Bank and net plan for post offices

Post offices are seen as vital to rural communities

Post offices around the UK are to operate as banks under a major transformation plan set out by the government.

The proposals - aimed at saving hundreds of rural post offices from closure - will also see them equipped with computer terminals linked up to the internet.

And Post Office chiefs will be told to prevent "avoidable" closures of rural branches.

We want a network which can thrive rather than just survive in the 21st century

Stephen Byers

The new measures are aimed at halting the rising tide of closures of rural post offices, which has been blamed on a decision to pay pensions and benefits directly into people's bank accounts from 2003.

Trade and Industry Secretary Stephen Byers said branches would form a "Universal Bank", allowing 3.5 million people who do not currently have bank accounts to have one for the first time.

But the plans were immediately attacked by the Conservatives, who questioned whether they would compensate for the loss in business.

And a top Post Office executive said about 1,000 rural post offices will still close over the next five years, despite the measures.

Mr Byers said the Post Office will also be required to maintain its rural network and prevent avoidable closures.

"Our commitment is clear - to maintain the rural post office network and prevent closures," Mr Byers told the Commons.

Stephen Byers: "the government wants to keep post offices open"

He said a "significant" amount of money will be made available to support the network when the Comprehensive Spending Review is revealed in July.

People with a "universal bank" account would be brought into the mainstream banking system for the first time and would be able to use cash machines and set up direct debits, Mr Byers told MPs.

Computer terminals would allow post offices and people to exploit e-commerce, he said. Anyone ordering goods online could use the post office as a delivery point if they were out at work.

Cash guarantee

The minister said: "We want a network which can thrive rather than just survive in the 21st century."

And he gave a guarantee that pensions and benefits could still be paid in cash at post offices after 2003, if recipients still wanted.

New Post Office roles

'Universal bank' for up to 3.5 million people

Computer terminals for internet access

Advice shop on government services

Mr Byers outlined a third new role for post offices - becoming one-stop shops for advice and information on government services.

Plans will also be published to make it harder for post offices to close.

Special funds will be offered to improve offices in deprived urban areas.

The importance of post offices should not be underestimated, he went on. They were focal points for many communities and their popularity was a tribute to postmasters and postmistresses.

Who pays?

He said: "We are enabling it to adapt to market forces. But we also recognise the role of the Post Office at the heart of our society.

"I believe the package of measures I am announcing today will provide the certainty the Post Office needs to face the future with confidence."

But shadow trade and industry secretary Angela Browning said the switch to automatic bank transfers meant £400m of income being lost to post offices from 2003.

She wanted to know whether Mr Byers was guaranteeing that shortfall would be made up.

The uncertainty surrounding post offices' futures had resulted in 500 closures in the past year alone, she said.

She also wondered who would meet the costs of the "universal banks" - account holders, the Post Office, the bank or tax-payers.

Mr Byers' statement had been short on detail, she said.

Mixed response

Post Office managing director Stuart Sweetman said: "The report and the government's response are a very welcome step towards a revitalised, modernised and improved network."

But he said that "unavoidable" closures will still take place at a rate of around 200 a year over the next five years.

Help the Aged welcomed the news pensions could still be paid in cash but still had worries, including on banking transaction charges.

"Help the Aged is not convinced that the government is responding adequately to the Post Office and banking industry changes," said a spokeswoman.