Senior Labour MP John McFall warned yesterday up to 6,000 post offices will be forced to close if the Government awards vital pensions and benefits business to a rival.

The respected chairman of the Commons Treasury Committee said 3,000 branches could go if only part of the Post Office Card Account (Poca) is lost.

More than four million customers use the card account to get their money, but rumours have swept Westminster that the Government is poised to hand it to PayPoint.

West subpostmasters said yesterday such a decision would be the final act of destruction for the network, while MPs from the region vowed to fight against it.

The Government has already ordered the axing of 2,500 post offices, including nearly 200 in the West, and critics warn the Poca decision will undermine its recent recovery in the opinion polls.

Mr McFall said: "If the Poca is taken away from the Post Office, or given to an alternative provider, then this is a decision that could come back to haunt us.

"The consequences for all communities, particularly those in rural and low-income areas, would be devastating. Without the card account, the Post Office network would be left dependent on state aid – which, under EU rules, the Government may no longer be permitted to provide.

"If the Post Office loses the contract, whether fully or partially, then the resulting closures would be uncontrolled and chaotic. They would hit rural communities and low-income areas hardest.

"There would be a public outcry if this were to happen."

John Bowman, secretary of the Taunton branch of the National Federation of Subpostmasters, said they were already fighting for survival, having gone through the latest round of closures.

Yet it now looked likely the Government had given the new contract, which begins in 2010, to another company.

"You will appreciate that this will have a devastating effect on the financial viability of those remaining post offices.

"And it will, due to the loss of this contract, cause more closures which would impact on Post Offices Ltd's ability to tender for any future contracts and lead to a terminal decline of the network."

Mark Baker, a federation official representing the South West, said sharing the contract would be as bad as losing it, and was totally unacceptable. He said their members were highly trained and accredited, while PayPoint operators had none of the security measures postmasters enjoy.

"As far as I am aware the owners of PayPoint outlets are blissfully unaware that they personally will be expected to serve and provide the cash, including coins, so that tens of thousands of people each week, can access their pension in cash in full on the due day.

"It will not take very long for the criminals of the world to work out that the corner shop has all of a sudden become an easy target, putting at risk not only the shop staff, but the pensioner as well."