Lilley accused of misleading MPs over post offices: Fears that benefits payment move could lead to 5,000 closures. Rhys Williams reports

PETER LILLEY, the Secretary of State for Social Security, misled the House of Commons when he promised MPs on Tuesday that the Government would safeguard the future of rural post offices, the National Federation of Sub-Postmasters said yesterday.

Mr Lilley had told the Commons that the Government's attempt to persuade more people to have benefits paid directly into their banks would not mean the closure of village shops.

During heated exchanges, he accused his Opposition counterpart, Donald Dewar, of scaremongering, explaining that all small post offices were paid a fixed sum regardless of the business transacted. 'Changes in people switching to automatic credit transfer (ACT) would make no difference in the amount of remuneration they receive,' Mr Lilley said.

But according to Kevin Davis, the federation's assistant secretary, only 1,626 out of a national total of 19,000 sub-post offices rely on such fixed sums. These are community offices open two or three half days a week in rural areas where there is insufficient population to sustain a full-time office. The remaining 17,374 offices, both rural and urban, depend on fees paid for each transaction performed.

'Those salaries are directly related to the amount of business they do,' Mr Davis explained. 'If there was a reduction in the amount of DSS work, it would directly affect the income, hence the viability, of those offices. We estimate that somewhere in the region of 5,000 sub-post offices would be under threat.'

Each year Department of Social Security business accounts for 956,000,000 sub-post office transactions, around half their total workload. A Post Office spokesman said: 'No post office is immune from the crucial importance of DSS work.'

Mr Dewar told the Independent yesterday that he would be pressing Mr Lilley for a full explanation: 'The minister either spoke in ignorance or was thoroughly selective with the truth. It was a fiery debate, but the minister should not take refuge in inaccuracy when he is in trouble.'

The Government calculates that it could save millions of pounds in administrative costs if people were to switch to having benefits paid through their bank: payments direct to bank or building society accounts cost 3p per transaction compared with 44p for payments through post offices. Delivering benefits at present costs the DSS pounds 650m a year.

Suspicions that the Government had a hidden agenda to close up to 5,000 sub-post offices were raised when three types of new form were sent to 24,000 pensioners in the North of England, suggesting that pensions should be paid to banks using ACT. Alternative methods of payment were suggested, but one form did not mention post offices.

A federation leaflet campaign warning that post offices could close has produced full mailbags for MPs. Elizabeth Peacock, Conservative MP for Batley and Spen, estimated that

she had received more than 600 letters, some of them from very elderly pensioners in their eighties or nineties.

Mr Lilley assured the Commons on Tuesday that pensioners would always have a choice.