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Lord Acton: My Lords, is my noble friend aware of a report in The Times today stating that the McDonald's in Whitehall was closed after a police warning and that the handful of staff present had to flee to safety through the rear of the building as chairs flew through the air? My noble friend cannot possibly be aware that I had breakfast in McDonald's in Whitehall yesterday morning--long before the violence took place--and that, as ever, I found all the staff to be extremely helpful, attentive and courteous. Will the investigation into the attack on McDonald's be pursued with the greatest possible vigour?

Lord Bach: My Lords, I am grateful for my noble friend's contribution. I can assure him that the

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investigation into what happened at McDonald's in Whitehall will be pursued with the greatest vigour, as will all other parts of the investigation.

Lord Northbourne: My Lords, perhaps I may ask the Minister whether it is still the Government's policy to be tough on crime and to be tough on the causes of crime? If that is the case, while addressing the judicial matters that have been discussed in your Lordships' House this afternoon, will the Government also look behind these events--along with violent incidents of football hooliganism such as that which took place in Istanbul--and question the reason why so many young people behave so badly, whether they are young men or women? Furthermore, will the Government look closely at the reasons why so many incidents of violence are taking place in our society today?

Lord Bach: My Lords, in response to the noble Lord I can assure him that of course the Government continue to believe in being tough on crime and tough on the causes of crime. However, I am not sure that on this occasion the noble Lord has chosen the best example. Certain youngsters, both male and female, get into trouble and then need help rather than punishment. However, I do not believe that that applied to those who were involved at the front of yesterday's demonstration.

Baroness Park of Monmouth: My Lords, can the noble Lord clarify one point for me? I have read that, before the march began, the police were not able to secure from one particular group a degree of information about its intentions and plans. Normally the police would expect to receive such information. Is that the case, and if it is, can anything be done about it?

Lord Bach: My Lords, the noble Baroness is quite right. As I said when I repeated the Statement of the Home Secretary, none--I repeat, none--of the organisers was willing to discuss their preparations in advance with the police. That of course goes against all the normal procedures followed by demonstrators of all kinds who have held their protests peacefully over many years in our society. Usually discussions between the organisers and the police take place, whatever their standpoint may be. However, these people were not prepared to hold advance discussions with the police. That might suggest to some that they were looking for trouble.

Lord Hoyle: My Lords, as one who in the past has participated in many non-violent demonstrations, whether in relation to jobs, the environment or peace, like my noble friend, I regret that those who wanted to occupy Trafalgar Square to make their protest about the situation at Rover were not able to do so. Perhaps I may also say that I join with all noble Lords in condemning those who committed acts of violence yesterday and caused injuries to the police. I am sure that the House will agree with me when I say that I hope that those police officers who were injured--in

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particular one officer who was hit in the face with a brick--will soon be fit and back on duty protecting the public once more.

Lord Bach: My Lords, I am grateful to my noble friend and I know that he has spoken for the whole House.

Baroness Carnegy of Lour: My Lords, in view of the fact that no one was prepared to discuss such arrangements with the police, could not the Government suggest to the in-coming mayor of London, when we know who he or she will be, that if such a situation arises again it would be desirable to close Whitehall altogether because the Cenotaph is there? I do not believe that anyone wants to see it boxed in whenever there is a demonstration. Further, bearing in mind the fact that 1st May seems to have been an inflammatory date in this matter, would the Government consider changing that holiday and perhaps granting an extra one at Whitsun?

Lord Bach: My Lords, I must remind the noble Baroness that this issue has nothing to do with the mayor. It is a matter for the commissioner and the Home Secretary, but operationally for the commissioner alone. With respect, I do not agree with the noble Baroness about 1st May. It is a day upon which many peaceful people wish to celebrate what they believe in. The behaviour of certain people on that date is an insult to those who want to celebrate May Day in a way that has been practised for many years.

Baroness Harris of Richmond: My Lords, the noble Lord has already undertaken to provide information regarding the cost of yesterday's demonstrations, but can he confirm that all police leave in London was cancelled to enable the force to police the crowds? Will he further undertake to publish for the people of London the cost to them of just the policing element because the people of London will lose out in that respect as regards the funding for their police service? Yesterday was quite disgraceful and the people of London deserve an answer to that question. They will lose policing because of yesterday's demonstrations and they need to know that.

Lord Bach: My Lords, I am grateful to the noble Baroness who has great experience in such matters. Yes, I can confirm that all police leave was cancelled and that in due course the public can expect a response in terms of the cost involved.

Postal Services Bill

Second Reading debate resumed.

4.41 p.m.

Lord Dearing: My Lords, in rising to speak I must declare an interest as a Post Office pensioner and as someone who has many friendships and much regard for people in the Post Office and in sub-post offices. We are discussing today an issue that concerns all of

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us; namely, the excellence and cost-effectiveness of our postal services, as well as the long-term well-being of what has over the past two centuries been a major national asset in a world where no business, whether public or private, however much regard it has been held in by the public and however illustrious the service it has given, can look to the future with confidence.

My concern is that this Bill should provide a framework that will give the Post Office an opportunity to emerge in a very uncertain world as one of the main players in Europe. The Minister was my predecessor at the University for Industry (the UFI). We dedicated ourselves to the service of people and in equipping them to be effective throughout life in terms of work in a rapidly changing world. The latter affects the Post Office very much. The Minister referred to four factors in that change. The one that comes immediately to my mind is the awesome advance of information technology and, equally awesome but even more surprising, the ability of people to use it.

In this world of change, I am very much aware that there is a movement in the Commission to liberalise postal services across Europe. I am concerned that Britain should emerge as one of the successful nations in providing postal services to Europe.

I have had a particular worry about this matter which goes back 20 years. I have in mind the uncertainty that has, to my knowledge, persisted during that period about the framework within which the Post Office will be able to operate. This was highlighted by the Trade and Industry Select Committee in the other place when it criticised that uncertainty and referred to the damage that it was causing to the prospects of the Post Office. Therefore, even though it has taken them a little time, I am grateful to the Government for seeking to resolve that uncertainty.

However, in expressing that appreciation, I have nevertheless a few points to make. Whether the Post Office is able to be successful in this new environment depends very much, as I said, on the framework within which it will operate. Fundamental to that is the strength of its balance sheet when it is set up as a company. For example, will it have the resources to enable it to be a major player, or will the Treasury play it careful and thereby ensure that it is not?

I noted with interest the provisions in Clauses 68 and 69 for government loans and guarantees. I should be much happier if they were not there and if the Post Office's balance sheet made such provisions unnecessary. I say that because all my experience in working on public corporations is that the more arm's length the relationship with a government, the more the latter are concerned purely with creating a framework and in discharging those functions that are proper to a shareholder, the better for government, the better for the public and the better for the organisation--in this case the Post Office. Therefore, could the Minister tell us, if not this afternoon then perhaps on a future occasion, what the Government have in mind for this balance sheet?

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I note that Clause 67, for reasons that I totally understand, provides that there shall be no disposal of shares or share swops without the approval of both Houses of Parliament. However, as the Minister knows well, decisions often have to be made swiftly in the commercial world. Those who are in the front-line must be able to act with confidence and conviction. When these matters are brought before Parliament, I urge the Government to do so swiftly and not to spend ages working out a position with the Treasury. In those circumstances, Parliament will respond decisively with either a yes or no to the proposals. So much for what I see as the big issue for the Government. I say to them, "The more you stand aside and discharge your responsibility as the setter of a framework and as shareholder, the better for everyone".

I turn now to Clause 102, which deals with subsidies to what are called "public post offices". I did not note a definition in Clause 117 of "public post offices", which is a new term to me. I noticed a definition of "post offices", but I imagine that what I used to call "post office counters" is what is meant by that term. I realise why the Government are introducing this provision, but I very much regret the need for it. I assume that it comes from the decision that social security benefits will in future be paid through automatic credit transfers. I believe that that came from the calculation by the DSS that the cost to it of such transactions could be reduced, so I am told, to one penny as compared to 48 pence, thus making a saving of £350 million. I have no doubt about the accuracy of any such calculations. However, I learnt long ago that it is not the arithmetic that matters; it is the thinking that underlines the arithmetic.

What worries me is whether those responsible for taking that decision have done a total cost-benefit analysis regarding the cost to society as opposed to the benefit to the DSS in making this change. Did the Government calculate those sums? If so, can the Minister tell the House the outcome? Did the Government ask the banks whether they wanted this business? Further, did the banks say that they would do it for nothing, or is it possible that they will charge? Is it not the case that bank charges are no light matter? In making such savings, could it be that the DSS is transferring the costs to people who can ill afford them--for example, pensioners or families with children who draw family benefits--or is it transferring them to the Post Office? There will be costs, and they will be big costs.

I am pleased to know that the PIU has been invited to look at the future and at how the future might be secured for the network of post offices, but I wonder whether it has also been asked to do the total sum, because it is the validity of that total sum which should first concern the House before we move on to the issue of subsidy. There is no security in subsidy. I would say to the Minister, for whom I have a warm regard, that I understand why he should have referred in his speech to an unhealthy reliance on the payment of benefits, but perhaps the 8,000 sub-post offices that have that unhealthy reliance might see it rather differently.

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I referred earlier to the regard and respect in which I hold many people in the Post Office. I had particularly in mind the courage shown by many postal workers and especially lonely sub-postmasters and sub-postmistresses who have had to resist with great courage armed attacks which, in my time as chairman, sometimes occurred at a rate of 10 or 20 per week: little people, old people, mature matrons, pillars of the Church, wrestling on the floor of the post office to safeguard public moneys. I remember the immense courage of people in Northern Ireland. I remember going into a sub-post office at the entrance to a housing estate in Belfast. When I entered I was faced with a one-way mirror as protection for the staff in that sub-post office, which had been raided 10 times. Behind the counter was a ladder so that they could shin up to the loft if they were attacked again. The courage of these people was awesome. In a recent letter to the Minister I quoted Mark Anthony:

    "The good [that men do] is oft interred with their bones;..."

Let us just remember, in taking these decisions, the good service that these good people have given.

To sum up, I ask the Minister about the balance sheet. I ask him to give great public service by using his energies and knowledge as a businessman to ensure that the Government, in the administration of this Act, are "hands-off". I ask the Government to reserve their role to that of a shareholder. I also ask the Minister to tell the House about the total costs and benefits of the change regarding social security benefits. I would also like to ask the Minister, as he was asked by the noble Baroness, Lady Miller, how the subsidy scheme will work and if we can be sure that it will work in a way that will help to re-establish the competitiveness and the ability to get business of these sub-post offices and Crown Offices. We would all wish it to operate in a way that is uniform throughout the land and is not subject to local decisions which will impair it. It is a great national service--a mass provision of post offices throughout the land in the service of the common people.

4.53 p.m.

Lord Clarke of Hampstead: My Lords, in my view this Bill signals the beginning of the end for our world renowned postal service. Let me declare at once my interest. It began 54 years ago when, at the age of 14, I joined the GPO, as it was then, as a telegraph boy. That interest continued throughout the following 51 years until I retired as a trustee of the Post Office pension funds. The period in between included employment as a postman and a sorter and for 36 years I was a representative of the Union of Post Office Workers. I spent the last 14 years as a national officer of the union and served for 10 of those years as its deputy general secretary. I am in receipt of an occupational pension from my union.

I was reminded earlier by the noble Baroness, Lady Miller of Hendon, of the silver salver that she presented to the staff of the Post Office. That salver was placed in a cabinet in my office at the union's

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headquarters, and it was not until I entered this House that I realised the connection. I just hope that my successor is looking after the salver as well as I did.

I am sure your Lordships will understand that speaking in this Second Reading debate is a sad and painful experience for me--painful because of what I firmly believe will happen to our great Post Office and the service it provides to every part of our islands and abroad. It is particularly painful for me to criticise my party in public for the first time in my life.

When the Government published the Bill earlier in the year, many people, both inside and outside the Post Office, welcomed the fact that at long last commercial freedom was to become a reality. The noble Lord, Lord Dearing, mentioned the long period of indecision leading to the problems that have been faced by the Post Office. At the time the Bill was published I had my doubts about the method being suggested to bring about that freedom. I believed, and still believe, that the proposed creation of the plc will eventually lead to private shareholding in the Post Office at some future date.

Of course commercial freedom is essential to the future of the Post Office. That has been glaringly obvious for many years. In my maiden speech on 1st December 1998, I said:

    "Commercial freedom will allow the Post Office to plan outside the Government's public expenditure cycle. It will give it freedom to borrow and invest, freedom to enter into acquisitions, joint ventures and strategic alliances, and freedom to allow the workforce to share in the success of the Post Office".--[Official Report, 1/12/98; col. 410.]

I firmly believe that all these freedoms would have been possible without the need to create the plc. I shall say more on that point later.

The Bill will replace the old-fashioned EFL, the external finance limit, with the new, commercially based shareholder dividend. It will give freedom to borrow at commercial rates up to £75 million per annum for acquisitions, joint ventures and business investments, for the fast-track process for investments in excess of this amount. These measures are to be welcomed.

The inclusion of the universal service obligation for letters and parcels to all the 26 million addresses in the United Kingdom at a uniform price is also to be welcomed. However, it will require some safeguards for the Post Office when the question of a monopoly limit is addressed. The regulator will be charged with reviewing the scope of the letter monopoly and reporting to the Government within one year. If that report does not fully accept that the universal service obligation will need a reasonable monopoly limit, then I am afraid that the excellent service now provided by the Post Office will be put at risk. We shall have to wait and see what the newly created regulator recommends.

This House needs to know the exact role and powers of the new postal services commission. It is essential that the House be made aware of the level at which the regulatable recommended monopoly is to be set. Commercial freedom and exposure to greater competition will require a sensible, gradual and controlled liberalisation of postal services, not just in

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the United Kingdom but throughout the European Union. Perhaps my noble friend the Minister can give the House an assurance that the Government will take steps to ensure that this will happen. I am confident that the Post Office and its dedicated staff will meet whatever challenges are set by the new regulatory machine in respect of the collection, distribution and delivery of letters.

The Bill has a very important bearing on the future of the Post Office Counters network. We await the report of the Government's Performance and Innovation Unit. The unit was asked to identify the contribution made by post offices to the vitality of local communities and to consider how the Post Office can best contribute to the Government's objectives in the future and, in the process, formulate objectives for the Post Office network.

During the Third Reading debate in another place on 18th April, the Secretary of State for Trade and Industry expressed his regret that the PIU report was not available for Third Reading. I also regret that. The Secretary of State said that he hoped the report would be given to the Prime Minister soon after Easter. Following that, an announcement would be made on his view of the PIU's work. There is not a Member of this House or of the other place who could not quickly have given the answer to the first part of its remit. I refer to the identification of the contribution made by post offices to the vitality of local communities. Their role is essential to community life. The value of the Post Office network has been well rehearsed in your Lordships' House. We have heard today from the noble Baroness, Lady Miller of Hendon, about the vital part it plays in our community. At times of crisis, such as the passport fiasco last year, the closing by Barclays Bank of some of its branches, and on many other occasions, the Post Office has fulfilled an essential role-- a role that is not confined to rural sub-offices. Crown offices are also vital to the communities they serve.

The Post Office has been able to meet these needs simply because it was there when needed. Any further reduction in the network can only go against the interests of communities which the Post Office has served for centuries. Perhaps my noble friend the Minister will today give the House an assurance that the Government are determined to maintain the network at its present level. Perhaps the Minister can give the House more detail about the subsidy proposed at the time of Third Reading in the other place.

Members of this House, myself included, have from time to time sought assurances from the Government that arising from the decision they have taken to pay benefits directly into claimants' bank accounts from 2003 instead of over the counter in cash at post offices, no one who wants to retain the ability to receive his or her benefits in cash will be denied this facility. A number of assurances have been given. I again ask my noble friend whether he will give a guarantee that no pressure advertising will take place in an attempt to woo claimants away from their chosen method of payment.

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Last September the Trade and Industry Select Committee said that the decision to pay benefits into bank accounts would mean the Counters business facing annual losses of £100 million. In a Statement in another place, and repeated by my noble friend the Minister in this House, the Secretary of State asserted:

    "Taken together, our proposals for greater commercial freedom will bring over £600 million into the Post Office over the next three years".--[Official Report, 8/7/99; col. 1028.]

That statement was repeated at his press conference on publication of the Bill. I would appreciate it greatly if my noble friend the Minister could confirm that the figure of £6 million is made up of two elements.

Am I correct in assuming that the £125 million per year reduction in the negative EFL together with the £75 million per year borrowing accounts for the £6 million over three years? Am I also correct in saying that the £75 million is not money available to improve services but will constitute loans to fund acquisitions and will need to be repaid with interest?

Set against this extra money will be substantial financial drains on the Post Office's resources. Will my noble friend confirm that the revised Horizon project--the automation of Counters offices--is likely to cost the Post Office £100 million per year and that the estimated loss on accumulated EFL surpluses amounts to £107 million per year in 1998-99? Will my noble friend also confirm that if the monopoly was reduced to 50p (and 150 grams) it would lead to the Post Office facing a further reduction of profits of approximately £100 million? Following the recent merging of the two Post Office pension funds, does the Minister agree that the contributions holiday that the Post Office has enjoyed for many years is unlikely to continue? If my understanding of the situation is correct--I am confident that I shall be told if that is not the case--the seemingly advantageous position is not quite so attractive as one might have been led to believe.

I am conscious of the length of my speech. As I said, I am fearful for the future of the Post Office. So, too, I am sure, are other noble Lords. I wish therefore to return to the part of the Bill that causes me great distress and not a little disappointment; namely, the whole question of the plc status and the shareholding concept that will allow a partial share sale in Post Office plc in order to further a joint venture or partnership. I believe that by creating a plc and introducing the concept of shareholding the Government have made a grave mistake. The benefits to the Post Office contained in parts of the Bill, especially those that provide the much needed commercial freedom, could have been obtained by the creation of an independent publicly owned corporation (IPOC), as mentioned by the noble Lord, Lord Razzall.

On 8th July last year, I asked my noble friend the Minister where, in the Labour Party's manifesto for the 1997 general election, I would find any reference to making the Post Office a plc. My noble friend replied:

    "I do not think the question of a plc was covered in the Labour Party manifesto, but things do happen in this world that were not covered in that manifesto".--[Official Report, 8/7/99; col. 1033.]

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Today, in referring to share ownership, the terms "plc" and "shareholding" were linked together by the Minister in almost the same sentence. Of course the question of a plc was not included in the manifesto. No one in their right mind would have thought that the Labour Party would make such a proposal. After all, the Labour Party, the public, many institutions and the trade unions had campaigned vigorously against the previous government when it was suggested that the Post Office should be privatised. Therefore I was not surprised that the question of a plc could not be found in the manifesto. I am surprised, however, that the matter has appeared in the form now before us.

I respectfully suggest that if the proposals contained in the Bill, as they refer to the creation of a plc, had been proposed by a Conservative government, the Labour Party would again be campaigning against such a proposal. Those within the Government who are determined to have their way will say that the proposals in the Bill do not constitute privatisation. I agree that they do not at this stage but I believe that this Bill, if enacted in its present form, will make it a simple exercise for the shares to be sold at some future date.

The warm words of comfort that say, "Trust us, we do not intend to sell private shares", are meaningless unless there is an unequivocal statement that we shall never sell private shares. Of course, my noble friend cannot commit future governments for ever. He can, however, say that a Labour government will never come back to this House and another place with proposals to go further than the Bill as at present drafted allows. So far such a statement has been missing. My noble friend can assure the House that the words of the Secretary of State for Trade and Industry on Monday 7th December 1998, repeated in this House by my noble friend on the same day, are no longer part of the Government's thinking. I refer to his comment:

    "I should make it clear that we certainly do not rule out the possibility of introducing private shareholding into the Post Office--for example through the sale of a minority stake in it--at a later stage".--[Official Report, 7/12/98; col. 744.]

Today I respectfully ask my noble friend to say unequivocally that there is no suggestion, now or in the future, that a Labour government will ever sell private shares in the Post Office. Of course my noble friend cannot bind any future government to this principle. The Bill makes it only too easy for a future Conservative government to have in place the means for secondary legislation to be swiftly introduced that would effectively kill the publicly owned Post Office. Or, perhaps, has my party reached the stage where it believes that it will remain in power for ever? I should like to think so. However, history tells us that all good things come to an end. I cannot believe that we, in my party, are so arrogant that we believe that there will never be another Conservative government.

Any reading of the provisions of Clause 67 shows that the Treasury will always hold the ace cards in any share dealings with prospective partners in any joint venture. It is also clear that there is to be no limit or cap

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on the disposal of shares. At present, unless it is amended, there is an open ended provision which in itself brings into question the oft-repeated statement that the Post Office will remain publicly owned. I suggest that my noble friend gives consideration to introducing a statutory limit of 10 per cent of the total share capital of what will be Post Office plc. By providing such a cap on what can be disposed of, or swapped, or traded in a joint venture, some credibility could be restored and the public would see that the Government's statements about keeping the Post Office in public ownership might be better believed. It would certainly help me to believe what is being said.

I expect that someone will ask, "What if the prospective partner with whom we want to go to bed wants 10.5 or 11 per cent?" That argument could be pursued up to the 50 per cent plus figure that would take the Post Office out of public ownership altogether. It would be better to introduce a limit in the first instance and then examine any problems that may arise if the cap is found to be too low. To my knowledge there is no experience anywhere in the world of a "share swap" arrangement between operators in the postal business. That is not surprising given that so few postal operators are at present in the private sector or have plc status. There is evidence of such deals in the field of telecommunications. There is the case of the deal between France Telecom and Deutsche Telecom. In that case each company has given the other 2 per cent of its shares. If it ever came to pass that the Post Office were to enter into a similar arrangement, 10 per cent of shares available for such dealings would be more than sufficient to arrange such a marriage.

What is more common within the tele-communications industry is the establishment of a joint venture for a particular range of services. In such cases some of the assets of the two partners may be transferred into the new joint venture. A good example of how the arrangement could work for the Post Office in the future is the announcement made in early March that the Post Office had signed heads of agreement with TPG in the Netherlands and Singapore Posts. The form of the alliance is a global joint venture in which TPG will hold a 51 per cent stake with the British Post Office and Singapore Posts each taking a 24.5 per cent stake. What is significant in this case, which will provide cross-border mail services, is the fact that the alliance does not involve any assets of the three respective partners. I am sure that my noble friend is aware of these facts. I believe that the Government should look at providing for a limit as I have suggested.

The word "democracy" and the concept of democracy are often heard in this House. Along with countless thousands of ordinary Labour Party members, I value and have worked hard for democracy within the Labour Party--a democracy

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that gave its support for a resolution at the 1999 party conference which stated that the Post Office should remain a 100 per cent publicly owned service. It also stated that,

    "there must be no uncertainty or ambiguity both now and in the future about the commitment of a Labour Government to the continued public ownership of the Post Office".

The resolution also urged that,

    "a commitment to full public ownership of the Post Office is clearly contained in the Labour Party manifesto for the next General Election".

Some parts of the Bill are welcome but, in my view, a number of clauses stand the decision of that democratic conference on its head.

I said at the beginning of my remarks--I apologise for the length of them--that this is a sad day for me. To misquote a phrase made famous by my good friend Neil Kinnock,

    "The sight of a Labour Government, a Labour Government, bringing forward proposals that will eventually destroy a valuable public service, a public service that has served our country so well for over three and a half centuries, fills me with great concern".

I hope that before the Bill leaves this House it will be amended in a way that gives some comfort to the Post Office, its staff and the public that it serves.

5.11 p.m.

Baroness Byford: My Lords, the Postal Services Bill is a compromise to allow the Post Office some of the freedoms of privatisation while, at the same time, maintaining ultimate government control and ownership of the parent company.

At this stage, I should declare an indirect interest as a member of VIRSA, an organisation which is working with the Government and sub-post offices to try to promote their future.

In her opening speech, my noble friend referred to the many concerns that we have on these Benches. I should like to add my weight to three in particular. My first concern relates to the relationship between the regulator, the consumer body, the post offices and the Government. This is an issue we shall certainly discuss at Committee stage. My second concern relates to the £75 million limit--which, as other noble Lords have said, sounds like a huge amount but which, in today's business world, is very small. Again, we shall have to return to this issue if we are to make some sense of it. My third concern relates to the discretionary subsidy, an issue which many noble Lords have already mentioned and to which, I suggest, others will speak later. I am concerned about how it will work, whether there will be even-handedness and whether it will enable all areas to work within the same framework--a theme to which I shall return later.

While I share these worries, my main concerns today are much narrower and centre on the effect of the Bill and on the associated pronouncements made, for instance, in the July 1999 White Paper on low income communities in rural areas and in towns and cities.

My most serious concern is in relation to the effect of the intention to abandon the Horizon smartcard system in favour of payment of benefit through the

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automated credit transfer system into bank accounts. The situation was confused--I think it still is--and I, like many others, have continued to table Questions about it. Only recently, the Minister responded to a debate in the House on the issue. I hope that when he responds to the debate he will refer to the matter again.

For the people out there, the situation is still very confused. The information given by the Government has been provided in a series of statements which contain no actual conclusion. On 2nd February the Prime Minister stated that:

    "We should ... modernise so that benefits are paid into bank accounts for people who want that, but we shall make arrangements for those who do not want that to enable them to continue collecting in cash".--[Official Report, Commons, 2/2/00; col. 1036.]--

not necessarily at post offices, but in cash.

However, Mr Rooker had stated in January:

    "Following the move to ACT from 2003 customers will have their benefits paid into a bank account but will continue to have a choice of where they access their cash, with those who wish to collect at post offices still being able to do so".--[Official Report, Commons, 24/1/00; col. 83W.]

Mr Rooker had earlier stated in October:

    "As at August 1999, about 65 per cent. of all benefit recipients were receiving payment in cash by order book or girocheque at the Post Office".--[Official Report, Commons, 26/10/99; col. WA 842.]

In his evidence to the Trade and Industry Select Committee, Alistair Darling said:

    "About 85 per cent of those who receive benefits have bank accounts".

If only 15 per cent of those who receive benefits do not have a bank account, but 65 per cent of benefit payments are claimed at the Post Office by giro or order book, it appears to me that 50 per cent of benefit recipients prefer not to use banks, for whatever reason. There are many reasons for that and perhaps I may mention some of them.

Banks reserve the right to apply monies entered into a customer's credit to the overdraft. Trite but true. Many benefit payments result from the payee's financial distress caused by circumstances such as job loss, which tends to result in overdrafts. Secondly, many recipients have shared bank accounts and at times of financial stress they need the facility to apply benefit payments to their own needs. Thirdly, one of the most difficult times for many people is the break-up of a marriage or of a long-standing relationship. Whichever parent has responsibility for caring for children, he or she may need to have a source of ready cash which does not involve using family bank accounts which may not be immediately available to them.

Other noble Lords have spoken eloquently on the subject. I look with great admiration at the noble Lord, Lord Dearing, and wish that I could speak without a note.

Alistair Darling also quoted to the committee the comparative costs of paying benefits, and other noble Lords have referred to this. Giro cheques cost 79p per

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payment; order book costs 49p per payment; the payment card would have cost 67p; to pay by ACT costs about a penny.

It may cost the Government one penny under whatever system they plan to operate, but I beg leave to doubt that it costs one penny in toto. I am left wondering where and how the remaining cost elements will be recouped by those providing the service. Bank accounts are notorious for accumulating charges--just as banks prefer to operate in areas not noted for the presence of benefit claimants.

I turn now to my other major worry, which is the effect on sub-post offices of the loss of government revenue from servicing the benefit payments system. We should remember that many small, privately-owned sub-post offices have been bought by people who have left their careers early, either through redundancy or early retirement. They have been relying on the sale of those businesses to top up their interrupted pension provision. If the Government's moves threaten the viability of those businesses, it is unlikely that they will be readily saleable. I pose these questions to the Minister: have the Government kept this matter in mind? What will they do about it?

The Government have responded to the worries of the sub-post office franchisees by proposing a subsidy. We await, as other noble Lords have said, the report of the PIU. Even for this modernising government, the length of time they have taken to bring this report to light beggars belief; it should have reached us earlier. Still we await the report on the detail of how the subsidy will work, but in the interim I should like to quote from the press release of the General Secretary of the National Federation of Sub-Postmasters, Colin Baker, following an amendment at Third Reading in another place. It states:

    "We are however encouraged that the Government are looking for ways of supporting a network of post offices and if matters get to such a point then clearly subsidies particularly temporary ones may help to get the network through a very difficult phase. We would set our face completely against local authorities giving or administering subsidies because we think that we would rapidly lose control over the network as different local authorities will most certainly deal differently when faced with the need to subsidise and we must not forget that different local authorities may be under different political control"--

and have different vices and different hopes.

    "We cannot therefore work up any enthusiasm for that prospect.

    "We would say the answer to the network is investment, not subsidy allowing us time to get through this difficult period and out the other end".

It wants to see a long-term prospect of business success.

It is worth noting that so many of our people, whether or not they have bank accounts, choose to claim their money through post offices. It is also worth noting that 95 per cent of the population live within one mile of a post office compared with 60 per cent living that close to a bank. I am sure that I do not need to say anything further about the level of bank closures in rural areas and towns. Indeed, a bank closure was recently announced which we hoped would not take

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place, but it has now taken place. In rural areas, only 9 per cent of villages have a bank but 60 per cent have a sub-post office.

I shall not go into greater detail today because Second Reading is not the time so to do. But Second Reading is the time to make clear to the Government the fears held by many vulnerable and frail people. Such people are hardly able to get to post offices, let alone to banks--which may no longer be there. They are extremely concerned about the future of their local sub-post offices. If something is not forthcoming from the PIU report, the 8,000 post offices that are likely to be closed will be under a great threat.

I have three questions for the Minister. Is the suggestion of subsidies just one option? If it is, perhaps he will enlarge on that a little more. If it is not, and although we do not have the PIU report, will he enlarge on what some of the other options for the survival of these sub-post offices might be? Finally, can he give us a greater indication of when the report will be available?

These are difficult times for those whose livings are very much under threat. I, like, I am sure, other noble Lords, went to the rally at Central Hall which followed the presentation of a petition of 3,128,000 plus signatures. This is not a small item. I know that it is a small item by comparison with the whole Bill but it is extremely important. The Bill should not be just about making the framework work for the Post Office's sake. It should also serve the people who will be using the Post Office. I hope that when the Minister comes to reply he will be able to do so positively rather than say, "We will hear, we will hear, but we do not know when".

5.22 p.m.

Baroness Miller of Chilthorne Domer: My Lords, I wish to touch on two issues with regard to post offices and sub-post offices, particularly in rural areas. The first concerns reasonable access and the second concerns how small sub-post offices will be kept going when they face a 40 per cent cut in their income.

If I were a cynical person, I would think that the PIU report had been delayed deliberately. I am sure that the Government did not intend that, but it is regrettable that the PIU report and the White Paper have both been so delayed. No doubt the reason is that some of the questions that need to be answered before the Bill passes through the House are particularly difficult. The question of access to services is one of them. I looked recently at the attempt of the Index of Local Deprivation to define what access means. In an extremely good and jargon-free report it said that it is very difficult to define access to services,

    "because it may not necessarily be a question of physical proximity to services. For example, someone without a car and with poor public transport options could have more difficulty reaching a post office that is one mile away than someone with a car or good public transport options who lives five miles away from the nearest post office. Range, cost and frequency of public transport are a key".

Unfortunately, the best measure that the Index of Local Deprivation can come up with is an "as the crow flies" measure. When the Post Office comes to look at

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how reasonable access will be measured, I fear that it will have no greater success than the Index of Local Deprivation.

Noble Lords have touched on the issue of access to small sub-post offices and the services that they offer. The Third Reading debate in another place also concentrated on post office services. For rural areas and many urban neighbourhoods, the post office is a means of delivering a wide range of services, not all of which are post office services. I wish therefore to move to the question of subsidy. How much of the subsidy will be for post office services? That is clearly what the Government must intend as it is in a Postal Services Bill. But if it is okay to subsidise government services, how is that not an unhealthy reliance on one form of government service? How is it that, suddenly, a subsidy for providing information through small sub-post offices is permissible and is not to be regarded as unhealthy?

How will this form of subsidy deal with multi-functional premises where perhaps the sub-postmaster also runs a garage? He may be receiving a healthy income from the garage, but he may have to deal with much paper work in the evening and spend much time in order to run what is very much a charitable service for his community as the sub-post office would not provide a meaningful income without the subsidy. How will the Government begin to test sub-post offices for viability?

In endeavouring to put the question of post office services into one small pocket and look at a subsidy for that--and in advance of the White Paper on rural matters and the PIU report--the Government will struggle. I hope that the PIU report will be available before the Bill completes its passage through this House. From which pocket of money is the subsidy likely to come? The Treasury, so it thinks, has made a large saving of £400 million. In order not to spend vast amounts of its now saved money, will it think of taking the subsidy for rural post offices out of its matched funding for the rural development regulation money, thereby diminishing that pot? Perhaps it is thinking of taking it out of some other pot earmarked for rural areas. I should be interested if the Minister believed that the subsidy would come out of new money. The history of Treasury subsidies for rural areas does not lead me to think that that is in the slightest way likely. What stage have the discussions with the Treasury reached? What understanding is there with the Treasury as to whether this money will be found by regions or areas from money already allocated to them, or will it be genuinely new money?

5.27 p.m.

Lord Harrison: My Lords, where Heseltine hesitated, Labour has acted. Where the second-class Tory plans for the Royal Mail were lost in the post for 18 years, Labour has delivered. This first-class Bill has arrived on time and on form to match the challenge of rapidly changing national and international markets; above all, the single European market.

2 May 2000 : Column 970

Labour is modernising the Post Office in a sensible and reasoned way; providing a firm basis for greater competition in the industry; giving the new plc greater financial freedom to expand and innovate, while retaining this much loved institution in public ownership--because that is what the public wants--and so producing a better deal for consumers, including the blind and the socially disadvantaged. This Bill has the stamp of authority and, I might add, of common sense.

Pleasing, too, is the Government's response to two decades of rural neglect, inherited from the previous government. The sub-post offices of Britain are being updated and transformed by the Horizon Programme, giving our loyal sentinels in the countryside sub-post offices the weapons to defend rural values while opening up new horizons in expanding a panoply of new services: 3,000 new cash machines installed; 1,500 rural lottery ticket sales points started; vehicle licence transactions doubled; and 6,500 sub-post offices, selling telephone pre-payment cards, delivered this month. These rural post offices, the quintessence of satisfying public/private partnerships, will be the focus of further commercial opportunities. The Government's announcement of the possibility of subsidy to retain such post offices for social need, determined against new statutory assessment criteria, is a master-stroke entirely unforeseen by the philosophers on the Benches opposite. Your Lordships might be readier to listen to the collective wisdom of the Opposition if the hue and cry for rural post offices were matched by a complementary concern for sub-post offices in inner-city areas. Isolated communities are not found solely in the wide, open spaces of rural Britain.

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