Mandelson offers hope to Post Office

Lord Mandelson has pressed the prime minister to save the Post Office network by allowing it to offer government services and financial products, according to a leaked letter seen by the Guardian newspaper.

It says Lord Mandelson suggests the current economic downturn and “recent events in the financial services” present an opportunity for the Post Office to take on a new range of tasks.

In the letter to the prime minister dated October 30, Lord Madelson says: “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 suggested policy would be a reversal of current accepted thinking that the government has become resigned to managing a decline of the network which is currently making losses of £4m a week.

The proposed review would be separate from one about to report by Richard Hooper, the former chairman of the communications regulator Ofcom, who is conducting a review into the Royal Mail postal service.

In the letter the business secretary refers to the “reassuring” nature of the Post Office, appearing to suggest the government could defy expectations and return to it the £1bn contract for the post office card account (Poca).

Lord Mandelson says: “POL has two real strengths. 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.

“As recent figures show, many savers have demonstrated their trust in the Post Office by moving their savings into accounts it offers. Similarly, the face-to-face contact which a post office offers is becoming an increasingly important and reassuring factor for many people – especially when many private companies, as well as many government agencies, are seeking to reduce their own face-to-face contact points.”

“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.”

Last year the government fought against massive opposition, within even its own ranks, to scale back the network, enabling it to cut government subsidy from £150m to £110m. The decision was so unpopular that members of the government who had been in the cabinet when it backed the plans – including Jack Straw and Tessa Jowell – openly campaigned against closures in their own constituencies.

More recently it was an issue in the Glenrothes byelection: Conservatives and Liberal Democrats campaigned against closures in Scotland.

At present, 2,500 post offices are due to close, and some have already shut.