PO could lose £20m contract to issue benefit payments

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The Post Office could be stripped of its £20million a year contract to issue benefits payments, it is feared.


Post Office Limited is fighting with a private operator to hold onto to its “green giro” contract through which it pays benefits to 333,000 people.

The deal is worth around £20million a year to the Post Office – or 8 per cent of its annual revenues from the Government.

Whitehall sources said that the Department for Work and Pensions was keen to give the contract to a rival operator, although no final decision has been taken.

The rolling contract is being retendered by the department as part of a bid to save money. It is not known if the rival bidder would continue to provide benefits through giro books.
Consumer Focus, which represents the interests of Royal Mail customers, last night wrote Steve Webb, the pensions minister, urging him to reconsider.

Andy Burrows, post expert at Consumer Focus, said: “Losing this £20 million pound a year contract would be another significant blow for the post office network.

“It makes most sense for the Post Office to keep the contract for paying benefits cheques so benefit recipients get a service they have come to know and trust.

“Post offices often provide the heartbeat for a community and people want to see them thrive.

“The Government should be looking to offer more services through post offices, not fewer.”

The news comes at a sensitive time for Royal Mail, which runs the post office network. The Government is trying to currently trying to pass legislation to privatise the business, most likely in 2012.

As part of the deal, the UK’s 11,500 post offices will be spun off and kept in state hands, or possibly run as a mutual organisation.

Mr Webb’s Liberal Democrat colleague Ed Davey, the Postal Affairs minister, is engaged in extensive efforts to persuade other Government departments to give more contracts to the post office network.

George Thomson, general secretary of the National Federation of Sub-Postmasters, said: “What message does this send to other Government departments if they want to award one contract in another direction?”

The federation is pressing the Government to provide a water tight long-term guarantee that Royal Mail will not be able to take work away from post offices after privatisation.

Sources in Whitehall last night insisted that no final decision had been taken about the benefits contract, which would be awarded in the next few weeks.

A Post Office spokesman said it was very keen to hold onto the contract.

He said: “We want to continue to do this work. We have a good proposition and have been successfully serving the needs of these customers for many years.”