Trade and Industry Press Notice 83

Session 2002-03     17 July 2003

Press Notice 83


Publication of Report

The Trade and Industry Committee today published its Report on the impact of the introduction of ‘Direct Payment’ on benefit and state pension claimants and the post office network.

The Government announced in May 1999 that benefit payments and state pensions would, in the future, be delivered via the Direct Payment (ACT) system. The phased implementation of this policy, involving the migration of existing clients from the old system of order books and girocheques payable at Post Office branches to payments to some form of bank or building society account began in April 2003. The Committee has reviewed the way in which ‘Direct Payment’ has been introduced, how benefit claimants have been or will be affected and how Post Office Ltd is responding to the challenge of replacing revenue lost as a result of the change in benefits delivery policy. 

The Committee concludes that, for those benefit recipients who prefer to conduct their day-to-day financial affairs through their bank accounts, the introduction of ‘Direct Payment’ will provide a more convenient means of receiving their benefits. An increasing number of claimants were already choosing this option.

However, there remains a significant number of people for whom the traditional system of payment by means of the order book is the best option. This includes many elderly or disabled people, for whom the prospect of opening an account of any sort presents difficulties and anxieties. It also includes those customers who rely on weekly cash payments as an integral part of their budgeting. The Committee feels that the Government did not take the needs of these people and the impact of a change in policy on them properly into account before Direct Payment was introduced. It concludes that the primary objective of the new delivery policy was to reduce Government expenditure.

The Committee regrets the fact that the Direct Payment programme has created a great deal of confusion and uncertainty among customers about the options available to them and feels that this could have been avoided, or at least reduces, if the Government had implemented an effective pubic information campaign before it began  the rollout of the programme.

The Committee regrets that the Government has not yet decided how benefits will be paid to those people who, for whatever reason, cannot open or operate a bank or Post Office card account - the Exceptions Service. It feels that, at the very least, the Government should reassure customers by making clear that order books can continue to be used until 2005, by which time the details of the Exceptions Service will be finalised.

The Committee found that the procedure laid down by the Government for opening a Post Office card account is too complicated and has recommended that the procedure should be no more complex than that for opening a basic bank account.

The Committee agrees that the change in policy on benefits payment presents Post Office Ltd with a serious challenge as it tries to bring its business back into profit, but concludes that this cannot be seen as a root cause of the problems faced by the business. The trend away from the use of the post office network for benefit collection started a long time before the introduction of Direct Payment. It is too early to quantify the impact of the introduction of Direct Payment on the income of the post office network and of individual sub-postmasters. Much will depend on the success of Post Office Ltd’s strategy for the development of banking services and other new products, and of its restructuring of the network. The Committee will keep the progress of the network under review.

Commenting on the Report, Martin O=Neill MP, Chairman of the Committee, said: A The Government’s intention to change the way in which benefits and pensions are delivered was announced more than four years ago. It is regrettable that, since then, too little attention has been paid to the practical problems that the change in policy will pose to some of the most vulnerable members of our society.

“Even though the majority of benefits and pensions recipients have bank or building society accounts and may find Direct Payment helpful, the new system does not cater properly for those for whom opening a bank or post office account creates difficulties, or those who rely on others to collect their pensions or benefits on their behalf. This has created anxiety and confusion which could and should have been avoided by proper forward planning on the Government’s part.

“ At the very least, it should have been made clear that customers have the option of continuing to use their order books to collect their benefits from their Post Office branch until such time as the Government has devised an Exceptions Service to deal with third party collections and other problems. The Minister for Pensions himself has acknowledged that for many people, “do nothing” is the best option available to them at the moment, and the Government’s public information material should reflect his advice.

“ The move to Direct Payment could hardly have come at a worse time for Post Office Ltd’s new management team, which is working to turn the company around and ensure the survival of the post office network, and has created considerable anxiety for sub-postmasters and their customers. But the Committee is clear that the change in benefit delivery, while it poses a major challenge to the viability of the business and of individual Post Office branches, cannot be seen as the root cause of the network’s problems. Customers were already drifting away from the network and using their bank accounts for benefit and pension collection. The Committee heard from the network’s management about their plans for the introduction of more banking and other new services into the Post Office’s product range, and much will depend on the successful marketing of those products, and on the company’s restructuring operation. We will maintain our close interest in these developments.” 

Copies of the Eleventh Report of Session 2002-03 can be downloaded from our website: (