Post Office Card Account

Steve Webb Excerpts

Tuesday 24th May 2011 Westminster Hall

[Rachel Reeves (Leeds West) (Lab)]

I congratulate the hon. Member for Truro and Falmouth (Sarah Newton) on securing this debate, which I know will be welcomed by people up and down the country who rely on post office services in their local community and value the Post Office card account. As she said, this debate is a chance for the Minister to alleviate some of the concerns felt by sub-postmasters and postmistresses and their customers. Consensus is building on the importance of guaranteeing Royal Mail business for the Post Office. I hope that the Government will take note.

Two key issues are at stake. The first is ensuring access to pensions and benefits, especially for vulnerable people and those in rural communities. The second is ensuring that the post office network as a business is viable and vibrant in the long term. The importance of both those issues rings true in my constituency, where temporary closures include the Hawksworth Wood post office, which has been closed for nearly a year, despite Government promises that there would be no more post office closures. Since the closure, local residents have had to travel to other areas for the post office services that they value, either tackling a long, steep hill or paying for a bus to another part of the city. The closure has been devastating to the community served by the post office. It has been particularly hard on older people and more vulnerable people, as many hon. Members have said, because the face-to-face service that they are used to is extremely valuable.

I am sure that many hon. Members have experienced similar closures in their constituencies and know at first hand the difficulties that they create. Currently, 424 post offices are temporarily closed, 417 of which have been closed for a prolonged period. It is vital that we strive to keep post offices open and help them adapt to changing demands from their customers and, particularly, to protect the vulnerable. Post offices are at the heart of many of our communities, and we need to make it easier for them to survive. The business generated by the Post Office card account can help them to do so.

Labour did not get everything right on post offices, but POCA in the post office network was a proud achievement. POCA was introduced by the Labour Government to improve financial inclusion, as my hon. Friend the Member for Llanelli (Nia Griffith) said. That is particularly important in deprived and remote areas. I am proud of Labour’s decision to introduce POCA and the decision in 2008 not to allow it to leave the post office network, which would have diverted business away from the Post Office and jeopardised the viability of many of our local post offices.

About 4 million Department for Work and Pensions benefit and account payments were made through POCA in 2010, to a group of customers who rely on a simple service to receive their pensions and benefits. Many of them are elderly: 55% are pensioners. POCA is a core aspect of Post Office business and a key driver of footfall, but it is also designed to promote basic financial inclusion. Unlike most financial products—I say this as someone who used to work in financial services—POCA has huge support among the people who use it. When the POCA contract was on the agenda in 2006, as has been said, it generated 4 million signatures in support of keeping it in the post office network. I believe that that is the largest ever peacetime petition.

A Help the Aged survey of its members also found that they were overwhelmingly in favour of the service. Help the Aged’s report highlighted the importance of post offices, particularly to older people who rely on POCA, and POCA’s popularity in rural areas where no local bank is easily accessible. That is also an issue in some of the most deprived urban areas.

The Post Office card account has several key advantages for its customers. Some 71% of people without access to a bank account depend on POCA to receive payments. POCA customers are often people who cannot or do not want to access bank accounts; 30% have no other bank account. According to Age UK, someone from an unbanked household is 23 times more likely to use a POCA than someone from a household with access to bank accounts. POCA is also the only facility for receiving benefits or pensions open to people who have been declared bankrupt. Another good feature is that the facility offers no risk of getting into debt. POCA also offers a crucial facility for people with mobility problems. Almost 10% of Post Office card account holders have a second card that can be given to a carer to draw cash on their behalf, a facility not available through high-street banks.

POCA was introduced as part of a wide-ranging approach to financial inclusion as a simple facility for people who could not or did not wish to use a bank account. However, POCA alone is not enough to ensure that older, vulnerable and hard-to-reach customers are financially included. To do so, the Government could work to identify links with credit unions and consider carefully what steps are needed to increase the accounts’ functionality in the interests of post offices and their customers. Like other hon. Members, I urge the Government to increase POCA’s functionality and consider whether direct debits could be introduced. Even now, people with a Post Office card account but no bank account do not get the direct debit service that helps save money and time on utility bills and other payments, a service that most of us take for granted.

There are, of course, risks involved in introducing direct debit functionality. The Treasury financial inclusion taskforce has documented the excess charges often incurred by new users of bank accounts, and they must be taken into account, as average losses are £140 a year and charges are focused on the poorest households. Consumer Focus also has concerns, but none the less supports a more flexible POCA account, and its research indicates that POCA users do too.

The coalition agreement said:

“We will give Post Office card account holders the chance to benefit from direct debit discounts and ensure that social tariffs offer access to the best prices available.”

In answers to parliamentary questions, the DWP has also said that research is being conducted on the subject. What steps have been taken to ensure that that promise is delivered?

Members are keen to ensure that POCA lasts beyond 2015 and that we have some certainty about the future, as my hon. Friend the Member for Llanelli said. The year 2015 may seem like a long way off, but POCA customers and sub-postmasters—like many Liberal Democrat MPs, if I may say so—look to 2015 with some trepidation.

When exploring options for increased functionality, it is important to consider that the Post Office has unprecedented access to the consumers whom credit unions are best able to support. Credit unions do an immense amount of good in our communities. The Leeds and Bramley credit unions have a tangible impact on the lives of my constituents, too many of whom, lacking access to the services that credit unions offer, are driven into the arms of loan sharks. However, credit unions in my constituency lack a shop front and a high-street presence. The post office network could help change that.

Despite sending a mixed message with the financial inclusion fund, the Government have supported credit unions and could take a serious step to support them by linking them with the Post Office when considering the Post Office card accounts. Will the Minister update us on what practical measures the Government are taking to support that aim? Hon. Members support credit unions as an important source of affordable finance within our communities and welcome the opportunity to increase footfall in our post offices.

We must make it easier for post offices to survive. POCA is one of the services that ensures the viability of post offices. About 20% of total visits to post offices, or 6.5 million visits a week, are made to access POCA payments. POCA brings in a significant portion of income for sub-postmasters up and down the country. The National Federation of SubPostmasters has estimated that it provides 10% of sub-postmasters’ net pay. In rural and deprived areas such as Truro and Falmouth, Argyll and Leeds West, that proportion jumps significantly: it is about 12% in deprived urban areas, for example. Indeed, 15% of sub-postmasters earn £400 or more a month from POCA transactions. Nationally, POCA brings in about £195 million a year.

POCA customers ensure vital footfall and additional income to ensure that post offices remain at the heart of our communities, but a Government supposedly committed to preserving the footfall have already failed one test by handing the green giro contract to PayPoint. Now 250,000 people who would previously have gone to post offices to collect their green giros will no longer do so. That is a negative step that could damage our post offices and reduce the services available to customers.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

The hon. Lady will be aware, as has been said, that the previous Government initiated a competitive tender and set criteria for bidding. All of it was undertaken according to strict European Union competition rules. If one of the two bidders was substantially cheaper than the other, does she think that the Government should have gone with the higher bidder?

[Rachel Reeves]

As the Minister knows, that decision would have been outside my domain, but we should consider the Labour Government’s decision in 2008 to award the Post Office card account to the Post Office rather than continuing with the tender. That is an example of what this Government could have done if they had chosen to do so, but they did not.

In evidence to the Select Committee on Scottish Affairs for its report on postal services, the general secretary of the Communication Workers Union, Billy Hayes, described the decision to remove green giros from the Post Office, at a time when the Government were committed to increasing the use of the post office network, as being

“about as joined-up as spaghetti”.

This is a hit to the footfall in post offices, and I urge the Government to ensure that POCA remains a Post Office account.

With the POCA contract subject to competition tendering requirements, and considering the fact that only 4,000 of approximately 12,000 post offices are viable independent of the shops in which they operate, the stakes for the future POCA contract could not be higher. Moreover, with Government commitments to the post bank seemingly in the long grass, as my hon. Friend the Member for Llanelli has said, and with little tangible progress towards making the Post Office the front office for government, what assurances can the Minister give us that POCA will be part of securing the commitment to maintaining post office services?

--- Later in debate ---

[The Minister of State, Department for Work and Pensions (Steve Webb)]

Good morning, Mr Hollobone. I join the congratulations to my hon. Friend the Member for Truro and Falmouth (Sarah Newton) on securing this important debate. I am delighted that, although this is the final day before the Whit recess, we have a good turnout and that, as has been said, we have heard perspectives from rural and urban England, rural Scotland and Wales—indeed, from around the United Kingdom.

[Jim Shannon]

rose—

[Steve Webb]

Before the hon. Gentleman seeks to intervene, I should say that, when I said the United Kingdom, I thought that I was including Northern Ireland.

There are a lot of common threads. Any community-minded constituency MP will echo much of what has been said this morning. My own constituency is a mixture of market towns and villages, most of which, notwithstanding the series of cuts over the past year, either have sub-post offices or, in some instances, have reopened them as community ventures—community shops, co-operatives and so on. I think that we all share that commitment to the post office network.

My hon. Friend the Member for Gloucester (Richard Graham) is absolutely right to say that, although money is tight, the Government should prioritise spending on the post office network. I encourage him to think about which Government Department identified £1.34 billion for the post office network, and about the other spending issues that that Department faced that raised some political issues. He will recall that there were other calls on the Department’s money, yet it prioritised the post office network, because we are about not just words, but deeds in relation to that. To be clear, in return for that £1.34 billion, Post Office Ltd must maintain a network of at least 11,500 branches and continue to adhere to the strict access criteria that mean that 99% of the population live within three miles of a post office.

[Nia Griffith]

Does the Minister agree that, under the previous Labour Government, it was £150 million per year and that that went up to £180 million per year in the last year in which we were responsible for setting the subsidy? That is half of what the present Government are giving to the post office network, and it was sufficient to keep open those 11,500 post offices. Why on earth has such a large amount of money been given to the Post Office when it would be far better to create the streams of business that make post offices viable and sustainable for good, so that they do not need that type of subsidy? I find it very difficult to understand why doubling the subsidy is the best way forward when making things viable would really be the best way forward.

[Steve Webb]

I could not have written that question better myself. Why is it necessary to double the subsidy to keep the post office network going on a viable basis? Because so little was done over the past 13 years to make the post office network sustainable. That is precisely why we have had to put temporary subsidy in while we get the Post Office back on its feet.

I shall quote from the Department for Business, Innovation and Skills document, “Securing the Post Office Network in the Digital Age.” On the very point that the hon. Lady raises, it states:

“Senior management at Post Office Ltd… estimate that without action and modernisation”—

how much of that happened?—

“keeping the network operating at its current size would result in the annual subsidy required from taxpayers rising from £150 million this year to £400 million by 2016—and would carry on climbing.”

That is the legacy. That is what would have happened had we done nothing. I sense, Mr Hollobone, that you are not a great PowerPoint fan, but it is at such moments I wish we could have a screen and slides because I would simply refer hon. Members to chart 3 of that document.

I will point that document in the direction of Opposition Members because it shows that the long-term gradual decline in the post office network is partly because of demographic trends—sub-postmasters retiring and not being replaced—and partly because, during the 13 years of a Labour Government, the number of post offices has fallen off a cliff. During the two closure programmes between 2003 and 2009, 5,000 branches were closed. People have stood in this place and in this Chamber for the past 13 years pleading loyalty to the post office network, yet those were the people who carried out two massive closure programmes.

[Nia Griffith]

Does the Minister not agree that the fundamental reason for the Post Office’s loss of business is the complete revolution in how we correspond with each other? Personal letters were of immense importance 20 years ago, but the growth of the internet and so on is clearly the main factor in the reduction in the amount of mail business going through post offices. That is the be-all and end-all and the real reason for the existence of many post offices, in addition to what Government business they can do.

[Steve Webb]

The reasons for the decline of the post office network are many and varied. When I go to my local village post office, I am told that eBay is keeping it going. The fact that people buy postage for parcels and so on brings a whole range of different customers into the post office network. One of the biggest trends, which was accelerated by the previous Government through direct payments, was people being paid via their bank accounts, rather than by traditional giros at post offices. That was one of the single biggest changes that accelerated the demise of the post office network. Opposition Members ought to take just a tiny bit of responsibility for the trends that we have seen.

On the Post Office card account specifically, the perspective of POCA users has been missing from the debate. The Post Office has recently published some startling research that it undertook on what POCA holders wanted from the account. The Post Office talked to 930 people and asked the following about the POCA:

“is there anything you would change about it, for instance any additional services you would like it to provide?”

Some 80% of respondents said “nothing.” I will return to that significant point. Some 80% of respondents did not want any changes to the account and they valued POCA for its particular characteristics, which we should think carefully about changing. The next most popular answer to that question had a 4% response rate. I shall read down the list of things people would change about POCA, which have a response rate of between 4% to 2%:

“deposit/cash cheques into it; more cashpoints; use any ATM; comments relating to PO service in general; more flexible like a debit card; interest on account balance; online account access.”

Hon. Members will have noticed that direct debit is not on that list. Some of these issues are counter-intuitive. I will not say that I like nothing better than to go online to use my bank account—which, I should just add, I access at the post office—but the folk who use POCA value it for what it is. As a number of hon. Members have said, we need to ensure that the people who have POCAs can benefit from things such as direct debit. However, that may not imply sticking things on to POCA.

Why might it be a good thing to provide access to those services but not to do so through changing the POCA? It is striking that many hon. Members have said that 30% of people with a POCA do not have another bank account. However, I tend to think of it the other way around. Some 70% of people with a POCA have a bank account or some other sort of account. So why do they have two? If they have a bank account with direct debits and all the rest of it, why do they bother having a POCA? Because people like to budget in different ways and they like a simple account that cannot go overdrawn.

Some of the evidence on charges is startling and worth repeating. I have been known occasionally to go overdrawn without planning to and I am shocked when I see the charges. The evidence of what happens shows that most people do not simply face one charge in a year. Once things have gone wrong, the charge is debited. People are then more overdrawn, they perhaps do not notice it and so another charge goes on. Just to give a feel of the situation, in 2008, out of 12.6 million active bank accounts, about a quarter incurred at least one penalty charge and the average charge was £205. Of that 2008 sample, a quarter of people had one charge, 15% had two charges and 39% had at least six charges.

Hon. Members can start to see why such an overdraft facility—there might also be a situation where someone had a POCA that could not go overdrawn but a direct debit bounced and somebody somewhere had to pay a charge for that—is not necessarily what people are asking for. People do not want to pay more because they are on a low income, so we need to find ways of giving them access to the best prices. However, grafting the ability to use direct debit on to an account that people like because of its simplicity may not necessarily be the best answer.

I absolutely stand by our coalition agreement commitment. The coalition programme for Government includes a pledge to give POCA holders the chance to benefit from direct debit discounts, but that should not necessarily be done by grafting direct debit on to POCA. We have listened to what the account holders are saying to us and our impression is, yes, people want the best prices they can have, but not necessarily by taking a product they value and turning it into something else.

That brings me on to the point my hon. Friend the Member for Truro and Falmouth made about the fully transactional account. One of the problems with the fully transactional POCA is that it would be so different from the product that was originally tendered, we would have to retender. The postcards will probably go to the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Kingston and Surbiton (Mr Davey), but I have a feeling we might be going through it all over again. The comment rightly made by the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) was that there is uncertainty about the future. There always is. If we said that we need a full transactional POCA, so we are going to retender for it, I suspect that there would be riots on the streets of Kilmarnock.

We do not want more disruption and uncertainty. What we want—and as a Government what we are trying to do—is to work in partnership with the Post Office far more. Rather than those involved with running post offices being people to whom we do something, they should be in here as people we do something with. That is a profoundly different approach. The hon. Member for Leeds West (Rachel Reeves) talked about joined-up government and different Departments not damaging the Post Office. The Department that springs to mind is the Department for Transport. I renew my car tax each year at my village post office because, having talked to the sub-postmistress, I know it is one of the biggest transaction charges it gets. The Department for Transport would rather I did not do so. It sends me letters that say, “Do it online—you don’t have to go to your post office.” One year, it had a prize draw—or a raffle or lottery—in which I could win a free car.

The fact that Departments are not working in a co-ordinated way on the Post Office is not new. I work closely with the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Kingston and Surbiton, and the Financial Secretary to the Treasury. The three of us have discussed financial inclusion issues, particularly credit unions. The post office network and credit unions could work together. There are exciting possibilities on that. One of the challenges is that, although credit unions are often very good and strong in a localised way, there are some very small credit unions and, in large parts of the country, if we asked someone on the high street where their nearest credit union is, they would not know what we were talking about. The potential for linking post offices and credit unions and access is very exciting, but it is also very expensive. That is the trade-off and the challenge.

We do not want credit union accounts with hefty charges because that would defeat the object of the exercise. We are wrestling with how to bring those two things together, but there are real opportunities for the post office network to build closer links with credit unions. In recent years, credit unions have made great progress in bringing affordable, financial services to people who would not otherwise be able to access them. I want credit unions, in partnership with the Post Office, to provide more services more efficiently to more people. That is what we want to see.

I was asked about the Post Office as the front office for Government. A number of Government Departments are looking at ways to do that, and I want to share briefly with the Chamber some measures that the DWP is taking. The hon. Member for Llanelli (Nia Griffith) mentioned George Thomson at the National Federation of Sub-Postmasters, who wrote to the Secretary of State. I am delighted to say that, in response to that letter, the Secretary of State had a face-to-face meeting with George Thomson. Several points that she read out, and which were on his list, are now being piloted in Government.

For example, a pilot for document verification started last week. The Pension Service, for which I am responsible, is piloting a check-and-send style service. That is for applicants who claim state pension or pension credit, and who are required to submit additional documents in support of their claims, such as birth or marriage certificates. Many people do not like sending their marriage or birth certificate in the post, so why not go into a post office and let post office staff check the documents, as they do when people renew their car tax? Post office staff could say, “Yes, that is fine; I have seen it. I am authorised to say that.” That would be quicker, and would give the Post Office revenue and footfall—everybody would be happy. That is not a—I do not think the word “piddling” is parliamentary—little pilot. Some 106 post office branches in the north-east of England are involved—a big pilot. It started last week and will run for three months in the Seaham pension centre catchment area. It will include a mix of Crown branches in urban, urban deprived and rural locations.

That is one concrete example; let me give the Chamber another. Later this year, we will be looking at a national insurance number pilot, which will investigate whether applications from what we call low-risk groups—EU citizens in states that are already members of the EU, not including the accession countries—could be directed to the Post Office for the evidence-gathering interview to get a national insurance number. Although the Post Office currently carries out document checking for the Driver and Vehicle Licensing Agency and the Identity and Passport Service, the DWP requires something qualitatively different. We are working closely with the Post Office to see if we can have an efficient but secure service, and hope to go live with the project later this year.

We want business in post offices, but we do not want dirty great queues. In other words, if I am queuing up to buy a stamp, I do not want someone in front of me trying to verify a national insurance number. We have to try to think of what post offices are good and efficient at, and harness that without disrupting the core business of the post office. That is why we are conducting these pilots.

The hon. Member for Llanelli mentioned signing on. In rural areas, getting to a jobcentre can be quite a trek, so why not sign on at the post office? At the moment, I was surprised to learn that customers in rural areas, intriguingly, sign on by post. The pilot will test whether there are benefits in requiring customers to attend and sign on in a local post office instead. We will evaluate that approach across a wide geographical spread and range of labour markets. We have identified test locations in Essex and in the highlands and islands—a range of areas.

[Cathy Jamieson]

That is very positive. Does the Minister agree that there are potential lessons for local authorities? Will he undertake to ensure that the outcomes of pilots are conveyed directly to local authorities, including in Scotland, as they may wish to look at doing something similar, particularly the check-and-send style service?

[Steve Webb]

I am very happy to undertake to do that. Those are some examples of what the DWP is doing. Other Government Departments are also looking at things, including our friends in the Department for Communities and Local Government and in the devolved Assemblies and Parliament. We want to see everybody working together, alongside and with the Post Office, rather than simply taking bits of business away.

The issue of the green giro was, properly, raised. I was intrigued by the hon. Member for Leeds West. Having quoted Billy Hayes, she then said that, having issued competitive tender for a second time, we should have ripped it up and just given it to the Post Office anyway. I do not think that that was the intention of the previous Government when they issued the tender. It would raise one or two issues about tendering if, every time the Government issued a tender with the Post Office in it, they panicked half way through and then just gave it to the Post Office anyway. That might undermine the concept of tendering, not just with the Post Office but across Government as a whole. Indeed, I have a suspicion that if we kept doing that we would probably end up subject to legal challenges too, which might cost a good deal more than the money we spent on the contract.

It is worth putting the issue in context. I take the point that there are variations between post offices, but the green giro, on average, delivers a fiver a week to the average sub-postmaster, just to give a sense of scale—a fiver a week, and falling. The number of people with these cheques and green giros is falling. It is therefore worth retaining a bit of scale. They are important, and my hon. Friend the Member for Argyll and Bute (Mr Reid) is right to mention the importance of rural access. I can assure him that, before the contract was awarded, I stood in my office with a map of the United Kingdom with dots on it, marking out the PayPoint network and the Post Office network. I was pleasantly surprised by the rural extent of the PayPoint network, but I take his point about north Argyll and the islands. I hope that PayPoint reads Hansard and does something about that. I can tell his constituents, through him, that my hon. Friend has been a pain in my side on this issue, and properly so. He has represented those concerns very strongly.

My hon. Friend asked specifically about disabled people. I stress that all the outlets that can be counted for the tender have to comply with the Disability Discrimination Act 1995. The new service, the replacement for the cheque, is specifically designed to be simple for that group of clients. There is no need to sign and there is no need for a PIN—it is only necessary to present a card. It is designed to be analogous. In a sense, it is converting a piece of paper to a plastic card. Beyond that, it is essentially the same process designed for the same people. Access was very important to us.

We covered a wide range of issues in the debate. I was interested to hear the hon. Member for Kilmarnock and Loudoun mention her visit to the Pollok credit union. That is a positive example of a credit union and post office working together.

I was interested in the point made by my hon. Friend the Member for Gloucester in an intervention. He pointed out the difference we now see with the post office network. The Post Office has had the promise of a subsidy to undertake to maintain the network at the 11,500 level, so when there is a closure of a post office, effort is now going in to replace it. Rather than the gradual attrition that has gone on, frankly, for decades, there is now a Government in place who are committed to protecting the network. That is a sea change in attitude, and one that post offices will very much welcome.

A question was asked about the tender process. Clearly, such processes are done under strict rules. We are required, under the EU, to be specific about what we are tendering for, and to include both cost and qualitative factors. We can take account of access—that was part of the consideration. I have no reason to think that that process was not properly undertaken, but if the hon. Member for Leeds West has further evidence on that she is welcome to send it to me.

My hon. Friend the Member for Argyll and Bute mentioned the issue of what happens when a village or a community does not have PayPoint access. One thing that the Post Office can do—I think that my hon. Friend the Member for Truro and Falmouth mentioned this—is to see this as an opportunity to offer customers a Post Office card account, or to remind them that there are approximately 30 different sorts of accounts that can be accessed at post offices. Hitherto, when people turned up with a green giro, there was no incentive to say, “Why not have a Post Office card account?” Now that there is, I hope that many of his constituents will do so.

We have heard about the excellent work of post office staff, with their friendly, familiar approach and knowledge of people. An interesting mix of people receive green giros. It is not necessarily overwhelmingly people who struggle with signatures or plastic. Often they are young unemployed people, whose financial situation is a bit chaotic. The mix is diverse. Many community post offices will be able to provide a facility for the people my hon. Friend is rightly concerned about, so that they can access their money at the post office through a POCA, with the help and support that post office staff so often give. I place on the record my appreciation, and the Government’s appreciation, of the sub-postmasters up and down the land, who are very often the heart and soul of our community.

What I want as a Government Minister, instead of warm words while presiding over a halving of the post office network, is to put the money in to ensure that post offices are there, and to give them that breathing space to modernise the network. Ultimately, that has to be the key. Rather than presiding over declining business, and Departments across Government withdrawing a bit here and a bit there to save some money, let us look forward. Let us look at new services of the sort being piloted by the DWP. Let us look at modernising the premises. There are some exciting ideas. I will not go into detail, but there is the idea of a “post office local”, whereby the rather intimidating screens will come down and post offices will be much more friendly and welcoming.

The post office network has huge potential. It is worth remembering that it is still the biggest retail network in the country, notwithstanding everything that has gone on. My commitment, as a member of this Government, is to ensure that we are not passive bystanders watching the network decline, but that we are active participants encouraging and supporting the Post Office, and making sure that it has the bright future that everyone in this House wants to see.