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Westminster Hall

Tuesday 18 December 2001

[Sylvia Heal in the Chair]

Post Office

Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Ainger.]

9.30 am

Mr. Archy Kirkwood (Roxburgh and Berwickshire): I am pleased to introduce this important one-and-a-half-hour debate for colleagues with an interest in the future development of post office services, particularly in relation to electronic government and the Government's targets to deliver services using automated credit transfer systems and new banking systems.

I am delighted that the Minister is able to join us. I know that he is particularly busy and that he has had difficulties at home to do with the health of a family member. We are all pleased that it seems that the family difficulties are being resolved. We are particularly grateful that he has joined us this morning while under that sort of pressure.

This is an important debate on the relationship between the Post Office as an institution and central Government, and the services that we are trying to ensure are delivered in the best possible way to our constituents. I shall set out the context in terms of Consignia and the Post Office. One does not have to be an expert to recognise that both are currently under considerable financial strain. Anyone who has studied the recent report of the announcements made by the chief executive to the Select Committee on Trade and Industry will see that the Post Office is under a great deal of financial pressure across its operations. It is facing financial losses and increasing competition, not only internally in the United Kingdom but throughout Europe and the wider world. Base level staff within the Post Office and Consignia are understandably worried—both those who work directly and those, such as sub-postmasters and sub-postmistresses, who work indirectly for the organisation. It would not be proper at this time of year to miss paying tribute—as I am sure all Members would wish—to the dedication and commitment of Post Office staff, particularly the postmen and women who over the next week or so will work themselves into the ground to ensure that our constituents get the delivery services that they have come to expect. Their sacrifice and contribution are acknowledged and recognised by us all.

I shall concentrate on the future facing postmasters and postmistresses and consider two aspects of e-commerce and ACT technology. I want to refer to the universal bank, about which the Minister made a significant announcement in a written answer yesterday. I shall then consider the "Your Guide" system of promoting government general practitioner services in the way suggested in the performance and innovation unit report, published in June 2000.

First, I shall cover some of the background to the current situation regarding sub-postmasters and sub-postmistresses. I vividly remember the television report

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of the Conservative party conference during which the then Secretary of State for Social Security, the right hon. Member for Hitchin and Harpenden (Mr. Lilley), waved his magnetic stripe card high above his head with gay abandon and an uncharacteristic flourish. In fact, that is not true, because the year after he took to song, which was even worse. It looked like an awful opportunity for a photograph, but that did not cross his mind. The Horizon card scheme ended up hung round his neck like a political albatross, because it was a signal failure. However, it was a signal failure only afterwards.

It will discomfort the Minister to remind him that the right hon. Member for Birkenhead (Mr. Field)—the Minister for Welfare Reform from 1997-98—confirmed at the annual conference of the National Federation of Sub-Postmasters that the Labour Government would continue with the swipe card. The hon. Member for Vauxhall (Kate Hoey), whom he sent in his absence to the subsequent annual conference, also confirmed that the Government would try to roll out the Horizon card scheme as it was originally conceived. Many sub-postmasters rightly made investment decisions on the basis that that would provide secure income generation.

Many of my constituents told me that they had invested heavily in the bricks and mortar of their village and town post offices, safe in the knowledge, as they believed, that their businesses would have some income security. That was turned completely upside down when the Minister of State for Social Security in the last Parliament decided that the game was up and that the scheme would not fly. Everyone took a terrible financial loss, including ICL—the company that promoted the scheme—the Post Office and postmasters. The Government also lost a lot of money. The National Audit Office and the Public Accounts Committee have looked into the matter, which was one of the biggest financial disasters ever known in the public sector.

That is the background to the debate. In June 2000, the performance and innovation unit produced a report—"Counter Revolution: Modernising the Post Office Network"—which gave postmasters in my constituency real hope that if everything that was set out in the report was done, which is what they wanted and needed, there was a future for post offices in urban and rural areas throughout the United Kingdom. The report raised their hopes, and the National Federation of Sub-Postmasters could not have written it better. The report's concepts are still the foundation for a secure future for post offices in rural and urban areas.

The report highlights the universal bank, the concept of the roll-out of the government general practitioner and the "Your Guide" pilot as crucial to the success of the entire undertaking. These are big projects and none of this is easy. It is difficult for Government to procure them and to roll out contracts. They always take longer than anyone would like. I also accept that considerable investment has been put into the hardware system, which is now working and which makes a positive difference. That is all welcome. However, the day of judgment is looming, and we must try to pin down what income stream will flow from the PIU reports and recommendations, the universal bank and the general practitioner services for sub-postmasters. I need not remind the Minister that there are only 53 or 54 weeks between now and when ACT technology starts to be delivered and post office owners no longer have access to

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the income stream from fees for cashing social security giro cheques. In anyone's language, that is not a long time. The timetable for finishing work on the universal bank and rolling it out in a sensible, coherent way, and for developing sophisticated new concepts such as general practitioner services, is certainly ambitious. Time is not on our side.

Although the concepts and vision are right, post office owners in my constituency are fearful that they will not recover the £400 million that will be removed from the system with the loss in 2003 of social security giro cheque payments. They are not convinced that e-commerce, the universal bank and general practitioner services will provide adequate substitute income.

It is important that between now and 2003 postmasters and postmistresses are able to clarify the business opportunities. The written answer that the Minister gave yesterday to the hon. Member for Kettering (Phil Sawford) will cause them to be more rather than less fearful; the answer was helpful only to the extent that we now know a bit better where we are going. We waited for that answer for some time, but it was not what my sub-postmasters and sub-postmistresses wanted to hear. I will quote some key sentences for the benefit of Members who have not yet read it.

That is seductive, but the words "marketing strategy" concern me. If the Government were to make it more attractive for people to take ACTs straight into their bank accounts, it would diminish the opportunities that the universal bank would provide for sub-postmasters and sub-postmistresses.

Mr. Nigel Waterson (Eastbourne): I am grateful to the hon. Gentleman for initiating this important debate. Does he agree that a subtext is that the Treasury would dearly love to encourage more people to use PAT 14 accounts—named for policy action team 14—at the expense of the major banks, rather than the Post Office card accounts, which would have to be underwritten by the Treasury? I have not had the benefit of reading the detailed answer, but I suspect that it does not tell us how many accounts the Treasury is prepared to underwrite.

Mr. Kirkwood : I am grateful for that helpful intervention, which underlines my point. Another key sentence in the answer might help the hon. Gentleman understand the Government's plans for a cap:

That is good news, because we have argued all along that there should be no eligibility criteria or cap on numbers for Post Office card accounts. However, it is bad news because the operational assumption of 3 million accounts suggests to me that instead of the £400 million that is available annually at present, postmasters and postmistresses will be lucky to get £50 million out of the system when it is fully

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operational. Every week, 16 million social security benefit transactions in 18,000 branches throughout the United Kingdom contribute to that annual income of £400 million.

The question is how we will fill the £350 million gap. If the Government limit the amount of funding, it will not matter that there are no caps or eligibility criteria for the Post Office card account. The 16 million Post Office benefit transactions, if they continue at that level, will be financed with only £50 million. That will not take post office and sub-post office operators any further forward. I may be wrong, but I hope that the Minister will answer that crucial question.

Mr. David Heath (Somerton and Frome): I support my hon. Friend's argument. A further difficulty is that the Post Office card account and the basic bank account will not be on an equal footing if they are not simultaneously up and running in April 2003. That start date is desperately important for many reasons, not least of which is the effect of the Tax Credits Bill that is currently passing through Parliament. The Government have decided to split the contracts: one will go to the Link organisation, the other to EDS/Citibank. It will be difficult to get the contract right in the time scale available. Given the experience of previous contracts such as NIRS2, is the Minister confident that a POCA will be functional in April 2003?

Mr. Kirkwood : I am certain that some people know much more about that than I, or my hon. Friend do, although he has worked extensively on this subject. They are concerned that the roll-out periods and implementation plans are not robust, and feel that a full trial year of the fully spec system should take place before it goes online. My hon. Friend is right to remind hon. Members that the system is vital, especially for the low paid, whose domestic income depends on reliable delivery of benefits. Otherwise, they are thrown on to the social fund safety net.

The Government must persuade us not only that that can be done in the suggested time scale, but that they have a plan B. The obvious plan B would be to postpone the replacement of benefit books by ACT for as long as it takes to ensure that the new systems are robust.

Other questions flow from the operational assumption that 3 million people will open accounts. Do high street banks want a new cohort of people past retirement age queueing up in their branches to obtain their pensions? How will the Government's marketing strategy ensure that POCAs are limited to 3 million? If an agreed rate of return was set for each transaction, sub-postmasters might be able to derive income. If customers wanted to continue using the service, which they currently do at the rate of 16 million transactions a week, postmasters and postmistresses in my constituency could encourage them to do so in their post offices. If the transaction rate were agreed, people could choose where they obtain their benefits without the need for marketing strategies, pressure or incentives. Academic research suggests that people are more comfortable with benefit payments being made across the counter in their local post office.

We must try to pin down the Government's plans, which are crucial to the survival of the post office network. We are talking about 18,000 offices and a high

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closure rate. I think that the last Postal Services Commission report said that 541 offices closed in the year to March 2000. The Minister may say that closures have tailed off and that things have not been quite as bad this year but people have been founding their plans on the PIU report. When sub-postmasters and sub-postmistresses see the detail of the written answer dealing with the universal bank proposals and others, the closure rate of sub-post offices may accelerate.

I want to talk about the concept of the government general practitioner. The pilot scheme has been running for some months in Leicestershire and Rutland, and all the evidence made available to me suggests that it has been a success. The services that were rolled out have been of considerable interest to the people using the new delivery mechanisms.

Some of my colleagues and I had the advantage of seeing a presentation by the team that is rolling out the project. That powerful system is impressive. If it were put at the heart of the Government's programme of service delivery, it would transform the interface between the ordinary citizen and central Government. That vision was carefully worked out and involved consideration of the way in which post offices could be a one-shop entry into a panoply of Government services. I found particularly exciting the fact that they could to a large extent deal with information and advice themselves, using a combination of new technology and personal services across the counter. There is the additional benefit of passing on customers to specialist advisers and having surgeries on-site.

I think that the Secretary of State may have in mind the possibility of a visit to one of the best examples in the pilot area. I hope that she makes known her views and her experience of how well the pilot scheme has gone. If the Government invested time, effort and commitment in the idea, it would certainly be a key element in developing and delivering post office services in rural and urban areas in the longer term.

Again, the concept and vision are right, and the work that has been done is extremely useful and valuable, but we must ask questions about some of the resources, timetables and other issues. We need to know how the programme is going. What is the Government's view of the pilot scheme and what is their time scale for rolling it out? Which client groups found it most useful and to what extent are they using it in a way that they did not before? Do customer satisfaction surveys suggest that users are satisfied with the new services that they are being offered? I am particularly interested to know how the programme has affected low-income groups and rural areas such as south-east Scotland, which includes my constituency.

What will be the decision-making process? What steps is the Department of Trade and Industry taking to see that the devolved Administrations ensure that the content of "Your Guide" is accurate and up to date? If it is not relevant to the local circumstances, it will be useless and positively harmful. We need to tie in the constituent legislatures in Edinburgh and Cardiff and the content providers in the devolved parts of the United Kingdom where the content is significantly different because some of the rules and laws are different.

How do the Government see "Your Guide" helping to achieve their rightly ambitious targets for the delivery of e-government by 2005? What other areas of

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government policy are likely to be affected by the new service? The opportunities are almost limitless. It could help to improve public service reform, social inclusion and to tackle fuel poverty in rural areas. It could promote neighbourhood renewal, rural renewal and e-democracy. I came away from the presentation extremely enthusiastic. I am old and cynical yet I was really cheered up by the potential that this new tool can deliver if it is properly used.

Finally, I return to the future viability of sub-post offices in my constituency. Where will the income stream come from for "Your Guide"? When will we know what fees central Government will pay? When will we get down to the nitty-gritty of how these concepts—"Your Guide", the universal bank and other systems of e-government—which are right in theory, will work in practice? The day of reckoning is coming. We need to know how committed the Government are, how much money they will put into the system and how the Department will take forward these issues. We need to know that soon because the ACT migration scheme will kick in in 2003. As my hon. Friend the Member for Somerton and Frome (Mr. Heath) said, if we do not get these things sorted out by then we will all suffer. Certainly the attrition of the network will continue and rural and urban sub-post offices will continue to close at an alarming rate. I hope that the Minister can answer some of these important questions because many people are urgently awaiting his response.

9.58 am

Mr. Michael Moore (Tweeddale, Ettrick and Lauderdale): I am delighted to follow my hon. Friend the Member for Roxburgh and Berwickshire (Mr. Kirkwood)—my neighbour—in this important debate, and I congratulate him on securing it. The attendance for the debate has rather the feel of the usual suspects. There is strong representation on the Liberal Democrat Benches and a blank representation on the Government Benches, apart from the Minister whom we are grateful to see in his place. What was once a reasonably healthy attendance by Conservative Members at previous Post Office debates has now diminished. I do not think that fairly reflects the seriousness of the issue, although I concede that the full title of this morning's debate may be somewhat esoteric and may have scared off a few hon. Members.

The bottom line for us all, regardless of party and whichever part of the country we represent, is that the local post office is a vital part of our communities. My hon. Friend said that our thoughts are focused at this time on the Christmas postal deliveries. I attended the Peebles delivery office yesterday at the ungodly hour of 6.30 am. I was a late arrival; most of the postmen and postwomen had been there since midnight, anticipating what turned out to be the busiest day of the year so far. About 50,000 items of mail were being sorted by a team of between 30 and 40 for delivery throughout the county of Peebles, which forms a large part of my constituency.

Much information technology in the modern post office is used for preliminary sorting, but when the mail gets to delivery offices such as that in Peebles, it is a much more manual affair. That is perhaps why, when I was going round the office, getting in the way of people sorting the mail, several postmen and postwomen told me that they could not understand why, at this busy time

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of year, senior managers in the Post Office had announced the possibility of 30,000 redundancies. To say that the timing was insensitive is an understatement; to see the hard work being done and the necessary way of working in post offices suggests that senior managers need to get back to the floor themselves if they are to understand more about what goes on in their business.

Although it is not the primary aim of the debate, I hope that the Minister can assure us that there will be nowhere near as many redundancies as has been suggested, even though some doubt was subsequently cast on that figure. The people who deliver the customers' mail would be reassured to know that they are extremely valued and that it is not their fault that the Post Office is in commercial difficulty.

Mr. Waterson : I do not for a moment disagree with the hon. Gentleman about the excellent work and commitment of Post Office workers. In his conversation with them, did he ask why the Post Office or Consignia is responsible for about half of all days lost throughout the economy in industrial disputes?

Mr. Moore : I did not discuss that issue. The industrial record in my constituency is perfect, and I am unaware of any recent disputes in any of the areas that I represent. Perhaps the hon. Gentleman will raise that matter with the Minister.

We are, rightly and properly, focusing on the delivery of e-government through post offices. Liberal Democrats have consistently expressed anxieties about the future of the sub-post office network in rural areas and in larger towns where sub-post offices also give an essential service. They, too, feel under financial threat because there is great uncertainty about their future.

The Government proposed the universal bank and the 'Your Guide' system as solutions to the crisis; my hon. Friend the Member for Roxburgh and Berwickshire extolled some of the ideas and asked some important questions. Time is short to get the new systems in place, assuming that they will deliver what they promise. Substantial anxieties remain among the sub-post masters and mistresses in my constituency and, I suspect, across the country.

My hon. Friend and I recently held a meeting with our local post masters which highlighted their worries, especially about the shape of the community information network, which "Your Guide" will represent. They expressed great uncertainty about it and although their federation had received a presentation in Perth not long before, they were conscious of widespread ignorance among local agencies in the Borders and elsewhere about the services that could be provided through it and the roles that councils and other agencies would be expected to play. That meeting in Galashiels led us to ask for the meeting, which my hon. Friend mentioned earlier, with the "Your Guide" implementation team in London. We were given a comprehensive and neutral presentation of the project's development to date, and I thank the individuals concerned for their time and patience.

The presentation made it clear that there are three core customer propositions in the project that try to focus its usefulness on retirement, work and community

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services, and on key groups that use or might be tempted to use the Post Office reasonably regularly. An impressive range of services is being considered on such matters as money and legal issues; retirement; jobs and training; benefits entitlements; local government services; adverts and notices; and, importantly, local information. There are several channels, to use the jargon, through which the services may be delivered, but the touch-screen facility is perhaps the most imaginative and the one that catches attention. We saw a demonstration and were able to test it out in its current form for our constituencies, and we were impressed by what we saw, although we appreciate that it is not yet the finished article.

It was a good presentation in many ways, but it raised a series of questions in my mind. It was not clear which Department is in charge of ensuring that the services that are to be delivered through "Your Guide" are properly prepared, although I assume that it is the Department of Trade and Industry. If the Minister is able to answer that question, perhaps he could list the Departments that he expects to use "Your Guide" and give us a progress report on the state of preparedness for trialling it beyond the pilot stage that is happening in Leicester. It also struck me that, as my hon. Friend the Member for Somerton and Frome (Mr. Heath) mentioned, huge cost implications are often associated with such projects. It is unclear what departmental budgets exist to ensure that proper preparation is made for developing the services and ensuring that they are delivered on time.

Most important will be the roll-out of touch screen and other aspects of "Your Guide" to the wider sub-post office network. Will the Minister tell us what stage the procurement and contract setting has reached? Given that we are within 18 months of the project going live throughout the country, we would expect to hear about an advanced stage of negotiation and roll-out. I hope that we will not be told that nothing will be done until the pilot is finished. I suspect that that will be a handy answer behind which to hide, but no one will believe the Minister and his Department if that is the best that can be done at this stage. We want a cast-iron assurance that the 2003 deadline will be met. As my hon. Friend the Member for Roxburgh and Berwickshire said, there appears to be an alarming shortfall between the income generated under the existing benefits system and what is promised under the new system. If there is no income when we trip over from one to the other, there will be chaos in the system and many people will lock up their post offices and throw away the keys.

My hon. Friend spoke about the relationship between the DTI and devolved administrations. Anxious about the future of our sub-post offices, we in the Borders have devoted considerable time to that matter. The position north of the border is extremely murky: it is not clear who is in charge of the roll-out and the relationship with the DTI. I am a firm supporter of devolution—as, indeed, is the Minister—but that is no excuse for losing the thread of Government policy and the impetus to deliver it.

At what level is liaison with the Scottish Executive taking place and to what extent are the same services as those set out in the "Your Guide" plan for London involved? I do not want to make a personal point, but is

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the Minister's sister in charge? Perhaps they will have a chance to sort out a few problems over turkey this Christmas.

I have heard some flashy suggestions that the "Your Guide" platform could be used as an internet access point across the country, which would help the Scottish Executive to reach their target of internet access for the whole of Scotland. That is superficially attractive and I can understand why one might think in those terms but, as the history of commercial internet café sites shows, those who want to use the internet do not necessarily use it for a short period. To make this a commercial proposition—and ensure that people are not gummed up in queues until they get fed up and move on elsewhere—internet access may have to be denied and other routes for delivery established. Will the Minister clarify the position, which is a matter of growing concern north of the border?

My hon. Friend's argument came home to roost when we spoke recently to key local players in our region. He and I chair a monthly meeting that brings together the convener and key economic development officials from the council, the chairman and chief executive of Scottish Enterprise Borders, the chairman and principal of Borders college, the vice-principal of Heriot-Watt university, and the chief executive and chairman of the Scottish Borders tourist board: I hope that that list includes everyone. That meeting has taken place monthly for two and a half years, primarily to focus local efforts on maximising the benefit to the region of European funding, but we also touch on wider purposes. When I recently mentioned the roll-out of "Your Guide" I was met by blank stares. I blame not those senior local individuals, but the information system. We are close to implementation yet key players such as the council, which should be interested in developing its services through the platform, know little about it.

My hon. Friend and I suggested that the implementation team should come north of the border at the beginning of January to demonstrate the system to local agencies. That may sound like an ad hoc approach from the Minister's point of view, but it is important from our local perspective. I hope that the Minister will provide the implementation team with sufficient resources, because it is costly to acquire the kit north of the border. The team must be able to meet Ministers and the Scottish Executive. I understand that the Minister cannot instruct or demand in that respect, but I hope that he will encourage the appropriate Minister to meet the team. If the "Your Guide" platform is on time in England, we do not want to be left behind in Scotland.

The bottom line is that within 18 months the sub-post office network should have a viable future. It is important that post offices serve our local communities and that Government policy objectives can be delivered through that post office network. Despite numerous debates in the House, Government announcements in parliamentary answers and so on, it is not clear what form that future will take. The documents that we are asked to read are full of buzz words: modernisation, reform, and one nation—you name it, it is in there. Sub-post masters would add another buzz word, which is uppermost in their minds—survival. They fear for theirs

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right now. I hope that the Minister appreciates that the onus is increasingly on him to demonstrate how they will survive.

10.15 am

Dr. Vincent Cable (Twickenham): I add my congratulations to my hon. Friend the Member for Roxburgh and Berwickshire (Mr. Kirkwood) on initiating the debate, on his campaigning over the years for the post office network and on the work that he has done on the Select Committee on Social Security in bringing out many of the ways in which the automated credit transfer system will have an impact on the Post Office. The debate builds on a substantial legacy of work. He and my hon. Friend the Member for Tweeddale, Ettrick and Lauderdale (Mr. Moore) referred to the problem from the standpoint of the Scottish Borders. However, this is not specifically a Scottish problem, a Borders problem or a rural problem. I represent a relatively affluent London suburb but I know from experience that post office branch closures arouse perhaps more emotion than any subject other than the closure of hospitals. The issue concerns us all.

I wish to ask two opposing questions. First, what can the internet and particularly e-government do for the Post Office? Secondly, what can the Post Office do for the internet and e-government? The first question returns us to the issue that both my hon. Friends have touched on in some detail: the underlying economics of Post Office Counters and of the network and how they will be affected by the changes of the next two to three years. Perhaps I can put the same questions in a slightly different way. I understand that as a result of the phasing in of ACT in 2003, the network will lose approximately £430 million in income, which is slightly more than the figure suggested by my hon. Friend the Member for Roxburgh and Berwickshire. The notional figure that I was carrying in my head, as a result of past debates and parliamentary questions, was that the universal bank and particularly the Post Office card account would bring in about £180 million. My hon. Friend quoted £50 million, and it would help us all to have more clarity about the income string that we could expect. The Government have always said, "That is an issue of commercial secrecy; we cannot discuss it." It may be an issue of secrecy or it may reflect an unwillingness to say that they do not know the answer.

It is also vital to have more clarity for the sake of staff. People are having to make decisions about whether to continue in the business or to close up. If there is a prospect of raising more money than the figures I have cited, it would help to build confidence within the network if we knew that. The more the Minister can say about the expected figures for card accounts and the income stream that will flow from that, the more that would help business planning. It would also help if we could add to that a notional estimate of what fee income the network can expect to derive from its electronic government work, a role that will emerge from the pilot programme. I was given estimates of a fairly derisory income, but that may be over-pessimistic. There may be substantial money in the scheme, in which case it would be useful if the Minister could give us a range of estimates. We are not asking him to put his reputation

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on the line by citing a precise figure—a possible range of figures would tell us something about the way in which Post Office economics are being affected.

Before leaving the question of the impact on the Post Office, I raise the slightly wider question of how internet-based services will affect Consignia as a whole. As we have learned over the past week, the finances of Consignia are in a dire state. It is not simply a question of strikes, though they are important. The simple fact is that there has been growing competition for the services provided by the Post Office for many years, particularly by electronic mail and fax. The Post Office has been unable to respond because of under-investment, in large part because its annual gross profits every year have been looted by the Treasury. As much as 90 per cent. of its gross profits for much of the 1990s was taken by the Treasury in tax and dividends. It has not invested and is not ready for the challenge. It is now faced with a pincer attack from two sets of regulators: the Association for Postal Commerce—Post Com—which is helping couriers and others to get into bits of its business, and the European Commission, which will squeeze its margins by reducing the weight limit. It is difficult to see anything other than a downward spiral of increasing losses and contraction of business, and at some point the issue will arise of whether Consignia can continue with its universal service obligation.

The relevance of the internet is that at least it offers a positive opportunity rather than a set of negative threats. The Post Office's one great asset is the door-to-door delivery system. It may become a liability, but it could become an asset if it were linked to the increasing use of internet shopping. Terminals in domestic households and the Post Office Counters network could be the mechanism for stimulating new business and value addition for the postman delivery service, and that could be a great boon for Consignia. However, I do not see much evidence of that.

I want to ask the Government for some indication of how they see the income streams of Post Office Counters and Consignia generally being affected by the changes. I also want to turn the question round and ask what the Post Office Counters network can do for the dissemination of internet access and electronic government. I understand that both universal access to the internet and availability of electronic government are targeted for 2005, so the two processes are interrelated. The Government must address the issue of how far the adaptation of electronic government by Post Office Counters can contribute to reducing the digital divide problem, which has several elements. One is the great difference between social classes—about 20 per cent. of families with unskilled workers as head of household, but more than 60 per cent. of those with professionals as head of household, have internet access. There is also a big gap between the old and the young, and between rural areas and big cities. The question is whether the Government can bridge that gap using the post office network. Let us take those in turn.

With imagination in the use of electronic government through the Post Office, much could be done to bring the elderly within the system. They are the main users of Post Office Counters because that is where they collect their pensions. They are being left behind, but they do

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not have to be. In Twickenham, an imaginative system has grown up around the villages which are the basis of my constituency. One social entrepreneur has created in each suburban village an online system targeted specifically at elderly people, most of whom are now wired up to the internet, but that is unique and specific to my area. The system—Hampton online and Twickenham online—has not, as far as I know, been replicated elsewhere. If elderly people are to have internet access, the Post Office Counters network of branch offices is best placed to achieve that. I wonder how far the Government are targeting that specific audience in that way.

The second problem relates to rural areas. We know that BT is behind with its asymmetric digital subscriber line roll-out, but even if it were up to scratch with that, there would be a problem. We know from case studies in Europe, in countries such as Sweden, that even if there is a line going into a village, the offshoots into domestic households often lag far behind. The way in which village communities obtain access to internet services is primarily by using a focal point, such as the library or the local main post office.

I turn to electronic government itself, an area in which there are clichés. The Government often set themselves a target of having certain services online, but the services offered are often fragmentary and not very useful. It is important that a small trader should, for example, not only be able to use electronic government terminals to find out how to get an application form for a VAT return, but should be able to talk interactively to the VAT office. That would make business and the payment of tax much easier. The quality of electronic government is crucial, not simply access to it. We must understand how far the Government have thought through going beyond mere mechanical targets to achieve a really useful electronic government service. The Post Office experiment could be important in accelerating that process.

We are at a branching point. We can envisage an environment in which the Post Office Counters network declines or disintegrates rapidly and the Post Office as a whole is on a downward spiral. However, it is equally possibly to envisage upturn and increasing opportunities. The use of the internet-based system and electronic government could be a main mechanism in achieving that. The Government must be much more explicit about how they intend that to work and how much income the Post Office can derive from it.

10.26 am

Mr. Nigel Waterson (Eastbourne): I begin by congratulating the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) on securing the debate. It is a timely opportunity to discuss such issues, although it is not one that a significant number of colleagues have taken. Perhaps they are desperately trying to catch the last Christmas post.

As it is Christmas, I join in the tribute paid to postal workers in my constituency and elsewhere. They are a special breed of people. How many of us would want to get up so early and tread the streets in all weathers? I know how committed and dedicated they are to their task.

The real affection that the British people have for the Post Office—if I can use that old-fashioned term—is underlined during the Christmas post. It is therefore all

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the greater pity that the postal services face so many problems at present. A rather good film was made a few years ago by Mr. Tim Burton called "The Nightmare before Christmas". The postal services are becoming the nightmare before Christmas in some ways.

There are two principal issues. First, how effective are the Government in delivering e-government and e-services generally? Secondly, will the steady erosion of postal services, in particular the closure of branches throughout the land, undermine the efforts to introduce e-government?

It will be interesting to see whether the Minister, in what will probably be a protracted reply, given the time available, will follow the example of his Secretary of State in Question Time the other day. She distanced herself from the many problems currently faced by postal services and no wonder, because we are talking about an organisation that is losing £10 million a week and has the worst industrial relations of any organisation in the country. Perhaps the Minister, who has many and varied contacts in the unions and in politics, can use his good offices to try to get the Communication Workers Union's tanks off Consignia's lawn so that it can at least make some sensible management decisions and have some expectation of carrying them through to fruition.

We know that the management have decided that they must make savings of £1.2 billion. Rather unbelievably, the figure of 30,000 redundancies was blurted out during evidence to the Select Committee. Ministers and senior management have rowed back from it ever since. Underlying all that is Consignia's dismal failure even to come close to meeting what are in my view quite modest delivery targets. Achieving its basic core business of delivering a first-class letter the next day is simply evading that failure.

We keep hearing ideas floated that would dismantle the postal service as we know it. They include the abolition of the first morning collections, which has happened in many parts of the country, and scrapping the second delivery. It has also been suggested that people should actually pay to receive their mail, rather than its being delivered in the traditional fashion. I hope that the Minister will explain how such developments will sit with the universal service obligation.

In introducing the debate, the hon. Member for Roxburgh and Berwickshire rightly dwelt on universal banking services and the "Your Guide" pilot. Despite the written answer that slipped out yesterday, presumably in anticipation of this debate, the universal banking project is fraught with uncertainty. What is certain, however, is that in April 2003, 36 per cent. of sub-post offices' income—about £400 million, although the figure will have risen even during this debate—will disappear. That is one major reason why 547 sub-post offices have closed. That is a record figure, and the trend is continuing this year.

During questions a couple of weeks ago, Ministers tried to draw comfort from the fact that that rate of closure may be slowing. I am sorry to disabuse them, but there are a number of reasons for that. Many sub-post offices have already closed and will probably never reopen. Moreover, the honest truth is that some people are hanging on simply because they cannot find anyone to buy their business. Many in urban areas are waiting

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until next year, when new forms of financial support will be introduced as part of the Government's regeneration proposals. As has been eloquently pointed out, a great mass of people are waiting to see what will happen with the universal banking project.

In a remarkably frank tour d'horizon before the Select Committee, the chief executive of Consignia accepted that about half the network is, in effect, uneconomic. As many as 5 million people are unbanked, and probably unwired as well. They are the main targets of any proposals. Yesterday's interesting written answer states that good progress is being made, that the Government are negotiating on these matters—one would hope that they are—and that they are developing

the aim of which is

The answer also suggests that departmental staff will discuss options with people. Can the Minister assure me that when advice is given, it will be wholly neutral? Departments should not try to pressure people into opening traditional bank accounts or PAT 14, stripped-down versions, instead of Post Office card accounts. According to some estimates, as many as 7 million people could request POCAs. There is a cost involved in providing such accounts, although it is difficult to estimate, as the figures have been difficult to get hold of.

The written answer to which I referred also states that there will be no cap on numbers. I welcome such talk, as far as it goes, but is the Minister really suggesting that the Treasury will write a blank cheque for these accounts and pick up the bill regardless of how many people apply for a POCA? Moreover, according to one estimate, PAT 14s will cost £60 or £70 a year per account. Will the banks or the Treasury bear those costs? According to the Minister's estimate, how many people will want to open such accounts?

Although it is nice to hear that the Minister is still negotiating and developing a strategy, does he accept that the April 2003 deadline is rapidly becoming unrealistic? The key issues of training for sub-postmasters and, indeed, for customers have already been mentioned. For the elderly in particular, keying-in pin numbers and swiping cards will be difficult and unfamiliar tasks. We ought to hear a little more on the migration strategy and the way in which costs will be allocated.

To judge by information that we have received, the consensus is that the "Your Guide" pilot has proved to be quite a success. It has had 150,000 users so far, which is impressive for a six-month pilot in one area that has run for only two thirds of its term. That is encouraging. As co-chairman of the all-party group on older people, I can see enormous potential for helping older people in the community, especially those who are less able to get around. There have been massive benefits through Age Concern, and the surface has barely been scratched. It is a good idea and we are pleased that it is going well. No doubt the Minister will tell us more.

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The original performance and innovation unit proposal envisaged a 12-month pilot, and there was quite a scramble to get it up and running for the six-month period. Ministers should not just wait for the pilot to come and go, after which people's expertise will dissipate, and then start thinking about what will happen next. A few days ago I tabled a question on that for written answer, to which I have yet to receive a reply. I was hoping for the purposes of the debate that I might get it yesterday afternoon, but I was not as lucky as the hon. Member for Roxburgh and Berwickshire, who received his answer on the universal bank. We deserve to be told about the attitude of Ministers to the pilot. Following all the work that has gone into it from the private sector, are they producing their own detailed proposals on how it will work in practice, or has there been slippage in the decision-making process? What is their timetable?

I recently searched the Government's e-envoy website to see their strategy paper for the coming year. As far as I could see, it made no mention of Consignia or post offices. That rather suggests that the organisation is not necessarily seen as crucial to the delivery of services. I hope that that is not the case. The Minister will not mind if I remind hon. Members that he has not always inspired the IT industry with confidence. In July, a publication called "The Register" questioned whether he had done enough about the internet, and concluded that he had done "nothing at all". By September, its view had changed somewhat, and it said that

I am sure that he will wish to refute that.

The real problem is the Government's attitude. When difficulties arise—there are legions in this instance—the Ministers involved tend to say, "It's not me, guv." They have made desperate attempts to distance themselves from the failures of the Post Office, saying, "It's nothing to do with us, it's the company—it has commercial freedom." If they are prepared to stand by while existing services are dismantled, what is their attitude to the new, exciting e-services? The simple message is that they cannot have it both ways. They cannot say on the one hand that it is nothing to do with them, while on the other the Secretary of State effectively sacks the chairman of Consignia, Dr. Neville Bain, during Question Time in the House of Commons. The Government are the 100 per cent. shareholder in Consignia. I have tabled another question, which remains unanswered, on whether they will waive their dividend this year in view of the company's dreadful commercial results.

Ministers are interfering at every level of Consignia's management and organisation. The other day, when 30,000 redundancies were announced, the Minister was reported to have made clear the Government's "concern and anger." Behind the scenes, they are constantly chivvying Consignia in one direction or another. They must therefore take responsibility. If they are not prepared to give Consignia real commercial freedom, so that management can get on with managing and making

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the decisions that are necessary to bring our postal services firmly into a new century, they must carry the can. I look forward to hearing what the Minister has to say.

10.39 am

The Minister for E-Commerce and Competitiveness (Mr. Douglas Alexander) : Like other Members, I congratulate the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) on his success in securing this morning's debate on such an important topic. He was, along with the Member for Tweeddale, Ettrick and Lauderdale (Mr. Moore), the first Member to seek a meeting with me on these issues when I assumed office in June. I know that it is an issue of special concern to him, not only in his own village or constituency but throughout the country. I am also grateful to the hon. Gentleman for his kind remarks about the difficulties that I am encountering at home at the moment. The difficulties of which he speaks arise from the very early arrival of a son last week. I am glad to say that he is doing well, as is his mother. Although, on reflection, I think that my wife took rather literally the interpretation of the general election by my right hon. Friend the Prime Minister as an instruction to deliver.

I now move on to the substantive issue. I shall direct my remarks first to the issue of the government general practitioner or the "Your Guide" service, as it is now known in the pilot. I will endeavour, in the time available to me, to answer as many of the substantive questions, the very genuine questions, that have been raised by the hon. Gentlemen and colleagues.

First, I shall make clear the context of today's debate. The Post Office is still piloting the concept of post offices as government general practitioners in Leicester and Rutland. The aim is to test the concept of post offices acting as one-stop, first-stop shops providing information, advice and access to transactions within a range of public voluntary sector organisations. The Government have put £25 million into the pilot, which is being branded as "Your Guide" and which began to be rolled out from mid-July of this year.

The pilot was fully up and running in all post offices in the Leicester-Rutland area by the end of August, and was formally launched at the beginning of September. During the pilot, post offices concentrated on a number of limited, key services to core customers, which included advice, information, assumptions, actions in broad areas of retirement, seeking work and local information. The service will include advice and information on pensions, other benefits, job vacancies, local transport, interface with local government, and much more. I hope that that gives some guide to the hon. Member for Tweeddale, Ettrick and Lauderdale in terms of the Government Departments that have been involved in the project, and in terms of the evaluation.

The services are being delivered through five channels: first, electronically by touch-screen kiosks; secondly, by means of a freephone hotline; thirdly, by over-the-counter service from sub-postmasters who are supported by the network's relatively new Horizon intranet system. In a meeting I had with the National Federation of Sub-Postmasters yesterday, its representatives were keen to emphasise the centrality of the role of sub-postmasters in the "Your Guide" pilot.

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They were keen to suggest that this was a means by which we could place leverage on the trust that is felt in many local communities towards the advice and guidance that can be offered by sub-postmasters. The fourth channel is through leaflets, and a much wider a range of leaflets than currently appear in most post offices. The last channel is an expert advice centre that brings representatives from key organisations, such as the Benefits Agency and Age Concern, closer to those in need of face-to-face interviews.

The Leicester-Rutland pilot fulfils the recommendation of the performance and innovation unit report, which has been much discussed this morning. For a range of reasons we believe that post offices would be well placed to offer the services involved. I should add that post offices offer a vital service, not only to vulnerable citizens but to the viability of many rural communities. Often post offices provide the last shop in a village, and may be the only place within reach for less mobile citizens for banking services. The current pilot in Leicester—Rutland provides the opportunity to examine these hypotheses.

The outcome of the pilot will be fully evaluated by the Post Office—I will give some more detail about that in a moment—by those organisations participating in the pilot, and by the Government participating as a whole. The Department of Trade and Industry is co-ordinating an overall Government evaluation of the findings of the pilot. The responsibility of the DTI, the evaluation will examine the extent to which the "Your Guide" concept can deliver services that citizens really want and need. It will also examine the extent to which "Your Guide" can provide value for money for Government Departments and other organisations using it as a channel to offer their services to the public. This includes examining the extent to which "Your Guide" can help those organisations achieve efficiency savings. It will also cover the extent to which "Your Guide" services can improve the ability of Government Departments to meet their service objectives.

The pilot ends on 1 March 2002. The full evaluation report is expected in June next year. I emphasise that this reflects a tight timetable. I will turn to evaluation in a moment. First, there is the question whether the pilot as it stands is going well. The post office network and local and central government departments participating in the pilot have already done a tremendous amount of work to set up the pilot, and have it running within such a short timetable. Indeed, yesterday that point was emphasised to me by the National Federation of Sub-Postmasters, which was keen to stress its confidence in and support for Consignia's work.

Mr. Moore : I take the Minister back to his point about evaluation being completed in June next year. That is six months later than was envisaged in the original plan, which means that the project is six months behind schedule.

Mr. Alexander : The hon. Gentleman will be glad to hear that I heard the section of his speech that dealt with that issue, and I shall address it in a moment.

Full and robust evaluation of the pilot outcomes must be conducted to inform future planning decisions. Among the tasks that the core evaluation must perform

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is that of interpreting the data that emerge from the pilot. For example, it is easy to measure how many times an individual page of content has been called up on an electronic kiosk in any post office, but a degree of analysis is necessary to establish and measure usage and to understand the extent to which the services provided by the pilot are proving to be useful for customers. The evaluation process includes gathering data both manually and electronically, the conduct of surveys within and beyond the pilot area and the gathering of qualitative data via focus groups, discussion groups and feedback sessions involving the public, sub-postmasters and stakeholder organisations, including both central and local government.

As the Minister responsible, my answer to the question, "How is the pilot going?" is "Please be patient, we must wait and see." I must emphasise that evaluation is taking place and is continuing during the pilot. I have been keen to emphasise both to my Department and to Consignia the importance of expediting the evaluation process for the reasons mentioned by the hon. Member for Tweeddale, Ettrick and Lauderdale. I hope that by early next year we shall be able to state how the pilot has gone.

Turning to the decision-making process on the national roll-out, the hon. Gentleman asked about the timetable and the procedure. The decision whether to proceed with roll-out of a national government general practitioner service and the form in which it should be delivered will involve not only the DTI but my colleagues in several Departments and, as far as possible, leaders of local government. I am the Minister responsible for the GGP project and I am actively championing it within Whitehall, but given that a range of Departments and organisations are involved, and that they would pay for the national service, the decision must be made collectively.

Turning to the specific question about the timetable for the roll-out of the national GGP service, the PIU recommended that pilots for the GGP and internet access point propositions should be up and running early this year with a view to evaluation and full roll-out in mid-2002. Given that the Post Office had to work on the supporting business case during autumn last year and that the details of funding arrangements and the scope of the pilot, including where it should take place, had to be decided, it was agreed at the end of November last year that it was impractical to put pilots in place until early this year. Consignia has therefore done a superb job in designing, building and rolling out a pilot that commenced last June. That has been a major task involving detailed on-going discussion on the original PIU recommendations with various Departments, local government and the voluntary sector.

We have decided to limit the length of the pilot to six months to address concerns about the timetable. The current pilot finishes at the beginning of March. Full evaluation in line with best practice, project management and public procurement cannot be rushed because there are rules to which we must adhere for the national roll-out of the pilot to be judged a success. Interpreting the data from the pilot and understanding its implications for a wider national service is a complex task. In addition to evaluating the pilot, which will entail looking back and learning lessons from it, there will need to be a forward-looking application of the lessons

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learned. We must involve the full range of potential stakeholders in order to design a service that will meet both the needs of citizens and the service aims of participating organisations.

Paying organisations must examine how a national GGP service could fit in with their wider service delivery plans, how far it could help them in achieving greater efficiencies, how much the service which they find useful would cost them and whether it would provide value for money compared with alternative direct channels to the public. As the hon. Member for Roxburgh and Berwickshire was kind enough to acknowledge, by definition these are complex issues and not to be taken lightly. At this stage, I am not ruling out the option of commencing roll-out of a national service next summer—as proposed by the PIU report. Realistically, it is not likely that it could be a full roll-out of a comprehensive national service. If the pilot proves successful, and paying Departments believe that a national service can provide value for money for them, it is more likely that some services will begin to be rolled out next summer in parallel with on-going longer-term work on a fuller comprehensive service.

A fully comprehensive national service will, of course, not be cheap. The touch-screen facility, mentioned by the hon. Member for Roxburgh and Berwickshire, is only one feature of the system operating in Leicestershire and Rutland. That is a relatively costly way forward but, on the basis of anecdotal evidence, it appears popular with certain members of the public. Before committing the funding that would be required, it is therefore essential to ensure that the service is designed in a way that meets the needs of users in the paying Departments.

The Government are approaching the project with urgency. We have already commissioned a pilot that will run for just over six months in all post offices in the area, and a full evaluation will be carried out as quickly as possible while complying with best practice regulations. We will ensure that the various streams of work required—evaluation, funding, service design and such like—are conducted in parallel. If proved a success as a pilot and if the concept is shown to provide value for money, the project will be taken forward with all expedition.

The specific point about the participation of devolved Administrations is of concern not only to other hon. Members, but to me. Administrations received consequential funding for the piloting of GGP in post offices at the same time that money was made available for the pilot in Leicestershire and Rutland. The money was not ring-fenced, so it was for individual Administrations to decide whether to run pilots in their regions. I understand that the Executive in Northern Ireland are actively considering running a pilot, but that neither those in Wales and Scotland have decided to do so at present.

I, too, am a long-standing advocate of devolution, and on some subjects one must accept both the power of and the responsibility for devolved Administrations. Notwithstanding the option of Christmas-lunch conversations, the hon. Gentleman will understand the political reality that although we can suggest the great merit of schemes north of the border, a decision to

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commit funds ultimately rests in Edinburgh and Cardiff respectively. If the decision is taken to go ahead with national roll-out in the United Kingdom, reserve services could be delivered through post offices on UK-wide. However, it is for devolved Administrations to decide whether devolved services should be included in that programme. I fully acknowledge the point—not least in a Scottish context—about the importance of services that are provided by an Executive being available in a way that is genuinely useful to constituents.

Although a case may be made for tailoring the service in devolved Administrations on the basis of local need—I have acknowledged that in relation to Scotland—on the whole, it would detract from the overall service. It would be a great pity if it were less comprehensive in one part of the United Kingdom than elsewhere. I am happy to say that the three devolved Administration are keeping in close touch with my Department and Consignia about national roll-out following the pilot being taken forward. Like Whitehall Departments, they will carefully review the outcome of the pilot in Leicestershire and Rutland, apply the lessons learned and actively identify services that they might want to offer through post offices.

As the hon. Gentleman will be aware, a number of other initiatives are being introduced by the devolved Administration in Scotland. They are relevant to his Scottish constituency and deal with social inclusion through the internet. I do not wish to suggest a lack of geographical knowledge of Scotland, but there is a digital highland project at the other end of the country from his constituency, and an initiative—introduced by the Scottish Executive—that addresses public internet access points. There is continuing potential for such initiatives to have a role in post offices in future. However, on the basis of conversations to date between Consignia and the Scottish Executive, Consignia has reached a judgment that those two initiatives had no particular role to play in post offices. Although I welcome the hon. Gentleman's work at local level, scope exists for further discussions, not least involving the Scottish Executive and Consignia, about the possibility of schemes that are not specifically tailored for post offices being made relevant to them as regards social inclusion and digital divide work elsewhere in Scotland.

I mentioned earlier some of the areas covered. The Department for Work and Pensions, the Inland Revenue, the Department for Education and Skills and the Department for Transport, Local Government and the Regions have all been involved in the development of the pilot. We expect each of these Departments to be heavily involved in the evaluation process. That addresses the substantive point on the government general practitioner. Unless Members wish to raise any further points on that issue I shall turn to the universal bank.

In prefacing his remarks on the universal bank, the hon. Member for Roxburgh and Berwickshire paid due acknowledgement to the difficulties encountered by the Conservative Government in the original benefit card proposals. It pleases me to say that the revised model Horizon card scheme has been rolled out successfully throughout the post office network. In looking for grounds for optimism about the capacity of both the Government and the Post Office to move forward that

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initiative, the £480 million committed to the computerisation and modernisation of sub-post offices over the past year or so should give us great courage and optimism for the future.

The hon. Gentlemen emphasised the terms of yesterday's written answer on ACT migration and marketing strategy. Interestingly and perhaps unsurprisingly, he and the hon. Member for Eastbourne (Mr. Waterson) held conflicting views on the importance that should be attached to it. I disagree with the suggestion of the hon. Member for Roxburgh and Berwickshire that a marketing strategy is inappropriate given the scale of public education that is necessary on ACT migration. Ironically, I am more inclined to agree with the hon. Member for Eastbourne, who acknowledged that the information must be made available to the elderly. Therefore a marketing strategy will be a key part of that work.

Mr. Waterson : Will the Minister deal with my request for an undertaking that there will be total neutrality in the advice given and that people will not be pushed in one direction or another regardless of their personal circumstances?

Mr. Alexander : I reiterate the points that I made in yesterday's written answer: we will give advice that allows people to make the best choice dependant on their circumstances. There may be some disagreement on the best way forward on this serious point. We have always recognised, not least in terms of social inclusion, the great merit in moving many of those currently not banking into the banking system and ensuring their full participation. Perhaps the hon. Member for Roxburgh and Berwickshire did not pay due acknowledgement to the significance of the statement in yesterday's written answer that there would be neither a cap nor eligibility criteria in terms of POCA numbers. Those points were

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emphasised in our previous debate in this Chamber by many of the usual suspects, as the hon. Member for Tweeddale, Ettrick and Lauderdale so charmingly put it.

The emphasis of the ACT migration and marketing strategy will ensure, as I have just said, that each customer has the best account for his or her circumstances. Conventional basic bank accounts offer more services than the Post Office card account and do not have its limitations, and so are likely to be the best option for a significant number of people.

As hon. Members are aware, in recent months we have been working on the detail of our migration and marketing strategy. In that context consideration has been given to eligibility criteria and caps. I am glad that clarity was offered in the written answer given to the House yesterday. POCA numbers must be managed to levels that deliver value for money while ensuring that the new system meets the needs of benefit recipients who want to keep their benefits separate from their normal bank account—for example, women with joint accounts who want to keep child benefit separate.

Mr. Kirkwood : All that is true, but how much money is going to Post Office card accounts?

Mr. Alexander : I fear that I may disappoint the hon. Gentleman. I have to say that the contract negotiations are still continuing. I assure the House that often on a more-than-daily basis I am updated on the discussions that are taking place. As stated earlier, there is the issue of commercial confidentiality, but much detailed work is being done at present, not least that involving the DWP, which is why I was grateful for its involvement in the project management work. We shall have to wait a little longer for information on the details because, by definition, what will ultimately go to the sub-postmaster will in part be a judgment informed by POCA management's decision and also the—

Mr. Frank Cook (in the Chair): Order. We come now to the next topic for our consideration.

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