Rt Hon Lord Lilley

    Sub-Post Offices
    12/01/2000 Westminster Hall Adjournment Debate
    Mr. Peter Lilley (Hitchin and Harpenden): I congratulate the hon. Member for Stroud (Mr. Drew) on securing the debate and on the thoughtful way in which he introduced it. It follows on from a debate on 15 July, introduced by my hon. Friend the shadow Secretary of State for Trade and Industry. We have had two debates in a relatively short time on the subject of sub-post offices and the post office network because every Member of Parliament knows that post offices perform a vital function in our constituencies, be they rural or urban. The sub-post office is invariably a shop as well. It serves families, the elderly and the disabled. It becomes a focus for the whole community and helps to sustain it, especially in country areas.

    My interest in the subject deepened when I became Secretary of State for Trade and Industry–or, as I subsequently realised I was, President of the Board of Trade. I realised that I had responsibility for the network and was instrumental in ensuring that we made a 1992 manifesto pledge to sustain a nationwide network of post offices.

    When I moved to the Department of Social Security, my interest deepened further, as I saw how essential the network was to the effective delivery of benefits to many of the most vulnerable people in our communities. I helped to ensure that that delivery mechanism and the network would continue by agreeing to the Horizon project, about which the Government are now trying to rewrite history; I shall set the record straight. The contract was originally awarded to ICL Pathway because it had experience of setting up a similar system in Ireland, which, for historic reasons, has a similar network of sub-post offices. ICL Pathway had practical experience and we knew that it could do the job. We also knew that computerisation and mechanisation of the sub-post office system would be paid for by the potential savings from eliminating the fraud that was possible under the old order book system.

    Contracts have to be not only signed, but managed. It is important that those who manage–Ministers–make sure that they know what goes on. I have always made it a practice, in business and in government, to ensure that I know the bad news, which travels slowly up large organisations. If the person at the top is no good, he will not know what has gone wrong. I asked always to be told what went wrong, as well as what went right. If there were problems, we addressed them immediately and announced the changes.

    It is not clear that the current Government have been aware of what is going on–I do not want to go into the history at length, as I set it out on 15 July. We are still waiting for answers from the Government. Why did Ministers assure the House–they did so on four or five occasions over two years–that the contract was proceeding and was likely to be completed on target by the end of 2000, but then suddenly perform a volte face? Were the Ministers who gave those assurances simply ill informed or did they mislead the House? The Select Committee on Trade and Industry concluded that there were suggestions that

    “Ministers have been less than candid in their responses to the House and to this Committee about the problems facing the Horizon project. Unfortunately, the report was slipped out during the recess, so that grave indictment of Ministers did not receive the publicity it needed. ”

    The only explanation is that the Treasury won. It has always been determined to close down the network of sub-post offices, if possible, to move to ACT and to make what it regards as a short-term saving in public expenditure. I doubt whether that saving will ever arise, and I doubted it when I was a Minister at the Treasury, at the Department of Trade and Industry and at the Department of Social Security. It was only when two former Chief Secretaries to the Treasury occupied the Department of Trade and Industry and the Department of Social Security that the announcement was suddenly made that the project would be scrapped and people would be compelled to have their payments made into bank accounts.

    What really matters is not the history but the future and the consequences of that decision for some of our most vulnerable people. Fifteen per cent. of those on benefits do not have bank accounts, so how will they receive their benefits if they live in areas where sub-post offices have to close down because of the changes the Government are making? The Government admit that 1 million of that 15 per cent. of people could not reasonably be expected to operate a PIN number system because they are elderly or frail. Such people would be vulnerable if they gave PIN numbers to neighbours or others to receive their benefits. We need answers today as to how the Government will tackle the problems of people without bank accounts, and of people too elderly and confused to handle PIN numbers for themselves.

    We want to know whether banks will be compelled to give accounts to those whose income derives solely from benefits, such as those who are dependent on income support and jobseeker?s allowance. If they are to be compelled to take such people as customers, how will that be enforced? Which banks will be forced to take which customers? Will people have to pay a pound or two in bank charges from their benefits, which no one here pretends are excessively generous?

    What will be the impact on families? Many wives use child benefit separately to pay for some of the needs of their children, as was specifically foreseen when it was introduced instead of a tax allowance. If that money must be paid into an account, and if a wife has only a joint account with her husband, how is she to keep the money separate for her children?s needs? Must she open a separate account? Will she then have bank charges deducted from the child benefit paid into it? We need answers to those questions.

    Mr. James Gray (North Wiltshire): Is my right hon. Friend aware of an allied problem? When there is an overdraft, possibly for perfectly good reasons, the benefits money will go straight to pay off the overdraft, rather than to people in need.

    Mr. Lilley : My hon. Friend makes a good point. That is why the existing arrangements have been satisfactory. They were largely introduced by the Labour party in 1978, so it is odd that it is now threatening and undermining them.

    We need to know what the impact will be on the revenues of sub-post offices. How much revenue to the post office network will be lost because of the changes? If there is a saving to the Treasury, there must be a loss to the sub-post offices, but how much? What will be the subsequent loss to post offices through the loss of footfall–people coming into the shops, dispensing money and creating revenue? That creates no gain to the Treasury, but it is a loss to the system and so undermines its viability. Sub-post offices are very unusual in that people usually leave with more money than they had when they entered. They dispense some of that money in the process, but that will not be possible if their money is paid out through ACT.

    How many sub-post offices will be closed throughout the country? If the Government are seriously determined to maintain a network of sub-post offices, will they not have to renegotiate the contract with Post Office Counters Ltd. as they do every two or three years? That contract is made up of two elements, one of which is about keeping the network open, while the other relates to actual usage of post office services. We will have to jack up the lump sum that Post Office Counters Ltd. is paid to keep the network open, offsetting any savings that it is making on the individual transactions; therefore, the saving that the Treasury is hoping to make may well prove to be illusory.

    We must recognise that the Government?s decision to scrap the Horizon project will damage the quality of life for disabled people, elderly people and families throughout the country. It will undermine communities, especially in rural areas. It is another threat to the countryside and, ultimately, it will be a threat and a cost to the taxpayer. Questions have been asked in previous debates, but they have not yet been answered by Ministers. I hope that we shall receive some answers today.

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    Same Debate ? column 66 Peter Lilley?s intervention on Minister

    The right hon. Member for Hitchin and Harpenden (Mr. Lilley) mentioned what happened in the past. We are unable to access some of the records from the benefits payment cards project. The project was well intentioned, and I supported it in a previous capacity. However, when we took office, the contract was running three years late and was vastly overspent.

    Mr. Lilley : If the project was running three years late when the Government took office, why, on four occasions over two years, did Ministers assure the House and the Select Committee on Trade and Industry that it would be complete on time by the end of 2000?

    Mr. Johnson : I shall correct that. It was running three years late when we took the decision to move to the new arrangements. When we took office, the contract had already been renegotiated; and it had been established in May 1996 and renegotiated in February 1997. I was party to those discussions in a previous capacity. The previous Government spent two years trying to privatise the Post Office, two years trying to plunder it and a year establishing a well-intentioned project that the Trade and Industry Committee said was “blighted from the outset.