Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 480 - 499)



  480. Another point you made was that there were organisational changes which were due to yield productivity changes?
  (Mr Roberts) Yes.

  481. Costing I think you said £108 million?
  (Mr Roberts) Yes.

  482. If they are due to yield productivity changes presumably that means that eventually they will make more than that back again?
  (Mr Roberts) Yes.

  483. When will that money come in?
  (Mr Roberts) We have saved we believe about £63 million this year as a result of those changes, that will be ongoing. We expect to make a maximum of about £93 million so that would pay back within two years.

  484. That was a one off, £108 million?
  (Mr Roberts) One off £108 million, yes.

  485. The situation is you have made a loss this year of how much?
  (Mr Roberts) We have not said what our losses are this year because we have not yet finished the year.

  486. Sorry, this is the year in which—
  (Mr Roberts) Costs went up by about a billion pounds, 12 per cent I think it was in that year.

  487. Sorry, a billion pounds?
  (Mr Roberts) A billion pounds, yes.

  488. How much was the loss that year?
  (Mr Roberts) £430 million loss.

  489. Roughly a quarter of your losses that year were due to this one off charge?
  (Mr Roberts) Yes.

  490. Which in future will bring in 60 to 90 million?
  (Mr Roberts) My colleagues have just reminded me it was the year that the Horizon Project came in so we had a lot of exceptional costs as a result of that Project.

  491. How much was the exceptional cost of Horizon?
  (Ms Cassoni) £485, I am sorry the losses were £285.

  492. Sorry, what was the 485, the total?
  (Ms Cassoni) The losses that were written off, the one off losses because of this project, Horizon.

  493. The cost of Horizon?
  (Ms Cassoni) The Horizon Project which is a computer system for Post Office Limited cost one billion in total as Mr Roberts said. We had a one off write off during that year of about £500 million which hit the balance sheet and the losses after that write off were about £250 million.

  494. The losses after that write off?
  (Ms Cassoni) Yes.

  495. In the following year?
  (Ms Cassoni) No, in the same year. If you ignored the write off for this computer project we would have been profitable.
  (Mr Roberts) In that year.
  (Ms Cassoni) In that year, yes.

  496. Does that mean that in the following year, as you had expected, given you had these two one off hits which were not going to occur in future years, if we had just carried on as we were before, are you saying you would have expected to be profitable in the following year?
  (Mr Roberts) On Horizon there was a one off hit of £500 million. It added then about £100 million a year to operating costs. We have been going through with that extra £100 million coming through. On the change to working practices, the £108 million, that was a one off up front payment, an element of it actually continues in pay, a small element. The impact of Horizon and the international agreement on prices, both of those continue.

  497. Sorry, Horizon continues at 100?
  (Mr Roberts) That continues at 100 for about five years, so we are in about the last year of that.

  498. The costs which do not continue amounted to 485 plus the productivity deal of 100.
  (Mr Roberts) Indeed.

  499. So the losses that do not continue were much greater than the overall loss for that year. If it had not been for those two completely one off charges you would have made a profit?
  (Mr Roberts) Yes, we would.

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