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HORIZON: DRAFT REPORT TO MINISTERS
The DTUPost Offi an
DTI officials and the Post Office take a different view. Termination of the project
would undoubtedly be a major blow to ICL. Just how great would depend primarily
on the stance taken by Fujitsu who have claimed that it could lead to the collapse of
ICL. At the very least it would seriously jeopardise Fujitsu’s plans for ICL’s
floatation next year, and could lead Fujitsu to decide to divest itself of the company.
Even on a “least bad” scenario of an agreed termination, the failure of the project
would badly damage ICL’s reputation both here and in export markets and its future
prospects. DTI officials are also concerned at the effect that termination could have on
our relations with Fujitsu. Fujitsu have been a major inward investor in the UK, with
well over £700m invested in the last decade and the creation of around 20,000 jobs.
Whatever the justification from a UK standpoint, termination would be seen in Tokyo
as a major breach of faith by the UK Government - a withdrawal from the project
because we had changed our minds on the policy but had sought to put the blame on
ICL. It also risks being seen in some quarters as a vindictive retaliation by the UK
Government against Fujitsu for the latter’s closure of the Newton Aycliffe plant in the
Prime Minister’s constituency.
From a Post Office viewpoint termination now would delay by at least two or three
years the availability of the modern, online automated platform which POCL
desperately needs if it is to retain existing clients and to win new business. Loss of the
benefit payment card and the Horizon platform would be seen by the 18,000 sub
postmasters as a devastating blow to their commercial prospects, and no matter how
carefully managed the announcement, many would simply give up. The value of post
office franchises would plummet, and replacement franchisees would simply not be
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available. The effects of these unplanned closures on the integrity of the network as a
whole can only be guessed at at this stage, but could be serious. They could well be
sufficient to cause existing and prospective clients to re-evaluate the value of the
network as a delivery mechanism. Under any such scenario, the true costs of
termination would rapidly escalate to a point at which they significantly exceeded the
cost of proceeding with either Option A or B.
The Post Office remain firmly of the view that despite the difficulties referred to
earlier in this report, Option A remains their preferred way forward. The assured
revenue stream for a further period of years, the highest retention of footfall, and a
smooth and controlled migration to ACT and network banking mean that this option
offers POCL the best prospect of transition to a viable commercial future, free from
the need for Government subsidy, and with the delivery of a unique interface and
channel of communication between Government and the citizen.
DTI officials also believe that the present unattractive profile of Option B may be
significantly softened once an assessment of the revenue stream which POCL could
expect from the commercial exploitation of the Horizon platform, based on work
which should produce at least preliminary conclusions over the coming weekend, has
been incorporated into the NPV calculations.
Finally, the delay which termination will cause to the availability of a modern online
automated platform capable of delivering front end banking facilities on behalf of the
commercial banks will, if serious damage to the Post Office Counters network is to be
avoided, delay the move from present paper-based methods of paying benefits by at
least two or three years.
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