The government hopes the move will give struggling branches extra income and allow better access to basic financial services for millions who miss out because of expensive bank charges.

Business Secretary Lord Mandelson was set to publish a consultation paper on Wednesday which he said will include a "whole number of ideas and options" for how post offices can expand into banking and financial services.

Speaking to regional journalists in Westminster, Lord Mandelson said customers may have "greater trust and confidence" in post offices than the High Street banks, which last year teetered on the edge of financial collapse.

He said the government's proposals will make the most of the Post Office's "wonderful brand" and aim to "sustain the life and very vitality" of the national network.

He added: "It should be a triple win for the individual, for competition within the financial services sector and for the vitality of the post office network."

New services which could be offered by post offices include mortgages, current accounts, children's savings accounts and start-up loans for small businesses.

Government sources say it is hoped the plans will prevent the current network of 11,500 branches shrinking any further.

Ministers also hope to help the two million families that are currently not with a mainstream bank and who are at risk of falling into the clutches of loan sharks.

At the moment there are restrictions on services the Post Office offers.

It can issue foreign currency, give limited saving accounts and it operates the Post Office Card Account where people have their pensions and benefits paid into.

Gordon Brown used his annual party conference speech this year to declare: "I want the Post Office to play a much bigger role, bringing banking services back to the heart of people's communities."

A total of 58 post office branches were axed across Lancashire, Fylde and Southport under last year's controversial closure programme, including branches in Preston, Chorley, Leyland, Morecambe and Lancaster.

Residents were given just six weeks to make the case to save their branch.

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