The campaign for a Post Bank has been stepped up with calls for the Government-owned Northern Rock to be used as the basis for a new state-backed bank in post office branches.

A coalition of groups, including unions and businesses, published detailed proposals it said would give a big boost to the post office network and prevent further closures.

A Post Bank would "revive and protect" post offices, support local communities and help smaller firms, especially as the banking system was still in "disarray", it was argued.

The Government was presented with a number of options, ranging from using Northern Rock as a foundation to a mutually structured people's bank, to buying out the current relationship between the Post Office and Bank of Ireland.

"There is a now a huge opportunity to meet the demand for secure, government-backed banking while also securing the future of the Post Office and Northern Rock. The time is right for Post Bank," said the coalition.

Billy Hayes, general secretary of the Communication Workers Union said: "We have met the challenge to create a workable model for the creation of a Post Bank. Our new report builds upon the conceptual idea and provides practical blueprints that will appeal to the general public who are disillusioned with the old, tired banking model.

"There's never been a better time to set up a Post Bank. In order to ensure a viable future for post offices across the UK we urge Lord Mandelson (Business Secretary) to endorse this vote-winning initiative and to urgently take the necessary steps to introduce a Post Bank."

John Wright, chairman of the Federation of Small Businesses, said: "Northern Rock presents the Government with a considerable opportunity. It should not consider selling it off privately, but instead, should use it to establish a Post Bank and invest in the long term future of the Post Office.

"Following the start of the economic slowdown last year, small businesses have experienced a sharp decline in access to finance and the Federation of Small Businesses estimates 120 small businesses are closing every day as a result of these tough conditions.

"The Government must choose between short-term profit and securing the long term future of financial services at the Post Office by establishing a trusted and non-profit making bank run through the post office network."

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