Mandelson: Post offices have bigger role to play

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The Business Secretary made his intervention in a letter to Gordon Brown in which he suggested that the banking and wider economic crisis could strengthen the case for the future of the post office network.

"We should examine the prospects for POL (Post Office Ltd) becoming a much more significant player in financial services - offering a wider range of attractive products within easy reach of the whole population, available from an institution they can trust," the letter states. Lord Mandelson's views will delight campaigners battling to save their local post office. They are also likely to be surprised, as the Government was seen to be seeking to manage the shrinking of the network, which has been losing £4million a week.

In the letter, dated 30 October and leaked to The Guardian, the Business Secretary highlighted the "reassuring" reputation of post offices, saying "we will need to explore our options" over the funding of the remaining 11,500 branches after the current arrangements end after 2011. "POL has two real strengths," he added. "The first is the trusted 'post office' brand. The second is the fact that it offers direct physical contact across its widely accessible network with the 24 million people who visit a post office each week."

He said many savers had moved their money into post office accounts as fears grew over the safety of funds in banks. "Taken together I think all of these developments offer POL, with our support, a genuine opportunity to rebuild itself into a widely accessible, trusted provider of a broader range of financial services," he added.

His comments will raise hopes among sub-postmasters and mistresses that they could retain the £1 billion contract for the post office card account, rather than it going to private firm PayPoint.Labour MP John McFall, chairman of the Treasury select committee, said: "I'm glad to see that the Government is considering the Post Office playing a part in providing financial services which will eventually allow the Post Office to stand on its own two feet."

More than 2,500 post offices face closure after the Government cut the network's subsidy from £150million to £110million last year.

The Post Office is in talks with several Whitehall departments about offering more services, including checking the identity of applicants for new passports and driving licences, rather than just accepting paperwork for this task.