Business Secretary Peter Mandelson is urging Gordon Brown to save the Post Office network by allowing it to provide a new range of Government services and financial products, it is reported.
In a leaked letter to the Prime Minister seen by The Guardian, Lord Mandelson suggested that the economic downturn combined with "recent events in the financial services" presented a new opportunity for the Post Office.
"We should examine the prospects for POL (Post Office Ltd) becoming a much more significant player in financial services - offering a wider range of attractive products within easy reach of the whole population, available from an institution they can trust," he said.
The suggestion is likely to be welcomed by Labour backbenchers who have bitterly resisted Government moves to scale back the current network, which have seen 2,500 post offices slated for closure.
A spokesman for the Department for Business and Enterprise said: "We do not comment on private correspondence."
