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Select Committee on Trade and Industry Eleventh Report
ee eee reer
ELEVENTH REPORT
‘The Trade and Industry Committee has agreed to the following Report:—
THE HORIZON PROJECT FOR AUTOMATED PAYMENT OF BENEFITS THROUGH
POST OFFICES
Project Horizon
1. In the mid-1990s, the previous Government embarked on an ambitious project, christened Horizon[1], to computerise the Post Office
network and automate the payment of benefits, financed under the Private Finance Initiative (PFI). It was designed to give all benefit claimants
2 magnetic strip benefit payment card, for presentation at a specified post office, where it would be swiped by a clerk and cash paid out. The
‘system was intended to produce substantial savings over the current system of payment books, and be substantially less open to fraud, as well
as providing the Benefits Agency (BA) with the means to account fully for their vast programme of expenditure.[2] The contract was awarded to
TCL In May 1996, with the intention that systems would be installed by the end of 1998 and that all benefit recipients would be In receipt of
cards by mid-1999.
1 The terms "Horizon", "Pathway" and "BA-POCL" (Benefits Agency-Post Office Counters Limited)
have all been applied at different times to all or specific parts of the programme Back
2 Ev, p 34, para 5 Back
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Select Committee on Trade and Industry Eleventh Report
Progress and problems
2. In the course of 1997, there were reports in the press of difficulties with the programme, and expressions of concern from interested parties.
When we raised the matter with the Post Office and the Minister in the course of oral evidence in November 1997, however, both seemed
confident that it \was progressing to plan. Vie concluded in January 1998 —
“There have however been recent reports that the programme is running two years behind schedule. It is cruciai for the future of the national
network of sub - post offices that the ICL Pathway automation project be taken through to @ successful conclusion: we seek # detailed eccount
of progress and problems in the Government's response te this Report.“[3]
In its response of April 1998, the DTI told us —
“so. the Government is committed both to the maintenance of a nationvride network of post offices and to providing @ secure, convenient and
Cost effective means of paying benefits to customers. That Is what the Horizon automation programme Is designes to do, Post Office Counters
Ltd and the Benefits Agency are continuing to work closely with ICL Pathway to progress the Horizon programme and the Government is
monitoring developments closely. A smail pilot trial of paying child benefit by payment card at 10 post offices began in October 1996, followed in
May 1997 by trials at 200 post offices of arder book control service with bar-coded order books, These trials were extended in scope by a
further software release In November 1997, Post Office Counters Ltd and the Benefits Agency are now working with ICL Pathway to finalise
plans for the next stages of the delivery of the programme, with a working assumption that a live trial of all services at some 300 post offices
would begin In January 1999. Subject to successful completion of this trial, national roll-out to all post offices would start in April 1999 and be
completed before the end of 2000."[4]
3. In November 1996, aware of concerns being expressed at what was happening to the programme, we raised it in oral evidence with the then
Secretary of State, Mr Mandelson. He told us -
“There have been delays but the Benefits Agency and the Post Office continue to work closely with ICL and the Govemment Is closely
monitoring progress. You are right to suggest that under the leadership of the Treasury there have been ministerial discussions about the
progress that Is being made and vinen It can be completed. The current plans provide for Post Offices to be automated by the end of the year
2000 and in that context the Government Is committed to the maintenance of a nationwide network of post offices. I think people need to be
assured of that. I feel confident that the project will be property completed and that tt will provide @ very Important platform, computer based
platform, springboard, for the Post Office to intraduce and develop quite a diversity of services which are very important Indeed if the business
prospects of the Post Office are to be secured ...... There Is 2 constant monitoring of the performance and attainabillty of this project by the 3
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Government. Obviously it is very, very important to the Post Office and its customers. It is very important to the Government's wider plans. We
remain confident on the basis of the information that we have at the moment that it will reach completion ..... "I
‘A month later, on 9 December 1998, we heard orai evidence frum Ian McCartney MP, the Minister of State at the Department of Trade and
Industry, on the outlines of the review of the Post Office announced on 7 December 1998 by the then Secretary of State. He told us ~
“We are still committed to the creation of an information technology network in 18,000 post offices. As a Government we are working both as a
Department with the Post Office and the Post Office partners which include of course the Benefit Agency one of the biggest customers, and that
work is progressing to try and ensure we get in place such @ netvork. It is critically important to the future of the Post Office that it does.” [6]
4. Vibile still awaiting the outcome of the review announced in April 1998 by the then Secretary of State Mrs Beckett, which was to have
concluded in the autumn of 1998, we had reason to assume from successive Ministerial assurances that the Horizon programme was
proceeding, despite delays and difficulties, and that Mr Mandelson's confidence expressed to us in November 1998 that the project would be
“properly compieted” was well-founded. On 24 May 1999, however, the Secretary of State for Trade and Industry announced in a Press Release,
and in a Written Answer, changes to the Horizon project which in broad terms meant scrapping of the magnetic strip benefit payment card, and
2 rejigged fixed price computerisation contract between the Post Office and ICL, designed to lead eventually to @ much broader smart card
Service. The Benefits Agency is no longer @ party to the programme, save for paying as an interim measure for the bar-coding of order books,
and Is now committed to moving fram 2003 to payment of benefits by automated credit transfer (ACT). The Secretary of State's statement
explained that -
"The changes to the Horizon project are aimed to put it on @ sustainable footing for the future and allow the Post Office to move as quickly as
possible to the computerisation of post office counter services. “[Z]
5. It has been suggested that, over the past two years, Ministers have been less than candid in thelr responses to the House and to this
Committee on the problems confronting the Horizon project. The Secretary of State for Social Security, in 1997 the Chief Secretary at the
‘Treasury, confirmed in evidence to us that Ministers outside the DSS — primarily the Treasury and DTI — had been focussing on the programme
Since August 1997: It had been clear from then, If not sooner, that “there were major difficulties” [8] We appreciate that in such issues,
Involving large sums of money and, as the Permanent Secretary at the DSS told the Social Security Committee in July 1998, the prospect on
termination of “a long, nasty negotiation which viould probably in the end result in some sort of out-of-court settiement",[9] some discretion
was necessary. Ministers were Indeed intent over many months — perhaps too many months —- on rescuing the project, until thelr cumulative
loss of confidence at the turn of 1998-99. Having reviewed the evidence given to us, we de however consider that a fuller reflection
of the process of review which was underway, and of the serious problems with the programme, could and should have been
presented tu Parliament and to this Committee.
3 HC3R0 of 1997-98, para 40: Qq 159-60 & 220 Back
4 Fifth Special Report from the Trade and Industry Committee, HC 684, p vi, para 26 Back
5 HC 1138, Minutes of Evidence of 4 November 1998, Qq 1021f: italics added Back
6 First Special Report from the Trade and Industry Committee, HC 113 of Session 1998-99,
Q177 Back
7 HC Deb, 24 May 1999, col 21w Back
8 Qql37, 157, 167 Back
9 HC 614 of Session 1998-99, Q377 Back
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Select Committee on Trade and Industry Eleventh Report
ee eevee
Evidence
6. In vievs of the size and prominence of the programme, not only the largest PFI programme within the responsibility of the DTI, but one of the
largest in existence, and of the significance of the decision to scrap the Benefit Peyment Card for the survival of the national post office network
and to the ability of benefit claimants to collect benefits in cash from post offices, we decided to inquire into the events which led up to the May
1999 announcement and into future prospects. We heard oral evidence on 14 June 1999 from the National Federation of Sub-Postmasters
(NFSP); the Communication Workers Union (CWU) and Communication Managers’ Association (CMA); ICL and the Post Office: and on 14 July
1999 from the RE Hon Stephen Byers MP, Secretary of State for Trade and Industry; the Rt Hon Alistair Darling MP, Secretary of State for Social
Security and the Rt Hon Alan Milburn MP, Chief Secretary to the Treasury. Folloviing the latter session, we sought copies of the 3 principal
reports on the programme, which had been referred to in evidence to us: the PA Consulting Group Report of October 1997, the report of July
1998 by an expert panel chaired by Adrian Montague (the Montague Report) and the report of October 1998 from the independent
troubleshooter, Graham Corbett. Copies were made available on a provisional basis in early September. On 13 September the DTI confirmed
that they were to be regarded as provided in confidence “in order to assist the Committee's understanding of the background to the project and
to the decision which Ministers collectively reached”. We have therefore reluctantly agraed not to quote extensively from the three
documents, nor reported them to the House; we have however drawn on their contents tu inform our conclusions.
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Select Committee on Trade and Industry Eleventh Report
History
Origins
7. In late 1992, DSS trialled three new social security benefit entitiement claim forms only one of which "contained a direct reference to
payment in cash at a post office".[10] Following a vigorous campaign by the NFSP, Ministers set up a joint study by the Benefits Agency (BA)
and Post Office Counters Ltd (POCL) to undertake a review and come up with @ way forward.[12] After what ICL described as “a lengthy
competitive bid", and “following @ procurement process in line with Government and European regulations”,(12) ICL Pathway was selected in
May 1996 to design, build, finance and operate an automatic benefit payment system as a Private Finance Initiative project, under which the
private sector contractor carries the development risk, with the reivard in the form of transaction fees. ICL had experience of establishing and
running a broadly similar scheme for the Post Office (An Post) in the Republic of Ireland, as well as running 8 1994-95 programme of barcoding
of order books for use at post offices within the M25 area.[13]
8. The 1993 report of the Joint feasibility study conducted by BA and POCL into a solution to the problems of paper based methods of payment
examined three principal options — barcodes, @ swipe card and a smartcard, It concluded that “a magnetic swipe card offered the most effective
(as well as cost effective) way forward. This approach was endorsed by Ministers”.[14) The Post Office had always intended to migrate its
customers onto a ‘Post Office smartcard”, cavering many other functions, so that it naturally wanted any new technology to be compatibie in
future with smartcards.[15] The Benefits Agency saw the swipe card as "an Interim measure’, to ease the transition to ACT,[16] and may have
been unwilling to Ue themselves in for the longer-term to @ Pust Office smartcard. ICL told us that "ICL’s original proposal was to issue a
smartcard, but the customers maintained thelr preference for a “mag stripe" Payment Card."[17] In response to our subsequent inquiry, ICL
told us that they had submitted a proposal In February 1996 during “proposal evaluation and pre-contract discussions", which noted that the
German social security programme elready used smartcards. The approach was rejected, possibly on the grounds of cost - an Increment of
around 80p a card - a5 well as technical risk.(18] The Chief Executive of the Post Office agreed with the benefit of hindsight that it might have
been better to have moved straight to the smartcard, but noted that there had been "social and technical reasons” for the decision to select
magnetic stripe card.[19] We question Ministers’ characterisation of the magnetic swipe card system as “an out-dated concept” and
3 redundant technology; although the selection of a magnetic card rather than @ smartcard in 1996 may with hindsight have
proved unfortunate, It was always Intended to move to a smartcard in due course.
PA Review
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9. Under the original timetable, contract details, including a detailed schedule of service specifications, were to be completed by the end of
1996; 2 live Operational Trial would run from April to July 1997, and full roll-out to be completed by the end of 1998.[20] There were
however delays from the beginning. The Post Office told us that the process of agreeing the Schedule of Service specifications "took eight
months rather than the three originally allowed."[21] A revised timetable agreed by all parties in February 1997 delayed the beginning of rail-
out from July 1997 to November 1997,[22] In the course of 1997 further difficulties emerged. In August 1997 DSS Ministers alerted Treasury
Ministers to record that "they were extremely concerned by what they discovered."[23] In September 1997, as @ result of consistent and
chronic slippage in delivery dates, all parties commissioned a strategic review by PA Consulting Group. The review's broad conclusions were set
out in evidence from the Post Office — “the programme was technically feasible, that it would take longer and cost more to deliver, was of &
complexity underestimated by ICL and that there was no sensible way of descoping/radically altering the plan. Overall it vias better to continue
than to terminate,"[24] The review noted that the target for national roll-out had slipped by 13 months in the 8 months betveen the November
1996 version 2 of the master plan and the July 1997 forecast, ending up further away than before. As a result of the review's recommendations,
POCL took over line management of the programme in April 1998 from the Joint Programme Delivery Authority.{25)
Montague Report
10. Matters only Improved in part over the next 9 months. In November 1997 @ formal note of default letter was sent to ICL Pathway, who
rejected it.[26] There were further delays to the programme and ICL requested a change in contractual terms, either by an extension of the
contract or increased charges.[27) . In March 1998, follawing what ICL regarded as "excessive interference and bureaucracy”, and against what
the Post Office referred tu as “a background of concern about delay to the project and its ability te deliver its objectives", Ministers established
an Interdepartmental working group, which in turn established an independent panel of experts, chaired by Adrian Montague.[28] The findings
of the Panel's July 1996 report were “broadly in line with previous reviews" according to the Post Office, and "confirmed the technical viability of
the project” according to ICL.[29] The Government's account to us of the Panel's findings was that the project could deliver the functions
expected of it, but not before the end of 2001 and not without improved management and uncertain cost.(30) Annex A to the Montague Report
set out a number of options and offered a detalled assessment of the two which it deemed to be the only practicable ones: Option 2, "partial
restructuring” — that eventually adopted by the Government — which was seen as having the disadvantages of the perpetuation of @ high cost
paper-based method of payment: POCL's infrastructure being too highly specified for its needs: and the strong possibility of “long, acrimonious
and costly legal disputes” but as presenting a lover risk; and Option 1, "full restructuring", by extension of the contracts, followed by a rapid
mave to ACT payments. The Government told us that the working group concluded that If the project were ta continue it should be on the basis
of "no Increase In the level of payments to ICL: Improved management: and the appointment of @ troubleshooter."[31] We have not seen the
detailed conclusions of the working group, which evidently constituted a gloss on the Panel's Report: their reported opposition to additional
payments to ICL, whether by an extension of the period of transaction payments or an alteration in their level, boded lll for the programme's
survival, since ICL were seeking at least to cover their expenditure to date and avold a loss.
Corbett Report
11. In September 1998 Graham Corbett, Deputy Chairman of the MMC, was appointed by the Treasury as the troubleshooter recommended in
the Montague Report to “facilitate discussions between the three parties [ICL, BA, POCL] on an acceptable way forward’. Vie were told by the
Government and ICL that he proposed extension of the contracts and an ICL/PO Public/Private Partnership.(32] Mr Corbett's viritten report to
the Chief Secretary of 20 October 1998 records offers of extensions of the contracts made by the two public sector sponsors, BA and POCL, and
the difficulty presented by ICL's unwillingness to give up its desire for a modest positive return over the project, and its reluctance to draw a line
under the problems of the past two years. By December 1998, however, ICL and the Post Office had agreed terms, which wauld have led to ICL
accepting a loss on their business case and to the Post Office taking on some of the financial burden “by picking up increased prices to ensure
continuation of the programme and the BPC .... . This deal would have provided POCL with a more certain route to Network banking ....".[33}
ICL submitted its final proposals in December 1998, based on these negotiations. We were shown in confidence by ICL and the Post Office the
outlines of these proposals which seemed to them to represent an acceptable vay forward. As the Post Office Chief Executive put it — "We
thought we had it tied down by Christmas, but obviously we had not ....".[24] The Government state that these proposals “would have required
both a large increase in the charges paid by the public sector parties, and also an extension of the contract", thus running aginst the yiorking
group's July 1998 conclusions.[35]
Outcome
12. Meenwhile, the October 1998 milestone for a live trial had come and gone.[36] ICL told us that it "emerged" in January 1999 that "the BA
did not wish to proceed with the magnetic swipe card", although not until May 1999 was it clear that Ministers had decided to dispense with the
Benefit Card.[37] Between January and May 1999 a number of options for retrieving something from the project were examined.[38]A senior
‘Treasury official was tasked with devising an alternative solution, which was that announced in May 1999.
Basis for May 1999 decision
13. It is evident that a combination of factors — repeated delays and failures to reach important milestones: the demands of ICL
to recoup their expenditure by either a higher transaction charge or an extension of the period during which such charges would
be payable: doubts about the resilience and relative obsolescence of the technology — led Ministers tu a collective luss of faith in
the programme. The Chief Secretary told us "We viere anxious if at all possible to try and resurrect what looked like a project which was
beyond resurrection*:[39] and “in the light of ali the evidence what did we do? Try and resuscitate it? Try and resurrect it, vihen we were being
told it would (a) cost us more money and (b) we could not be sure it would actually operate?"[40} The Secretary of State for Trade and Industry
admitted that it " probably would have been easier to let the contract run on and not to have taken the decision that we have now taken”.[41]
It is however our impression that the principal factor in deciding to ditch the Benefits Payment Card was neither the cumulative
delays nor technical doubts on feasibility, but the increasingly unpalatable prospect facing the Benofits Agency of paying high
transaction costs for an extended period, rather than moving as rapidly as possible to ACT transactions. The evidence given in July
1998 by the DSS Permanent Secretary to the Social Security Committee puts it plainly —
“a8 the project slips, our costs mount because we are having to carry on with our end of the project. The savings we shall get from it, which
are administrative savings are balanced by the administrative costs, though there are big savings in fraud savings. But of course as the length
of the project shortens, because it is supposed to end in 2005, we get less and less of those .... . From our point of view, the best answer viould
actually be payments into bank accounts and if we want to use post offices, the post offices could actually have some kind of banking facility
Where people can Just put their card in at the pest office and get their money out. So that is how it looks from our point of view, As the project
Got delayed and delayed the Benefits Agency who are accountable for it, were really beginning to say, "This can't go on"'.....ACT Is in pence and
ail ather methods of payment are fer more expensive than that so the more uncomfortable for us it feels."(42]
Already in the autumn of 1997 the PA Report recorded the reservations felt by the BA about the economic viability of supporting the automation
of benefit payment at aif Post Offices. Nine months later the Montague Report noted uncertainty about both sponsors long term Intentions and
that BA's commitment to the programme would be hardest to achieve while the lower unit cost of payment by ACT was so attractive. In the
Annex setting out the Panel's views on a way forward, it records BA's concern at the implications of use of @ benefit payment card for only @
short while until 100% ACT became effective. While itis understandable that the BA should have had doubts about the prospect of either an
ever briefer and potentially more osstly interlude of a benefit payment card squeezed between an crder book regime and ACT or delays to the
Introduction of ACT putting off the anticipated saving for two or more years, It remains unclear what timetable for migration to ACT was
envisaged at the formative stage of the programme in 1994 to 1996. It is however clear that BA and ICL had radically different perceptions from
‘the very outset, without the benefit of discussion on this crucial matter. Everything we have heard and read confirms us in the view that
the programme was blighted from the outset by the desire, justifiable or not, of the Benefits Agency to move as soon as.
permitted tu compulsory Automated Credit Transfer: and that it finally foundered because of the reluctance of either the Treasury
or ICL's parent company Fujitsu to find the additional funds required once the business case of all those Involved deteriorated in
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the face of delays. We du not fault Ministers for taking the decisivn they did in May 1999 in those circumstances. We have nut
regarded it as part of our task to conte to a judgement on decisions taken prior tu May 1997; it may be that the inquiry by the
Comptroller and Auditor General will cast light on such decisions.
Costs
14. The Chief Secretary set out for us the costs to the public purse of the programme:[43]
II Sunk costs specific to Benefit Payment Card I I Costs attributable to Horizon
=
£m £m
Dss 130 140 I
PO 10 30
Total 140 170
Furthermore, the Secretary of State for Social Security estimated fraud savings foregone as around £320 million.[44] The £140 million
expenditure by DSS on Horizon is expenditure on the CAPS computerisation programme, which Is necessary In any event.[45] Vie were relieved
to hear that a number of relevant lessons had been drawn from the project and are being reflected in revised Treasury guidance.[46] It has
been an expensive lesson: we hope that it proves a salutary une.
Major problems
15. We have sought to establish in outline terms only the reasons for the delays and difficulties In the programme. The PA Report identified
three root problems, which are born out by our analysis and that of the other reports -
* marginal business cases. each slippage exposed further the vulnerability of the programme: as
the financial return from the programme deteriorated significantly for all parties there was
erosion of the sponsors’ business cases, putting strain on relationships between sponsors and
between the sponsors and Pathway.
agendas in conflict: all the reports noted an adversarial approach between some of those
involved and substantial tension, suspicion and distrust between the sponsor organisations at
most levels.
¢ PFI structural problems: the PFI contract implied a transfer of risk which was not sustainable
in practice, since the public sector sponsors could not afford failure of the system.
16. Vie add the following observations based on evidence and a reading of the Reports ~
+ Itis agreed that the management of the programme by the customers --- BA and POCL —
was imperfect. In May 1996 a Programme Delivery Authority (PDA) was established, intended
to provide a single customer base.[47] It grew in size to almost 150 people. ICL complained that
“the PDA maintained it had a right to require ICL Pathway to behave as if this was a
conventional government procurement programme. This led to a huge amount of senior
management time being devoted to solving the issues which were constantly being raised by the
PDA" [48] The PA Report identified in excess of 25 forums that met on a regular basis with
numerous additional ad hoc meetings: found that certain change requests had taken more than
six months to be resolved: and suggested that the PDA was far too large and should be reduced
to around a quarter of its existing size. The Government's memorandum emphasised that the
“new way forward" - management by POCL - was simpler both in terms of its management
structure and focus, drawing on the lessons learned from large IT projects of this sort. [49]
+ POCL and BA do indeed seem to have been pursuing different and sometimes competing
agendas from the outset. The BA continued at a policy level to hanker after an accelerated
move to ACT, meaning that, in the tactful phrase of the Managing Director of ICL Pathway,
“the business drivers were out of sync with the technical drivers".[50] The Government candidly
stated that the swipe card "had always been seen by DSS/BA as an interim measure, designed to
ease the transition from paper-based methods of payment to payment by ACT"[51] POCL were
looking towards an eventual migration to a smart card. As a result, the PDA had difficulty "in
speaking with a decisive voice on the decisions which needed to be made .....when it had to
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make decisions [it] had to really go back and try and broker decisions back with two sponsors
so they did not have executive authority."[52] The Chief Executive of the Post Office attributed
the delay primarily to the absence of a clear line of accountability between one customer and
one supplier.[53]
The complexity of the project seems to have been underestimated from the outset. The
Government memorandum described the project as "highly complex, both in terms of scale and
technology, and commercially” and affirmed that the process of agreeing detailed specifications
“revealed a complexity not previously properly understood".[54] ICL seem to have assumed
that the principal task was one of integration rather than new development and design, leading
to additional work, and an unexpected degree of dependency on a relatively small privately
owned North American software company — Escher — and Riposte messaging software. The
Managing Director of ICL Pathway told us - "The complexity was greater than people
anticipated .... . Complexity has to be managed. You have to bring it down to a scale. J think
what has driven the complexity on this programme is not the individual activity across a post
office, it is when you multiply that by 20,000... ."[55] The Chief Executive of the Post Office
suggested that "in the early period there was maybe some under estimate of the complexity of
this whole programme by the supplier."[56]
ICL alleged that one major technical obstacle to progress was that the integrated database to be
provided by September 1996 by the Benefits Agency — the Customer Accounting and Payment
Strategy (CAPS) database — was not available as promised.[57] ICL told us that “it
subsequently emerged that it would be available only on a phased basis and would be delayed
by three years ...."[58] The Secretary of State however assured us that, while there were
difficulties with CAPS in the early days, the "system is up and running, some 15 million
customers have their records on it and it is used by 75,000 staff every day ..... CAPS actually
works".[59] Reviews by consultants in 1997 led to a necessary strengthening in the CAPS
programme management team, and it is evident that there were seen to be risks associated with
the clean-up and migration of data from existing benefits processing systems to the new CAPS
systems. Whether or not delays in CAPS releases arose from Pathway release problems rather
than the other way round, CAPS releases were eventually "de-coupled". DSS told us that —
“None of ICL Pathway’s software delivery dates were delayed by CAPS. Throughout the
project, DSS systems were ready as and when ICL Pathway’s were and this would have
continued to be the case ..... CAPS software "went live" over a series of releases from
September 1996 up to May 1999. This included whatever CAPS software was required to
enable flows of information to be provided to ICL Pathway on time ie for their initial release in
September 1996, for full integration testing and again for their release in October 1997 (CAPS
was ready in June 1997). Whenever ICL Pathway have required an interface or data from CAPS
it has been provided in accordance with dates and plans agreed by all parties .......... in relation
to payments for benefits other than Child Benefit, the necessary CAPS software was in place in
March 1998 but there was no associated ICL Pathway software to support this. The ICL
Pathway release which was live in 204 Post Offices was not capable of supporting more than
one benefit."[60]
* There seems to have been a constant procession of changes to requirements. ICL told us in
response to our written queries that 323 formal requests for change had been received, against
the original 366 contractual requirements, as well as "numerous informal changes and
“clarifications” to requirements. These included the introduction of a temporary bar-coded paper
payment card, with its own usage rules: the issue as late as February 1999 of 131 rules
governing the encashment of benefit payments by other than the beneficiary: and ever-changing
security procedures, described by ICL as "far in excess of typical financial industry norms" .[61]
17, Whether or not the project and its outcome to date has been "the largest IT disaster ever for the Government"[52] — and there Is no
shortage of competition (63]— It has become apparent to us that a proper Inquest is required, demanding detalied exploration of complex
Issues of management and finance beyond our capabilities. Given the particular interest shown by the National Audit Office in PFI
projects, and in the growing catalogue of Government IT failures, we are strongly of the view that an inquiry by the National
Audit Office Into the Horizon Project, using thelr powers to see departmental papers, would be of much assistance to Parliament:
and we are confident that ICL and thelr principal sub-contractors would see It as In the national Interest to co-operate as fully as
possible. We wrote to the Cumptroiler and Auditor General in July to propose such an inquiry; we are pleased tu record his
agreement as conveyed tu us in a letter of 7th September that the National Audit Office should carry out an inquiry into the
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lessons learned from this project, focussing on risk management.
10 Ev,pl, para 3 Back
11 ibid, p27, paras 8-10 Back
12 Ev, pl7,para 2; p27,para 11 Back
13. Ey, pl6,paras 1-2: p27, paras11-12 Back
14 Ev, p27, paras 9-10 Back
15 Ev, 27, para 6: p11, para 7: Qq15, 49 Back
16 Ev, p 35, para 14 Back
17 Ev, p17, para 5: Q76 Back
18 Ev, p26.A3 Back
19 Q124 Back
20 Ev, pl6, para 1: p27, para 12 Back
21 Ev,p27, para 13: also p34, para 6 Back
22 ibid, para 15:p34, para 6 & Qq 139, 159 Back
23 Q157 Back
24 Ev,p28, para 17 Back
25 ibid, para 19 & Q127: p17, para 10 & Q75 Back
26 Ev, p28 , para 16: p17, para 11 Back
27 Ev, p34, para 7 Back
28 ibid,p17, para 12:p28, para 20 Back
29 ibid Back
30 Ev,p34, paras 8-9: Qql44 Back
31 Thid,p34, para 10 Back
32 ibid:p18, para 13 Back
33 ibid, p28,para 23 Back
34 Q114 Back
35 Ev, p34, para 11: Q146, 161, 167-8 Back
36 Qql46: 158: 170 Back
37 Ev,p34, para 13 Back
38 Q168, 170 Back
39 Q 168 Back
40 Q 166 Back
41 Q158 Back
42 HC 614, Qq 369-370: also Q382: and Q154, 166 Back
43 Q153 Back
44 Q1S4 Back
45 QI5S5 Back
46 Q140 Back
47 Ev, p17, para 6: p27, para 12 Back
48 Ev, p17, para 10 Back
49 Ev, p34, para 13 Back
50 Q102: also Qq 63-74 Back
51 Ev, p35, para 14 Back
52 Q75 Back
53 Q127 Back
54 Ev, pp33-4,paras 2 & 6: Q 140 ete Back
55 Qq71, 90 Back
56 Q127 Back
57 Qq63, 73-4 Back
58 Ev, pl7, para 8: Qq 66ff Back
59 Q154, 163, 165-6 Back
60 Ev, pp 52-3 Back
61 Ev, pp25-6, A2 Back
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62 Government Computing, June 1999 Back
63 For list of successful PFI IT projects see Ev.p57 Back
ax
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ee eevee
Revised contract
18, The May 1999 agreement provides for automation of Post Office Counter Services “as quickly as possible", by @ "more realistic" terget dete
of the end of 2001. The Secretary of State described the project in the Press Notice as delivering “the long overdue computerisation of the Post
Office network n partnership with ICL".[64] The Post Oftice toid us that following a Ministerial decision to abenden the Benefit Card, in early
1999 "negotiations then tock place between Government and ICL on the cost of the new contract and in the light of these the Post Office signed
heads of agreement on the basis of which we are now attempting to negotiate a full agreement by the end of July." [65] The Post Office and ICL.
agreed terms and signed @ revised contract on 28 July 1999.[66] In oral evidence, the Chief Executive told us that this new contract would cost
“somesehere in the region of £800-900 million” between novi and 2005.(67] ICL referred in their evidence to @ revision of the original contract,
with the replacement of transaction payments by a fixed price contract to March 2005, and the removal of the Benefits Agency from the
contract. The programme of automation and installation of the network is due for completion by April 2001.[68) It would seem that the
POCL/ICL contract for rolling out the infrastructure is being presented as @ revision of the original contract rather than a nevi contract for leg:
reasons, presumably to avoid the need for public tender: the Chief Secretary told us that the Government was confident that it was indeed
revision, [69] The Post Office Group Accounts for 1998-99 record in a "Post balance sheet event” that POCL' is required to pay ICL Pathway a
total of £548m plus VAT (subject to certain retentions) and further annual payments by vay of operating charges until 31 March 2005”.[70]
While it makes evident sense for ICL to cuntinue with the work it has already begun, the impression remains of an essentially
political deal to ensure that ICL has a substantial contract with the Post Office, at a price which seems to have been largely
determined in advance of contractual renegotiations, as a means, however inadequate, af making up some of the £180 million
written off by ICL in their 1998-99 accounts.
19. The principal concern in this new or revised contract is how it is to be financed: a matter on which the Government
statements were curiously silent. The Chief Executive of the Post Office told us in oral evidence that half of the sum would come from
“surplus funds from previous investments in the Post Office currently shown on our balance sheet*.{71] The Post Office Accounts show that
“£480 million of fixed asset investments can be utilised to fund the initial payments to ICL Pathway by way of a contribution."[72] The Secretary
of State told us that the Treasury had sareed to make such a cortxtion, and that “he difference will be met then by Post Office Counters.
from charges for people using the services .....".[73] The Post Office had always planned to spend around £400 million over the 1999-2005
period, but had also expected "2 fly steady period of income from DSS through the payment of benefits the prospect of a move to ACT in
and after 2003 puts that Income flow In some doubt for the last 2 years.[74] In order to pay for automation the Post Office now faces the
possibility of making an annual loss on the POCL. profit and loss account of around £100 million per annum rather than the expected annual
profit of around £30/40 million, subject to how the up-front expenditure \s accounted for.[75] Representatives of the workforce suggested that
the expenditure required could have & “profound effect” on Post Office finances and on the range of ather Investments it is able to make, at the
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very time that it has been given greater freedom to pursue the Joint ventures and acquisitions it deems essential. They warned that “It really
blows a great hole in future Post Office finances ....",[26] The Post Office is in effect being obliged to use its resources to pay half the
price of the automation deemed necessary for preservation of the national network of sub-post offices, with a real risk that it
may find it difficult to recover the costs by generating new business. The Government must recognise that in satting its annual
minimum dividend, particularly in the years 2003-2005. We would also welcome confirmation that the automated infrastructure
procured by the Post Office will not be too highly specified for its needs, and will be capable of handling branch banking business
on-line.
64 DTI Press Notice P/99/439 Back
65 Ev, p28, para 25 Back
66 HC94, Ev, p38 Back
67 Q 126 Back
68 Ev, p18, paras 17 & 19: Q79 Back
69 Qq 175-8 Back
70 Group Accounts, p33, Note 28 Back
71 Q 126 Back
72 Group Accounts, p33 Back
73 Qq 181-2: 202 Back
74 Qq 126, 131 Back
75 Qq 130-1 Back
76 Q51 Back
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Select Committee on Trade and Industry Eleventh Report
Roll-out of automation
20, Delays apart, it is generally agreed that the system as installed works well and is popular with claimants and operators alike. The General
Secretary of the NFSP told us “There was absolutely no resistance from sub-postmasters and very little from customers. It wes warmly received
by the customers .....", an impression confirmed by the NFSP’s National President, a sub-postmistress in one of the trial areas in the North-cast.
[ZZ] The General Secretary of the CV/U told us "The experience that we have had during the trials was that the benefit card vas popular with
the public and it was popular with the staff working the triais”.{Z8) ICL told us that "The technology was acknowledged as working successfully
‘and was weil received by sub-postmasters, their staff and claimants alike”.(79] Equipment has been successfully installed in very diverse post
office premises, some large, some smail and antiquated.[B0) Programmes of staff training and assistance are in piace and have been assessed.
[81] The Chief Executive of the Post Office emphasised that "The original project for the last 12 months was actually delivering vihat it should
have done and it vas hitting the milestones that it should have hit".[82] The Chief Secretary vias confident that the 2001 deadiine would be
met:(B3) the Secretary of State for Trade and Industry emphasised the relative familiarity of smartcard technology.[@4] In evidence submitted
to us on 27 August 1999, however, the Post Office told us that the first key milestone, of acceptance of the system had not been achieved by
the due date of 16 August and that it was now hoped to achieve It by the end of September, with formal acceptance due by 15 November.[85]
While those concerned expressed general confidence that the roll-out of automation would proceed smoothly, and that the
apparently ambitious target of converting 300 pust offices a week in 2000 was achievablo, the failure to meet tho first milestone
cannot but cause concern in a project with such a chequered history. We look to Ministers tu inform us in response to this Report
of the progress being made with the revised contract.
77 Q35: Ev, p2 Back
78 Q48 Back
79 Ev, pl7,para 11 Back
80 Qq88-9 Back
81 Qq54ff, 89 Back
82 Q128 Back
83 Qq 148-9 Back 15
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84 Q 173 Back
85 HC 94, Ev, p38 Back
a=
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Select Committee on Trade and Industry Eleventh Report
Smartcard platform
21, Beyond the roll-out of the programme of autumation of the network, @ new and separate programme is envisaged for using this platform
through the introduction of smarteards, and agreements with @ range of Government, local authority and commercial agencies. The ICL Press
Notice of 24 May stated
“ICL is also selected as the Post Office's preferred supplier for Modernising Government Services and Network Banking .... . We have opened up
the prospect of an exciting partnership with the Post Office in developing its strategy for Modernising Government and Netviork Banking
services."
In Its evidence to us ICL stated ~
“ICL and the Post Office will continue discussions on @ Public/Private Partnership for the development of Network Banking and Modemising
Government services which may be built upon the Pathway platform."
‘The Secretary of State told us that "this smartcard technology Is something that we are negotiating at the moment and will come on after we
have automated the system because it is @ whole different set of proposals that we do need to put in place."[86] Although POCL hope and
expect that cash payment of benefits by ACT either directly into the Past Office's banking partners or via other banks may form part of this
future, it extends fer wider. The Post Office evidence emphasised their vision of the Hortzon project as a "comerstone” of their future es the
obvious local access point for a range of government and commercial transactions, connected to commercial netwarks.[87] As designed, the
equipment which has been installed in trial areas and which will be nationally installed is "smart-enabled” and indeed already uses smartcard
technology to be accessed by Counters staff.[88] It is also “web-enabled”: as ICL put It —
“There Is no reason at all in our view why the Post Office cannot reach thelr customers either through the Internet from their home TV, through
digital TV or through kiosks .....".{89}
‘The Secretary of State underlined his commitment to opening up the “whole range of new opportunities" vihich smartcards presented, giving as
an example the possibility of arranging for debits to pay utilities bilis:[90] @ commitment evidently shared by postmasters and postal services
employees.
22. The introduction of smartcard technology Is crucial to the future of Counters.{91] It viould indeed seem to be the only way to make up for
the loss of the exclusivity which would have been conferred by the Benefit Payment Card. The crucial benefit to the sub-post office network of
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the card vas indeed its exclusivity: that claimants without bank accounts or choosing not to use them for this purpose and wishing to draw
benefits in cash would only have been able to do so using the Post Office netviork. As the NFSP warned, "Without exclusivity, [POCL's] ability to
provide the service on 8 commercially sustainable basis was not possible .....".[92] Under the May 1999 agreements, post offices will be only
one of 8 multiple of alternative delivery channels, alongside automatic telling machines (ATMs or "holes in the wall"), supermarkets and others.
[23] POCL will theretore need to make commercial desis with all or most of the banks and building societies which hold claimants’ accounts.{94]
While Counters will have to compete with other outiets for some of the potential business they do so from a strong geographic position and with
@ high public reputation for trustworthiness. The Secretary of State told us that without the automation programme now foreseen post offices
would have been unable to compete.[95] As the General Secretary of the CWU put it, "The smart card technology can move you into all sorts of
[26} Evidently, POCL will have to have a close relationship with the Benefits Agency, to establish a robust regime for those claimants
‘accounts who nonetheless wish to drave benefits in cash, and those who are unable or unwilling to have a conventional bank account
‘through vihich benefits are paid: and to come to agreements with @ range of banks and building societies. While there are obviously some
difficult times ahead, and some hard bargains to be struck with a number of other commercial organisations, we are hopeful that
Post Office Counters will be able to ensure the future of the network, given equitable treatment by the Benefits Agency, and
other Government agencies.
86 Q 191 Back
87 Ev, p27. paras 2ff Back
88 Ev, p27, para 5: p18, para 16 & Q76 Back
89 Q107 Back
90 Qq 185, 191 Back
91 QUIS Back
92 Ev, p2 Back
93 ibid: Q2 Back
94 Also Q17 Back
95 Q 187 Back
96 Q49: Ev,p11, para 9 Back
a= => aD
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Select Committee on Trade and Industry Eleventh Report
ee eevee
Compulsory ACT
23. The statement in May 1999, that the new arrngement for paying benefits through the Post Office, building on banking technology would be
introduced in 2003 has caused understandable concern. In oral evidence, the Chief Executive emphasised that the Post Office's principal concern
was the speed of migration to ACT from 2003,(97] The Secretary of State for Social Security toid us that “we are not taking active steps to
switch customers on to ACT before 2003" and that from then *we will start the process of enabling our customers to get the money paid into a
bank, into a building society, other financial institutions or the post office ....for the next three years we are not going actively to pursue the
transter of our customers to ACT*.[98] Thereafter, the speed of proposed migration remains unciear. The onus is on the Post Office to have in
place agreements with all concerned to enable those who so wish — and indeed to encourage all — to use the local post office as a banking
facility. The DSS is evidently in discussion with private sector competitors of the Post Office, and from 2003 is unlikely to show any favours to
the Post Office. We welcome the undertaking of the Secretary of State for Social Security not to take any active steps to encourage
claimants to opt for ACT before 2003; we also look to him to ensure that the general benefit afforded by the national network of
post offices is fully reflected In decisions by the Benefits Agency during and after the process of introduction of compulsory ACT
from 2003 onwards, and that this process takes account of the needs of imants.
24, The Post Office told us -
“Benefit recipients like to be able to collect benefits from post offices”.[99]
It is estimated that around 80 or 85 per cent of benefit claimants have a bank account.[100] 70 per cent of those claimants nevertheless prefer
cash payment to @ bank transfer: A memorandum from the DSS drawing on recent research by the DSS and others sets out some of the reasons
why claimants choose not to have ACT for their benefits.(101] The Managing Director of POCL told us that
“for some people it Is the only way they trust themselves to actually budget through @ week ... they know that Is what they have to spend and
five on and that is thelr cholce”.[102)
‘There Is resistance to compulsory ACT, as was demonstrated in 1992. The General Secretary of the NFSP told us
“There are people who are not able or are very unvuilling to have bank accounts ... the last time there was significant resistance to being forced
to have bank accounts, forced to remember PIN numbers or write them down on the back of your purse, forced to queue at automatic telling
machines ....".{103]
19
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Witnesses from the Post Office put emphasis on the “human face” of withdrawing cash from a Post Offic
“People are fairly reluctant to go and do business with a machine ... at the end of the day there has tu be a human face attached to that
automation .... one of our greatest strengths is the personal service that we can give in virtually every community in the country ...".{104]
It is also asserted that the banks and other financial institutions may be less than enthusiastic at the prospect of a huge additional number of
small personal accounts, although research suggests that fev applicants for an account are refused. The CW/U suggested * .... all our evidence
shows that the banks do not really want these small bank accounts®.[105] The Chief Executive of the Post Office told us that from the
experience of discussions with banks "I have to sey thet at senior levels vihen I raised this there is something less than enthusiasm ....".{106]
‘The Government is promoting as 8 matter of policy the spread of bank accounts especially among the more socially dissdvantaged:[107] but it
remains to be seen how far financial institutions will respond to this policy.
25. The Government has emphasised the shift towards ACT In recent years, The Post Office White Paper referred to over 30 per cent of
child benefit recipients having opted for ACT and stated "over 50 per cent of new pensioners are making a similar choice."[108] The
Government's memorandum referred to “the escalating trend of benefit recipients to opt voluntarily for payment by ACT — no less than 54% of
new child benefit recipients choose ACT, as do 47% of new pensioners.”[109] The Secretary of State for Social Security told us - "The vast
majority of new entrants Inte the system .... are opting to go to ACT*[L10]: that
“of the new entrants on to the system, 55 per cent of child benefit people are opting for ACT, 47 per cent of pensioners, 40 per cent of
incapacity benefit people, and I think the graup you will have mast concems about are those on incume support where quite clearly their need
Is far greater but we will address that problem."(L11]
We sought the latest figures on ACT for new benefit claimants.(112) The Image presented of a flood of new entrants opting for ACT is
exaggerated. Most nev pensioners are In fact not opting for ACT, Fewer than one in 10 income support recipients elect for ACT, Fewer than 1
in 3 of new benefit recipients opt for ACT. Quite apart from the problems of dealing with what the Secretary of State estimated as the 5 per
cent of claimants — maybe 1 million people — who will not be able to operate a bank account,(113] and the question of the frequency of
payments, the fact reniains that, for a variety of reasons, most new benefit recipients still opt for cash in hand from a post office:
and that this choice must be respected In action as well as on paper.
97 Q120: also Ev,p2: Q 51: Post Office White Paper, para 7.19 Back
98 Qq 192ff. 198 Back
99 Ev, p27, para 7 Back
100 Qq 160, 183 Back
101 Ev, pp 53-5 Back
102 Q116 Back
103 Q7 Back
104 Qq32, 116 ete Back
105 Q51 Back
106 Qqi21-3 Back
107 Ev, p35, para 14 Back
108 Cm 4340, page 58, para 2 Back
109 Ev, p35, para 14 Back
110 Q155 Back
111 Q160 Back
112 Ev, p 51 Back
113 Q160 Back
=> <=> a=
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Select Committee on Trade and Industry Eleventh Report
Other agencies
26. In addition to seeking new business with Government and other agencies, following the agendas set out In the Modernising Government
White Paper and referred to in our recent Report on electronic commerce,{214] it is vital for POCL's future that they retain as much as possible
of the current range of Counters contracts with Government agencies as operations move tn electronic payment and authorisation. A 3-year
contract has recently been signed with DVLA.[115] A consortium including the Post Office won the new contract for television licensing. There
are however natural concerns as @ wide range of agencies, none responsible on their ovin for 2 large proportion of Counters business, but taken
together representing an importent part, naturally seek to use other means of delivering their services. The Post Office White Paper states that
“One element of the Government's help to sustain the nationwide network of post offices is to influence the rate of any migration of existing
Government business so that it does not run too far ahead of POCL's ability to develop new sources of revenue to replace it
and that
“The unique reach of the counters’ network, coupted with the Hortzon platform, should mean that POCL is well placed to offer a major channel to
Geliver the Government's ambitions to Interface with citizens in a modem, convenient, efficient and coherent manner through the Increasing use
of T*.1U.6)
‘The Secretary of State for Trade and Industry told us —
“The real challenge actually for myselt as Secretary of State for Trade and Industry and for the Post Office is to make sure we can capitalise on
the Modernising Government agenda."[1.17)
We welcome the Government's recognition of the Importance of retention by Post Office Counters of Government business, as
expressed in the recent White Paper. We would however also welcome recognition by Ministers that their role is not restricted to
that of interested spectators, and that Government agencies have obligations and duties beyond those of purely commercial
organisations. We recommend that the Government set out in thelr response to this Report a table showing for each Government
agency contracted to the Post Office for service delivery the current position and a clear Indication of Ministerial policy on future
contracts: and showing progress in introducing the Electronic Government agenda as it relates to delivery uf services through
post offices.
21
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114 Tenth Report, HC 648 of 1998-99, part V Back
115 Eg Cm 4340, page 64, para 19 Back
116 Cm 4340, page 61, para 10 and page 63, para 18 Back
117 Q 198 Back
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Select Committee on Trade and Industry Eleventh Report
Post Office improvement
27, Post Office management, pastmasters and Counters staff recognise that there are steps which they could take to make it more likely that
benefit claimants and other customers would maintain their preference for using the Post Office for # range of services. The CV/U told us that it
had recently reached an agreement with POCL on a ‘major review of service and efficiency across all Crown Office counters .... both sides are
committed to doing that ...".[118] It is accepted that there is need for greater flexibility on opening hours, although in evidence to us NFSP
witnesses questioned the level of demand for Counters services outside the current hours, including Saturday afternoons.[119] In broad terms
the NFSP told us —
“we want to go out to every sub postmaster and advise them that their customer is very important, ..... We are going to ~ to use a modern
term — massage the customer so the customer knovs that he or she is being looked after, We are going to look at the opening hours, We are
going to lock at hows post offices present themselves ...".{120)
‘There are for example only around 20 post offices with automated cash machines: vite In many areas there may not be sufficient demand to
make them profitable, talks are progressing. The Secretary of State for Trade and industry emphasised his view of the importance of such
services in encouraging people th use their iocal post office.[12] All concerned in Post Office Counters can and must now consider
more imaginatively what they can do to make the network more attractive te actual and potential customers.
118 Q52 Back
119 QgBif, 15: 56 Back
120 Q18 Back
121 EgQ180 Back
23
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=> <=? Gx GD 4D
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13/09/2022, 17:15 House of Commons - Trade and industry - Eleventh Report
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Publications > All Select Committee Publications > Commons Select Committees > Trade and Industry > Trade
and Industry
Select Committee on Trade and Industry Eleventh Report
SUMMARY OF CONCLUSIONS AND RECOMMENDATIONS
Overall conclusion
(a) It is evident that a combination of factors — repeated delays and failures to reach
important milestones: the demands of ICL to recoup their expenditure by either a higher
transaction charge or an extension of the period during which such charges would be
payable: doubts about the resilience and relative obsolescence of the technology — led
Ministers to a collective loss of faith in the programme. It is however our impression that
the principal factor in deciding to ditch the Benefits Payment Card was neither the
cumulative delays nor technical doubts on feasibility, but the increasingly unpalatable
prospect facing the Benefits Agency of paying high transaction costs for an extended
period, rather than moving as rapidly as possible to ACT transactions. Everything we
have heard and read confirms us in the view that the programme was blighted from the
outset by the desire, justifiable or not, of the Benefits Agency to move as soon as permitted
to compulsory Automated Credit Transfer: and that it finally foundered because of the
reluctance of the Treasury and ICL's parent company Fujitsu to find the additional funds
required once the business case of all those involved deteriorated in the face of delays. We
do not fault Ministers for taking the decision they did in May 1999 in these circumstances.
We have not regarded it as part of our task to come to a judgement on decisions taken 25
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prior to May 1997; it may be that the inquiry by the Comptroller and Auditor General
will cast light on such decisions (paragraph 13).
Reporting of problems
(b) Having reviewed the evidence given to us, we consider that a fuller reflection of the
process of review which was underway, and of the serious problems with the programme,
could and should have been presented to Parliament and to this Committee (paragraph 5).
Choice of technology
(c) We question Ministers’ characterisation of the magnetic swipe card system as "an
out-dated concept" and a redundant technology; although the selection of a magnetic card
rather than a smartcard in 1996 may with hindsight have proved unfortunate, it was
always intended to move to a smartcard in due course (paragraph 8).
National Audit Office
(d) It has been an expensive lesson: we hope that it proves a salutary one. Given the
particular interest shown by the National Audit Office in PFI projects, and in the growing
catalogue of Government IT failures, we are strongly of the view that an inquiry by the
National Audit Office into the Horizon Project, using their powers to see departmental
papers, would be of much assistance to Parliament: and we are confident that [CL and
their principal sub-contractors would see it as in the national interest to co-operate as fully
as possible. We wrote to the Comptroller and Auditor General in July to propose such an
inquiry; we are pleased to record his agreement as conveyed to us in a letter of 7™
September that the National Audit Office should carry out an inquiry into the lessons
learned from this project focussing on risk management (paragraphs 14 and 17).
Revised Post Office-ICL contract
(e) While it makes evident sense for ICL to continue with the work it has already begun,
the impression remains of an essentially political deal to ensure that ICL has a substantial
contract with the Post Office, at a price which seems to have been largely determined in
advance of contractual renegotiations, as a means, however inadequate, of making up
some of the £180 million written off by ICL in their 1998-99 accounts. The principal
concern in this new or revised contract is how it is to be financed: a matter on which the
Government statements were curiously silent. The Post Office is in effect being obliged to
use its resources to pay half the price of the automation deemed necessary for preservation
of the national network of sub-post offices, with a real risk that it may find it difficult to
recover the costs by generating new business. The Government must recognise that in
setting its annual minimum dividend, particularly in the years 2003-2005 (paragraphs 18
and 19).
(f) We would welcome confirmation that the automated infrastructure procured by the
Post Office will not be too highly specified for its needs, and will be capable of handling
branch banking business on-line (paragraph 19).
(g) While those concerned expressed general confidence that the roll-out of automation
would proceed smoothly, and that the apparently ambitious target of converting 300 post
offices a week in the year 2000 was achievable, the failure to meet the first milestone
cannot but cause concern in a project with such a chequered history. We look to Ministers
to inform us in response to this Report of the progress being made with the revised
contract (paragraph 20).
Future of Counters network
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(h) While there are obviously some difficult times ahead, and some hard bargains to be
struck with a number of other commercial organisations, we are hopeful that Post Office
Counters will be able to ensure the future of the network, given equitable treatment by the
Benefits Agency, and other Government agencies (paragraph 22).
Move to ACT
(i) We welcome the undertaking of the Secretary of State for Social Security not to take
any active steps to encourage claimants to opt for ACT before 2003: we also look to him to
ensure that the general benefit afforded by the national network of post offices is fully
reflected in decisions by the Benefits Agency during and after the process of introduction
of compulsory ACT from 2003 onwards, and that this process takes account of the needs
of all claimants (paragraph 23).
(j) The Government has emphasised the shift towards ACT in recent years. The image
presented of a flood of new entrants opting for ACT is exaggerated. Fewer than I in 3 of
new benefit recipients opt for ACT. The fact remains that, for a variety of reasons, most
new benefit recipients still opt for cash in hand from a post office: and that this choice
must be respected in action as well as on paper (paragraph 25).
Public sector agencies
(k) We welcome the Government's recognition of the importance of retention by Post
Office Counters of Government business, as expressed in the recent White Paper. We
would however also welcome recognition by Ministers that their role is not restricted to
that of interested spectators, and that Government agencies have obligations and duties
beyond those of purely commercial organisations. We recommend that the Government
set out in their response to this Report a table showing for each Government agency
contracted to the Post Office for service delivery the current position and a clear
indication of Ministerial policy on future contracts: and showing progress in introducing
the Electronic Government agenda as it relates to delivery of services through post offices
(paragraph 26).
Post Office improvement
(1) All concerned in Post Office Counters can and must now consider more imaginatively
what they can do to make the network more attractive to actual and potential customers
(paragraph 27).
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© Parliamentary copyright 1999 Prepared 21 September 1999
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