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HMAY-18S9 SUN 16:19 ID:HM TREASURY
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Dr Neville Bain Esq.,
Chairman
‘Lhe Post Office
148 Old Street
London ECIV 9HQ
HORIZON
As you are aware, there has been a long and detailed examination of
this project. My Ministerial colleagues and I consider that the right
way forward is to reconfigure the project without the benefit
payment card rather than to terminate it, The attached documents
set out the core clements of such a reconfigured project,
You will also be aware that Fujitsu haye made clear that they are
only prepared to hold open the offer in these documents until
midnight today, Sunday 23 May 1999. The offer would involve them
taking a significant provision in their Accounts which will be
published on 25 May. If the offer is not accepted today, their
provision will be larger aud they have suid that, in these
circumstances, they would only be prepared to reconfigure the
project in this way on the basis of a considerably higher pr ice than
that currently on offer.
My colleagues and I believe it is desirable that the Post Office
signs the deal on offer today. It offers early automation of post offices
and a platform from which to carry forward Post Office
Counters(POCL) strategy of network banking and modern
government services.
In your letter of 18 May you raised certain issues about
proceeding in this way.
First, the timing of the move by the benefits Agency to
compulsory ACT, Such a move offers substantial efficiency savings to
the Benefits Agency and the impact of delay is very costly. Despite
this I have agreed with my colleagues that, if the Post Office were to
sign the deal on offer todav. the move would not start until 2003 and
P02
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— a I
WUE EYE Ue SHMeAeeeU UE ZUUO. 2 LIYE LU GUUS, LUTE WOU De no
“ehahge in the present arrangements under which benefit recipients
<cun freely choose the payments method which best suits their needs
unless a change has the prior agreement of the Post Office.
Second, funding and income. The cost of the reconfigured project
is expected to have a significant impact of the finances of POCL in
the next few years, In recognition of this, the Government would be
willing to agree that £480 million of the cash investments, including
gilts, held by the Post Oftice should be transferred to POCL on the
signing of the Codified Agreement in July. POCL could draw down
the £480 million at their discretion to cover their funding and income
gap. This money would otherwise pass to the Government together
with the rest of the £2 billion plus of these investments in 2002-2003
as announced last December,
No doubt POCL would seek to exploit automation to attract new
business and income. The more successful they are in this regard, the
longer the £480 million would, of course, last,
Looking beyond the next 5 years, POCL’s position will depend
of how successfully implements its strategy. ‘The financial
implications are not something we can sensibly address today.
Third, the use of the infrastructure for Government services, It
is clearly the hope of Ministers that the Post Office will be successful
in retaining and winning business on merit. We firmly believe that
competition for this business should be on the basis of a.level playing
field between all potential suppliers. We do not believe that it is in the
interests of delivering efficient and effective services to customers
that competition should be biased either in favour or against a
particular supplicr. The Post Office should do well in such
environment in view of its unrivalled national network and the public
trust which it enjoys.
Agninst this background I hope that your Board will be willing
to sign the enclosed letter and schedules today.
Yours sincerely,
da Stephen Byers
(Apprand by th Gerla 4. Set eg ome signed ‘mn Lisolvenc)