government response to post office banking consultation 2010 03

Only available online 

Read our Briefing on the government's propsals to provide a range of banking services through the Post Office Network.

The Department for Business, Innovation and Skills has published plans for the Post Office to provide a range of financial services, following a public consultation earlier this year. The proposals would see the Post Office provide a range of financial services including; current accounts, mortgages, savings accounts for children and a national network of credit unions to be delivered via the Post Office branch network.

The government also announced additional funding of £180m to support the Post Office network ‘at around its current size'. There are over 11,500 Post Offices across the UK, more than the total number of bank branches, with 99.7% of the population living within 3 miles of a branch.

In addition to the Post Office providing current accounts, they will also offer a ‘weekly budgeting account', aimed at giving low income households the opportunity to take advantage of discounts for paying bills by direct debit. The government also want the Post Office to provide banking facilities for customers with current accounts other banks and (if agreement can be reached with RBS and Santander) around 86% of accounts should be accessible via the Post Office.

Mortgages will be offered to first time buyers wanting to get onto the property ladder, providing up to 90% of the cost of buying a home. And there will be a new ‘Saving Gateway' account, with the government adding 50p to every £1 that people on lower incomes save.

There are also plans to provide services to businesses, and the government want to ‘explore the development of a Post Office business account' and provide services to small businesses.

Perhaps the most radical plan is the proposed link-up between the Post Office and credit unions, offering savings, loan and current accounts that can be accessed anywhere in the country. This ‘national distribution network' of credit unions is intended to increase access to affordable credit and provide an alternative to extremely high-cost credit that many poor communities rely on. Credit Unions, which are currently available in relatively few areas, will be extended to cover the whole country. The cost of establishing this credit union network is to come from the proposal announced in the Budget (read our analysis of the Budget) to introduce a new levy on banks to support community finance organisations.

Responses to the consultation
In total, over 2,400 responses to the consultation were received.
The consultation asked what people valued about the Post Office, the type of financial services the Post Office could provide and about the values that should underpin the approach to Post Office banking.

By far the most valued thing about the Post Office was its local and accessibility (mentioned by 62% of respondents), with the next most popular response (access to banking facilities) being mentioned by 27% of people. Around 1 in 10 people mentioned the important social role the Post Office plays, providing a focus for community life and a place where people meet and interact.

The suggestion that four key values (universal, accessible, trusted and sustainable) should underpin Post Office banking received overwhelming support, with 99% of respondents agreeing.

The question on what financial products people would like to see the Post Office provide, unsurprisingly, mirrors the proposal the government has put forward. These were:
• Current account: 64%
• Access to other bank accounts: 55%
• Business account: 54%
• Children's savings account: 49%
• Weekly budgeting account: 42%
• Credit unions: 37%

A lack of trust in high street banks led a significant minority of respondents to suggest that Post Office banking be run through a ‘state backed bank', such as Northern Rock or National Savings and Investments (NS&I). However this option is rejected by the government as being time consuming and expensive, since the Post Office have an existing agreement with the Bank of Ireland that runs until 2020.

The government's proposals mirror very closely Urban Forum's consultation response (based on a survey of members), with overwhelming support for the Post Office to provide a wider range of financial services. The government's aims to tackle financial exclusion, improve access to affordable credit and to protect the Post Office network are entirely consistent with Urban Forum's own priorities.

Read the proposals in full

Our briefing on the consultation and our consultation response

We've also produced an analysis of the Post Office Bank proposals.