The Department for Social Security has backed down over proposals to automatically pay all state benefits to recipients through personal bank accounts.
The climbdown comes as major banks privately admit they are unwilling to grant accounts to many state-benefit recipients, as they look to cut costs by shedding unprofitable low-income customers.
About two-thirds of 27 million state-benefit recipients use payment books, which they cash in at post offices. The rest receive payments through their bank account, under the automatic credit transfer (ACT) system.
In May, the DSS proposed a full-scale switch to ACT, to occur between 2003 and 2005, when all recipients would receive payments through personal bank accounts.
But, the Government’s White Paper on the future of the Post Office, published last Thursday, concedes: “All benefit recipients who wish to collect benefits at post offices will still be able to, both before and after the change (to ACT).” A DSS spokeswoman also says that ACT will not become compulsory.
Colin Baker is a member of a ministerial working group set up by the Government to implement the ACT initiative, and also general secretary of the National Federation of Sub-Postmasters.
Baker says: “The decision (to allow the continued use of payment books) indicates that the Government has a problem it hasn’t thought through.
“The banks have indicated that they don’t want many of the state-benefit recipients and the Government has realised if it wants to make ACT compulsory, it’s probably going to have to operate the bank accounts itself, perhaps through a social bank.”
About 4.7 million, or ten per cent, of the UK adult population are without bank accounts, including many of the 1.6 million unemployed, according to Datamonitor.