Page last updated at 19:18 GMT, Tuesday, 11 November 2008

Mandelson sees Post Office growth

People queuing outside Post Office in London
Trust in the Post Office is key to its prospects, Lord Mandelson believes

Lord Mandelson has said he "believes in the future" of the Post Office amid reports it will be encouraged to offer more financial and government services.

The BBC understands ministers are keen for the service to develop new areas of business such as providing pictures for new passports and ID cards.

The network's future is uncertain with up to 2,500 branch closures mooted.

There are also worries about whether the Post Office will lose an existing contract to process benefit payments.

'Unique brand'

The future of the Post Office Card Account (POCA), which four million people use to receive benefit and pension payments, is uncertain with a decision on who will operate the service from 2010 due soon.

We should examine the prospects for the Post Office becoming a much more significant player in financial services
Lord Mandelson

Unions have claimed that a further 3,000 branches could shut - in addition to those set to shut following a lengthy consultation process - if the Post Office loses the contract to the private sector.

But Business Secretary Lord Mandelson said the government would "back" the Post Office's attempts to broaden the services it offered.

"It has a unique brand and a relationship with millions of customers," he told the BBC.

"It could be doing better in securing its future if we reflect further and widen the activities they taken on."

Earlier on Tuesday, the Guardian newspaper published details of a letter sent by Lord Mandelson to Gordon Brown in which he said public trust in the Post Office gave it scope to expand its services, particularly in the supply of financial products.

"We should examine the prospects for the Post Office becoming a much more significant player in financial services," the letter said.

The Post Office would have to compete against private firms to provide new government services.

The BBC's David Thompson said a "change of emphasis" in the government's approach to the Post Office would encourage both its employees and its customers.

Contradictory

The Conservatives said the comments appeared to contrast with the government's attitude towards post office closures.

"While they have been removing vital business from the network, we have been calling on the government to allow sub-postmasters to offer more services so that they can secure their future," said shadow business secretary Alan Duncan.

"Our proposals to expand the Post Office Card Account to allow more vulnerable customers to pay utility bills by direct debit will generate a further 20 million for the network, and help rescue many more post offices from Labour's cuts."

The Post Office has benefited from the funding crisis afflicting High Street banks this year, as more customers have moved their savings to its financial arm, run in partnership with the Bank of Ireland.

Ireland's decision to offer a blanket guarantee to all deposits in its banks - also covering Post Office accounts - led to a surge in new interest from people concerned about the safety of their savings.

More than 1.5 million people now have savings accounts with the Post Office, holding more than 3bn in funds.

But concerns over the scale of Post Office closures, particularly in rural communities, have raised question marks about the viability of its position as an alternative to leading banks.



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