Post Office welfare contract loss described as a “betrayal”

Industry bodies have hit out at the UK Government after Post Office Ltd lost its contract to provide welfare payments. The Department for Work & Pensions announced today (Thursday) that Citibank will provide a new ‘over-the-counter’ service at PayPoint outlets from 2012, in a contract that is worth around £20m a year.

The National Federation of SubPostmasters (NFSP) described the news as “bitterly disappointing”, whilst the Communication Workers Union (CWU) labelled the move as a “betrayal of Britain’s most vulnerable”.

Payment by cheque is to be gradually phased out, with the Government blaming a “dramatic fall” in use. Less than 2% of welfare payments are now made by cheques, costing the taxpayer around £30m annually, despite still being open to fraud.

Minister for employment 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 NFSP warned ministers that if the Post Office network is to remain at its current 12,000 outlets, they must deliver on their promise to transform post offices into “the front office for Government.” The organisation claims “350,000 vulnerable citizens receive pensions and benefit payments by cashing a cheque at their local post office each week”.

NFSP general secretary George Thomson said: “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.

“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. As the government plans to remove Post Office Ltd (POL) from Royal Mail Group and make it a stand-alone company, this imperative is even greater.

“I warn the government that neither subpostmasters nor Post Office customers will tolerate any further moves to withdraw vital services from our counters.”

The CWU launched a scathing attack upon the Government, fearing for the viability of the Post Office network.

Billy Hayes, CWU general secretary, said: “This is a cut too far. Taking Government business away from the Post Office on top of privatising Royal Mail… 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.

“It’s a betrayal of Britain’s most vulnerable and a despicable act of vandalism on our post office network.”

Grayling understood that the “Post Office will be disappointed that they didn’t win the payment contract”, but declared now is the time to “start looking forward, not back”.

The Government previously announced a £73m fund to help the growth of Credit Unions, with ministers expecting the Post Office network to “play a central role in enabling Credit Unions to reach more families”.

“We would like to see people accessing Credit Union accounts across Post Office counters as well as credit union branches,” a Government statement said.

A Post Office spokesperson said: “Whilst Post Office is disappointed not to have been awarded the ‘Simple Money Transmission Services’ (SMoTS) 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 SMoTS 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.”

Do you agree with the move? Or is it indeed a “betrayal”? Please comment below…