Rt Hon Lord Lilley

    The sad drama of our sub-post offices becomes more and more like a pantomime.

    Last week the Bad Fairy (Stephen Byers) pretended to have become a Good Fairy who could save the sub-post offices from the spell which he had cast on them.

    You will recall it was he who first threatened their future by proposing to compel pensioners and others to have their benefits paid into a bank account. The aim was to save the ?400m which the DSS pays the Post Office each year for handling benefits and giros. Unfortunately that means cutting the income of sub-post offices by a third ? enough to force many to close.

    When I originally warned about this threat the government claimed that the Horizon project to computerise all sub-post offices would generate new revenues to replace the lost contract with the DSS.

    The story was never credible. Then last month, the Post Office blew it sky high. They published accounts showing they had written off the entire ?600m cost of the Horizon project. Why? Because they could not realistically foresee revenues sufficient to pay its costs let alone replace lost revenues from the DSS. Audited accounts require greater honesty than ministerial statements these days it seems!

    As a result the hapless Stephen Byers had to come back to the House of Commons last week with a new rescue package. Unfortunately this turns out to be nearly as flimsy as its predecessors.

    Central to it is a so-called ?guarantee? covering 10,000 of the 18,000 sub-post offices. Unfortunately in the small print it emerges that the guarantee only requires the Post Office to protect sub-post offices ?if closure is avoidable?. And it emerges that closure would be deemed unavoidable if no new owner can be found. Yet that is almost the only circumstance in which offices close at present. And once they have lost a third of their revenues thousands of sub-postmasters will give up and get out and no-one will want to take over a loss-making shop. So much for the ?guarantee?.

    The other gimmick to save the sub-post offices was the announcement that they would all become branches of a new ?Universal Bank?. People will then be able to draw money out from the Post Office by setting up an account in the Universal Bank or asking their own bank to transfer their benefit funds to it.

    The key issue is will that generate sufficient revenues for the sub-post offices to replace the ?400m lost from the DSS. I asked the Minister a simple question: “will the post offices receive the same fee as at present or less for handling each benefit payment and will they handle the same number of payments or fewer? If their revenues are the same as at present then the government will have lost the ?400m saving it sought when it first put the sub-post offices at risk. And if ? as clearly would be the case ? the sub-post offices get paid less for fewer transactions then they will close at an accelerating rate?. Stephen Byers gave the breathtaking answer that he “did not know? what would happen to post offices. Indeed he subsequently revealed that he does not even have a business plan for this Universal Bank. It is just a fairy tale concept dreamt up by the spin doctors to convince us the sub-post offices are safe.

    Apparently no-one had told him that there is already a bank operating through the sub-post offices ? the Girobank now managed by the Alliance and Leicester.

    It generates only a tiny income stream for the post offices. A new nationalised alternative operating within the same offices is unlikely to be a goldmine.

    The sad truth is that the government?s initial decision to force people to have their pensions and benefits paid into banks was fatally flawed. It can only save money if they are prepared to let the post office network go to the wall. The British people will not forgive them if they do.