Post Office bank plans attacked

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Government plans to promote new financial products and services in post offices have come under attack for having no chance of being implemented until after next year's general election.

Business Secretary Lord Mandelson said growing financial services would help secure the future of the postal network, which has suffered a wave of closures in recent years.

But shadow business secretary Ken Clarke said the ideas were uncosted and would not be introduced before the next polling day.

He said: "This is a last-minute attempt to patch up the damage Labour has done to the post office network after 12 years of neglect. Despite Gordon Brown's promise of reform in his conference speech, he has kicked plans for desperately-needed change into the long grass until after the general election.

"Of course, post offices need to diversify and offer a wider range of services in order to survive. We will give post offices more freedom to compete by offering a wider range of business services and advice on issues like tax returns and pension entitlements.

"If the Government think that this is such an important announcement, why are they only shuffling it out as a written statement in the wake of a press release, thus avoiding proper parliamentary debate and scrutiny?"

Unite and the National Federation of SubPostmasters both accused the Government of missing an opportunity to provide a people's bank based at the Post Office.

The Communication Workers Union said the announcement was "limited", adding that most of the details outlined in a consultation were already in the pipeline.

The public consultation will study the type of products that could be offered, including a Post Office Current Account, accessible from any of the 11,500 branches across the UK, Children's Savings Account, designed to encourage children to save through their local post office, Business Bank Account, and Weekly Budgeting Account, aimed at low income households so bills could be paid by direct debit every month or quarter.

Lord Mandelson said: "Growing financial services at the post office will help secure the future of the network and give people access to a full range of banking products at an institution they trust and value."

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Don't bog down progress in consultation, Mandelson. Just get on with making this great British institution a real banking alternative



The Post Office consultation announced today is a most baffling affair. It's billed by Lord Mandelson and his department as containing "exciting proposals" on which he wants our views. He wants to see the Post Office at the forefront of mortgage provision and he says it is "ideally placed to bring banking services to the heart of people's communities".

The consultation will ask us if we want the Post Office to have its own current account, a children's savings account, business accounts, the ability to manage our money on a weekly budgeting account, and links between the Post Office and credit unions.

The department for business, innovation and skills (BIS) also wants the banks that don't allow their current accounts to be accessed at the Post Office – hang your heads RBS and HSBC – to do so. (They could just tell them to do it – why consult us?)

The thing is though, these proposals are good. The Post Office should adopt all of them, and has indeed in the past announced that it will, for instance, offer current accounts. The big criticism is they don't go nearly far enough. A Post Bank – where all the profits go back into the Post Office and are not halved with the Bank of Ireland as at present – would be a really practical and visionary step. It would introduce diversity into the banking system too.

So why have a consultation? These are mainly business proposals that would extend the Post Office's thriving and well-run financial services. It's hard to see the populace rising up in indignation at the idea of Post Office children's savings accounts. ("How outrageous. I am so against this!"). It's not like that. Why are we having a three-month consultation on financial developments?

If BIS was serious about quickly expanding and strengthening the Post Office it would say to Alan Cook, its head, that he should just get on with providing these sensible and desirable new services. Whether people want them or not will show up in the market. At the New Economics Foundation and in the Post Bank Coalition we think that people love and trust the Post Office and will use these new offers and thus make these extended financial services popular.

The consultation is really worrying on two counts. The main one is that these mouse-like developments – in fact any self-respecting mouse would have a bolder vision than this – don't tackle the neglect and the lack of government support from which the Post Office has suffered for decades. A third of sub-postmasters and sub-postmistresses have seen their revenues decline in the last year. This is just not sustainable. The government has recognised today that the Post Office is a great British institution but it needs to treat it like one.

That means that it doesn't need this consultation (reporting cunningly just before the election, when the long grass will be even longer) but it does need to follow the excellent advice of the BIS select committee report last July – on, yes, the future of the Post Office. Having massively consulted, it concluded that financial services should be expanded and that, crucially, the government must put its business through post offices and recognise the Post Office's potential as an unparalleled social, community and economic network.

Mandelson's department needs to be more radical, more profoundly committed to strengthening the Post Office, more committed to helping small businesses have the financial advice and help they need, than is allowed for by these virtuous proposals. Consulting us on a Post Bank, on using Northern Rock, on making the Post Office the public alternative to our present dreadful banking system – now that would be worth consulting on.