14 November 2008
By Julie Read
Government indecision over whether to leave Royal Mail in charge of the Post Office card account has left the fate of 3,000 post offices in the balance, senior MPs said this week.
In a report published on November 10, the Commons business, enterprise and regulatory reform select committee warned the Department for Work and Pensions that if the Post Office tender was unsuccessful, the decision 'would have grave effects on the Post Office network'.
The account, used by more than 4 million people, was designed to make the need for giros and payment books for pensioners and benefit claimants redundant, while still allowing them to use post offices to collect money.
A decision from Whitehall had been expected earlier this year, but Royal Mail now believes that the contract will be given to rival bidder Paypoint. Paypoint is the country's biggest private payment network, operating at more than 20,000 outlets including newsagents and supermarkets.
The current contract, under which the Post Office is paid by the DWP according to the number of people who open and use the account, expires in early 2010. In May last year the government put the new contract out to tender.
The MPs said: 'Several months on, no decision has been announced. Moreover, there is speculation that the contract could be split between the Post Office and another provider. This situation is destabilising for the Post Office network and we are disturbed the government has allowed [this to happen].'
The committee argued that 'a tender which offered far more teller outlets than the 10,000 specified but could do so only in urban or relatively densely populated areas would not, in our view, meet the needs of Poca users'.
It also warned that taxpayers could end up paying higher subsidies to maintain the network while supporting the commercial providers of the card account.