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‘ CONFIDENTIAL Ls
10 DOWNING STREET
LONDON SW1A 2AA
11 May 1999
From the Principal Frvate Secresary
Dear Dan,
BA/POCL
The Prime Minister was grateful for the Chief Secretary's mimate of
10 May.
discussed this with the Chancellor, who set
‘The Prime Minister has now
fay to Option BI
out in more detail the Treasury’s concerns about signing up tod:
‘The Chancellor said that this would be something of a leap in the dark, For
¢ what discussions had taken place with the banks on the
what demand there would be for the new smart card: or
how willing benefit recipients who already had bank accounts would be to use the
proposed POCL bank accounts. We needed more time to bottom these issues
out, Itwould be wrong to commit the Government now {0 an option that would
cost £400 million more over the CSR2 period than the best alternative. This
would simply divert resources away from the Gevernment’s key priorities in the
next CSR.
example, it was not clea
viability of this option;
Against this background, the only sensible course of action would be to
buy more time to consider all the options in much more depth. ‘The most rational
option would probably be termination. But given where we were starting from
with ICL, it would probably be best to commit now to Option B3 and agree to do
further intensive work on Option B1 over the next three months. He therefore
proposed that Steve Robson should write to ICL this evening along the lines of
the attached draft.
The Prime Minister said that he had not had time to look into all the
options in detail, Starting with a clean sheet, it was doubtful whether we would
want to devote substantial new resources to a project that appeared to be designed
largely to prop up the Post Office network. However, we were not starting from
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onan ananoatnesceamanncmon
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aclean sheet. He was content for the Chancellor to go over his concerns in more
detail with Lord Falconer and other interested parties, to Uy (0 find an agreed
way forward. Any solution should meet three key political requirements:
row, with the Post Office or the Sub-
(i) we did not want a huge political
yural network had been put in
Postmasters’ lobby claiming that the enure
danger by the Government:
Gi) we should not put ICL’s whole future at risk; and
(i) it would be important to ensure that the Government had a fully defensible
position vis-a-vis the PAC
The Chancellor said that he would discuss the way forward with Lord
Falconer and report back to the Prime Minister.
lam copying this letter to ‘Tom Scholar (H.M. Treasury), Antouy
Phillipson (Department of Trade and Industry), Rod Clark (Department of Social
Security), Mark Langdale and Sebastian Wood (Cabinet Office).
Yours sincerely.
D. Monnery. Esq.,
Chief Secretary’s Office.
CONFIDENTIAL
Richard Christou
(CL ple
26 Finsbury Square
LONDON
RCIA IDS
BAIPOCL AUTOMATION PROJECT:
Pysther to my letter of 23 April, Lam now in & position to let you know
Ministers’ decision on how to proceed with this project.
isters would like to tnke forward the project in hyo stages.
subject to agreeing acceptable tertis,
« in stage one, the POCL would
contract for the supply of the Horizon automation platform, including the
EPOS and OBCS systems;
- jn parallel with the roll out of stage one, POCL would develop 4
detailed business plan, so as to establish how best to take forward their
Jong wen network banking stralegy. ‘The results of this plan would
iage two of the profect in which POCL would contract te procure
inform si
whatever additional functionality would be required to deliver this
business plan, We would expect this work to take approximately three
months.
STEVE ROBSON
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