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18-DEC-1998 14:21 FROM ICL CORPORATE AFFAIRS To
WITHOUT PREJUDICE
18” December 1998
pecuteienpaanppesssesemstan.
Rt. Hon. Stephen Byers, CHIEF SECRETARY — I
Chief Secretary,
HM Treasury, REC.I 18 DEC 1998 I
Parliament Street, ACTION A
SWIP3AG bre iste,
COPIES
To I Bat Poe
Deev Ma Baers, PEP
Since my letter to you of 9 December 1998, there have been a number of
meetings as a result of which ICL has clarified and refined its proposal as
set out in that letter. Accordingly, since I believe a decision by Ministers
on that proposal is imminent, I felt it would be useful to write to you today
to summarise the current status of our proposal.
First, POCL requested clarification of the nature and extcnt of Fujitsu’s
support for ICL. We have confirmed that this will be delivered by way of
a legally enforceable performance guarantee from Fujitsu (in favour of the
Sponsors) covering all of ICL's obligations in rclation to the project,
including the provision of all necessary funding.
Second, we have held further discussions to clarify the issues surrounding
our proposals on Acceptance. We have reached complete agrcement on
all issues relating to Acceptance with POCL, This agreement is embodied
in a detailed paper, a copy of which is with your officials. This paper has
been discussed with BA, but has not becn agreed with them.
Third, we have held further discussions with POCL to clarify issues
relating to our commercial proposals. Again, we have reached agrecment
with POCL, on the fundamental principles which will allow us to develop a
definitive, detailed, legally binding agreement with them in due course. Keith Todd
The agreement has imposed increased volume risk on ICL. Clef Executive
Fourth, although we have not had any direct discussions with BA, I think + togg
it is helpful to state ICL’s position in relation to pncing under the BA ict pic
Contract. The proposal of 9 December 1998 included an increase of £8 m 26 Finsbury Square
(NPV) over the Corbett proposal, In the interests of reaching a speedy ,/.nde
conclusion, I have reluctantly agreed to renounce this increase. I am ‘
making this concession on the basis that the Secretary of State for Social
Security will support the Horizon Programme and this proposal. You
CEO\Pathway\LoRChyw001 1 ener ie
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18-DEC-1998 14:22 FROM ICL CORPORATE AFFAIRS TO
Should, therefore, consider that the negative impact on ICL of my proposal
of 9 December 1998, namely - £118m (NPV), has now moved to - £126m
(NPV).
Fifth, ICL bas done some further work on the proposals (enshrined in the
Heads of Agreement for the public/private partnership with POCL) to use
the Horizon infrastructure for the delivery of “Bettcr Government”
services. We have written a further paper, copies of which are with your
officials J attach a copy for your reference,
T must emphasise that ICL regards the whole area of “Better Government”
as a tremendous opportunity for the Govornment, the Post Office and ICL Z,
to realise the huge potential] that the Horizon system has to deliver these
new services. Built into our plans is a further investment of £78m by ICL,
over and above that required for the basic Horizon system.
Finally, I would like to ask you to consider our proposal of 9 December in
the light of all of the matters dealt with in this letter and to assist us in
reaching a speedy and favourable conclusion. We can then work with the
Sponsors to turn these proposals into definitive agreements early in the
New Year. More important than that, an end to these difficult negotiations
with allow us to review our relationship with the sponsors on a more
constructive basis, and above all proceed on a timely basis to deliver the
Horizon System, which I firmly believe will benefit not just the Sponsors,
but the whole nation.
Keith Todd
CEO\Pathway\LuRChjw001 2
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1B-DEC-1998 14:22 FROM ICL CORPORATE AFFAIRS TO
Horizon & Modern Government
Horizon & Modern Government
A briefing paper from ICL Pathway
Abstract: This paper outlsnes areas in which the ICL Pathway network and services and the
Post Office Horivun programme may be usilised to support deliuery of the wider
government agenda under the Modern Government initiative.
1 Introduction
The scope of the 1999/2000 national rollout of the ICL Pathway/Horivon programme is to bring
automation to every Post Office counter, so that all transactions will be undertaken via Horizon. A prime
objective is to autumate the peyment of Benefit Agency benefits by the introduction of the Payment Card
which will virtually eliminate benefit encashment fraud and remove paperwork from the process. Horizon
will provide an advanced, modern and flexible IT infrastructure enabling POCL to offer automated
services to Government and commercial clients in addition to the core businerrcs of the Post Office Group
im mails and communication services.
The result of this considerable investment will be to open the way to placing the Post Office, the traditional
heart of the community, at the centre of thc UK's move into the Information age. In utilising the Post
Office's well known, trusted, national asset and brand together with the ICL Pathway network and
services, government and industry can avoid the expense and risk of crying to create new brands and new
networks to support their important transformational initiates taking the UK into the new millennium.
2, The Pathway Infrastructure
Pathway technology is based on the latest specification PCs with Microsoft NT operating system, running
ina highly scoure high-capacity managed network rcaching the 19,000 Post Offices. The PCs are equipped
with barcode, smartcard and magstripe card readers and receipt printcrs from first installation, and are
dnven by 1con-based menu systems accessed via touchscreens. All these technologies have been in
successful use in 200 pilot Post Offices over the last year. The applications software is the world leader for
new generanon counter automation and 1s web-enabled, allowing straightforward addition of further
internev/intranet services. The central hub systems provide data routing, information management,
client gateways and security management including Card Management Seevices (for hoth magstripe and
Smartcard) Milisary levels of security including Postmaster Smartcard logon and data encryption (both wn
PC and across the network) lead to high levels of confidentiality and trust. Touchscreens, icons and usce
driven menus generate ease of usc and staff and customer confidence.
3. National Rollout 1999/2000
National rollout is planned to start in third quarter 1999 and will deliver counter automation, including
flatscrecn technology where required, into circa 38,000 counter positions in 19,000 post offices. The
complex and very large scale logsstics programme for planning, preparation, wiring, ISDN telecoms
installation, equipment installation and commissioning and staff training is already underway with 7,000
post offices in the process and 300 being surveyed each week. National Rollout software releases support
all the major client requirements, Network banking, umversal banking and household budgeting services
wall be introduced from early 2001. These additional services bring new levels of facility and extend the
range of services available to Post Office customers. This is particularly relevant to the expected growth in
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Horizon & Modern Government
use of personal bank accounts, stakeholder pensions and assistance to fambes in their houschold fmancial
planning and budgeting,
At this point the national network 1s ready to take on the new government strategics.
4. New facilities and secvices introduced in parallel 1999/2000/2001
Dunng 1999 we anticipate first installations of kiosks in post offices (and elsewhere) intended to introduce
public access to government, commercial, tourism etc information and services. The Pathway system, being
touchscreen-based and web-enabled, allows compatibility in the development of kiosk systems look and
feel. It also will support guided communication via the Government Gateway to the wide variety of
government datacentres and websites whethcr central departments, local authorities, GORs, agencies, the
voluntary sector or other government or near-government organisations.
In the same time period the Government Gateway website will be built using ICL's CAFExpress design,
based on “lfe-events” for citizens and SMEs, with guided access to the variety of government information
and forms relevant to a particular life event. This intelligent approach to the complexities of interactions
with government will enable the citizen and SME to gain a complete picture of the information and
services available to them, with electronic completion, verification, submission and acknowledgement of
forms.
The website will be used as a common, consistent focal pomt for government interactions across Counters,
Kiosks and internet (via home or desk PC and digital TV), as well as providing support for Callcentres. The
Pathway network and back-end systems will increasingly provide the means for managing the
communications, the IT infrastructure, security and the information flows.
Use of the Government Secure Intranet, together with Pathway’s own secure network, will deliver high
levels of security, confidentiality and trust - especially compared with public internet services.
‘Thus during 2000 we will see the hasis of a national standard approach for cmzens and SMEs to interact
electronically with government using the technology of their chowe.
5. ‘Smartcard based scrvices starting 1998
All Post Office Counters and Kiosks are equipped for Smartcards at installation. The Benefits Agency
requirement for a bespoke magstripe payment card has been unplemented alongside the Pathway system’s
capability for full Smartcard-based services - indeed these: are already in use for Postmaster logon and for
loading utility companies’ chargecards. In order to capitalise on BA's current investment in their bespoke
card, we belicve the best way forward is to migrate benefit magstripe card holders to a Post Office “Cinzen
Smartcard” from 2000 - the choice being with the citizen.
Ininal application of the card for entity verification in support of payment of benefit will be rapidly
enhanced to a fall range (at the citizen's choice) of banking, household budgeting, housing benefit,
electronic forms signing (digital signature) services. Levels of usage of a Catizen Smartcard will be
authorised at time of card registration and issue, by visual verification of additional specified documents
from: driving licence, bankers card, pension book, birth ceruficare, passport.
The geographic reach of the network of post offices creates the unique opportunity for rapid, nanonal
introduction of these services.
6. Citrzen’s Account 2001
The issue of substantial numbers of Citzen Smartcards, both to Benefit claimants and to citizens and
businesses seeking first steps into electronic government and electronic commerce, wul pave the way to
creating optional Citizen’s Accounts with government, The Smartcard 1s effectively the key to the building
(with informed consent) of a “personal databasc” of citizen’s/SMEs business with government, in turn
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18-DEC-1998 14:23 FROM ICL CORPORATE AFFAIRS To
Horizon & Modern Goverument
supporting fast access to all the personal files in government departments, agencies, LAs, voluntary bodies
etc; reducing duplication and overlap; and offering everyone the mcans to organise their transactions with
government,
Additional benefits will accrue to government in efficiency savings and analysis of expenditure and income.
7. Muluple Smartcard applications 2001/2002
The role of the Post Office Smartcard will be enhanced to include an increasing range of applications eg
transport season tckets/tokens, concessions, library card, driving licence, vehicle tax/insurance, retailers
loyalty, credsv/debit applications, medical allergies.
Interoperability of Smartcards with other card systems will reduce ar remove the need for multyple cards,
passwords, PIN numbers and multiple administrative systems across eg DVLA, local authorities, education
authorities, transport companics.
8. Beacon Projects
Early highly visible projects will demonstrate the power of the Horizon network and the benefits to
citizens, businesses and government, In discussion with Post Office we propose three such Beacon Projects,
1 London Elections in 2000: — clectronic voting (at citizen’s choice) via Kiosks in main Post Offices
2 Government.direct in Northern Ireland in 2001: ~ taking advantage of a large-scale population
and relatively coherent and close-knit government services. The National Rollout covers N Ireland
during 1999; allowing first UK implementation of a wide-ranging government.direct service with
Smartcatds and 2 NIO Government Gateway website. Promoting the democratic process, social
inclusion, citizens’ confidence ia government, law and order, security.
3. Name & Address Fale 2001; ~ 3.5 million house moves take place every year of which 40% are
notified to Royal Mail for mail redirection. By offering a free (to citizens and SMEs) Royal Mail
service this can be increased to close to 100%, with substantial savings to goverument in removing
delays, lost lecters, rework, failed correspondence, missed appointments, fraudulent claims etc.
Future extensions to cover personal numbers (citizen choxce) — passport, Nino, NHS, licences,
bankers cards; and change of persona! circumstances ~ hirth/marriage/death; and electoral rolls —
will enhance the value to citizen and business and snctease the savings to government.
4. Conclusion
The attached diagram represents the new, multi-channel, intelhgent interfaces which can be offered to
citizens and businesses in support of the goals of electronic service delivery and Modern Government.
Extensive work has already been carried out in the Post Office to analyse which yovernment-to-citizen and
government-to-business processes will take most benefit from the exploitation of electronic service
delivery.
The oppornunity to build on the modern and advanced Pathway infrastructure and survices 1s
complemented by the unique geographic coverage and reputation of The Post Office.
‘With the National Rollout programme poised to start, the timescales outlined fur national introduction of
the new services are, in the view of both ICL and the Post Office, several years ahead of any potennal
alternatives.
vl 18 Dec 98 3 Commercial in Confidence
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Scottish No 10
Revenue Depts parliament Cabinet Offi bias :
eg Inland Revenue/ CA, ‘abinet Office Assembly NI Assembly 8
ICE
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DTI 12 Agencies Local Authority DETR 24Azencies pss 8
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FCO Town Hall Voting _ > Births,Marriage,Death JSA; Job Centres 8
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Home Office i i Universities 3
Passport Offices PATHWAYNETWORK
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Coroner Pp Se. POCL Kiosks: PCiaigital TV GPs 8
fe) Counters ew toceeme Local Healthcare 2
5
&
Cc CITIZEN °
or 2
L SME 8