BANKS and post offices were given the go-ahead yesterday to charge fees for up to ten per cent of withdrawals from Britain's cashpoints.

The Treasury rejected demands by a committee of MPs to stem the "very worrying" spread of fee-charging machines.

Instead, ministers said they expected the proportion of ATM withdrawals imposing a charge to level off at no more than five to ten per cent.

The MPs' report had demanded action to stop the high-street banks selling off free machines to operators that typically charge £1.50 for each withdrawal.

It criticised the Post Office for not allowing individual sub-postmasters to insist on free ATMs for their customers.

But the Treasury's response dismissed fears that vulnerable and low-income consumers might be subject to disproportionate costs as a result of ATM charges.

It described charging cashpoints as "a legitimate business model", because most were at sites where there had previously been no machine.

The committee's key demand for the Banking Code, setting down minimum standards, to be extended to cover operators of charging cash machines was rejected.

The Treasury said the Government did not believe free ATMs were under threat and their numbers were increasing by about three per cent a year.

"There are alternative ways of gaining free access to cash. Many of the banks now offer their customers free over-the- counter withdrawals at the Post Office and 'cash back' is widely available in supermarkets and shops," it said.

Major banks had made it clear they have no plans to sell off any more of their ATM networks.

The MPs had concluded customers pay £140m a year to withdraw their own money, with a typical £1.50 charge for each withdrawal.

Three-quarters of post office machines now charged - an increasing problem as more pensioners received benefit payments through their accounts, rather than over the counter.