What should be done? I comprehend why Barclays Bank wants to close 172 of its branches in small towns and villages, nearly a 10th of its network. But equally I can well understand why many people in small communities are so appalled by the news that they have taken to mounting protests of various kinds. Sit-ins have been organised and plans to block the bank's clearing mechanism with a multitude of small cheques for tiny amounts are under consideration.

In a Norfolk village, for instance, the local Methodist minister is hoping to mobilise disgruntled account holders into staging a simultaneous mass "hit" on the bank's website "to make life difficult for Barclays".

Let us start with the bank. Barclays is a badly frightened institution. New and powerful rivals have recently emerged in the shape of building societies converted into banks, supermarkets that provide financial services and insurance companies like Prudential, which has created a substantial Internet banking business, Egg. Moreover Barclays has just seen its ancient foe, National Westminster, suffer the indignity of being taken over by a smaller Scottish unit; and many of NatWest's senior managers have just learned that there is no place for them in the enlarged organisation.

Barclays must do many things to survive, and cutting costs wherever it can is one of them. It notices the trends. Customers are switching to its own Internet service at a fast rate. The proportion of customers regularly using its branches has fallen from 56 per cent to 36 per cent in five years. In any case, bank branches have already been hollowed out. You try to ring your local one and find that you have been connected to a call-centre situated in some distant town. As a matter of fact, the only reason I ever enter my local Barclays branch is to obtain foreign currency for a holiday.

But people in the small towns and villages that are to lose their local bank are also apprehensive. To older residents the very presence of a bank is a source of comfort; a loyal customer feels that he or she can surely always turn to the local manager for advice. Traditionally the bank manager figures alongside the doctor, the vicar, the solicitor, the police sergeant and so on as somebody to approach in times of trouble - and not just by telephone or letter, but face-to-face.

The disappearance, too, of the local bank adversely affects other retailers in a small community. I don't just refer to the question of safety in paying in the day's cash takings. I mean that retailers can only operate in clusters. Each individual outlet needs the presence of the others in the high street to help attract a sufficient number of customers. The bank branch is important in this respect. Take it away and the viability of local retailing may be mortally damaged.

Even if this line is not crossed as Barclays and the other high street banks withdraw, the local population is left with a host of inconveniences - the inability to quickly cash a cheque, the 20-mile return journey to the bank in another locality, the extra traffic along rural roads that results.

All these concerns merge into the wider debate, the "haves" with access to Internet banking versus the "have-nots" without; town versus country; the rich South-east of England versus the rest of the nation.

Country people see only loss - of their bright young people, their local shops, pubs and church services, their countryside itself as a new town suddenly appears in their midst, their local source of wealth as farming sinks into ever-deeper losses, their traditional pursuits.

Townspeople, on the other hand, if I may use that description for all those whose tax payments help to finance the numerous subsidies that rural areas receive - whether it be to keep agriculture going, or the small village school or public transport - hear only the non-stop complaints the country addresses to the town. And as some return each evening from their long journeys to and from work in the Big City, or turn up at the weekends to stay in their country cottages, they find they are unwelcome. It seems a bit unfair, but then town and country have always had a bad relationship. Now it seems to be getting worse.

This is the setting in which the Barclays case raises a new question. Should the state intervene in the provision of banking services for rural areas? It cannot halt the disappearance of the banks' physical plant, the branches themselves, from the countryside. The question is whether money transmission (that is, being able to use the banking network to pay in or receive cash) is like public transport, a service everyone has a right to expect, if only in vestigial form. I say yes. Otherwise people will start keeping cash under the mattress again.

Does this mean, then, that the state must subsidise the banks so that they are compelled, say, to install cash machines in rural areas on a wide scale? I doubt whether government funding is required. Under its own steam, Barclays has set up a pilot scheme in Cornwall to offer basic services at 270 post offices.

No, it is the arts of persuasion that can usefully be employed. High street banks must accept that as far as money transmission is concerned, they have the same duty towards rural areas as have public utilities such as water, gas and electricity. They must make the service available, whatever the cost.

As it happens, the Government is well-positioned. For this very day, the Treasury is due to receive a 350-page report on banking competition drawn up by Don Cruikshank, the former telecommunications regulator.

The focus of Mr Cruikshank's work has been on the pricing of banking services to small and medium enterprises, payment and cash machine systems and electronic commerce. And he is expected to argue that the levels of profits earned by the high street banks are unduly high.

In other words, the banks have been earning monopoly profits in certain parts of their activities.

The Treasury has the power to refer the report to the new Competition Commission, or even to put new banking legislation before Parliament. These are powerful sanctions. They can be used to ensure that simple banking services in the countryside are preserved.