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| Financial Times, 20 January 2006, |
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| Royal Mail is lobbying the government to reverse a decision to end a Pounds 1bn contract for the payment of benefits through post offices. |
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| Subpostmasters have asked Tony Blair to intervene personally to overturn the move by the Department for Work and Pensions, which they warn would "inevitably accelerate the decline" of the post office network, closing thousands of branches. |
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| The government was yesterday forced on to the defensive over its move to end funding for Post Office card accounts, used to pay pensions and benefits to more than 4m people, when the contract ends in 2010. |
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| Alan Johnson, the trade and industry secretary, told MPs there needed to be "discussions between DWP and the Post Office to see how the situation will emerge post-2010". The government is understood to be looking at a range of options. |
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| The National Federation of SubPostmasters has written to the prime minister attacking the DWP's "devastating" decision, which it warned would have "disastrous consequences for the post office network". |
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| Colin Baker, the federation's general secretary, also criticised other departments for "effectively driving people away from post offices" by promoting a new online service for car tax discs and developing an alternative network for passport applications. |
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| "All this leads to strong doubts over the government's commitment to the post office network," Mr Baker warned Mr Blair in his letter. |
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| Ministers defended the contract decision, saying it had always been clear the subsidised account was an interim arrangement to ease the transition from benefits and pensions being paid over the post office counter to payments direct to bank and building society accounts. |
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| James Plaskitt, a DWP minister, told BBC radio's PM programme that the contract "did not have a life beyond 2010. It is actually an expensive way for the DWP to pay out benefits. It costs a pound for us to put an amount in a post office card account as opposed to a penny to put it into a bank account". |
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| But the government will have to reconcile this drive to cut the DWP's costs with its publicly stated commitment to support the post office network, particularly in rural areas. |
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| Royal Mail, the state-owned postal operator that operates the post office network, refused to comment. But executives are understood to be in talks with ministers in a bid to reverse the DWP's move, which they fear could double the Pounds 110m losses sustained by Post Office Limited in its last financial year. |
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| The subpostmasters' anger and sense of betrayal over the government's decision on the contract stems partly from a deep-seated insecurity about its long-term future. The network has suffered a body blow, as Mr Baker put it, in recent years from the government's decision to allow benefits to be paid directly into bank and building society accounts, as well as over the post office counter. |
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| Fewer than a quarter of pensioners and benefits claimants now use the post office network, which has lost much of the Pounds 400m income it used to gain from the government as a result. |
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| Allan Leighton, Royal Mail's chairman, has said the government needs to provide a "long-term funding resolution" for the Post Office. In particular, ministers have yet to make a decision on what - if any - support will replace the existing Pounds 150m-a-year subsidy for the rural post office network when it ends in 2008. Without such support, significant closures are likely. In the past two years, about 2,500 post offices have shut, leaving 14,500. |
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| DWP officials stressed that people would still be able to receive their payments at post offices after 2010, provided they opened bank accounts. But such assurances were not enough to stave off attacks from Tory MPs. |
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| David Ruffley, shadow minister for welfare reform, said: "We are concerned about the effect this move will have on the more vulnerable, for whom claiming benefits is already a highly convoluted process." |
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"We're now seeing real concern about the future of this network . . . Does he (Mr Johnson) not understand that small post offices are the absolute core of their local communities and if they go then a very valuable part of the local community goes as well?"
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| The trade and industry secretary said 3,000 rural post offices had closed between 1979 and 1997, the period of the last Conservative government. "What we've tried to do is get a grip of this problem . . . to allow the transition from the old days when it was the only place you could buy a stamp and collect your pension to the current 21st century." |
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| In the Commons, Charles Hendry, Conservative MP for Wealden, warned Mr Johnson of the likely impact on the rural post office network and small towns and villages. |
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