Post office closures at record high

The rate of closure of sub-post offices is accelerating rapidly, despite promises by the government to find them new business and reverse their collapse.

Figures for the first two quarters of this financial year show 333 post offices have shut, only 49 fewer than closed in the whole of the previous financial year, in itself a record. If the trend continues, more than 600 net closures will take place this year.

The figures, released by the Department of Trade and Industry, show 145 closures in the first three months of this financial year and 188 in the second quarter.

At the beginning of the year the Post Office could claim a network of 18,000 branches, the biggest single commercial network of outlets in Europe.

In a new worrying twist for the government, the number of rural closures at the half-year stage has declined, but there has been a rapid increase in the number of post offices in towns shutting down, especially in poorer areas.

The government is in large part responsible for the problem, as a result of its decision to switch payment of benefits from cash via post offices to automated payments direct into bank accounts.

The Post Office has calculated it will lose £400m of business annually as a result of the move. The switch, which is taking place in stages, has removed one of the most profitable lines of business of local post offices - many derive more than 40% of their total income from benefit payments.

Alan Johnson, the industry minister, is conducting research to discover the reasons behind the dramatic increase in urban closures.

The Liberal Democrat treasury spokesman, Vincent Cable, said: "These figures are very worrying. We are getting pretty close to a collapse. Sub-post offices are voting with their feet and if the government does not act soon, the whole network will crumble."

Many of the closures are due to sub-postmasters and mistresses either retiring or dying. The Post Office has then been unable to recruit replacements, leading to the enforced closures of the local post offices.

The government has tried to plot a new future for the Post Office through its proposals for a universal bank. The bank, run jointly by the high-street banks and the Post Office, would offer accounts for the 5m British people who do not have an account, the so-called socially excluded.

The Post Office has asked the banks for £130m to help set up this basic form of banking through its outlets. The new account would not provide overdraft facilities, a cheque book or direct payments except for utility bills. In addition, the banks would be expected to put cash machines in the local post offices.

The government is trying to ensure a response from the banks by the end of the year. The speed-up in the rate of closures will be putting extra pressure on the government to deliver.

But many of the high-street banks regard the proposed £130m payment as unfair and amounting to a voluntary tax. However, many of them know that they are politically vulnerable on the issue as a result of the rapid rate of closures of rural banks and the need to provide some form of alternative banking through post offices.

The Cabinet Office published a report in the summer suggesting the rural post offices could also develop a role as one-stop shops for government services and as a distribution point for goods bought over the internet.