A £450 million bid to save thousands of rural post offices was unveiled by the government on Monday.

Patricia Hewitt revealed details of a £150 million-a-year plan for the next three years for new IT systems, income safeguards and a marketing campaign for the struggling service.

The cash injection is aimed at rescuing the UK's 8500 rural post offices that have been under threat from dwindling trade.A breakdown of the plan includes £66 million a year for sub-postmasters' incomes and £79 million in the first year for operating costs such as renewing IT systems.

The cash will be divided up by Post Office Ltd but, as with other government cash, there is a demand for modernisation.

The cash will help to soften the blow of the redundancies the Post Office has announced in a bid to stem massive losses and the threat from the regulator to open up its business to competition.

The Post Office will have to maintain its rural network and provide "over the counter" services for tax credits, pensions, benefits and banking facilities.

Other schemes that will get funding will be mobile post offices and funding for services to be run from existing village "hubs" such as pubs and even hair salons.

Hewitt defended the subsidy, arguing post offices played a vital role in rural communities.

"They are much more than simply providers of mail services. In many places the post office is also the village shop, the local community centre, the business exchange and the bank," she said.

"This multi-million pound package shows our commitment to the rural post office network."

The Conservatives claimed backed the investment but blamed ministers for a crisis of their own making.

Shadow trade and industry secretary Tim Yeo, backed the government's proposals "as far as they go".

"Labour have become renowned for its neglect of rural communities. Much of the crisis facing rural post offices results directly from the government's decision to reverse previous policy for payments of all benefits including pensions at post offices," he said.

"The plans still fall short of a coherent and comprehensive strategy to ensure the survival of institutions crucial to village life. Rural post offices will continue to close under Labour."

Campaigners questioned whether the cash would achieve the government's objective of maintaining the rural network.

Peter Carr of Postwatch claimed it was far from clear how the plans would halt closures.

"Today's announcement provides funding up until 2006 but we would question what long-term plans there are to support the rural network - the Post Office's 'Community Service' role will not cease in three years time," he said.

"We welcome the government's commitment to provide financial assistance to the rural network but are extremely disappointed that, despite advice from the regulator all the financial assistance will go directly to Post Office Limited.

"The government may be filling the Post Office's financial black hole but is not directly supporting the threatened businesses of sub-postmasters."