Universal Bank customers will have access to the Link network of cash machines

To prevent low-income families from missing out on benefits, and to end their exclusion from the financial system, the Department of Trade and Industry has been trying to create a "Universal Bank", using the Post Office in partnership with High Street banks.

Basic banking

First, the banks will be urged to offer "basic bank accounts" available to any customer, no matter what their credit record.

These would share most of the features of a typical current account such as a cash machine card and the ability to accept credit transfers - such as wages from an employer. The basic bank accounts would also allow direct debits and standing orders.

Customers previously refused an account could therefore take advantage of discounts offered by gas, water and electricity companies to customers who pay by direct debit.

However, the accounts, designed by people with no bank account as part of research by the University of Bristol, would have no overdraft facilities and no cheque books.

No profit for bankers

Crucially, they would be available through the post office as well as the High Street banks, and customers should be able to deposit cheques and withdraw money from their accounts at any post office.

Initially the government wanted the high street banks to fund a large part of the project - even though the accounts would be branded under the name of the Universal Bank.

But the High Street banks expected that because the accounts catered for people on low incomes, they would prove unprofitable. To compensate for the losses they would make, they insisted the accounts should be sold under their own brands.

Subpostmasters and subpostmistresses, many of whom receive up to half of their income in the form of fees for paying out benefits, were also concerned that they would lose out once benefits will be paid directly into bank accounts.

They want to be properly compensated for handling transactions on behalf of the High Street banks.

A basic basic account

After months of difficult talks, a compromise is being hammered out. The High Street banks are already offering basic bank accounts under their own brands.

Most of the banks - with the exception of the Halifax - are understood to have agreed that these accounts could be opened by staff at post office branches.

Customers will be able to make deposits and withdrawals at post offices at no charge, and will also have access to the Link cash machine network.

For those who refuse to deal with a High Street bank, the Post Office (now renamed Consignia) will offer an even more basic service known as the Post Office Card Account.

A spokeswoman for the Post office said this would be a simple vehicle for receiving benefits, with no direct debit facility and allowing just one withdrawal a week.