£180m boost to expand post office financial services

The Government today announced extra funding of £180 million for Post Offices under a "major expansion" of financial services offered by the network.

The new money is on top of £1.7 billion currently being invested in the 11,500 branches, with the aim of making them more sustainable.

Business Secretary Lord Mandelson said: "Since the global banking crisis we have set about reinventing the financial services industry piece by piece, building a system that is fairer, trusted and more responsible.

"Today is the next step in that process. The Post Office is a well-loved community institution and this move will bring more banking services back to the heart of those communities."

Lord Mandelson said the new measures, including new accounts and business services, had previously been likened to creating a Post Office Bank.

A coalition of groups including the Communication Workers Union, Federation of Small Businesses and National Pensioners Convention were pressing ministers to support a Post Office Bank.

Lord Mandelson said today's announcement would be a core part of Labour's election manifesto.

Ministers said the measures announced today marked a "step change" in banking at the Post Office and demonstrated the Government's ongoing commitment to the Post Office network.

They include a weekly budgeting account to help people on low incomes manage their household budgets and save money by taking advantage of the discounts for using direct debit to pay their utility bills; a children's savings account to be launched in the next 12 months; and a Post Office Current Account, which will be accessible from any Post Office in the country.

Negotiations are also taking place with RBS and Santander to give access to their current accounts, meaning that around 86% of current accounts would be accessible at Post Offices.

A new agreement was also announced with Santander to allow all its business account holders to access their accounts at the Post Office.

The Post Office will also explore the development of a Post Office business bank account, which would be available throughout the network.

Other measures will include Post Offices offering a new mortgage product with a 90% loan-to-value ratio aimed at first-time buyers, plus a Saving Gateway account for people of working age on lower incomes.

Business Minister Pat McFadden said: "The Post Office can provide a range of good value, simple financial products for everyone.

"These are the clear messages that people have given us and we are acting on them - a major step towards making the Post Office a sustainable neighbourhood banking service."

Climate Change Secretary Ed Miliband, Labour's general election manifesto co-ordinator, said: "Paying bills by direct debit often means a discount on bills of nearly £100 a year. This new account will mean some of the consumers who have to pay higher fuel bills can benefit from that discount and manage their energy bills better.

"We will continue to work with companies and consumers to ensure energy bills are as low and as fair as possible for everyone."