POL00028093
POL00028093
@oos I
- = — —_
vir * fs H .
an Abe OE A “4 H STUART SWEETMANS OFFICE__.
) RESTRICTED - POLICY AND COMMERCIAL AWG/7A01
NOTE OF 7TH MEETING OF THE HORIZON WORKING GROUP
ON MONDAY 15 NOVEMBER AT DTI CONFERENCE CENTRE, 1
VICTORIA STREET, LONDON
Present: .
Alan Johnson MP, Minister for Coinpetitivences
Jeff Rooker MP, Minister of Statc DSS
Simon Lancaster, Private Sccretary/Alan Jolinson
David Sibbick, Dircctor-Fosts, DTI
Isabel Anderson, Postal Services Directorate, DTT
Christine Geodfellow, Benefits Agency (BA) Payment Modernisation Programme Manager
Paul Hanson, BA ACT Project Delivery Manager .
Martin Dunne, BA Commercial Manager
Dave Higlett, Private Secretory/ Jeff Rooker
Stuart Sweetman, Group Managing Director, Customer and Banking Services PO
Basil Larkins, Managing, Director; Network Bank PO
Daye Miller, MD Post Oitice Network Unit PO
Colin Baker, General Suuretary, Navona! Federation of Subpostmasters: (NFSP)
John Peberdy, Chairman to Negotiating Committee, NFSP
‘Terry Deegan, General Sceretary, Communication Managers Association (CMA)
Tony Harris, Assistant National Secretary-Postal, CMA.
Tony Kearns, Assistant Secretary, Communication Workers Union (CWU)
Matthew Payton, Reseatch Assistant, CWU
MAIN POINTS
Child Benefit Form
A, Mr Rooker said that he had looked into the issue of the wording on the child
benefit leaflet which had recently been sent out to 360,000 child benefit recipients.
He understood thet the wording on ACT was consistent with that used on other
leaflets and forms since 1994. In his view there had therefore been no breach of’
faith.
2. Mr Baker thanked Mr Johnson and Mr Rooker for the speed of their response
to his complaint, He asked whether if the Benefits Agency were of the view that
there had been no breach of faith this meant that the child benefit letters would
continue to be issued, .
3. Mr Rooker said that he believed that this mail shot had been completed and
was not sure if any further such drops were scheduled, The aim was to move people
who were not entitled to be on weekly payment to monthly payment. Allowing
people who were not cligible to collect weekly payments to do so was wasting
money.
1 HWG7MIN.DOC
07/01 ‘01 14:29 TX/RX NO. 0094 POS
POL00028093
POL00028093
Pluora Seon
Qo ron”
wes le.
POL00028093
I POL00028093
30, °99 TUE 16:
ge-ioteoe TUE 2:38 bees STUART SWEETMANS OFFICE. Qos
i) RESTRICTED - POLICY AND COMMERCIAL MWG/7/01
4. Mr Johnson said that he understood that of 7.5 million child benefit recipients
360,000 had been receiving benefit an a weekly basis, and all of these had received
the form in question. Mr Rooker added that the BA were not mailing all child
benefit customers.
Ss. Mr Baker exoressed concem that the words accompanying the child benefit
form were a blatant attempt to migrate people to ACT. The forms had been
misunderstood by customers since there was no mention of collecting the benefit in
cash at the post office as an option. On periodicity, he asked whether there would be
a transitional period for those migrating from weekly to four-weekly payments.
Iwas 6. Mr Johnson concluded that he understood that the form was the same as that
noreges'* agreed in 1994 but he promised his officials would look further into this and would
gy 8h report back to the group as a matter of urgency (Action Point: DTT). Mr Rooker
gal & v said that he would be quite happy to revisit the issue if necessary but he would not be
(pnb ecent re-designing forms and leaflets as there had been no change in policy.
Migration to ACT post 2003
7, MrRooker talked about the reasons for the plamed move from paper-based
methods of paying benefits. He said that he was not in position ta enter into
negotiations on the commercial issues surrounding the OBCS. He referred to the
relationship that the Post Office has with a number of banks. He explained that, both
as a member of the Government and Minister for DSS, he was committed to
maintaining a viable network of post offices but he did not see it us his department's
responsibility to fund the network, Since DSS would be making savings from
moving to payment by ACT it might be possible to fund some modest adjustment in
the overall financial picture. On migration to ACT, Mr Rooker reiterated that
benefit recipients were increasingly opting for ACT - with 54 per cent of new child
benefit recipients and 49 per cent of new pensioners choosing ta receive benefit via
their bank accounts. He recognised however that some people would never be
suitable candidates for bank accounts, The Benefits Agency made around 1 million
emergency payments to recipients who represented some of the most vulnerable
citizens, On the Performance and Innovation Unit study, Mr Rooker said that he had
met with Charlos (Clarke, the Minister sponsoring the study on the future of the Post
Office Counters network, :
Payment modernisation programme - Progress. since May 1999 and forward
look
8. MrHansor, described work which the BA have been undertaking since the
Ministerial decision of 24 May with support from POCL and the subpostmasters and
subpostinistresses in the pilot offices. The BA had successfully withdrawn the
Benefit Payment Card (BPC) without interruption to payments. Closure of the BPC
2 HWG7MIN.DOC
07/01 ‘OL 14:29 TX/RX NO. 0094 POG
3011
30-NOV-1933
e
POL00028093
POL00028093
9° FE tsa Fay
STUART SWEETMANS OFFICE... .U-_. @oor
RESTRICTED - POLICY AND COMMERCIAL *HWG/7/01
project had involved wind-down activity. They were continuing their systems work
on CAPS which was always intended as a bascline for modern payment methods and
had other btisiness tenefits associated with rationalising personal details of
customers. ‘Shey had of course also started carly work on the project for delivery of
ACT plans,
9. On the forward look, Mr [anson explained that this work, which was
necessarily process driven, involved: project initiation; working with Ministers on 7 057
setting objectives: establishing a timetable; and determining resource/IT s ke
requirements. Some big decisions needed to be made, for example, on exceptions to wt Cyl
payment via a bank account; the payment process; the migration process; and . ‘or!
partnerships. ,
Exceptions
10. Onexceptions, Mr Hanson said that there was a need to establish which _7 a wt
people and which benefit payments were not appropriate for migration to ACT. at
There were a number of people for whom ACT might not be the right answer, these #*
might, for example, include people who had been rejected by banks, young people
and people who deal in cash. A mechanism for dealing with those for whom ACT is
not suitable had not yet been identified.
11. MrBaker asked how many people DSS estimate to fall into this category.
Mr Hanson said that some research had been done including a study by the Rowntree
Foundation. The working assumption was that exceptions could number perhaps two
million people. 7
12. Mr Deegan asked whether this category included an element of I ‘exclusion due
to selfselection. Mr Hanson was unable to confirm the position on this.
1B. Mr Deegan asked whether ordinary individuals would have an altemative to
being paid by ACT. Mr Hanson said that ACT would be the nornal method of
payment. Individuals would have to fall within the limited exception category in
order not to be paid br
Tayment process
= wlelis ?
14. I MrHanson said there was work to be dane with the Post Office on delivery of
Ministers! commitment that people would continue to have a choice of collecting .
their benefits in cash at post offices, The new Postal Regulator would be monitoring
access to post office serviccs. The DSS/BA were concerned in particular about
accessibility in rural communitics and outlying urban areas, they knew that in the
latter a number of post offices were very heavily reliant on benefit work.
3 HWG7MIN.DOC
07/01 ‘01 14:29 TX/RX NO. 0094 PO7
POL00028093
POL00028093
30 . . r
oon ben Mee adres” EST STUART SVEETMANS OFFICE... oos
i—) , RESTRICTED - POLICY AND COMMERCIAL HMWG/7/01
Migration process
15. MrHanson described the sorts of issucs which BA would need to take into
account in decisioris on the migration process. For example, they would need to
make decisions on the order in which they migrate customer groups and payments.
They needed to ensure that the plans enabled them to fulfil the obligation of the
Secretary of State to pay the right amount of money to benefit recipients on the
correct day. They «iso needed to take account of the DSS and Government financial
picture, There was also a need for the BA plans to intercept the Post Office plans for
network banking.
Partnership
16, MrTJanson emphasised that BA would need to think about the role of their
partners in planning the migration process. These included the banks with whom
DSS/BA already have relationships since 34% of, customers were already being paid
their benefit by ACT. They would need to make sure benefit customers could access
thoir cash. And they needed to establish an appropriate relationship with the Post
Office under these new arrangements. The BA were the Post Office's biggest
customer and a large contributor to sub-postmasters' incomes. Sub-postmasters also
had a big impact on BA's customers.
Next steps
17. Mr Hanson said that DSS/BA were looking forward to seeing the results of the
Prime Minister's PLU study which would look at the value of the network, The :
DSS/BA expected xo take 1% to 2 yeats to develop the policy options with Ministers.
A lot of planning work was necessary jn order to deliver the ACT migration by 2005.
Officials from DSS/I3A would be having a further mecting with key people in Post
Office Counters on 23 November. '
Question and Answer session
18. -MrMiller asked whether the Benefits Agency envisaged having achieved
migration of the "rump" by 2005. Mr Hanson said thet BA were siming to complete
the migration of all customers by the end of the existing contract im spring 2005.
19, MrKears asked who would pay for dealing with the rump - who was going to
pick up the tab.
20. 1c Tlanson confirmed that there would be a need to protect benefit customers
against bank charges, Other important issues included how customers could be
protected from losing benefit if they become overdrawn and how to deliver benefits
in denominations smaller than £1, Mr Larkins suggested that there were
4 WG7MIN.DOC
07/01 ‘O01 14:29 TX/RX NO. 0094 POs
POL00028093
nr
3Q/11 “99 TUE 16: J
D-NOV-18S9 TUE saraee Fay STUART SWEETMANS OFFICE... 2. @oas
—) RESTRICTED - POLICY AND COMMERCIAL HWG/7/01
straightforward answers to these latter two questions and invited Mr Hanson to talk
with him.
21. MrKearns asked when the answers to such questions would be known given
the objective of coremencing the migration in 2003. Mr Hanson said that DSS/BA
expected their plans to be well developed by 2001.
22. MrBaker described how the procedure whereby benefit recipients signed for
their benefit in post offices offered a degree of security, He doubted whether this
could be replicated with ACT. Mr Hans: conceded that there was an element of.
passivity associated with receiving benefit by ACT. The BA would need to address
the issue of any additional safeguards which might be needed,
23, MrHonson reiterated that there were 18 months to 2 years’ work to be
undertaken in conmultation with Ministers. At the moment, the DSS/BA were
working on the timetable for the project work,
24. Returning ta the issue of customer choice, Mr Deegan asked whether
everyone would have the opportunity. to opt for the option of collecting their benefits
in cash, If this opt.on was not universally available there would be a stigma attached
to collecting benedits in cash. Mr Hanson confirmed that everyone would have the
opportunity to collect their benefit in cash at tho Post Office. He explained that in
crediting benefit tc an account ACT would be the normal mechanism, whilst in.
debiting the account people would have the continuing choice of a range of outlets,
including banks, ATMs, cashback facilitics, and, of course, post offices.
25. . MrRooker and Ms Goodfellow confirmed that ifa customer had a bank
account ACT would be the normal method of payment, Clearly. however, there
would inevitably te a need to make provision for a number of exceptions.
Current post office contract management arrangements
26. MrTDunne said that the BA met with the Post Office every two months to
discuss service issues; their contract with the Post Office was the biggest single
service conteact in the UK. ‘The low level of complaints received suggested that the
contract works quite well. The BA also met with the Post Office in the context of
the Fraud Prevention Action Group, and Quality Forum meetings were held to
discuss improvoment initiatives.
-Methods of payment business ~ 23 usual
27. Mr Dunne said that BA's communication strategy was unchanged since 1994,
Standard wording and customer information continued to be used. The forms in use
stated that payment by ACT was available at post offices.
s HWG7MIN.DOC
07/01 ‘O01 14:29 TX/RX NO. 0094 Pos
@
30/11 _°99,
DeNOV=2599)
POL00028093
POL00028093
TUE, 18:41 Fa STUART SWEETMANS OFFICE
RESTRICTED - POLICY AND COMMERCIAL BWG/7/01
28. MrBaker asked whether BA would be discontinuing the procedure instigated
under the BPC project whereby BA wrote to beneficiaries in receipt of more than
one paymant or having the facility to receive their payment at different post offices
advising them that in future they would only be able to use one nominated post
office. Mr Hanson said he would need to look into this, The need to do this for the
BPC had passed. He was unaware if there were other business reasons (Action
point: BA).
29. MrJohnson explained that the Horizon Working Group’s task was to look at
the scenario where POCL stoad to lose up to £400 million of revenue from the BA.
Even witl: automation and the development of network banking POCL might well
face a financial gap of as much as £300 willion. DSS had said in response to crucial
questions asked about choice of payment that people would not have the choice
about how moncy was paid into their account but would have the choice on how they
accessed the cash. There was a potential dilemma in that the Government wanted
people to encourage people to have bank accounts whereas allowing benefit
recipients to continue to receive their weekly benefit payments in cash only if they
didn't have bank eccounts would mean that many wouldn’t want to use a bank
account, In response, Mr Hanson said that 80 per cent of ‘benefit customers already
had access to bank accounts,
30. MrJohnson asked how many people with bank accounts at post offices that
could be accessed at post offices received their benefit via ACT. Mr Sweetman
undertook to look into this question (Action point: Post Officc).
31. Mr Sweetman went on to express concern about the cansequences of seeking
to pay all benefits by ACT. He said that DSS were currently paying the Post Office
“40/50p per transaction, POCL’s research showed that transaction costs of banking
were of a similar scale. POCL’s discussions with the banks suggested that they were
not enthusiastic aliout this benefits work which they saw as being a luss-making
proposition, -He asked how Mr Rooker saw-a way through this, mentioning that.
Frank Field had seen the issue in policy terms as a liability the banks would be
required to absorb. Mr Hanson pointed to the wider government agenda on social
exclusion. He indicated that mixed messages were being received from the banking
industry, and a clear view had yet ta emerge.
32, McDunne said that not all benefit recipients were perceived in the way Mr
Sweetman was suggesting. A lot of transactions were now highly automated and
some bunks were offering simpler products such as direct debit-only cards.
Mr Peberdy sugested that banks might seek in the region of £1.80 per transaction,
the equivalont of un ATM transaction.
33. Mr Deegan said that the BA should recognise that many within the Post Office
were still recling from the shock of their withdrawal from the BPC project. The
6 HWG7MIN.DOC
07/01 ‘01 14:29 TX/RX NO. 0094 PLO
@o10
POL00028093
—— a POL00028093
enn 5c)? TRE ASEA? Fay L.GRO_ I ~~ stuart SWEETHANS OFFICE “gon I
i—] RESTRICTED - POLICY AND COMMERCIAL HWG/7/01
impact on the Post Office was deeply worrying. Everyone needed to fully
understand that whereas a few months ago Post Office staff believed they were
building a relationship with the BA, they were now very worried about the impact of
recent developments on the business. He suggested it would be a tragedy if the BA
saw the post office counters network as just another outlet for paying benefit
recipients - any hope of maintaining the post office network in its present form
would not come to fruition. He expressed concern that the planned migration to
. ACT would stigmatise those without bank accounts. At the moment the great
strength of the Post Office was that it crossed social divides, He wished to avoid the
situation where the Post Office was just dealing with the bottom end of the market.
Govemment should not underestimate the impact on society if POCL were not able
to do deals with the banks.
34, MrHanson confirmed that the DSS/BA recognised their wider public sector
role and obligations. ‘
35, Mr Sweetman said that looking forward they would need to find a product
which meets the needs of the 2 million for whom a bank account would not be
appropriate, He was reassured that DSS/BA saw the Post Office as a potential lead
player in coming up with the solution to this,
36. Mr Hanson said that the DSS/BA have 27 million different customers. Social
stigma was an issue about which they were concerned across all of service delivery
not just payment methads, Mr Johnson said that the PIU would be paying particular
attention to that point.
37. In conclusion, Mr Johnson thanked the DSS/BA team for their presentation
and asked if they would return and give the Horizon Working Group updates on
progress.
DTI Postal Services Directorate
29 November 1999
q HWG7MIN.OC
07/01 ‘01 14:29 TX/RX NO. 0094 Pil