Benefit payment system delayed by two years

One of the biggest projects ever awarded under the Government's Private Finance Initiative - a pounds 1.5bn contract awarded to ICL in 1986 to computerise benefit payments at post offices - is running two years behind schedule.

Michael Harrison reports on why only 40,000 claimants will be using the new system by March 1998, the date it was to be available to 19 million claimants nationwide.

The project to automate social security payments to 19 million claimants, using a credit-card system to replace order books and Girocheques, was due to be ready by next year. However, the national roll-out across the Post Office's 19,000 outlets will not now be complete until the year 2000 at the earliest.

The information technology group ICL was awarded the contract by the Benefits Agency in May, 1996 after beating off fierce competition from two rival bids, one from IBM aand the other from a consortium of Cardlink, Andersen Consulting and Unisys.

At the time, ICL and its partners - the Benefits Agency and the Post Office - forecast that the new automated service would virtually eliminate fraudulent encashment from the system, saving the taxpayer around pounds 150m a year.

The plan had been to go national with the system within 18 months, replacing 1 billion physical benefit transactions a year with a swipe of the card.

However, the partners took a decision in the run-up to the election to delay the phased introduction of the system. One very small scale trial involving 1,500 claimants and 10 post offices in Stroud, Gloucestershire, was conducted between October 1996 and March of this year.

A second trial involving 205 post offices in the South-west and the North- east began last April. But by March, 1998 there will still only be 40,000 claimants using the system.

Although it is claimed the system will eradicate pounds 150m in fraud a year, the Department of Social Security has incurred extra costs in consolidating all its benefit payments on to one central database which is compatible with the new Post Office automation system. One estimate puts the extra cost as high as pounds 200m.

A spokeswoman for ICL Pathway, the ICL subsidiary set up to manage the project, said the decision to delay the full roll-out had been taken because of the scale of the project. She added that it was important to make sure the system worked effectively because those relying upon it were some of the most vulnerable groups in society, such as the elderly, disabled and unemployed.

Initially, the card system is being used to replace child benefit payment books, but ultimately it will be used to pay everything from pensions and disability allowance to unemployment and housing benefit.

The card has a magnetic strip which contains details of the benefit claimant and how much they are entitled to. Each card will only work at one nominated post office. When the card is swiped the system may throw up a random question to check the identity of the person claiming the benefit. They may, for instance, be asked the number of the street in which they live or other personal details.

ICL has to bear the cost of any losses incurred if the technology does not operate properly or a way is found to forge the cards or get around security systems. But the Benefits Agency is liable if it is paying benefits to authorised card holders to which they are not entitled.

ICL said it was not aware that any problems had been encountered with the system during trials or that it was paying out incorrect amounts. The spokeswoman added that there may have been instances of fraud, but this was a matter for the Benefits Agency.

ICL Pathway's subcontractors on the project include Girobank, the printing group De La Rue, Microsoft and An Post, the Irish Post Office, which is providing consultancy on counter automation.