The government has decided against the creation of a Post Office Bank scheme, blaming cost constraints.

Speaking at the launch of the future of the Post Office policy statement, Minister for Postal Affairs Ed Davy said that although the government was keen to extend banking through the network, the scheme would be too costly to implement.

“Now is not the right time to create a state-backed Post Office Bank,” said the Minister. “Setting up and capitalising a new bank would be time consuming and extremely expensive. At a time when public finances are under huge strain, funding is better spent modernising and maintaining the network.”

The Post Bank scheme was first proposed by Lord Mandelson under the Labour government as an alternative to high street banks. The idea was supported by the Liberal Democrats in its election manifesto earlier this year.

The decision to cancel the scheme was criticised by trade groups. The Federation of Small Businesses said it would have helped keep the network alive while providing a solution for small firm having difficulty accessing finance. The Communication Workers Union said it would have “brought lucrative business to the Post Office”.

The government did announce an agreement to allow RBS customers access to their accounts through the Post Office network. According to the Minister this will enable over 80% of current accounts to be accessed in post offices, with only Santander and HSBC remaining
independent from the network.

It also announced several pilot schemes that will enable post offices to offer government services. This includes providing ‘print on demand’ government forms to the public. The government is also exploring plans to allow post offices accept Pension Service and National Insurance Number applications.

National Federation of SubPostmasters general secretary George Thomson welcomed the trial of government services in post offices.

“They have the potential to allow the public to deal face-to-face with the state in a trusted local environment, as well as delivering vital new revenue streams for our post offices,” he said.

“However ministers must ensure that funding is earmarked to allow the nationwide rollout of these services on a permanent basis,” he added. “We must also see enough services introduced to ensure there is an increase in the number of people visiting post offices.”