The Government's new banking service, to be run through post offices, moved a step closer with the announcement that the UK's main banks had agreed to back the scheme.

Trade and Industry Secretary Stephen Byers said the banks had agreed to contribute £180m towards the running of the Universal Banking Service, and would make their current accounts available to consumers through post offices.

The scheme is being introduced to ensure people can still collect their benefits in cash from post offices after the Government's move to make it compulsory to pay benefits directly into a bank account from January, 2003.

People will be able to collect benefits in cash over the counter through the Post Office Card Account, a new type of account into which their benefits will be paid.

The scheme also aims to give people who do not have bank accounts access to a current account through the Post Office's 18,000-strong network.

Mr Byers said: "This is a major step forward both in ensuring the future of the Post Office network and in tackling financial exclusion."

The scheme is supported by Barclays, Lloyds TSB, Royal Bank of Scotland/NatWest, HSBC, Abbey National, the Bank of Scotland, Halifax, Alliance and Leicester, National Australia Group, the Co-op and the Nationwide.