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Mr. O'Neill: A great argument for the new system is that it will reduce the number of fraudulent claims and the loss and theft of benefit books, but how low are the figures, assuming that take-up is a wee bit higher than currently projected? We have heard the costs of the existing system, but what are the costs and, by definition, the savings of the new one? I do not believe that that has ever been put on the record before.

Mr. Timms: We certainly expect significant reductions, and I will ask the Under-Secretary of State, my hon. Friend the Member for Gravesham, to respond to that point in his winding-up speech.

The changes, of course, will result in other benefits. Citizens Advice recently published a booklet on financial inclusion, in which it said:

Citizens Advice is right to celebrate direct payment as a method of financial inclusion—a goal that we all share. Post offices should be attractive places that offer services that people want to use and to which they want to return, not places that people are forced to use because they have no alternative. We share that vision with the Post Office, and increasingly it is being realised in practice.

I conclude by taking the opportunity to praise the men and women who work in the Royal Mail. They have been much maligned by the media in recent
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months. The truth is that the vast majority of Royal Mail staff do a superb job with real dedication. They are honest and hardworking and they take pride in the work they do. They are a vital part of the fabric of our communities in rural and urban areas.

The reforms of the services that we have introduced—greater commercial freedom for Royal Mail, independent regulation and a stronger consumer body—are providing the right framework for a modern, competitive postal market. It will maintain the universal postal service and give consumers more choice. It gives Royal Mail the opportunity to compete with confidence in an increasingly dynamic market. There have been problems. They can be overcome and they will be. We have given a clear message to Royal Mail and its trade unions that they must work together to restore public confidence urgently.

As regards the post office network, we will continue to work with the company as it faces up to the challenges of changing demands from customers and society. I am certain that the organisation can look forward to a future much brighter than the experience of the past few months, and its customers can do so as well. I call upon the House to support the Government amendment.

4.51 pm

Malcolm Bruce (Gordon) (LD): I commend the Minister for the energy and enthusiasm with which he responded to the debate. He must almost believe everything he said, and believe that he could persuade the House. If the picture were as rosy as he describes, people would be clamouring to open post offices, rather than snatching the money to close them as fast as they can. That is the reality. Nobody wants to open a post office in the present circumstances. We have a long way to go before we can achieve even an equilibrium and a confidence in the future of the post office network that will encourage people to retain or move into the business. That is what concerns many of us.

I shall deal first with issues relating to the Royal Mail service. It is true that the letters service has come back into profit in the past year, which is welcome. The loss in the previous year was partly due to the fact that in spite of the Royal Mail's application for a postal increase, it was denied for more than a year and the company lost £1 billion of revenue. Although Royal Mail should properly justify increases and ensure that it maintains efficiency, when costs have genuinely risen and the revenue is not allowed to rise, that clearly drives the organisation into loss. As a consequence of that, many of the savings come from reductions in service, rather than from the investment about which the Minister boasts.

I accept that it is difficult to defend the long-term future of the second delivery, given the disparity between costs and customers. Most of us could be persuaded to accept that if we were confident that the standard of the first or only delivery was rising, rather than falling. Royal Mail has difficulty in creating confidence because it has only bad news to tell.

Michael Fabricant: The hon. Gentleman will recall that the Minister said that many other countries have only one delivery. Is it not the case that that one delivery is usually before 10 am and is reliable and predictable,
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whereas the Government are speaking of deliveries right up to 1 pm or 2 pm, and those deliveries are decidedly unreliable?

Malcolm Bruce: That is a point to bear in mind. Those of us who visit post offices, as we all do at various times of the year, have some sympathy with people who have to come in at 4.30 am, 5 am or earlier to sort and deliver the mail. I can see the difficulties in making them come in at 2 am. That is where investment is required to increase mechanised sorting, so that the whole process can be completed early enough to achieve an acceptable delivery time.

This week, for example, I received representations from a company that has made representations to me before that its delivery has slipped back two or three hours. When a company complains, the Post Office endeavours to accommodate it by shifting the delivery around. That means that someone else's delivery is put back and, when they complain, the original schedule is reinstated. Until the whole delivery system is brought forward, the problem will not be solved; it will merely be moved about.

A new development that has not been mentioned slightly puzzled me, and it is rather important. Last week, my local postie arrived and asked whether I liked his new transport. He said, "I've become white van man." He had parked a hire van outside my front door. I asked what had happened—I assumed that he had accidentally put his vehicle off the road. He said, "No, it is new policy in the Post Office not to own the fleet, but to contract it out and reduce its size."

That is a serious point. If hired vans of any hue can go around masquerading as Post Office vans, it will have an effect not only on image, but on confidence. When people see the little red van coming up their drive, they know and have confidence that it is their local postie. Allowing some anonymous white van to deliver the mail clearly opens up the possibility for fraud, misrepresentation and lack of confidence. If there is a serious cost saving to be made, as I am assured there is at a local level, we should know the ramifications. This is not just a matter of diluting an image; it has serious further implications. I would be interested to know whether there is an answer and explanation at a policy level.

Another service that I think many of us use personally, but which is also used commercially, is the household delivery service, whereby postal deliverers will deliver unaddressed mail along with addressed mail. That service is used by supermarkets, commercial operators and, believe it or not, by political parties to get their message through people's doors. It is increasingly difficult, however, to negotiate with the Post Office in order to transact such business, which must be bad for both the commercial and the public service operators that want to do so.

My experience is that it is impossible to get a firm cost, time or schedule. Indeed, the clear indications are that the Post Office does not want such business, which is regarded as a nuisance. Private companies are moving into the field, charging more and not necessarily giving as good a service. Again, no rational explanation has
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been given. It seemed to us that the service was a good one, and that it was good for the Post Office to ride on the back of the fact that it was delivering to households anyway. It is not clear whether the Post Office has decided that such business is not profitable, that it does not want it and that it is prepared to leave it to private operators—if that is so, it would be better if it were open about it—or whether, as has been suggested to me, some other constraint is preventing it from expanding what should be a profitable add-on business that supports the rural network.

Mr. Russell Brown (Dumfries) (Lab): Could it be that there is so much business of that sort and the demand is so great that the Post Office has to turn some of it away? That might be why it is not quick to respond. Like many other businesses, if it is inundated with work it will be slow to respond, thereby putting off a potential customer.

Malcolm Bruce: That may be true, but my experience—I have also talked to one or two colleagues—is that we do not get a constructive relationship in which the Post Office says, "If you bid for this, you can have it" or "We can't do it." Instead, we get a lack of response, firm dates and clear guidance, which is poor management, it seems to me.

I do not know what such business represents for the Post Office, but it is going the right way about losing it. It is clear that other organisations think that it is worth stepping into that business and taking it away. As a customer, my local party—this point is relevant to everybody who uses such services—is now contracting privately, not out of choice, but because we cannot contract with the Post Office. That is unfortunate. I do not know whether there is an answer, but it would be appropriate for Royal Mail to explain why it regards such business as marginal or of limited interest. If such business is development business, it would be interesting to know why the Post Office is not developing it more efficiently and in a more organised way.

A poor delivery service, the phasing out of the second delivery and a growth in competition are creating a worry about Royal Mail's future. When one speaks to it, it says that the most serious competition that it faces comes from the Dutch and the Germans. Most of its business is business-to-business business of the sort that is not based on delivering granny's post card. Businesses simply want guaranteed delivery on a large scale. They do not mind who does it, but they want reliability at a competitive price.

If Royal Mail does not respond soon, it will find when it has put its house in order that a lot of the business has already gone elsewhere. That is a matter of concern. Indeed, Royal Mail's capacity to maintain a universal service would start to be called into question if it were to lose too much of its business to competitors. I do not share the Minister's confidence that the management can deal with that competitive threat.

For most members of the public, concern about the mail pales into insignificance compared with the future of their local post office and post office services. Perfectly rightly, the Minister said that the culture has changed, and that people prefer to have payments made into their banks and no longer want cash from the local
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post office in the same numbers. None of us denies that point, and we all recognise that we must respond to it. However, many people, including those with bank accounts, want to use their local post office, whether to obtain cash, make payments or use other services. They want to know that such services will exist in the future, but that is not currently the case.

I am slightly surprised that the Conservatives chose to debate this topic, because 3,344 post offices closed between 1981 and 1997 under the Conservative Government—2,543 post offices have closed since 1997 under the Labour Government. My concern is that few more than 14,000 post offices, half of which will still lose money, will be left at the end of the current process. Postwatch says that 250 post offices that closed in recent times should not have done so given their locations and the need for them, but such decisions cannot be revisited in order to reopen post offices.

One of the most difficult tasks for any MP is to persuade the Post Office to open a new post office, even after a major population change occurs. During my 21 years in Parliament, I have succeeded precisely twice, and the second opening caused the Post Office promptly to close another post office in the same town, so my campaigning had a marginal effect.

The Government have not made it clear what will happen in the future. If the branch network were reduced to 14,000 offices, half of which would lose money, what aspect of the business plan leads the Minister to believe that enough business, whether public or private, exists to secure a viable, long-term future? His assurance that the network will be stable at the end of the organised programme is belied by the fact that post office closures will continue once the programme is completed—they will continue haphazardly as people retire or decide to give up because they are not making money.

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