£1bn reprieve for post offices

A £1bn government contract should save 3,000 post offices from closure, ministers are expected to confirm today. The Government will announce that the Post Office is to keep its five-year contract to distribute benefits to 4.3m claimants.

Unions and Labour backbenchers were worried that the contract would be handed to private company PayPoint. They warned the loss of the contract would lead to the closure of 3,000 more post offices.

The reprieve for the Post Office comes after massive political pressure - including a petition signed by two million people and a parliamentary motion by 265 MPs. A decision to close 2,500 of Britain's 14,000 post offices last year had already proved enormously unpopular.

The Government now appears to believe that the economic downturn strengthens the case for post offices. A letter leaked to the Guardian showed that the new business secretary, Lord Mandelson, had written to Gordon Brown proposing a review that might see the Post Office's role expanded into "financial services".