New UK Post Office boss in battle to save pounds 150m subsidy for rural branches

The new boss of Britain's post office network expects a showdown within months of his arrival with ministers over the future of rural branches, many of which would shut if the government makes cuts to its pounds 150m subsidy.

Royal Mail announced yesterday that Alan Cook, the current boss of National Savings & Investments, will take up his new position as managing director of its Post Office Ltd subsidiary next month.

Mr Cook, 52, won plaudits for revamping NS&I, the Treasury's retail savings arm, over the past three years and attracting billions of pounds in extra investments.

He is expected to repeat the turnaround at the Post Office, which has suffered a bruising couple of years. Deep cuts to the urban post office network sparked heated exchanges in parliament and protests from pensioner groups angry at the loss of local amenities. Moves to offset the loss of lucrative benefit payments with a wide range of financial services have also proved difficult in the face of stiff competition.

Royal Mail's chief executive Adam Crozier said he was delighted Mr Cook had accepted the role. "Alan has a fantastic track record in growing business at NS&I where investments in premium bonds and other savings and investment products have grown by an impressive pounds 10bn in the last three years."

Mr Cook, a former senior Prudential executive, said he will overhaul the marketing and branding of the post office network to "freshen up its image". He said the current strategy would be reviewed, but he believed the business was fundamentally sound and well respected and trusted by the public.

"I think the concern over the number of post offices and how far they are from people showed how much people want to be near a post office, how much they value it," he said.

The government is due this year to review a pounds 150m subsidy to rural post offices. Ministers are known to want cuts in the subsidy which is due to run until 2008. Mr Cook said one of his first jobs would be to assess costs of running the rural network and alternative plans for providing services.

"We need to see what the costs are and how we can make the service more cost effective. Then we need to discuss with ministers the appropriate level of government support," he said

Mr Cook is joining an organisation he is well acquainted with. The Post Office is National Savings' biggest distribution channel, accounting for sales totalling pounds 6.7bn in 2004/05, and has been running adverts featuring its animated ants to promote sales of premium bonds via its branches.

After the government's savings bank recently announced a link-up with Tesco to sell savings products in its bigger stores, Mr Cook had to write to thousands of sub postmasters to reassure them of National Savings' commitment to the Post Office.

Mr Cook, who earned pounds 190,000 last year, has presided over a turnaround in fortunes at National Savings, which was in decline when he joined in October 2002. Since then, the total amount of money invested, mainly in premium bonds, has grown from pounds 62bn to pounds 72bn.

During his three years in charge, NS&I has introduced a string of initiatives aimed at shedding its traditionally sleepy and unexciting image in favour of a more modern identity. It is premium bonds that have been the star attraction in recent years. Mr Cook had the good fortune to join National Savings just as sales of the bonds were going into overdrive as a result of the stock market slump.

Mr Cook capitalised on their growing popularity by increasing the maximum amount an individual is allowed to invest in premium bonds from pounds 20,000 to pounds 30,000.

The government is to review a pounds 150m subsidy to rural offices. Ministers want cuts in the grant, which is due to run until 2008 Photograph: Robert Morris/Photofusion