Post Office computer fiasco 'cost £881m'

The Government's spending watchdog has launched an investigation into a disastrous computer project which led to losses of nearly £1bn and has put the future of 18,500 post offices at risk.

As ministers struggle to overcome a crisis created by plans to cut post offices' income from delivering benefits, they face criticism from the National Audit Office (NAO) over the fiasco. It is expected to say taxpayers' money was wasted when the project was scrapped. Total losses amounted to £881m, with the Benefits Agency writing off £130m, the Post Office £571m and the computer company ICL £180m.

Stephen Byers, the Secretary of State for Trade and Industry, will spell out this week how the Government plans to compensate post offices for the loss, which follows the collapse of the Horizon project.

Postmasters and mistresses say the cut in their income will force many of their businesses to close, depriving rural communities of vital services. The scheme would have safeguarded post offices' trade by giving benefit claimants swipe cards for use there. It could also have cut benefit fraud by more than £320m per year.

But in May last year, with the Public Finance Initiative project years behind schedule and millions over budget, the Government pulled the plug. Instead, most benefits will be delivered through bank accounts from 2003. Now the NAO is examining the scheme and has asked for details of a renewed £1bn contract awarded to ICL after its collapse. The audit office is likely to deliver its report in July.

MPs suggested the renegotiated contract, which will allow a range of government services other than benefits to be accessed at post offices, was given to ICL in a political deal to compensate it for the loss of the swipe-card scheme. All the parties admit they had different aims from the start of the project in 1996, with the Benefits Agency seeing the swipe card as a temporary measure before the introduction of automated bank transfers, the Post Office believing it would safeguard its business for the long term, and ICL wanting a more sophisticated "smart card" instead.

The Benefits Agency has suggested ICL failed to deliver on time and to budget, but the computer firm says delays were due to the agency's failure to hand over vital data.

The project has attracted criticism from the Trade and Industry Select Committee, which found last autumn that ministers had been "less than candid" when they assured MPs they were still committed to the project just weeks before admitting they were not.

It said ICL's new £1bn post office deal was "an essentially political deal to ensure that ICL has a substantial contract with the Post Office, at a price... as a means, however inadequate, of making up some of the £180m written off."

An ICL spokesman said the remaining part of the project was progressing well and 300 post offices were having equipment installed each week. "We have a fair and reasonable contract with the Post Office," he said.

Colin Baker, General Secretary of the National Federation of Sub-Postmasters, said the NAO inquiry would come too late to help his members.

Start your day with The Independent, sign up for daily news emails
Voices
voices
News
general electionThis quiz matches undecided voters with the best party for them
Arts and Entertainment
Keira Knightley and Matthew Macfadyen starred in the big screen adaptation of Austen's novel in 2005
tvStar says studios are forcing actors to get buff for period roles
News
Prince William and his wife Catherine, Duchess of Cambridge show their newly-born daughter, their second child, to the media outside the Lindo Wing at St Mary's Hospital in central London, on 2 May 2015.
news
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA celebration of British elections
  • Get to the point
2015 General Election
May2015

Poll of Polls

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Recruitment Consultant / Account Manager - Surrey / SW London

£40000 per annum + realistic targets: Ashdown Group: A thriving recruitment co...

Ashdown Group: Part-time Payroll Officer - Yorkshire - Professional Services

£25000 per annum: Ashdown Group: A successful professional services firm is lo...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before