Post Office Card Account

Debate between Nia Griffith and Richard Graham

Tuesday 24th May 2011 Westminster Hall

[Nia Griffith (Llanelli) (Lab)]

I congratulate the hon. Member for Truro and Falmouth (Sarah Newton) on making an excellent opening speech. She outlined the history of the Post Office card account very clearly, but she also showed that she is way ahead of many other hon. Members in thinking about 2015 and the fact that in order to secure the future of post offices any incoming sub-postmaster will immediately ask, “What will be my income in five or 10 years from now?” They see no hope of any inter-business agreement coming through, as a result of the privatisation of the Royal Mail; very disappointingly, such an agreement has not been enshrined in legislation. Consequently, they will ask, “Well, what of the promise that the post office will be the shop front for Government business? What is going to come of that promise?” So it is very timely that the hon. Lady has secured this debate today.

Labour first introduced POCA as a measure to boost financial inclusion. It was designed to give people who had perhaps always dealt in cash an opportunity to collect their pensions or benefits from their local post office. Indeed, by 2008 4.5 million people had a POCA, of whom 30% had no other bank account. Obviously, therefore, the future of POCA is vital for that particular sector of the population.

Those of us who were here in the last Parliament will remember the box-loads of cards that came in begging us to lobby to keep POCA and to have it extended beyond the finishing date of its first phase, which was 2010. Obviously that renewal of POCA was made by the last Government. They put in place the present arrangements, which will run until 2015. Now we need to look towards 2015 and consider what will happen next.

As has been pointed out, the Royal Mail Group used to earn about £195 million annually from POCA. That figure has now dropped to about £135 million annually, but the income from POCA is still a very significant source of income for post offices. Furthermore, it is not necessarily very evenly spread and therefore some post offices will be disproportionately hit if a lot of Government business is withdrawn from the network.

POCA is important for consumers because it was part of the last Government’s financial inclusion plan. It exists so that customers can obtain their benefits or pensions if they cannot use or do not wish to use any other kind of banking account. It allowed account holders or a nominated helper to withdraw cash free of charge at any post office branch using a plastic card that could not be used for other purposes. It also meant that the problem of people getting into debt, and all the difficulties associated with some types of account, were avoided. The important thing now is to say, “Where do we go next?”

In its 2010 manifesto, the Labour party made a clear commitment to a people’s bank with a full range of competitive, affordable products, and the hon. Member for Argyll and Bute (Mr Reid) mentioned that there was a commitment in the coalition agreement not only to an enhanced Post Office card account but to a people’s bank. The Minister himself stood on that manifesto for a people’s bank, so what is happening about it? Why have we not yet seen any steps towards creating any sort of additional banking services in the Post Office? I hope that the Minister today is able to tell us something about the plans, because at the moment it looks very much as if that coalition promise has been broken. There is no plan for any form of people’s bank at the Post Office, and we do not yet know what sort of enhanced services the Post Office card account will have—perhaps the Minister will enlighten us.

[Richard Graham]

The hon. Lady glosses over a bit of the history of the Post Office card account. My memory is pretty clear that in 2007 the account was put out to tender and that by the beginning of 2008 it was clear that the tender would not be given to the Post Office. The previous Government changed direction only in November of that year, after an enormous campaign that showed the unpopularity of the suggestion.

The hon. Lady is right that in March—I think—of last year, the Government started to recommend that the Post Office card account be extended to cover other financial services, and that her own party’s manifesto included more of the same, but that does raise the question of why, after 13 years in government, her party took so long to arrive at some proposals for extending the account. It would be fair to say—I hope that she agrees—that this Government have made substantially increased commitments. The question, however, which she rightly raised, is how we will take forward those commitments to using post offices as the front office for more Government work.

[Nia Griffith]

It was indeed decisive action by the Labour Government in late 2008 that ensured that the contract went to the Post Office. My question here, however, would be, “What has happened to the green giro?”

I refer the hon. Gentleman back to the letter, with which I am sure the Minister is familiar, that George Thomson wrote to the Secretary of State for Work and Pensions in September. It contained a list of ways in which he thought further Government business could be put the way of the Post Office, including, among other ideas, assisted applications for all benefits, assisted benefit withdrawals, signing on, payment in cash and various housing benefit validations. He obviously wanted to discuss in detail with Ministers in the Department for Work and Pensions his ideas about the Post Office becoming a front office for DWP business—the DWP is probably the Department that would most use the Post Office. Instead, however, what do we find? We see the green giro awarded elsewhere, and that is a very significant blow for the Post Office.

[Nia Griffith]

What we want to know now is what the Government will do about securing more Government business for the post office network. It is absolutely clear that unless there is more business, the worrying situation of hundreds of post offices being temporarily closed—for months, or two or three years—will continue. Post offices are closing because it is extremely difficult to identify people who want to take on a sub-post office. They want to see guaranteed income, but instead they see much less security in what they will get from Royal Mail in the future, both because of the drop in the volume of postal items and because there is no guarantee in the Bill currently going through Parliament of any definite business from Royal Mail for the post office network after privatisation.

[Richard Graham]

The hon. Lady is, of course, absolutely right that the risk at the moment is different from what it was. The risk under the previous Government—the reality, in fact, not the risk—was the Government-led closure of some 8,000 post offices across the country. The risk today is that the network of 11,500 post offices that remain after the Labour closures programme could be weakened—she is quite right about that—if sub-postmasters either retired and no one took over or if they decided that the business was so unprofitable that they had to give it up, again with no one prepared to take over. I must point out, however, that that risk is a very different one.

In Kingsholm in my constituency of Gloucester, a profitable post office was closed. The sub-postmaster was one month short of having served 25 years and wanted to continue in the job, but my predecessor as MP and his Government closed the post office. Under this Government, a post office closed in Quedgeley when the sub-postmaster decided to give it up, but after a while a new sub-postmaster was found and a new post office opened, with the support of Post Office Ltd and the Government. The hon. Lady is right that there is a risk, but it is not the same, and it is much smaller.

[Nia Griffith]

The hon. Gentleman conveniently forgets that although about 8,000 post offices probably met the previous Labour Government’s access criteria we kept 11,500 open, and put in a £150 million subsidy each year to do so. He was very lucky that a new sub-postmaster was found for Quedgeley, but in my constituency, and those of many Members, post offices have remained closed for much longer, and the real difficulty will be in enticing people to take on the businesses if they cannot see a viable future in them. I am so grateful to the hon. Member for Truro and Falmouth for securing the debate today, because the Post Office card account will be a key part of that viability.