Council leaders have warned they will campaign in force if the Government does not renew the Post Office’s contract for administering its benefits card scheme. MPs have criticised a delay in the decision over the contract and the Local Government Association says taking it away from the Post Office ‘could rip the heart out of local areas across the country’.

The contract for the Post Office Card Account expires in early 2010 and under competition law the Government has to put it out to tender. The Post Office is likely to face stiff competition from other providers, including PayPoint, Britain’s largest private payment network. MPs on the Commons Business and Enterprise Select Committee have voiced concerns that the longer a decision is delayed the harder it would be for long-term plans to be made but they said not granting the contract to the Post Office would lead to more local Post Office closures.

Now the LGA has written to the Business and Enterprise Secretary, Lord Mandelson, expressing fears that more closures would be the death of high streets across the country and denying vital services to vulnerable people.

In a joint letter the LGA chairman, Margaret Eaton and London Councils chairman Merrick Cockell say local authorities will campaign ‘in force’ to ensure that much needed post offices stay open. The letter says, “Councils up and down the country are deeply concerned about the prospect of widespread post office closures if Royal Mail loses the Post Office Card Account contract. For many people, the post office is the lifeblood of the high street and losing it would rip the heart out their area.”

They warn that in rural areas the local post office may be the only shop for miles and in towns it can be the only access to cash in an entire neighbourhood. “Many people, especially the elderly, still conduct their financial affairs in cash. This money is often spent at local businesses, so when the post office closes, a whole parade of shops can follow,” they add in the letter.