The Government delivered some first-class news to the Post Office by awarding it a contract to continue with a card account used by millions of people to receive benefits and pensions, ending the threat of closure to thousands of branches.
Work and Pensions Secretary James Purnell told MPs the organisation would retain the business under a new contract running for five years from 2010, with the possibility of an extension beyond that, raising hopes of a brighter future for the service.
Around 2,500 post offices will have shut by the end of the year under a closure programme and there had been warnings that a further 6,000 would be under threat if the Post Office Card Account (Poca) went to a rival bidder such as PayPoint.
Mr Purnell said that in order to support a viable post office network, the competitive tendering process had been cancelled.
"I firmly believe that this is the right decision for our customers, the Post Office and sub-postmasters. The Post Office is a cherished national institution at the heart of many communities. The card account is an important source of income, and brings customers through the doors of post offices across the country."
Around 4.3 million people hold a Poca to obtain pensions and benefit payments including jobseeker's allowance and child benefit.
Around £80 million is paid out every day to account holders, with many of them spending some of the money in post offices or shops run by subpostmasters. The card accounts for one in four visits to post offices, rising to one in two in rural areas.
Alan Cook, managing director of the Post Office, said: "We very much welcome this decision, which enables us to achieve our goal of maintaining a branch network of around 11,500 outlets for the foreseeable future.
"We will, of course, also be working with other Government departments to drive a wide range of services through the network, while at the same time building on our existing range of financial and other products."
Billy Hayes, general secretary of the Communication Workers Union, said the announcement was "a victory for common sense", adding: "We hope that (the) decision represents a further indication that the Government is now willing to adopt a more positive approach towards the future of this vital public service."
