Government proposals to encourage sub post offices to operate as banks will not even begin to cover the losses faced by the network, a Liberal Democrat Euro MP has claimed.

Liz Lynne (LibDem, West Midlands) said the threat to 40 per cent of sub post offices remains, with the prospect of substantial closures, both on inner city street corners and in rural areas.

The MEP said:

"Of course we welcome creative ideas involving the use of banking and the internet. But all the indications are that this will not even begin to cover more than a fraction of the £400m income due to be lost by automated credit transfer replacing over the counter payment of benefits.

"The only way ministers can restore confidence in the service is to spell out just how much subsidy they are prepared to pay to maintain the Sub Post Office network.

"Even if this initiative was fully funded, millions more would be needed to stem the losses their own policy will cause.

"The first is the loss to Post Office Counters that will be caused by automated credit transfer. The second is Brussels' proposal to cut the Royal Mail's monopoly rights on delivering mail from 350 grammes to 50 grammes by 2003, which I am campaigning to block in the European Parliament.

"Liberal Democrats are opposed to both of these plans, which together could devastate the Postal Service as we know it. Our campaign to save the Sub Post Office network and the universal delivery of mail must go on."