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Rod Clark PPS\SoS From: Indra Moria PER -Sp-Projs- >">
Dave Higlett PS\MoS Date: 24 August 1998
Louise Wright PS\PSL
Ben Stayte PS\PSC(AE) Copy: Carole Souter PFD5
Vicky Hutchinson PS\PSC(ST) Colin Jackson PS\PermSec
Special Advisor Rob Baldwin BA\CEO
Jonathan Tross DCM Ruth Calder PFD1f
Marilynne Morgan Solicitor Linda Oliver PFDSpPrj
Stephen Hickey PFD
Martin Sixsmith INF
George McCorkell, BA Project Director
Sarah Graham PFD Special Projects
Ron Powell Sol
John Bretherton INF
Hamish Sandison Bird&Bird
BA\POCL automation project:
Actions and Note from 18 August 1998 meeting with SoS
1. I attach:
- the action points agreed following SoS’s 18 August meeting with
officials (annex A);
- the note of the meeting itself (annex B).
2. I have separated the actions from the meeting note itself in order to ensure
the actions points accurately reflect the work required by SoS (in some
cases actions commissioned in the course of the meeting were later revised
in light of further discussion with SoS).
Indra Morris
PFD Special Projects
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Annex A
BA\POCL Project
Actions from 18 August 1998 meeting with SoS
Action 1: By 27 August Sarah Graham to provide:
- draft memorandum for SoS to send to Ministerial colleagues to set
out rationale for moving to ACT so as to ensure the principle is
accepted and to outline contingency plans for moving to ACT with
and without POCL
- supporting information notes (for DSS Ministers only) on
implementation plan and issues which need to be addressed in order
to extend ACT.
Action 2: By 27 August Sarah Graham to provide:
- a draft memorandum for SoS to send to Ministerial colleagues
outlining grounds for cancellation (including background to the
project, legal implications, and costs);
- supporting information notes (for DSS Ministers only) on the
contracts involved and the negotiating position.
Action 3: By 27 August Sarah Graham to provide:
- information note, for SoS, on financials including costs of continuing
with the project. [This information to feature, at a high level, in the
memorandum on legal issues].
Action 4: By 27 August Martin Sixsmith to provide:
- a communications\presentation strategy for SoS’s consideration.
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Annex B
BA\POCL automation project
Note of Secretary of State’s 18 August 1998 meeting with officials
Attendees: Secretary of State
Jonathan Tross DCM
Marilynne Morgan Solicitor
Stephen Hickey PFD
Martin Sixsmith INF
George McCorkell BA Project Director
Sarah Graham PFD Special Projects
Ron Powell Sol
John Bretherton INF
Indra Morris PFD Special Projects
Rod Clark PPS\SoS
Hamish Sandison Bird&Bird
The meeting convened to discuss:
- SoS’s preferred way forward on the BA\POCL project;
- information\action required in order to support Ministers’ decision on
this.
SoS summarised his primary position as:
- termination of the contract because of ICL’s failure to deliver;
- as acontingency proceeding to ACT (which provides an opportunity
to pursue wider policy objectives).
In view of this SoS would indicate to OGD colleagues that he planned to
instruct Peter Mathison to terminate contracts (due to ICL’s failure) once the
current Direction expired in mid-September. The question for SoS and his
colleagues would then be how best to recover the position in order to pursue
a common agenda. These two elements would need to be tackled
simultaneously - a decision to cancel could not be taken without a credible
and desirable way forward being identified and agreed.
The strategy with POCL was discussed. The desire not to leave POCL in a
difficult position was clearly an important consideration. However, SoS was
of the view that the future direction of the Post Office was a separate
question.
Moving Towards 100% ACT
The meeting also discussed the timescales within which a move to virtually
100% ACT could be delivered, and the extent to which aligning with the
Post Office could slow this timetable down. Under contingency options,
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should the project fail, it had been assumed that compulsory ACT could be
introduced from October 2001. By then the Department would have already
begun to promote voluntary take-up (from April 2000). SoS was advised
that taking POCL out of the planning equation was unlikely to significantly
affect these dates.
6. Although POCL’s need to develop (and if necessary procure) banking
facilities would be a factor for the timetable the Department itself would
need to tackle a number of critical issues (policy, legislative and operational)
before a significant shift towards payment of benefit by ACT would be
possible or sensible. These included:
- securing secondary legislation;
- capacity of current IT system and business processes to cope with
large volumes of ACT payments;
- need to bank ‘unbanked’ benefit recipients;
- the barrier of periodicity and the requirement for clear policies on
special cases etc;
- need for an approved publicity and customer awareness campaign.
7. In light of this discussion SoS identified a number of key issues on which he
required information from officials:
- achievable timescales which would maximise the volumes of
customers moving to ACT and deliver the changes as speedily as
possible;
indication of the potential for achieving 70% ACT within the lifetime
of this parliament;
- an explanation of periodicity issue;
- information on the key areas for decision and action (policy and
operational) in order for move to ACT to happen, and happen quickly;
- potential for building on wider developments eg expansion of cash-
back facilities.
Where relevant the above should address both the impact of aligning with
POCL and of moving forward unilaterally.
Legal and Contractual Issues
8. The implications for existing contracts, and the need to cancel or re-
negotiate them, would be a factor in any government decision. It was noted
that the option to cancel the benefit payment card, but restructure the
project so that POCL delivered banking facilities with ICL (option 2) was not
free from the risk of litigation from ICL. It was, for example, possible that
ICL would not accept the terms.
9. In addition a question was raised as to the freedom SoS would have to
terminate without POCL’s agreement. This clearly could affect the
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negotiating position. SoS requested additional advice in this area.
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Financials
10. SoS indicated that moving towards 100% ACT could make a significant
contribution to the strategy for reducing Departmental expenditure. More
importantly it could do so by achieving these through running costs savings.
11. The potential for savings was clearly illustrated by the comparable costs
between paper based methods of payment (47p for order books, 78p for
giros) and ACT (currently less than 2p per transaction). However, it was
noted that an element of contingency in the financial projections may be
prudent, in part to protect savings projections from any changes in ACT
costs.
12. It was acknowledged that banks may seek to recover from DSS the costs of
banking the unbanked. This would be resisted. DSS would not wish to
replace a subsidy of POCL’s ‘social’ function with subsidising that of the
banks.
13. However, it was seen as encouraging that banks such as The Bank of
Scotland were already leading the developing market for ‘universal’ (social)
banking.
Presentation
14. The importance of careful handling and presentation was underlined; in the
past DSS attempts to move towards 100% ACT had been seen as pursuing
a narrow agenda, damaging to wider government interests (because of the
perceived threat to the viability of the Post Office network, and the potential
impact on rural communities). These criticisms would again be made.
15. ‘It was clear that much was at stake and a great deal of noise was inevitable.
Careful, but proactive, handling was therefore essential. In view of this the
period between the decision ‘in-principle’ being communicated to the parties,
and a public announcement should be kept as a short as possible.
16. SoS indicated that (in the longer term):
- any campaign to promote voluntary take-up of ACT would require
clearance; and that,
- offering financial incentives to customers for ACT take-up was
unlikely to be an option,
Conclusion.
17. SoS indicated that he would speak to the Chief Secretary that day to discuss
how best to progress reaching a decision on the future of the BA\POCL
project.
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