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Vanaittel
TAB TLRR BUSS Ke dorwe iu:
RESTRICTED - POLICY AND COMMERCIAL
DEPARTMENT OF TRADE AND INDUSTRY
FAX HEADER: URGENT
FOR THE ATTENTION OF: MENA REGO
KEITH BAINES
LOCATION:
NUMBER OF PAGES TOFOLLOW: 5
. DATE: 16.12.98
FROM: ISABEL ANDERSON -
POSTAL SERVICES DIRECTORATE
306 RED ZONE
151 BUCKINGHAM PALACE ROAD
LONDON SW1W 98S
TELNO. [GRO FAXNO. I_I GRO
MESSAGE
HORIZON : FOLLOW-UP TO INTERMINISTERIAL MEETING ON
14,12,98/ FIRST DRAFT OF NOTE TO CHIEF SECRETARY
Mena
Keith
Tattach a first draft of a note for the Chicf Secretary just received from Treasury
officials on which we will be commenting. Grateful if we could speak urgently
with you. :
Isabel Anderson
* 16/12 '98 17:04 TX/RX NO. 0340 “POL
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draft outline note for CST : PsISecnstang Shke
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Date and timy of transmivsion: 16 Dacombar 1998 15:29:46
Number ot pagas including this covor shoot: OG
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‘With huge apologies for the delay (we have had to deal with another
crisis here that has taken up most of the day) I attach a very rough first
draft of a note for the CST. I would be grateful for drafting suggestions:
DTWPOCL: - on the latest discussions with ICL on acceptance,
guarantees, the JV and on what option 1 can deliver (by when) on the
wider government policy agenda
DSS/BA: on the detail of option 3 and the case for this option.
If you can let me-have.comments today that would be good. Otherwise I
am alming to put this up by tomorrow lunch time. We also await papers
from POCL. : . .
Sarah.
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e
DRKET “RES TRCN ~ POAICH A COMMLEREE At
FACTUAL NOTE FOR CHIEF SECRETARY TO CIRCULATE TO COLLEAGUES ON
BA/POCL AUTOMATION
A clear decision on the way forward for the BA/POCL automation project Is
required. There are two cholces facing Ministers:
” to continue the project broadly on basis of ICL offer of 9 December but with
changes to acceptance testing to meet the concerns of the public sector parties;
reassurance on the nature of the Fujitsu guarantee; and confirmation that
Horizon offers a platform to take forward the wider government policy agenda -
option 1 plus; .
had to move to termination via Issue of notice and then to implement the fallback
strategy based on a move to payment of benefits directly into bank accounts but
which could be withdrawn at post office counters - option 3.
Option 1 plus
2. This option envisages that:
“ the roll out of the automated platform into Post Offices would start in Jan 2000
and would be completed by September 2001;
” paper-based methods of payment would end by [when in 20017] and compulsory
benefit payment by ACT would begin in April 2005 and would reach 100% by
October 2008; . a.
“ the benefit payment card would be the interim method of payment and would
have a life of around [8] years;
. the Post Office would introduce limited banking services (I.e contracts with [one :
or two} major banks In X number of outlets?) by ? 2001, and full banking services
in all their offices by ? 2004;
. other PO services (such as payment of bills, TV licence renewal, [what else]
would be automated by [when?], and the Post Office would work together with
ICL to provide a smartcard by (when?) and to win other government.direct
business [by when?} a
# BA's contract with ICL ends in 2008 andthe Post Offices’ contract ends In 2010
3. The overall benefit to public sector of this option is estimated to be around £1.3bn
NPV (a benefit to DSS of £1.16bn and to the PO of...)
4, In the light of the ICL offer of 9 December:
” the Post Office have argued that they have a commercially viable case and they
are prepared to meet the remaining gap between ICL and the public sector on its
contracted services and absorb Increased pricés for the benefit payment
transactions in order to secure the deal (although the Exchequer will continue to
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bear some of the risk of this when we move to the new 40% dividend regime);
” acceptance testing resolved???
. FJ guarantees confirmed
. something on the JV - what will it deliver by when, without giving any guarantees.
pros 1
is an announcement ending the uncertainty over the project will reassure
subpostmasters and the PO non-BA clients that the Government Is committed to
automation to secure: POCL's future. Cancellation will inevitably lead to
uncertainty until a new automation platform is commisstoned, and this will be
compounded by an announcement that BA will be moving to ACT. The downside
risks to the PO network are therefore reduced relative to the fallback option;
7 the PO would not be starting again from scratch to commission an automation
platform; it would be building on a system that has been shown to be technically
viable and is close to completion;
” the benefit payment card provides a bridge between current paper based
methods and ACT which gives the Post Office time to adjust and can be a
platform on which to launch the PO's plans for a smartcard;
” the detrimental impact on ICL and Fujitsu and inward investment into the UK will
be reduced.
cons
” the Benefit Payment Card Is a bespoke technology. If we could start from scratch
we would be able to introduce something more modern - le a smart card
(timescale?);
” it is agreed by all parties that Government should eventually move to paying
, benefits directly into bank accounts since this is more efficient, and would provide
- an opportunity. to address the “unbanked” and reduce financial exclusion. The
benefit payment card delays this move; .
” given the current record of extensive delays (Including the most recent slippage)
there is a risk that delivery of the system will be even later than currently
expected; =
ee there are legal risks around procurement (given the changes to the contract) (but
our legal advisers are of the view......)
Option 3 -
5. The fallback option comprises:
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8
Pratwsrscipases Fivo
« a campaign to promote voluntary ACT from April 2000, compulsory ACT from
2001, 100% by ? 2004
a PO offer interim “cashback” banking by 2001 as compulsory ACT begins, and full
banking by 2004
se full role out of PO automation achieved by 20047
[ete....]
6. The overall benefit to the public sector of this option is estimated to be £1.3bn - le
a similar order of magnitude to option 1.
pros
” avoids the introduction of the benefit payment card (a bespoke technology) and
offers the opportunity to.commission a’new system based on a more modern
technology
s BA can move more quickly to ACT providing an earlier opportunity to address the *
unbanked" problem and reduce financial exclusion. :
“ large admin savings for DSS come on stream earlier
” Although Ministerial statements will provide some assurances, cancellation will
inevitably lead to continued uncertainty until a new automation platform Is
commissioned, and this will be compounded by an announcement that BA will be
moving to ACT. The downside risks to the PO network are therefore greater;
“ the PO would have to start again from scratch to commission an automation
~ platform; .
” the detrimental impact on ICL and Fujitsu and inward investment into the UK.
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