Post Office Card Account Oral Answers to Questions

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Steve Webb (The Minister of State, Department for Work and Pensions; Thornbury and Yate, Liberal Democrat)
With permission, Mr Speaker, I should like to make a statement about the Post Office card account—potentially a slightly less contentious topic than the previous statement, but we will see.

The Post Office card account provides a basic payment service by which people who are without a traditional bank account may receive their benefits, pensions, allowances and tax credits. Although most people have a bank account, there are certain groups for whom that is not viable, and for them the Post Office card account provides an important lifeline. The account is used by around 2.5 million people, including over 1.3 million pensioners. It was introduced to support the move from order books to direct payment into an account, and it was due to come to its natural conclusion in March 2015.

I am pleased to announce that the Government have agreed a new £250 million, seven-year contract that will protect a key service for vulnerable pensioners and benefit claimants as well as helping to safeguard the future of the post office network. For those people who cannot access mainstream banking, the Post Office card account is a vital facility. Through this agreement, we are ensuring that their needs are met. The contract with Post Office Ltd will ensure that the Post Office card account remains available until at least the end of 2021. That long-term deal is good news for the users of the service, good news for the Post Office and for sub-postmasters and good news for taxpayers.

The new contract provides a minimum of 10% efficiency savings over the life of the contract, saving the taxpayer over £27 million, while protecting the income of sub-postmasters. That is an important contribution to reducing the costs of providing contracted services, and the savings are commensurate with what has been achieved in other service contracts.

The new contract will be provided through the FOCS—front office counter service—framework. FOCS was awarded to the Post Office in 2012 following a competitive tender, with the intention that other Government services could be provided through a framework in the most efficient way possible. FOCS provides the Post Office with a gateway to win future Government business. I am pleased that we have been able to use the framework to deliver the new Post Office card account contract.

The latest Post Office card account contract, which was signed by the previous Administration, was due to reduce the number using the service. However, that did not happen as planned, which means we are starting the new contract with more customers than originally anticipated.

The Post Office card account was always intended to be a stepping stone to mainstream banking. The new contract continues to support that important principle of movement into financial inclusion. I welcome yesterday’s announcement that banks will remove punitive charges from their basic bank accounts. Increased access to basic bank accounts is a huge step forward for those who have previously struggled to open an account, and it supports the delivery of universal credit, breaking down the barriers to financial inclusion and work.

Like most other bank accounts, those basic bank accounts are accessible at the post office. This means that those who prefer to collect their money at the post office can continue to do so, preserving footfall for sub-postmasters. The Post Office also has a range of financial products which are currently being trialled in various parts of the country, and are due to go nationwide soon. This contract allows a further seven years for the Post Office to develop these accounts and move to a secure and sustainable business model.

The benefits of financial inclusion cannot be overstated. Claimants who are paid into a transactional account are more likely to find long-term employment, and can more easily manage payment of utility bills and direct payment of housing costs to landlords. But we recognise that certain groups remain unable to access such services and the Post Office card account is designed to meet their needs, even if it is as a stepping stone to mainstream banking. The Post Office card account is simple and easy to use and is readily accessible. People with a POCA can collect payments and check their balance either over a post office counter or by using one of a network of almost 2,500 Post Office ATMs spread across the UK network. Such accounts can be opened without a credit check, which means, crucially, that they can be accessed without difficulty by people with a poor credit history.

The Post Office card account is invaluable for those people who rely on someone else to collect their money for them, for example because of a disability. Just over half of Post Office card account users are pensioners, including a significant number over the age of 80. This agreement means that they can continue to receive their payments into a POCA and collect them at the post office, as they do now. I know how important the sense of continuity and familiarity that comes from using their local post office is for many older pensioners. I also know how important the local post office is to local communities. This contract provides certainty for the Post Office and sub-postmasters and helps safeguard the future of the post office network. The new agreement will help sub-postmasters to retain footfall and generate income for their important local businesses.

In 2010 this Government committed £1.34 billion to maintain a national post office network, modernise branches and safeguard the future of the post offices that play a vital role in urban, deprived and rural areas. In 2013 we committed a further £640 million to support the modernisation of the post office network over the next three years. Since then, the post office network has been at its most stable for 20 years. I am pleased that the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend Jo Swinson, who has responsibility for Post Office and postal affairs, is here to support this statement.

To conclude, this £250 million, seven-year contract with Post Office Ltd for the Post Office card account represents good value to taxpayers and security for sub-postmasters, protects local services and ensures that we continue to meet the needs of the most vulnerable users. I commend this statement to the House.

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Gregg McClymont (Shadow Minister (Work and Pensions); Cumbernauld, Kilsyth and Kirkintilloch East, Labour)

This is a welcome announcement from the Government, especially for all those who rely

on Post Office card accounts. Indeed, it is the only sensible decision for consumers, pensioners and small businesses and for the Government. After all, it was this Government who promised to make the Post Office the front office of Government, to the tune of contracts worth £450 million per annum.

In the context of that promise, today’s statement raises as many questions as it answers. This is a not a new contract, but the renewal of an existing contract. What is the value of this new contract to the Post Office relative to the current contract? Where will the £27 million of efficiency savings come from? Does this mean more money for the Post Office or less? Does this statement take the Government closer to or further away from fulfilling its broken promise to the Post Office of an annual income of £450 million from the provision of Government services?

Before this renewal, Government services accounted for about £130 million of Post Office income. What is the total amount of Government income through the provision of Post Office services which will be in place following the contract renewal? Again, does this mean more money or less for the Post Office and for sub-postmasters? The National Federation of SubPostmasters urges the Government to fulfil their promise to deliver £450 million of income per year. Can the Minister be clear to the House about whether the statement takes the Government closer or further away from delivering that promise?
As the Minister knows, the Department for Work and Pensions had several pilots under way, which the Post Office was undertaking on its behalf. Can the Minister update the House on the progress of those pilots? They involved, for example, verification for national insurance and verification of documents for the Pension Service. What stage have those pilots reached, and will they contribute to closing the gap between the promise made and not delivered to the Post Office during the botched privatisation of Royal Mail?

More widely, the Minister rightly reflects on the importance of Post Office card accounts to those with disabilities and to pensioners. The Post Office Local programme is part of the network transformation and can, in some circumstances, reduce the number of counters available that provide privacy to those undertaking POCA business. What is the relationship between the post office modernisation programme and the ability of Post Office card account users to continue to enjoy the privacy that they associate with post office transactions, especially pensioners and the large number of Post Office card account holders who are over the age of 80?

The Minister referred in his statement to the number of transactions undertaken through Post Office card accounts. Does he seek to arrest the decline in usage? Is he clear that there has been a decline both in the number of people using POCAs and the number of transactions? His statement is ambiguous on that point. Finally, will he be clear about whether the Government have a strategy to increase the usage of Post Office card accounts or whether they are happy to let the decline continue?

This is a welcome announcement for all those who use post offices, but as far as we can see, it takes the Government no closer to—indeed, it takes them further away from—meeting that broken promise to the Post Office about Government services and making it the

front office of Government. Can the Minister provide clear answers about the value of the contract, what it means for the Post Office’s total income and what it means for all those who care about the Post Office and Post Office card accounts?

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