Banks snub post offices scheme

Rural post offices are under threat of closure

The government has insisted that its plan for a new "universal bank" operated through rural post offices, is still on track despite criticism from leading bankers.

The scheme, which could save local post offices from closure, would be open to everyone, including people on low incomes who could receive benefit payments into their accounts.

Members do not consider the idea of a universal bank to be either useful or attractive

Tim Sweeney, British Bankers Association

But members of the British Bankers Association, the governing body of banks, say the proposals would create an unattractive, "poor person's bank".

The association's director Tim Sweeney, in a letter obtained by The Guardian newspaper, said his members were against the idea they had been asked to help run.

"My members do not consider the idea of a universal bank to be either useful or attractive," said the letter quoted by The Guardian.

Stephen Byers said branches would form a 'universal bank'

"The potential for there to be a stigma for those using what may come to be known as a "poor person's bank" should also not be overlooked."

The Department of Trade and Industry responded that the comments were premature as banks had not yet received full details of the scheme.

In a statement it said: "The Post Office is to present a business plan for the universal bank to the government at the beginning of September.

"It therefore follows that detailed proposals concerning the universal bank have not yet been given to the banks. When they are, we are confident that many of the concerns expressed by the banks will be met."

The new measures are aimed at slowing the increasing number of closures of rural post offices, which has been blamed on a decision to pay pensions and benefits directly into bank accounts from 2003.

'Expensive and complex'

The government says the universal bank would allow 3.5 million people to have a bank account for the first time which they could access without having to travel to larger towns.

The bankers say the Post Office and Benefits Agency should join the Link Cash Machine network instead.

Mr Sweeney said the government's proposals seemed to be an extremely expensive and complex way of delivering the service.

But he said association members wanted to work with the government to provide basic banking services to people who did not have accounts.

"The thrust of the letter was to say we understand the government's objective, we just think there are better ways of achieving it," he told the BBC Radio 4 Today programme on Saturday.

Tories: 'Ill thought-out'

Shadow trade and industry secretary Angela Browning said: "This problem is one of Labour's own making - it is their policy that will prevent people from collecting benefits at sub post offices from 2003.

"This is yet another example of a poorly conceived, ill-thought through scheme from Labour, designed to create headlines but with no substance, or promises of government funding, behind it at all."

She said the real issue was who would pay for bank accounts for those who currently do not have one.

She said: "It's clear from today's BBA statement that it won't be the clearing banks, so will it be existing account holders, taxpayers or post offices? No answers have come because Labour have absolutely no idea."

Colin Baker, of the National Federation of Sub-Postmasters said the banks were not delivering a veto and added: "We can talk this through."

The Department of Trade and Industry, which has pledged to help increase business to rural post offices, said it was disappointed by the reaction from the bankers' association.