Post offices will become local banks as part of radical reforms to prevent a repeat of the closure programme which saw 123 West Midlands post offices axed, Ministers have announced.

Customers of NatWest and Royal Bank of Scotland will be able to access their bank accounts through the post office - and other banks are expected to join the scheme in future years, Ministers said.

The announcement is part of a package of measures designed to save the post office network, which currently requires a subsidy from the taxpayer of £180 million a year.

Other changes include increasing the number of branches which are run as part of a shop, such as a newsagent, rather than as standalone businesses.

Post offices will offer more services on behalf of government agencies. For example, they could be fitted with systems allowing them to print off almost any official form on request.

And post office branches could eventually become “mutual” businesses, owned by sub-postmasters, employees and customers.

Post Office Ltd announced in 2008 that 55 branches in Birmingham, Warwickshire and Solihull were to be closed, including five replaced by part-time “outreach” services. Another 68 services in the Black Country, Worcestershire and Herefordshire, including 13 to be replaced by outreach services, were also closed.

Nationally, 2,500 branches were shut in a bid to reduce the massive subsidy needed to keep the network going.

Labour welcomed some of the announcements but said it was disappointed that the Government had scrapped plans to create a new “people’s bank” at the post office.

This was a proposal developed under Labour to give the post office its own bank that would appeal to people who didn’t currently have a bank account.

Jack Dromey (Lab Erdington) said: “Labour pledged at the general election to develop post offices as the hub of local communities, including the notion of a people’s bank.”

He condemned Government plans to separate the post office network from Royal Mail Group, the business which delivers mail, which is to be privatised.

“Investment in post offices is welcome but breaking the link with Royal Mail is wrong and damaging.”

Postal affairs minister Ed Davey said: “We’re determined to turn the Post Office network around and end the years of decline. The Post Office is a tremendous national asset. It will not be for sale and there will be no programme of closures.

“To underline our commitment we have announced £1.34 billion of funding over the next four years. The money will put the Post Office on a stable financial footing. It will help modernise the network and make it even more appealing to customers.”