From: Geoff Mulgan
Date: 24 December 1998
PRIME MINISTER ec: Jeremy Heywood
Jonathan Powell
David Miliband
Lord Faleoner
Geoffrey Norris
BA/POCL
1. We have come very close to reaching an agreement on the way forward
for BA/POCL. But the Ministerial changes yesterday made it impossible to
reach final agreement. The attached note from Stephen Byers sets out how we
propose to proceed. In line with your instructions, our aim over the last two
weeks has been to ensure that the Government continues with ICL/Futjitsu, while
also avoiding the danger of being locked into an obsolete technology in the form
of the Benefit Payment Card. This has broadly been achieved. It has required
considerable compromise on the part of DSS, and some movement from DTI,
although the relevant Ministers have not given final agreement yet.
2. The aim is to pursue a two-stage approach.
¢ In the first, Government will confirm as soon as possible to ICL that it wishes
to continue with Horizon within the overall financial parameters that have
been agreed. This move should stabilise the situation and restore trust
between the main parties, which remains at a very low level,
In the second stage, beginning in January, the three parties - ICL, POCL and
BA - will work together to agree a better route forward in terms of the
technologies. There will be three alternatives on the table: the existing plan
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for rolling out the Benefit Payment Card; new proposals from ICL in which
there would be a rapid move from the BPC to smart cards which would
support a range of Government and banking services; and proposals from the
Benefits Agency for a direct move to smart cards. Our hope is that we can
secure agreement around the second or third of these options, either of which
would be markedly better than the current project.
3. During this second stage, it will be important to keep the overall
Governmental interest in sight. This will require that Ministers in the DSS and
DTI impose substantial pressure on the BA and POCL respectively to ensure that
they play a constructive role in negotiations rather than solely protecting their
interests.
4. J have asked the Treasury to let ICL know that we are very close to
agreement because, not surprisingly, they have been very concerned to get a
response from Government as soon as possible.
5. During the next stage, it will be important that someone who is on top of
the issue plays a co-ordinating role, given that Alan Milburn will be coming to
this issue unsighted. It would probably be best to give Lord Falconer a more
overt co-ordinating role.
gcidnestecanomictba-poct vib.doo
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