prior to direct payment, 15 million claimants used the post office, and current estimates suggest that as many as 5 million will use card accounts? That is a little out of kilter with the early figures that he quoted. Does he hope that the Minister will attempt to justify that figure?

§ Mr. Turner
I hope to explain why that is the case, and I will ask the Minister to put the situation right.
The discrimination arises in part from the fact that the POCA process is, according to Postwatch, "overlong and overly complex"; in part because many beneficiaries do not realise that they do not have to transfer from traditional order books at all, let alone to a bank 103WH account; and in part because agencies such as Jobcentre Plus are under such pressure to effect transfers that they are none too careful about misleading customers.
My purpose in calling this debate is threefold. First, will the Minister make it clear that every pensioner and benefit recipient is entitled either to continue to be paid by the traditional method, or to open a Post Office card account? Secondly, will he simplify the method of opening a POCA, which is currently an obstacle course? Thirdly, and vitally, will he withdraw Jobcentre Plus's advice that all benefits will be paid by direct payment in the future"? That advice is factually wrong.
I hope that the Minister will also respond to Postwatch's concern that the payment modernisation process is continuing without any independent testing of the Government's processes". The process to obtain a POCA is complex. We can argue about how many stages there are, but there are more than are involved in opening a bank account. In brief, the applicant receives a pack asking him to ring the Department for Work and Pensions, which takes his details and sends him a document to take to the post office, where he fills in an application form and sends it to Electronic Data Services, which sends him an account number, which he then puts on another form, which he sends to the Department for Work and Pensions. I hope that I have got that right. As Postwatch says: The…process requires customers to retain and assimilate documents that they have received at different stages in the process. The duration between receiving these different documents may sometimes be quite long…For applicants who have little or no experience of using bank accounts, this may be confusing and potentially off-putting. What evidence do I have that the most vulnerable are having difficulty? Martin Lewis, the Brighstone sub-postmaster in my constituency, tells me of a pensioner whose name was misspelt at one of the many stages, but whose application was rejected because she had corrected it. Other applications were rejected because an applicant's signature went outside the box provided. The sub-postmistress at Wroxall, Rosemary Clayton, outlines the following cases: Mrs H has been granted Attendance Allowance—was bamboozled into giving her National Savings number by staff from DWP erroneously telling her money could be paid into it by them—it cannot. They paid £686 into somebody's account with the same number. After telephone calls from Mr & Mrs H money was sent to her by cheque and she got the benefit book she wanted all along.
Two separate cases of pensioner couples with elderly parents living with or near them. Mrs Pensioner has for some considerable time, collected her own money plus her husbands and parents both. Being told she cannot be an agent for both a husband and a parent, as nobody could be of pension age themselves and still have a living parent. Both had to be very firm before they were believed.
Lady who had three Christian names and uses them all, can only have one name and one initial on the card account. When she rang the helpline and said she could have as many names as she likes at a bank she was told to go to the bank.
War pensioner was told his money had to go into a bank or building society, which he agreed with. Only when he got his letter about his Old Age Pension was it clear a card account was an option. DWP appeared to have steamrollered war pensioner into the bank. 104WH Rosemary Clayton concludes: These are just a snapshot of the numerous problems our customers have had. I should like the Minister to concentrate on the word "steamrollered". Sandown sub-postmaster Rodney Archer told me that in 2002 the largest of the residential homes that uses this Post Office…has been visited and persuaded by representatives of DWP to arrange for ALL residents allowances to be paid through bank accounts and accessed via direct debits. The basis of the argument…was that collection of the allowances by an agent was no longer acceptable and if residents still wished to cash them they had to attend the Post Office in person. Meanwhile child benefit recipients were told by Jim Harra, director of the Child Benefit Office, that Payment straight into an account at a bank, building society or the Post Office will replace order books and girocheques. They were presented with a fait accompli. They were not told that if they did not provide an account number they would still be able to draw their benefit and that a new system was planned for those who could not use accounts.
A Jobcentre Plus document dated 7 October 2003 told field directors of their "payment modernization project" as follows: Previous material issued has contained many soft messages…We need to pay most of these customers into bank accounts which cost 1p rather than into POCAs which costs at least 30 times more". That is an understandable objective, but look at how it is done: by emphasizing that POCA is probably not the best option for customers. The document goes on to say, You should be aiming to get 9 out of 10 new customers paid into bank accounts— I think that means new customers' money— with a small proportion of these paid through POCAs…You must encourage customers to be paid by direct payment at every opportunity…You must not issue a PID"— a personal invitation document, that is, to open a POCA— unless all the options have first been discussed. In other words, they should not offer this supposedly universal service on which both sub-postmasters and benefit recipients are relying if they can possibly help it. To make things worse, if a customer refuses to open an account, the document suggests: advise them that the customer conversion centre will contact them at a later date as all benefits will be paid by direct payment in future. Those last words are not true, and they run totally contrary to ministerial assurances. The Minister himself told the hon. Member for Gordon (Malcolm Bruce) that 85 per cent of customers will have their benefits paid by direct payment"—[Official Report, 17 November 2003; Vol. 413, c. 486W.] so presumably he accepts that not all benefits will be paid this way. When asked by the hon. Member for Portsmouth, South (Mr. Hancock) about the practice of his Department's managers and agencies seeking to dissuade claimants from using the Post Office to access their benefits in preference to banks and building societies",
he replied: "No such practice exists." —[Official Report, 8 December 2003; Vol. 415, c. 321W.]

§ David Taylor
Is the hon. Gentleman aware that the customer conversion centre goes through all the 105WH banking options when people who want to open a Post Office card account ring, but the reverse is not true? Applicants for other banking options are not made aware of the Post Office card option. Does he not think that that is a little unbalanced?

§ Mr. Turner
I think it is one-sided. What is worse, postmasters are not allowed to advertise the Post Office card account because the Post Office Ltd. says that it is a Department for Work and Pensions product, not a Post Office Ltd. product, and it is not allowed to advertise the product itself, but has to use words that have been agreed with the DWP.
On 8 December 2003, the Minister told me that there would be an "exceptions" service for those whose payments could not be paid "directly into an account."—[Official Report,8 December 2003; Vol. 415, c. 321W.] If the policies he outlined remain his policies, he must instruct Jobcentre Plus to withdraw the misleading document that it has issued. I urge him to simplify the system, to withdraw the misleading documentation and to make it clear that people do not have to transfer at the rate at which his Department would like them to.
The Prime Minister wrote in the foreword to the PIU report that the Government "fully accepts" its conclusions. One conclusion involved a universal bank. The Post Office card account, which is the Minister's product, could provide such a bank if he and his system allowed that. I urge him to do so.

§ Mr. Mark Hendrick (Preston) (Lab/Co-op)
I congratulate the hon. Member for Isle of Wight (Mr. Turner) on securing this debate on a subject that is important to many of our constituents.
A number of my pensioner constituents have indicated to me that they do not want to change over to the new card account system. The new system provides a more efficient and secure service, but for disabled pensioners who are visually impaired or have another relevant disability, the requirement to key in a four-digit code may make the system difficult or impossible to use. Will the Minister consider retaining the paybook system for that group of pensioners? That would offer choice to a disadvantaged group.

§ Mr. Alan Reid (Argyll and Bute) (LD)
I, too, congratulate the hon. Member for Isle of Wight (Mr. Turner) on securing this important debate and on being generous with his time to other hon. Members. I have two points. First, according to DWP figures, millions of people have not responded to the invitation letters, yet the Minister says that order books will be phased out next year. Will he please tell us what will happen to those millions of pensioners next year? Will they be moved to the cheque-based exceptions system?
Secondly, if the current rate of movement to the banks is maintained, the Post Office will lose more than a quarter of its income over two years. No business can survive such a loss of income, so what will the Government do to ensure that small rural post offices survive?

§ Mr. Owen Paterson (North Shropshire) (Con)
I thank my hon. Friend the Member for Isle of Wight (Mr. Turner) for his great generosity in letting other hon. Members speak. I also congratulate him on landing the debate.
In August, I drove 150 miles around my constituency visiting all but four of the post offices there. The message I received was extraordinarily consistent. First, in an area such as mine, the post office is often directly linked to the village shop. One of the most effective postmasters, whom I brought down to meet the Minister for Energy, E-Commerce and Postal Services, said that if the post office goes, the shop goes, and if the shop goes, the village goes. The two are inextricably linked. The proportion of the turnover that comes from post office business is enormous. In some cases, it is as high as 70 per cent. and it is frequently more than 50 per cent.
Another message that emerged clearly is that, as my hon. Friend the Member for Isle of Wight said said, getting a card account is an extraordinarily complicated business. According to the National Federation of Sub-Postmasters, there are 22 steps—

§ The Parliamentary Under-Secretary of State for Work and Pensions (Mr. Chris Pond)
It is not true.

§ Mr. Paterson
The Under-Secretary shakes his head and grins, but there are 22 steps. He can come to Knockin and meet Mr. Colin Doyle, who will tell him that those who have got past those obstacles have done so only thanks to his help. He helps local pensioners to struggle through the network. I explained this to the Minister of State and, like my hon. Friend the Member for Isle of Wight, asked that the system be made much simpler. If the Under-Secretary does not believe me, he should listen to some of the quotes from postmasters. One says: The Benefits Agency is bullying people to change. The Government has not been fair. Another says: The Benefits Agency has been very difficult. The forms are designed not to help. Another says: The initial letters give a clear idea that customers must go direct. They are misleading. The bank section is deliberately put before the card section. The Under-Secretary will not like this one, which says: The Government have no idea of what they are doing. They are totally clueless. They are destroying the infrastructure of country life. The procedure for applying for cards is deliberately hugely complex. They are really angry about the process. People are only getting cards with the direct help of postmasters. I echo my hon. Friend's request: will Ministers please consider redesigning the system?
The Minister of State told me when I visited him that a sum of money has been put aside for rural post offices —£450 million over the next three years. Will the Under-Secretary explain in detail how sub-postmasters can apply for that money during the transition phase?

§ The Parliamentary Under-Secretary of State for Work and Pensions (Mr. Chris Pond)
I add my congratulations to the hon. Member for Isle of Wight (Mr. Turner) on securing the debate on direct payment and the future of the Post Office.
The move to direct payment and the introduction of universal banking services has resulted in a number of benefits, including an increase in customer choice, help in addressing financial exclusion and improvement in access to financial services. That last point is particularly important, and although it has not been mentioned by any of the hon. Members who have spoken during this short debate, it was certainly stressed to me when I spoke to a number of groups representing our customers—including Age Concern, Help the Aged, Mind and Citizens Advice—at a series of meetings before Christmas. All those organisations and others welcomed the process of moving more people into the financial mainstream.
Citizens Advice recently published a booklet on financial inclusion: "Beyond Bank Accounts: full financial inclusion", in which it said: The government, the banking industry and the Post Office should be commended for the progress they have made in establishing Universal Banking Services. The ambition to enable all people to own the most basic of financial services—a bank account—is one we share. The booklet continues: Getting people onto the ladder of financial inclusion is vital and Universal Banking Services should be heralded in this regard.

§ David Taylor
The Minister says rightly that basic bank accounts have been designed to promote financial inclusion, but at least 80 per cent. of the basic bank accounts available from the various clearing banks are not operable at a post office. That does not promote inclusion, does it?

§ Mr. Pond
I shall come back to that point in a moment.
I came into politics to combat the poverty and social exclusion—of which financial exclusion is a most important part—that the Conservative party did so much to make worse when it was in government. I am frustrated and disappointed to hear so many hon. Members criticising the attempts to combat that financial exclusion that we are making in partnership with the Post Office, banks and voluntary organisations. The nostalgia for the days of order books and giros that we have heard during the debate is far removed from the drab reality that left 3.5 million of our citizens financially excluded.

§ Mr. Andrew Turner
Will the Minister give way?

§ Mr. Pond
If the hon. Gentleman will forgive me I shall make a little more progress first.
The new arrangements ensure a more modern, efficient and reliable service, which increases customer choice, provides better value for the taxpayer, cuts fraud, and boosts financial inclusion. Many hon. Members in this Chamber may not wish to accept the fact that more customers of the Department for Work 108WH and Pensions now have their benefits and pensions paid into an account than by order book or giro, but does anyone seriously suggest that we should take away the choice from those customers to have their payments into bank accounts, Post Office card accounts or other accounts, simply in order to shore up the Post Office? Even if they believe that that should happen, do they seriously believe that it would secure the future of the Post Office?
The Government believe in choice, and in giving our customers the dignity of the financial inclusion that the rest of us enjoy. I would be astonished if any hon. Member present does not enjoy the full range of financial services that some people wish to deny to the customers of the Department for Work and Pensions. The future of the Post Office does not depend on our continuing to deny people that choice. It depends on providing attractive services that people wish to use and a full range of banking and financial services through the Post Office. We share that vision with the Post Office and we are working with the Post Office to help to build it. I remind Opposition Members that 3,500 post offices were closed during the Conservatives' term of office without a single step being taken to deal with the financial exclusion that so many people faced at that time.

§ Mr. Turner
The Minister has taken five minutes to deal with this issue, but nobody is suggesting that people should have to go back to order books. We are concerned that people cannot open Post Office card accounts when they want to.

§ Mr. Pond
I shall address that point in a moment. However, it is important to remember that not only the Post Office card account, but many current and basic bank accounts can be used at post offices. Some 20 million people can access their current account electronically at post office branches. My hon. Friend the Member for North-West Leicestershire (David Taylor) makes the point that not all basic and current accounts are available at post offices—

§ David Taylor
Most are not.

§ Mr. Pond
A wide range is available for customers, and the Post Office is working hard with the banks to make more accounts accessible. There have been 13.5 million banking transactions at post offices since April.

§ Rachel Squire (Dunfermline, West) (Lab)
In respect of partnership with banks to offer real choice, what action has the Minister taken on the three main Scottish banks' refusal to enter such a partnership with post offices?

§ Mr. Pond
My hon. Friend makes an important point. The Post Office is working hard to ensure that people in Scotland have the same access to banking services as people elsewhere. We are doing what we can to support that process in discussions with the banks and the Post Office, but my hon. Friend will recognise that that decision is for the financial institutions to take. We will do everything we can to support the process, but we cannot insist that the banks participate in the project.
109WH The hon. Member for Isle of Wight said that I had spent too much time talking about the wider issues and not enough time talking about the Post Office card account. Much of the wider debate so far—and much of this debate—has tended to give pensioners in particular the impression that they have to open a card account to access their pensions or benefits at a post office. That erroneous presentation of the actual situation will damage the future of the Post Office.
Why should we change the existing arrangements? The hon. Gentleman says that he is not defending order books, and I am pleased to hear that—order books came in with ration books, and I think we all agree that they have had their day. Certain Conservative Members are shaking their heads—they want to keep the order books. In April 2000, in this Chamber, a former Secretary of State for Trade and Industry said that the process of distributing benefits by order books was one of the most costly, inefficient and fraud-prone ways of delivering money."—[Official Report, Westminster Hall, 12 April 2000; Vol. 348, c. 62WH.] Those were the words of the right hon. Member for Hitchin and Harpenden (Mr. Lilley).

§ Mr. Paterson
No Conservative Member mentioned order books. We hope that the Government's hopes for the banking system come off. Perhaps the Minister will address the main thrust of the debate, which is that an incredibly difficult system is geared to drive pensioners into not applying for card accounts. Will he answer the questions that we have asked? Will he come up with a simpler system, so that people can apply for card accounts?

§ Mr. Pond
Given an opportunity to do so, I shall deal with that point. I am pleased to see that the hon. Gentleman is also confirming that he is not in favour of order books. We know that order books would have disappeared long ago had the Conservative Government's plans been pursued.
Are we discouraging people from taking up a Post Office card account? If that were Government policy, we would be making a rather poor fist of it. Almost 2 million people have already said that they wish to open a Post Office card account. Eventually, the number of Post Office card accounts will exceed our operating assumption of 3 million. In the last month alone the number of pensioners requesting Post Office card accounts has increased by almost a third. Hon. Members have suggested that we are discouraging people from applying for Post Office card accounts by making the process very difficult, but if so, how have 2 million people managed to get through that very difficult maze to open a Post Office card account well in advance of the 2005 deadline? These figures disprove the suggestion that we are trying to discourage people.
However, the Post Office card account will not be the best option for some people. It will not accept direct payment of wages, so it will not make people ready to take on a job. The guidance given by Jobcentre Plus has been mentioned, but it is the responsibility of Jobcentre Plus to make it clear to people that if they have only a Post Office card account, they are not job-ready. The Post Office card account will also not allow people to access discounts on their fuel bills by paying by direct debit. It is an electronic order book. I suspect that every 110WH hon. Member present pays their fuel bills by direct debit in order to get a discount, yet they wish to deny that option to many of our customers.
We have emphasised all along that we want people to continue to collect their benefit or pension from the post office if they wish to do so. They will be able to do that by accessing their bank, building society or Post Office card account at the post office, rather than by using the order book, which is what they currently do. We have made it clear that although we have reprieved order books from the demise planned for them by the previous Government, they will be phased out in 2005. That is the fact of the matter. The hon. Member for Isle of Wight was upset that people had been told that.

§ Mr. Andrew Turner
Will the Minister give way?

§ Mr. Pond
In a moment. The hon. Gentleman suggested that sub-postmasters and mistresses could not advise people about the Post Office card account. I made it clear to him that the Post Office produces leaflets and posters that state: Collect benefits and state pensions in cash here. We are doing everything we can to allow the Post Office to promote its position as a purveyor of financial services. That is where its future lies.
We are committed to the future of the post office network. As the hon. Member for North Shropshire (Mr. Paterson) suggested, the local post office—and, frequently, the shop that is linked to it—is often the heart of a community. I, like other constituency Members, have witnessed the heartache that can be caused by the suggestion that a local post office should close. We are committed to maintaining that network as far as we can: we have put in £2 billion over five years, there has been investment in post office technology and, as the hon. Gentleman mentioned, there has been £450 million for rural post offices. I will have to write to him to answer his specific question about how that might help his own post office. We are determined to support the post office network, but we do not believe that we can secure its future by continuing with order books and giros.

§ Mr. Hendrick
Will my hon. Friend address the point that I raised regarding the visually impaired and the disabled, who may not be able to use a complicated four-digit code?

§ Mr. Pond
I was about to address that point. My hon. Friend is a vigorous campaigner on behalf of such groups. I have been holding meetings with representatives of organisations such as the Royal National Institute of the Blind and other groups representing visually impaired people about both the process of direct payment, of which they are in favour, and how we can devise an exceptions service to make sure that those who are unable to access a bank account have the opportunity to receive their money through an alternative—probably cheque-based—method. We also discussed the changes that the Post Office is trying to make to ensure that people with those disabilities can access a Post Office card account through the post office through the improvements in the personal identification number pad.
111WH We have been trying to ensure that we can secure both the future of the post office network and financial inclusion for our customers, and I hope that the hon. Members who have contributed to this important debate will join us.