GOVERNMENT proposals have caused an exodus of post office customers, threatening the future of the service, according to unions and staff.

And the Association of Chartered Accountants has warned that the livelihoods of people running smaller post offices is being put at risk by reforms which include plans for benefits to be paid into bank accounts rather than over the post office counter.

The Benefits Agency has sent letters to people informing them that from next year, they must have a bank account to receive benefits.

But post masters claim that the letters are misleading and are causing panic among their customers.

Kate Everett from the Victoria Road post office in Darlington has produced flyers reassuring people they can still get their money from the post office.

She said: "The post office will be connected to the banks so although people will have to open bank accounts they will still be able get their money from us.

"These letters are misleading and are making people think they will have to go to a bank but they will have a choice.

"I am losing business every week over this and it must be worse for people living in rural areas."

A spokesman for the Benefits Agency confirmed under the new system payments would be made directly to a bank or into a card account at the post office.

But Andrew Harding, executive director of the Association of Chartered Accountants, said many post offices would be effected and there could be a knock-on effect for other companies.

He said: "If these proposals result in the closure of small post offices, small business people will be forced to travel much further, sometimes at great inconvenience in order to deposit or withdraw money and to post important packages.

"While this will affect everyone, the greatest impact will inevitably be on the most vulnerable people - the elderly and disabled.