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'3,000 more post offices to close'

By Martin Delgado for The Mail on Sunday
Updated: 04:34 EDT, 2 November 2008

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The fate of 3,000 post offices hangs in the balance amid fears that Royal Mail is to lose a vital £200m Government contract.

At risk: The fate of 3,000 Royal Mail post offices is unknown

Royal Mail has been fighting to retain the right to run the Post Office card account - which processes millions of pension and benefit payments - for the next five years.

But informed sources say that the contract is likely to be awarded to rival bidder PayPoint, which operates out of convenience stores, garage forecourts and off-licences.

If the move is confirmed, it means post offices will lose one of their most valuable sources of income, condemning up to 3,000 more to the scrapheap.

This is in addition to the 2,500 already being axed under costcutting plans which have been condemned by MPs and campaigners as divisive and damaging to communities across Britain.

Many small post offices get 20% of their income from the card and will be unable to survive if the business is taken away from them.

There is also concern about security if the service is taken over by a private company rather than retained by Royal Mail, which is subject to regulation and supervision by Government-appointed watchdogs.

Under the current system, the claimant puts their account card into a chip-and-pin machine and the cash is handed over by Post Office staff.

Although the details of the proposed new system have not yet been made clear, campaigners claim that if PayPoint wins the contract, assistants in shops and garages will have access to a customer's financial details, making him or her a potential target for thieves and identity fraudsters.

In addition, large amounts of cash will have to be kept on the premises. Waiting times may also increase because customers - many of them elderly or infirm - could have to queue up with people shopping for groceries, paying for petrol, settling utility bills or topping up their mobile phone pay-as-you-go card.

The National Federation of Sub-Postmasters said it feared that only 9,000 post offices would soon be left out of a national network that stood at 17,000 just a few years ago.

Federation general secretary George Thomson said: 'The longer the delay in making this announcement, the more worried my members and I have become. The consequences for the Government of not awarding this contract to the Post Office will be absolutely dramatic in terms of the effect it will have on the post office network.

'At least 3,000 offices will close in about 14 or 15 months, on top of the 5,000 that the Government has closed in the past five years.

'It will be one of the most shortsighted decisions this Labour Government will have made. For the public, particularly in rural parts of the UK, it will be an absolute betrayal. It makes no sense for the Prime Minister to say he wants to help small businesses through the financial recession that is about to engulf the country and at the same time take away a contract that helps 12,000 post offices survive.

Save our post offices

Financial Mail and This is Money have been fighting post office closures since 2002. See more here...

'If they make a decision that does not give the Post Office the contract to continue serving its four million benefit customers, it will be an absolute disgrace.'

An announcement had been expected last summer but it is thought Gordon Brown wants to delay it until after Thursday's byelection in Glenrothes because of the political damage it will do, particularly in Scotland where many rural post offices face closure.

Last month, more than 250 MPs signed a Commons motion to keep the contract with Royal Mail 'because of its unrivalled geographical reach and its status as a trusted brand'. The Post Office card account is a massive business that is responsible for £27bn worth of transactions. One industry insider said: 'The card is a key plank in the Post Office's business plan and losing it will be the final nail in the coffin for many post offices.'

PayPoint, which was founded in 1996, describes itself as one of the UK's 'leading premier branded networks for the convenient local payment of household bills and mobile phone top-ups'.

It claims to have more than 23,000 outlets in Britain - agents receive a commission of between 0.5% and 4.5% per transaction - and it is now expanding into Eastern Europe, having recently signed a deal to process household utility bills in Romania.

In 2006, it was awarded a six-year contract by the BBC to handle over-the-counter TV licence payments. A Post Office Ltd spokesman said last night: 'We await the announcement from the Department for Work and Pensions [DWP].'

The DWP said: 'The contracting process is still ongoing and no decision has been made.' PayPoint declined to comment.

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