THE BRITISH government is considering the creation of a “People’s Bank” that would add substantially to the range of financial services available through the country’s network of 12,000 post offices, an arrangement that is currently carried out in a joint venture with Bank of Ireland.

Bank of Ireland currently offers a range of financial services through its partnership with the Post Office and last year extended that contract to run to 2020.

But proposals have been put forward by a coalition of business groups, MPs and unions, which would see a new state-owned Post Bank that would expand services to match those of high street banks, including debit-card facilities, current accounts, savings plans, loans, business services and financial advice. It is as yet unknown whether Bank of Ireland would play a role in the expanded operation.

A spokesman for Bank of Ireland last night noted that the proposal was only at a very early stage. “We are the contracted provider of financial products through the UK post office and we have ambitious plans to develop the service. If there are plans to develop the whole post office network as envisaged in this plan, we would see huge potential for ourselves as the contracted provider.”

Pat McFadden, the government minister for postal affairs, said he was “warm” to the idea of allowing the Post Office to function more like a fully-fledged bank, but with a clear social purpose.

One of the architects of the proposal is the left of centre pressure group Compass. Its general secretary Gavin Hayes last night told The Irish Times: "The Post Office is a trusted national institution and this as a win-win situation after the terrible collapse of the banking sector."

The new bank would be based on a similar scheme run in New Zealand and he said, should be funded by public money “not private capital”. He said the role of banking services provider should be put out to tender.

The “People’s Bank” proposal is part of a bigger debate as Gordon Brown’s government tries to head off an MPs’ rebellion over plans to sell part of the Royal Mail, which owns the Post Office, to a foreign operator. Critics suggest that selling the Royal Mail would expose rural communities to the harsh realities of the market, leaving many without a key local service. Post Office accounts sold by the Bank of Ireland have been covered by the Irish Deposit Protection Scheme since October.