Government to give green light to £140m for rural post offices

The Government is in talks with the Post Office on a £140m payout to keep rural branches open.

The amount and terms of the deal to keep the 8,500 rural post offices going until the end of 2006 are still under negotiation. This is intended to fulfil a Government promise to stem closures.

Last year the post office network posted a £160m loss, while Consignia, the owner of the Post Office and delivery service Royal Mail, had a £1.1bn loss as a whole.

The real crunch point will come in April, when benefit claimants will no longer have to get their income through a post office and can have it directly transferred to their bank account. The change will save the Government £400m a year, but will mean Consignia loses out on much-needed commissions.

The negotiations are separate from the £210m that the Government has already decided to give the Post Office to close 3,000 urban branches where there is little demand. On Tuesday Parliament will debate the deal.

Rural post offices have so far had little financial support from the Government.

However, Consignia has implemented a plan to maintain the rural networks. It has hired 28 "rural transfer advisers" – essentially management consultants for postmasters. They try to troubleshoot and devise solutions such as putting a post office counter in the local pub, or starting a mobile service.

Although these measures have been successful – the closures have fallen from 441 in the 2000/01 financial year to 194 last year – it will be harder to survive the loss of the benefits agency contract.

Sue Huggins, who is in charge of the rural network, said discussions were well advanced.

A spokesperson for the Department of Trade and Industry said that an announ- cement was scheduled shortly.

But last week there was good news as 10 banks pledged £180m over five years to get services through post offices from April.

Consignia's delivery division, Royal Mail, is also suffering from problems and may scrap the second post to save money.