Official hearing page

23 November 2022 – David Sibbick

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(11.00 am)

(Proceedings delayed)

(11.18 am)

Mr Blake: Good morning, sir.

Sir Wyn Williams: Good morning, Mr Blake. I’m very sorry if I’ve kept people waiting.

Mr Blake: Sir, today’s witness is Mr Sibbick. Thank you.

Sir Wyn Williams: Yes.

David Sibbick


Questioned by Mr Blake

Mr Blake: Thank you very much.

Can you give your full name, please?

David Sibbick: My name is David Sibbick.

Mr Blake: Mr Sibbick, you should have in front of you a witness statement.

David Sibbick: I do.

Mr Blake: Is that statement dated 26 August of this year? Yes?

David Sibbick: Yes, I have that.

Mr Blake: Thank you. On the final page, page 19, there’s a signature there. Can you confirm that that’s your signature?

David Sibbick: That is indeed my signature.

Mr Blake: Thank you. Is that statement true to the best of your knowledge and belief?

David Sibbick: Yes, it is.

Mr Blake: Thank you very much.

For the purpose of the record, the statement is WITN03350100.

Mr Sibbick, thank you very much for attending the Inquiry today. As you know, I’m going to be asking questions on behalf of the Inquiry.

Your statement and the exhibits are now in evidence, so anything that I’ll ask you will be supplementary to that.

I’m going to start with your background. You started your career in the Civil Service in 1960?

David Sibbick: I did, a long time ago.

Mr Blake: I think you began in the Post Office itself?

David Sibbick: That’s correct.

Mr Blake: What did you do in the Post Office?

David Sibbick: I started by working in what was, I think, called the Establishments Division, it was concerned with postmen’s pay and issues like that.

Mr Blake: Thank you. Then you moved to what was then called the Ministry of Posts and Telecommunications?

David Sibbick: When the Post Office moved from being a government department, there was a small sponsoring Ministry set up to do the things that sponsoring ministries do, and I moved to that rather than staying in the Post Office.

Mr Blake: Then at some stage you became the private secretary to the Permanent Secretary in that Department?

David Sibbick: Yes, I did.

Mr Blake: Eventually that Department became the Department for Trade and Industry?

David Sibbick: It was absorbed into the DTI as then was.

Mr Blake: In 1989 you became Director of Posts –

David Sibbick: Correct.

Mr Blake: – and you retired from the Civil Service in 2000?

David Sibbick: Yes.

Mr Blake: In the period that we’re dealing with, in this phase, procurement, acceptance and rollout, it looks as though you were the most experienced member of the Civil Service when it came to matters relating to the Post Office.

David Sibbick: I think that’s almost certainly correct, yes.

Mr Blake: Thank you.

Before we start, do you have any general observations on how the Post Office was governed during your period?

David Sibbick: Well, that is an absolutely huge question which I’m sure you will be looking at in much greater detail in Phase 6 of this Inquiry. I suppose what I can say is that there was a convention at the time that the way these organisations should be governed was that the government, a minister, would appoint the board, and the board was responsible for all operational issues within the Post Office, reporting obviously to the Minister, who would have regular dialogue with the chairman, but the overriding principle was you appoint the chairman and board and then you either back them or sack them.

You didn’t meddle day to day and part of the argument for that was that, if you were going to meddle day to day, if you were going to have your civil servants crawling over everything that the operational people in the organisation tried to do, you would not attract to the top of the organisation people of the sort of quality that you needed to attract.

Mr Blake: We’ll get to the detail in due course but, in practice, was the Post Office left alone to get on with its business or was there meddling?

David Sibbick: I suppose it depends on what you call “meddling”. This overall principle was there but, as almost everything in the real world or the political world, it gets a bit overtaken from time to time by events, and Horizon turned out to be one such event.

Mr Blake: I’m going to take things chronologically, starting with your first involvement.

At paragraph 7 of your witness statement you’ve said, you describe the long-running sore between the Benefits Agency and the Post Office and officials being scarred by their involvement. Those are obviously powerful words. Can you tell us about your early involvement in the project, so the early to mid-1990s, and those differences?

David Sibbick: I was not particularly involved in the early part of all of this. My close involvement really started at the point when the Secretary of State for the Benefits – responsible for the Benefits Agency wrote to my Secretary of State and to the Treasury Secretary of State, saying “Look, we’ve got a problem here, we need to get round a table and sort it”, and that, I think, was in the late summer/early autumn of 1997.

I was aware before then of the Horizon project, and I was aware from talking perhaps informally to people that there were these frictions –

Mr Blake: Can I just pause you there for one second, sorry, only because we’ve lost the Chair on the screen.

David Sibbick: Oh.

Mr Blake: Sorry, we may have to wait a moment. There is a transcript, so everything you’ve said will be recorded.

David Sibbick: Yes.

Mr Blake: We’re just trying to re-establish connection.


Mr Blake: Sir, we can see you now. Can you see and hear us?

Sir Wyn Williams: Yes, for the first time, I think, in however many months this has been happening, a glitch occurred. So I didn’t catch what Mr Sibbick was going to say in answer to your questions on paragraph 7, Mr Blake.

Mr Blake: So this is the long-running sore; you described in 1997 your first awareness that there were –

David Sibbick: That was the first time that ministers were involved and, therefore, I was involved in having to brief ministers on how to best take all of this forward and what our line might be.

Mr Blake: You’ve said officials being scarred by their involvement –

David Sibbick: I knew, before then, but it was interesting to have it confirmed by a senior official from DSS that these issues had been rumbling on for a long, long time. The Benefits Agency, they can obviously speak for themselves, but they felt that they were being ripped off, if I can put it like that, by the charges that they were having to pay to get the work done by the Post Office. The Post Office, of course, thought the Benefits Agency were not paying nearly enough for the work that they were carrying out for the Benefits Agency, and I think these squabbles just went on, I suspect, every time that the contract had to be renegotiated.

The Benefits Agency, or DSS, also had a particular problem in, as I understand it, they were not able to get their accounts signed off by their auditors because of the volume of fraudulent transactions around the Benefit Payment Card or other payment methods, and the large amount of money that went missing.

So they also had that interest.

Mr Blake: How important was the benefits card aspect of the Horizon project in those early days?

David Sibbick: I think it was absolutely crucial, from the point of view of Post Office Counters. The great fear was that if too many customers – if they were forced to accept automatic credit transfer of their payments, would no longer go into Post Offices and, apart from withdrawing their money, actually spending their money on the private side of the shop, the so-called “footfall”, and I think this footfall aspect was hugely important to subpostmasters, to the National Federation of SubPostmasters, and the threat of ACT had some years earlier resulted in the National Federation organising a significant protest march down Whitehall, as I recall, from people not so much, I think, opposed to the idea of having to have their payments into bank accounts but the fear that they would lose their village shop or their corner shop, if they lived in an urban area.

I think, you know, this was the big concern, and why politically it was so important to have in place, if you will, trying to get away from the fraud-prone paper based pension books, and so on, to have something else in place, and the Benefit Payment Card was what they came up with to serve that purpose.

Mr Blake: Keith Todd, the former CEO of ICL, has given evidence that he didn’t expect the complexities arising from what he had thought were two aligned government entities, the Benefits Agency and the Post Office. How obvious would it have been outside of Government that there were these frictions between the Benefits Agency and the Post Office?

David Sibbick: Well, I don’t think it would have been evident to the general public necessarily, but I’m sure people who had any real involvement in either of these organisations would have known that this was, as I say, a long-running difficulty.

Mr Blake: The procurement process began in 1994. Were you involved in that at all?

David Sibbick: No, I was not. I was not. I knew that – I knew that it was going on but I wasn’t involved in any way.

Mr Blake: Were you aware that Pathway’s technical solution was the least preferred option of the three bidders?

David Sibbick: The Tom, Dick and Harry, as I believe it was referred to?

Mr Blake: Yes.

David Sibbick: Yes, subsequently, I was certainly aware that ICL Pathway had been accepted over the other two bidders, in part because it appeared that they were willing to take the biggest element of risk in the project.

Mr Blake: Were you aware that their technical solution was the least preferred of the three?

David Sibbick: I’m not sure that I was conscious of this. In the early days, I had no reason to believe that ICL would not be capable of delivering what they had contracted to deliver.

Mr Blake: We’ll come to work that was carried out in the summer of 1998 but, at the procurement stage or between the procurement stage and that period, were you aware, for example, that concerns had been raised about a system known as Riposte during the procurement stage?

David Sibbick: My understanding was that Riposte was something that emerged once it had been decided not to go ahead with the Benefit Payment Card. I’m not a computer expert, I’m not even terribly computer literate, but what I did understand and I understood from talking to senior people in ICL, that ripping out the Benefit Payment Card part of the system and replacing it with something else was absolutely a non-trivial thing to have to do and would require a lot of work in a certain amount of time.

To answer your question about Riposte, my understanding was that Riposte kind of emerged when you were looking at the, I think it’s called middleware or shareware, for the system going forward without the Benefit Payment Card. I wasn’t aware that it was, in any sense, an issue whilst the Benefit Payment Card was still the way forward.

Mr Blake: We will, in due course, come to some references to that system in 1998, so I don’t want to – I’ll take you to that.

Were you aware, for example, that the evaluation board had concluded that Pathway required a proactive management stance going forward from the procurement stage?

David Sibbick: I think probably not really. I had no reason to believe that the Pathway project was not being well managed until it emerged that it was running late and over budget, and so on, which was – I think the system originally went live in 1996 and it was in late 1997 that the two parties put Pathway into a position of “We can pull the plug on this now if we want to, we’ve got the right now to pull the plug it if we want to”. And, as I say, it was about that time that ministers got involved, because they could see – well, they could see a car crash coming.

Mr Blake: Let’s move to the spring to autumn of 1998 – you have dealt with that at paragraphs 15 to 17 of your witness statement – and the Horizon Working Group. Can you tell us why the Horizon Working Group was set up?

David Sibbick: Yes. First, there’s some confusion. There were two Horizon working groups. The first one was the sort of ministerial one, senior officials, and so on, with Adrian Montague’s technical group reporting to it.

There was a second group set up which, at the time, nobody could think of an original name to distinguish it from the first one, I suppose, but that was more to keep some of the other parties – so the NFSP, the CWU, and so on – to keep them involved. It was also thought that, because it was their members who were going to be using this system, that it would be a very useful body to monitor progress of the rollout once that had started.

So that had an ongoing role, if you like, the second one. It was chaired initially by Ian McCartney, I think, and subsequently by Alan Johnson.

Mr Blake: Yes, and I think you refer to them in your witness statement as the working group 1998 and the working group 1999?

David Sibbick: Yes.

Mr Blake: Let’s focus on the working group 1998 for now.

David Sibbick: Yes.

Mr Blake: Can we go to HMT00000034, please. Thank you very much.

This is the report that they produced in July 1998. Can you tell us the background to this report, please?

David Sibbick: Well, the background to it was to look at where the project had got to, what options there were moving forward, and to make sure, as well, through the technical subgroup that the technical aspects of it had been properly explored and properly understood by government.

Mr Blake: Can we turn to page 4, please. That’s internal page 3, but it’s page 4 on the pdf. Thank you. This is the “Summary and conclusions”, and I’m just going to read from 1.1. At the end of 1.1 it says:

“We were asked to consider:

“[First] whether the project is technically viable; and if so, how quickly it can be completed and at what cost to government;

“[second] the direct and indirect costs of cancellation and of any alternative available to deliver the project’s objectives.”

Then it says:

“We set up an Independent Panel of experts to address the first question.”

The independent panel of experts is the group that’s led by Adrian Montague; is that correct?

David Sibbick: That is correct.

Mr Blake: Thank you. Then can we look at, down the page to 1.4, please, these are the three options that this group set out at this stage, so the summer of 1998. Number 1 was “Seeking to continue the project”; and scrolling down, the second option would be to “[Reshape] the project by cancelling the Benefit Payment Card”; and the third option “Terminating the whole project”.

So those were the three options in play at that stage.

Can we look at the “Recommendations” on page 8, please, and it’s at the bottom of page 8. Thank you. So the recommendations, starting at 1.7:

“The Working Group, apart from the DSS and Treasury Social Security team, recommends that …”

Then over the page, thank you very much, first:

“in line with option 1, ICL Pathway should be given terms for continuing with the project …”

So essentially their first recommendation is continuation.

Then we see, for example, the third bullet point there:

“If ICL cannot accept these terms, or if the negotiations cannot be satisfactorily concluded within two months, Ministers should sanction the public sector parties withdrawing from the contracts on the grounds of ICL Pathway’s non-performance and we should implement option 3.”

So the options there are continuation, give them a chance, but if negotiations break down, withdrawal. Is that a fair summary there?

David Sibbick: Yes, it is.

Mr Blake: Thank you. Then below that at 1.8 it says:

“DSS recommend a similar approach with ICL, but based on option 2.”

So that’s option 2 was getting rid of the benefit card part of the programme?

David Sibbick: Continuing with the project but dropping the Benefit Payment Card, yes.

Mr Blake: Then it says:

“Treasury Social Security team prefers option 3.”

Option 3 being cancellation.

Now, DSS and Treasury Social Security team are quite significant parts of this working group, in that – who formed the working group? It was the DTI –

David Sibbick: No, it was set up by the Treasury.

Mr Blake: Yes. Yes, but it was the DSS and the Treasury Social Security team, and the DTI were presumably members of –

David Sibbick: Oh, yes.

Mr Blake: – the group?

David Sibbick: Oh, yes.

Mr Blake: Yes. So in other words, translating 1.8, the DTI agrees with continuation, the Treasury, save for their social security team, agree with continuation – you’re not so sure?

David Sibbick: I think the Treasury probably, at this point, were wavering. They appeared to start off being quite firmly opposed to the project and seeing, understandably, the benefits from ACT. I think they moved a bit, probably with the personnel involved, to, I thought, understanding the problems that cancellation would cause, politically, both in terms of the network of Post Offices but also the harm to the country’s industrial strategy, in particular the damage, possibly even bringing collapse of ICL, Fujitsu being a major inward investor, and so on, and I think those issues started to weigh a bit more heavily in some Treasury minds at least.

Mr Blake: So, at this stage, who is it that really supports option 1? That’s the recommendation of the group, but it seems as though, even at this stage, the DSS certainly don’t and the Treasury Social Security team don’t.

David Sibbick: Well, I think – I think the group didn’t succeed, if indeed it was even trying to do that, in persuading certain members of the group that continuation was not the best way forward. And this was the issue that was then – “fought over” is perhaps putting it too strongly – for quite a few months after that.

Mr Blake: The section on technical viability is on page 12, and can we have a look at that, please. If we could scroll down to the second half of that page, thank you. So it says:

“The Panel has concluded …”

Is that the independent panel that you mentioned before with Adrian Montague, or is that –

David Sibbick: Yes, I think that’s what it’s referring to.

Mr Blake: “The Panel has concluded that the project is technically viable, although there are some risks, in particular around:

“scalability and robustness. The programme is probably the biggest of its kind and the system has had to be tested at the level of its component parts. The Panel is satisfied these risks are being well managed by ICL Pathway, but they nevertheless remain.

“the system is (necessarily) heavily dependent on a third party ‘middleware’ product called ‘Riposte’. ICL Pathway have taken steps to cover their dependency on the project.”

So that’s where Riposte is mentioned.

David Sibbick: Yes, it is. It is, and I have to confess that I don’t remember Riposte being such a major part of the project at this stage.

As I said, I know it became a major issue when the Benefit Payment Card part of the system had to be – had to be removed and replaced with something else, but what we did know, I think, from Adrian Montague’s report, was that Riposte had been used by a number of other Post Offices, I think, and certainly other applications.

So they had reason to believe that it would be fit for purpose. I know that later on there was discussion way above my head, in terms of technical understanding, about Riposte and web-based Riposte and whether, if they adopted that, it would negate some of the features of Windows NT, which had hitherto been relied on to carry out certain functions, and so on. So I think it was not without some technical controversy.

Mr Blake: If we look below that:

“The Panel also believes that the basic infrastructure is very robust for the future and is generally based on industry standard products. It should therefore allow POCL to compete for new business in a variety of markets, and for example develop new applications based on smart cards …

“The Panel has seen no evidence to suggest that the systems being developed by BA and POCL to connect up to the systems being developed by Pathway will not work as required.”

Let’s look at the report itself. So that section is on “Technical viability”, and that’s the heading there, and what it’s highlighted is some risks around robustness, that’s that first bullet point, and also some concerns about the use of Riposte, albeit at 3.1.5 it says “the basic infrastructure is very robust”?

David Sibbick: I think it may well be that, if Riposte was a part of it at that stage, it was just, as it were, a standard industry application that was working perfectly well.

Again, my limited understanding was that the Benefit Payment Card was operated within the system on a kind of batch basis, so that the information would be – from it would be collected up at the end of the day and presumably consolidated, and then fired off back to the Benefits Agency or whoever, over lines that were leased or paid for much more cheaply than if you had the thing online all the time during the day.

I suspect that if we could think back 20 or 25 years, all of that would make a lot more sense than it perhaps would seem to today, when – but maybe you wouldn’t even consider these as problems.

Mr Blake: But you would accept that what’s in front of you is at least some concerns about robustness and dependency on Riposte?

David Sibbick: Yes, I would absolutely accept that.

Mr Blake: Perhaps we should look at the Montague report itself, which may assist to develop that further. Can we look at POL00028094, please. So this is the report. Can you tell us a little bit about the other author – in fact, all three authors? Who was Adrian Montague?

David Sibbick: Adrian Montague was the person who was in charge of the Government’s PFI initiative.

Mr Blake: And Bill Robins?

David Sibbick: I don’t know.

Mr Blake: I think he was head of the Northern Ireland Social Security Agency.

David Sibbick: Okay.

Mr Blake: And Alec Wylie?

David Sibbick: Again, I don’t know.

Mr Blake: He was Director General of Communications and Information Services at the Ministry of Defence. Does that help your recollection or not?

David Sibbick: Not really, I’m afraid, no.

Mr Blake: Do you know how they were selected for that particular project?

David Sibbick: How Adrian Montague was?

Mr Blake: Adrian Montague or all three of them.

David Sibbick: Well, I imagine Adrian Montague himself recruited those two people, I don’t know that.

Mr Blake: We’ll be hearing from –

David Sibbick: Yes.

Mr Blake: – Sir Adrian.

David Sibbick: Okay. Why Adrian Montague? Well, this was – Horizon was at that point a massive PFI scheme, so it’s not surprising, perhaps, that he was selected for that task.

Mr Blake: He wasn’t himself a technical expert, though?

David Sibbick: I believe not.

Mr Blake: No. You’ve said in your statement that ministers and officials were effectively reliant on these experts to inform them of technical issues.

David Sibbick: Yes.

Mr Blake: Was there a standing body of technical advisers within Government dealing with Horizon or was it –

David Sibbick: No.

Mr Blake: – reliant on reports such as this?

David Sibbick: It was reliant on reports such as this. What I would say is that I know that the Post Office itself had an IT department headed by – I can’t remember his name but I believe he was very well respected within the IT industry, and I’m sure the Benefits Agency, likewise, would have had their own technical expert. So it’s not that the project lacked technical people looking at it, and evaluating it.

Mr Blake: Was Government therefore dependent on what they were told by the Post Office?

David Sibbick: Dependent what we were told by the technical subcommittee. They were – they were there to provide technical expertise to all the government parties involved equally, rather than each of us trying to set up our own expert and have experts layered on experts layered on experts, and so on.

Mr Blake: Can we look at page 3 of this document, which provides the “Executive Summary”. The third bullet point under “Background” reads as follows:

“In the light of concerns over progress, this Panel, chaired by the head of the Treasury Task Force on Private Finance, was set up to make an independent assessment of whether the programme was technically viable, if so how quickly it could be completed and at what cost.”

Is that your recollection of its purpose?

David Sibbick: Yes, it is.

Mr Blake: The issue, it seems, from the third bullet point, is one of viability rather than, for example, reliability. Would you agree with that, at that stage, in 1998?

David Sibbick: Yes, given that that was a finding of the technical committee.

Mr Blake: Yes. But the focus, the word that we’ve used, we’ve heard, both from the overall working group report and from this report, is one of “viability”.

David Sibbick: I think what was meant by that was technical viability.

Mr Blake: Yes.

David Sibbick: There were financing issues, of course, and they come up a bit later on in all of this but I think at this point one is talking about technical viability: will the system work? Will it do what it’s supposed to do?

Mr Blake: Peter Copping of PA Consulting has given evidence to this Inquiry, and he has described the task that he was asked to carry out for this expert panel as “calibrating the art of the possible”, rather than looking at, for example, technical faults and defects. Would you agree with that?

David Sibbick: Well, that was his view. I mean, I have no real basis for challenging that but what we – what Government needed was advice on whether this thing can be made to work and do the job that it was – that it was set up to do.

Mr Blake: Would you accept that it wasn’t a report that addressed, at a very detailed level, issues such as technical faults and reliability of the system?

David Sibbick: When I read the report of the Adrian Montague group, it looks to me as though it does go into quite a lot of technical detail, and I imagine they drew on whatever they needed to draw on to come up with that.

I think it was quite reassuring and I don’t think it was kind of deliberately slanted because that’s what ministers or anyone else wanted to hear.

Mr Blake: Perhaps we can look at the “Findings”. If we look at the second finding there, the second bullet point, it says:

“Our view is that the programme is technically viable. There must be some risk around scalability and robustness because the system has had to be tested at the level of component parts, but we are satisfied these risks are being well managed by Pathway.”

So their view being expressed there is that the programme itself is technically viable, albeit there are risks with regard to scalability and robustness. Is that a fair reading of that finding?

David Sibbick: Yes, I think – I think that is exactly right. If there was – if there were issues around testing, and those later on as well, I think it was around the fact that this is an immense project, in terms of the numbers – 20,000 post offices, 40,000 counter positions, if I vaguely remember the numbers – and I would have thought anything that you tried to put together, you can test in a much more limited environment, but you don’t know what’s going to happen when you roll it out at that sort of – at that sort of scale.

And I wonder whether the testing that was done at the end, after the Benefit Payment Card had gone from the system, whether that was sort of tested at sufficient scale, I don’t know. I seem to remember seeing bits of paper around the place where people were expressing concerns that it hadn’t been.

I think some of these pieces of paper came from the National Federation of SubPostmasters, where members who had early experience of the system were finding all sorts of bugs in it that they were reporting upwards.

I don’t think it’s surprising that there were such bugs. My understanding of the way these huge systems work, whether they’re the bank’s systems or government systems or anything else, you know, there will be bugs, and the issue is whether they can be identified quickly enough and whether they can be put right quickly enough.

Mr Blake: Is that kind of analysis, I think your view is that that should take place towards the rollout stage or later down the line than, for example, 1998?

David Sibbick: I think, I think what I’m saying is that you need to test the system at all stages but when it’s kind of complete, when you’re about to push the button and roll it out to all of these post offices, you do want to make sure, I would suggest, that you have tried to test the thing at scale as thoroughly as you possibly can.

Mr Blake: Looking again at that second finding, where they say “There must be some risk around scalability and robustness” –

David Sibbick: Yes.

Mr Blake: – would it be fair to say that the expert report wasn’t finding the Horizon system at that stage as robust, that wasn’t a finding that they were making? I will out of fairness take you to the next paragraph, which does say – I’ll read that:

“There is good evidence of future proofing at all levels. The basic infrastructure is very robust for the future and, in the main, industry standard products have been used. The system who allow POCL to compete for new business in a variety of markets, including banking and financial services. New applications based on smartcard technology should be relatively straightforward and economic. If online applications are required, they may take longer and require more investment.”

So looking at those two paragraphs –

David Sibbick: Yeah.

Mr Blake: – is a fair summary that, in terms of the actual working of the Horizon system, there are certainly risks around robustness, the basic infrastructure itself is robust, very robust for the future, but there are undoubtedly risks with regards to scalability and robustness of, for example, the software that it would use?

David Sibbick: Yeah, I think that’s what I was probably rather inadequately trying to express, that the system had been tested – I won’t say in the laboratory, because obviously it was a lot more than that. The system had been thoroughly tested and all the bits were shown to work, and so on, but, when you start rolling it out into the real world, you are bound to get problems coming up with it. I think the final sentence of that “If online applications are required, they may take longer and require more investment”, and that was also very much my understanding, that it’s one thing to take the Benefit Payment Card out of the system, though you still need to test how it works, sort of, without that, but what you need to replace it with is smartcard technology and that – that still had to be developed.

That was a bit of an un – as I understood it, that was a bit of an unknown at that time and ICL, I think, recognised that there was actually quite a lot of development work still to be done on that.

Mr Blake: Would you accept that those two paragraphs there are not signing off Horizon as being robust?

David Sibbick: I think it’s signing it off as being robust, as far as they had got. But it wasn’t finished. There was more to be done, and then the scalability thing was always going to be – have a big question mark over it. You know, would it really work at – I think it’s something like 40,000 counter positions. So you then have not just issues about the system itself but about the training to use it, whether it’s easy to use, whether some 80-year old subpostmistress in the Orkneys is going to easily get to grips with that technology. And I can feel for the poor lady, because I wouldn’t be very good at it either.

Mr Blake: I think your evidence is that it was saying that it was sufficient at that stage but there were undoubtedly risks with regards to scalability, for example?

David Sibbick: Absolutely, and possibly not just scalability. What I recall was that, at the end, in a big rush after it had been decided to drop the Benefit Payment Card, the system had to be adapted to work without it and perhaps, as far as possible, to make provision for things to be added later on, and there was then a lot of – I don’t like to use the word “pressure” because it sounds as though somebody is sort of breathing down their necks and saying “Get on with this”.

The pressure came from the political decision to finally agree that the Benefits Agency could start rolling out their ACT solution from 2003, which was not a very long way ahead, given the time it takes for all of these things to work through.

So that was, that was, if you like, the pressure to get the system done and rolled out. Of course, it wouldn’t have been accepted by POCL, if they thought there were major flaws with it. I remember there were a couple of flaws identified at the very end, just before the sign-off, and they were put right and they were tested and shown to be okay, so that POCL was satisfied with that, and then they wrote a rather large cheque.

Mr Blake: We’ll get to all of that probably this afternoon, but I’m happy to stay with it briefly now. Is it therefore your view that, ultimately, Horizon was rushed out after the Benefits Agency pulled out of the project?

David Sibbick: I don’t like to say “rushed out”, because that sounds like it was just kind of “Get it out of here, willy-nilly”. I don’t think it was that at all. I do think there was a lot of pressure, a lot of desire on the part of the Post Office to get this thing moving because, if you sit around too long you’re not going to get it all sorted by the time ACT comes along, and you want to get it out there and in use in order to persuade banks and other organisations to start using it because, apart from anything else, you’re going to need additional revenue streams when the amount that the Benefits Agency is asking you to do is reduced and, therefore, the amount of income you get from that is reduced.

Mr Blake: Thank you.

Returning to the findings, can we just scroll down a little bit, please. Thank you. So it goes on there:

“A further nine months delay to the programme is our best forecast, with September 2001 for national rollout completion. Critical path issues will have to be resolved fast to make this possible, and the date could be brought forward with commitment and goodwill on all sides.”

Perhaps that gives an indication as to the time pressures that may might be involved –

David Sibbick: Yes, yes.

Mr Blake: – in rollout, even at that stage, while the benefits card system was part of the project. Do you agree with that?

David Sibbick: Yes, I think so.

Mr Blake: Moving down to the bottom of that page:

“Driven mainly by timetable slippage, the sponsors’ business cases are eroding. The direct cost of delay is estimated at £180 [million], over half of which falls to the sponsors. Potential savings from fraud reduction would also be delayed. Pathway, on the basis of the figures it has provided, would make an overall loss if the contract continued on its present terms and would require an extension to break even.”

So, I mean, perhaps even in the summer of 1998 there seemed to be significant time pressures to complete the project?

David Sibbick: I think that’s right.

Mr Blake: Can we go over the page, please.

David Sibbick: We say “time pressures”. I mean, the pressures came, at least in part, from the fact that all the disadvantages of the situation, as it was then, were costing everybody money. You know, “We can’t sit around and just let this thing kind of bleed to death and us bleed to death with it”.

Mr Blake: Then the report suggests a “Possible way forward”, and it says, for example, in the first bullet point:

“Although the parties did not … agree, we believe that a restructuring of the full programme could offer … a way forward.

“The restructuring would extend the use of the card beyond the current contract end date. BA and POCL would prepare for a rapid increase thereafter in benefit payments via the banking system … POCL could by then be ready to offer a competitively priced service for customers who still wished to use post offices for access to cash in this new environment. Pathway would be closer to recouping its investment.

“A second option [so this is the alternative], less risky in programme management terms, would be to descope the programme by stopping the Benefit Payment Card, while still allowing time for BA and POCL to prepare for ACT.”

So what were the proposals being put forward by the expert group at that stage?

David Sibbick: Well, as I understand that, what they’re saying was “We could propose going forward, still on the basis of the Benefit Payment Card, for a limited period and then to have to switch over”.

The alternative that they were proposing, I think, was, well, the one of scrapping the Benefit Payment Card and then trying to move forward without it, until such time as an alternative can be – can be developed.

Mr Blake: Can we turn to page 11, which sets out some of the problems that had been identified by the expert panel. It’s paragraph 22 that I’d like to look at.

So it says there – I’m going to read it just for the purposes of the transcript:

“However there remain problems and difficulties in formally signing off requirements and solutions so that delivery dates can be planned and agreed. For example:

“there is not yet a stable baseline requirement formally agreed by all parties on which plans and key milestones can be agreed;

“the parties have yet to sign off proposals to descope Release 2 … in New Release 2 … a partial solution ready for the start of national rollout and New Release 2+ … the full solution to be available later;

“there is no agreed Acceptance Plan or timescale for acceptance, which puts at risk the timetable for contractual acceptance of the system;

“there is no consensus on the length of Model Office testing, live trial … and the contingency to be allowed;

“there is no agreement on the rate of rollout, or ‘beat rate’;

“there are no agreed timescales for change control decisions;

“version 4 of the Master Plan … has not been signed off and there is no formal agreement about the conditions for deciding that rollout has been completed; and

“hence the dates proposed for the start of live trial and rollout to all 19,000 post offices are at risk.”

Over the page, please, to paragraph 27, this is again a mention of the Riposte concerns, it says:

“Although we believe the architecture to be viable, there is a concern that the system is (necessarily) heavily dependent on the third party middleware product ‘Riposte’. This risk will persist and steps must be taken to manage this risk over the operational lifetime of the system (in addition to those steps already taken in the development stages by ICL and Pathway). If, as is confidently predicted by ICL [and I think this is a point that you were making earlier] by ICL, this product becomes a Postal industry standard, this risk is significantly mitigated. Pathway has also taken steps to cover their dependency on Riposte by holding a copy of the source code and by training their staff in its use.”

Now, again, those passages that I’ve just mentioned, there are certainly risks that are being highlighted with regards to the Horizon project?

David Sibbick: There certainly are, yes.

Mr Blake: Do you know how your Department envisaged that monitoring would take place with regards to the operational lifetime of Horizon?

David Sibbick: I don’t think that we had any plans to closely monitor this on a day-to-day basis. Horizon had become a political issue, with ministers involved, and ministers were just concerned to get a solution. We were not concerned to stand over the thing and try to see whether each individual little bit can get properly resolved. We just wanted to know whether what ministers had agreed to could be delivered in time and, if it couldn’t, then it comes back for some decisions on what we do in those new circumstances.

As far as we were concerned, all of these things here – and I agree there are quite a lot of them – were for the parties involved to solve, and they were not saying to us that those issues could not be resolved. They’d been flagged up as things that needed to be put right.

I, again, find this reference to Riposte a little confusing because, if it had always been part of the system, then I’m not sure what the – what the issue was.

I knew that it needed to become part of the system in order to allow the functionality that POCL wanted to see for the future.

Mr Blake: I mean –

David Sibbick: If I’ve got that wrong, then I apologise.

Mr Blake: No, I mean, sticking with Riposte, we know, for example, that there was a known bug identified later on, that we refer to as the Callendar Square bug, 2000 and onwards.

Was there anyone in Government tracking these kinds of issues that were highlighted in this report?

David Sibbick: I’m not aware that there was anyone in – certainly in DTI, I don’t know what DSS were doing, but not tracking it on a sort of day-by-day, issue-by-issue basis.

Mr Blake: Because a report of this kind, it provides a snapshot in time, doesn’t it?

David Sibbick: Yes, it does.

Mr Blake: I think you’ve said that you would have relied on the Post Office to have followed these kinds of matters forward?

David Sibbick: Er –

Mr Blake: The highly technical matters that –

David Sibbick: Well, I’m sure that, if highly technical matters looked as though they could be showstoppers, then they would have been escalated up within the Post Office. But the Post Office is, as you know, a very big organisation and lots of different bits and functions of it, so I don’t think the board would have seen – seen it as its job to follow these issues on a day-by-day basis to make sure that they were getting resolved. Like us, they would want to know whether everything is going to be okay to go ahead.

Mr Blake: I’m going to move on to November 1998. Can we look at BEIS0000181, please. Are you content? We do usually take a morning break. We’ve started quite late today. Are you happy to –

David Sibbick: No, I’m content to go on if that’s what you wish to do.

Mr Blake: Please do tell me if you would like to at any stage though.

David Sibbick: Thank you.

Mr Blake: So let’s look at this document. One thing that you’ve also referred to in your witness statement is a KPMG report addressing technical issues, and I just wanted to cover that off as well.

Do you recognise this document? I think it’s an annex to a ministerial submission.

David Sibbick: Yes. Yes.

Mr Blake: It talks there of the three options: option 1, continuing with Horizon; option 2, continuing with the project minus the benefit card; and option 3, cancellation of the project.

Can we look at page 3, please. Option 2 is the continuation minus the benefit card, and it says there:

“KPMG have confirmed that Option 2 is technically and commercially feasible.”

Again, similar to the kind of language that we heard from that expert’s report: feasibility, viability. Do you consider those similar terms, that the experts there are looking into feasibility rather than, for example, reliability?

David Sibbick: That might be a better word, yes.

Mr Blake: Would it be fair to say that the focus of the Government at this stage, at that time, was whether the project was possible rather than whether it would be, for example, reliable?

David Sibbick: Of course, we would want to see that it was – that it was reliable. It was going to be responsible for making an enormous number of, if you like, state payments or benefits to a great number of people living all over the country, and it needed to work, it needed to be reliable, it needed to be relatively easy to use.

Mr Blake: But we saw the task that was set for the independent group was whether the system was viable. If we look at some of these KPMG documents we can see there that their task was whether it was feasible.

Do you see the difference between that and asking somebody whether the system is reliable or to analyse and assess the reliability of the system?

David Sibbick: I think – of course, the – of course, financial issues came into all of this, but I don’t think, in the context that we’ve discussed so far this morning, we were talking about anything other than whether the system could work.

Mr Blake: Can we look at BEIS0000179. This is another document that describes the work that KPMG were carrying out. I think you wrote this ministerial submission –

David Sibbick: Yes, looks like it.

Mr Blake: – to the Secretary of State. This is 6 November 1998.

It’s over the page, please, paragraphs 5 and 6, which discuss, to some extent, KPMG’s role. It says there:

“To assist with the first strand of work, the negotiations between BA/POCL and ICL, Graham Corbett, Deputy Chairman of the MMC and former Finance Director of EuroTunnel was appointed to chair the negotiations. KPMG were appointed to assist him, particularly in understanding and validating the business cases of each of the contracting parties.”

Then the next paragraph:

“KPMG were also asked to undertake a major piece of work on the second strand of activity, that of enabling value for money comparisons to be made between the three options.”

It may assist if I take you to one further document that relates to KPMG and that is HMT00000005. This is a KPMG report or interim – I think it’s a progress report, and perhaps we could – I think you’re named there as one of the recipients – just scroll to the final page of that, page 5. It again addresses “Option 2 viability”, and it says:

“Having examined the high level architecture of ICL Pathway it would appear that Option 2 is technically feasible. Indeed Pathway are actively marketing the system to overseas post offices, without the Benefit Payment Card.”

Again, I think that’s something that you mentioned earlier, that it was being used abroad in other post offices?

David Sibbick: Riposte.

Mr Blake: Riposte?

David Sibbick: Yes.

Mr Blake: Again, there we see reference to technical feasibility and –

David Sibbick: Yeah.

Mr Blake: – KPMG having examined the high level architecture. Did you understand anybody to be producing, at that stage, a report that went into the detail of, for example, bugs and errors or technical concerns about reliability?

David Sibbick: I don’t think so. Here we have moved on, apart from the high level architecture bit, we are here talking about financial viability of the project and whether the financial attributes would – could be made to be acceptable to ICL and to the Post Office. So now, I think, Mr Corbett was brought in and KPMG, to look at these things, because now we’re kind of moving more towards “We think we know where the system is going in a physical sense, now does it make commercial sense, can it be made to make commercial financial sense?”

Mr Blake: One thing that KPMG has looked at is the high level architecture –

David Sibbick: Yes, yes.

Mr Blake: – and it said that it’s technically feasible?

David Sibbick: Yeah. Again, they believe that it’s technically sound and can work.

Mr Blake: I suppose “technically sound” may be different to “technically feasible”, and I think the point I’m really making is: at the DTI, were you interpreting these reports as signing off the Horizon system?

David Sibbick: No.

Mr Blake: No?

David Sibbick: No, I don’t think so. I think we were reassured by these reports that there was something there that could be made to fulfil the functions that we needed from it. I don’t think at any stage we were saying “Oh, okay, this is now an absolute done deal, it’s a masterpiece, it will work, no problems with that, we can forget about that entirely”. But I think these reports were giving us reassurance that the thing was going in the right direction and could continue to be made sound in wind and limb.

Mr Blake: Albeit subject to the risks that we’ve seen identified in the experts’ report?

David Sibbick: Absolutely, absolutely.

Mr Blake: Can we look at a document from December 1998, and that is at CBO00100001_072. This is a document that I’m afraid we have only sent you quite recently. Have you had a chance to have a look at that?

David Sibbick: I’ve sort of skimmed it, yes.

Mr Blake: It’s a letter or a note to the Prime Minister from Geoff Mulgan. Do you remember who Geoff Mulgan was?

David Sibbick: Er …

Mr Blake: I think he was a special adviser to the Prime Minister.

David Sibbick: I think he was a special adviser to Lord Falconer.

Mr Blake: Thank you. Would you have seen this document at the time?

David Sibbick: I would expect to have done, yes.

Mr Blake: I’ll just read the underlined part of paragraph 1:

“A decision now needs to be taken on whether to proceed with the Horizon project.”

Can we go over the page, please. I’m going to read paragraph 4 in its entirety for the record. It says:

“However, the decision is not clear cut. The problems that have beset this project may well continue; continuation would lock the government in for 10-12 years to what many see as a flawed system; cancellation on the other hand would enable the Post Office to take advantage of newer, cheaper or more flexible technology, while the DSS could move rapidly to paying benefits into people’s bank accounts. Cancellation would also release around £2-3 [billion] over the next decade to be spent in other ways to support and automate the Post Office.”

Paragraph 6:

“in making a judgement, the following issues are paramount …”

It’s that first bullet point that I want to focus on. It says:

“The virtues of the project itself: overall, Horizon, now looks increasingly flawed. It is centred around a technology, the Benefit Payment Card … that is both overengineered – and very expensive – and likely soon to be obsolete. Indeed, ICL acknowledge that the [Benefit Payment Card] will have not commercial value to them at the end of the project. Although they remain underdeveloped, the alternatives, which involve simpler off-the-shelf banking technology, look increasingly attractive, offering a route to universal banking, automated post offices and better provision of government information.”

Were you aware at that time of the suggestion that the technology had been overengineered?

David Sibbick: I don’t – I don’t know exactly what is meant by that. I’m sure that ICL would have wanted to do everything that they could, to put everything that they could into the system to make sure that when it was rolled out in these huge numbers that it would – that it would all work. You can look at it afterwards, I suppose, and say, “Well, you didn’t really need to go to quite these lengths, look, it works an absolute treat, nothing ever goes wrong with it, you could have cut some corners, you might have had one or two things – one or two things being thrown up, but it would have been good enough”.

I think the – in a way, the way that I – that I read this, this whole piece, is that it would be so much easier if we weren’t starting from where we are starting. If we could start with a clean sheet of paper, life would be so much simpler. But the point underlying it all was: but we’re not starting with a clean sheet of paper, we’ve got ICL involved in a major, major project, the collapse of which would be – have serious implications, as I’ve said, for them, for Fujitsu, for inward investment, for the Private Finance Initiative, and so on, and what do you do about the whole thing of the Post Office Counters Network?

So I understand absolutely what this is saying. My reaction to it is: yeah, but we’re not starting with a clean sheet of paper, we’ve got what we’ve got and we probably need to try to make the best of it.

Mr Blake: Could we go over the page, please, to paragraph 7. In fact, it may be over two pages. Thank you very much. It says there:

“Departments remain divided. Alistair Darling remains strongly opposed to continuing. Ian McCartney for DTI will argue strongly for accepting a deal (Peter Mandelson has largely kept out of the discussions). The Treasury is divided at official level, but Stephen Byers will probably, on balance, want to accept the deal for pragmatic reason, even though he would prefer to cancel.”

David Sibbick: Yes.

Mr Blake: Is that an accurate reflection of the respective positions at that stage?

David Sibbick: I think absolutely so, yes.

Mr Blake: Then moving on to the next paragraph:

“At first glance, most of the factors point towards continuation. However my view, which Lord Falconer broadly shares, is that although short-term considerations and expedience point strongly towards making a deal, this will in the [long term] prove unsatisfactory, leaving the Post Office and government dependent on a hugely expensive, inflexible, inappropriate and possibly unreliable system.”

Do you know where those concerns about reliability came from?

David Sibbick: I suppose they came from some of what we’ve seen, that there are risks attached to – to all of this, and the Benefits Agency, which is – which was much closer to the project than we were, for example, had, I think, increasingly cast doubts on ICL’s ability to deliver that. They didn’t want the project from the word go. So they were always rather hostile to it and I’m sure that they would have interpreted a lot of these caveats that we’ve seen as, “Well, look, look at all this, look at all this, it’s going to be awful, isn’t it, and, at the end of the day, we would have spent a huge amount of money and we won’t actually have achieved our longer term objectives with it”.

Mr Blake: If we go to the final page, there are some handwritten notes. Now, we have a statement from Sir Tony Blair now and his statement can be found at WITN06080100. I’m not going to bring it up on screen but that’s just for the record and so that it is in evidence.

Sorry, could we go to the page before as well, which is where the handwriting starts. I can read you, he has typed out this handwriting, just in case you can’t read it?

David Sibbick: I think I can, in fact, read the handwriting.

Mr Blake: Well, I’ll read you his interpretation of it. It is:

“I would favour Option 1 but for Geoff’s statement that the system itself is flawed. Surely there must be a clear view on this. Speak to me on that, ie reading the enclosed paper, it all focuses on the financial deal but there the risks are pretty even, probably coming down on the side of continuing. The real heart of it is the system itself.”

David Sibbick: Yeah.

Mr Blake: Now, the message seems to be getting there to the Prime Minister that the system itself has flaws or it is flawed. Where would he be getting that information from? Is that also – I mean, I suppose that’s from the author of this letter –

David Sibbick: Yes.

Mr Blake: – who you’ve said has received it likely from the DSS. Is that a fair analysis of what’s happened –

David Sibbick: Yeah, I don’t – I mean, I think it’s a fair – a fair statement of where, you know, where they were coming from, and I don’t think I disagree with very much of what’s said. But all of that, in the end, had to be tempered by the political damage on the other side of cancellation.

Mr Blake: Thank you.

Those kinds of concerns, though, about the system being flawed, don’t seem to appear to be articulated in DTI correspondence. Do you think that’s fair, from what you’ve seen of the submissions and the letters at the time?

David Sibbick: Well, a lot of the technical reports, and so on, were appended to briefing. I don’t think that we were trying to frighten ministers with some of the things that could go wrong. I don’t think either we were implying that everything is okay and all you’ve got to do is take a decision and everything will be wonderful. And I think that our ministers, like other ministers, were very well aware of the pressures that were increasing, almost day by day, that some decision wasn’t taken and something moved forward.

I mean, it had just kind of got stuck in the mud, as it were, and all of that time – I can’t remember what the number was – but several million pounds a day were being thrown away.

Mr Blake: Because of its commitment to the project and to that option 1, do you think that the DTI shied away from highlighting those kinds of problems at that time?

David Sibbick: It’s possible that we were misinterpreting the gravity of, of some of these things. But I don’t think we were any more biased one way or the other than the technical reports that we were receiving.

Mr Blake: Can we look at BEIS0000418, please. This is a letter from Peter Mandelson, who was at that time the Secretary of State –

David Sibbick: Yes.

Mr Blake: – to Stephen Byers, who was the chief secretary to the Treasury. Would you have drafted this kind of letter?

David Sibbick: Probably.

Mr Blake: I’m going to read the first paragraph. It says – can we just scroll down slightly, thank you:

“I was disappointed that our meeting yesterday was again unable to reach a clear decision on the way forward for the BA/POCL automation project. The continued uncertainty is becoming increasingly damaging for all the parties concerned. As I see it, the choice is a straightforward one:

“to continue with Horizon, we will need to secure heads of agreement. Within two to three years Horizon will have equipped the Post Office with a modern IT system, capable not only of handling the Benefit Payment Card, but also front-end banking facilities in conjunction with the commercial banks. This will help us to implement our social banking policies, and to bring modern electronic government into communities which other organisations simply do not reach.”

So a positive result of Horizon being implemented, or suggested quite considerable benefits from Horizon.

David Sibbick: That such benefits could and should flow from proceeding with Horizon, yes.

Mr Blake: Then the next bullet point, quite a bleak picture is painted:

“or we can take a major step into the unknown, delaying the modernisation of the Post Office Counters network, risking the departure of existing clients and virtually eliminating the possibility of attracting new ones. The damage to the confidence of subpostmasters and the knock-on effect of network closures will produce political fallout, no matter how carefully we try to handle it. The reduction in the network will reduce our ability to extend social banking and modern government into the very communities we most wish to target. Our relations with Fujitsu, a major inward investor into the UK over the past decade, would be severely damaged, as would the credibility of PFI.”

Those are some of the things that you’ve been telling us about this morning. Would you accept that quite a bleak picture is being painted there?

David Sibbick: Well, I think, I think what that was – what this letter was doing was countering the letter from, was it Alistair Darling or Geoff Mulgan or someone, who seemed to be painting a very, very different picture from the one that we were interpreting from the evidence that we had.

Mr Blake: Can we go over the page, please:

“There is still some way to go to complete the Horizon project, but the basic development work has been thoroughly evaluated by independent experts …”

Can I pause there: is that a reference to the expert group that we’ve seen?

David Sibbick: Yes, it is, and I think the point there is that those experts were saying that the basic development work was robust, because it hadn’t really moved much beyond that at the point that they were looking at it. So they were saying that, if you like, the nuts and bolts – or the electronic equivalent of nuts and bolts – you know, they all look the right ones and put together in the right order, in a way that would work and work reliably.

Mr Blake: So I’ll just read the whole of that sentence. It says:

“… the basic development work has been thoroughly evaluated by independent experts who have pronounced it viable, robust and of a design which should accommodate future technological developments.”

Do you think that fairly and accurately reflected what the independent group had found or do you think it was painting again a slightly rosy picture?

David Sibbick: I think so, I mean, the technical group and other people accepted that the system, if it was going to do proper smartcard functions, would need further development work but the – if you like, the architecture of the whole thing looked as though it was suitable for those adaptions, when they came along.

Mr Blake: Could we bring on screen, perhaps alongside this document, a document we’ve seen, it’s POL00028094, and it’s – thank you. That’s the report. If we could look at page 3 of the report, thank you, and if we scroll down slightly, thank you, so this is where it says:

“Our view [of] the programme is technically viable. There must be some risk around scalability and robustness because the system has to be tested at the level of component parts.”

Do you think that that is fairly reflected in the statement that it is viable, robust and of a design that should accommodate future technological developments?

David Sibbick: I think it broadly is, yes. I mean, this says that – technically viable, the system has been tested at the level of component parts. So the basic bits of it, which is what they had at that time, they kind of signed off as being fit for purpose. But it doesn’t in any way, shape or form say that, you know, this means that the whole project, when it’s completed, will be absolutely fine. It says, “As far as it’s got, when we’re looking at it, it looks good to us”.

Mr Blake: One of the things that the Inquiry is trying to establish is where this term “robust” comes from and it’s a phrase that we’ll then see in quite a few documents from the DTI.

David Sibbick: Yes.

Mr Blake: Do you think that, effectively, shorthand has been used there to describe a much more complex problem, or a much more complex issue?

David Sibbick: Well, I’m sure robust doesn’t mean it’ll bounce if you drop it on the floor; it’s not that kind of robustness. I think what it’s saying is the way that it’s being built and put together should mean that, in use, in the way that it’s likely to be used, it should stand up to the task being asked of it.

Mr Blake: Do you think that the risks that were highlighted by the independent group should have been highlighted in this kind of correspondence, the risk to robustness that they identified?

David Sibbick: Yes, as I say, I don’t think they were trying to say everything is perfect, what they’re saying is “We’ve looked at it and, as far as we can see, it looks at this stage to be okay”. They’re not saying “We’re absolutely certain that it’ll be okay when more work has been done on it”. At this stage it looks – it looks good, or good enough.

Mr Blake: Moving on to the next paragraph, it says:

“I believe the only sensible choice is to proceed with the Horizon project. It is the way forward which offers the least commercial and technological risk.”

Do you know where that came from, that it offers the least technological risk?

David Sibbick: No, I think that what – what it refers to, or what it’s trying to refer to is, if you cancelled the project and you had to start from scratch again, you would be – because you’ve then got nothing, you don’t know whether something else could be developed that would be that much better. I mean, you know what you’ve got, you don’t know what you haven’t got. It might be wonderful, it might be rubbish.

Mr Blake: At that stage, you were aware that ICL Pathway, out of the three bidders, for example, posed the highest technological risk?

David Sibbick: I didn’t know at the time, I was not involved in that at the time. I’ve subsequently learned that the parties had chosen ICL Pathway because their proposal meant that ICL would be carrying the greatest risk, was my understanding of the –

Mr Blake: I mean, do you think in December 1998 the Secretary of State, or those in high levels within the DTI, would have been aware that Pathway, in fact, had been found to pose the highest technological risk at the procurement stage?

David Sibbick: Probably not.

Mr Blake: Do you think that these kind of –

David Sibbick: I don’t know what DSS ministers would have known from the Benefits Agency, but I don’t think that was anything that was ever brought to our attention at the time.

Mr Blake: Do you think that Peter Mandelson in this letter, having referred to the system to be “viable, robust and of a design that should accommodate future technological developments”, and also highlighting that it offered the least technological risk, do you think that was trying to spin it a little bit and sound a bit positive in order –

David Sibbick: I don’t think the technological – least technological risk was spinning it. I think if you were to throw away Horizon and then go out into the marketplace and try to get something else, you don’t know what you would get. So there would be a much bigger risk around that. I’m not suggesting that you might not find something better, but there’s a risk that you would find something worse.

Mr Blake: It wouldn’t have posed the least technological risk, though. I mean, having nothing poses the least technological risk, doesn’t it?

David Sibbick: It poses the least technological risk but an enormous, enormous political risk.

Mr Blake: Yes, but do you think the phrase there “least technological risk” was really trying to make the risks involved in the project seem less than they were?

David Sibbick: No, well, I hope it wasn’t interpreted like that, it wasn’t intended to mean that. What it was intended to do, as I’ve just said, is to say “Well, we’ve got something that we know here – we think, not that there are no problems with it or no technological risks left, but we think that it’s going to be okay; if you start from scratch again, that could be a greater risk”.

Mr Blake: Before we break for lunch, can we look at CBO00000009, please. Now, this is a letter or a note from Jeremy Heywood, it is effectively the response from the Prime Minister to Geoff Mulgan’s note that we saw earlier.

David Sibbick: Yes, yes.

Mr Blake: I’m going to read that second paragraph, it says:

“The Prime Minister was concerned about your view that the Benefit Payment Card is over-engineered and is likely soon to be obsolete. His clear preference would be to avoid cancelling the project, but to go for a variant of your Option 1 and Option 2. We should retain the [Benefit Payment Card] but seek to ensure that over time it delivers real benefits and provides an effective transition path to a satisfactory long-term position. If necessary the Prime Minister thinks it may be sensible to give ICL a financial incentive to improve the [benefit card] project in this way.”

So this is just a few days after that letter from Peter Mandelson, again being quite frank about the overengineering and likely to be soon obsolete aspect of the benefit card payment aspect. Was there a feeling in the Department for Trade and Industry at this time that those kinds of issues just shouldn’t be mentioned, or should be underplayed?

David Sibbick: Sorry, I’m not quite sure I understand.

Mr Blake: So we have, at exactly the same period as we have that Peter Mandelson letter –

David Sibbick: Yes.

Mr Blake: – where again it’s referring to the issues that have been highlighted by Geoff Mulgan about the overengineering.

David Sibbick: Yes, yes.

Mr Blake: I think his letter also referred to reliability problems. That seems to be quite frank about those problems.

David Sibbick: Yes.

Mr Blake: Was there a lack of candour about those kinds of issues arising from DTI correspondence on these issues?

David Sibbick: Er …

Mr Blake: Again, were the DTI underplaying the technical concerns, were they minimising them?

David Sibbick: Certainly – they certainly weren’t trying to talk them up. I’m quite certain of that. I don’t think we would have argued that the Benefit Payment Card, in the light of developments in the marketplace since the project had been started, has turned out to be the cleverest choice that could have been made, but – I come back to this point again – we’ve got what we’ve got and we need to try to make the best of it.

So you had an option of taking the project forward, I mean, if you didn’t want to abandon the – if you didn’t want to abandon Horizon and, as it were drop, ICL off a very high cliff, so you want to continue with ICL, so you have a choice of doing it with the Benefit Payment Card where, in a sense, the longer you stick with it the more you’re investing in a technology that you know is not really going to be fit for purpose a bit further down the road, or do you drop the Benefit Payment Card at this point and say “Right, we’re now going to have to find something quickly that will serve for the future”, some form of smartcard.

But I think we all – we would have all agreed that the Benefit Payment Card was not the best choice that could have been made, in the light of experience.

Mr Blake: Do you think that the DTI and the DSS were so fundamentally locked into their positions that, effectively, the DTI was supporting Horizon at any cost?

David Sibbick: Well, I don’t know, I don’t know “at any cost”. I certainly think that we understood the major, major problems that would arise from scrapping Horizon, as I said, for ICL, for the Post Office Counters Network, and so on. So I think we were very solid, if you like, on the right answer – maybe wish we didn’t start from here, but the right answer, given where we are, has got to be to stick with this thing in one form or another.

Mr Blake: Thank you very much.

Sir, I think that might be an appropriate time to break for lunch.

Sir Wyn Williams: All right, that’s fine by me.

Are we on schedule to finish Mr Sibbick at a reasonable time this afternoon, Mr Blake?

Mr Blake: Yes, we are. I mean, we could start, perhaps, at 1.50 rather than 1.55.

Sir Wyn Williams: All right, let’s do that. Fine, thank you.

Mr Blake: Thank you very much.

(12.56 pm)

(The short adjournment)

(1.50 pm)

Mr Blake: Good afternoon, sir.

Sir Wyn Williams: Good afternoon.

Mr Blake: Thank you very much, Mr Sibbick, before lunch we were on 14 December, I’m now moving to 21 December and it seems as though it was a very busy pre-Christmas period in 1998.

David Sibbick: It was.

Mr Blake: Let’s look at CBO00100001_057, please. This is a document from the Chief Secretary to the Treasury, suggesting a proposed way forward. Do you remember this at all?

David Sibbick: In general terms, yes.

Mr Blake: That Chief Secretary to the Treasury, as of that date, was Stephen Byers.

Can we go over to page 2, please, which is where we find the passage on the way forward, it’s on the second half of that page. So his proposal for the way forward was, “Stage 1 – stabilisation”:

“Ministers would agree by 24 December:

“to continue the programme with the Benefit Payment Card, with a firm re-commitment to deliver the project on time by all parties;

“to agree commercial terms with ICL on the basis of the 9 December offer updated by Keith Todd’s letter of 18 December”, and various other provisions.

But the key one there being to continue with the Benefit Payment Card, and then there being a stage 2 which we will see over the page. It’s the bottom of the page, “Stage 2”:

“By the end of March 1999, with the commercial arrangements redrawn as above, the parties will have an opportunity to see whether the programme can do more to deliver the Government’s present policy objectives. Ministers will ask the Post Office to take forward discussions between the parties in the context of the PPP envisaged with ICL to explore what more could be done, with the agreement of all parties, to further the following objectives”, and there are various objectives on the page after.

Essentially, what is being proposed by the Chief Secretary to the Treasury at that stage is more Horizon, rather than less Horizon; do you agree with that, as in to use Horizon for future additional purposes?

David Sibbick: Yes, I think it was envisaged from quite an early stage that Horizon, as it was being developed at that point in time, needed to be a springboard, if you like, or a platform that could be developed for wider and more modern purposes.

Mr Blake: Then perhaps we could go to BEIS0000397 and that is a ministerial submission that I believe you drafted on 21 December, so, again, the same day as that was received from the chief secretary to the Treasury. Would you have received the chief secretary’s document in advance? Would you have seen it before others, perhaps?

David Sibbick: I think it looks from this as though, as though when I drafted this, we had sight of the chief secretary’s note.

Mr Blake: Yes. So, I mean, it says there:

“The Chief Secretary’s office has this evening circulated a note …”

Would this ministerial submission perhaps have been drafted earlier in the day and bits filled in or do you think you actually urgently responded in the evening of 21 December –

David Sibbick: I think it’s entirely possible that I responded that evening. I do remember that around this time there were an awful lot of awfully late nights.

Mr Blake: If we look at paragraph 2, please, it says there in bold and underlined:

“This is the outcome for which we have fought for the last nine months, and you should strongly support the Chief Secretary’s proposal.”

So clearly, in terms of the DTI position as at 21 December, it was fully in support of that proposal?

David Sibbick: Yes.

Mr Blake: Can we go over the page, please, to paragraph 7. Now, we saw stage 2 mentioned in the chief secretary’s document, and it says here:

“Stage 2 has clearly been devised to try to make the package more palatable to DSS. At any level much beyond that of a rather obvious face-saver it seems unlikely to succeed. What may also help, however, is that the argument has moved quite strongly against DSS and Option 3 (termination of Horizon, rapid move to ACT) on two fronts in recent weeks.”

Can you tell us about where things had reached at that stage then, and which Government departments were supportive of the DTI at that stage?

David Sibbick: I think we knew at that stage that Number 10 was broadly supportive of moving in that direction, albeit with some reluctance, in that they saw it, we all saw it, as a less than optimum solution.

Mr Blake: Perhaps we can look at a letter to Number 10, and that is CBO00100001_053, please. This is just a couple of days later, a letter from Ian McCartney, who was then Minister of State, to the Prime Minister.

Is this a document, a letter, that you would have drafted or been involved in the drafting of?

David Sibbick: Yes.

Mr Blake: I’m going to read the first two paragraphs. It says:

“I have become seriously concerned at our handling of the decision on the future of the BA/POCL counters automation project, Horizon. The Christmas break is upon us, yet despite a series of meetings and several rounds of correspondence, a decision remains beyond our grasp.

“On Monday, Stephen Byers put forward a suggested compromise [that’s I think the one we just saw] that seemed to command a broad measure of support. Certainly we in DTI would have been content to sign up to it. Yesterday Alistair Darling submitted a counter-proposal which essentially revisits an option we had already discarded – namely that of continuing with the Horizon infrastructure whilst dropping the Benefit Payment Card … and introducing early compulsory ACT.”

The next paragraph says:

“We should be clear that the smartcard at the heart of Alistair’s proposal has absolutely no direct role in the delivery of welfare benefits or in the early introduction of front-end banking at post office counters.”

Would it be fair to say that that was quite a tense period with the Treasury and those are quite strong words?

David Sibbick: I do remember drafting this and feeling at the time – and I was absolutely not alone in this – that this kind of paralysis that seemed to have been reached at ministerial level was damaging everybody and costing a lot of money, and not moving anything towards an outcome at all, and that somehow this logjam needed to be broken, and that it was very disappointing that DSS was simply trying to loop the thing back into the same old arguments.

I think the sentence about “We should be clear that the smartcard … has absolutely no direct role in the delivery of welfare benefits”, I think that meant at that point in time, not that it wasn’t the right way forward for the longer term. But the system at that stage wasn’t ready for that, and we hadn’t at all worked out how that was all going to be – how that was all going to be done.

The intention had been, from the DTI’s standpoint, was that it would be best to continue with the Benefit Payment Card until such time as the technology had sort of caught up, and the Benefit Payment Card could then be converted to have smart – I mean, not the card itself, because that was just a “dumb” card, but that it could be replaced by a smartcard which would do the same thing as the Benefit Payment Card plus a load of other things.

Mr Blake: 23 December 1998 is a significant date in that it was the date that Stephen Byers was appointed as Secretary of State at the DTI.

It’s referring to the proposal he made whilst Chief Secretary to the Treasury. Are we to read anything into his appointment at the DTI in respect of Horizon and whether it was effectively a safe pair of hands in terms of the continuation of the Horizon project?

David Sibbick: I think you’d probably have to ask the Prime Minister that, what his motivation in moving his ministers around in the way that he did at that point in time.

Mr Blake: Was there a consistency of approach by his appointment?

David Sibbick: Well, as it happens, yes, there was. Whether that was deliberate or not, I can’t – I can’t tell you.

Mr Blake: If we go over the page, I assume that this letter was written before the change in Secretary of State, because it refers to –

David Sibbick: Yes, I believe, I believe it was, yes.

Mr Blake: Is that a reason why it was sent from Ian McCartney at that time, because perhaps the Secretary of State himself was moving?

David Sibbick: It might have been, I honestly don’t remember.

Mr Blake: I’m going to read the first paragraph there, so it says:

“We simply cannot allow ourselves the luxury of continuing to avoid a decision by tabling each time some new variation on which to commission further work. The continuing delay and uncertainty is already causing serious damage and hardship. The 18,000 subpostmasters, who have collectively sunk £1 billion of their own money in the business, are finding it increasingly difficult to sell their businesses when they wish to retire or move on. The number of such offices remaining unsold on the market is unusually high. Reinforcing this, the number of net closures within the network (offices which have closed and for which the Post Office has been unable to find replacement subpostmasters) in the seven months since the beginning of April is running at some 50% above the level of previous years. Most of them are those which for social reasons we least want to lose. The General Secretary of the National Federation of SubPostmasters is in no doubt that the largest single factor behind these depressing figures is the continued uncertainty about the future of the Horizon project and the associated introduction of the BPC.”

Again, that’s quite a bleak picture if Horizon isn’t taken forward; would you agree with that?

David Sibbick: I would … a slight gloss on that. It’s a pretty depressing picture if nothing is decided. We want – we know what we wanted/decided, but it was getting to the point where almost any decision that moved the thing forward would have avoided this situation which is spelt out here.

I think the level of frustration behind this that you can perhaps read into it … I may have written the words but it was a widely shared sentiment at that point in time.

Mr Blake: But the next paragraph refers to concerns about Fujitsu and Japan, and that’s something that I’m going to come onto, but certainly the picture that’s being painted there for the Prime Minister is that things are going to be very bad if the Horizon project isn’t taken forward?

David Sibbick: If – again, I would say if no decision is made. The decision we wanted, of course, was that Horizon should be taken forward, for all the reasons that we’ve been spelling out for weeks and months, but I think more than anything at this point in time was “For heaven’s sake, can we not take a decision on moving forward?”

Mr Blake: Then the paragraph after, I’m just going to read the first half of that paragraph, if we could scroll down slightly:

“The proposal in Stephen Byers’ letter of 21 December is based on a long period of intensive commercial negotiation as well as a thorough technical appraisal. It offers both a way forward with the lowest technical and commercial risks, and the best prospects of maintaining a financially viable nationwide network of post offices into the future.”

We again there see that reference to “lowest technical risk”.

There seems to be a theme in DTI correspondence over this period which is at odds with some of the risks that were being presented in that expert report that we saw this morning.

Would you agree with that, or do you still maintain the position you had before lunch?

David Sibbick: I still maintain the position. Maybe the words were not as well chosen as they might have been. We believed at that stage genuinely that the Horizon project, as outlined at this point in time, was going to work and offered a better and more secure way forward than abandoning it and starting something completely new at this point in time.

Mr Blake: Moving to early 1999, it seems as though there were quite a few developments over Christmas and the early New Year. Can we look at CBO00100001_039.

Thank you very much. This is a letter from the Private Secretary to the Prime Minister, it’s addressed to Rod Clark, who I believe was at the DSS at that time, and it’s dated 14 January 1999.

Do you recognise this letter, or would you have seen this letter at the time?

David Sibbick: Yeah, I will have – I would have seen it, yes.

Mr Blake: There is a very bold header that says:

“NO FURTHER COPIES SHOULD BE MADE of this letter, and it should be made available ONLY to other Ministers and officials with a STRICT NEED TO KNOW of its contents.”

Is that unusual?

David Sibbick: I have not seen it very often, if at all.

Mr Blake: Do you know why it would have been written?

David Sibbick: I imagine because some very sensitive negotiations were going on at the time, and what was going on at a political level in the background was perhaps best kept away from those commercial negotiations, I guess.

Mr Blake: The Prime Minister’s position is set out there, and I’ll just read those two points. It says:

“our key objective should be to develop the Horizon Project, by negotiating with ICL the earliest possible move to smart cards. It will be extremely important to get the Post Office to take this negotiation seriously.

“but at the end of the day, if this negotiation does not succeed in improving upon the existing Benefit Payment Card project, it would be better to accept this project than to pull out of the negotiation with ICL completely, with all the damage that could do.”

Were you aware at the time of why the Prime Minister was of that opinion?

David Sibbick: I think the Prime Minister was very well aware of the damage that pulling out of Horizon, pulling out of ICL, I think, would do to ICL, to Fujitsu, to that sector of the UK economy, to the credibility of the PFI project, as well as the political fallout from subpostmasters and people who liked to use sub post offices, if something was leaked or made publicly available, which meant that they risked losing their village Post Office or their corner shop, or whatever it is.

I’m quite sure from talking to people that the demonstration in March that the National Federation of SubPostmasters organised back in about 1994, people were joining that not because they were so opposed to the idea of having their benefits paid into bank accounts, though a lot of them obviously were, but more because they were told that this would pose a very real threat to their village shop, to their corner shop, and so on.

Mr Blake: We see some more involvement from the Prime Minister on 1 March 1999. Can we look at that, BEIS0000375. This again is a letter from the Principal Private Secretary. Would you have seen this at the time?

David Sibbick: Well, at the time or very shortly thereafter, yes.

Mr Blake: Can we just scroll down slightly. This addresses what was then called “Option 2a”. I think that was a benefit account that was only accessible at the Post Office plus a smartcard option. Do you remember that at all?

David Sibbick: I confess at this distance in time my recollection of exactly what the various options – I think at one time there was an option A, B1, B2, B3, C – I don’t remember the detail of them all.

Mr Blake: Are you aware of what the Prime Minister’s position was around this time? Did he continue to be supportive of the overall project?

David Sibbick: I think he remained supportive of not walking away from ICL, in particular, and of finding some way that satisfied the parties who were involved in all of this and allowed the project to move forward, with – with ICL, I think is the key bit of that.

Mr Blake: How important was the Prime Minister’s guidance, direction, decision, view?

David Sibbick: I would have taken it very seriously, certainly, yes.

Mr Blake: How important – were you aware of, for example, the Post Office taking it seriously?

David Sibbick: Erm …

Mr Blake: Were you aware of the Post Office even being aware of it?

David Sibbick: Not aware of this in terms, no. You’d have to ask them, obviously, but my recollection is that the Post Office were getting more and more fed up with this. They clearly – their position was different from ours, if you like, in that what they wanted was to keep the Benefit Payment Card, and anything that took away from that increased, in their view, the risk to their customer base – and that was obviously something they didn’t want to see – and not just their customer base, but also the revenue that they got from the Benefits Agency for delivering those services.

Mr Blake: To what extent were they influenced by senior politicians?

David Sibbick: The Post Office board was clearly made aware of our Secretary of State’s thinking. They were – they would also have been aware through POCL’s links with the Benefits Agency and through DSS, and so on, where other ministers were on all of this, and what the remaining risks were that it would all go against them still. But I think they shared the frustration that things had got stuck and they couldn’t move them forward and, you know, all the time things were kind of drifting away from them.

I think, even at the point that the project, as finally agreed, started to be rolled out, they may have got a bit more relaxed about it once it was going. But I remember sensing still quite a lot of residual bitterness, a feeling that they had been shafted, if you like, and hadn’t got what they wanted. Nobody had got exactly what they wanted. It was a compromise.

Mr Blake: Moving to April 1999, can we look at BEIS0000362, please. This is another ministerial submission that you wrote on 16 April 1999. Can we look at paragraph 2, please:

“After an immense amount of effort by all the parties concerned over the past two or three days to refine and analyse the costings associated with Option B (the smartcard-based post office benefit account) …”

So I think that was the option that, at some stage, was a 2a, the one that I mentioned before:

“… the inescapable conclusion is, looked at narrowly, this option is significantly more expensive than Option A (the Benefit Payment Card).”

Just at the end of that paragraph:

“This conclusion is scarcely surprising since Option B involves paying ICL for the aborted Benefit Payment Card and then paying on top of that for the development for the Post Office benefit account and for the smartcard.

“This led the Treasury to produce at lunchtime today a draft report by officials for Ministers concluding that Option B is too expensive and should be rejected by Ministers; and that Option A is undeliverable – not for technical reasons but because of the ‘dysfunctional relationships’ between the contracting parties – and should also therefore be rejected. This leaves only termination which should be accepted by Ministers as the least bad of three thoroughly unattractive options.”

You say at the bottom there, in paragraph 4:

“I said immediately that DTI officials could not be party to such a conclusion.”

Again, there seems to be quite a divide in Government on the way forward –

David Sibbick: Absolutely.

Mr Blake: – and the DTI’s position is clearly set out there, that it certainly wouldn’t be a party to termination?

David Sibbick: Yes.

Mr Blake: Then if we go over the page, paragraph 5, you make a number of points, the first is:

“The Prime Minister’s remit was to explore an alternative way forward to Option A, not to introduce the already discarded option of termination.”

If we could look at the very final bullet point:

“Finally, the history of Option A is indeed one of dysfunctional relationships, but tame acceptance that two public sector bodies would refuse to give effect to a clear collective decision by Ministers is a sad basis for deciding on termination, with all the damage that would do.”

Again, strongly worded –

David Sibbick: Oh dear, I was upset. Yes.

Mr Blake: Had ministerial submissions become less strongly worded over the years or was this a particularly strongly-worded ministerial submission, or maybe both?

David Sibbick: Maybe a bit of both. Again, the frustration that we’re just going round the same loop again and not finding a way through it. Nobody’s disputing that some of these arguments that are put on the other side had validity but, at the end of the day, you were in a situation which had generated some political imperatives and trying to pretend that they didn’t exist or kicking against them, if you like, was just wasting everybody’s time.

Mr Blake: I’m going to move to May 1999, and can we look at BEIS0000275, please. This is a note of a document of 11 May 1999. It’s from Katherine Hathaway, I believe she was a civil servant in your Department; is that right? Do you remember –

David Sibbick: I don’t remember, actually, I’m sorry, but I don’t.

Mr Blake: In the first paragraph it mentions a meeting with George Hall?

David Sibbick: Yes.

Mr Blake: Do you recall George Hall? I believe he worked at ICL.

David Sibbick: Yes.

Mr Blake: This is a document that the Inquiry’s seen before, it was put to Keith Todd, and I’ll just read to you the first paragraph under “Horizon”.

David Sibbick: Yes.

Mr Blake: It says:

“We spent the first 30 minutes discussing Horizon during which George confirmed that he knew that Ministers were split between cancelling the project and option B1 (version 2) – he also knew exactly where that split lay, ie HMT/DSS versus the others. When asked how the deadline of 23 April had been extended he admitted it was only because ICL were fudging their financial reporting with potentially disastrous results as far as the directors were concerned.”

Can you offer us any insight into that at all?

David Sibbick: Into what ICL were doing? No, I can’t.

Mr Blake: Do you remember this allegation being –

David Sibbick: Well, I know that what – they were doing everything in their power to keep the project alive. I also know – I don’t remember the details of it very well – that Fujitsu were looking to float Horizon – to float – I’m sorry, to float ICL and, obviously, ICL were trying to make sure that nothing awful happened that would kill that.

Mr Blake: The next paragraph:

“He confirmed that Keith Todd will lose his job should Horizon go down and that Fujitsu will divest themselves of ICL which will be broken up and the Services side will probably go to Siemens along with some other Fujitsu interests on the hardware side. Siemens are known to be interested in acquiring a services business and are already in discussion with Fujitsu.”

Did you see that as a genuine concern or a negotiating tactic of some sort, regarding the future of ICL?

David Sibbick: Yeah. Ultimately, I think, you know, that is what – that is what could have happened. I’m not saying that I thought at the time that this is imminent, this is what is going to happen. But certainly I didn’t discount it as, if we carried on fudging this and making such a mess of it, that might well be where it all ended up, and particularly so, particularly so, if we cut loose ICL from going forward with the project.

Mr Blake: The next paragraph:

“He also said that he was personally hawkish about the legal situation and regarded DSS as having been utterly duplicitous (he suggested that ICL might accuse DSS of fraud – which I somehow doubt actually). Indeed he suggested that Horizon had been a great eye-opener for ICL as regards to how the Government did business and that ICL would think very hard about ever undertaking this kind of project again. I assume that this will become common knowledge around the industry eventually and that PFI in IT areas will become even more difficult than it already is.”

Why were DSS seen as duplicitous? Are you able to offer any insight into that? I appreciate they’re not your words.

David Sibbick: I don’t know what he meant by that. I can only guess that he may have meant that a lot of DSS’s claims were not well-founded and that DSS were attempting to achieve their objectives using information that wasn’t really correct or wasn’t proven, or whatever. I don’t know.

Mr Blake: This is quite a frank conversation with somebody from ICL. Did ICL see the DTI as being very much on their side –

David Sibbick: Yes. Yes, they did. And I had that from a number of sources on a number of occasions, that they were grateful that we were – we were doing our best for them, and they knew that we were fighting hard against a very determined opposition. And I say it again: I have a great deal of sympathy with the Benefits Agency’s stance on this. It made perfect sense from their point of view.

Mr Blake: This is 11 May. On 24 May, POCL and ICL reached an in-principle agreement, and I’m going to go to 28 May, that’s BEIS0000355. This is another submission from yourself and this is a stage where a new working group was established. This is the 1999 working group I think that you mentioned earlier.

David Sibbick: That’s correct, yes.

Mr Blake: Can you tell us briefly why that working group was set up?

David Sibbick: Yes. I think it was to involve parties who hadn’t been directly involved in other discussions, to bring them together, mainly the groups of people, NFSP and CWU, and so on, who were going to be using the equipment. We wanted to bring them in at that stage so that they had a sense of understanding where we were trying to get to and how we were trying to get there. But, equally importantly, we saw that group as being a very useful source of feedback as to how the rollout was actually going and whether problems were being quickly identified, quickly reported back, quickly acted on, quickly resolved.

Mr Blake: This submission sets out four issues. Can we look at paragraph 2. The first issue there:

“… there are negotiations between POCL and ICL that need to take place over the next 2-3 months to put in place the detailed contractual arrangement that will give effect to the outline agreement reached last weekend.”

Then the next paragraph outlines a second issue, if we could scroll down slightly:

“The second issue is to ensure that the remaining development phases of Horizon, including large scale live trials are completed without further slippage; and most crucially that the rollout of the system following acceptance to all offices within the network is accomplished in a smooth and timely fashion. The CWU and NFSP members will be in the front line of the action during these phases, and both organisations have much to contribute to the successful completion of these phases.”

It seems that the second issue is about prompt rollout of the system, no further slippage; is that right?

David Sibbick: I –

Mr Blake: Is that a fair description of that second issue?

David Sibbick: Yes, it is.

Mr Blake: Over the page, please, to number 4. This is the third issue:

“The third issue is how to maximise the commercial potential of the Horizon platform.”

Then number 5 sets out the fourth issue:

“The fourth issue is how POCL is to be funded in the medium and longer term future once some £400 million of revenue from BA … begin progressively to walk out through the door from 2003.”

At the bottom of the page, it has the suggested terms of reference and, over the page, please, there are the three points there. Number 1:

“To oversee the negotiations between POCL and ICL which will develop the letter of agreement signed between the parties on 24 May into a Codified Agreement governing the contractual relationship under which the project will be taken forward; and to facilitate solutions to say any problems which may arise …”


“To oversee, to contribute actively to, and to facilitate solutions where problems arise, the completion of the development phases of the Horizon project, and in particular the smooth and timely rollout of the system to all offices within the Post Office network; and [three]

“To contribute through ideas, contacts and other practical measures, to maximising the commercial potential of the Horizon infrastructure, thereby to the future viability of the Post Office network as a whole.”

Is it right to say that this 1999 working group wasn’t a technical group to analyse technical issues?

David Sibbick: No, not at all. No, not at all. But, except that if issues arose in sub post offices when they were trying to work the system for the first time, those issues would be identified and reported back. Whether they were technical issues or not, I don’t know, and probably the people who were reporting them back wouldn’t necessarily know. They would just know that something wasn’t working properly.

Looking at these words again, I don’t know, I think, if I was drafting it today – which thank goodness I’m not – rather than “oversee”, which implies some kind of control over it, as it were, I think the concept was more to keep a very close eye on and to see whether there are thoughts or whatever that you can contribute to the process, as it goes on.

Mr Blake: Who was expected to pass on through this group those kinds of issues?

David Sibbick: I’m …

Mr Blake: Who would you have expected to be contributing within the group –

David Sibbick: Yes.

Mr Blake: – to problems with the completion and development –

David Sibbick: To be contributing within the group? I would have thought, particularly, the National Federation of SubPostmasters because it was primarily their members up and down the country operating 40,000 or whatever it was of these terminals, who would be coming up with any problems that they were – that they were finding. I mean, they would know if something wasn’t working properly, and if it wasn’t working properly it needed to be reported upwards and it needed to be jumped on very, very quickly.

Mr Blake: In terms of significant technical reports to government, am I right in saying that it’s the 1998 working group that was the significant report, as far as that is concerned, and that the – sorry, the 1998 working group report, and that the 1999 working group was not looking at things at a technical level but was –

David Sibbick: Yes.

Mr Blake: – as you say, receiving information from, amongst other people –

David Sibbick: Yes.

Mr Blake: – the NFSP?

David Sibbick: At this point in time, I’m not sure how much the original working group and its technical subgroup were still actively involved in all of this. My recollection, which may be quite wrong, is that they weren’t or weren’t to any very great extent. I don’t recall them as being. What I would have expected is, if some of these things that were being identified by subpostmasters as not working properly, they would have been, as I say, reported up to their bosses, to helpdesks or whatever and, if necessary, they would have been escalated upwards, the Benefits Agency is out of it at this point of course, through POCL, through ICL, and escalated to whatever level was necessary to authorise whatever needed to be done to put it right.

Mr Blake: We see on this page the suggested membership, so we have there the DTI –

David Sibbick: Yes.

Mr Blake: – POCL, Communications Workers Union, National Federation of SubPostmasters, “ICL would not formally be a member, but would be invited to attend meetings as appropriate”. Is this group the core group for feeding back those kinds of concerns that are arising during that rollout period?

David Sibbick: It was absolutely – it was intended to be absolutely a primary channel for that purpose. It doesn’t mean that it would be the only one, but yes, it would be a primary one and it would be perhaps the – I was going to say almost the only one that would be reporting – whose reports back would have gone to ministers.

Mr Blake: Can we look at NFSP00000471, please. This is a report of an NFSP meeting in June 1999.

Would you have seen these reports at the time?

David Sibbick: Not at all, no.

Mr Blake: I’ve taken previous witnesses to these minutes and I’m going to take you to the same couple of passages at page 23, please, about halfway down on that page.

In fact, if we look at the page before, it will make it clear at the bottom of that page, 9(c), the discussion here is on “Counter Automation – BA/POCL”, and this is a meeting in June 1999.

If we go over the page, please, about three-quarters of the way down there is a paragraph:

“There was general discussion on the severe difficulties being experienced by subpostmasters who are already running an automated system. Seven sheets of comments from the North East had been passed to Mr Dave Miller. The difficulties and trauma being experienced by some subpostmasters were giving rise to concerns for their health and emotional wellbeing. It was felt by some that a tragedy was not far away if something was not altered soon. The software was considered to be poor quality and not intended to run such a huge network. The system is based on ECCO which was originally written for a network of 700 – not 15,500.”

Over the page, please, about halfway down it says:

“The general secretary assured the meeting that Mr David Miller had been informed of the difficulties in no uncertain terms.”

Over the page again, we have the comments from Miss Lindon:

“Miss Lindon commented that this seemed to be a typical Post Office Counters situation and felt that ICL could not be blamed for the problems.”

It says there:

“Pointing out that it is now three years since the project was first mooted, which is a very long time in the technological world, she suggested that a different system be tried, smaller and less complicated, which would be of greater benefit to the smaller offices and probably be a good deal cheaper and easier to operate. POCL seem to be attempting to build an audit system into the project, making the whole thing far to [sic] big, too cumbersome and too complicated.”

Were you aware of these kinds of concerns at the time being raised in an NFSP meeting?

David Sibbick: No, I read the pages that you’ve just referred to and several of the pages that follow it and I was absolutely horrified. I thought it was unbelievable that, with this level of concern at this stage in the rollout, this very early stage in the rollout of the project, that something was not done about it.

Going on a few pages from here, there’s the report of a meeting that I attended –

Mr Blake: Perhaps we could go to, is it page 27 at the bottom?

Sorry, do carry on. I may be pointing to the wrong part.

David Sibbick: There was a bit where the Minister was reported as saying – or the implication is “I don’t care what’s the matter with it, this thing’s got to go ahead and there should be no slippage”. I don’t recollect at all the Minister saying that sort of thing in those terms. This is very, very stark, and absolutely not what we would have wanted to see. I know there was pressure to get the rollout going and even accelerating, but I can’t – I find it difficult to believe that this is something that we would have, as a Department, as a Government, we would have countenanced just turning a blind eye and saying “Get on with it”.

It didn’t come out, I think, in the meeting anything like as starkly as it did in the paragraphs to which you referred just now, and some of the paragraphs around it, which make absolutely terrifying reading, really.

Mr Blake: So the meeting that you attended, which I think is at the bottom of page 27 –

David Sibbick: Yes.

Mr Blake: – that was a meeting with Mr Peberdy and the general secretary. You weren’t present at the larger meeting, which is the subject of this report; is that right?

David Sibbick: No, no, no, I was present at the meeting of the working group.

Mr Blake: Yes.

David Sibbick: Not anything else.

Mr Blake: The kinds of concerns that we have heard in this report, were those kinds of concerns in any way brought to your attention by Mr Peberdy at that meeting on 22 June?

David Sibbick: I don’t think that we – I’m not saying he was trying to hide anything or not say that there weren’t problems, but I don’t ever remember getting from anyone anything with the flavour of those earlier paragraphs, which are really – at the beginning of something, that you’re now going to multiply by 100, and 1,000, and 10,000, and so on, and just leave it.

Mr Blake: You’ve said that the Horizon Working Group 1999 was –

David Sibbick: Yes.

Mr Blake: – the forum to raise those kinds of issues?

David Sibbick: It was – it was a forum to raise these sort of things. Obviously not the only one. Obviously, if you’ve got a problem you report it to your supervisor or you report it to a helpdesk or whatever, or whatever. But this was certainly a channel for feeding back those kinds of discoveries, if you like, these reactions, and it was the one channel, I would have said, that has direct access to a minister.

Mr Blake: We’ve seen who was at that NFSP meeting, and we’ve heard and read that comments were fed back to David Miller of POCL. Who should have been passing on those messages to Government or through the Horizon Working Group?

David Sibbick: It should have come out, in my view, much more starkly at the meeting of that working group than it did. I don’t think – I don’t recall and I don’t think the minutes really bring out that anything was put to the group in quite those stark terms. I don’t know, maybe I’m misremembering, but I don’t recall – I don’t recall that.

I know things were raised and, “Yes, we’re going to talk to the Post Office about it”, and so on. Not – nothing like “This is awful, if this isn’t resolved this is an absolute showstopper, you know, we can’t roll the thing out like this to all those poor subpostmasters and subpostmistresses around the country and have them having nervous breakdowns, and what have you, because they can’t make the system work”.

Mr Blake: Who should have been shouting that message?

David Sibbick: Well, the representatives in particular of the National Federation of SubPostmasters. I’m not saying they weren’t doing their job. I think – I mean, they must answer to themselves and I knew them very well and they were good people, but they too needed to see the system rolled out and working, and I guess they thought, “Well, we don’t necessarily want to start ringing alarm bells too loudly in case it generates pressure to stop the project, or whatever it is. You know, these are concerns, they must be raised with the Post Office, they must be sorted. But let’s not overreact, let’s not … let’s not frighten everybody”.

Mr Blake: Moving –

David Sibbick: That’s what I think. I mean, I don’t – you have to ask them about it. But you’ve got the two documents there, you’ve got the one which records what’s being said about the awful situation which some subpostmasters were finding themselves in, and then you’ve got the minutes of the meeting, which I suggest don’t quite reflect fully the flavour of – of that.

Mr Blake: Moving to July 1999, can we look at BEIS0000236, please. This is another ministerial submission from yourself. If we scroll down, please – thank you:

“The detailed agreement between Post Office Counters Limited … and ICL for taking forward the restructured Horizon project was signed by the parties this morning.”

Over the page, please, to paragraph 5:

“After a slow and resentful start, POCL have I think surprised themselves at the progress that they have been able to make with ICL, both in contractual discussions and in resolving a large number of outstanding technical issues. It is very early days yet, and at risk of accusations of wishful thinking, I nevertheless detect in this early progress perhaps some vindication of Ministers’ decision to simplify the contractual relationship by taking the Benefits Agency out of the frame, and to simplify the technical content of the project by removing the Benefit Payment Card.”

Would it be fair to say that you were cautiously optimistic at that stage?

David Sibbick: Yes, I was, and I think what I was particularly optimistic about was that what caused the original Horizon project, if I can put it like that, to fail more than anything, I think, was that the Benefits Agency and POCL – I’m not attaching blame to either side – just couldn’t get on, and ICL, who probably had their faults as well, were stuck in the middle of this. And it’s – I think it was probably more than anything that that caused the delays and eventually the, sort of, collapse of Horizon Mark I, if I can call it that.

Mr Blake: Paragraph 6:

“By the same token, however, if POCL are at least beginning to lift themselves out of the depression into which they sank as a result of the decision to allow BA to move to ACT from 2003, it will now be very important to them for Ministers to reach a compromise that at least gives them some modest gains over what is currently on offer in their negotiations with BA.”

A bit further down:

“They have a mountain to climb if the hugely ambitious programme for rollout of the system to 40,000 counter positions in nearly 19,000 offices is to be completed on schedule, and if they are to drive forward in a positive and optimistic spirit the search for new business to help plug the £400 million a year hole in their finances that the loss of BA revenue will create. A positive sign from Ministers now stands to produce benefits well beyond its modest cost; a negative sign could not fail to damage the healing process.”

I think the “state of depression” is something that you mentioned earlier. Can you give us a flavour of that, please?

David Sibbick: I just think that, at the end of all these negotiations and before they’d actually got anything on the ground to show for it, POCL felt that they’d been shafted. They felt that they’d been kind of cut adrift with no Benefit Payment Card and a system that they didn’t know what they could do with.

The negotiations with ICL for Horizon Mark I had been so fractious and unproductive that they probably feared that the same thing might happen with Horizon Mark II, but I think they found – or at least the people who were dealing with ICL found – that when it was just a one on one and there wasn’t this ridiculous sort of triangular relationship, that they could actually make progress and get things done, and I think they started to feel an awful lot more cheerful.

That was the sense that I got from the people that I spoke to but perhaps I was speaking to the wrong people.

Mr Blake: Well, we’ve seen an ICL monthly report, I’m not going to take you to it, I think you have been provided with it recently. Its reference, for the purpose of the transcript, is FUJ00058183. That’s a report of June 1999 and it says that POCL continued to remain negative and critical towards the programme and hadn’t got over their bitterness in the way in which they’d been treated by the public sector and that they held ICL partly responsible. Is that something you would agree with?

David Sibbick: Well, it’s obviously somebody’s interpretation of what they feel the mood in POCL to be. You know, I’ve said that there was a great deal of bitterness around the start of the rollout programme. I was certainly aware of that. But the clouds seemed to be lifting, it seemed to be looking an awful lot more positive, but …

Mr Blake: Did you sense any mistrust between the Post Office and ICL at that stage?

David Sibbick: No, I don’t think I did. I think probably POCL, as the thing went along, were kind of half expecting nasty surprises, because of the bad experience that they’d had before, but I thought – and after the end of – or towards the end of 2000, I wasn’t there any more, I’d retired, so I don’t know how it progressed after that point. But when I left it, I thought there was a greater sense of optimism than there had been up until that point.

Mr Blake: The second half of this paragraph describes the rollout as “hugely ambitious”. Do you think it was too ambitious in respect of its timeframe, for example?

David Sibbick: I’m sorry, what are we looking at now?

Mr Blake: So:

“They have a mountain to climb if the hugely ambitious programme for rollout of the system to 40,000 counter positions and nearly 19,000 offices is to be completed on schedule …”

David Sibbick: Yeah.

Mr Blake: Looking back at it, or perhaps even your view at the time, do you or did you consider that it was too optimistic and perhaps rushed?

David Sibbick: I remember thinking that this was a huge programme to try to manage, to, you know, to get 40,000 terminals in and working and the people trained to use it properly and the helpdesk set up and in place, and all that. Yes, enormously ambitious. I don’t think I had a sense that, “Oh, this can’t possibly work, can it?” But just sort of looking with some awe at what they were planning to achieve.

Mr Blake: The Benefits Agency had pulled out in May 1999, the plan was to roll out pretty soon. Do you think the time period that was left for, for example, all of that testing that you talked about at the very beginning of today, do you think there was sufficient time for all of that?

David Sibbick: I suppose, do I or did I? I don’t know, I don’t know at the time how conscious I was of all of that. Looking at it now, my understanding is that, once they had ripped the guts out of Horizon, that is the removal of the Benefit Payment Card part of the technology, the amount of testing that was done thereafter to see whether the residual bits were working properly, there was very little time. I’m not saying that the testing wasn’t adequate. There was very little time, and I wonder whether there was enough time for all of the testing that should have been done, could have been done, would have been desirable to do, was actually done.

But it’s very easy always in these circumstances to say “Well, in an ideal world we’d have spent another six months testing this” but it wasn’t – it was a somewhat less than optimum world, if you like, that they were trying to do all of this in.

Mr Blake: We know from this morning that in 1998 there was this thorough look into the viability of the Horizon system. Do you think that that summer of 1999 would have been an appropriate time to have carried out another government look at the reliability, this time, of the Horizon system?

David Sibbick: Yeah, in retrospect, perhaps it would. I don’t know what the technical experts would have felt at the time, whether it was worth going back and having another sort of look at the roots, as it were, to see how they were growing. Clearly, by the time it was rolled out, quite a lot of time had elapsed and we know that, in that time, it wasn’t – it wasn’t visible to us. But we knew that work was continuing, even though ICL had been put in breach back in the November, or whatever it was, and they must have known that that was coming down the road at them anyway.

My understanding is that they carried on working and carried on with developments, in the hope, certainly, that when ministers finally sort of say got their act together – that sounds terribly patronising, I don’t mean that – that once decisions had been reached they would be that much further forward and be able to move the thing on.

Everyone, I think, was conscious of time in all of this. The Benefits Agency, very conscious that until something was sorted the losses from fraud on the paper-based system would continue unabated, so they too needed this thing to be, to be settled.

Mr Blake: Can we look at a document from August 1999, that’s BEIS0000119, please. This is lines to take that had been prepared for a meeting with Derek Hodgson. Do you recall this document or the background to this at all?

David Sibbick: I think I probably do, yes.

Mr Blake: It doesn’t matter so much because I’m only really going to take you to the background section but if there is anything that you recall –

David Sibbick: I was just going to say about what’s on the screen at the moment, “in two respects the system was not yet suitable for acceptance and declined to do so”. What we understood, that there were screen freezes and something at the –

Mr Blake: Perhaps we could scroll down, actually, as that’s where the two problem areas are highlighted. It says:

“The two problem areas which led POCL to refuse acceptance on 18 August are:

“(a) some connection difficulties resulting in a small number of counter transactions not being properly recorded in the ‘back end’ systems;

“(b) higher than expected incidence of ‘screen freeze’.

“ICL confident that these are just glitches for which they have an effective fix. POCL want a demonstration of this by 2-3 weeks clear running before accepting the system [because] (acceptance triggers a [significant payout to ICL, £68 million].”

Where would that information have come from, do you know?

David Sibbick: I think we would have been – we would have been told of that by the Post Office, I assume. I don’t know –

Mr Blake: Is that the kind of technical detail that you would be provided with at that stage, that limited detail, or do you think –

David Sibbick: I don’t think we would have been provided with that sort of level of detail at all if it hadn’t suddenly cropped up as a potentially serious means of delay to the programme. In the event, it wasn’t and POCL apparently had satisfied themselves that the patches that had been put in place were good and were holding, and so they went ahead with it.

But no, we wouldn’t normally have had sight of that level of detail, if it hadn’t been for the context of it. I believe there was something else around at the time concerning helpdesks that had to be resolved as well, that POCL were unhappy about. But, other than that, at that point in time, we had no reason to believe that POCL were anything – and ICL – were anything other than satisfied that the system was in a sufficiently good shape for it to be rolled out.

Mr Blake: You have mentioned the helpdesk. Perhaps I can take you to another document that shows that, BEIS0000264.

David Sibbick: Yes.

Mr Blake: This is just a front sheet. In fact, it’s the annex to that that I’d like to take you to, but that has a separate document reference number, that is BEIS0000265, and these are “Points to make”. It’s for a meeting between Patricia Hewitt and ICL on 2 November 1999.

It says there:

“I was pleased to hear that the Post Office formally accepted the Horizon automation system on 24 September although I understand that this was delayed by one month.”

If we look over the page, it has some background there:

“Formal acceptance of the reconfigured Horizon system planned for 18 August was postponed because of Post Office Counters’ concerns about training, system stability, data integrity (there had been an unacceptably high level of screen freezes) and the effective operation of the helpdesk. The Post Office accepted the system on 24 September on the basis that effective remedial action had either been completed or was in hand.

“Currently 950 post offices are automated and the Post Office expect that this will rise to 1,800 before Christmas. The Post Office is committed to achieving rollout of the system by March 2001 at the rate of 300 offices per week.”

So, again, there there’s mention in very summary form of the kinds of issues that are being experienced on the Horizon system.

Having seen those NFSP meeting minutes, for example, do you feel that, at that time, so August, September, October 1999, you were being provided with a frank assessment of the rollout success or otherwise?

David Sibbick: I have no reason to believe that the Post Office, that POCL, would have wanted to cover up any problems that there were. I can’t believe that they would have wanted to sign a cheque for £68 million, or whatever it was, for the system if they weren’t satisfied – well, in the words here, “that effective remedial action had either been completed or was in hand”.

I think – again, I’ve said before, a system of this size and this complexity was bound to have teething problems showing up and the issue was: how quickly can you jump on these, how quickly can you resolve them and put corrections in place?

I don’t know what the answer to that was because, as I say, I wasn’t there for very long after that.

Mr Blake: But do you think at that time you were being provided with sufficient information about how it was going?

David Sibbick: I don’t think we would have been provided with a lot of detailed information at all. We would have been provided with information about the bigger issues and told when they were – and told when they had been resolved. I’m not sure how much of this also came up through the Horizon group 1999.

Mr Blake: I’m going to take you to one more document before we have a short break, and then I’ve just got some individual issues to take you to that shouldn’t last too long.

Let’s look at this further document, it’s BEIS0000478. You produced some briefings and lines to take in autumn of 1999. I think a few different ones have been provided to you in advance of today, but it’s this one that I will take you to.

These are lines to take in respect of the Trade and Industry Select Committee report. Do you remember in summary what that report said or what that report was about?

David Sibbick: I don’t remember that particular document.

Mr Blake: Perhaps we could scroll down slightly.

David Sibbick: Yeah. I think this was – I mean, this was just lines to take on what the select committee had reported –

Mr Blake: Yes.

David Sibbick: – on.

Mr Blake: Perhaps if we keep on scrolling –

David Sibbick: Yes.

Mr Blake: – we can see where it goes to the Q&A brief.

David Sibbick: Yes.

Mr Blake: Over the page, please.

David Sibbick: Yeah.

Mr Blake: It addresses on page 5 –

David Sibbick: Right.

Mr Blake: – halfway down – these are simply, I think, press lines or lines to take, I think the – in fact, the covering document said “To: Ms Madson News”, so presumably that’s the newsdesk of the DTI, is it?

David Sibbick: Yes.

Mr Blake: Yes. It says there:

“Given the failures in this project, why didn’t the Government just terminate and find another supplier?”

The line to take there is:

“The Government is satisfied that the agreement has put the project back on track, this will deliver a modern online IT platform to some 40,000 counter positions in more than 18,000 post offices and represents the best value for money for the taxpayer.”

There are lots, if we keep on scrolling, of subjects but technical robustness is only addressed at page 13. Over to page 13, please, thank you. It’s the second point there, it says:

“IT consultants appointed by the Government’s review found the system to be technically robust and deliverable?”

So this is a point, an anticipated point, that somebody may put to the DTI?

David Sibbick: Yes. Yes.

Mr Blake: The response is:

“They also found that its deliverability wasn’t dependent on a number of other factors. Given the possibility of further delays with the project, and the lack of assurances on cost and timetable, the Government decided that a restructuring of the project had become essential.”

That reference there to IT consultants having found the system to be technically robust and deliverable, that seems again to be a reference back to the 1998 report and the DTI’s interpretation of that report. Do you –

David Sibbick: I think it must have been earlier than that. I think – my recollection is that the original Horizon, Horizon Mark I, if you like, which was – which was close to completion, although it wasn’t allowed to go ahead and get properly completed, the technical experts looked at that and said, in effect “If this had been allowed to go ahead we think it would have worked and worked well”, is my recollection.

Mr Blake: So you don’t think that that is a reference to, for example, the PA Consulting report back in 1998 that fed into the Horizon Working Group report?

David Sibbick: I don’t think specifically it was a PA report, no.

Mr Blake: No.

David Sibbick: I mean, various – at that stage, various people were looking at various things.

Mr Blake: What there hadn’t been, by this stage, though, so 1999 –

David Sibbick: Yeah.

Mr Blake: – was an up-to-date consultant report that found the system, as then being rolled out, to be technically robust and deliverable?

David Sibbick: I agree with that, yes, that’s true.

Mr Blake: Do you think that that was perhaps a missed opportunity?

David Sibbick: It might have been. I’m sure that the reason for it was the pressure now to simply get this thing on the road and going. In retrospect, it’s possible to say that, if there had been more time, things could have been done differently and perhaps better. But, at the time, and in the circumstances, that was the way that it was handled, as I say, possibly less than optimum.

But it was always the time pressure, and this is not just the time pressure from the Post Office or the DTI; it was the time pressure from everybody, you know. The Benefits Agency Agency wanted the thing moved forward so that they could get closer to the point when they could plug the leak of fraudulent money disappearing from the system that they had to account for. So everybody wanted a solution.

Mr Blake: Thank you very much.

Sir, I think that’s a convenient moment to take perhaps a ten-minute break.

Sir Wyn Williams: Yes, by all means.

Mr Blake: Thank you very much.

Sir Wyn Williams: Will that be 3.25?

Mr Blake: Yes, thank you very much.

Sir Wyn Williams: Fine. Thank you.

(3.14 pm)

(A short break)

(3.25 pm)

Mr Blake: Hello, sir.

Sir Wyn Williams: Hi there.

Mr Blake: Mr Sibbick, I’m going to ask you about a few discrete issues. I shouldn’t be very long. I can’t imagine I’ll be longer than half an hour.

David Sibbick: As far as I’m concerned, as long as you need.

Mr Blake: Thank you.

The first one is Japan. There are many documents that you have been provided with that address the relations with Fujitsu and wider relations, commercial relations. For the record, for example, they include BEIS0000127, BEIS0000281, BEIS0000127, BEIS0000421. Those are all from September and October 1998.

I’m going to start with December 1998, and can we look at BEIS0000336, please. There’s BEIS0000334 which is just a covering telegram, and I’ll skip over that.

Do you remember seeing this, at least in preparation? If not, we can take a bit more time over it. It’s a telegram –

David Sibbick: Yeah.

Mr Blake: – from Tokyo, from the British Embassy.


Mr Blake: It may assist – sorry, could we go to BEIS0000334, please. So this is from Isabel Anderson, who I believe worked for you or with you?

David Sibbick: With me, yes, yes.

Mr Blake: I think you are, yes, copied in there. This is attaching certain documents including a note of a meeting between Sir David Wright, Ambassador in Japan, and Mr Naruto, Vice Chairman of Fujitsu and Chairman of ICL UK, and Mr Sakai, Senior Vice President of Fujitsu, and Mr Yurino, director of ICL UK.

Then perhaps, if we could go to 336, this is the note, this is the telegram itself.

I don’t need to go into great detail of this particular document. Perhaps we can just look at paragraph 3. You have there Mr Naruto stressing the difficult and serious crisis that Horizon faced at that time. So that’s December 1998.

They were worried that HMG didn’t fully understand the seriousness of the suggestion and perhaps, at the bottom of the page, we have Mr Naruto fearing for Fujitsu’s domestic reputation if the project failed and he repeatedly stressed that the failure of the project will have serious repercussions for Fujitsu’s international standing.

Perhaps we can go down to the “Conclusion”:

“The contents of the letter and the tone of Mr Naruto’s approach make it quite clear that we have a major and potentially damaging problem on our hands.

The next paragraph, paragraph 8:

“Failure of Project Horizon and of ICL’s role in it would also knock a hole in the credit we get here for PFI/PPP initiatives. The Fujitsu/ICL role in Project Horizon has been seen as a template for high level political study here of this approach to large-scale public projects.”

Paragraph 9, it continues:

“… any threat to ICL’s continued viability would have profound implications for jobs in the UK and for bilateral ties.”

Could we go to BEIS0000278. This is another telegram from the British Embassy, 25 January 1999, so moving on slightly. This is, if we look at paragraph 1:

“At his request, Keith Todd, Chief Executive of ICL, called on me [that’s the ambassador] on … 23 [May] … after talks with the Fujitsu President. He expressed Fujitsu’s quote complete disbelief and lack of understanding at HMG’s decision-making process unquote.”

That telegram continues in a similar theme.

Can we look at BEIS0000315, please. This is a briefing for the Secretary of State on 4 June 1999, so quite a bit on.

If we go over the page, and over the page again, to the background, it sets out that there was a meeting on 14 May:

“… against the background of negotiations which had been taking place between HMG and ICL led by HM Treasury on a compromise solution …”

It sets out there, in paragraph 2, that:

“Mr Sekizawa stressed that unless an unconditional agreement could be signed by 17 May, Fujitsu would have to accept a £306 [million] provision in their consolidated group accounts. If that happened he would find it very difficult to justify to shareholders and analysts any course of action other than to walk away from the project and seek to recover the £300 [million] development costs already incurred.

Paragraph 3:

“Later that evening, Steve Robson wrote to ICL with a counter proposal requiring ICL to accept a loss estimated by ICL to be £250 million. There is no doubt that when news of this offer reached Mr Sekizawa and Mr Naruto on their arrival in Japan there were strong feelings that the company had been betrayed by the British Government.

“In these tense negotiations over the following days we know that it was your letter to Keith Todd of 21 May confirming the Government’s wish to proceed with the project, and later the personal appeal to Mr Naruto by the Deputy Ambassador on your behalf that persuaded Fujitsu not to abandon the negotiations.”

Can you tell us, over this period, how significant it was that – and how much pressure there was to maintain this relationship with ICL and not to damage ties with Fujitsu?

David Sibbick: I think it was, from the very beginning, seen within the DTI as very important indeed, that it would have been a major blow, as I think I’ve already described, to the whole PFI concept if a project of this importance and this stature, if you like, failed. But it was – it was – however important that was, that was only one element in our consideration.

The other was the damage to the network of post offices up and down the country if the thing failed. So we had these twin objectives, as it were, to keep on trying to press ministers into a solution that dealt with these two issues, and I think it was the combination of them, the industrial one and the purely political one, the subpostmasters and the network, and so on, that, in the end, the force of those arguments – I would say that, wouldn’t I – but the force of those arguments were what prevailed. And …

Mr Blake: We see at paragraph 2 the Chairman of Fujitsu stressing that an unconditional agreement needed to be signed by 17 May, and negotiations thereafter concerning the date – and May was seen as particularly important, May 2000 – sorry, May 1999. I mean, can you tell us how much time pressure there was coming from the Fujitsu end to get –

David Sibbick: Quite – quite a lot. As we understood it, there was a lot of pressure on them to get this sorted out so that they could sign off their accounts, as I understand it, for that year, and a lot hinged on this as to whether Fujitsu would have no alternative but to kind of cut ICL loose, disband it, whatever they were going to do with it.

And we understood that there were genuine, absolutely genuine, time pressures there, and this wasn’t just Fujitsu trying to scare us or whatever. We believed that it was real, rightly or wrongly, I think it was real.

Mr Blake: A second topic I’d like to ask you about is simply the financial success or otherwise of ICL. Can we look at BEIS0000255, please.

This is a submission to Sir Michael Scholar on 14 July 2000 and it relates to a draft National Audit Office report on the cancellation of the Benefit Payment Card project, so it’s a draft of that report that had been received by that date.

Can we look at page 4 of that submission, please. It’s paragraph 8 that I’d like to ask you about.

David Sibbick: Right.

Mr Blake: It says:

“Given how badly wrong the project went from almost day one, the [National Audit Office] report could hardly fail to make uncomfortable reading to a greater or lesser extent for each of the key players. Within this, however, our objective has been to secure a report which focuses in a positive way on the lessons to be learned from the project, and which without pulling punches at least avoids unnecessary criticism that could gratuitously damage the commercial prospects either of ICL (and through them our relations with their parent, Fujitsu) or of POCL.”

How important was avoiding damage to the commercial prospects of ICL and Fujitsu, even at this stage, after the rollout had taken place and the contracts had all been signed?

David Sibbick: I think it was important in the sense that ICL needed to be a healthy partner going forward on all this. You know, we weren’t there to make ICL rich or anything like that, but we did need them to be financially viable so that they could take this project forward, they could – they would have money to spend on developments, further development of the project, that was going to be essential if it was to survive more than a few years without completely running into the sand.

So, yes, we did want to see ICL financially healthy.

Mr Blake: Can we look at BEIS0000253, please. This is again 31 July 2000, so again long after the contracts had been signed and rollout had commenced. This is a submission from yourself to the Secretary of State.

David Sibbick: Yeah.

Mr Blake: It’s about the timing of the publication of the NAO report. I just want to look at the second half of paragraph 1, please, it says:

“ICL wanted early publication to minimise the adverse effect on their planned flotation in the autumn of a report which shows the company’s performance on the Horizon project in a less than flattering light.”

Do you think that, by that stage, the DTI had become too close to ICL?

David Sibbick: No, I don’t think so. There are two – there was a part of the DTI, not the part that I was in, that was responsible for sponsoring the electronic sector or whatever it was called. I didn’t have the sense that they were necessarily too close to ICL. I certainly wasn’t. I spoke to them periodically, I knew some of the senior people there. But, no, I don’t think we were too – I don’t think that we were too close to them at all. I think we had a genuine interest in seeing ICL as a healthy company in a very important sector of our economy.

Mr Blake: Do you think that it would be right for the DTI to be concerned about the timing of a publication to minimise the effect on ICL’s planned flotation, for example?

David Sibbick: If it was something that was going to happen anyway, and you could do it at a certain time, rather than another time, and that would be helpful to one of the partners of a huge project, why wouldn’t you do that? You know, why would you go out of your way to be unhelpful if you could do the reverse?

Mr Blake: Thank you very much.

The next subject I’d like to ask you about is PFI. So at paragraph 33 of your statement, and I think you’ve already mentioned it already today, you said that the:

“DTI avoided the loss of a major player in the electronics sector, the risk of future investment prospects, and the damage to the PFI brand.”

Then at paragraph 34 of your statement you refer again to “damage to the image of the UK’s PFI initiative”.

How important was the PFI brand?

David Sibbick: Erm … it was something to which the Government attached quite a lot of importance. It was Adrian Montague’s – I was going to say “baby”. He was sort of in charge of promoting that. I think it was just something that the UK had kind of come up with and a lot of other administrations were interested in that as a way of helping to finance public sector projects, and people who were looking to us and saying “Wow, aren’t you clever, this is a wonderful way of doing things”. Would have – well, we wouldn’t have wanted then to see the thing suddenly collapse and say “Not such a good way after all, perhaps”.

Mr Blake: Are you aware of any complications that PFI may have imposed in the project itself, such as problems with the sharing of information between Fujitsu and the Post Office?

David Sibbick: I’m personally not aware of that, no.

Mr Blake: I’m going to move on to prosecutions.

To what extent were you aware of any consideration being given to the use of Horizon for prosecutions, or Horizon data for prosecutions?

David Sibbick: I was not aware of that at all.

Mr Blake: Thank you very much.

Mr Sibbick, is there anything else that you’d like to add that may assist the Chair or that you would like to say?

David Sibbick: A number of things, I suppose, if I can kind of order them a bit.

The first – the first is: we – with the benefit of hindsight, we can all be geniuses and we wouldn’t have necessarily done things in the way that we did had we had wider sight or wider knowledge, as it were.

Perhaps the second thing that I would say is that you will see that I’ve put a lot of submissions, a lot of advice to ministers over this period. Ministers I’ve been fortunate enough to work for have been pretty bright people, more than capable of making up their own minds on things – try to give them the facts – they could accept what I was suggesting they should do, what the action should be, but they were clearly under no obligation whatsoever to accept that. If they thought I was wrong, they’d have said so, they’d have had no hesitation in saying so.

The third thing, perhaps, if I may, is that I don’t think any of the parties to this were acting in bad faith. I think they were promoting vigorously their own vested – and I’m sure – their own interests, which was what they were there, what they were there to do, and I think all of them genuinely believed what they were saying.

I’ve said several times that what the Benefits Agency wanted, what DSS wanted, on their terms made absolute sense, it was the right thing to do and, in a wider sense, it was also the right thing to do. It just so happened that there were some arguments on the other side that were also very persuasive and which, in the end, more or less prevailed.

Perhaps a final thought. I don’t know if it’s the final one, but another thought is that everybody acted – this was a huge complicated project, it was, to a large extent, treading ground that hadn’t been trodden before. It would have been wrong to expect perfection first time round, you know, it was never going to be like that. And then when it went wrong initially, various stakes had already been put in the ground. You know, we had a contract with ICL, it was a highly publicised contract, the Horizon project, and you couldn’t – you couldn’t undo that, you couldn’t sort of unsee that.

So there was a compulsion to say, “Okay, that’s there, we – it would be pretty awful just to sort of abandon it, we perhaps don’t have that luxury, we need to take it forward, we need to find some way of taking it forward”.

I don’t think at the end of this anybody got exactly what they wanted. It was a compromise and a very difficult compromise to reach. I was very pleased to play some small part in all of that.

I’m so, so sorry that it turned out badly in the end for so many people and I just wish your Inquiry every success in getting to the bottom of this and, above all, in making sure that nothing like this could ever happen again.

Mr Blake: Thank you very much, Mr Sibbick.

Sir, do you have any questions at all?

Sir Wyn Williams: No, I don’t, thank you.

Do I take it, Mr Blake, that you’ve have asked all the questions, in this instance, that this witness is to be asked?

Mr Blake: Yes, I have.

Sir Wyn Williams: Thank you.

Well, I’m very grateful to you, Mr Sibbick, for coming to give evidence to the Inquiry. I’m sorry that I caused a slight delay this morning, which I hope didn’t inconvenience you too much, and thanks again for attending.

David Sibbick: Thank you very much, sir.

Sir Wyn Williams: So 10.00 tomorrow, Mr Blake?

Mr Blake: Yes, thank you very much.

Sir Wyn Williams: All right, thank you very much.

(3.51 pm)

(The hearing adjourned until 10.00 am on Thursday, 24 November 2022)