Post plan has been tried already

LETTER: There is talk of turning the Post Office network into mini banks of "honesty lending" – it has been tried, it was so successful that it was privatised.

Girobank was established by the Post Office in 1968. It was the first computerised bank, the first to adopt OCR (Optical Character Recognition), the first to offer free banking, beating the much vaunted First Direct by many years.

Girobank's system was based on direct transfers between accounts, beating the old cheque clearing system by many days.

In the early 1960s the majority of the population was paid in cash, did not have bank accounts and it was labelled by the banking system as unprofitable.

There were 22,000 post offices then compared to 3,000 banks. The banks kept their tariffs secret but Girobank published its, the main one being free transfers between accounts – it revolutionised banking in Britain. Girobank was not an instant profitable success, it struggled until it attained the utilities, the Government's social services payments and the stores and petrol stations.

Post offices opened earlier and closed later than banks, they accepted sealed packets of banknotes and sealed bags of coins at face value.

Its only drawback was that the term Girocheque became synonymous with welfare payments causing a serious snob factor.

The Government reacted to the banking industries protestations in 1990 and sold Girobank to Alliance and Leicester whose first action was to stop the free postage due to "customer demand".

Bob Wydell

Oswestry