Dozens of rural post offices in the South West could be replaced with limited counter services in garages and shops under government plans to downgrade a fifth of the branch network in a move which has dismayed campaigners.

Under changes that will be rolled out from next June, 2,000 post offices – including many in the South West – will be converted into new Post Office Locals, which offer more restricted services from within other commercial premises.

The Government yesterday insisted the new model was not an attempt to squeeze rural services but to make them “more commercially viable”. But consumer watchdogs and rural campaigners said the plans will hit isolated rural communities the hardest.

Customers will not be able to apply for a driving licence, send bulky mail overseas, pay car tax or make cash withdrawals using passbooks – but they may benefit from longer opening hours if the new service is on a commercial premises like a filling station.

Alice Barnard, chief executive of the Countryside Alliance, said: “This is essentially a downgrading of the postal services offered to local communities. The PO Local model will create a lower quality public service and will simply not be financially viable for most sub postmasters.

“Isolated rural communities stand to suffer the most from the closures and loss of postal services. We are concerned that there has been insufficient public scrutiny of the new model and the effect it will have on people’s everyday lives.”

The watchdog Consumer Focus warned that shop and garage owners often treated PO Locals as a “secondary offer” and said there were examples of staff being unable to offer more complex transactions because of a lack of training. It also discovered that some PO Locals, which are currently being trialled, having to “ration” money and being unable to pay pensions and benefits because they can only keep limited amounts of cash on the premises.

Andy Burrowes, a postal expert at Consumer Focus, said: “We found examples of that and clearly we need to make sure that the model is robust and those issues are addressed before the wider roll-out can begin.”

The Department for Business, Innovation and Skills, which is expected to take over the running of the post office network from Royal Mail in April next year, yesterday defended the plans.

A BIS spokesman said the scheme would make “ running a post office more profitable for hard working sub-postmasters”.