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CONFIDENTIAL, Js
10 DOWNING STREET
LONDON SWIA 2AA
11 May 1999
From the Principal Private Secretary
Dear Dan,
BA/POCL
The Prime Minister was grateful for the Chief Secretary’s minute of
10 May.
The Prime Minister has now discussed this with the Chancellor, who set
out in more detail the Treasury’s concerns about signing up today to Option BI.
The Chancellor said that this would be something of a leap in the dark. For
example, it was not clear what discussions had taken place with the banks on the
viability of this option; 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, It would be wrong to commit the Government now to an option that would
cost £400 million more over the CSR2 period than the best alternative. This
would simply divert resources away from the Government’s key priorities in the
next CSR.
background, the only sensible course of action would be to
Against this
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
CONFIDENTIAL
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CONFIDENTIAL
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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 try to find an agreed
way forward. Any solution should meet three key political requirements:
h the Post Office or the Sub-
(i) we did not want a huge political row, wit
e rural network had been put in
Postmasters’ lobby claiming that the entir
danger by the Government,
(ii) we should not put ICL’s whole future at risk; and
(iii) 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.
1 am copying this letter to Tom Scholar (H.M. Treasury), Antony :
Phillipson (Department of Trade and Industry), Rod Clark (Department of Social
Security), Mark Langdale and Sebastian Wood (Cabinet Office).
Yours sincerely,
Anne Stenson I
) JEREMY HEYWOOD
D. Monnery, Esq.,
Chief Secretary’s Office.
CONFIDENTIAL
Richard Christou Esq
ICL ple
26 Finsbury Square
LONDON
EC2A IDS
BA/POCL AUTOMATION PROJECTS
Further to my letter of 23 April, I am now ina position to let you know
Ministers’ decision on how to proceed with this project.
Ministers would like to take forward the project in two stages.
- in stage one, the POCL would, subject to agreeing acceptable terms,
contract for the supply
EPOS and OBCS systems;
of the Horizon automation platform, including the
e one, POCL would develop a
~ in parallel with the roll out of ste
ake forward their
Jong term network banking strategy. The results of this plan would
POCL would contract to procure
detailed business plan, so as to establish how best to t
ge two of the project in which
inform
wha 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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