Conservative proposals on Post Office Card Accounts
Following the excellent news that a campaign by Conservatives and others has shamed the government into renewing the Post Office Card Account contract, this is how Conservatives believe that the card should be extended, helping both Post Office branches and customers.
What does the Post Office Card Account do now ?
POCA is a basic cash account run by the Department for Work and Pensions, which currently can only receive welfare, state pension and tax credit deposits.
How would the Conservatives extend it?
A Conservative government would expand and widen the role of POCA, both enabling it to accept additional deposits – including housing benefit and any weekly wages – and create sub-accounts which can be used for direct debit payments on a full range of public and private sector bills, including utilities.
Based on evidence from industry, vulnerable customers ‘cost’ utility companies on average double the amount of non-vulnerable customers. This is because of higher collection costs.
The running costs of the additional functionality will be met in full by participating energy companies. A number of utility companies, including EDF, United Utilities and Water UK (the representative body for UK water companies) have endorsed this proposal.
Who will benefit
According to the latest Treasury figures, over two million people do not have access to a bank account (HM Treasury, Family Resources Survey, 23 July 2008).
However, research by the social enterprise Saving for Poverty has shown that the figures for those who are unbanked or act as unbanked (because they withdraw all their cash on a week-by-week basis) is actually nearer to 8 million.
Not being able to pay bills by monthly direct debit adds a substantial penalty onto household bills – primarily because of the higher collection costs faced by energy companies dealing with unbanked customers.
Amongst the six main energy suppliers, direct debit customers save up to £80 a year over standard customers, and save £122 a year over pre-payment meter customers according to the latest available figures from Energywatch (August 2008). These figures are even higher when compared to online direct debit payments.
Save the Children has estimated that the ‘poverty premium’ costs an average £1,000 per year. This figure includes fees arising from the use of non-mainstream credit lenders who can charge as much as 170 per cent interest.
Utility companies will use the cost savings generated through these customers paying through automated direct debit style processes – estimated by Saving for Poverty to be up to £800 million a year – to offer lower rates to these users, bringing them broadly into line with traditional direct debit customers. This equates to £100 per POCA customer.
Post Offices
Fees from utility companies for this POCA functionality are projected to generate £20 million in additional revenues for post offices each year (Saving from Poverty).
Post Office Ltd. makes a saving of approximately £18,000 from the closure of each individual post office (Royal Mail). The £20 million of additional revenues could therefore help to keep more post offices open and help suspend the Labour Party’s programme of forced post office cuts.
What does the Post Office Card Account do now ?
POCA is a basic cash account run by the Department for Work and Pensions, which currently can only receive welfare, state pension and tax credit deposits.
How would the Conservatives extend it?
A Conservative government would expand and widen the role of POCA, both enabling it to accept additional deposits – including housing benefit and any weekly wages – and create sub-accounts which can be used for direct debit payments on a full range of public and private sector bills, including utilities.
Based on evidence from industry, vulnerable customers ‘cost’ utility companies on average double the amount of non-vulnerable customers. This is because of higher collection costs.
The running costs of the additional functionality will be met in full by participating energy companies. A number of utility companies, including EDF, United Utilities and Water UK (the representative body for UK water companies) have endorsed this proposal.
Who will benefit
According to the latest Treasury figures, over two million people do not have access to a bank account (HM Treasury, Family Resources Survey, 23 July 2008).
However, research by the social enterprise Saving for Poverty has shown that the figures for those who are unbanked or act as unbanked (because they withdraw all their cash on a week-by-week basis) is actually nearer to 8 million.
Not being able to pay bills by monthly direct debit adds a substantial penalty onto household bills – primarily because of the higher collection costs faced by energy companies dealing with unbanked customers.
Amongst the six main energy suppliers, direct debit customers save up to £80 a year over standard customers, and save £122 a year over pre-payment meter customers according to the latest available figures from Energywatch (August 2008). These figures are even higher when compared to online direct debit payments.
Save the Children has estimated that the ‘poverty premium’ costs an average £1,000 per year. This figure includes fees arising from the use of non-mainstream credit lenders who can charge as much as 170 per cent interest.
Utility companies will use the cost savings generated through these customers paying through automated direct debit style processes – estimated by Saving for Poverty to be up to £800 million a year – to offer lower rates to these users, bringing them broadly into line with traditional direct debit customers. This equates to £100 per POCA customer.
Post Offices
Fees from utility companies for this POCA functionality are projected to generate £20 million in additional revenues for post offices each year (Saving from Poverty).
Post Office Ltd. makes a saving of approximately £18,000 from the closure of each individual post office (Royal Mail). The £20 million of additional revenues could therefore help to keep more post offices open and help suspend the Labour Party’s programme of forced post office cuts.
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