3,000 more post offices could be forced to close

The warning, from the National Federation of Sub-Postmasters, will be another blow to millions whose local post office is the heart of their community.

It comes as 2,500 branches are already disappearing from villages, towns and cities across Britain under the current closure programme.

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But George Thomson, the federation's new general secretary, will warn in a speech today that thousands more face the axe.

If his bleak prediction is correct, 25 per cent of the branches which survive the closure programme will shut down.

This would mean the number of post offices will have plunged from 19,000 to just 8,500 since Labour came to power in 1997. The controversy centres on the Post Office Card Account, which is used by around four million claimants every week, mostly pensioners.

It was established in 2003 when the Government forced pension and benefit recipients to receive payments via a bank account.

Those without a bank account were offered a card account, similar to a basic bank account. They use a plastic card with a four-digit PIN number to get their money.

But the current contract ends in 2010 and under European law the Government must put out the new contract to tender. This means Post Office Ltd must fight rival bidders to win the contract, with a decision expected in the summer.

Mr Thomson will tell the National Federation's annual conference in Torquay it would be "catastrophic" if the Post Office loses the contract.

But sources say PayPoint, the payment network with a history of winning contracts from the Government such as the BBC licence fee, has put in a bid.

Users of PayPoint terminals can pay an energy bill, the London congestion charge, top-up a mobile phone or renew a TV licence.

The network already has 19,000 pay terminals in shops around the country - a wider network than the crumbling Post Office.

Yesterday Mr Thomson said the Card Account was a "crucial lifeline to thousands of sub-postmasters already struggling to keep their businesses going." Of the 24million visits made to post offices every week, about 6.5million are made by Card Account customers.

The decision on the contract - which will run from 2010 to 2017 - will be made by the Department for Work and Pensions.

A department spokesman declined to comment on the federation's concerns because of its involvement in the tender process.