Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 80 - 99)



  80.  They expended money they were not expecting to expend. Had the thing gone head and worked that money would not have been expended. That is what Mr Roberts has just told us, on his side at least.
  (Mr Roberts) It would have been expended later because the original contract meant that ICL Pathway would have taken all of the up front development costs and paid for those. What was going to happen downstream, once it worked, is that we would have paid a per transaction cost back to ICL and that was the way in which ICL would have gained their revenue and got their return on their original investment.

  81.  Can I move on to talk about the question of a split project. Ms Lomax, you said earlier, "When things go wrong there are always difficult choices to be made". Either you or Mr Roberts said that.
  (Ms Lomax) I certainly said that, yes.

  82.  Surely it is always going to be true of a project which is split between the public sector, your Department, and an independent body—and Mr Roberts has emphasised very strongly that his body is an entirely independent body from the public sector—I do not see how you are ever going to be able to make the decision sensibly when part of the money is having to come from the public sector and part is coming from, apparently, a private organisation?
  (Ms Lomax) What made it particularly difficult was that the Post Office is a very important supplier. We have a very sensitive commercial relationship, a rather peculiar commercial relationship between the DSS and the Post Office, and that made the relationship very special. The fact that it was at arm's length body, I am not sure whether that really makes that much difference, I do not know.

  83.  It seems to me that the Post Office is organising itself as, in effect a private sector body—in which case the fact of the matter is you do not any longer have the same aim in terms of public sector money—if that is the case you are always going to have a conflict when any difficult decision has to be taken, whether the project is working well or not.
  (Ms Lomax) It is important that the two parties to a project like this have shared objectives, the extent to which they genuinely have shared objectives makes a big difference to how they cope with difficulties when they arise.

  84.  You are never going to have shared objectives in terms of the financing of the project if one is private sector and one is public sector.
  (Mr Roberts) I think the point you are making is that one set will be coming from a government vote, whereas ours will have come through the Department and the Post Office. Those differences are absolutely there. The only point I was going to make was, we did put a lot of effort into the memorandum of understanding, which was produced before the tendering exercise went ahead, which was really to define the key aims of the project, which we both subscribed to, and this was around automating the Post Office, automating transactions and getting fraud out of the system.

  85.  Was it not obvious from the very start that if anything ever did go wrong, if any further decisions had to be made there was going to be a clear conflict of interest between your organisation, which set itself up as a private and separate organisation, and the Department, which was clearly a public organisation?
  (Mr Roberts) If it was about returns on money and those kind of commercial activities, then, yes, I accept that. I think on a lot of the activities which were around automating the Benefit Card, many of those things were quite split. Anything to do with the card and the security arrangements was quite clearly a matter for the DSS and anything to do with the running of the Post Office network was ours. By putting together the programme development authority, as we did, we were trying to minimise that as far as we could. As the NAO report makes clear there were difficulties and what we were trying to do was build a sufficient system to resolve those as quickly as we could.

  86.  We have taken you far enough through what went wrong. Let me turn to the future, Mr Roberts, what is the current rate of closure of small rural post offices?
  (Mr Roberts) In the network this year, Mr Rendel, 424 post offices have closed. That is a snapshot number. Not all of those will remain closed. That is at about a month ago.

  87.  Over what period?
  (Mr Roberts) Over our financial year, which started last April, about ten months.

  88.  That is out of how many?
  (Mr Roberts) 18,000.

  89.  One in 36, three per cent closed in one year.
  (Mr Roberts) Yes.

  90.  In a rural area how far would you expect the average resident to travel to the nearest post office?
  (Mr Roberts) I am not sure we have an average figure, it would depend on the kind of rural area you have. If you are in the middle of Scotland it is probably quite some distance. If are you Southern England—

  91.  I represent a constituency in Berkshire, let us start with Berkshire.
  (Mr Roberts) I really would not want to hazard a guess, two or three miles maybe. It does depend on terrain and all sorts of other things. I would not want to mislead the Committee, we do not have an average figure.

  92.  Ms Lomax, what analysis you have done of whether there will be any excessive travelling and inconvenient distances to be travelled as a result of this new system coming in?
  (Ms Lomax) A considerable amount of research is going on into attitude towards payment through the Post Office, and things like that, in preparation of payment modernisation. I am not aware of the answer to that particular question.

  93.  My actual question was, what analysis have you done?
  (Ms Lomax) I do not know. We are doing a lot of research but I do not know if we researched that particular aspect.

  94.  Quite a number of people are paid by post at present when they are living out in rural areas. That, presumably, is going to be impossible, are they going to have go in before they can get anything.
  (Ms Lomax) A huge amount of our business is conducted over the telephone and through the post.

  95.  They will still be able to claim by post?
  (Ms Lomax) Yes, indeed.

  96.  Once the Universal Bank has been set up, how many of your benefit recipients do you expect will not have any bank account?
  (Ms Lomax) About three and a half million I think is our best estimate at the moment.

  97.  After the Universal Bank has been set up.
  (Ms Lomax) After, I do not know, a small number. There will be some absolute exceptions of people who just do not want bank accounts at any price or are not capable of having one.

  98.  You do not know how many that small number is.
  (Ms Lomax) I think we have an estimate of a small number, 5 per cent[4]. I would be misleading you if I gave you a precise figure. It is a small core.

  99.  I have to say I am horrified to hear you do not know what the precise figure is. Given the difficulties these people are going to have, how are they going to get their money?
  (Ms Lomax) We have to make some special arrangements for them, we have not yet done that.

4   Note by Witness: The figure is, in fact, under 5 per cent, not 5 per cent. Back

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