MPs cheer as Post Office awarded Card Account contract » Bill payments » 24dash.com

MPs today cheered the Government's decision to award a new contract for a card account used by millions of people to receive benefits and pensions to the Post Office.

Work and Pensions Secretary James Purnell said the announcement was "good news for our constituents, good news for Post Office Ltd and good news for sub-postmasters".

In a Commons, statement he said ministers were cancelling the current procurement exercise and awarding the contract for the Post Office Card Account (POCA) to the Post Office.

The contract would run initially from April 2010 to March 2015 with "the possibility of an extension beyond that".

Mr Purnell said that in a time of financial turbulence, the PO was a "trusted brand" seen as a safe and reliable provider of financial services.

The move would help ensure a "viable future" for post offices left in place after the current modernisation programme.

But shadow business secretary Alan Duncan described the decision as a "humiliating climbdown for the Government, who have done everything they possibly can to find a way of awarding it (the contract) to somebody else".

A decision on the future of the card account has been long awaited, with MPs demanding only this week that ministers end the uncertainty.

The Federation of SubPostmasters said 3,000 branches would close if the contract was not renewed with the Post Office.

MPs from all parties have campaigned for the contract to stay with the PO, in a bid to save local post offices from closure.

Mr Purnell acknowledged today that the POCA was "central to maintaining a viable PO network".

He told MPs: "It is also clear that maintaining a viable PO network is even more critical now than it was two years ago."

The economic crisis had made people, particularly vulnerable people, more concerned about financial transactions.

"The PO, with its trusted brand, is seen as a safe, secure and reliable provider of financial services.

"So, I believe that now cannot be the time for the Government to do anything that would put that network at risk ... "

To loud cheers from all sides, Mr Purnell said: "The Government has now decided to cancel the current unfinished procurement exercise and to award a new contract for the continuation of the POCA directly to Post Office Ltd.

"We have concluded that, in the current circumstances, protecting vulnerable groups by preserving a viable PO network justifies the award of a contract outside the competitive process.

"These are exceptional times and we believe this is a proper and proportionate response," he said to further cheers.

"The PO considers that this decision, along with the extra money invested by the Government, will ensure a commercially viable future for the post offices that will be in place after the modernisation programme is complete."

But Mr Duncan mocked the minister, saying: "Today's statement is disarray dressed up as decision.

"The announcement is long overdue. We expected it in July, we were promised it for October. But we've only got it now.

"It's quite clear the Government was looking for every possible way of giving the contract to someone other than the PO but in the end they simply didn't dare.

"Today marks a great success for those who have campaigned for the PO and a humiliating climbdown for the Government ... ."

Mr Duncan questioned whether the decision to abandon the competition for the contract would lead to the Government facing challenges in the courts and Europe.

He said: "The Government insisted on having a tender.

"And now, today, after months of an expensive process, they have simply binned that tender altogether."

He questioned how much the decision cost and whether compensation would be paid to the losing bidders.

Mr Duncan added: "Can you confirm that the legal status of this decision is 100% watertight and can you tell the House that there is no risk or scope for any legal challenge from anybody who was not awarded the contract?"

He said the Government had been "shamed" into taking the decision to prevent a damaging internal split.

"Post Offices, communities and many of the country's most needy people will today be breathing a sigh of relief that the card account has been re-awarded to the Post Office.

"But they will know that the Government has been shamed into taking this decisions from a mixture of internal weakness and division in their own ranks.

"It is not a success for the Government but a triumph for which campaigners deserve the credit."

Mr Purnell said the shadow business secretary "took churlishness to new levels" but confirmed that compensation for "reasonable costs" would be paid to the firms which lost out.

He refused to reveal the level of payments to losing bidders, claiming the figure was "commercial in confidence".

Mr Purnell said the decision was not going to be "unpicked" and he did not believe EU clearance was needed.

He said: "This decision has been properly, and legally, taken."

Mr Purnell told Mr Duncan: "You accused us of disarray - I'll tell you what disarray was: disarray was the situation we inherited from your government."

The old benefits payment card was "millions over budget and years behind schedule".

Labour former minister Kate Hoey said there would be "widespread relief" at the decision which she hailed as a victory for campaigners.

"While this is a breathing space for the Post Office, now is the time to really get the Government business back into our Post Offices, to get the local authority business back into out Post Offices and really get the Post Office as a proper bank."

Mr Purnell said: "We now are looking at how we can find further services for the Post Offices."

Liberal Democrat spokeswoman Jenny Willott said she was "delighted" with the announcement which followed "vociferous opposition" to the potential loss of POCA.

She also expressed concerns about how much money was "wasted" on the competition process and why the decision took so long to make.

"The Department for Work and Pensions has behaved appallingly through all this. There has been delay after delay after delay," she said.

Mr Purnell said Ms Willott's speech was the sound of the Liberal Democrats' campaigning Focus leaflets "being pulped by their thousands".

He said the change in circumstances followed a "significant reduction in confidence about financial transactions" which had led people to turn to the "trusted brand" of the Post Office.

Labour's Lindsay Hoyle (Chorley), a long-standing campaigner to keep POCA with the Post Office, hailed the decision as "a great day for common sense".

He thanked Mr Purnell for taking the "right decision" on behalf of people who use the account and of sub-postmasters, praising the campaigning they had led.

Mr Purnell joined the plaudits, saying: "You are right to say that we should pay tribute to the campaign led by sub-postmasters, they have left no one in any doubt about the importance of this account and indeed of the network."

Peter Luff, Tory chair of the Commons Business and Enterprise Select Committee, said the decision provided an opportunity to set up a sustainable future for the PO network.

But he said Mr Purnell's department still had "one very important responsibility".

"That is to ensure the agencies of your department fully get behind the POCA, and many of us are very, very concerned about the attitude in particular of the pension service in this respect."

Mr Purnell said action had been taken to address instances where his department had not been fully supportive of people trying to take up POCA.

Labour's David Drew (Stroud) also welcomed the decision, and called for the Government to look at ways to advertise POCA and encourage people to use it.

The Work and Pensions Secretary said advertising was primarily a matter for the PO itself, but that "improved services and functionality" were coming with the new POCA account.

"So it will be even more helpful than it was in the past," he added.

He was pressed on this by Tory Brian Binley (Northampton South), who said: "Could you explain a little more about that, on the basis that we have been pushing for greater functionality through the whole time of this exercise."

Mr Purnell replied: "Just to illustrate, there will be a simpler opening process for POCA accounts.

"There will also be a facility to correct mistakes, i.e. if too much money is taken out that will be able to be corrected.

"The exact decisions on how that is done are for us and the PO to negotiate and that is exactly what we will do."

Tories jeered that these were nothing new, while Labour's Sally Keeble (Northampton North) suggested that improved services could include allowing women to access Child Trust Funds without having to go to a bank.

And Labour's Charlotte Atkins (Staffordshire Moorlands) asked whether POs could help with the take-up of tax credits, particularly pension credits.

Mr Purnell said he would look at both proposals.

Labour's John McFall, welcomed the decision "clearly and unambiguously" on behalf of the Commons Treasury Select Committee which he chairs.

"But I have spoken to PO executives, and they are aware that these funding proposals should be the last, and by 2015 it should be a universal bank standing on its own two feet," he said.

"So I'm looking for a commitment from the Government to ensure we do that."

Mr Purnell replied: "I know that that is the intention of the PO and believe they will be making clear that this gives them the basis on which to plan for that future with certainty."

Tory David Curry (Skipton and Ripon) said it was "exactly the right decision" and raised chuckles around the House by suggesting it was the work of new Business Secretary Lord Mandelson.

"I'm sure we are all grateful to Lord Mandelson for it," he said.

And he asked Mr Purnell to guarantee a minimum number of Post Offices remained open nationwide, saying there was no point having services without places to access them.

The Work and Pensions Secretary said even Conservative frontbenchers expected the network to shrink, adding: "I think that is a reality that people recognise."

Liberal Democrat Michael Moore (Berwickshire, Roxburgh and Selkirk) welcomed the decision but said sub-postmasters will now be worrying about "how much they will get per transaction".

He urged ministers to "come clean" about this and "put their minds at rest".

Mr Purnell replied: "We have yet to award the contract to the PO. We will clearly be in discussions and negotiations with them and that's the right way of doing that."

Liberal Democrat Steve Webb (Northavon) said ministers had put the contract out to tender based on legal advice given in 2006.

"You've now decided you can cancel the tender process - so either the advice you received at that time was wrong or the legal position has changed?"

Mr Purnell said: "I paraphrase Keynes - when the facts change the legal advice becomes different, and the facts have changed as I explained in my statement.

"There has been a major change in people's attitude to financial services.

"Given the vital social and financial importance of the PO the legal advice is that this is the appropriate and legal way of proceeding."

George Thomson, general secretary of the National Federation of SubPostmasters, said: "We believe the Government decision to cancel the tender process and award the contract exclusively to the Post Office is the correct decision for the post office network, for POCA customers and for UK plc.

"The Post Office's bid was highly competitive, and provides customers with unrivalled geographical coverage, security and peace of mind, and a seamless transition from the current card account.

"The alternative to today's news - the loss or the joint award of the contract - would have undoubtedly resulted in at least 3,000 unplanned post office closures, decimating the national network as subpostmasters are forced out of business through loss of income and significantly reducing vulnerable customers' access to basic financial services.

"This decision must now mark an end to continued uncertainty surrounding the post office network's future. Subpostmasters, and the post office network, cannot sustain the ongoing threats to vital services and further post office closures every two or three years.

"Instead, the Government will hopefully now start to make full use of the huge national asset it has in the Post Office, rather than regarding it as a problem and continuing a downward spiral of cuts and closures."

Business Secretary Lord Mandelson said: "The Post Office is a trusted and familiar brand for those using the Post Office Card Account and today's decision helps secure its future. Now the challenge will be for the Post Office to broaden its offer to loyal customers and to bring in new ones to help get it on to a stable financial footing.

"There is the potential to leverage its brand to help it expand further into areas like financial services, particularly in the current financial climate where people value trust and certainty more than ever."

Minister for Postal Affairs Pat McFadden said: "This announcement is great news for the Post Office.

"The Post Office network has been through a difficult year, with some branches having to close, but that process is now coming to an end.

"Today's announcement recognises that the Post Office is a valuable national asset. With the card account secured and with the Government's £150 million annual subsidy to support the Post Office, the network can now look forward to more stability."

Gordon Lishman, director general of Age Concern, said: "This is not just a win for the Post Office, it's a win for the two million pensioners who have a Post Office Card Account and the many more for whom their local Post Office is a lifeline.

"Many older people rely on the post office as a one-stop shop to not only access cash and benefits but to pay bills, get advice and information, and socialise.

"This announcement has averted a further decimating round of closures and will allow older account holders to continue to benefit from the secure service and access to highly trained staff that they currently value."

Mr Duncan added: "This is disarray dressed up as decision. This process has been a humiliation for the Government and a deeply destabilising waste of time for everyone else.

"If they're cancelling the tender, why on earth did they set up a competition in the first place?

"Post offices, communities and many of the country's most needy people will today be breathing a sigh of relief that the Card Account has been re-awarded to the post office. But this is a decision that the Government has been shamed into making, from a mixture of internal weakness and division in their own ranks.

"This is not a success for the Government, but a triumph for which campaigners deserve the true credit."

David Sinclair, head of policy at Help the Aged, said: "This decision, although welcome, will not stop the road of decline the Post Office is moving down.

"Both the Government and the Post Office have failed time after time to grasp the opportunity for the post office network to become a key 'one stop shop' for information, community and financial services.

"Renewing the contract will, for the time being, preserve thousands of post offices that millions of older people rely on. However, if we are to maintain what is an irreplaceable network, we need to invest in maximising its potential, not cutting back or simply sustaining how we use it now.

"It is vital the new POCA account works better for older people. We need to ensure the drawbacks of the old POCA, namely the lack of interest or the ability to pay direct debits, are not preserved.

"Older people will need far more account features, similar to a standard bank account, if this decision to keep the account is seen as the right one and not simply a political one."