Examination of Witnesses (Questions 80
MONDAY 26 FEBRUARY 2001
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 bodyand Mr Roberts has emphasised very
strongly that his body is an entirely independent body from the
public sectorI 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 bodyin
which case the fact of the matter is you do not any longer have
the same aim in terms of public sector moneyif 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
(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
(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
(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
(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
(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
(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
(Ms Lomax) I think we have an estimate of a small
number, 5 per cent.
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
(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