Taxpayers face bill for new universal bank: Government to pay handling fees

Taxpayers face bill for new universal bank: Government to pay handling fees
From THE GUARDIAN, May 3rd, 2001

By JILL TREANOR Taxpayers could face a rising bill from the proposed post
office-based universal bank under terms to be unveiled today. After protracted negotiations between the high-street banks and the
government, Stephen Byers, the trade and industry secretary, is
expected to announce that the major banks have decided to back the
project. Under the scheme, Mr Byers is expected to reveal that the banks have
agreed to offer basic accounts which can be used in post offices. In
addition, the Post Office is to offer its own-branded card account. Early in the discussions, the banks had warned the government that
the accounts might carry the ‘stigma of the poor’. The aim of the post office banking service is to create basic
accounts for about four million claimants of social-security
benefits who do not have one. They will need an account when the benefits system is automated in
2003. The Post Office, meanwhile, has been seeking a way to plug the
pounds 400m of revenue it will lose from handing out cash over post
office counters. Basil Larkins, managing director of network banking at the Post
Office, admitted yesterday that the greater number of post office
accounts opened, the ‘higher the cost to the taxpayer’. This is because the Post Office will charge a fee for handling the
cash paid in and out of the accounts. This will be paid by the
government for the Post Office’s card account and by the individual
banks for any transactions made through their own basic bank
accounts. Because of the terms attached to the banks’ participation in the
project, it is likely that many claimants without a bank account
will choose to open one of the simple accounts operated by the Post
Office rather than the more extensive ones to be offered by the
high-street banks which might include direct-debit facilities. The high-street banks have agreed to participate in the project
provided the basic accounts are opened only in their own branches
and not over the post-office counter. This may make the Post Office
card account a more attractive option to benefits claimants as these
accounts can be opened in post offices directly. This would place a
financial burden on the taxpayer. Mr Larkins said the Post Office had no opinion on which option would
be more appealing to the claimants who needed accounts. He described the Post Office card account as ‘looking like a benefit
book’ from the customers’ point of view. It could be used only over post office counters and to withdraw the
amount of social security due. The basic bank accounts being offered by the high-street banks,
however, would enable customers to use cash machines, but are not
intended to allow them to go overdrawn.
Copyright 2001 The Guardian.
Source: World Reporter (Trade Mark) – FT McCarthy.THE GUARDIAN, 03rd May 2001