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CONFIDENTIAL - COMMERCIAL
DRAFT LETTER FOR THE SIGNATURE OF THE SECRETARY OF STATE
TO THE CHIEF SECRETARY
BA/POCL AUTOMATION PROJECT
I have now had an opportunity to consider further the paper we discussed at our
meeting following Cabinet yesterday morning.
I believe that the proposal contained in your paper, if all the elements could be brought
together and made to work, offers POCL most of the advantages of the benefit
payment card (bpc), together with some additional and potentially valuable wider
advantages (including early and excellent positioning in the smart card market). I also
accept that it should provide a better fit with our wider policy objectives including
social/universal banking, single Government account, and electronic Government.
Additionally, I see no reason to doubt that ICL could be persuaded to go along with it
if the price (which they will doubtless argue must include recovery of most of the £250
million of what under your proposal would become nugatory expenditure on
development of the bpc so far) could be made sufficiently attractive.
Indeed if we were starting today with a clean sheet of paper, your proposal offers the
promise of a number of clear advantages over the bpc option (Option 1). But we do
not have that luxury. We have instead on the one hand Option 1, where a great deal of
the development work has already been done and independently validated, and where
the technical, commercial and financial issues are known and understood. The whole
process could be put into gear and moved forward rapidly, ending months of
uncertainty and effective planning blight for the main protagonists.
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° CONFIDENTIAL - COMMERCIAL
Against this, on the other hand, your proposal offers a number of potential advantages,
but also represents in a number of respects a worrying leap into the unknown, and
thereby extends the uncertainty and planning blight for a minimum of several more
months. It is far from clear, for example, whether POCL could operate a Post Office
bank account - whether a physical account with a commercial banking partner, or
some form of “virtual account” within Horizon - without seriously damaging its
prospects of becoming an agent for all the main banking groups to provide front end
banking . A fundamental renegotiation of contract terms with ICL would also be
needed, and ICL’s price at the end of the day might be more than we are prepared to
pay.
An important related consideration is that given the central importance of the Horizon
project to the future of POCL, it will be difficult, and may in practice be impossible, to
publish our White Paper on the future of the Post Office until we are clear on the way
forward for Horizon. This is, I believe, also the view of your officials. Adoption of
your proposals could therefore delay publication of the White Paper by several
months.
For all these reasons, my own preference remains for a decision in favour of Option 1
and transition via the benefit payment card, whether in the form of a magnetic stripe
card or a smart card. But I am grateful for the further work which you and your
officials have undertaken with ICL, and which has, I accept, sought to address many of
our earlier concerns.
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