Examination of Witnesses (Questions 40
WEDNESDAY 30 OCTOBER 2002
MP AND MR
40. In short, you are not guaranteeing a Bill
in the new session?
(Mr Smith) I think given the sorts of considerations
that I have described I am not in a position to say this morning
what the legislative situation is going to be. I would want to
underline though that we take anti-social behaviour very seriously
indeed. It is very important to get more effective co-ordination
of the various agencies concerned. As any of us will know dealing
with some of these cases in our constituencies, you have got one
dimension of it which the school is trying to handle, another
the police are trying to handle, another where it is the local
authority, maybe the local residents' committee, Social Services,
a whole plethora of bodies can be involved. I think more effective
co-ordination and alignment of the various carrots and sticks
we have to deal with these situations is necessary.
41. So plenty of words but no action promised.
(Mr Smith) I have already referred to action that
we are taking, for example learning from the experience on Anti-Social
Behaviour Orders and making sure that those can work in a more
timely fashion. I think this is an area where it does make sense
to examine the end-to-end processes, the time it takes for cases
to get referred to the relevant agencies, for action to be initiated
in the courts, how long it takes the courts to deal with them.
We are examining all of that precisely with a view to action to
tightening and speeding things up.
42. Are you definitely saying that there will
not be a Bill? It sounds very much like that from the drift of
what you are saying.
(Mr Smith) I did not say that. I cannot come to the
select committee and give the gracious speech.
43. In your research into the effects of the
Bill have you found any country in your researches that has a
similar measure on the statute books because the Library, I believe,
is looking at this and in the countries it has looked at so far,
which is about six or seven, it has not found a comparable one?
(Mr Smith) In the area of housing benefits?
(Mr Smith) I am not aware of another example in housing
45. Secretary of State, I want to ask you some
direct questions about direct payment, what was known as ACT.
Clearly there is a strong overlap with the Department for Trade
and Industry who are responsible for post offices. I would like
to ask you some particular questions. 15.4 million currently use
the Post Office to withdraw their benefits and their pensions
and we perhaps all in this room know the arguments for that: it
is much, much cheaper to use direct payments and, secondly, it
is an attack on fraud as well. I wonder today if you can perhaps
confirm or deny to the Select Committee that there is absolutely
no Treasury cap of three million on the number of Post Office
card accounts that may be opened?
(Mr Smith) There is no cap, I can confirm
that. Obviously when you are planning a change such as this you
do need to factor in some assumptions as to what you think the
likely levels might be. It certainly was an assumption that that
might be a likely level.
46. Will benefit claimants and those who also
have pensions have a real choice of having payments done through
their own bank accounts, the basic bank account or the Post Office
(Mr Smith) The answer to that is yes. I anticipated
that there might well be questions on this. We can pass them around
now or you can look at them later but I have just brought two
examples. One is the letter to the child benefit recipients which
started going out from Monday and the letter from the Veterans'
Agency which has been going out for a few weeks.
You can see I have highlighted there that there is clear reference
to people being able to access their benefits at the Post Office
and via the Post Office card account.
47. The reason I ask that is you will recall
when we met previously informally that I raised the same point.
We had an excellent meeting at the Burnley Pension Centreto
refer to a previous Parliamentary Question just last weekI
was very impressed with the set-up there but what did concern
me in the script, which is well done by and large, was the script
default position was "if you are a new pensioner you will
get your benefit paid through your bank account". There was
no reference at all to the basic bank account. There was absolutely
no reference to the Post Office card account. That has certainly
been picked up in discussions I have had personally with Post
Office employees. We went to my constituency and we had an informal
session and there was great concern. This new set-up is well respected
by the postmasters but the problem is there is next to no marketing,
next to no promotion, next to no enthusiasm in a real way to promote
this Post Office card account and without that I can see the demise
of post offices across the length and breadth of this country.
(Mr Smith) First of all, I would not want to suggest
that I think the health or the success of post offices and the
maintenance of the network depends solely or even primarily on
the Post Office card account. Remember the Universal Banking Service
aims to make basic bank accounts and other banking products available
through Post Offices. There is the investment we have made, the
£500m in enabling the Horizon automation to take place and
the £270m that is going in to implement the Performance and
Innovation Unit Report's recommendations. We are investing an
enormous amount, as is the Post Office itself, in the modernisation
of the Post Office network and the service they are able to give.
I think it is through giving that service in a good, efficient
way so that people want to use the post offices that they have
the means to ensure that there is a good future for the network
at the head. As I say, we are not capping the Post Office card
account, people are given the opportunity to take it out. It is
not going to be the right thing for everybody. There is not a
direct debit facility. We should not forget the large number of
claimants, currently 59 per cent of new retirement pension customers,
who are choosing ACT at the moment. There is an extent in this
to which people have been voting with their feet. It is very important
that the pledge that where people want their money in cash at
the post office we are able to deliver on that pledge. There is
a significant number for whom the Post Office card account is
the means of doing that and we want to make sure that they have
that opportunity and that it works as efficiently as possible.
48. That is all fine and well but the problem
in my experience is simply this, that people do not know there
are basic bank accounts, people certainly do not know there are
Post Office card accounts, they are not being marketed. The Postmasters
Association, and I am not a shop steward today, have made it clear
to methese are the experts, these are the people who are
seeing these 15.4 million day in and day outthe Post Office
itself is not promoting it particularly well. Because of financial
services regulations postmasters now advise clients about this.
I am very concerned about the low profile that Post Office card
accounts and basic current accounts have had. I do not want you
to just take my word for it, you will be aware that the Treasury
Committee recently expressed disappointment at the progress of
this and they called for "more proactive and innovative marketing
if they are to be taken seriously", that is the government,
"on their express commitment to overcome financial exclusion".
(Mr Smith) Can I make two points in response to that.
First, on the general question of direct payment, there is a big
information and, indeed, advertising campaign being prepared which
I think is due to start in January. Can I also say that as far
as the choices confronting individual clients are concerned, I
think it is sensible to phase this in over a period. If they are
not going to need for some time to do something about this, I
am not sure it is sensible to awaken a general feeling of anxiety.
In terms of responsiveness to customers and the efficiency with
which we, the Post Office, the Inland Revenue and others are actually
serving the public, it does make sense for this change to be grown
through the system gradually rather than having new systems confronted
with big bang surges in demand, which is just the sort of thing
that very often makes IT and service innovation go wrong, not
just in the public sector but in the private sector as well. I
do not apologise if we are moving into this in an incremental
gradual way. I just want to stress that we are not capping or
steering people away from Post Office card accounts but it is
fair and right to point out that there are other products which
many people are choosing and which in many ways are advantageous.
49. I think most people would agree with the
migration period over the two year period. Letters are going out
now to new pensioners and new parents for child benefit and this
is up and running in April, as you know, we need to be selling
these products now. I have got serious concerns about the lack
of marketing and the lack of a high profile of this Post Office
card account. It is not your sole interest to make sure that you
have profitability for postmasters, I understand that, but for
many post offices more than 40 per cent of their income comes
from benefit transactions. Two things are going to happen. We
can still have benefit efficiency for your Department and ensure
that our rural network, particularly throughout the UK survives.
I have major concerns that by taking away 40 per cent of Post
Office income, which will happen for many post offices, we will
see the closure of the Post Office network in many areas and also
constituents do not know what the real choices are in my experience.
I cannot talk for the whole Committee but I had impressed upon
me during the Committee's visit in Inverness that there is a very
low profile of the Post Office account. Postmasters themselves
are telling me that day in and day out the public are saying "what
do I do in April on the changeover?" Can you tell me on that
question what are your estimates, obviously with your partners
in the DTI, for Post Office card account use in the first, second
and third years of operation?
(Mr Smith) I think it would be wiser for me to send
you those figures rather than give them off the top of my head.
50. A final point. The big four banks, HSBC,
Barclays, NatWest and Lloyds TSB, as you know have around 68 per
cent of current accounts in the UK at present. Can you perhaps
tell the Committee why only 14 per cent of basic bank accounts
are within that very major group? Is it because there is a major
lack of interest among major banks to set up these basic bank
accounts, which is a crucial element in the Universal Bank Service?
(Mr Smith) It is probably a question you really have
to put to the banks rather than to me. I cannot answer for the
priority that they give to different parts of their product range.
I would say in developing universal banking it is good that we
have been able to conclude agreements now with all of the major
banks to get the basic service up and running. They are not always
easy discussions. I am very grateful for the input from the banks
that made this possible. This whole move to ACT, to direct payment,
and in particular the establishment of the Universal Banking Service,
this is a very difficult project, of course it is, bringing together
the interests of millions of clients out there, our responsibility
as government across different departments, the banks, the post
offices, the important interests of those running the Post Office
network. I think it is a tribute to all concerned that the project
has got to where it has. Of course some people have anxieties
and it is important that those are addressed. As I say, on promotion
as the advertising campaign comes through and as people see the
letters for themselves they will see that there is no hidden agenda
here and will appreciate that this is a change which makes sense
which will be more convenient for clients and which does, through
the extension of banking services into the post offices, offer
one of the principal means by which post offices can secure a
good future for themselves.
51. My very final point is to say that I am
not sure I fully agree with your points about the banks' position.
The universal bank approach is the government's baby and the basic
bank account is something that the Government is negotiating with
them to try and develop. If the big four cannot develop more than
14 per cent of basic bank accounts we have got real worries. The
point is it has not been promoted well enough. The second point
is if you run a large bank like Barclays, why set up a basic bank
account if you can get customers going into the mainstream accounts
where you make more money? Perhaps you could give us figures on
the development of the Post Office card account over the next
three years and you could also give us your estimation with the
DTI of the number of basic bank accounts that you think will be
set up over the next three years because I was not successful
in my question to the DTI so I thought I would try you.
(Mr Smith) We will certainly supply such information
as we can. It is, of course, difficult to estimate some of these
things because it will depend on the choice of customers themselves.
52. I want to support everything that David
Stewart has said. I believe that the information you are getting
does not really reflect the concern that is out in the country.
Do you have a plan B? Supposing everything that can work well
does work well, the universal bank is in place, the Post Office
card account is up and running. I can see that that will still
be a challenge but personally I think there are still very high
risks associated with the scale and the way it is going. Do ministers
know what they will do next if it starts to come apart at the
seams? Is there a plan B? If there is not, I would be concerned
(Mr Smith) Yes, contingency plans have been drawn
up and are being actively considered for contingencies that we
might have to prepare for if confronted with the unexpected.
53. For example, if the migration started to
go wrong could you freeze the migration until you fixed it? You
are not going to force this through the two year period if some
of the mechanics, the transmission facilities and the universal
bank start to produce unintended and unforeseen problems?
(Mr Smith) With all of the other agencies, and the
Post Office are such crucial partners in this, we are scoping
the risks, drawing up contingencies and, indeed, taking the advice
of others, like the Office of Government and Commerce, to ensure
that the preparations that are being put in place are soundly
grounded and we could change our plans were that necessary in
the light of experience.
54. So you would be willing to take representations
if we started to see that happening, you would draw attention
(Mr Smith) Certainly, if you start to see anything
going wrong tell us and your suggestions will be very carefully
55. Thank you. The second point from mereally
it is a short circuitis I am concerned that there are seven
organisations working with Postwatch and they are still very concerned
about, for example, the fact that there is no generic agreed material
available in the post offices now. We are all being asked questions
by our own retired populations about what they should do next.
Worse than that, the rumours I have heard are that the Government
have done a deal with the Post Office which will restrict agreed
advertising and generic material that goes out. In fact it is
worse than that, that they have signed a contract with the Post
Office which limits the marketing of the card account. I do not
know if these things are true or not but they have been talking
to officials today, they have not been able to get to see ministers.
If Postwatch can set up a meetingwe are talking about organisations
like Age Concern herewould you get the ministers to meet
them because my concern is the same as David Stewart's, that you
are not getting the true picture? I am not saying that people
are hiding things from you but the concerns out there are actually
much greater than perhaps they are within the Department. You
would give some reassurance to voluntary organisations if you
would agree to get ministerial colleagues, or even yourself, for
a short time to try and talk through some of these things. It
is not in anyone's interest if these rumours, if they are untrue,
are taking root and are causing more trauma and worry than is
(Mr Smith) Certainly if we can help assuage fears
and provide information and otherwise help the whole process forward
in a sensible way by meeting with others, including ministerial
involvement, I am very happy to consider that. On your earlier
point about people being concerned about what they have to do
and by when, it is important to underline that until people are
advised by letter that they need to do anything they do not need
to worry about this.
Chairman: Thank you for that.
56. It will not surprise you and I am sure in
your usual Blue Peter way you will have prepared something
about the IT aspects. Your letter to MPs on 19 September six weeks
ago said there was still some way to go. Can you give us any idea
of whether you have got an indicative date for "A-day",
as your Department calls it, and for migration?
(Mr Smith) I have little to add really to what I put
in the letter. The testing is progressing. It is progressing quite
well but until I can be certain that it makes sense to start on
a particular date I am not going to give indications of when that
57. You seem to be piloting this on current
cases according to your letter, which I have to say surprised
me, I thought you were looking and had been looking in the Department,
albeit before you yourself were in post, at going live in April
for new cases. Is this a change or perhaps I misunderstood it?
(Mr Smith) No, it is not a change in policy at all.
As you say, "A-day", when it comes, will engage first
with new cases and then "C-day", when existing cases
convert over on to the new system, comes later. I think there
is perhaps confusion here between the IT system and the Child
Support reform system. Yes, some existing cases within the existing
Child Support rules are being operated with the new IT, and this
is perfectly sensible in bringing a new system into effect. You
see if dealing with real cases it can handle things and you examine
the scaleability because it is often the difference between dealing
with a few thousand cases and dealing with hundreds of thousands
of cases. Yes, when "A-day" comes that is when the new
system comes into effect in terms of the new basis of calculation.
58. You are expecting "A" before "C"?
(Mr Smith) What we are really doing is using the testing
now on real cases with real members of staff and real agencies
to make sure that it really works before we bring the new basis
of calculation in.
59. So you are still expecting "A-day"
before "C-day", are you?
(Mr Smith) Yes.
4 Automatic Credit Transfer. Back
Samples of departmental letters from the Child Benefit Centre
and the Veterans' Agency were passed by the Secretary of State
to Committee members. Back
Please refer to the supplementary memorandum from the Secretary
of State to the Chairman of the Committee, paras 2 and 3, Ev 18-19. Back