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RESTRICTED COMMERCIAL
The Rt Hon Stephen Byers MP
Chief Secretary to the Treasury
Parliament Street
London SW1P 3AG. 22 December 1998
Prue Cai Sernehing
BA/POCL AUTOMATION PROJECT
y and also w My note to you
I refer to your private secretary’s letter of yescerda}
forward which can
earlier shis week in which I suggested that there 1s @ way
meet the objectives of all of the parties concerned.
1 have now seen the recent letter from.Keith Todd to you of 18 December,
setting out (albeit very briefly) ICL proposals around exploiting the Horizon
system in order 10 support "Better Government” initiatives and help achieve
other important objectives - such as achieving substantial progress towards bank
accounts for all - on the Government's policy agenda. This letter seems to me
te provide a possible solution which will allow us to move forward ina way that
I addresses all our concerns as well as moving us positively towards achieving our
I goals.
,
Specifically, I now see a way forward as follows:
confirm to ICL/Fajitsu that Government can commit to the level of
funding for the project that has emerged from the Jatest discussions
(assuming you agree to commit that level of funding),
ING THE PAST
10 THE FUTURE
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© — and that, given the potential offered by @ Government Smart Card,
and ICL’s view that this can be introduced almost 46 swiftly as the
Benefit Payment Card, we should seek to re-shape the current
contracts around an early transition (0 @ Smart Card, without the
added complication of the Benefit Payment Card;
* that the public sector will negotiate within the overall funding
package with ICL on this basis.
So far as the public sector is concerned, we would thereby be:
* buying a product we want, for the additional money we would be
spending under Option 1;
© giving FajitswICL the guaranteed funding/re-assurance they need to
continue discussions with us about the project, thereby ensuring that
{CL/Fujitsu remain a thriving and productive part of ‘UK pie.
So far as the public sector is concerned, our internal concerns are to protect the
Post Office network, ensure continued footfall from Benefits Agency customers,
and at the same time achieve a sate and cost-effective means of paying benefits.
These can be achieved by, for example:
*® — deciding that DSS/BA will continue t fund POCL to the tune that
it would have done under the existing contract it holds until 2005,
© agreeing that the additional money that would have been paid to
POCL under the Option 1 agreement brokered by Corbett - £800
million over three years between 2005 and 2008 - can be re-directed
to support POCL and ICL;
* the provision of this money could be linked to an incentive for
ICL/POCL to move to Smart Card swiftly:
ey
Recycles Paper
HO. 899
¢ DSS/BA to agree not to move to ACT until Smart Card is in places
ymenis to ContinEe but with extended
* — in the interim, paper-based pa:
gs endemic it
fraud measures to achieve the £100 million savin:
encashment payments at present,
ard that the pablic sector can agree
1am sore that there must be 2 way forw:
att, it
roughly along the lines outlined above With this hopeful prospect in si;
would certainly seem premature to rash into agreeing anything specific in the
next few hours. In any event, 1 could not sign up lo a negatiating strategy
which agreed to Option 1. When Ministers jast met, we were adamant that the
acceptance conditions were just not acceptable; that remains the case.
Your “stabilisation” process is, in fact, complete acceptance of option 1
unamended, And there is as yet no agreed commitment, even in Government,
10 any variation on it. 1 remain reluctant to commit us to a ten year contract for
a card thar no one - not even ICL - now wants
If however, you wish to provide some early re-assurance to ICL/Fujitsu, i
wouid be content for you to send a letter on the lines of the attached draft.
Copies of this letter go to Jack Cunningham, Charlie Falconer, Peter
Mandelson, lan McCartney, David Miliband and Geoff Mulgan.
[Agreed by the Secretary of State and
signed in his absence.]
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BA/POCL AUTOMATION PROJECT: SUGGESTED DRAFT LETTER
1, Thank you for your leners of 9 and 18 December 1998. I arn particularly
pleased to see the very firm commitment that Fujitsu have now given to support
the project.
2. Based on your latest NPV requirements and your proposals to support
“Better Government", my colleagues and I are clear it will be possible to
conclude negotiations on the future automation of POCL which will meet the
requirements of all parties, Officials will be in touch in the New Year to take
negotiations forward.
3. I am very pleased that the discussions over the past few months have
reached this positive outcome,
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