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13/09/2022, 16:58 House of Commons - Trade and Industry - Minutes of Evidence
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Select Committee on Trade and Industry Minutes of Evidence
Memorandum submitted by the National Federation of Sub-Postmasters
This submission is made in response to the request from the Select Committee of 9 June 1999 inviting the National Federation of Sub-
Postmasters (NFSP) to give cur reactions to the recent announcement by Government of the future of the Horizon project, the events that led to
the withdrawal of the Benefits Agency payment card from the project and its implications for 18,000 sub-postmasters who ovin and operate the
vast majority of the network of post offices.
i. THE BENEFITS PAYMENT cARD
‘The decision of the previous Government to automate the delivery of benefits payments using the benefits payment card was based on the need
to reduce costs, eliminate fraud and ensure beneficiaries would be able to continue to receive their payment in cash from the post office, thus
ensuring they retained @ choice as to the method of payment which best suited their individual circumstances.
This decision was taken In response to the strong hostile public reaction to a trial which the DSS began in 1993 to test three different versions
of the pension claim form. Only one version contained a direct reference ta payment in cash at @ post office, whilst all three gave great
Prominence to payment by ACT. The biased nature of the trial, which could have resulted in the withdrawal of the option to choase to use the
ost office appeared to have been undertaken by the DSS without regard to the Government's stated commitment to the nation-wide network.
Had the trial been rolled out nationally it would have very quickly threatened the future of at least 5,000 sub post offices.
Government's decision to automate the network promised far more secured future for all involved with the Counters Business, not only
safeguarding the right of customers to choose to receive pensions and benefits from post offices but also providing a platform on which to
develop new products and services for a wider range of clients. This was recognised to be the only way to ensure the future survival and
Drosperity of the post office network, and it remains the case now.
‘The NFSP began to develop concerns about the future of the Horizon project during the latter months of 1997, Since then, press speculation
surrounding its future has been continuous creating great uncertainty for the future of subpostmasters’ businesses, POCL and Its current and
prospective clients.
2. WELFARE REFORM AND THE pAYMENT cARD
https://publications. partiament.uk/pa/cm199899/emselect/emtrdind/530/906 1402. htm
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‘On 12 May 1998, Kate Hoey MP addressed delegates at the NFSP Annual Conference on behalf of the Minister for Welfare Reform. That speech
focused on the Benefit Payment Card, fraud reduction and welfare reform, emphasising the links between them.
Wider access to banking facilities and financial advice for low income groups was stated to be a key aspect of Government's welfare reforms
with the aim being for everyone to have access to @ basic bank account by 2020. The ability of the nationwide past office network to play a
significant role in providing that access and continuing to provide a method of paying benefits was welcomed by the Minister for Welfare Reform.
Post offices have been, and remain, the cornerstone of benefit delivery for the vast majority of people who rely on benefits. The NFSP
understands the need to provide e modern, secure payment system which is cost effective, robust and fully accounted.
In the address to Conference, the Minister for Welfare Reform recognised that our partnership with the DSS was crucial in making these
objectives achieveable for benefits payments through post offices—and that the payment card was designed to do all these things.
‘The business case to warrant the investment being made in establishing @ nationwide network through which customers may receive their
benefits using the nevi benefits payment card was based on being only in post offices, POCL is obliged to operate the largest UK retail network,
reaching Into practically every community throughout the country. Without exclusivity, its ability to provide the service on @ commercially
Sustainable basis was not possible. Vie therefore welcomed and were reassured by the written confirmation later given by the Minister for
Welfare Reform that there were no plans to extend the use of the payment card to other outlets.
3. GOVERNMENT rEVIEW OF THE PROJECT
‘The NFSP understands that the reasons for the delays experienced by the project were In part caused by the sheer size of the project (the
programme was the largest IT project in Europe) and the physical diversity of the post office network. A project of this size and complexity was
always likely to have its problems. Hovrever, following the award of the PFI contract to ICL Pathway, progress was hampered by the failure of all
the parties to agree the detalled project specification, Lack of progress and rising costs led to a major review by Government to decide the best
route forward.
‘Since It became apparent early last year that Government were reviewing Its future, the Horizon project has been overshadowed. The NFSP
remained in close contact with POWL and ICL Pathway during the course of the review, spending a great deal of time dealing with the
uncertainty. Our concems have been constantly relayed to Government and POCL to ensure the decision makers are in no doubt as to the
importance of automation to the future of the network.
Confirmation has now been finally recelved that the payment card will not go ahead because magnetic strip technology Is out of date.
4. PROGRAMME bELIVERY
‘The system has already been [nstalied In over 250 post offices in the South West and North East of England with all services fully automated.
‘The Payment Card has worked successfully since October 1996 and has been well received by customers, being easy to understand and use.
‘The work being done at offices has in many cases been significant and Is a reflection of the Inevitable difficulties of automating large diverse
network.
‘On the systems side, aur understanding is that the system had been moved successfully through the final stages of testing prior to addition of
the remaining offices to make up the balance of 300 taking part in the formal live trial. The training courses, go-live arrangements and support
arrangements both at offices and via the helplines were ready to ensure a successful trial prior to national roll out.
This experience has emphasised the need for careful planning and management through eny trial period prior to automation being rolled out
rationally.
s. IMPACT OF THELOSS OF THE BENEFITS PAYMENT cARD
Government has stated that it has found a positive way of moving forward on automation as a result of which for the first time ever post
offices will have an up to date automation platform, helping them to provide a better service for their customers. Government has further stated
that it intends to move to a more modern and efficient way of paying benefits through the post office network, building on banking technology.
It intends to do this by transferring betyeen 2003 to 2005 to a system of paying benefits directly by ACT to bank/building society accounts. Post
offices will only be one of a multiple of alternative delivery channels, Customers will only be able to retain the choice to pick up their benefit
from the post office if the account they have is accessible through the post office.
We view the headline agreement reached between POCL and ICL Pathway as short term protectionism which will have a disastrous effect once
the Benefits Agency enforce automated transfer of benefits direct to a bank/building society account. The effect on the network of post offices
we estimate to mean the direct loss of up to 40 per cent of all business currently transacted over post office counters.
If automation is completed by 2001 it will be necessary for POCL to strike commercial desis with ali banks and building societies to enable
those claimants who are their customers to access their account at the post office.
If this is successfully achieved it will mean that the post office network will just be one of a series of delivery channels alongside bank
branches, ATMs, supermarkets, telephone banking etc. It is likely that customers will exercise their right to use all of these channels according
to their needs. The impact on customers we will return to.
The adverse impact on post offices will be worsened once ACT is enforced as it is inconceivable that customers will continue to use the post
office to pay their bills even if they visit the post office to pick up their benefit. This in turn will have @ knock on effect on the turn over of the
sub-postmaster’s associated retail business, it being the synergy betvieen the private/post office business that has enabled so many post offices
to remain viable.
Many sub post offices already operate on the edge of viability. In these circumstances, with @ loss of work on such a large scale, the local post
office will not survive, resulting in @ loss to those beneficiaries wha want to use post office services, including the elderly, Infirm and those
without transport, people wha now are comfortable with transacting their business in the post office environment,
By maving to compulsory ACT, where each beneficiary will need ta have @ commercial relationship with their bank many may incur bank
charges, Banks are now Introducing charges to use their services, for example to access an ATM and use counter services.
Memorising @ PIN number and accessing cash et an ATM machine makes people vulnerable. A cost effective and secure method of paying
benefits—for vino?
The Impact on the communi of the las of « post afice is wel Known, The eub- post office I at the heart of the community and the vital
social role sub-postmasters play has been recognised many times by
Every day there Is a social role played out by the sub-postmaster In every community. Who will fulfl that need when the sub post office Is
closed?
‘The NFSP's view Is that the decision to scrap the benefit payment card will lead to:
https://publications.partiament.uk/pa/cm199899/emselect/emtrdind/530/906 1402. htm
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~ the loss of subpostmasters' investment in their post office business, in which many have
invested their life savings and on which they rely for their income and retirement provision. In
many many cases entire families earn their living from their post office:
~~ the prospect of a significant proportion of the current 40,000 sub post office staff losing their
jobs, many of these staff being part time, one of the most vulnerable sections of the workforce;
— 17,500 jobs in POCL being put at risk;
— the loss to the community of their local post office, restricting customer choice.
The NFSP therefore wish to ask for the support of the Trade and Industry Select Committee:
— in opposing compulsory ACT as the costs, both financial and social, will far outweigh the
savings the DSS can make by enforcing ACT;
— to ensure the Benefits Agency do not promote ACT until automation of the post office
network is complete and contracts with the banks signed;
— to ensure the Government maximises its use of the network for delivery of its welfare
reform and "Modernising Government" aims, which needs to be done in a way which is
commercially viable for all parties to the contract;
— to encourage all Government Departments which now use the post office network to remain
loyal to POCL during the period in which the proposals to maximise the use of the network for
the Government Gateway are developed and implemented.
12 June 1999
ax
© Parliamentary copyright 1999 Prepared 21 September 1999
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