Áine Collins (Cork North West, Fine Gael)
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I thank the Minister of State for taking this debate. The decision by the Department of Social Protection to issue a new tender this coming September for paying social welfare benefits could, if implemented, see the closure of up to 400 post offices. This would have a devastating effect on rural communities. Bank branches in rural areas have already closed. I am concerned that this will continue not only in many villages, but also in substantial towns. It is possible that, within a few years, bank branches will only be located in cities and large provincial towns.

If post offices close in my constituency of Cork North-West, a majority of people will have no access to a financial institution in any town or village, with the possible exception of credit unions. Credit unions are being considered for rationalisation and are not open for normal hours of business in many places. The current proposals require a reduction in cash payments for social welfare benefits at post offices from the current level of 51% to 3% by 2017. This reduction in cash payments would directly result in the closure of 400 post offices.

People are sore with banks after what has happened in recent times. A new type of banking is being developed under which we must pay for each transaction. People who are in receipt of social welfare payments already have strained budgets. Many have gone through significant personal crises in recent years. Asking them to reduce their spending power in order to pay for every transaction is not something that I would support.

In many areas, the only available shop is attached to a post office. We know from a similar experience in the UK that most of these shops will close down. No cost-benefit analysis has been carried out to take into account the potential damage that could be caused by the Department's actions socially, economically and to the overall community.

Security is also an issue. In recent times, there have been horrific crimes against older people and thugs have robbed them for small amounts of cash. In the new scenario, these same thugs will know that every pensioner will have a swipe card and a pin number, leaving them vulnerable to being forced to hand over their cards and details, guaranteeing a cash return for the robbers. Fraudulent payments could also be an issue. Making an automatic payment into a bank account with no necessity for someone to show up for payment is wide open to abuse. Unscrupulous people need not interrupt their days' work to collect unemployment benefit fraudulently. Recipients of other payments can be living in another jurisdiction while continuing to draw their payments illegally without any fear of being detected.

During the banking crisis, the Department of Finance has benefited from significant levels of savings being deposited at post offices. If 400 post offices close, that money will gradually return to the banking system. The proposed changes may have short-term financial gains for the Department of Social Protection, but these will be more than offset by costs to other Departments, for example, the Departments of Justice and Equality, Finance and Transport, Tourism and Sport, as well as an unseen cost to the Department of Social Protection.

We must consider the potential for errors in electronic systems, such as that which occurred today. Electronic payments made to bank accounts have been delayed today due to a processing issue. Payments through post offices are a way of avoiding such a situation. This kind of delay can cause serious hardship for people who are living on the edge, where every cent counts. We all remember the impact of such a technological glitch when Ulster Bank had problems with its systems last year.

Will the Minister of State postpone this process until the impact can be fully assessed? I am not just referring to the financial impact, but to a wider community impact. I am seeking an assurance from the Minister of State that this will not be a fait accompli when we return in September. We need more in-depth consideration of these issues.

Alex White (Dublin South, Labour)
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I am responding to this Topical Issue debate on behalf of my colleague, the Minister for Social Protection, Deputy Burton.

The payment strategy being considered by the Government has the goal of reducing significantly the level at which welfare payments are made in cash. This goal is shared by the national payments plan and the roll-out of the standard bank account. Reflecting its central role in the delivery of cash transactions, this will in particular impact on An Post, notably in the context of the delivery of welfare payments.

The payment strategy is a multi-phase strategy to be achieved over a number of years. The first phase is progressing, with the Minister being able to announce recently that An Post had been selected as the preferred bidder for the cash payments service, subject to contract agreement. This will ensure a cash service will be available at local post offices for up to six years while other aspects of the strategy are progressing. The second phase of the strategy will be the public procurement competition for a new electronic payment solution to commence later this year. This e-payment solution will supplement existing direct payment by electronic funds transfer, EFT, into customer accounts in financial institutions while strengthening the Department's approaches to fraud and control.

The Department must look for opportunities to provide better and more secure customer service while continuing to serve the most vulnerable in our society. In building on the visible movement of welfare customer towards EFT, the strategy sets out a roadmap for progressive movement towards the increased use of electronic payment channels. In support of national competitiveness, cost containment and cost efficiencies in the payments process are crucial in light of budget constraints and the Government's policy to protect the value of social welfare payments.

Analysis undertaken for the payment strategy indicates a significant variation in the cost of different payment methods. It costs six and a half times more to issue a payment to a customer in cash than it does by EFT. The movement of cash also has societal costs and imposes security risks on customers and staff alike who handle, distribute and receive these moneys. Cash limits the scope for customers to avail of cheaper prices online and curtails financial inclusion of customers. Cash also perpetuates transactions in the shadow economy.

Undeniably, a loss in the current revenue stream from social welfare payments would impact on An Post. The Government understands that in anticipation of the increasing use of EFT generally, An Post has prepared and implemented a strategy that aims to address the reality of increased use of electronic payment methods within the economy. On the revenue side, An Post has made significant progress in developing new commercial opportunities with other financial and payments institutions, notably AIB and Danske Bank. It is understood that agreement has also been reached with Aviva on transferring the Aviva branch network to An Post. New lines of business have been generated, such as foreign exchange where An Post now holds 30% of the domestic foreign exchange business. Post offices were also used as a payment channel for the property tax.

The Minister has asked me to assure the Deputy that welfare customers will be assisted in a period of managed conversion to electronic payments so as to limit the risk of anxiety or stress for customers. This will also benefit the board of An Post in devising and implementing suitable strategic business options for the delivery of its services and the maintenance of its network.

Áine Collins (Cork North West, Fine Gael)
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I thank the Minister of State for his comments. While I accept the need for rationalisation and cost savings in government, particularly in the Department of Social Protection, which has the largest budget, we are discussing more than just a financial cost. Who will pay for the lodgement to the bank? Every time a transaction is carried out on an account, the individual must pay for it.

In rural Ireland, social protection means more than giving money to people in the most cost-effective way. A connection with the post office is sometimes the only outlet for social interaction that many older people have in the entire week. They look forward to their few hours on Thursday or Friday when they collect their pensions, meet their friends and do the little shopping that they require. This benefit to the entire local economy is badly needed at this time. We are all aware of the difficulties being experienced on rural high streets. Yesterday, I spent some time with traders in Charleville alongside Retail Excellence Ireland. They emphasised the importance of the mix of retail and services. The post office would be a necessary part of this mix.

We need to open a discussion on what type of society we want. Anyone who tried to shout "Stop" about the property bubble was ignored or ridiculed. We must not make the same mistake now and not shout "Stop" about changes that have the potential to rip the heart out of communities throughout the country. These changes will have a long-term impact on the type of society and communities in which we live, work and grow old.

I cannot overstate the importance of this issue for my constituents and people in rural Ireland generally. We are all now facing into the holidays and a new tender process will commence in September. I ask the Minister to postpone this process and allow the Government time to examine the potential impact. This action will have devastating consequences for urban and rural areas, and society in general.

I acknowledge that An Post has challenges outside the issue of social protection. We have examined the idea of paying motor tax in post offices and the Minister of State also referred to Aviva and various other payments. In small rural villages, however, such payments will not keep local post offices viable. Without social welfare payments, such post offices will not be viable. We are looking at the closure of 400 post offices and the effect that will have on jobs.

Alex White (Dublin South, Labour)
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Deputy Áine Collins has made the case very well indeed concerning the importance of post offices. She has said how vital rural post offices are in provincial towns and villages. Post offices are also extremely important in suburban Ireland as they are central to the social interaction the Deputy outlined.

The Government accepts that while cost is a hugely important factor and must be uppermost in our minds, particularly at the moment, there are broader considerations such as those referred to by the Deputy in the course of her contribution.

An Post is aware of opportunities to develop and enhance new lines of business, and it is doing so already. An Post is a strong organisation and it will continue to develop. From that perspective, therefore, there are such opportunities.

The Deputy made the point that change is happening quickly. The response I have given from the Minister for Social Protection indicates that while the Department is moving on with its proposals, there is nothing particularly sudden in respect of what is occurring. Opportunities have been provided for a period of managed conversion and change. There is a run-out period, as I have outlined, and there will be opportunities for the Deputy and others to contribute to this discussion as it proceeds.

While the financial context is not the only consideration to be taken into account, it is a very real one. From that perspective, I have nothing further to add to what the Minister for Social Protection has stated in response.