Universal bank fears prompt Post Office plan

Contingency plans to maintain the rural and sub-post office network if the government’s Universal Bank plan does not start on time are being discussed in Whitehall amid growing conviction that the deadline will be missed.

Delay could see the Department of Trade and Industry paying an additional, temporary subsidy to Consignia, the renamed Post Office, to keep endangered branches open.

The Universal Bank’s services – offering accounts to millions of benefit claimants who do not have or cannot get their own facilities from high street banks – should be in place by April 2003.

The deadline has been set to coincide with the switch to the payment of benefits by automated credit transfer into claimants accounts.

This move, due to save up to Pounds 600m, is intended to replace benefit books and would remove an important source of business – particularly to rural and sub-post offices.

Alistair Darling, the work and pensions secretary who is now in charge of the inter-departmental committee overseeing the Universal Bank, has made clear to colleagues that automated credit transfer will begin on schedule in April 2003. He has also secured Treasury backing for this position.

However, there is mounting concern among ministers that what one senior figure called “the sheer logistics” of establishing the Universal Bank accounts – to be known as “clear” accounts – will prevent the service being launched by then.

The loss of benefit claimant custom could leave rural and sub-post offices in financial difficulty. However, the Treasury and Department for Work and Pensions have made clear to the DTI and Consignia that this is now a matter for them. One official said delay would, therefore, leave the DTI having to subsidise the network until the Universal Bank services were in place or face more post office closures.

Although Douglas Alexander, the post office minister, told MPs that good progress was being made, Consignia has complained of a lack of crucial information that it needs – to get the computer systems running – from the government.

There has also been a dispute, now seemingly resolved, over how many people will have their benefits paid into the new accounts.

The DTI has identified up to 6m potential customers but as the accounts cost the government money to service, the Treasury and Department for Work and Pensions want to hold the number down. They would prefer to pay the benefits through high street bank accounts that cost them no extra money.

Officials say the Treasury view has prevailed and that the number of account holders will be capped at about 3m – roughly the number of people unable to get bank accounts. This would preclude those with existing bank accounts who might otherwise be tempted to switch to the Universal Bank.