'Bitter disappointment' as Post Office loses benefit payments contract

Published by Jon Land for 24dash.com in Bill Payments and also in Housing

Subpostmasters today expressed "bitter disappointment" over a Government decision to move a lucrative contract for processing benefit cheques from the Post Office.

Citibank will provide a new service from 2012, using Paypoint outlets, in a contract worth around £20 million a year, affecting more than 250,000 people.

Payments by cheque will be phased out after ministers said there had been a "dramatic" fall in their use over the past few years, with less than 2% of welfare payments now made by cheque.

It costs the taxpayer around £30 million to process cheque payments and they were easily open to fraud, said the Government.

Employment Minister Chris Grayling said: "This new contract represents value for money for the taxpayer. The facts are payment by cheque is now too costly and too open to abuse and we want our payment system to be as cost-effective as possible.

"We will make sure that everyone who receives their payments by cheque has all the help they need for the changeover and we can assist in choosing another method of payment that better suits their needs."

The National Federation of SubPostmasters (NFSP) said the decision had raised fears among subpostmasters on the future of other benefits payment services such as the Post Office Card Account (POCA), used by almost four million customers every week.

General secretary George Thomson said: "This is a bitterly disappointing decision from the Government. Benefits cheque customers rely on their local post office to provide this important service, with subpostmasters and trained Post Office staff providing assistance to hundreds of thousands of vulnerable customers each week.

"Many of these customers will be unwilling or unable to travel to a Paypoint outlet such as an off-licence or garage forecourt to claim their weekly pension or benefit allowance."

"Furthermore, we are unconvinced that Paypoint will be able to deliver this important and complex service. The company hasn't consulted with its agents on their ability or willingness to provide the service. Instead Paypoint continues to force a race to the bottom, making below-cost bids for contracts by driving down rates paid to their agents ever further.

"If we are to maintain a network of 12,000 Post Office outlets, subpostmasters need significant volumes of work in order to survive, including regular repeat transactions such as benefits payments. Ministers have to deliver new government work to post offices, not more broken promises."

The federation said the Government's plans to privatise Royal Mail made it imperative that post offices were given more work.

"I warn the Government that neither subpostmasters nor Post Office customers will tolerate any further moves to withdraw vital services from our counters, including the POCA."

A Post Office spokesman said: "Whilst Post Office is disappointed not to have been awarded the contract, we are pleased that the Department for Work & Pensions has outlined new plans for working closely with us in the future, including three pilot schemes, universal credit reforms and strengthening links with Credit Unions.

"The commitment to fund the IT platform to link Post Offices to Credit Unions also offers a real opportunity for customers to benefit from our network of 12,000 branches across the UK and our skilled and trusted workforce.

"We will work with our existing customers to help them continue to get their cash at Post Office branches, either by switching to the Post Office card account or by using one of the many commercial bank accounts that are accessible at Post Office branches.

"Post Office has a vital role to play in the provision of Government and local authority services and all new business the Government entrusts to us helps us to maintain the network at its current level."

The Communication Workers Union launched an angry attack on the Government, saying the decision spelt "disaster" for the future of the post office network and accusing ministers of "betrayal".

General secretary Billy Hayes said: "This is a cut too far. Taking Government business away from the Post Office on top of privatising Royal Mail and taking that business away will cause the biggest closure programme we've ever seen.

"What they take away in revenue, the Government will either have to give back through subsidy or promote mass closures.

"The Government can't be trusted with our public services, our post offices or the care of the most vulnerable.

"This Cabinet of millionaires has no idea what it's like running a small business where the loss of one or two revenue streams can make the difference between profit and loss. Post offices are a lifeline to many communities across the country.

"The Government has lied to voters about safeguarding the post office network. Instead of increasing work, they're taking it away.

"Instead of promoting trusted Government-owned brands which are accessible to everyone, they've chosen a private company which many vulnerable people on benefits will not be able to access.

"It's a betrayal of Britain's most vulnerable and a despicable act of vandalism on our post office network."

Andy Burrows, of Consumer Focus, said: "Our research suggests that people, particularly those on a low income, value the security and privacy that post offices provide.

"We are concerned that many convenience stores will not be able to provide the kind of service many consumers need.

"This will be a major blow for the post office network. Government has committed to making the Post Office the 'front office' for public services. The decision to axe this £20 million contract seems out of step with that ambition.

"The Government now needs to keep a very close eye on whether this new arrangement works for the vulnerable consumers affected."

Minister for Postal Affairs Edward Davey said: "I appreciate that this is a blow to sub-postmasters. But the contract is relatively small - representing around 1% of sub-postmasters' income - and DWP have today outlined exciting plans that are potentially worth far more to the Post Office.

"Three new pilots, and opportunities to support the Universal Credit reforms and to strengthen links with credit unions, which could allow many more people to access credit union services at their local branch, and people will still be able to access their benefits and pensions directly from the Post Office by using the Post Office Card Account or one of the many current and basic bank account that are accessible at branches."

Paul Reuter, national officer of Unite, said: "This is another example of a disjointed government playing fast and loose with the network of post offices across the country.

"The removal of the Green Giro from the Post Office is another death knell for the sustainability of post offices. This decision will particularly hit those in communities where post offices are a fundamental part of society."

Lindsay Mackie, campaigner at the New Economics Foundation, said: "Taking the contract for benefit payments away from the Post Office is an act of social vandalism that will devastate communities across the UK."