Rt Hon Lord Lilley

    This week, I called a debate in Parliament about the future of sub-post offices to coincide with a mass lobby by sub-postmasters and a huge petition signed by over 3 million people.

    There is massive and growing concern about the future of post offices in towns as well as rural areas because of the government?s plan to make the payment of benefits into banks compulsory.

    The Treasury has always seen the ?400 million spent on distributing benefits via the post offices as a tempting target. When I was Secretary of State for Social Security, I was advised that if people were forced to have their benefits paid into bank accounts, it would lead to the collapse of the post office network. And the only way to prevent that would be for the Department of Trade and Industry (DTI) to subsidies the sub-post offices. And that would eat up the bulk of the potential savings.

    So, it would bankrupt sub-post offices; undermine communities; and inconvenience the most vulnerable members of society all for little or no net saving.

    I have twice asked Labour ministers if they received similar advice and twice received no reply.

    The hidden consequence of this policy is the additional loss to post offices from loss of trade. At present pensioners who pick up their money in the post office spend some of it in the shop. If they get the money via their bank account or a hole in the wall ? they probably won?t spend it in the sub-post office.

    So even if the DTI returned to post offices, all the savings the DSS will make as a result of cancelling their contract to pay out benefits, post offices would still be worse off through loss of trade. And many would still close.

    When I was at the DSS, I concluded that making benefit payments through banks compulsory was a non-runner. Either it would destroy the post office network or it would make hardly any overall saving if the network had to be subsidised.

    But I recognise that the process of distributing benefits by order books and giros was costly, inefficient and vulnerable to fraud. Moreover, as I recall, up to half the ?400 million annual costs did not end up in the hands of sub-postmasters. It represented the cost of printing order books, warehousing them, distributing them and so on. So I launched a project to automate the process and introduce a payment card. This would achieve substantial savings, eliminate fraud and yet leave sub-post office revenues largely intact. And as a by product the computer system could enable post offices to expand into other areas of business.

    I still believe that is the only realistic route. Sadly, when that scheme allegedly ran into problems (as nearly all big computer projects across the world do), the Treasury took the opportunity to scupper it and impose its pet idea of paying all benefits via the banks. Yet the project was modelled on a similar scheme which is up and running in Ireland. Where the Irish succeeded, our Labour government failed!

    We need to revive that idea if we are to protect our sub-post offices, the communities which depend on them and the vulnerable people they serve