Welfare payment via PayPoint - but what will it mean for our Post Offices?

CITIBANK WILL PROVIDE a new service to replace welfare cheques (the "Giro") with cash from PayPoint outlets, the Government announced last week.

Citibank, the international bank, will provide the new over-the-counter service at PayPoint outlets across the country from 2012 in a contract worth around £20m a year. The new service will mean payments by welfare cheque, currently operated by the Post Office, will be phased out gradually to make sure people have time to prepare for the change.

The decision to end payment by cheques is supported by the dramatic fall in their use over the last few years, with less than 2 per cent of welfare payments made by cheque says the Department of Works and Pensions. It now costs the taxpayer around £30 million to process cheque payments.

Chris Grayling, Minister for Employment 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."

However Consumer Focus, the customer advocacy champions, said:

"Our research suggests that people, particularly those on a low income, value the security and privacy that post offices provide. We are concerned that many convenience stores will not be able to provide the kind of service many consumers need. This will be a major blow for the post office network. Government has committed to making the Post Office the ‘front office’ for public services. The decision to axe this £20million contract seems out of step with that ambition."

Of course any measures that affect the services currently provided by Post Offices and threaten their existence as viable businesses will be looked at with alarm by local people.