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To: John Roberts Copy: Stuart Sweetman _
From: Jonathan Evans Date: 7 December 1998
“Beyond Horizon” presentation to Ministers - 8 December
Tattach some briefing for tomorrow’s meeting.
The meeting is at 2.30pm at the Treasury. The expected Ministerial attendance is
Stephen Byers, Alistair Darling, Peter Mandelson and Jan McCartney. I believe that
Jack Cunningham and Lord Falconer have been invited, but are not expected to
attend.
Jam planning to get together with my co-presenters for half an hour beforehand, so
I will probably meet you in the conference room just before 2.30pm.
Talso attach a copy of the briefing - hurriedly put together - for David Sibbick on
_ Friday night to brief Peter Mandelson.
Jonathan Evans
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“BEYOND HORIZON” PRESENTATION - 8 DECEMBER
purpose: _ to give Ministers a better understanding of the issues and options
facing the Benefits Agency and Post Office Counters Ltd in the event of the
cancellation of Horizon.
(NB: Stephen Byers, who has orchestrated the meeting, has said that he is keen for
the meeting not to dwell on reasons for or against Horizon, but to concentrate on
what would happen the issues facing us with Horizon definitely and irrevocably
cancelled.) ‘ .
presentation: will be conducted by members of the HMT-led Horizon
Working Group:
Sarah Mullen HMT (introductions)
Sarah Graham Dss
George McCorkell BA
Jonathan Evans POCL
David Sibbick DTI
the latest version of the presentation is attached, but is subject to some detailed
change from DSS/BA. - -
POCL purpose:
¢ to show by our approach and manner that we are looking constructively for a
solution to the problem created by Horizon’s termination (against the background
that in some quarters we have been painted as taking a dinosaur-like stance of
presenting the only alternative to Horizon as being Armageddon)
* notwithstanding the above, to point out the risks, uncertainties and
unpredictability of trying to find a solution which avoids one or all of:
substantial network reduction, POCL loss-making or subsidised, ACT
introduction delayed ;
¢ to highlight, not in an overt way but by implication, that continuing with Horizon
carries much less risk than other options.
Outline POCL argument:
¢ if Horizon falls, POCL would still want to automate its network - the only hope it
has of retaining clients and gaining new business into the future. A full
. replacement system could take (under reasonable assumptions validated by
KPMG) until 2004 to be rolled-out _
¢ but BA wants to start ramping up ACT from 2000
e there is therefore a gap of 4 years during which POCL would be losing customers
without the technical ability to keep them
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‘ ¢ how could we respond? i oo
¢ try fo speed up automation timetable - unlikely and certainly cannot be
relied upon ' . ..
¢ introduce a simple interim solution in advance of full automation
sufficient to enable customers to withdraw cash from bank accounts - this
*, may well be possible technically (although there would be some risks to
the ultimate full solution from’having had to roll out the interim one as
well). The main risk is that POCL would need to pay the banks to operate
the service rather than be paid. Ie this solution would not help restore the
£400million income we would be losing from BA
¢ try with ICL to resurrect a “son of Horizon” solution out of the ashes of
Horizon without the Benefit Payment Card (the so-called option 2) -
while this option is not only extremely unlikely to be possible if ICL cannot
agree terms for Horizon, POCL has already raised strong doubts about its
validity. Horizon was built around the Benefit Payment Card and to
remove it would remove its underlying logic; we would be dealing with a
wounded supplier; we should re-tender for an automation solution = ICL
could be a tenderer and if their previous expertise gave them an
advantage, this would reflect iri their bid
* persuade BA to delay ACT until we had the ability ’to retain benefit
customers: in the Corbett discussions on Horizon, BA have agreed to delay
ACT until 2006-2008. We would be looking for them to move to this
position if Horizon fell et
¢ none of these responses would provide the perfect solution. All would involve
“some compromise between BA’s and our objectives - involving such features as a
continuing “floor payment” by BA to POCL} or HMG acceptance of network
reduction or of'a loss-making/subsidised POCL, .
* however POCL would want to work closely with BA in the aftermath of -
Horizon’s cancellation to work up the best solution to put to Ministers.
¢ other issues: maintaining subpostmaster confidence would be crucially
important in order not to put the network at risk. Subpostmasters are very
nervous about the Horizon outcome, and would react badly to its termination.
. They would require some clear and explicit assurances in order to quell their
> concerns. Similarly with client confidence - we would lose much crewdibility
with other clients who are-waiting impatiently for our automation to help unlock
efficiencies in their processes (eg DNS, DVLA). Further delay will put more
- business at further risk : ;
After the formal presentation, there will be a discussion - which could easily expand
into a wider conversation. Additional points to put across could be: F
¢ we want Horizon, but not atany price, and ICL must change tack from their
stance to date : :
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¢ we get the impression that ICL have built up a methodical and detailed portfolio
. of accusations to level at the public sector (especially BA) in the event of
. litigation. Thus any litigation option is very risky (NB meeting with Treasury
counsel to try to take forward the preferred litigation route is tomorrow at noon)
¢ weare ready if necessary to make network reduction - but Ministers should not
underestimate the strength of negative feeling this would generate amongst
_ customers , :
* weare ready to work closely with DSS/BA to find a solution - there business is
and will be of great importance to us. .
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DRAET PLOENTATION
: beyond Horizon :
the Tssues and options facing AMT ‘
the Benefits Agency and Post Office Counters Lid
if the Horizon programme is cancelled
ayeeienttion to Minions” BD ecember1998* -
acitizens* benefit and banking service
2005
. crore nema bn ev wl Snel Cak am
*+ people able to collect their benefits in cath from post offices/shopey
banks and a rummber of cher otkets - whichever s most conversent
‘+ 9946 ofthe population with their own bank scoount with access to the
‘benefits that can bring, for example direct debit payments; and will
_ have the opporunity to take up an olferof a Single Personal Accout. —~
‘with Goverment .
‘+, thete services achieved by active purtnerthip between bankaprivaie
sector; the Post Office and Govercmert, endthe people
the “prize” for Government
* an automated post office network able to match “ Q an hk
Government's ambitions for it; and to support longer-term. INA CAN
commercial opportunities for the Post Office
+ simple, safe - and modem - way of delivering the
Billions of taxpayers’ money paid out each year
* active support for the wider Government agenda:
“Modemising Government”, welfare reform and
combating financial exclusion 2
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Phase 3 - Complete Conversion
‘Oct 2001 - Dee 2004
&
Cone Mela
what are the issues for POCL?
crucial to automate the network, while,
+ maintaining customer footfall ~ 19 million
benefit customers use post offices ~ and
* maintaining the confidence of subpostmasters
and clients . .
in order to manage network in acontrolled
way, and retain business stability without
subsidy
Tete Cay
new POCL automation
SSS WW ee
SSE te
Gated
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new automation - fit with ACT
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[proactive
~ ACT stuns!
- 8 toast 7
can we bridge the gap?
* speed up full automation - unlikely and risky
* introduce interim banking technology -
technically possible, but would POCL make any -
money? ;
+ delay ACT- defers BA's savings
at present, we do not have a solution free from
significant risks
what would POCL want to do?
* in the light of Horizon’s demise, determine
best option for automation
* establish commercial relationships with banks
* work closely with BA on timing of ACT, and
the manner of its introduction
[direction clear=but, precise outcome uncertatt]
uM Gam}
Jalon Eran)
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~
the challenge