Government called to account over benefit payment changes

A Department of Trade and Industry committee today lambasted the government over the way it has dealt with the move towards electronic payments of post office benefits, saying that the primary motivation behind the move was a reduction in expenditure.

The government began its implementation of a phased move from the old system of order books and girocheques to electronic payments via banks or building societies in April this year. The all-party committee, which was set up to look at the impact of the new system, said that it had created "a great deal of confusion and uncertainty among customers."

It added that it appeared that "the primary objective of the new delivery policy was to reduce government expenditure."

The report, entitled 'People, Pensions and Post Offices', said that while the move to electronic receipt of benefits was more convenient for some customers, many elderly or disabled people found the system fraught with difficulties and were often better off receiving payment by order book.

The committee said that the government should be doing more to make it clear that customers can continue to use order books until 2005 and added that the procedure for opening a Post Office card account, one of the options for electronic transfer, was too complicated.

The Post Office has expressed its concern that the Post office card account - funded by the government - is not being promoted heavily enough and that when customers did want to apply they were running into difficulties.

"It is my firm belief that the government wants as many people as possible to use their bank accounts to access benefits," Colin Baker, chairman of the National Federation of Subpostmasters, told the Observer newspaper. "The customer journey to pay into a bank account is pretty slick. On the other hand, if you want to open a Post Office account, it's very difficult."

Forty per cent of the turnover of Post Office branches currently comes from benefit payments, and the Post Office could lose as much as ?400m a year if no one signs up to the card accounts.

Yet the committee concluded that while the change in benefit payments presented the Post Office with a "serious challenge", it was not at the root cause of the problems faced by the business, given that people were moving away from their local branches for benefit collection before the start of the new system.

The government responded to today's report by saying that it believed the committee had "fundamentally misunderstood (its) position" and that it was giving customers "more choice and flexibility over how they collect their money than ever before".

Original article: Electronic benefits have loose wiring