CHANCELLOR Gordon Brown has agreed in principle to subsidise rural post offices to stop the network collapsing.

Trade Minister Alan Johnson was stressing this today as thousands of sub-postmasters joined the mass rally at Westminster.

The Conservatives were heaping further pressure on ministers to protect rural post offices during three debates in Parliament.

They were highlighting that the closure rate of post offices has increased as compulsory computerisation of the network is speeded up.

The Government was tabling a clause at the Report Stage of the Postal Services Bill to allow subsidies for struggling post offices.

Mr Johnson emphasised this was not the "preferred route" but a fall-back position if transition to a fully computerised and automated benefits payment system for post offices ran into trouble. He said: "It may be needed as a short-term measure to bridge the gap." Ministers were also defining in the bill what they mean by a "nationwide network of post offices".

Mr Johnson, a former postman, stressed that pensioners and benefit claimants would continue to be able to get payment in cash over the counter at post offices. He said: "We are not going to force them to open bank accounts. We are going to ensure they can get their benefit in cash if that is the way they want to receive it." Ministers said the Post Office was on course for full computerisation of the network by spring 2001, with automated payment of benefits set for 2003. They stressed claimants would be able to get benefits in cash at post offices through a bank, or another simple form of account being developed.

Three-thousand bank cash machines are also being installed in post offices. Mr Johnson said the 18,500-strong post office network had been in decline, with an "overdependence" on income from processing benefit payments. Post offices receive a fee for the transaction and also spin-off trade from claimants visiting their premises.

Mr Johnson added that this "under-utilised, under-promoted network" needed to be properly equipped for the 21st Century. This could be by offering banking, governmental and e-commerce services.