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NATIONAL FEDERATION OF SUB-POSTMASTERS
Branch
Secretaries’
Circular
EVELYN House
NO gsc 12/1999 REF xsycoipc Nwoe01 DATE 45 June 1999 i
INDEX
ACTION/
ITEM SUBJECT INFORMATION
1. FUTURE OF THE AUTOMATION PROJECT ACTION/
INFORMATION I
Circulation: Branch Secretaries
Copy to: National Executive Council
Regional Council Secretaries
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1. FUTURE OF THE AUTOMATION PROJECT {
Foliowing the work undertaken since the end of May to analyse the impact of the
announcement by Government that the Benefits Payment Card would be withdrawn,
the Executive Council met on Friday 11 June 1999 to decide the way forward.
On Tuesday 8 May, a meeting took place with Stephen Byers, Secretary of State for
Trade and Industry to question him about the announcement and Government's
plans for the future. Stuart Sweetman and Dave Miller, at present Horizon
Programme Director and who is due to take over as Managing Director of the new
Counters Network Business Unit, also met with the Executive Council to update us
on the work now taking place to finalise the terms of the contract with ICL Pathway
to deliver the automation programme.
The line adopted by the Executive Council is contained in the written submissions
(copy of which is attached) to the Parliamentary Select Committee for Trade and ¢
Industry, and is the line we suggest is used in answering members and anyone else L
who expresses concern about the future of the post office network.
The main points are:-
* Press speculation and mounting concern about the future of the project had
ON created a great deal of uncertainty, not only for subpostmasters but also the
entire industry including current clients and prospective clients. The Government
announcement on 24 May ended that uncertainty.
Government decided it did not wish to proceed with the Payment Card and that
POCL and ICL should revise the agreement to deliver the Horizon infrastructure
but without the Payment Card.
The Benefits Agency made a policy decision that it did not wish to proceed with
the magnetic strip card, preferring instead that commencing in 2003 and ¢
completing in 2005 all claimants will have a commercial relationship with a bank
or building society, and to make direct payments into those accounts
notwithstanding the fact that
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= many millions of legitimate benefit claimants do not have bank accounts
and, because they rely on their benefits, are unlikely to be able to open
bank accounts
- millions who do have bank accounts still choose to pick up their benefit in
cash from a post office.
In reality, the Benefits Agency contract was due to end in 2005, and even with the
Payment Card, the Benefits Agency had made it clear they intended to move to
ACT when that contract ended. The policy decision to move to ACT cannot be
overturned. Whilst subpostmasters should not actively discourage anyone who is
concerned from writing to their MP, it would not be appropriate to mount a
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When all this is done, we will still need customers. It is essential that all
subpostmasters understand the importance of providing a good quality
service to customers so that they want to keep using the Post Office.
. An alarmist reaction to these proposals is more likely to scare customers
iw away now. Reassurance should be given that they will be able to continue to
use the post office to collect their benefit in cash. A number of banks already
have a contract with POCL to facilitate this - and more deals should be
forthcoming once automation is delivered.
We have started to work towards our key objectives, and have already met with
Stephen Byers, the Secretary of State for Trade and Industry. The Federation is
also now part of a Working Group which has been set up by, and will be chaired by
lan McCartney, Department of Trade and Industry Minister of State with
responsibility for the Post Office. The Working Group will help to ensure the
successful delivery of the Horizon project and maximise its commercial potential.
The Group will consist of representatives from POCL, the Federation, the I
i Communication Workers Union (CWU) and the Communication Managers I
Association (CMA) and it has the full backing of Government. I
Members: should. be- reaSsured. that the Federation is fully involved in the
development of the automation platform and ensuring that the potential the platform
provides is fully utilised.
The Executive Council has decided that four campaigns are needed to lead
members and ensure we all act together to achieve our objectives:-
1. Customer Focus - “Keep your customers warm” i
Even if automation is delivered and contracts signed with banks/building
societies and Government to use the network, customers will have a wide
range of options to pick up their benefits. We need to start now to ensure
customers want to continue to use the post office.
The only way to do this is to ensure every subpostmaster is aware of the
need to, and delivers, a high quality service to customers - exemplifying our
brand image as a trusted, professional and friendly environment in which to
carry out the everyday business of life.
2. Tell non members
The Federation is fighting to save all subpostmasters investment - members
and non members alike. It is vital that non members join the Federation to
maximise our ability to achieve these objectives.
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campaign at this point in time. If subpostmasters write to their MPs expressing
concern the response they are likely to receive will be based on the letter *
Stephen Byers sent to all MPs immediately after the announcement (copy of letter
attached). This emphasises Government's commitment to automating the
network and our involvement in ensuring that it is successful. But Government is I
well aware that we have that option in reserve. i
Government's decision to go ahead with computerisation of the post office
network without the Payment Card will deliver the infrastructure we need to
survive and compete.
e Whilst the withdrawal of the Payment Card is not ideal, there is no alternative and j
we know what has to be done to secure everyone's future. I
« We are pleased Government has confirmed that automation of the post office
network is to go ahead.
« An ACT campaign similar to the one organised in 1992 is not feasible - it would t .
not be successful and we would lose credibility.
The way to proceed is to:~
e ensure automation goes ahead on the revised basis. The only alternative would
be termination of the whole Horizon project. It is essential therefore that
automation of the network is completed by 2001 - before the move to ACT begins
in 2003.
« remind Government of our concerns about the move to compulsory automated
credit transfer of benefits direct to the claimants bank/building society account.
We are not against claimants being able to ¢hoose ACT if that is their wish.
However, the claimant should have the right to ghoose.
* stress to Government that the Benefits Agency should not promote ACT until
automation of the post office network is complete and contracts with the
banks/building societies signed - providing thesbpportunity for claimants to opt to
pick up their benefit in cash at a post office. .
we
e ensure that all Government Departments which now use the post office network
remain loyal to POCL during the period in which the automation platform is
introduced.
« press Government to maximise its use of the network by delivery of its welfare
reform and “modernising Government’ aims, which may be built upon the
automation platform. This needs to be done in a way which is commercially
viable for all parties to the contract.
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3. Government Awareness
Nationally, we will continue our work to keep Government aware of the value
of the post office network - and of the Federation's potential.
4. Final Resort
If it becomes necessary at some point in the future, we hold in reserve the
ability to run an ACT-style campaign. However, now is not the time to
consider this option.
Therefore, instead of this being an overt ACT campaign as before, the
campaign has to be more subtle and sustained with everyone playing their
part in working to retain our position as the first option people choose through
which to have their state benefit paid.
Ene: A copy of the submissions to the Parliamentary Select Committee for Trade
and Industry is attached for your information together with a letter dated 27
May 1999, from the Secretary of State, Stephen Byers to all MPs regarding
the future of the project.
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The Rt Hon Stephen Byers MP
Secretary of State for Trade and Industry
Secretary of State
Department of
Trade and Industry
1 Victoria Street
London SWiHf OET
To all Members of Parliament i
27 May 1999
On. ;
POST OFFICE AUTOMATION : '
I thought you might find it helpful to be updated on progress with the Horizon Project
which aims to make sure that our Post Office network is modernised and automated and
ready to serve us well over the next decades.
As you may know the project was entered into in 1996 by the previdiis ‘adiifistration,
It has suffered severe delays and set backs. That is why, when these delays became
apparent, the Government commissioned a major review of the project to decide the
best route forward.
It also became apparent, that given the delays, the original concept of having a magnetic
strip benefit payment card, was technologically out of date. The banks, among others, -
are already moving away from the magnetic strip in favour of the next generation
technology -'the smart card. We therefore wanted to find a solution that recognised this
fact.
Tam pleased to say that we have now found a positive way of moving forward on
automation. As 4 result of this, for the first time ever, post offices will have an up to
date automation platform, helping them to provide a better service for their customers
and representing 4 major investment in the future of the nationwide network of Post
' Offices. The target set for achieving the computerisation of the entire network of Post.
Offices, is by the end of 2001. This is a realistic target that we believe can be met. The
- introduction of this technology will give the Post Office network a leading position in
the modemising Government agenda which aims to make Government closer to the
people, not least through the use of newer technologies.
dti mplet
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The automation of the network will allow us to move from the traditional paper based
methods to a more modem, efficient and fraud-proof way of paying benefit through the
Post Office network, building on banking technology. In this way, we will ensure that
the Post Office network has the services to attract the customers to the other shop
services that local post offices often incorporate so underpinning the existence of a
successful and thriving Post Office network. The move to make payments using the .
Automated Credit Transfer system will begin to come in in 2003 and be completed in: ¢
2005, giving plenty of time for the network to be ready, and guaranteeing the network I.
in the meantime. Many benefit recipients already chose to receive benefits via payment
to their bank accounts, The Government can give an assurance that those benefit
recipients who wish to collect their benefits in cash at Post Offices should continue to
be able to do so, both before and after the change-over. .
In the interim we will be using bar coding on order books ta tackle benefit fraud, This
will provide savings of about £100 million a year.
We shall be involving the National Federation of Sub-Postmasters closely in this
initiative. If you have. any questions or queries about these developments, do not
hesitate to write to myself or the Minister responsible for the Post Office Ian.
McCartney. i I .
Stephen Byers
oti , inple.
Deparanaat of Trade and tnéusry
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THE FUTURE OF THE POST OFFICE NETWORK
SUBMISSION BY THE NATIONAL FEDERATION OF SUBPOSTMASTERS *
This submission is made in response to the request from the Select Committee of 9
June 1999 inviting the National Federation of SubPostmasters (NFSP) to give our
reactions to the recent announcement by Government of the future of the Horizon
project, the events that led to the withdrawal of the Benefits Agency payment card
from the project and its implications for 18,000 subpostmasters who own and I
operate the vast majority of the network of post offices.
1. The Benefits Payment Card I
The decision of the previous Government to automate the delivery of benefits 1
payments using the benefits payment card was based on the need to reduce costs,
eliminate fraud and ensure beneficiaries would be able to continue to receive their
payment in cash from the post office, thus ensuring they retained a choice as to the
method of payment which best suited their individual circumstances.
This decision was taken in response to the seal hostile public reaction to a trial
which the DSS began in 1993 to test 3 different Versions of the pension claim form.
Only one version contained a direct reference to, payment in cash at a post office,
whilst all 3 gave great prominence to payment by ACT. The biased nature of the
trial, which could have resulted in the withdrawal of the option to choose to use the
post office appeared to have been undertaken by the DSS without regard to the
Government's stated commitment to the nation-wide network. Had the trial been
rolled out nationally it would have very quickly threatened the future of at least 5,000
sub post offices.
Government's decision to automate the network promised a far more secure future
for all involved with the Counters Business, not only safeguarding the right of
customers to choose to receive pensions and benefits from post offices but also
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providing a platform on which to develop new products and services for a wider
range of clients. This was recognised to be the only way to ensure the future
survival and prosperity of the post office network, and it remains the case now.
The NFSP began to develop concerns about the future of the Horizon project during
the latter months of 1997. Since then, press speculation surrounding its future has
been continuous creating great uncertainty for the future of subpostmasters’
businesses, POCL and its current and prospective clients.
2. Welfare reform and the payment card
On 12 May 1998, Kate Hoey MP addressed delegates at the NFSP Annual ¢
Conference on behalf of the Minister for Welfare Reform. That speech focused on
the Benefit Payment Card, fraud reduction and welfare reform, emphasising the links
between them.
Wider access to banking facilities and financial advice for low income groups was
stated to be a key aspect of Government’s welfare reforms with the aim being for
everyone to have access to a basic bank account by 2020, The ability of the nation-
wide post office network to play a significant role in providing that access and
continuing to provide a method of paying benefits was welcomed by the Minister for
Welfare Reform.
Post offices have been, and remain, the cornerstone of benefit delivery for the vast
majority of people who rely on benefits. The NFSP understands the need to provide
a modern, secure payment system which is cost effective, robust and fully
accounted.
In the address to Conference, the Minister for Welfare Reform recognised that our
partnership with the DSS was crucial in making these objectives achievable for
benefits payments through post offices - and that the payment card was designed to
do all these things.
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The business case to warrant the investment being made in establishing a nation
wide network through which customers may receive their benefits using the new
benefits payment card was based on being only in post offices. POCL is obliged’ to
operate the largest UK retail network, reaching into practically every community
throughout the country. Without exclusivity, its ability to provide the service on a
commercially sustainable basis was not possible. We therefore welcomed and were
reassured by the written confirmation later given by the Minister for Welfare Reform
that there were no plans to extend the use of the payment card to other outlets.
3. Government Review of the Project
The NFSP understands that the reasons for the delays experienced by the project
were in part caused by the sheer size of the project (the programme was the largest
IT project in Europe) and the physical diversity of the post office network. A project
of this size and complexity was always likely to have its problems. However,
following the award of the PFI contract to ICL Pathway, progress was hampered by
the failure of all the parties to agree the detailed project specification. Lack of
progress and rising costs led to a major review by Government to decide the best
route forward.
Since it became apparent early last year that Government were reviewing its future
the Horizon project has been overshadowed. The NFSP remained in close contact
with POCL and ICL Pathway during the course of the review, spending a great deal
of time dealing with the uncertainty. Our concerns have been constantly relayed to
Government and POCL to ensure the decision makers are in no doubt as to the
importance of automation to the future of the network.
Confirmation has now been finally received that the payment card will not go ahead
because magnetic strip technology is out of date.
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4. Programme Delivery
The system has already been installed in over 250 post offices in the South West
and North East of England with all services fully automated. The Payment Card has
worked successfully since October 1996 and has been well received by customers,
being easy to understand and use.
The work being done at offices has in many cases been significant and is a
reflection of the inevitable difficulties of automating a large diverse network.
On the systems side, our understanding is that the system had been moved
successfully through the final stages of testing prior to addition of the remaining ¢
offices to make up the balance of 300 taking part in the formal live trial. The training \
courses, go-live arrangements and support arrangements both at offices and via the
helplines were ready to ensure a successful trial prior to national roll out.
This experience has emphasised the need for careful planning and management
through any trial period prior to automation being rolled out nationally.
5. Impact of the loss of the Benefits Payment Card
Government has stated that it has found a positive way of moving forward on
automation as a result of which for the first time ever post offices will have an up to ¢
date automation platform, helping them to provide a better service for their Ny
customers. Government has further stated that it intends to move to a more modern
and efficient way of paying benefits through the post office network, building on
banking technology. It intends to do this by transferring between 2003 to 2005 to a
system of paying benefits directly by ACT to bank/building society accounts. Post
offices will only be one of a multiple of alternative delivery channels. Customers will
only be able to retain the choice to pick up their benefit from the post office if the
account they have is accessible through the post office.
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We view the headline agreement reached between POCL and ICL Pathway as
short term protectionism which will have a disastrous effect once the Benefits
Agency enforce automated transfer of benefits direct to a bank/building sociéty
account. The effect on the network of post offices we estimate to mean the direct
loss of up to 40% of all business currently transacted over post office counters.
If automation is completed by 2001 it will be necessary for POCL to strike
commercial deals with all banks and building societies to enable those claimants
who are their customers to access their account at the post office.
If this is successfully achieved it will mean that the post office network will just be
one of a series of delivery channels alongside bank branches, ATM's, supermarkets,
telephone banking etc. it is likely that customers will exercise their right to use all of
these channels according to their needs. The impact on customers we will return to.
The adverse impact on post offices will be worsened once ACT is enforced as it is
inconceivable that customers will continue to use the post office to pay their bills
even if they visit the post office to pick up their benefit. This in turn will have a knock
on effect on the turn over of the subpostmaster’s associated retail business, it being
the synergy between the private/post office business that has enabled so many post
offices to remain viable.
Many sub post offices already operate on the edge of viability. In these
circumstances, with a loss of work on such a large scale, the local post office will not
survive, resulting in a loss to those beneficiaries who want to use post office
services, including the elderly, infirm and those without transport, people who now
are comfortable with transacting their business in the post office environment.
By moving to compulsory ACT, where each beneficiary will need to have a
commercial relationship with their bank many may incur bank charges. Banks are
now introducing charges to use their services, for example to access an ATM and
use counter services.
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Memorising a PIN number and accessing cash at an ATM machine makes people 3 I
vulnerable. A cost effective and secure method of paying benefits - for who?
The impact on the community of the loss of a post office is well known. The sub
post office is at the heart of the community and the vital social role subpostmasters
play has been recognised many times by Government.
Every day there is a social role played out by the subpostmaster in every community.
Who will fulfil that need when the sub post office is closed?
The NFSP’s view is that the decision to scrap the benefit payment card will lead to:
« the loss of subpostmasters’ investment in their post office business, in which
many have invested their life savings and on which they rely for their income and
retirement provision. In many many cases entire families earn their living from
their post office.
¢ the prospect of a significant proportion of the current 40,000 sub post office staff
losing their jobs, many of these staff being part time, one of the most vulnerable
sections of the workforce.
¢ 17,500 jobs in POCL being put at risk.
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the loss to the community of their local post office, restricting customer choice.
The NFSP therefore wish to ask for the support of the Trade and Industry Select
Committee:-
¢ in opposing compulsory ACT as the costs, both financial and social, will far
outweigh the savings the DSS can make by enforcing ACT.
¢ to ensure the Benefits Agency do not promote ACT until automation of the post
office network is complete and contracts with the banks signed.
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¢ to ensure the Government maximises its use of the network for delivery of its
welfare reform and “Modernising Government” aims, which needs to be done in a
way which is commercially viable for all parties to the contract.
e to encourage all Government Departments which now use the post office network
to remain loyal to POCL during the period in which the proposals to maximise the
use of the network for the Government Gateway are developed and implemented.
We look forward to the opportunity to expand further on the points covered in this
submission.
12th June, 1999
National Federation of SubPostmasters 22 Windlesham Gardens Shoreham by Sea West Sussex
BN43 5RE Tel:!
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