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Monday 29th March 2010 | 09:48
Business Secretary Lord Mandelson today announced a major expansion of the financial services offered by the Post Office, in a drive to put banking back into the heart of communities and making the Post Office network of 11,500 branches more sustainable. He also announced £180m of new funding for the Post Office.
Publishing the Government’s response to its consultation on Post Office banking, 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.”
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.”
The measures announced by the Government mark a step change in banking at the Post Office and demonstrate the Government’s ongoing commitment to the Post Office network. They include:
- Funding - £180m of new Government funding for the Post Office in 2011/12 to maintain the network at around its current size. This goes beyond the £1.7bn that is already being invested between 2007 and 2011.
- Weekly budgeting account - An account which would help people on low incomes manage their household budgets, save money by taking advantage of the discounts for using direct debit to pay their utility bills and which would be available through the Post Office. The Government is already working with the Post Office and utility companies to make this account a reality as quickly as possible.
- Children’s Savings Account - the Post Office will launch a Post Office Children’s Savings Account in the next twelve months, encouraging children to save through visits to their local Post Office.
- Post Office Current Account - the Post Office will launch its own current account that will be accessible from any Post Office in the country.
- Access to accounts from other banks - detailed negotiations are taking place with RBS and Santander to give access to their current accounts - this would mean that around 86% of current accounts would be accessible at Post Offices.
- Business services - a new agreement between the Post Office and Santander will 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. Additionally, following responses made to this consultation, the Post Office and the Regional Development Agencies will explore how they can best work together to serve small and medium enterprises in each region.
- Mortgages - the Post Office will offer a new mortgage product with a 90% loan-to-value ratio aimed at first-time buyers. The Post Office will also increase its lending substantially, aiming to double the value of its mortgage book in the financial year 2010/11.
- Increasing affordable credit - plans to support a national distribution network with credit unions, reflecting the natural partnership with the Post Office, through a proposed levy on retail banks. This will ensure that credit union savings, loans and current accounts can be accessed anywhere in the country.
- Saving Gateway – the Post Office will launch a Saving Gateway account this year. This is a new account for people of working age who are on lower incomes which aims to kick-start the savings habit, with Government adding 50p for every £1 saved.
The package was launched during a visit to the recently re-furbished Trafalgar Square Post Office by Business Minister Pat McFadden and Energy Secretary Ed Miliband.
Ed Miliband 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.”
The Post Office is one of the UK’s fastest growing financial services providers, and the country’s number one foreign currency provider. Today’s announcement is the next step towards turning the Post Office into a leading player in financial services.
These new measures build on recent announcements in the Budget. They show that the Government will continue to work to improve the supply of affordable credit for low-income households, including by supporting third sector lenders. The Government also announced an intention to consult on making sure banks make an appropriate contribution to community lenders, proposing using a new community levy to be funded by retail banks that will support a link between credit unions and Post Offices.
At the Budget, the Government also announced that all retail banks will be placed under an obligation to provide a universal service, with a legal requirement to offer a basic bank account to everyone who needs one, and has a valid address. Other measures already announced include new rules requiring responsible lending, affordability checks and cooling off periods for consumers; and a clampdown on credit card lending practices, expected to save consumers £300million a year.