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To:
DAVID SIBBICK
DIRECTOR POSTS
CGBPS
PORT
From: SpAdv
CHRISTOPHER WOOLARD SpAdv
Private etary to the Secretary of State
aot:
GRO
28 April 1999
Mo ho! Ht cule
BA/POCL AUTOMATION PROJECT: HORIZON: MEETIN‘
NEVILLE BAIN AND JOHN ROBERTS ON WEDNESDAY 28 APRIL 1999.
You were present along with Judy Britton, Dan Corry and I when Dr Bain and Mr
Roberts met the Secretary of State and Mr McCartney. Before the meeting the
Secretary of State had discussed handling tactics with you based on your briefing note
of 27 April. On the present figures, the Secretary of State considered the problem was
not so much the cost as the profile of the costs. If some way could be found of
smoothing the costs, then the problem might be solved. He also believed that we
should try and accommodate the 36 hours’ notice requested in Bain’s letter of 27
April.
2 The Secretary of State opened the meeting with Bain and Roberts by detailing
the current situation and the 10 May deadline. He was able to assure Bain that the £8m
funding for ICL’s continuing costs (although channelled via POCL) would be met by
HMT, although he advised them not to pay until they had this in writing from HMT.
He asked them to look at the profiling of option B1 to see if it could be “smoothed” via
recycling BA savings, help from ICL, perhaps more PO borrowing agreed by HMT or
a reduction in the EFL. There was a strong case that the £180m “termination cost”
should be paid by HMT.
3. Dr Bain said he was happy to pursue options. In particular he wondered if it
would be helpful to look at this in the wider context of the White Paper. Retaining the
£1 monopoly until 2003 would generate another £100m, whilst not removing Gilts
would generate a further £107m in interest. The nightmare scenario for the Post Office
would be to be “salamied”. Bain stated once again the case for option A. He stressed
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that they would pursue option B1, but could not ask the board to take on additional
risk without additional income; it had to be commercial. The Secretary of State noted
that there was a chance to put in place something better than the bpc.
4. Mr Roberts stressed that all the Post Office might be able to offer was “bits and
pieces” by comparison to the overall costs, and that his numbers did not include
£200m plus of risk. Given ICL’s track record he was concerned about the latter. You
noted that much of the risk was being removed with the exit of BA and the bespoke
elements of the bpc. Dr Bain said that in fairness, ICL had met all their delivery targets
since renegotiation. Mr Roberts acknowledged the need to have something in place of
the context of the White Paper if Horizon was lost.
5. The Secretary of State said it was his intention to publish the White Paper
during the “inter-purdah period” before 20 May. In his view the White Paper was a
vehicle for presenting wider public policy, but he acknowledged that there were issues
of concern to the Post Office that he would have to deal with in parallel even though
they would not appear in the White Paper. There would be no surprises for the Post
Office. He wanted to talk again with them by the middle of next week.
6. What the Secretary of State wanted was a paper to put to his fellow Ministers on
Horizon that put DTI and Post Office “on the front foot”. He agreed with Mr Roberts
that officials should liaise closely.
7. Following the meeting the Secretary of State spoke with you. He would like to
see a worked-up proposal that would be acceptable to PO and ICL that would
“smooth” the costs involved for the Treasury (with advice on any implications of how
that might be done). The Secretary of State would like that revised advice by Friday
morning (10am). Happy to discuss.
CHRISTOPHER WOOLARD