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To: ci: Mr McCartney
SECRETARY OF STATE Sir Michael Scholar
iarkaull 10-6 CGBPS
From: Q.Mo Fi fC. PORT
DAVID SIBBICK. 3. Mo FRM
_-DIRECTOR POSTS cll
' GRO I: Legal C
TET Bocincham. Ralace.Raad, COM
GRO cor
i CGBPS1
ne SpAdv
9 June 1999 SpAdv
HORIZON: MEETING WITH POST OFFICE CHAIRMAN, CHIEF
EXECUTIVE AND NON-EXECUTIVE MEMBERS OF THE POST OFFICE
BOARD ON THURSDAY 10 JUNE 1999 AT 17.30
Issue
1. You are meeting with Dr Neville Bain, John Roberts and 2 of the non-executive
Board Members, Dr John Lloyd and Mrs Rosemary Thorne at 17.30. It has been
agreed that the first half of the meeting will deal with Horizon and Corporate
Governance issues which are covered by this brief, whilst the second half attended
only by the Chairman and Chief Executive will deal with the White Paper on which
Judy Britton is briefing separately.
Recommendation
2. That for the first part of the meeting (Horizon, Corporate Governance) you are
guided by the attached steering brief and points to make.
Background
35 During the last increasingly frantic month of negotiations on Horizon the Board
felt that they were being asked to sign up to decisions for which they could see no
commercial basis, whilst Ministers declined to give them any comfort about how the
non-commercial aspects would then be covered. This would have been an issue in any
event, but because the numbers on Horizon were so large - and the numbers on the loss
of Benefits Agency work much larger still - in relation to POCL’s marginal
profitability, the Board had the greatest difficulty in finding a sensible basis for
decision taking.
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4. The Board are equally aware that Ministers for their part felt that the Post Office
was being obdurate and unhelpful, and refusing to recognise Ministers’ responsibility
the wider good. They are anxious to repair relations, and to find a basis for avoiding
similar difficulties in future. They see their role as considering proposals from a
commercial perspective, and making clear to Ministers where they see no commercial
case. They wholly accept that Ministers then have the right to ask them nevertheless
to go ahead for wider social or economic reasons, provided that Ministers at the same
make clear how the non-commercial elements are to be funded.
5s You will want to welcome the Board’s wish to find ways of avoiding similar
difficulties in future. The circumstances surrounding Horizon were hopefully unique,
partly in terms of the pressures, especially in the final stages, partly because the goal
posts kept moving with bewildering frequency as a succession of options took centre
stage for a brief moment before disappearing, but mainly because by the time Option
B3 became the Government’s preferred way forward, the Board appeared still to insist
on believing that they were being asked to sign up to an option which involved
dumping t the benefit it ee card and nd allowing the BA to move to ACT. They were
1 ad listers, as was repeatedly made
clear to the Post Office, The only decision the Board therefore needed to address was
whether to sign up to a deal under which the Government undertook to fund nearly
£500m of total project costs of some £850 million and to lock the BA in until 2003; or
to opt for the only alternative which was cancellation, with no Government
commitment to help fund a successor platform and no commitment to lock in the BA.
Viewed in those terms, it does not seem too difficult a decision to take quickly,
especially when delay carried a £100 million addition to the price tag.
6. Ofcourse the Board were entitled to be unhappy at the decision to drop the
benefit payment card, and to be concerned that the Government had given no
commitment about how the loss of £400 million income from the BA was to be
replaced. But it had been clearly explained to them that the longer term future of
POCL would be, and indeed could only be, addressed in the context of the PO’s
strategic plan.
7. Against this background, the Board’s apparent acceptance that their role is to
consider the commercial case, but that they must - having drawn that to the attention of
Ministers - accept that Ministers then have the right to take an alternative view in the
wider economic and/or social interest, should indeed form the basis of a clearer
relationship that hopefully will avoid the worst of the difficulties experience over the
past weeks. But they will be looking to Ministers to recognise in turn that they have
an obligation to be as open and up-front as possible with the Board on how the
consequences of a non-commercial decision are to be accommodated.
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DAVID SIBBICK
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