Mr. Peter Lilley (Hitchin and Harpenden): I want to highlight a major gap in this year‘s Queen‘s Speech: the failure to mention in any way how the Government will introduce measures to prop up the sub-post office network, whose future has been put in doubt by the Government‘s decision to make it compulsory for people to have their benefits paid into bank accounts. We all know that the sub-post office network is vital in all our constituencies and that there is great concern not just among sub-postmasters and sub-postmistresses, but among all our constituents–pensioners, young mothers, disabled people–who receive their benefits through the local post office.
The failure to mention that network in the Queen‘s Speech is surprising for three reasons. First, the campaign against benefit fraud is mentioned, but the Post Office‘s problems arose precisely because of the cancellation of the benefit payment card, which was to be the principal mechanism for eliminating some forms of fraud and which, only this week, the right hon. Member for Birkenhead (Mr. Field) said was essential if the Government are to carry forward their campaign against fraud.
Secondly, the abolition of the payment of benefits through the Post Office leaves a huge financial gap in the future of the Post Office network, which needed to be mentioned and the House needs to examine in full. Thirdly, if that gap is to be filled by a stealth tax imposed on the banks, as I believe it will be, that should require parliamentary authority, which should have been foreshadowed in the Queen‘s Speech.
Not long ago, Members of Parliament were given stark evidence of the size of the problem facing the Post Office network when the Post Office sent to every Member a brochure that showed that, by 2005, the network would face a deficit of more than ?500 million a year if nothing were done to replace the contract with the Department of Social Security.
That should not have come as a surprise to Ministers because, when I was Secretary of State for Social Security, officials advised me that, if I attempted to save ?400 million a year by making the payment of benefits into banks compulsory, it would lead to the collapse of the Post Office network. I was told that that would be avoidable only if the network were subsidised, but that the cost of that subsidy would wipe out any savings that one might hope to make. Indeed, those officials explained, the subsidy required to prop up the Post Office might be greater than the savings that one would make because, in addition to the loss of income from the DSS, post offices would lose what they call footfall: the traffic of people through the post office, who buy things and thereby provide additional revenue.
Ministers have never, although I have repeatedly challenged them, denied that they received identical or similar advice to that which I received. None the less, they ploughed ahead with the measure. The Secretary of State for Trade and Industry attempted to paper over the gap in the finances of the post offices with a statement that was thinner than rice paper. He pretended that the ?550 million annual gap could be filled by new commercial revenues.
Frankly, that suggestion should have raised questions in the minds of hon. Members and, indeed, of the commentators outside the House. To build new commercial businesses within a few years that will generate a net cash flow of more than ?500 million requires business expertise, which is rarely available. I know one or two business men who have achieved that and might be able to do it again, but the Secretary of State claims he can do it on the basis of his professional experience–I have looked it up–of five years as a senior law lecturer at Newcastle polytechnic. Apparently, that gives him the expertise to identify new commercial projects that will, in a short time, generate those revenues.
Those reading the Post Office brochure will see that the source of money that the Government are relying on is primarily the taxpayer. Taxpayers will pay to make good the savings: they will pay money through other Departments for services that the post offices may or may not provide them. The other sources on which the Government are relying will come from bullying the banks to provide that money and simple wishful thinking.
Mr. Geraint Davies (Croydon, Central): On the viability of generating ?500 million of income, does the right hon. Gentleman agree that, with 17,000 Post Office retail outlets–it is the biggest retailer in the country–we are looking at generating about ?250 from each per year? In those terms, the proposition does not seem that far-fetched, does it?
Mr. Lilley: That reveals the business expertise of the hon. Gentleman, which seems on a par with that of the Secretary of State. The fact is that ?550 million is a lot of money. To make a net profit of ?550 million in a short time, however large the initial network, will be a difficult task.
Mr. Davies: Will the right hon. Gentleman give way?
Mr. Lilley: I will not because I suspect that the hon. Gentleman‘s question will be of the same quality as his first. [Interruption.] If he is feeling hurt, of course, I will give way.
Mr. Davies: It is outrageous that the right hon. Gentleman should say things about my business background. As people will know, I have had a sparkling career in multinational companies and a number of successful businesses, which is much more than I can say for the right hon. Gentleman, as is clear from his facile remarks.
Mr. Lilley: I am sorry. Clearly, the hon. Gentleman is better qualified than the Secretary of State for Trade and Industry to hold that post and we look forward to his promotion to it.
The brochure that the Post Office network has put out identifies four major business streams. We look forward to their endorsement by the hon. Member for Croydon, Central (Mr. Davies), based on his business expertise. The first, although it is not highlighted, is probably the major one.
Mr. Peter Bottomley: I think that the hon. Member for Croydon, Central (Mr. Davies) divided ?500 million by 17,000 and came up with 250 as the answer. Perhaps he will have recalculated that figure by the end of the debate.
Mr. Lilley: It does seem as though the hon. Gentleman will have to follow his right hon. Friend the Secretary of State for Education and Employment into the numeracy hour. Perhaps that is why he gave up business for the Labour Back Benches.
The major element in the new revenues identified by the Post Office is a direct subsidy from the taxpayer. Originally, the Secretary of State for Trade and Industry denied that any such subsidy would be necessary, but he then introduced an amendment to the Postal Services Bill at a late stage of its proceedings giving him powers to pay such a direct subsidy. The Post Office brochure states:
The Post Office has developed a clear and transparent formula to calculate a Social Network Payment, which takes account of the costs of supporting sub-postmasters–
income lost as a result of the Benefits Agency withdrawal.
Clearly, that is how the Post Office believes the subsidy should be calculated.
I asked Ministers if the House could be informed about the formula that the Post Office proposes to calculate the amount of public money to be distributed to it. They replied that the information is commercially confidential. That is absurd. There is no commercial risk to the Post Office from releasing its proposed formula. The only conceivable commercial risk would be to competitors of the Post Office–if there are any–and surely they should have the right to know what is being proposed by way of subsidy to their major competitor.
Taxpayers have a right to know. The House has a right to know. The Government‘s refusal to give us those facts is a clear abuse of the exemptions in the code of practice on information. When I raised that matter during debates on the Freedom of Information Bill, I was told that the measure was already being observed by the Government and that in its future operation, they would not give such information. Worse still, the questions of Members of Parliament are not covered by the Freedom of Information Act 2000; we have less legal right to information than members of the public. Although I asked the appropriate Home Office Minister to confirm that in writing, he is experiencing great difficulty in getting back to me. However, the point was confirmed by the Lord Chancellor in another place.
The second major source of money is what the Government describe as Government general practitioner services–an interesting concept developed by the Government and the Post Office, whose aim, according to the brochure, is to provide a trusted one stop service for citizens in their dealings with “officialdom”, including all levels of government, other agencies and public bodies (e.g. NHS, Police) and the voluntary sector (for example . . . Citizens Advice Bureau). The service will cover transactions plus simple advice and information.
That is a daunting task to place on every sub-postmaster: to be well informed about every service provided by the Government–or at least well enough informed to point people in the right direction–and to provide some information and undertake some transactions on the spot. That will require extensive and costly training. It is hard to see how that source will be profitable.
In this case, however, we are given an amount; the Post Office says that, by 2005-06, more than ?80 million a year will be paid towards the Post Office network‘s fixed costs from Government general practitioner services. It is claimed that the cost will not fall solely on the taxpayer; the brochure states:
The Government will pay us to provide these services . . . overall this will be more effective and efficient than departments providing the services separately and will provide savings for them.
I wrote to the Secretary of State for Trade and Industry to ask whether he could quantify the savings to be made by Departments and whether they would offset to any degree the ?80 million charge that will otherwise fall on the taxpayer. No answer came the stern reply–yet again. We should be told, because the House is the guardian of public money and it should know how that money is being doled out.
The third element is e-commerce. The Secretary of State for Trade and Industry is a great one for the flavour of the month and when he made his statement, that was still e-commerce. It was still possible to envisage the making of easy money from e-commerce. The right hon. Gentleman proposed that post offices become collection, return and payment points for organisations carrying out business and consumer transactions.
The Post Office is a little less enthusiastic than the right hon. Gentleman; it is investigating the matter. It will certainly have to do so–most sub-post offices will have some space problems if they are to store piles of parcels to be distributed to people who were not at home for the delivery of their e-commerce. However, even the Post Office acknowledges that e-commerce will not raise a significant sum–just ?6 million by 2005-06. I am sure that the hon. Member for Croydon, Central will be able to divide that by 17,000 and work out the amount per Post Office, but that will not solve the problem posed by a gap of ?550 million.
Finally, we come to the major element, the jewel in the crown of the Government‘s proposals on commercial opportunities for the post offices–the creation of a universal bank. The Secretary of State told us in his statement that that would be the main solution–banking would be provided to the 3.5 million people who have no bank accounts and the branches that the high street banks have closed would be replaced. Again, it is amazing that the commentators should have swallowed that idea, not only because Girobank has always provided banking services through post offices, but because it is not immediately obvious that the greatest commercial opportunities lie in providing banking services to the 3.5 million people who are least attractive to banks and have therefore been largely ignored by them, who have the least money to spend or deposit, or who live in areas where the banks have found it least profitable to operate.
Of course the original idea behind universal banking was not to raise money, but to provide a social service to those who were otherwise financially excluded. Social services cost money; they do not earn money. So who will pay for the universal bank?
A judge asked a bank robber, when he was finally arraigned for his offences, why he robbed banks. He replied, “Your honour, because that‘s where the money is.” The Government‘s attitude is similar; they have turned to the banks because that is where the money is. They are telling the banks that they must set up accounts based on recommendation 14 of the poverty action team–PAT. That bears no relation to Postman Pat. Those accounts cannot run into overdraft. The banks have also been told that they must provide everyone with clear accounts and a money transmission system that mirrors the system that I originally wanted to set up with the benefit payment card.
The banks say that the system will cost ?45 million to set up and ?125 million to run, although the House has not been told that–we found out by diligent questioning. The Government have grandly said that they will cap the cost to the banks at ?125 million a year. The banks will be required to pay a 49p transaction cost, whereas the normal interchange fee between banks is 30p. Of course, both those figures are far more than the 2p that the Secretary of State said it would cost to transmit money using automated credit transfer.
I should like to hear an answer by the end of the debate as to whether the extortionate transaction fee will be additional to, or the means by which, that ?125 million a year will be levied on the banks. I should like to know how much of that ?125 million will represent net cashflow to the post offices, rather than the cost of meeting the additional costs that they will incur to set up the universal banking operation. Most importantly, I want to know under what parliamentary authority will the levy effectively be imposed on the banks?
In July, the Economic Secretary to the Treasury and the Minister for Competitiveness wrote a letter to the British Bankers Association, although they did not bother to inform us about it. It has become known as the Johnson and Johnson letter. In that letter, they asserted:
We now expect the banks to meet their social obligations.
They concluded that the banks
will by October need to be offering basic bank accounts and meeting the marketing, accessibility and availability tests.
Only the House can impose obligations on private organisations, or set tests that private and commercial organisations must meet by given dates. To do otherwise than to gain the authority of the House to impose such obligations represents the lawless use of power; it is an abuse of power, which rests on a veiled threat. The banks tell me that if they do not go along with the proposal, they will receive unfavourable treatment when the go before the Secretary of State over competition or merger provisions. A lot of consolidation is occurring in that area.
I pleased that the Minister for Competitiveness is now here. We have taken part in several debates on the subject, and I always welcome his participation in them.
If there is a veiled threat that the Secretary of State will use his powers over mergers and competition to the disadvantage of any bank that does not play its part in setting up the universal bank, the right hon. Gentleman will be in a difficult position when the necessary decisions come to be made. I once held that authority, and the Secretary of State is cautioned by his officials that he is acting in a quasi judicial role. If he has the slightest conflict of interest, he must declare it or stand aside. Effectively, the present incumbent has ruled himself out from any decisions involving the banks by indulging in back-street bullying of them.
The truth is that a stealth tax is being imposed on the banks to bail out the Post Office. I am no friend of banks, but I am a defender of the law and a defender of banks‘ customers. A report has been published this week by the National Institute of Economic and Social Research on financial accessibility. It says that the Government‘s measures will impose additional costs either on low-income claimants or on other customers of financial institutions. This is both inequitable and inefficient.
I am sure that the institute is right. Ultimately, there is not an entity called a bank that will pay the costs. The money in the banks is owned by us all. I should declare an interest because I have a bank account. It is my money, the money of the citizen, that will be bullied out of the banks to bail out the Government in a difficult situation.
We should not pretend that the proposal is a costless way of extracting money. Bank robbers go to jail because someone suffers when banks are robbed. A bank is not an imaginary entity. People‘s money is being protected and looked after in the banks. If the Government turn bank robber, they should be held to account.
The report of the NIESR on access to financial services is critical of the Government‘s proposal to introduce a universal bank. It states:
Universal bank customers may also find themselves labelled as being unsuited to mainstream providers, whereas in reality?
according to the institute‘s survey–
they do not differ from people who already have accounts with banks and building societies.
The real problem of the UN bank according to this interesting study is that some people are unfamiliar with banking, and the main distinction between those who have bank accounts and those who do not is whether they come from families or are in a milieu where bank accounts are familiar or not. The solution is a marketing problem and not one of setting up a new type of bank with a new type of account.
The conclusion that I draw from the institute‘s analysis of what the Government are up to is that the proposals put forward by the Secretary of State in his statement lack credibility, transparency and probably legality. Taxation by stealth is being proposed. It is an abuse of power and a cynical attempt to delay the impact until after the election of the foolish and ill thought out decision to undermine the viability of the Post Office network by requiring the most vulnerable people in our society to have their money paid into a bank account rather than through the post offices, which they would prefer.
All those who want a widespread network of post offices to remain will take this issue to heart when the election comes. The future of the network will become a big issue. People will know which party when in government was hailed by the National Federation of Sub-postmasters as providing the best ever guarantee for the future of that network and which Government–this Government–undermined its viability fundamentally and lack all credibility in their attempts to disguise the fact.
Mr. Lilley: One of the issues at stake is under what powers is the right hon. Gentleman negotiating with the banks, and what sanctions is he threatening to use if they do not concur and cough up the money to get him out of the hole into which he has put himself.
Mr. Byers: My approach to these matters is that with good will, good negotiation and proper respect for one another, agreements can often be arrived at. It should be a matter not of threats or sanctions but of people coming together and seeing whether there is a way forward that is mutually beneficial to all parties. That is what I am trying to achieve. I may be an optimist and it may not happen. It is a matter not of refusal but of having a proper discussion and arriving at a conclusion to which the parties will sign up. That is the target that I have set myself. I am confident that we shall be able to achieve it.