Page last updated at 09:59 GMT, Wednesday, 2 December 2009

Post Office bank plans outlined by government

Post Office sign
Under government plans, the Post Office would offer mortgages

Plans for the Post Office to start offering financial products have been outlined by the government.

There will now be a public consultation on the plans, which include offering access to accounts from every one of the Post Office's 11,500 branches.

The plan, which also includes the provision of mortgages, requires investment of up to £1.7bn by 2011.

The changes would turn the Post Office into "a leading player in financial services", the government said.

Wide network

"The Post Office is a great British institution that has been part of our economic and social fabric for well over 300 years," said Business Secretary Lord Mandelson.

"Growing financial services at the Post Office will help secure the future of the network and give people access to a full range of banking products at an institution they trust and value."

He added that the Post Office had more branches than all the High Street banks combined.

The government plans include:

  • Current accounts accessible from any post office branch
  • Children's savings accounts
  • Business accounts
  • Weekly budgeting accounts that ring-fence a proportion of income each week to pay bills
  • Closer links with credit unions
  • Working to ensure that all bank current accounts can be accessed via the Post Office.

"Our consultation outlines exciting proposals, but I want people to have their say," said Lord Mandelson.

Leaflets giving information about the plans and offering customers the chance to provide feedback will be available in all branches of the Post Office over the next 12 weeks.

Post offices are often crowded and providing broader financial services may create more clogging in the system, and some staffing issues
David Stubbs, Europe Economics

The government then hopes to begin rolling out the new services over the following year.

The plans do not make any proposals for the banking institutions that sit behind the Post Office's banking operations.

Currently, the Bank of Ireland provides the majority of its facilities.

'Turning point'

The consumer group Consumer Focus welcomed the government's plans.

"A greater role in financial services for post offices would benefit all post office users, but could particularly help low-income customers, small businesses, and those in rural and deprived urban areas where there are fewer banks.

"[The plans] could be a turning point in delivering a secure future for the Post Office network."

But there are concerns about whether post offices could cope with additional customers, and whether its staff are adequately trained to advise on financial matters.

"There are practical problems. Post offices are often crowded and providing broader financial services may create more clogging in the system, and some staffing issues," David Stubbs at Europe Economics told the BBC.

"[The Post Office] has put quite of lot of resources and effort into training its staff to become financial services advisers over the last few years, but there is some way to go before people can trust them to give the same type of service they can get from retail banks."

In October, Royal Mail, which operates the Post Office, was hit by strike action, with workers walking out in a dispute over job losses, pay and working conditions.

The government has outlined plans to part-privatise Royal Mail. Although the company's profits doubled in the year to the end of March, the government insists that radical change is needed to secure the company's future.

Mail volumes are falling by about 10% every year, and the company has a multi-billion pound pension deficit.

Extending its financial services would give the company the opportunity to increase its revenues.



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SEE ALSO
Post union welcomes 'concessions'
06 Nov 09 |  Business
Royal Mail strikes are called off
05 Nov 09 |  Business
Government backs sell-off of mail
16 Dec 08 |  Business
Royal Mail faces call to change
15 Dec 08 |  Business

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