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Galle Ne RF
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San
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Prime Minster
‘Modernising DSS Benefit Payments
Yam writing to alert you 0 problems with a private/public sector project desi
the benefit payment system and automate the Post Office network, In a nu
serious risk that this project will fail to deliver its objectives - or wilt
timescale that will make it worthwhile.
ned to improve
shell, there is a
Rot do so withia a
We have inherited this £1 billion project from our predecessors. Under the PPy
ICL were contracted by my Department jointly with Post Office Counters ue POCL
fund the development of 2 system which would provide an automated means of paying
benefits through a Benefit Payment Card to replace our current expensive and insecure
paper-based methods; and, on the back of this. to provide Some additional technology to Post
Offices, with the aim of hetping POCL extend the range of their future business, The
project was supposed to be fully operational in all Post Offices by the end of this year. Bur
due to a fong history of problems, ICL have deen unable to deliver to this timetable, so thar
the completion date has now been extended by two years t© 2000 at the earliest, with a
consequentias loss to us of around £200 million in fraud savings foregone.
This two year delay also brings with it funding consequences both for ourselves and for the
private contractor. These and some continuing major concerns around the project's
deliverability have led us to the view that it would be prudent to take stock before
committing to further investment. In doing so, it must be right to look to the medium and
longer-term Government objectives for a modern welfare system and the best way to sustain
a rural Post Office network into the millensiam and beyond.
‘The questions that this will raise have far-reaching consequences, which could impact on our
future capacity to deliver the benefit payment service people want, and on the future of the
Post Office network, vital to so many of our communities. You will anyway wish to be
aware because of the wide ranging Ministerial interests involved, and the seed to reach a
cross-Government consensus on the best route forward. The primary Depanmental
responsibilities fall to Margaret Beckett and me, but there are also significant issues around
rural policy, the Government IT infrastructure and strategies to promote social cohesion.
It is now urgent to reach a decision on the best way forward, because further investment will
be required if the project is 10 continue. I is also possible that ICL, the private contractor
concerned, may give their version of the story to the Press at any moment, in an atternpt to
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influence the outcome. There are inherent dangers of damaging media speculatig
around the future of the Post Office: as you know, the Post Office involvement 0 especially
could be matters here arousing strong public interest - and opinions, Thee meets there
speculation in the specialist Press. aeady some
You may also wish to be kept informed because ICL are part of the Pulitsy empire, wi
whom you had some contact on your recent visit to Japan and there is also a constive Ha
dimension for you y
The immediate urgency on the financing of the project means that John Desham (who is
Jeading this work here) will need to write Very shortly to Alistair Darling on the fund
igsues, Although we have a cleat view about the best route forward, { am clear thar ie
should at aif costs seek to avoid getting focused too closely on individua! Departmental
interests, aod that we should aim to establish an agreed view from the start, avoiding the
porentially damaging effects that our quite legisimately differing Departmental views can
have, when exposed to the public eye. On this basis, I shall be seeking to discuss with
Alistair and Margaret in the near furure,
A copy of this also goes to Gordon Brown.
Harriet I
6 February 1998
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