Official hearing page

11 November 2024 – Jonathan Reynolds, Kemi Badenoch and Paul Patterson

Hide video Show video

(10.00 am)

Mr Blake: Good morning, sir.

Sir Wyn Williams: Good morning, Mr Blake.

Mr Blake: We will shortly be hearing from Mr Reynolds. He’s not yet in the room.

Sir Wyn Williams: That’s fine.

Mr Blake: As you, sir, mentioned on Friday, at 11.00 we will be taking a one-minute’s silence irrespective of where we are.

Sir Wyn Williams: Yes, fine. (Pause)

Mr Blake: Sir, I anticipate we won’t be starting for at least two or three more minutes.

Sir Wyn Williams: All right. Do you want me to remove myself from the screen or can we just sit here quietly?

Mr Blake: Entirely a matter for you, sir.

Sir Wyn Williams: All right. Well, I’ll sit here quietly.

(Pause)

Jonathan Reynolds

JONATHAN NEIL REYNOLDS MP (sworn).

Questioned by Mr Blake

Mr Blake: Thank you very much. Can you give your full name, please?

Jonathan Reynolds: I’m Jonathan Neil Reynolds.

Mr Blake: Thank you very much. Secretary of State, you should have in front of you a witness statement dated 26 September this year; is that correct?

Jonathan Reynolds: Well –

Mr Blake: At least in the bundle –

Jonathan Reynolds: In the bundle I’ve seen it, yes.

Mr Blake: – behind tab A two, it should be. Thank you.

Jonathan Reynolds: Yes.

Mr Blake: Can I ask you please to turn to the final substantive page, that’s page 8. Thank you. Can you confirm that that is your signature –

Jonathan Reynolds: I can confirm that’s my signature.

Mr Blake: – and that the statement is true to the best of your knowledge and belief?

Jonathan Reynolds: That is correct yes.

Mr Blake: Thank you very much. That witness statement has a unique reference number of WITN11470100, and will be uploaded on to the Inquiry’s website.

As is well known, you are Secretary of State for Business and Trade; is that correct?

Jonathan Reynolds: That’s correct, yes.

Mr Blake: Your predecessor is our next witness, Kemi Badenoch. You have a background as a solicitor; is that correct?

Jonathan Reynolds: That’s right, yes.

Mr Blake: Are you able to assist us in what area of law you practised.

Jonathan Reynolds: I worked for Addleshaw Goddard LLP, I did my training contact with them, I left before I completed my training contract, when I was elected in the 2010 general election, and the seats that I did my training contract in were corporate and real estate.

Mr Blake: Thank you. I’m going to bring up onto screen a printout of your responsibilities as Secretary of State. Can we please bring onto screen RLIT0000349, please. It’s simply a printout from the gov.uk website, outlining the responsibilities of the Secretary of State. We see there, if we scroll down, it says:

“The Secretary of State has overall responsibility for the Department for Business and Trade.

“Responsibilities include:

“Overall responsibility for delivery and strategy

“Cross-government business engagement

“Public appointments

“[Free trade agreement] negotiations, mandates and decisions

“WTO [World Trade Organisation], G7 and G20 ministerial meetings

“Overseas network.”

Is that correct?

Jonathan Reynolds: That is correct, Mr Blake.

Mr Blake: We also know there is an Under-Secretary of State for postal affairs and we heard from him on Friday. What do you see as your responsibility in respect of overseeing matters relating to the Post Office?

Jonathan Reynolds: First of all, Mr Blake, let me say I’m very grateful for the chance to be here. I’ve been following this Inquiry, as you would expect, and perhaps didn’t anticipate a general election meaning I’d have the chance to participate in it, so I’m extremely grateful for the chance to be in this given how important the work is.

I would say, first of all, I see it as being my responsibility for everything the Department for Business and Trade is responsible for, that ultimately I’m accountable for everything so the Post Office is a significant part of that. I also see my role within the whole of Government when there are matters affecting the Post Office that perhaps touch on other Government departments, that I am a key member of the Government in terms of making sure the rest of the Government is doing what we need in regard to the Post Office and, whilst I work very closely with my junior minister, Minister Thomas, who you’ve heard from, as part of the Inquiry, the significance of this particular issue, which pertains not just to the need for redress for the survivors of this egregious scandal, but actually for what lessons we take from that for the future of the Post Office, whether it’s business model for how it’s run, for its governance structure, that’s a very significant personal priority for me as the Secretary of State.

Mr Blake: We’ve talked a lot about redress in the past few weeks. If there is not full, fair and prompt redress for subpostmasters, do you take ultimate responsibility at a governmental level?

Jonathan Reynolds: Yes, I think this is an example of where, in the past, there has been insufficient accountability and ultimately, as the Secretary of State, I take accountability for everything that is within the portfolio of the Department of Business and Trade.

Mr Blake: How do you propose that full, fair and prompt redress is going to be achieved?

Jonathan Reynolds: The first thing I would say is I understand there has been, quite rightly, a lot of analysis in this Inquiry about whether there is a tension between fair redress and the speed at which it is delivered and I understand why that is of such importance to the work that is going on here. Since the general election, there has been a significant increase in the pace at which compensation has been paid, the overall quantum of compensation is up in the last four months by roughly a third, and the number of claims to which there has been an initial offer being made in response to that claim has roughly doubled in the last four months to what it has been in the four months preceding the generation.

But I would very much want to say that I do not believe that increase in pace has been at the cost of fair or accurate compensation being made.

I think if you look at the key decisions that we’ve been able to make since the general election – so obviously the compensation scheme for the overturned convictions, legislation that was passed in the wash-up period between the two governments, the appeal scheme being announced for the Horizon Shortfall Scheme, the publication of the Capture report, the publication of redress data and the fixed-sum awards being offered under the HSS scheme, I think you could put that together into a package and see that we are trying to, wherever possible, offer a reasonable sum of compensation by fixed award, if that is what a claimant themselves wants, a detailed breakdown, if that is the appropriate way forward, greater capacity to process claims, greater deadlines in terms of when the 40-day period we put in place under some of the schemes by which an initial claim is made.

These are all ways in which – and the position is still not, you know, to everyone’s satisfaction but I think you can see we’ve tried to speed up compensation and redress without that being at the cost of any claimant feeling that’s not an accurate or fair level of redress for them to receive.

Mr Blake: Thank you. We’ll get into the specifics of that in due course. There are two matters that you say that are particularly important issues of concern, the first you have described as driving cultural change and the second is redress. We’ll get to redress shortly but, in terms of cultural change, what do you see as the most important way in which the culture at the Post Office can be changed?

Jonathan Reynolds: I think the scale of this scandal, as I say, cannot be separated out from the business model and the governance structure of the Post Office. So we need, from the work that I lead as Secretary of State and what this Inquiry is seeking to do, to not just respond to the obvious injustice and the need for redress to follow that, but to understand why, as an institution, the Post Office has gone so wrong, and what needs to change in future.

So, for instance, I believe that is everything from, you know, the internal governance structure of the Post Office, right down to the level of remuneration that postmasters receive. I mean, I think, despite the scale of this scandal, Post Office is still an incredibly important institution in national life. I think it still has an incredible role to play in communities. I look at the business model of the Post Office and I think, even accounting for the changes in the Core Services that are provided, I mean, people are familiar with the decline of letter volumes, there’s still a whole range of services that are really important but I don’t think postmasters make sufficient remuneration from what the public want from the Post Office.

And I think that’s going to require some very significant changes to the overall business model of the Post Office, as well as looking at what the future is in terms of the governance arrangements, that will, I think, to be frank, have a greater level of trust and responsiveness to the people providing the services on the frontline.

Mr Blake: Okay well, once again, we’ll get to the detail of that shortly. If we now focus then on redress and compensation.

We’ve seen in this Inquiry at certain stages there has been disagreement between your Department and the Treasury on matters of redress. In your current experience, have there been any disagreements during your term in office?

Jonathan Reynolds: No, I can genuinely say, Mr Blake, that there haven’t been, and I know there are a whole range of issues, perhaps perception of historic tensions between the Business Department and the Treasury, specifically on this issue, which is obviously a personal priority for me but also for many members of the Cabinet. I can say the support I’ve received from the Chancellor and the Chief Secretary to the Treasury, who, of course, formerly was the Chair of the Business and Trade Select Committee and the previous incarnation of the Business Department before that, I have exactly what I needed.

So if you look at, for instance, the announcements in the budget, first of all you see a greater amount of compensation now appearing in the national accounts, from the previous figure.

Of course, whilst that’s an increase, it’s actually even more significant than that because you will know the compensation previously for this – for the four redress schemes was accounted for in the Treasury Reserve, which was heavily overspent, so essentially not only does the budget put a greater sum towards redress, it confirms that is real money in place.

But you may also have seen in the budget that the allocation of money for redress has moved from being DEL – departmental expenditure limits – to annually managed expenditure, in other words, it is demand led. So whatever the level of redress is required, I can guarantee that this Government, that the British State, will be able to pay for that, and that has already been agreed with the Treasury and has appeared in the budget.

So, in terms of the support from Treasury colleagues, I could not have asked for more.

Mr Blake: Can you assist us, then the £1.8 billion figure that was announced in the budget, we’ve heard some evidence suggesting that’s not new money. Is it new money or, if it isn’t, to what extent has that situation changed?

Jonathan Reynolds: Well, it is new money because the allocations in the past came from an overall position, and I appreciate we’re getting into some of the politics of the budget here, where there were frankly too many claims on that Treasury Reserve for that to be genuinely ever expected to be paid. Now, governments do sometimes, I think, historically, you know, ascribe different policy costs to the Treasury Reserve but, you know, there were more demands on that money than money existed.

So the confirmation that not only is there a greater sum of money being allocated to redress but that can be absolutely guaranteed by myself, by the Treasury and the Government, is, I think, a significant development.

Mr Blake: If, ultimately, the claims fall under that level, is the rest of that amount of money going to be spent on something relating to postal matters?

Jonathan Reynolds: Well, if, because of the designation, as annually managed expenditure, to be frank, my assumption behind that has always been to make sure, if the sum of money for redress was greater than that, that I could guarantee it would be paid. I haven’t considered an underspend in any way, if I’m being honest about that. If it was, that would be a conversation that I could have with Treasury colleagues but, to be frank, my efforts have been to make sure that we could absolutely stand behind any sum of redress that the process came to.

Mr Blake: We’ve hearing discussions of widening redress to, for example, assistance and managers, or possibly to family members. Does that figure cater for that expansion and, if not, then what is the plan for funding that expansion?

Jonathan Reynolds: So you will understand we have, as well as the number of announcements that we’ve made, been looking at a whole range of issues, Mr Blake, exactly as you describe. A particularly significant one of those is around family members, where we have been looking at, for instance, if there was agreement to extend to family members, would the existing schemes be the right mechanisms through which people would do that; would it require something else? Obviously a whole range of fairly legal definitions as to who – how the scope would cover everyone who that needed to do.

If there were significant extensions to the eligible claimants at present, I would seek Treasury agreement for additional funding for those. It’s possible that sum of money might be sufficient but, if there was to be an extension in any way, I think the appropriate cause of action would be to ensure that there are agreements in place with the Treasury that due funding is available for those.

Mr Blake: Are you personally aware of any cost projections in respect of how much that might cost?

Jonathan Reynolds: I haven’t seen in any of the official advice I’ve received a specific sum of money. I think the costs – the work being undertaken covers the potential scope but that could be quite wide or quite narrow, depending on the definition of harms you were seeking to provide redress for and, to be frank, you will understand that part of our work will be guided by the findings of this Inquiry as well, and the recommendations that might come from it.

Mr Blake: Thank you. Could we please bring up onto screen BEIS0000888. This is an email exchange that we took the Minister to on Friday. We now have the underlying submissions, so we’ll go to the submission as well, but if we could perhaps start on page 5 and into page 6. At the bottom of page 5, we have the summary of the submission. It says:

“Timing: We would be grateful for a swift readout. Post Office has received regular correspondence from postmasters awaiting payment of the £75k fixed sum following the March announcement and we expect it to be raised during next week’s redress announcement.”

It makes number of recommendations to the Minister. The first is:

“Implementing your predecessors’ announcement to introduce a fixed-sum award of £75k to [Horizon Shortfall Scheme] claimants, to bring the scheme in line with the GLO scheme.

“b) Capping awards at £50k where postmasters reject the fixed sum and are offered a lower amount with no option to return to the fixed sum.

“c) Not providing legal advice to claimants to consider the offer of a fixed sum.

“d) Consider whether to delay the introduction of a fixed-sum award until we have clarity from [the Treasury] on funding for HSS appeals, noting that this could take several weeks or months.”

Finally:

“e) Note the revised application process …”

We’ll come on to most of those but, in terms of (d), we were just speaking about issues with the Treasury. Was there an issue here with the Treasury and was it overcome?

Jonathan Reynolds: Mr Blake, no, I’m not aware of there being any Treasury element to the conversation around this. As you say, the principles behind the key policy features of this submission had already, I think, broadly been established in Parliament as desirable, that the way the election had fallen meant, essentially, previous announcements were being implemented by ourselves as a new Government, and the key aspect of this is, obviously, the presentation of a fixed-sum for those cases where claimants would feel that that was the best course of action for them, effectively offering an expedited fixed sum, so it as to be able to get compensation and redress to people as quickly as possible and, of course, alongside that, if they believed that would not be an appropriate level of redress, the existing ability to have the individual assessment go forward.

Mr Blake: The fixed sum seems to be in relation to the HSS appeals mechanism. We can come on to look at that shortly. If we scroll up, please, we see on page 2 confirmation from the Minister. In the middle of page 2, thank you very much, it says:

“Thank you for attending the meeting today – for the benefit of the chain, the Minister was content with the recommendations a), b), c) and e) in the [submission] but has asked not to delay the introduction of the fixed sums award outline in recommendation d).”

So the potential delay that might be caused in respect of the appeals mechanism was put to one side, and the announcement made in any event.

If we please scroll to page 1 we can see that you had reviewed the submission as well and agreed with Minister Thomas’ steers. Is that something you recall?

Jonathan Reynolds: That’s right, that’s right, Mr Blake.

Mr Blake: Perhaps if we’re able to, it’s only been recently received but the submission of 22 July should have a unique reference number of BEIS0001228. Thank you. It’s going to come onto screen. I think it’s a submission that we didn’t have as at Friday’s hearing so I’d like to take you to it, just to clear up a few matters that were addressed on Friday.

So this is the underlying submission of 22 July. We see there a summary of the issue:

“This note seeks your agreement on delivering a fixed-sum award to provide redress to postmasters participating in the Horizon Shortfall Scheme.”

The “Recommendation” is exactly as we’ve seen in that covering email.

Can we please turn over the page to page 2. Paragraph 6 addresses the £50,000 cap. I’m just going to read to you that paragraph. It says:

“From a public money perspective, the £75k will be more efficient to administer than the full claims process. If the £75k remains available to those who pursue the full claims process, there is a high risk that many more will choose this option leading to greater costs and delays. We therefore recommend that claimants who reject the £75k should not be able to return to it if, upon full assessment of their claim, they are awarded a lower amount. Instead, we recommend that the award is capped at £50k (or the value of the offer if it exceeds £50k) to ensure fairness and help provide value for money for the taxpayers. This is consistent with the approach on the GLO scheme, although there haven’t been any instances of a claimant receiving lower than £75k in practice.”

This is a proposal that has been described as a jeopardy issue. It’s been criticised by some in respect of the pressure that it places on claimants who may be elderly, may simply be wanting money as quickly as possible, and are put in a position where, if they don’t accept the £75,000, they are at serious risk of losing a considerable amount of money. What is your view on that?

Jonathan Reynolds: So, Mr Blake, the public policy perspective on paragraph 6 is obviously that, in order to give people a route to redress as soon as possible, that’s what the fixed sum process is there to do, and my view was always that that should be set at a level where, for most people who would consider that, that would be, you know, a decent level of redress that they would feel was appropriate to the situation that they were in.

Obviously you’re right to say, when you have a choice between a fixed sum and an individual assessment, you wouldn’t want there to be a sense of risk or jeopardy that pushed people to a course of action that they ideally didn’t want to go under. So the £50,000 reference in paragraph 6 is effectively a security cap. It’s a floor by which you will be aware if you’re going through that process that you don’t risk, for instance, getting a sum of redress which is considerably below the £75k.

So you will see, I hope, in each of the decisions made, an attempt to provide people with a genuine choice as to what is the fair course of redress for them, bearing in mind quantum of redress and the timescale at which they will receive it, but always trying through, whether there’s the £50k floor in this proposal or, for instance, through the HSS appeals scheme that we’ve announced, a set of checks and balances that hopefully give people assurance that it’s not an attempt to force people down a route they wouldn’t necessarily want to go down, but to give them some assurance.

Mr Blake: How about the consideration of value for money for taxpayers in setting the £50,000 level where it is?

Jonathan Reynolds: Well, I think in every decision that you make as a government minister you always have to have regard for the fact that this is taxpayers money, ultimately, you’re making decisions and you want it spent fairly, but the key determinant, I would say, of the sums of money in this submission, is what are the appropriate levels from the perspective of fairness for redress that are put in place. You will see, obviously, I think people understand, if you didn’t have the distinction between the two schemes, you wouldn’t be creating essentially the capacity to consider the more complex claims in a way that you would want to make sure there’s fair and speedy redress for people in that cohort.

Equally, I think you wouldn’t want a situation where it was a choice between a fixed sum and no kind of security, if you went down the other route.

Mr Blake: Thank you. If we could scroll down because the submission may be new for a number of the Core Participants. I’ll just read to you paragraph 9, which addresses value for money. It says:

“There will be overpayment duty to this intervention. There is a risk that very small claims could make up a significant proportion of expected late applications, and all would be entitled to £75k. As of June 2024, the Post Office have paid [approximately] 600 claimants £5k or less (and have paid over 100 of these claimants less than £1k). However, officials believe the measure provides [value for money] overall as there are no lower cost alternatives that ensure equal treatment of [the Horizon Shortfall Scheme] and GLO claimants. Offering a lower or no fixed payment is unlikely to reduce the overpayment risk and may increase the total costs to [the Government]. The £75k fixed payment also reduces the administrative costs of resolving potential appeals due to under-settlements. As set out above it also mitigates some of the criticisms that the [Horizon Shortfall Scheme] applicants have under-claimed due to the lack of upfront legal advice and problems with the consequential loss guidance.”

Does that summarise for you the position in respect of the value for money?

Jonathan Reynolds: Yes, Mr Blake, I have always accepted there will be, in some cases, effectively an overpayment, relative to the actual financial loss but I think we would all accept, when you consider what the Post Office, what the UK State has put some of these people through, there’s a wider set of factors to consider, and that the kind of approach articulated in paragraph 9, whilst, yes, on the one hand there would be some people who could nominally be said to receive a considerable sum in relation to the shortfalls that they had been held accountable for, when considered in aggregate, this is a fair and reasonable approach.

Mr Blake: Thank you if we please turn over the page and scroll down to paragraph 16, about halfway through that paragraph, it says:

“Officials have discussed a potential closure date of 31 March with Post Office, but this timing may need to be reviewed. You will receive separate advice on scheme closure date in the next few weeks.”

We’re going to come on shortly to the closure dates of both the Horizon Shortfall Scheme and also the GLO. Are you able to confirm whether you did receive subsequent advice on this issue?

Jonathan Reynolds: Yes, I have received, Mr Blake, a further advice note on the potential closing dates for some of the compensation schemes.

Mr Blake: Thank you. If we scroll over the page, please, there’s a section on legal costs, that’s in respect of the advice that’s provided to applicants to the scheme:

“The current policy on the [Horizon Shortfall Scheme] legal costs is that Post Office will reimburse reasonable fees for postmasters to seek advice on their offer of compensation. For those who wish to accept the £75k fixed sum, either as a top-up where they have already settled their claim below this amount or those who have not yet settled, we do not think that the costs of legal advice should be reimbursed. This is because: the value for money is diminished by incurring significant expenditure on claimant’s legal fees; legal involvement will slow delivery down; and postmasters who settled below £75k have already had the opportunity to seek legal advice and are now being offered a higher amount.”

Can you assist us, then why is it that applicants who accept the fixed-sum award should not be provided with legal advice?

Jonathan Reynolds: So, Mr Blake, the intention of this point, of the policy, from my point of view, was always that I believed people who were able to make a very clear personal choice that they would be in a satisfactory position to accept the fixed-sum award would be able to do so, and the point in relation to legal advice was really to continue with the aspirations that that could be delivered at a significantly faster pace than previous compensation had to date.

It was always my belief, and is my belief, that anybody who has a more complicated case, who believed they were borderline in terms of whether the £75,000 fixed sum would be adequate redress or not, would go down the route of individual assessment, and this was simply a way of getting appropriate redress to a significant group of people as possible who would be able to make that decision without regard to their own legal advice.

Mr Blake: Do you recognise the risks that have been articulated in the Inquiry about certain individuals who might fall slightly above the £75,000, say £85,000 or £95,000, and don’t take legal advice and end up in a worse position?

Jonathan Reynolds: Yes, absolutely. I think whenever there’s any kind of threshold in public policy it’s always people close to, above or near on that threshold that some of these particular issues will emerge from. You referenced in your previous question the fact that a number of the claims would technically result in overpayment if they went down the fixed-sum route to redress. So my assumption here has always been that there will be a significant and is a significant group of claimants for whom this decision is relatively straightforward and anyone in that more complex position would go down the route of individual assessment, and, in fact, we’d have greater capacity to give those people appropriate redress at the pace they needed it at, if we were able to free up capacity to do so because of being able to offer a significant fixed-sum award to people who were in a position to make that decision quite clearly.

I will, just say in relation to that, I’m aware that there has been, you know, at various times, particularly in the public domain, criticisms about, you know, how many different stages this process involves, you know, different sets of lawyers and the cost of those. That has never been a factor, you know, in a decision like this. When you look again at the scale of this injustice, you wouldn’t want to, in any way, limit access to legal advice as part of that. This was simply about how to appropriately run the compensation schemes.

Mr Blake: Thank you. Paragraph 19 says:

“There is a risk that not offering legal advice will be criticised as unfair on postmasters given previous commentary about low levels of legal representation for claimants in the [Horizon Shortfall Scheme]. However, as this intervention will benefit postmasters and is intended to be delivered swiftly, it is a defensible approach that ensures the benefits of the policy are fully realised and we recommend that approach. A separate decision to introduce an appeals mechanism would also help here.”

Can you assist us, what is the current position on the appeals mechanism, so far as you’re aware?

Jonathan Reynolds: Yes. So we have made the announcement that we will accept the Advisory Board’s request for an appeals mechanism. That work is proceeding at pace. I believe – and I hope you will understand I have to formally announce any new initiatives to Parliament itself – but I hope to be able to have some of the details able to be presented to the House of Commons in a very short period of time, certainly looking towards the very beginning of next year.

Mr Blake: Thank you. In terms of the fixed sum, we’ve heard some evidence about concerns for those who sign up to that fixed sum, that they are waiving any right to an appeals mechanism that they’re not yet aware of how it will work. What’s your view on that?

Jonathan Reynolds: Well, you will have seen in the bundle that the reference to this that I made in an oral statement I made to Parliament, shortly after becoming the Secretary of State. In that statement, I talk about how the appeals mechanism is, in design, there to make sure people who feel that there hasn’t been appropriate consideration of all the evidence, they’ve got new evidence, can then have that considered through that appeal process.

In practice, I believe that appeals scheme will be open to anyone who is dissatisfied with the result of their claim. Given the appropriate safeguards, caps and a process that’s in place already, I’m not sure that will be too large a group of people but I think it’s an important safeguard in the system to have. But, effectively, just to repeat that, to be clear, I see that as being available to anyone under the HSS scheme who is dissatisfied with the result of their claim.

Mr Blake: Might that include those who accepted the fixed sum?

Jonathan Reynolds: Not those who have accepted the fixed sum, or I believe that would result in insufficient capacity in that scheme to deal with the kinds of cases we’re most interested in making sure have again had that full, speedy and effective redress.

Mr Blake: Can we please turn to RLIT0000413, please.

Sir Wyn Williams: Before we do, Mr Blake, could I just ask one or two questions about this myself?

Mr Blake: Absolutely.

Sir Wyn Williams: First of all, in relation to paragraph 19, since it’s still – well, it was on the screen – this is one of the things that’s going around in my head, Mr Reynolds, so I would like your help with it.

My understanding is that, under the HSS scheme that operated before fixed offers were introduced, once the scheme got to the point where an offer was made to a claimant, he or she, that is the claimant, at that point could take legal advice and be recompensed for the cost of it, subject to a limit, about whether or not the offer should be accepted or not, all right?

Now, in a sense, all that’s happening with a fixed sum is that an offer is being made at a much earlier stage because many of the steps leading to an offer have been left out. So I’m still struggling to see why there’s a blanket refusal to allow legal advice about the offer of £75,000. I take your point, Mr Reynolds, that for many people the answer will be obvious and, in those circumstances, I think you can reasonably assume that they wouldn’t bother with legal advice.

But there are going to be some cases where there are difficult decisions to be made, and it’s quite tough, I think, and I’m expressing a very provisional opinion, to think that the claimant in those borderline cases either has to make a decision without legal advice or pay for it themselves.

So my question to you is, why is it a blanket no recompense for legal advice, as opposed to a more nuanced policy, which would allow for, shall we say, the obtaining of legal advice when it’s obviously a borderline case?

Jonathan Reynolds: Yes, thank you, Sir Wyn. I know you’ve taken a particular interest in this matter, quite rightly. I would say the view in terms of the submissions that we received, that became the policy, was that to involve legal advice in such a way in the fixed sum would go against the objective of having a route to redress that was speedy, straightforward, easy to deliver at pace. I have always been of the view, as I said to Mr Blake earlier that anyone with any, perhaps, complexity or grey area in whether that would be the appropriate route for them would anyway go down the individual assessment route and take the offer of the funded legal advice.

That was part of that. I appreciate what you’re asking specifically is why not have an area – a bit of discretion in that, in terms of those particular cases? I think that is a very reasonable point and I can assure you that we are looking very much to the work of this Inquiry, in terms of lessons for the future and whether there would be the need, when, you know, dealing with schemes like this, or indeed this one, to take account of that. So I take on board your feedback on that point very much.

Sir Wyn Williams: Well, I am not making a recommendation in advance, Mr Reynolds, I assure you, but I did want to clear my thought process at the very least about that, so thank you very much. Could we go back to paragraph 6, please.

Mr Blake: That’s page 2.

Sir Wyn Williams: It’s the sentence four lines down:

“We therefore recommend that claimants who reject the £75k should not be able to return to it if, upon full assessment of their claim, they are awarded a lower amount.”

Fine, all right. I’ll park that and think about it. But there’s an intermediate position, isn’t there, which I want to canvas with you again because I’m sort of having these ideas floating in my head. The £75,000 is rejected, and the claimant goes down the route of full assessment but, long before he or she gets to full assessment, he or she realises (a) that their claim may not be as valuable as they thought or (b) just out of frustration, they are fed up with the process.

There is no getting off point, as I understand it, once you reject the £75k, you’ve rejected it once and for all. You can’t change your mind, shall we say, three or six months later but long before any offer is made to you; is that reasonable, do you think?

Jonathan Reynolds: Well, Sir Wyn, I believe that is the position.

Sir Wyn Williams: Yes.

Jonathan Reynolds: I have to be frank, I’ve never considered a situation properly where someone is in that place where they may wish, before the final determination is made, to change their route to redress. So I think that is an interesting proposition. I think you’d have to, in order to maintain the objectives here of the two routes to redress, decide when and how that would be appropriate to do so. It would also be my aspiration, to be frank, that compensation redress is delivered at such a pace that there aren’t significant periods between the claim coming in and the money going out the door to pay for that redress, but that is unfortunately the situation we have with a number of the claims.

So I think there would have to be some appropriate safeguards in place as to when that were possible. But it is something that could happen, if that would be where we believed we needed to make an alteration, again to provide the right redress to people at a pace that they deserve it.

Sir Wyn Williams: Thank you.

Thanks, Mr Blake. Back to you.

Mr Blake: Thank you very much.

If we could return, then, to that Guardian article at RLIT0000413. It addresses the potential deadline, and this time it addresses the GLO scheme, rather than the Horizon Shortfall Scheme. But I’ll just read to you a few passages:

“Post Office operators affected by the Horizon IT scandal will not all receive payouts by the March 2025 deadline called for by the campaigner Sir Alan Bates, the postal minister has admitted.

“Gareth Thomas said it would be difficult to achieve the deadline but promised that there would be ‘substantial progress’ towards clearing the compensation claim backlog by next summer.”

It says a little further down:

“‘I wish I could commit to Sir Alan’s timeframe’, said Thomas, speaking to BBC Breakfast on Wednesday. ‘I think we will have made substantial progress by next summer’.”

Are you in the same position: are you not able to commit to a timeframe and, if so, when, do you participate?

Jonathan Reynolds: Mr Blake, I’ve thought about this a great deal and, obviously, anything put forward by Sir Alan in particular I’ll consider to a significant degree. The position I’m in is I’m trying to make sure people get redress for a horrendous scandal, and that’s an important job of work. At a minimum, I don’t want to do anything that makes that injustice even worse, and the worry about a deadline, can you imagine a situation where, for whatever reason, a claim has not come in, I think it would be unconscionable to say that is not going to be considered.

Now, where I really do share Sir Alan’s frustration is in the fact that the real significant delay in the GLO scheme is in the claims arriving in because of the preparation for them. So I share all of Minister Thomas’ concerns but the last note I sent to my own officials was to say that, if there was a situation where we were still, going into next year, frustrated at the lack of claims coming in, even though I’ve got those concerns I’ve just articulated, I may wish to go forward with something like that, that would make clear I’ve got to have those claims in, in order to get people the redress and the justice that they deserve.

Now, I’d obviously want to make sure I was putting myself in a position where I wasn’t committing any further injustice in the future but, if my frustration in those claims not arriving at the Department meant that I felt that was the only way to speed this up, and I felt that wasn’t going to prejudice any individual claim, based on the information that I had, it will be something that I will consider because obviously I want to get redress to these people that they deserve, as soon as possible.

Mr Blake: Have you done any blue-sky thinking, either in respect of the Horizon Shortfall Scheme or the GLO or in respect of any of the other schemes, as to whether matters can be sped up, whether it’s by lowering the evidential burden or in some way making it easier and quicker?

Jonathan Reynolds: We think about the pace at which redress has been delivered a great deal, and I said to you in my introductory answers that obviously we have seen an increase since the election, but that has always been, for my personal view, not in such a way that has reduced the accuracy of the redress payments being made or in a way which has meant that claims today are being dealt with to a different evidential threshold to ones in the past. I think there probably would be some judicial review, you know, risk if that were seen to be the case.

Where we’ve seen increases in the pace at which redress has been delivered, some of those are just old-fashioned issues of capacity and focus. As I say, it has been clearly an objective of the new ministers, of the new Government, to make sure this is being done at pace but, again, I’d just like to reassure people that there is no sense of that being done at the cost of accuracy or a change to how cases are being considered relative to the past.

Mr Blake: Thank you. I’d like to move on to a new topic which is the Post Office Horizon System Offences Act. It came in just before the election. I think you’ve said in your statement that you that some involvement. Can you assist us with what that involvement was?

Jonathan Reynolds: That’s right. I mean, people will be familiar with the challenge that the then government had and we, as the opposition, were sensitive to, which was you have a large cohort of people for whom they were clearly wrongly convicted. There are two major problems with the traditional route to overturning those convictions: the Criminal Cases Review Process and Commission. Firstly that a lot of those people had lost all faith in the justice system and I think we can understand why that would be the case and, second of all, the time frames for where we had got to and extrapolating that to where we would get to were, for years and years – I mean, it was absolutely conceivable that if we had relied on the traditional constitutional route to doing that, many of those people would never have had the justice they deserved and obviously would never have got then the redress that they deserved because they would have been, at that point, in the process.

So when – I felt I’d had a good working relationship with the then Conservative Government’s Postal Affairs Minister, Minister Hollinrake, when the potential – he approached me and told me that there was potential for, you know, an Act of Parliament, very significant constitutional terms, of course, to overturn these convictions, I was immediately aware of just how significant that would be and the reasonable concerns a lot of people would have about constitutional protections and oversight of that, but just, looking at the problem, it was clear to me that was really the only vehicle that we had to deliver justice.

And so you will I think, Mr Blake, appreciate, you know, in any political context, you’ve got to consider not just the here and now but what are the precedents people might take from that?

You know, I think we’d all say we wouldn’t want a system where there were – you know, where it was a common occurrence for Acts of Parliament to overturn the courts. That is not an easy or attractive proposition to have. So I really led conversations on our side of the aisle within the Labour Party about why I believe this was the best and only vehicle to doing that and, between ourselves, I believe we secured the cross-party agreement that was necessary – I should say, at this point – we had no idea the general election was coming, so we had no idea it would be part of the expedited process that happens when an election is called to pass, the so-called wash-up procedure, when legislation goes through much quicker than it usually does.

And I think if you looked at some of the Hansard exchanges around that, we very much tried to indicate the unique circumstances that had led to this position being reached, and the cross-party agreement that lay behind that, and some of those protections we thought were necessary around that. But I will say, Mr Blake, I’m very much aware, in a year, 10 years, 50 years, whatever, there will be people who will say, you know, that was not the right decision because of the constitutional precedent, which I don’t believe it did set by the way a precedent because of the unique circumstances of this, but I know people will maybe cite that in future.

But I absolutely believe, without that cross-party agreement and breakthrough, we’d be in a position here today where this cohort of people would not have had their convictions overturned and they would not be receiving redress.

Mr Blake: Are you able to provide us with any update as to how many people have been contacted in respect of that legislation?

Jonathan Reynolds: Yes, Mr Blake. So you will be aware of something, to be frank, at the time when we were having these discussions and it wasn’t until I’d become the Secretary of State, and was several weeks into the job, that I became aware of, which is the Ministry of Justice, which obviously – the judicial system held the records for this group of cases – was not in a position to speedily inform this cohort of people of their eligibility – that their convictions had been overturned and their eligibility for redress.

I’m really aware of the fact that this is – this whole issue is an example where there’s a sense to different bits of Government, different bits of the State not accepting accountability, so when I talk about my frustrations with the records, it’s not me in any way passing blame or the buck for that, but I simply wasn’t aware that it wouldn’t be relatively straightforward having had this breakthrough to contact these people.

For the people in the Horizon Convictions Redress Scheme, there are 172 claims that have been received. That is up considerably obviously because it’s a relatively new scheme. Full and final settlements under that scheme are now at 36 but there’s still a significant number of people therefore who haven’t had those interim claims. Because of the problems with the records we made a direct appeal for people to contact us directly and go into the system, though I again appreciate they will say, “Why don’t you have the records to contact us?”, and we are regularly in touch with the Ministry of Justice about their efforts to identify specifically claims; the nightmare scenario frankly would be someone receiving a letter who wasn’t eligible to receive it.

But it is a frustration and, again, I would repeat the point that people who are in this position can contact the Government directly in order to go into the system and that the Ministry of Justice is working at pace on their side of this to make sure they’re identifying the right people.

Mr Blake: You spoke about those who aren’t eligible. We have heard some evidence in relation to a category of people who aren’t covered by the legislation, that’s, for example, those who appealed but who were refused leave to appeal or whose appeals were rejected and, as a result of them having previously appealed, they are then cut out of a scheme that overturns the convictions of those who didn’t even go to the appeals stage.

What is your view on that position?

Jonathan Reynolds: So the specific criteria for eligibility under the Act of Parliament, obviously that was decided by the previous Government but we were aware through the Parliamentary exchanges of the decisions that were taken. I think the two most significant ones were this cohort of people, so people who had already been able to go through the justice system but had not had their convictions overturned, the view being that they had already had the details of their case assessed in that way.

And the other cohort were people who were not prosecuted by the Post Office, they were, for instance, by the Department of Work and Pensions, where there would be a different set of factors, different position in terms of obviously the well known failure of disclosure process by the Post Office, wouldn’t apply to them, and they’d been a different position. I should say as well, of course, that the devolved governments pass their own legislation because of the devolved nature of justice across the United Kingdom.

But specific to the cohort you referenced, Mr Blake, I believe the previous Government system assessment was they would already have had their individual circumstances assessed and therefore in a different position to the majority of the cohort who were – then needed this legislation in order to have their convictions overturned.

Mr Blake: How about that other group that you identified: those who were prosecuted by other agencies?

Jonathan Reynolds: So again, I believe – if I recall the conversations that were had and exchanges in Parliament, that was based on a genuine sense that the circumstances of those cases were different, so there wasn’t the same failure of disclosure that we were aware of in the Post Office prosecutions. And that frankly there would be, within that cohort, a greater number of cases where there were legitimate issues that had been pursued, and the blanket exoneration of the Act of Parliament wouldn’t be the appropriate vehicle to include for those cases.

Mr Blake: Thank you. My final topic today relates to the future of the Post Office. If we put aside what external consultants may be planning, so Boston Consulting Group, I think, have been involved in planning. We’ve heard about a strategic review from a company called Teneo. If we put those all aside, do you have any ideas as to how the Post Office might be changed to avoid a repetition of what we’ve seen in the past?

Jonathan Reynolds: Yes, Mr Blake. So as I said this in my earlier answers, I believe you cannot separate out the issues of justice and redress that this Inquiry is rightly dealing with from those wider conversations about the future of the Post Office. I think the governance has to change. I think one of the most legitimate, you know, questions that I get, you know, from members of the public and constituents is the question of how did the Post Office not believe something must have gone wrong when all of a sudden after Horizon was introduced, there was a huge spike in convictions; what did they think was going on?

And I think you have to assume that what they thought was that Horizon was catching people, rather than something could have gone wrong with the system and it’s just inconceivable that that number of people were all of a sudden committing, you know, criminal offences and needed to be prosecuted.

And so the governance model has to change. There has to be connected to the change in the business model where postmasters have to earn more money from the services the public want. I want to say specifically, because I know it’s come up in the media, that any question about the future structure/governance of the Post Office would not be this Government just, you know – for instance, on the point of potential mutualisation, it wouldn’t be just passing it over and saying “Look, there that you go, you’re going to run yourselves in a different way”. We’re very much aware that the structure and the business model has to change in order to be sustainable. There are obviously some particular issues like the funding of a replacement for Horizon, which couldn’t be funded at the minute from the Post Office itself.

So those issues have to be addressed before we then look to what the future relationship is, but I am absolutely certain that the future has to be one that addresses the lack of trust, the lack of reciprocity and, you know, genuine regard for people who are providing the front-door services of the Post Office.

And frankly I believe anything should be on the table as to the right way forward around that. But, as I say again, it has to come after we make sure that the position of the Post Office is a long-term sustainable one.

Mr Blake: Thank you, Secretary of State. I have one or two more questions, we are very close to 11.00, perhaps we can take a pause?

Sir Wyn Williams: Mr Blake, I make it 10.59 and I’m sure no one would regard it as disrespectful if we take a natural pause, which is now. So I propose to start the minute’s silence now, and people in the hall may stand if they wish or sit as they prefer. I am in a room on my own, so I will continue to sit down. But the minute begins now.

(Pause for one-minute’s silence)

Mr Blake: Thank you very much.

Secretary of State, have you given any consideration to some fundamental issues, such as whether a self-sustainability, self-sufficiency model is ever a realistic ambition? We heard from one of your predecessors, Greg Clark, some novel ideas about a fundamental change to the type of company that the Post Office is, some sort of public organisation that is not a private company; are you able to assist us with your thinking on that?

Jonathan Reynolds: Yes, Mr Blake.

I mean, as I say, I don’t think anything should be off the table for the future. I think alternative governance models, mutualisation is one, I think, that’s been in some of the media coverage. You know, it would have some particular advantages in terms of dealing with the specific breakdown of trust between different parts of the organisation and provide a route going forward.

Some of the work that you mention, I mean, the distinction I’d have between, say, the Post Office’s work with Teneo is that that’s really about the kind of nuts and bolts of the business model, where is money coming in; where does it go; how can that change; what’s the course of action required for the future?

Whereas the Boston Consulting Group work with my Department is really more about the kind of fundamental purpose as, you know, technology has impacted on some of the traditional services the Post Office operates, the future of cash, we’re very keen as Government on Banking Hubs, which is – don’t necessarily have to be run by the Post Office but usually are. They are in my hometown of Stalybridge, so there’s a set of factors both for the Post Office as a business, if you like, and then its fundamental purpose, both being looked at by the appropriate levels of Government.

The future, in terms of what that structure might look like, and it could be something different – I mean, I give that some thought. You will understand, to address some of the problems I’m talking about, that can’t just be a top-down decision from the Secretary of State. The aspirations around the Green Paper, which I think Minister Thomas mentioned, which we intend to publish next year, is a chance for that wider conversation, a national conversation, to be frank about that.

I believe as an institution, as a brand, there’s still tremendous public affection for and desire for the Post Office to have a strong future but we’ve got to consider all of these issues as to its future business and how it is run as part of that process.

Mr Blake: Can you see a time prior to the Green Paper on which the Inquiry could be updated as to your thinking?

Jonathan Reynolds: I think we certainly are progressing conversations with the Post Office as to how they wish to make sure the business model side of change is progressing. I think there will be the opportunity to update the Inquiry about some of that. I believe the questions about governance are probably best suited to the Green Paper because, again, fundamentally, we want to be getting the input of postmasters themselves at the frontline as to what they would like to see, what would give them reassurance that the culture and effectiveness of the organisation was changing as part of that.

But, if there were any developments at Departmental level, I think it would be, you know, straightforward to be able to provide the Inquiry with an update to that regard.

Mr Blake: Thank you very much, Secretary of State. There are a small number of questions from Core Participants.

Sir, unless you have any questions, I will turn to –

Sir Wyn Williams: Please do. If I have any at the end, I’ll ask them at the end, all right, Mr Blake?

Mr Blake: It’s Mr Stein.

Questioned by Mr Stein

Mr Stein: Mr Reynolds, my name is Sam Stein. I represent a large number of subpostmasters affected by the scandal. Many of them engaged in the High Court case, the GLO litigation, as we call it, in 2019, and the spread of people I represent include people that were not subpostmasters but also managers, people working in branches, and importantly, at least for today’s discussion, as regards what’s going on, strategy-wise for the Post Office, people that are still serving as subpostmasters.

In answer to Mr Blake’s question just a second ago, which was about the timing or timeline for the delivery of a Green Paper, and your answer, which was that you felt it was best put within a Green Paper, you’re a very experienced, long-term serving politician. Also, currently, you’re in place as the Minister in charge of DBT. Can you give us the actual timeline, likely timeline for such a Green Paper?

Jonathan Reynolds: So the aspiration for the Green Paper that Minister Thomas referenced in his evidence is for next year. I’m afraid I can’t give you any more specific guidelines than that, but I, if it would be appropriate, can check with the Department and maybe write, if we’ve got an indicative part of, how we believe that would be ready. I should say that that’s simply because, you’ll be aware, some of the very earliest, most significant priorities of the new Government have been delivered by the Department for Business and Trade, the Employment Bill, for instance, or the Investment Summit. So please don’t take any sort of sense that it’s not an urgent priority; it’s just that the number of things the Department has had to do in the first three to four months of the Government have been extensive.

But the conversations we’re having about the future of the Post Office, which are almost on a weekly basis in the Department, should be an indication of just how significant we see this work, and it would be my aspiration, given I think the level of national interest in the future of the Post Office, to have that available and start that conversation as soon as possible.

Mr Stein: We’ve had a number of witnesses recently that have said things in the way you’ve just said them, in a way, which is, “We aim to do things really quite soon, we’re getting on with it”, and so on. Can you give us even a time bracket for the delivery of a Green Paper: as an example, next year?

Jonathan Reynolds: Yes, next year. That’s the –

Mr Stein: Right. First half of next year; second half of next year?

Jonathan Reynolds: It would be my personal aspiration for the first half of next year.

Mr Stein: Now, you understand that this Inquiry was set up with terms of reference which included obviously learning lessons from the criticisms made by Mr Justice Fraser in the High Court, and also assessing whether the processes and information provided by Post Office to postmasters are sufficient. So I’m reading from the terms of reference.

So the processes and information provided by Post Office are sufficient to enable both parties to meet their contractual obligations, to enable postmasters to run their businesses. This includes assessing whether Post Office Limited’s related processes, such as recording/resolving postmaster queries, dispute handling, suspension, termination, are fit for purpose. In addition, determine whether the quality of the service offer for postmasters and their relationship with Post Office Limited has materially improved since the conclusions reached by Mr Justice Fraser.

So the terms of reference of this Inquiry are not just historic.

Jonathan Reynolds: Mm.

Mr Stein: The word “are” means currently. At the moment, we’re in this rather odd position, which is this Inquiry has been now running for a number of years. There have been grave difficulties with disclosure, obtaining of material, that have contributed to the length of this Inquiry. The judgment at the High Court in 2019, which was a seminal judgment – two judgements, sorry, in 2019 – heavily criticising the Post Office is the starting point for this Inquiry.

Yet we hear from you that the changes to take place within the Post Office, the ones that you spoke about at 10.11 this morning, which are about a new business model, about the new direction of the Post Office, we hear from you and other witnesses that these are still yet to take place. So that means that the terms of reference of this Inquiry are simply, we are going to submit to the Inquiry chair, not going to be complete until we know, until we can see and examine what is happening to the Post Office.

How is this Inquiry going to be able to examine whether the new model that you’ve discussed – Mr Railton has called it change in polarity of the Post Office – how are we going to examine that, Mr Reynolds, considering all of these discussions are ongoing at the moment and that we may get a Green Paper somehow in the first part of the next year?

Jonathan Reynolds: Well, I can understand the frustration that underlines a question like that. In fact, I can’t speak for the previous Government, although, you know, I would say on all of this we’ve played this completely straight without any politics trying to be cooperative in opposition and then continue some of that work into government. So I can’t speak for how significant the conversations were, you know, before 4 July. I can only say, for our part, if you look at the first, you know, three to four months, there was an urgent need, first of all, to make some of the decisions we’ve been through this morning, on the redress scheme for the overturned convictions following legislation, the appeal scheme, the fixed-sum awards, the work around the Capture system as well.

There was an immediate need around issues of redress to respond to that. I believe, potentially, the previous government may have been looking for some sort of steer or guide from this Inquiry, and you quite rightly make the point that you see that as part of the process itself.

But I do know, in terms of the speed at which we’ve been looking, not just at the issues of redress but the future, and some of the decisions that are going to be in the public domain fairly soon, that sense of, you know, transformation is happening now, and I respect very much your point that you’d like to be able to assess that for a plan now. I don’t think, to be frank, in opposition that plan could have been drawn up in any adequate level of detail but, if you are telling me specifically that you feel that needs to be expedited in order to be a part of the kind of consideration that you are having in this Inquiry, I understand that very much, and can tell you, that will inform my decisions going back to the Department.

But I don’t think, given where we are sat here today, we could have increased the speed any further than we have, either for redress or the future business model of the Post Office.

Mr Stein: Mr Reynolds, are you prepared to return to this Inquiry? It’s a matter for Sir Wyn to decide but, if Sir Wyn, as an example, would wish to hear from you again and possibly Mr Thomas, the Post Office Minister, and hear as to progress and changes being made, are you prepared to return?

Jonathan Reynolds: Of course, if Sir Wyn wanted me to return I would be more than happy to.

Mr Stein: Now, compensation issues, at one point, in dealing with a question from Sir Wyn, you thanked him for his feedback. Again, we’re left in this odd position: the length of time it’s taken to get to where we are regarding compensation means that we’re about to close the evidence of this Inquiry as of this moment, unless Sir Wyn directs otherwise, this week. We get to closing submissions through the remainder of the year and we have oral submissions on, I think, 16 and 17 December. I’ll be corrected if I have that date wrong.

That means, in effect, that the oversight of compensation issues directly from this Inquiry, essentially, is going to go, unless Sir Wyn directs otherwise, to return to these matters in another hearing date. It also means that the questions of the appeal mechanism, the question of whether the thresholds are correctly placed, the question of whether lawyers should be allowed to advise people that have justifiable claims but perhaps don’t realise the extent of them, those won’t that have the Inquiry’s oversight.

How are we to determine whether, in fact, you and your colleagues are going to be doing the right thing about these issues? Can we have a commitment from you to report back as to the changes that you are going to make on those very self-same issues: that is the threshold question, the access to lawyers, the date of the appeal mechanisms. Can we have that commitment from you, Mr Reynolds?

Jonathan Reynolds: Well, I can give you a commitment that we keep the performance of all of the compensation schemes under review. I’m very sensitive to the fact that Sir Wyn was clear he’s not making a specific recommendation under any of those schemes. Of course, it has always been my view that the work we do as ministers, both in relation to the compensation schemes and the future of the Post Office, will of course have a considerable and indeed total regard to the findings of this Inquiry. So you ask a slightly different question, which is about keeping the review and potential changes to those schemes available while the Inquiry is going on. So I’d have to be guided by Sir Wyn in relation to that.

Mr Stein: You see there’s a bit of a trap here, Mr Reynolds. What has happened is there have been delays to those schemes. We’ve had witness after witness saying there have been problems with getting these schemes worked out, problems in setting them set up, difficulties in assessing their breadth, and so on, a litany of problems that have delayed the activities of those schemes. But that delay itself has now led to a lack of potential oversight from Sir Wyn, so there’s a trap that’s been set up by a failure to grasp the issues. So what we need is, rather than you saying, “Well, you’ve heard Sir Wyn”, we need a commitment to change on those very self same issues?

We can ask, of course, Sir Wyn to frankly give an interim report or set out his own view on these matters. That will be a matter for him. What we need is for you to say, “There are problems here, we need to resolve them and they need to be resolved in favour of subpostmasters”. I’ve called this before, with other witnesses, a spirit of generosity –

Forgive my voice, it seems to be going today, which is an unfortunate problem for an advocate.

But I’ve called it the spirit of generosity that decisions such as this should be made in favour of the subpostmaster, and they need to be made in favour of the subpostmasters frankly sooner rather than later; don’t you agree?

Jonathan Reynolds: Yes, I would agree with that and I would say, if you look at the actions we’ve taken to date, I think we can demonstrate that through each of the decisions that we’ve made, whether that’s the approach to the publication of data under the different redress schemes, whether that’s the openness around the Capture report that we published, whether it’s the changes with the route to fixed-sum compensation or the appeals scheme or indeed the redress scheme for Overturned Convictions.

So where there is a need, where I receive direct feedback that this part of the scheme, perhaps through the evidence of this Inquiry or a direct approach to me, where I believe there are changes that need to be made, I think we’ve demonstrated that we will make them and we will remain open to doing so in respect of any part of the system of redress, if we feel or see evidence that it’s not working as it should.

Mr Stein: Sitting just two across from me is Mr Enright, he’s partner at Howe+Co solicitors. He has been involved in this matter and his firm has been involved in this matter for many, many years. Are you prepared to meet with him to continue to keep an eye on these very self-same issues directly, so that he can discuss with you the progress and report back, as far as he can, the information that you’ll you give him as to these issues?

Jonathan Reynolds: Yes, more than happy to give that commitment.

Mr Stein: Can I turn then to Fujitsu and its role in this matter. Fujitsu has Mr Patterson, who is the European Director of Fujitsu, he has come to the Inquiry, he has given evidence to the Select Committee. There’s been an apology from Fujitsu for its role within this scandal.

We’ve asked questions of Mr Patterson, which is to what extent is Fujitsu prepared to put its financial muscle behind redress. Now, redress comes in two different ways. Fujitsu have said that they would consider contributions towards compensation. But they will not do so until the close of this Inquiry, okay? That appears to be their current position. Mr Patterson is giving evidence about such matters later on today.

Have there been any approaches from Fujitsu to Government to actually set out the structure of what it is proposing by way of contributions to compensation?

Jonathan Reynolds: So no, I’ve not received any specific information in relation to that. My understanding is the same as yours: that there’s been an acceptance of, I believe, the phrase used was a moral responsible to make a contribution, but that they were waiting for the findings of the Inquiry before taking that forward. I would welcome to see what the evidence will be in the remaining sessions but I have always envisaged, at some point, those kind of conversations being necessary.

Mr Stein: Well, can we try it another way round. Has the Government, to your knowledge, that’s in the last four months, under your own leadership with the DBT, or to your knowledge prior to a Labour Government, has the Government reached out to Fujitsu and said, “Well, hang on, we are spending an awful lot of money on compensation, you’ve made a promise, it seems, to contribute. Why are you waiting for the close of this Inquiry? That seems to be running out the Inquiry so you’re not under observation”.

Jonathan Reynolds: That’s –

Mr Stein: Has the Government done that; has the Government approached Fujitsu?

Jonathan Reynolds: I have not had that direct conversation. I am not aware if officials have had it at that level. It was genuinely always my understanding that the Inquiry would conclude before that element would be addressed.

Mr Stein: Would you consider approaching Fujitsu? It’s quite convenient Mr Patterson is here today. Maybe there’s an opportunity, given time restraints in the busy timetable for a minister, just to have a word to set up a meeting?

Jonathan Reynolds: Yes, I believe that will be a necessary meeting to have. I should say I’ve also been confronted with some rather unwelcome decisions I will have to make about the replacement for Horizon, the budget that I have walked in to find that being allocated, which is very, very large and I think there are questions as to whether that is the right way forward that we’re talking to the Post Office about, and frankly the need to have further involvement with Fujitsu to make sure there is a transition between the existing system and what the future will be, which I believe neither Fujitsu themselves would ideally want to be involved in and, frankly, I wouldn’t ideally want to be in the position I’m in where I might have to make a decision to extend that involvement in order to make sure that system is properly accounted for before a new system is in place.

So there are some issues already of engagement between the DBT and Fujitsu that will have to be there and, as I say, some of that is frankly less welcome than it would be, but that’s simply the situation I’ve walked through the door to find.

Mr Stein: Lastly, and only this: this scandal affected families. It affected people in small branches up and down the country. It affected the classic Post Office that we see in the high streets and the villages and towns. It affected a lot of people living in these premises, their partners, their children, their education, their ability to consider their children’s needs, and we know that there is a voice for children that needs to be expressed properly before this Inquiry, which is that they’re damaged as well. They feel affected by what’s happened. They’ve been hurt. Their aspirations have been limited. Questions about their education need to be addressed.

In other words, there is a need for a restorative justice that considers the wider implications of this scandal and what has happened.

Now, we heard, I think, from Mr Recaldin that the discussions have already taken place within Government on this very issue. It is an issue that we, on behalf of the client group we represent, we have suggested that Fujitsu could contribute to but, actually, this might be something to be grasped by both Government and Fujitsu and really good work could be done here, and it needn’t cost that much. It’ll cost a bit but it’s about ideas, and about making it possible for those families that have had such great difficulties. What’s happening in that regard, Mr Reynolds?

Jonathan Reynolds: That’s absolutely right. So the issue of wider family impact was very much on our minds when we came to office. We have commissioned some preliminary work around that, you’ll understand a whole range of questions as to the kind of harms you’re looking at, the kind of impact, making sure the definition of family members is a modern one that understand families come in all shapes and sizes – you wouldn’t want to commit further injustice by getting some of that wrong.

You mentioned whether specifically Fujitsu could be a part of the answer to that. I think that is an interesting proposal. I wouldn’t necessarily want to limit the involvement of Fujitsu just to that element of redress but the impact on wider family members is something that is being looked at within Government, yes.

Mr Stein: I said I’d finished and I really will, but we made that suggestion to Mr Patterson on the last occasion when he gave evidence. It’s not a new proposal. So again, could that form part and parcel of the wider discussions?

Frankly, there’s a need to restore the families back to what they hoped to be when they started their journey through the Post Office. At the moment that doesn’t seem to have been grasped. Thank you, Mr Reynolds.

The Witness: Thank you.

Mr Blake: Sir, we have questions from Ms Shah as well.

Questioned by Ms Shah

Ms Shah: There we go, can you hear me now; is that working now?

Jonathan Reynolds: Yes, I can, thank you.

Ms Shah: Good morning, Mr Reynolds. I ask questions on behalf of the National Federation of SubPostmasters. So Mr Read in his evidence to the Inquiry said that he thought the culture at the Post Office had changed and improved under his five-year tenure as CEO, although that does not align with the key findings of Grant Thornton’s report of the Post Office. There’s no need to turn it up, but for the transcript that report is POL00448771.

That reported earlier this year and the key findings on page 13 includes that there’s an inability to unlock a unified purpose and shared ambition around a longer term vision and strategy between POL and its shareholder; there’s an unconscious bias around the lack of accountability; there’s a lack of clear understanding of objective roles, responsibilities and purpose; and that, in relation to culture, there’s a misalignment on accountabilities between POL and DBT/UKGI, which is culminating in a failing working relationship.

Would you agree that these findings show that there continues to be significant issues in relation to culture and governance at the Post Office?

Jonathan Reynolds: Well, thank you for that question. I would say, having been the Secretary of State for four months, I can’t comment on claims from, you know, the progress over the last five years. But I would say that we start from the position that things need to change extensively, as I’ve said in some of the previous answers, with regard to the business model, the accountability, the governance structure. I think the job at the Post Office that’s required is one of transformation, not accepting that things are in a position now that is to anyone’s satisfaction and, broadly, I think that is something which is held by people involved at every level of the Post Office.

Ms Shah: Just to pick up on something that Mr Stein has raised, whilst the Grant Thornton review shows that there are continuing issues with the culture of the Post Office, five years after the GLO judgments, what confidence can this Inquiry and the UK’s postmasters have that, once the scrutiny of the Inquiry is removed, that the Post Office and Government will ensure that culture and governance is improved? In other words, when the spotlight of this Inquiry is turned off, is there not a danger that things will just revert to business as usual and this will remain a problem just too big, just too hard and just too expensive for government to solve?

Jonathan Reynolds: No, I think that is absolutely the right question and when I talked about the nature of the job, as I see it at the Government level, being not just sorting out the routes to redress and the pace at which redress is received, but they can’t be divorced from those wider questions about the future of the Post Office, that is what I mean by that. I think there is a danger, there is a perception that we could simply, even if we do a good job on redress, maybe not link it to the wider future and questions of transformation, and that’s an absolutely reasonable question.

So the commitment we have as a Government is to deal with these things together and hope there is some assurance of that, making sure that is held to because I know Government ministers change, they come and go and different people take over these departments. I think that is a job that will have to be held, not just by the Government but by the Parliament, I think the Select Committee in particular will play a role in ensuring that but I think we should all acknowledge that that is what success looks like here. It’s not just about resolving issues of redress and justice. It’s about the future of the Post Office, playing the role I believe it can and should play in national life, but in a way which recognises just how wrongs thing have gone in the past.

Ms Shah: Okay, well, this Inquiry has shown the prolonged and consistent history of Post Office with Government oversight treating postmasters as subservient and unworthy, making choices that benefit Post Office as a company and that are detrimental to postmasters, and not valuing or listening to postmaster input. Would you agree that there may need to be a number of different cultural change initiatives run by or implemented by Post Office and Government, or your Department, in order to restore the confidence of a group of people that have been consistently failed?

Jonathan Reynolds: Yes, I would agree with that statement entirely and I would say that there absolutely has to be a position where people delivering – postmasters delivering services on the frontline for the organisation feel that the overall organisation itself is there to support them, rather than to have what’s clearly been an adversarial relationship, one that has been lacking in trust, one that has been lacking in respect, to be frank, and that is at the heart of what we talked about with Mr Blake. You know, some of the potential governance changes have to be a part of that.

I think there’s – you know, the people I speak to, who have been affected by this fairly widespread recognition about the nature of a business model needing to change to provide greater remuneration to people, delivering services to postmasters themselves, and that will necessitate some quite considerable changes to the organisation centrally in order to do that. I think there’s an open-mindedness to different governance models as to the right way to do that, I don’t think anyone needs to be prescriptive at this stage about it. But you should always have oversight of what’s your objective in those changes, not governance changes for the sake of it. It’s about what would produce that much stronger, healthier relationship going forward.

Ms Shah: Thank you. We have heard from other witness to this Inquiry that it might not be practical for Government alone to play a more active role in the oversight of the Post Office due to the nature of the arm’s-length relationship but would you agree that it could only be a good thing for there to be an increased oversight and transparency and that this would be key in detecting and resolving any potential issues in the Post Office going forward?

Jonathan Reynolds: So I’d say this issue of how arm’s-length bodies and how Government and UKGI functions is one that’s got to be central to the conversation and the answers that we’re having. Now I honestly cannot tell you, having been a Secretary of State for no more than four months, whether I am confident that the arrangements of the UK state in this way will always work effectively or whether this was just the wrong questions being asked of the wrong people, you know, the wrong mechanism or whether there’s something more fundamental at stake in that.

I would say that I look at a whole range of things that I have seen from the perspective of being a Member of Parliament for over a decade and, obviously, this is a significant one but I think about Hillsborough, I think about Bloody Sunday, and I think about what we’ve recently seen around Grenfell, and I think there are some quite profound questions that we as a country have to ask ourselves, that go beyond individual mechanisms for oversight as to how we establish and run these kinds of organisations.

There are things that have been going, you know, fundamentally wrong with how power is wielded in the UK, how accountability is provided for. So I think, yes, there are some specific questions around the future governance structure and oversight, but I think there are some wider changes we’ve got to think about as a country, whether that is – you know, there’s been, I know, as part of this Inquiry some conversation about how we would address in future historic miscarriages of justice and abuses of power and whether there’s a sort of different mechanism, standing mechanism we can have to do that.

You’ll know the Government has committed to something called the Hillsborough Law, the duty of candour. I think all of these things are connected to each other and, whilst we’ve got to address the specific problems of this Inquiry, there are some wider lessons that we’ve got to consider because there have been too many cases in modern British history of fundamental abuses of power and that is just how it is. And we’ve got to recognise that – we’ve got to have the humility to recognise lessons have to be learnt from all of these things going forward.

Ms Shah: Just to focus on the question of oversight, you might have heard the evidence of Sir Alex Chisholm on 7 November. In his evidence he proposed an independent oversight committee, with reporting obligations to the Post Office Board, the authority to write to the Secretary of State with concerns, and obligations to report periodically to Parliament. In support of that, he states that, whilst this would add an extra layer, the particular circumstances here, where the Post Office Board has failed in its oversight responsibilities which clearly lie with the Post Office Board and the management executive being a part of that, their internal legal teams over many years have failed to provide effective service, then that has caused a terrific breakdown of trust, not only with the subpostmasters but with the wider public.

He suggested that special measures are required, because of the failings that the organisation have gone through. Just for the transcript, that’s pages 167 to 168 of that transcript.

Now, the NFSP has drafted a proposal for an oversight committee, which it has discussed with various key individuals within Post Office, Government and others. Again, no need to turn it up but, for the transcript, that is WITN00370110. I’m not sure if you’ve seen this proposal but it says that the aim is to expand on the existing shareholder relationship framework that currently exists between the Government and Post Office, whilst retaining its social purpose, to ensure a situation similar to the Horizon scandal is never able to occur again, whilst securing the future of the network. It says that lack of expertise, scrutiny and accountability were key elements of how this scandal continued for so many years. It is therefore the aim of this proposal to bring together a committee of people with specific Post Office knowledge, alongside those from a wider social perspective to ensure that the social purpose of the Post Office remains key.

Then at page 5 of the proposal, it outlines the proposed membership of the committee, and that includes postmaster representative bodies, such as the NFSP, unions such as the CWU and Unite, representatives from the Government, consumer champions, and representative bodies for groups who rely upon the social purpose of the Post Office, such as older people and people from economically deprived areas, as well as a temporary role for individuals who could offer advice on specific issues, pertinent to the agenda, among others.

So in light of this scandal, would you agree that it could only be a good thing for stakeholders to work together for the betterment of the Post Office in an open and transparent forum such as the one proposed here?

Jonathan Reynolds: Look, I’ll certainly look at that. It’s clearly a thoughtful proposal responding to what we have seen. I would want to make sure that any governance change was, first of all, one that was going to be effective. I mean, on paper, the existing structure could have been effective but clearly wasn’t. I also wouldn’t want anything which is seen to sort of be outsourcing responsibility for fixing these problems to a committee of people or whatever. I think that might be perceived as the opposite of what we’re trying to do in terms of facing up to and providing redress in relation to this and providing a future which is one where we’ve got confidence we’ve put these problems right.

But the kind of thoughtful proposal you’re putting forward, I can see where that has come from and what that would mean. So I promise we would absolutely consider anything of this kind in this way it would also have to be consistent of course with any future governance or business model changes but I appreciate the good faith nature of what you’re putting forward and it’s something we’ll look at.

Ms Shah: So would you be willing to make a commitment, then, to discuss this proposal with NFSP and others to explore this option and give the public and postmasters confidence in the future, because you’d agree it’s important to help and ensure that the Post Office meets its social purpose as a Government-owned company, rather than acting as a company with only profit as its goal?

Jonathan Reynolds: I would be absolutely willing to meet with anyone to discuss the future of the organisation. I would as well that, whilst I can see the very good spirit and good faith nature of that proposal, fundamentally that – I think, if postmasters felt that was something that they still didn’t have the power, they still didn’t have a structure that gave them authority, and they would just be, you know – the perception of that being a talking shop for grievances or not getting to the source of what had gone wrong here.

I’d be cautious about that but, again, I can see, you know, the positive nature of that proposal and where it’s come from and it’s obviously worthy of further discussion.

Ms Shah: Okay, thank you very much.

Mr Blake: Thank you, sir. There are a small number of questions from Ms Patrick. If I’m not going to get in trouble with the stenographer, can I propose that we take those –

Sir Wyn Williams: No, I’m sorry. It’s over an hour and a half now and I think small numbers of questions seem to become longer, not shorter, this morning. So I think we need to take a break.

Mr Blake: Okay, sir. That’s absolutely fine. After that break, we’ll need to take at least a 15-minute break before Ms Badenoch attends.

Sir Wyn Williams: Fine. So what time shall we resume?

Mr Blake: Perhaps if we take a short break now, say five minutes?

Sir Wyn Williams: Well, let’s make it 11.45.

Mr Blake: Thank you very much.

(11.37 am)

(A short break)

(11.45 am)

Mr Blake: Thank you, sir. Ms Patrick.

Questioned by Ms Patrick

Ms Patrick: Good morning, Minister.

Jonathan Reynolds: Hi.

Ms Patrick: Good morning my name is Angela Patrick. I act for a number of subpostmasters who were wrongfully convicted and have since had their convictions quashed. I’m instructed by Hudgells Solicitors. I only have two topics to cover with you.

The first is a question about mechanics, almost. In Phase 2, we heard evidence about handover from one administration to another, and back again, and one topic that came up was the issue of a new administration not being able to access the papers of the previous administration. I just want to ask you, Minister, has that practice changed?

Jonathan Reynolds: Yeah, absolutely, really interesting question. So bear in mind, this is all still relatively new for the new ministers. That is my understanding, that we can’t access papers and decisions from previous administrations. It comes up in a number of occasions, to be honest, particularly, actually, around the Department consideration of things like the trade talks, and so forth. We have to refresh all of that as a new Government. I would say specifically, in relation to the Post Office, I’ve never felt that there’s, you know, something I needed that I haven’t had access to. Some of the broad policy decisions, for instance, you’re saying the appeal scheme for HSS, had already sort of been – they were in the public domain through the Advisory Board’s recommendation, so it wasn’t like there was something I felt we didn’t know where it had come from or where it had originated, or a piece of information, and I think as far – or certainly from my point of view, I would say had a fairly good relationship with particularly Kevin Hollinrake, who had been the Postal Affairs Minister before the election and, frankly, the ability to talk or raise issues between us quite readily.

So that is my understanding of our constitution but I don’t feel or haven’t felt that it’s been a barrier for me in this case.

Ms Patrick: In practical terms, just to think about what that might mean, thinking about one or two of the topics that are still very much live, the Strategic Review and NBIT, if there had been, for example, some work done under the previous administration, a report produced or piece of research or a piece of thinking, that was set down on paper and in a drawer somewhere in the Department, that couldn’t be fished out and given to you as a minister but civil servants would have access to it; is that a reflection of the rule?

Jonathan Reynolds: I believe what you’re saying is right and I just want to say that I don’t consider myself an expert on this having just been through it recently through it fairly recently. I also don’t quite know the situation in relation to an arm’s-length body that is sponsored by the Department that would essentially be doing its own work and then referring that back to the Department for oversight or for decision making. But again, I would say I don’t feel that there’s sort of anything that I am aware of that has happened or would be beneficial to know about that I haven’t had access to, and when I have said in exchanges in Parliament, either in responses to questions from the oral statement or in departmental questions, some of the things I’ve shared with you this morning about the direction of travel I want to see the Post Office in, I’ve felt there’s broadly a degree of consensus between the benches on that future direction, though I haven’t had a sort of specific conversation with the former government about what they were thinking in terms of the future of the Post Office.

Ms Patrick: Thank you, Minister. The second topic I want to talk about is Mr Stein raised the issue of families and compensation.

Now, are you aware of an organisation called Lost Chances?

Jonathan Reynolds: I don’t think I am aware of that, no, sorry.

Ms Patrick: So there is an organisation called Lost Chances for Subpostmaster Children who represent the children of subpostmasters who have suffered as a result of the scandal. Were you aware that they had met with Paul Patterson of Fujitsu, on 9 August this year?

Jonathan Reynolds: No, I’m not aware of that meeting, sorry.

Ms Patrick: Since that date, Hudgells Solicitors have been chasing for Lost Chances, chasing Fujitsu for follow-up on that action. Have you had any conversation or contact with Fujitsu since that date in early August to discuss precisely that issue?

Jonathan Reynolds: No, I haven’t had that but I’m pleased, first of all, that that conversation has happened, though I’m frustrated to hear that it obviously hasn’t resulted in the follow-up that people would have wanted from that. And I’d be very happy to be, as a Government, as a Department, a sort of party to those conversations, if that is deemed to be helpful, going forward into the future, and I think, similar to the exchange we had earlier about possible options for redress in future, this is obviously an element of those, though I wouldn’t necessarily limit the conversations with Fujitsu just to that. But I can see why this would be an area of particular and appropriate interest.

Ms Patrick: Thank you. We have no further questions.

Questioned by Sir Wyn Williams

Sir Wyn Williams: Mr Reynolds, before you finish, can I just ask you this: I have heard evidence from some witnesses which suggest that, in effect, the Post Office cannot be rescued. Those are my words, not their words, but that’s what it amounts to at the extreme end, all right?

You have expressed quite firmly to me this morning, at the beginning of your evidence, that despite all the things that have happened, the Post Office should be preserved. So what I’d like, if it’s possible for you to do, is to just give me the two, three, four, whatever they are, bullet points which lead, I take it, your Government and you personally to think that it’s worth preserving the Post Office?

Jonathan Reynolds: Sir Wyn, that’s an incredibly thoughtful question. I would say, despite the scale of what went wrong here, and it was very, very large indeed – I mean, people if they recognise me as a Cabinet Minister in the street, this will be one of the things that they bring up, you know, that’s on their minds: wanting to know what the progress is, what the pace of redress is, and so forth. Despite that registering with the public in this way, I do genuinely feel the public still want a Post Office. They still want the service it provides. When I go into, you know, the post offices in my local community, they’re actually always pretty busy. I think, as I say, the regret is that I don’t think postmasters are earning appropriate remuneration from that level of business taking place and, frankly, when it comes to new initiatives like Banking Hubs, I think the Post Office has been – and in every case actually – has been the natural partner picked to run that in a local community.

I think there is, Sir Wyn, fundamentally, a need for something, whatever you call it, whatever the future is, that is the Post Office on the high street, providing the kind of services that it currently does, and potentially some new things in the future. I think the big public policy questions like the future of cash in our society, and the closure of high street banking in many communities, I think the Post Office is part of the answer to those other wider public policy concerns, and I do foresee, potentially, in future, services that aren’t currently delivered by the Post Office, either Post Office being a potential vehicle for delivering them, in that way.

But I think the future is definitely one that has, to be frank, a significantly smaller centre and, you know, is based much more around power authority and governance being provided to postmasters on the frontline, really a central organisation serving those people. In a way, I don’t think that’s been the relationship leading into this scandal in particular.

I would also say, to be frank, even when there are – I’ve had circumstances in my constituency, Sir Wyn, where someone success providing postal services wishes to move on, retire, whatever, and you ask for – is there another business in the local community willing to provide these things? If that can’t be found, there is still genuine regret amongst the public at the loss of those services. So I feel both the public demand and policy rationale is still there and that underpins these conversations and work that we’re doing and what the future might look like.

Sir Wyn Williams: Thank you very much, Mr Reynolds. I’m very grateful to you for taking the time to come to give evidence at the Inquiry. All I need do is to thank you for doing that.

The Witness: Thank you for the opportunity to be here, Sir Wyn.

Sir Wyn Williams: Right, Mr Blake. A 15-minute break, yes?

Mr Blake: Well, we’ll need 15 minutes in which everybody clears the room, I’m afraid.

Sir Wyn Williams: Right, okay.

Mr Blake: Thank you very much. Thank you.

(11.59 am)

(A short break)

(12.14 pm)

Mr Beer: Good afternoon, sir. Can you see and hear us?

Sir Wyn Williams: Yes, thank you very much.

Mr Beer: May I call Kemi Badenoch, please.

Kemi Badenoch

KEMI BADENOCH MP (sworn).

Questioned by Mr Beer

Mr Beer: Good afternoon, Ms Badenoch. My name is Jason Beer and I ask questions on behalf of the Inquiry. Can you give your full name, please?

Kemi Badenoch: My full name is Kemi Badenoch.

Mr Beer: Thank you. You’ve provided kindly two witness statements to the Inquiry. The first of them is dated 26 September 2024. Could you please open it? I think it’s tab A2 in your bundle there. For the transcript, the URN is WITN11480100. I think it’s nine pages in length, excluding the appendix. Is that your signature on page 9?

Kemi Badenoch: Yes, that is an electronic signature but, yes, I did sign electronically.

Mr Beer: Thank you very much. Are the contents of that statement true to the best of your knowledge and belief?

Kemi Badenoch: Yes, they are.

Mr Beer: Thank you very much. If you turn on a tab to your second witness statement, which is dated 7 October 2024, that’s 14 pages in length, excluding the appendix. I think there’s one correction to make, paragraph 2 on page 1.

Kemi Badenoch: That’s right.

Mr Beer: Second line. Should the date be 26 September 2024?

Kemi Badenoch: Yes, that’s correct. That’s the correction required.

Mr Beer: Thank you very much. Is that your signature on page 14?

Kemi Badenoch: Yes, that is another electronic signature but this is mine.

Mr Beer: Is that witness statement, with that correction brought into account, true to the best of your knowledge and belief?

Kemi Badenoch: Yes, it is.

Mr Beer: Thank you very much. By way of background, I think it’s right that, before coming to Parliament in 2017, you worked firstly as a software engineer in the CGI group; is that right?

Kemi Badenoch: For a company called Logica CMG, which then became the CGI Group.

Mr Beer: Which is, I think, a Canadian IT consulting firm; is that right?

Kemi Badenoch: Not when I was there but, yes, I believe that is what it is now.

Mr Beer: You then worked as a systems analyst I think at RBS –

Kemi Badenoch: Yes.

Mr Beer: – is that right? The retail and commercial bank. Then I think you moved to be an Associate Director at Coutts, the private bank and wealth management firm; is that right?

Kemi Badenoch: Yes, that’s correct.

Mr Beer: Then, finally, before Parliament, you worked as the Digital Director at The Spectator magazine; is that right?

Kemi Badenoch: Yes, that is correct.

Mr Beer: Thank you. You became an MP, the member for Saffron Waldon, as that constituency was then described, in 2017, and I think you remained on the backbenches until July 2019; is that right?

Kemi Badenoch: Yes, that is correct.

Mr Beer: In July 2019 you took up the position of Parliamentary Under-Secretary of State for Education?

Kemi Badenoch: Yes.

Mr Beer: Then from February 2020, until 15 September 2021 you were the Exchequer Secretary to the Treasury?

Kemi Badenoch: Yes, I was.

Mr Beer: That was when Mr Johnson was Prime Minister and Mr Sunak was Chancellor.

Kemi Badenoch: Yes, that’s right.

Mr Beer: From 16 September 2021 until 6 September 2022, I think you were a Minister of State at the Department for Levelling Up, Housing and Communities?

Kemi Badenoch: Yes.

Mr Beer: You were the Secretary of State for International Trade and, indeed, the President of the Board of Trade between 6 September 2022 and 7 February 2023?

Kemi Badenoch: Yes, I was.

Mr Beer: Then most relevantly for us, from 7 February 2023 until 5 July 2024, you were Secretary of State for Business and Trade?

Kemi Badenoch: That is correct, yes.

Mr Beer: So it’s that 17-month period, February ‘23 until July ‘24 that we’re most interested in, you understand?

Kemi Badenoch: Yes, thank you.

Mr Beer: Then I ought to record in the evidence that after 5 July 2024 you’ve been a member of His Majesty’s Opposition, more recently Leader of the Conservative Party and therefore Leader of the Opposition?

Kemi Badenoch: That’s right.

Mr Beer: Can I turn right back to the beginning, then, of the relevant period, February 2023. I think you tell us in your witness statement that you received an introductory briefing concerning the Post Office on 21 February 2023; is that right?

Kemi Badenoch: Yes.

Mr Beer: So that was about two weeks into your time as Secretary of State?

Kemi Badenoch: Yes.

Mr Beer: What was your state of understanding about the issues concerning the Post Office and, in particular, the Horizon scandal, before you took up your role as Secretary of State in February 2023?

Kemi Badenoch: No more than a lay MP. So I was aware that there had been an issue with the Horizon system and I was also vaguely aware about the outcome of the court case, which was that an injustice had occurred and a lot of postmasters required redress. But the full detail of what had gone wrong with Horizon and what the postmasters had endured I was not familiar with.

Mr Beer: So the previous ministerial and similar appointments you had held hadn’t brought you into contact with the Post Office or the scandal in any substantial way?

Kemi Badenoch: Not that that I recall, no.

Mr Beer: So the Common Issues Judgment, the Horizon Issues Judgment, the settlement of the Group Litigation, the overturning of convictions by the Court of Appeal in April 2021, the Overturned Convictions Scheme, the Horizon Shortfall Scheme, and the GLO Compensation Scheme, all of the things you were told about in that briefing of February 2023, they were essentially news to you; is that right?

Kemi Badenoch: In the sense that the detail of what they were was provided. I am sure that, as of that time, I would have heard about schemes and references to them but, in terms of the detail, that was news to me. I was fully engrossed in my other ministerial roles. In fact, the only thing that’s missing from the –

Mr Beer: Minister for Equalities –

Kemi Badenoch: Yes, I was Minister for Equalities from 2019 right up until July 2024, so I also had another ministerial job, so most of what I was doing was focused on my ministerial role and my work as a constituency MP.

Mr Beer: Understood. Can we look at the briefing, please. It will come up on the screen. BEIS0001061. You’ll see this is headed “Post Office introductory brief for the Secretary of State”. You’ll see it’s dated February 2022. I think that must be a typo because this was February 2023.

Kemi Badenoch: It could have been a typo but it may also have been a lightly updated version of the standard briefing which they would provide to Secretaries of State.

Mr Beer: So still a typo because the date to have been updated as well?

Kemi Badenoch: Yes, that’s right, yes.

Mr Beer: Can we please look at page 2. If we just pan out a little bit, please, an overview is given of the Post Office. You’ll see, for example, on the last bullet point, it gives some dates or a date of January 2023. So it is updated, perhaps even lightly. These kind of facts and figures, these would have been new to you?

Kemi Badenoch: Yes, definitely.

Mr Beer: If we go over, please, to page 3. There’s a diagram setting out the Government’s relationship with Post Office Limited. It records in the rubric that the Secretary of State became the sole shareholder in the Post Office Limited in 2012, by virtue of the Postal Services Act 2011.

Kemi Badenoch: Mm.

Mr Beer: Then you’ll see the boxes set out, two boxes on the left, two in the middle and then two on the right. On the left-hand side, two boxes, one within the other, one referring to you, the Secretary of State, and one referring to the Minister, Mr Hollinrake.

Kemi Badenoch: Mm.

Mr Beer: Did that position, as is set out in those boxes, reflect the state of affairs on 21 February 2023, ie the date of the briefing?

Kemi Badenoch: Yes, because if I can describe the nature of the Machinery of Government Change, Kevin Hollinrake had already been in the Department for Business before it was joined up with Trade, so he was already carrying out that work. So, effectively, the delegation existed even before he had come to the Department, but what the main change was that I was becoming the Secretary of State for Business as well as Trade, and I was taking on the sole shareholder responsibilities.

Mr Beer: I see. So as at the date of this meeting, 21 February 2023, five functions were retained by you, the five bullet points under “Sole Shareholder”, namely Board appointments, remuneration, Post Office’s strategic plan, the funding envelope and the size of the network?

Kemi Badenoch: Mm.

Mr Beer: But delegated to Mr Hollinrake ministerial oversight and the Parliamentary spokesman?

Kemi Badenoch: Yes, but I’m not sure that fully describes how it would have worked. The five items which are listed as my responsibilities, Kevin would have also been working on them as well. So the delegation works in the sense that both ministers are aware of everything that’s happening. He tends to – the junior minister looks at the detail, and I serve as an escalation point, usually given updates and decision-making capacity after he has provided advice to me, based on what he thinks should happen. That was the main nature of the role, delegation and responsibilities.

Mr Beer: In your witness statement, let’s look at it, please, it’s the second witness statement, it will come up on the screen. So WITN11480200, page 3, paragraph 10. You say:

“Two days later (on 23 February [so after the meeting we’ve just looked at] 2023) I had another meeting with David Bickerton at which it was suggested that Post Office business should be delegated to the Minister, Kevin Hollinrake. It was entirely normal as Secretary of State to delegate aspects of my large portfolio to ministers …”

Then you referenced a list of your ministerial responsibilities, which was indeed large:

“… it seemed entirely sensible to delegate Post Office issues to Kevin Hollinrake, given his interest in and grip of the issues and the fact that he was already doing this work as Minister within BEIS, prior to the creation of DBT and my arrival as Secretary of State”, which you’ve just essentially said.

Kemi Badenoch: Mm.

Mr Beer: Do we take it correctly from that that there was essentially a further delegation beyond that which was described in the two boxes, which overlapped with five bullet points in the first box and two bullet points in the second box?

Kemi Badenoch: I think it would be more accurately described as a way of working. So a more comprehensive restating of what sort of delegation I wanted to see. It was effectively the same sort of relationship that you would have had in any other ministerial Department, where the Junior Ministers look after the detail. But this conversation, if I recall correctly, it was just me restating my ways of working to David Bickerton, and looking at just the sheer scale of what needed to be done, ensuring that we weren’t dropping the ball on anything because, as of this point, I was still carrying out all of my duties as Trade Secretary.

So I was effectively taking on the work of two departments and I was quite concerned about how much needed to be done on the Post Office and I wanted to make it clear that Kevin had authority and they shouldn’t wait for everything to come to the Secretary of State. That’s one of the things that does tend to happen, where, even when a junior minister has opined on things, people wait for the Secretary of State and that ends up slowing things down. So it was a restating of how I saw of the delegation working.

Mr Beer: This paragraph here refers to the delegation of Post Office business or the delegation of Post Office issues –

Kemi Badenoch: Mm.

Mr Beer: – to Kevin Hollinrake, in the second and about the sixth line/seventh line. Was that delineated in any way, ie which things you were formally delegating to him?

Kemi Badenoch: I don’t believe so because I was still the official decision maker. So delegating from my perspective, apart from the Parliamentary work carrying out oral statements, and so on, was the day-to-day work on the Post Office: meeting people, so the meetings, going to the Board meetings, for example, talking to the staff within the Department for Business and Trade. So the day-to-day ministerial work of the Post Office was for him to look after and then the decision points would come to me.

Mr Beer: So you retained formal responsibility for decision making, that wasn’t delegated, but day-to-day business was?

Kemi Badenoch: I would – well, yes, that is correct. So I retained formal responsibility for decision making, but I also allowed him to make decisions and then let me know what he had wanted to do, and I would decide whether I needed to take a different option, which rarely happened. But all – I believe that all ministers should have the capacity to take decisions without constantly being micromanaged by the Secretary of State.

So when decisions would come to me, it would often because there might have been a difference between what Kevin wanted to do and official advice, and I would need to decide which way to go, or if he just wanted me to be aware of conversations that had occurred before he ended up making a particular decision.

Mr Beer: Thank you. Can we go back to the diagram, please, which was BEIS0001061, and look back again at page 3, please. Do you see, after the Hollinrake box, I’m going to call it, there is a line up to Post Office Policy Team and a line down to UKGI Shareholder Representative?

Kemi Badenoch: Mm. Yes, I do.

Mr Beer: Within the Post Office Policy Team box, the first bullet point is setting overall policy direction for Post Office. Did the DBT Post Office Policy Team have the responsibility for setting the overall policy direction for Post Office?

Kemi Badenoch: Well, it depends on what you mean by policy versus what the officials mean when they’ve put that on the slide. Can you elaborate exactly: when you say “policy”, how do you mean?

Mr Beer: I can only go on the words on the page, Ms Badenoch, which suggest that the Post Office Policy Team had responsibility for setting the overall policy direction for Post Office.

Kemi Badenoch: So I don’t think that that is what they are referring to. Ministers decide – ministers decide policy but the Post Office policy was decided long before Kevin and I had become ministers. I suspect what they were trying to say there was ensuring that they passed on what we were talking about in terms of policy direction on to the Post Office. But, in terms of setting overall policy direction, that would happen at ministerial level.

Mr Beer: So that’s one issue, responsibility for setting, and you say that that rested with the politicians rather than the civil servants?

Kemi Badenoch: Well, yes. I mean, the funding comes from the politicians. The nature of what the Post Office should or shouldn’t be doing comes from politicians. But this is one of the things that’s quite interesting about the Post Office itself as an entity. It’s one of those organisations that’s neither fish nor fowl. It’s not fully public service, it’s also commercial, as the solicitor shareholder, as ministers, we can’t get involved in commercial decisions. We don’t often have the detail and the expertise. This was just one of about 30 other arm’s-length management organisations which we’re looking at.

However, the policy teams do have the time to carry out that bit of work. And, remember, policy teams also carry out the research which advises ministers on what the options are and then we decide which direction to take. So I suspect this bullet point is trying to explain to me what the Policy Team does, rather than trying to define to outside observers how the Post Office is being managed.

Mr Beer: In the answer before last that you gave, you said that the Policy Team was – and I’m summarising here – more responsible for taking the decisions made by the politicians and passing them on, or carrying them into effect.

Kemi Badenoch: Yes.

Mr Beer: You’ll see that there isn’t arrow coming out of the Post Office Policy Team box. This isn’t just me picking apart a diagram, I’m trying to actual understand, on behalf of the Inquiry, what role the Policy Team had in setting the policy direction for the Post Office. If it was responsible for carrying into effect the will of ministers, how did it do that?

Kemi Badenoch: Well, this was one of the things which UKGI, for example, was doing. As the shareholders –

Mr Beer: Sorry to speak over you, I can understand that, but that’s not what this diagram shows, is it? Here, the narrow goes down to UKGI, and it suggests under the first bullet point that its responsibility was to challenge the Post Office’s strategy, rather than setting it.

Kemi Badenoch: Mm. So I think that this diagram needs to be looked at in context. It is not a definitive diagram of exactly how everything works. It is really a short briefing document, so that we can see how all of the teams are interacting and give a high-level overview of what it is they do. This PowerPoint is not a bible for exactly how things should work. We as ministers will have multiple teachings, which teams are rushing through in half-hour, one-hour meetings, how an organisation is put together and how it all – and how it all works.

But the real learning goes on over a longer period of time, not the half hour meeting. So I wouldn’t read too much into this diagram as the definitive sort of explanation of how things worked. You know, even as I described the delegation, this is simply what they’re showing me on day one, “This is officially what you do, here’s our team, this what we do”, and so on and so forth.

I would not use this diagram as a full description of how every single thing happened. It’s a useful illustration.

Mr Beer: You said that in fact UKGI had responsibility for carrying into effect the politicians’ decisions as to Post Office’s strategy?

Kemi Badenoch: No, that’s not quite what I said. I said UKGI also carried out that sort of representation of what ministers wanted, as a shareholder’s representative but they were not a Policy Team.

Mr Beer: Who did have responsibility for carrying into effect minister’s decision as to the policy direction of Post Office?

Kemi Badenoch: Well, it depends specifically on the issue. We have a team that has a director, there’s a Director General who covers the Post Office, as well as many other departments’ business areas, as well as arm’s-length bodies – British Business Bank being a classic example – and there will be quite a few people within the Policy Team who have an interaction with the Post Office, sometimes at Board level, but it’s split amongst various individuals.

Mr Beer: As between the Post Office Policy Team and UKGI, who had principal responsibility for carrying into effect ministers’ policy directions for Post Office?

Kemi Badenoch: Well, again, it depends on what specifically it is we are talking about. So –

Mr Beer: I’m essentially asking, did the Government use, its representative on the Board as the primary means by which it sought to influence the policy direction for the Post Office?

Kemi Badenoch: Well, quite often, the policy teams would also speak to the UKGI shareholder representative. So most of this day-to-day interaction was carried out by Minister Hollinrake, and I know that he was meeting our UKGI rep Lorna, as well as our policy teams. So I saw them as being more integrated than perhaps the diagram would show, and I think that’s a natural expectation for the size of the organisation but, in terms of setting policy, there were really just two things we were doing one was trying to make sure that the Post Office did not fall over, looking to the future, you know, the Board representation, the future of the Post Office, and so on, and managing the issues that had come out of Horizon.

And beyond that, there was very little new policy being created. So when we talk about policy, we’re really talking about the day-to-day management of policy that has been set over a longer period of time, and this was something that worked together really well broadly as a team with Kevin leading.

Mr Beer: Thank you. That can come down. Can I turn to my second topic, which is compensation and redress.

You tell us in your second witness statement, let’s turn it up, it’s page 11, paragraph 39, you say:

“Right from my first briefing, I was concerned with the pace at which the compensation was being delivered. Kevin Hollinrake also told me that we should be going faster, and he needed some help from his Secretary of State to accelerate things. We had briefings on the issue with officials, and it was quite clear to me that we were allowing bureaucracy to get in the way of redress too much of the time. Kevin and I wanted to get the money out there, and we were always given a reason why we couldn’t. For example, officials suggested we wait until the end of the Inquiry so we knew precisely what to do. I was adamant that we could not wait that long and we had to get the money out. I was particularly concerned that postmasters would die waiting for compensation. I remember saying in one meeting that I don’t want any of that happening on my watch, and that we wanted to get the redress out to people before it is too late. I wanted to know what we could do to get the payments out the door, and said we needed to do whatever we could to make it happen.”

Can I ask, firstly, as Exchequer Secretary for 18 months from February 2020 until September 2021, were you aware of any blockers in the Treasury to the payment of full and fair compensation?

Kemi Badenoch: No.

Mr Beer: Was that something that crossed your desk, the payment of compensation and the provision of redress arising from the Horizon scandal when you were Exchequer Secretary?

Kemi Badenoch: It may have done but I don’t recall, I don’t recall looking at that. I’m not sure that that sort of thing would have been the Exchequer Secretary’s remit, so I’d be surprised if it did. The Exchequer Secretary didn’t look at spending. It looked – the Exchequer Secretary’s role is around economic growth and where money is coming from, rather than where money needs to go to. So I would be surprised if that crossed my desk.

Mr Beer: So that would be more responsibility for the Chief Secretary to the Treasury?

Kemi Badenoch: Very likely, yes.

Mr Beer: Thank you. At this time, once you became Secretary of State, why were you concerned with “the pace at which the compensation was being delivered”?

Kemi Badenoch: Well, because after the briefing, and maybe during the briefing as well, Kevin had told me how he had been looking at this issue from the time when he was a backbench MP, and I was aware of the injustice, you know, just from reading newspapers rather than any Parliamentary briefing, and I had seen this sort of thing happen before, where justice delayed is effectively justice denied, and I am more interested in making sure that we get things done, rather than every single box is ticked.

I feel that there is often too much bureaucracy in the way of getting things done because people are worried about process, they are worried about, if things go wrong, them being on the hook for that, and so they carry out lots of checks and balances, well beyond what I think is required in order to deliver the right outcome.

Mr Beer: You say something along those lines in this paragraph here, the sentence about five lines in:

“… we were allowing bureaucracy to get in the way of redress too much of the time.”

Who was allowing bureaucracy to get in the way of redress too much of the time?

Kemi Badenoch: Well, the Government machine. So I think I remember asking a question like, “Why can’t we just give them the money now, if we know this” – I can’t remember specifically what we were talking about, but I just like to ask the simple questions, why can’t we just do this? And then I’d be told, “Well, there could be judicial review and the Treasury has these value for money requirements and, if we don’t meet them, then we might end up having to go to court”. So I just kept trying to find a way through, how do we – you know, I put myself in the shoes of the subpostmasters, that if I was this person or if I was a member of their family, what would I want?

And in my view, what they would want is for the matter to be dealt with as quickly as possible and to be able to move on with their lives and, when I would have conversations with officials, I would be told, “Well, there’s still an inquiry going on and if you make a decision like this without going through all the checks and balances or without waiting for the Inquiry to conclude, then you might have a problem later”.

But I thought that it was better to err on the side of ensuring the people got their compensation quickly, rather than making sure that we didn’t get into any trouble for not doing it in the perfect way.

Mr Beer: Thank you. I think in August 2023 you wrote a letter to the then Chancellor of the Exchequer, Jeremy Hunt MP?

Kemi Badenoch: Yes.

Mr Beer: Can we look at that, please. BEIS0000808. You will see it’s not fully dated, it’s dated “XX August 2023”, but I think we know from other evidence that the letter that issued was dated 9 August 2023.

Kemi Badenoch: Okay.

Mr Beer: The cross-heading is “Accelerating Post Office Horizon compensation” and, broadly, Ms Badenoch, was this letter in pursuance of your strategy to try and get compensation paid quickly?

Kemi Badenoch: Yes, it was and, bearing in mind that this is now five/six months after the initial briefing, this letter is an expression of my frustration that things are still not happening. And when I ask officials shortly before I send this out, “What do we need to do?”, they tell me that I need to write to the Chancellor, there’s no other way of getting what I want in terms of delivering the compensation swiftly.

So that’s the reason why the letter is being written at this point.

Mr Beer: You say:

“Kevin Hollinrake and I are both determined that postmasters affected by the Post Office Horizon scandal should get proper compensation – and that they should get it as rapidly as possible.”

You then describe in the second paragraph the three sets of compensation schemes or arrangements that were then afoot. In the third paragraph, you say:

“This scandal ruined many postmasters’ lives. The longer compensation goes unpaid, the more criticism we shall face – including from the Williams Inquiry. If we were to fail to compensate all the GLO members in time we would face severe criticism from all sides.”

Kemi Badenoch: Mm.

Mr Beer: “Kevin and I have therefore been looking at ways in which we could radically speed up the processes. We have already made interim payments of £163k to almost all postmasters whose convictions are overturned, and we undertake only limited scrutiny of GLO claims for certain hearing loss under £10k and HSS ones under £8k. We are looking to extend these measures substantially in relation to the GLO, which has started to receive claims.

“Some of the options we are considering would actually save money on the cost of lawyers or other advisers than they would cost in extra compensation. Others do have additional costs – but in my view these would be well worthwhile in light of the non-financial benefits of accelerating the schemes. In particular, I would like us to be able to offer a £100k fixed payment to every claimant who applies to the GLO scheme. I recognise that announcing this will create significant pressure to offer the same for HSS claimants, which we should consider separately, but I believe that is the right route forward for the GLO scheme. Such radical action would offer great advantages in terms of the speed of the process. The DBT Accounting Officer has expressed some concerns about the value for money given the repercussive risk and raised the potential need for a direction for this idea. I would welcome your views on the best approach, being mindful of value for money considerations, and whether you agree that we should pursue this.”

Then there’s a passage I needn’t read.

So it appears from this letter that, by this time, you and Mr Hollinrake were fully engaged into the need for urgent compensation to be paid to GLO members?

Kemi Badenoch: Yes.

Mr Beer: This is essentially a joint letter, is that right, from you and Mr Hollinrake?

Kemi Badenoch: Well, it’s my letter but we both agreed that this was the best way forward. He had come to me on one or two occasions saying that he was having trouble getting through to the Treasury and also separately getting officials to agree. So the reference to the DBT Accounting Officer is our Permanent Secretary, and he asked for my help, and I said I will go to the Chancellor myself and ask for this money and try and cut through the bureaucracy.

Mr Beer: So this is an escalation from him to you, essentially –

Kemi Badenoch: Yes, and this was my response to the escalation.

Mr Beer: – and a similar escalation in the sense that you’re writing directly to the Chancellor of the Exchequer?

Kemi Badenoch: That’s right.

Mr Beer: Do you think you should have assumed this level of engagement immediately after your appointment in February 2023, or shortly thereafter?

Kemi Badenoch: No, I would not have known enough to have carried out this level of escalation. This is coming after multiple attempts, which I can’t recall the full detail of, of trying to get compensation out, move quickly. So this letter is happening after a period of frustration that things still aren’t happening, and I also remember a conversation, where I was, you know, advised to wait until the Inquiry. This is the point I was referencing in the witness statement, and I am not one of life’s natural bureaucrats. My view is that we just need to get things done because, if you don’t, more problems will arise.

And what I was seeing, as I observed the way the Department and the Post Office were carrying on, was that we would just never get to the end of it, and I wanted to start seeing things happening. I had my own personal objective of making sure that we did right by the postmasters and we showed that we were delivering on the scheme as promised after the court case and that we were just being seen to do the right thing.

Being seen to do the right thing, in my view, is just as important as doing the right things. Making explanations and excuses for why things take so long shouldn’t go on beyond a few weeks or months, and that was my attempt to short-circuit the process and create options. So this was not a solution that we had got advice from; it was something that Kevin himself had recommended and said, “Why don’t we try this and see how far we get?”

Mr Beer: Presumably doing the right thing is actually more important than being seen to do the right thing?

Kemi Badenoch: Both of them are important. Doing the right thing when no one knows that you’re doing it often creates different problems elsewhere. So as a politician, it is not enough to be doing the right thing; it is important to be seen to be doing the right thing. Perception matters too, otherwise you lose trust.

Mr Beer: In paragraph 47 of your witness statement, you say:

“Kevin and I agreed that we should prioritise money out of the door, even if this risked paying more than was due.”

Is that the approach that you were advocating: that speed should triumph accuracy?

Kemi Badenoch: Yes.

Mr Beer: Can we look at the Chancellor’s reply the same month, BEIS0000705. You’ll see his reply. If we look at the second page and scroll down, you’ll see it’s a letter from Mr Hunt. Go back to the first page, please. It’s dated August 2023. He says, in reply to you:

“Thank you for your letter of 9 August …”

That’s one of the pieces of evidence that we can establish that your letter was dated 9 August from:

“… regarding the acceleration of Post Office Horizon Compensation.

“I am wholly committed to ensuring the postmasters achieve the full and fair compensation that they rightly deserve.”

Then moving on to paragraph 5, where he addresses the substance of your request:

“In relation to the specific proposal for fixed-sum awards on the GLO scheme, while successful delivery is paramount, we must also have regard to our responsibility for the public finances and to ensuring that the treatment of claimants on each Horizon compensation scheme is fair to that of their peers.”

Then paragraph 6:

“As you note, making fixed-sum awards on the GLO would incur significant repercussive risk and cost, including to the [HSS]. Given the extent of this risk and its high likelihood of crystallisation, I would encourage you to explore the full breadth of other options to advance the ultimate objective of timely and successful delivery of full and fair compensation.”

Then, over the page, he says he’s grateful to you and Mr Hollinrake.

So paragraph 6 was essentially a rejection of the proposal by the Chancellor?

Kemi Badenoch: Yes.

Mr Beer: You tell us in your witness statement, it’s at paragraph 44, this is your second witness statement, if we turn that up. It’s page 13. Having cited the letter that I read from you to the Chancellor, you say:

“Despite some initial resistance from the Treasury …”

Then you crossrefer to the letter we’ve just read, Mr Hunt’s reply.

Kemi Badenoch: Mm yes.

Mr Beer: “… I was prepared to issue a Ministerial Direction to get this over the line.”

You describe this as “initial resistance”. Wasn’t it just a refusal?

Kemi Badenoch: Well, the witness statement is written at a point when we did get some money over the line, so that’s what I’m referring to.

Mr Beer: I see. So, in the context of the payment of compensation as a whole –

Kemi Badenoch: Yes.

Mr Beer: – this rejection is to be seen as “initial resistance”?

Kemi Badenoch: Yes.

Mr Beer: Got it. You say you were prepared to issue a ministerial direction to get it over the line.

Can we look, please, at the reference to a ministerial direction. BEIS0000716. It’s page 23. You’ll see here an email of 21 August 2021, if we scroll down, and a bit more, just to see the signature block. I think Rose was one of your Private Secretaries –

Kemi Badenoch: That’s right.

Mr Beer: – or in fact the Private Secretary; is that right? If you scroll up, please –

Kemi Badenoch: Do you have the reference in the pack for the hard copy that I could look at?

Mr Beer: Yes, B28.

Kemi Badenoch: Thank you.

Mr Beer: It would be in the page in the bottom right-hand corner, 23.

Kemi Badenoch: Thank you.

Mr Beer: You’ll see that this is the first email in the chain. It’s the originating email. Your Private Secretary says that she had:

“… a meeting this morning with [you], which touched on [amongst other things]: (1) Horizon – in particular the ongoing work to speed up compensation for the GLO postmasters … The Secretary of State was particularly concerned about the pace at which compensation schemes are being delivered and is keen to ensure we’re doing all we can to speed things up.

“Conscious that Minister Hollinrake and [the Permanent Secretary] have very much been gripping this, so my sense is we need a couple of paragraphs to bring [the Secretary of State] up to speed on the following …”

If we just look to the first bullet point but the sub-bullet point:

“It is worth noting that [the Secretary of State] is supportive of the £100k flat offer to GLO postmasters and is content to provide a Ministerial Direction to see this get over the line. As such, it would be good if the update focuses on how we can deliver this proposal.”

I think that’s the crossreference you make in your witness statement to a willingness to provide a ministerial direction to get it over the line –

Kemi Badenoch: Yes.

Mr Beer: – is that right? Can you explain the circumstances in which a ministerial direction may be given?

Kemi Badenoch: I think this is best seen in the context of the question you asked me earlier, about speed versus accuracy. So in Government we have to make sure we’re delivering value for money for the taxpayer and there are some times when an amount that’s being paid is not really value for money, but there are other considerations, which a minister might think make that worthwhile. In this case, the ministerial direction, which I had wanted, was to overrule the value for money, because I was looking at a scenario where, if you’re a subpostmaster, would you rather have compensation that might be £10,000 more or £10,000 less than what you would have done, versus passing away and your family not getting the money or you not getting the money?

And, in my view, the worst risk was someone not getting money at all, rather than them not getting the exact amount of money right down to the penny.

That does not meet value for money considerations because the Government will be worried about overpaying and I felt that, given the context, given how long this had been taken, it was better that we overpay, if that’s the worst-case scenario, but make sure people get their money quickly, than wait until we derive the perfect amount and they are not there to receive the money at all.

Mr Beer: Would such a direction overrule or resolve all of the objections from the Treasury?

Kemi Badenoch: So this is where ministerial directions can be funny. So if the Treasury doesn’t give you the money at all, you can’t direct anything. They need to give you the money first and then you can decide how it is best used. So, yes, it can overrule certain requirements which they might place on things but, quite often, a ministerial direction comes in long after money has been given. But this was also not just me trying to solve the problem, but showing willing to my officials, so that they didn’t feel that they had to bear the responsibility.

A ministerial direction is often a short way of saying, “Don’t worry about it, it’ll be my problem not yours”.

Mr Beer: I was going to ask, was this exercising soft power, essentially, an unkind way of describing it would be sort of posturing, but in order to get a result?

Kemi Badenoch: It could be seen that way but I was very happy to make the direction. So it wasn’t just posturing but it was signalling the direction which I wanted the Department to take, and to make it very clear – and I am happy that we did this because now I can talk about it at the Inquiry – to make it very clear that we need to change the way we do things in Government. There is far too much going around and around in circles and avoiding taking serious real decisions because everybody is worried about getting into trouble later.

This is something which I tend not to worry about, maybe I should do, but I do trust my judgement, and I think that you look at the way this case has panned out that we should have just done it in August 2023. I am glad we got there in the end but I think the worries were – that people were overly worried, that’s the best way to put it.

Mr Beer: Why was no ministerial direction simply issued by you?

Kemi Badenoch: Because there was no money to haggle over what the right value should be. So, in order to issue a ministerial direction around value for money, you need to have the money in the first place and, at this point, no money had been outlined specifically for this proposal. At least, that’s what I recall.

Mr Beer: So threatening or raising the possibility of a ministerial direction would be ineffective?

Kemi Badenoch: Well, I don’t think so because, if you look at the letter, which the Chancellor had written, if we can just go back to it because you said refusal, and I said resistance, and I do tend to choose my words carefully. I did not see that as the end of the line. I saw it very much as the first – this is – I’ve been in the Treasury, I know how Treasury works. The Treasury often starts with “No”, and eventually you haggle your way through.

I was not expecting the documentary in January, which helped speed things along but, knowing how the Department worked, I knew that that was an opening move, you’d get a response, and eventually, you would get something and then we could use a ministerial direction to try to move the process along for that specific proposal.

Mr Beer: You wanted to look at the letter again, BEIS0000705?

Kemi Badenoch: Yes. There might be something there which I can point to, there might not, but I can’t remember off the top of my head.

Mr Beer: It’ll just come up on the screen. If there is, it will be in paragraphs 5 and 6?

Kemi Badenoch: Yes, the line, “I am receptive to measures which will increase the likelihood of successful delivery”, in my view was not a flatout, “No” but maybe “Try something else, we don’t think this is value for money”, and that’s where I could see room for manoeuvre. So the Treasury was supportive of us of making sure that compensation was paid in theory but, in practice, it was very hard for them to move away from their usual day-to-day behaviours, a lot of which, I think, was just them acting by rote.

I had seen this myself as a minister in the Treasury you get briefings and the briefing is often to say, “Well, nothing can be done unless the Treasury says so, it’s got to be value for money”. It just happens in a way that’s almost robotic, rather than looking specifically at individual circumstances and seeing whether you can – you know, whether you can be flexible. Inflexibility, I think, is one of the Treasury’s flaws, and that would have been the advice that I am certain was given to the Chancellor before he wrote the letter which he wrote to me.

Mr Beer: So were you disappointed or encouraged?

Kemi Badenoch: Neither. It’s just how things work. I’d seen – I saw enough there to know that it wasn’t over but there wasn’t very much that I could do with that letter, and we would need to try something else, try a different angle, make a different case, or something.

Mr Beer: You referenced earlier the documentary or the drama on ITV. Was it essentially that which made the difference?

Kemi Badenoch: I think it suddenly turned it from a value for money question to a public perception question, and this is the point, you know, that we were talking about: it’s not enough to do the right thing; you also have to be seen to be doing the right thing. And many people had not known the arguments that were taking place behind the scenes in Whitehall. There was an assumption that nothing was being done, and it was the documentary that made things happen.

But actually work was being done, it was too slow, it wasn’t happening quickly enough. No one could see what was taking place. So what the documentary did in my view was change the priority of this issue from something which was behind the NHS and security, and so on, you know, defence to, “We need to solve this now”. So it brought the urgency, which I had wanted us to have right from the get-go, it brought the urgency to it and raised the prioritisation.

Mr Beer: It’s a bit disappointing, isn’t it, if you step back, that it takes three or four nights on ITV whilst we were all at home in the New Year –

Kemi Badenoch: It’s extremely disappointing.

Mr Beer: – watching a programme to give something sufficient attention that the Government thinks that perception has changed and therefore takes action?

Kemi Badenoch: Well, I think that, if you look at it in the context of what is happening in Government, there are 1,000 things that are being asked – that money is being requested for. And I think, after a while, the decision makers or the analysts become very dispassionate. They’re not looking at it the way a politician might be looking at it or the way a member of the public might be looking at it, which is what is the human story here, who is being impacted?

After a while, it just becomes another line in a ledger and, well, if we take money away from schools – you know, if we give money to this, that’s money that’s going to go away from schools.

It is not irrational but it has to change: it is not helpful either. And I think that the way we go about doing things, making sure that every single box is ticked and there’s value for money and following all of the rules and regulations which we’ve put in place, we actually make things more expensive in the long run, that we end up paying out more than we would do if we just brought in common sense.

There is an absence of common sense in a lot of Whitehall because people are afraid to trust themselves and trust their judgement, follow principles and do the right thing. People want legal cover. They want to do things in a way that they can show a court or, you know, a lawyer that, “Well, I followed the rules, and I didn’t do anything wrong”. And that might work in a very simple system but Government is now too complex. The problems we’re trying to resolve are far too complex and I don’t think that works any more. We need to simplify quite a few things.

Mr Beer: Sir, on the absence of common sense in Whitehall, might we take our lunch break?

Sir Wyn Williams: Certainly, Mr Beer, yes. When shall we resume?

Mr Beer: 2.00 pm, please.

Sir Wyn Williams: Right.

Mr Beer: Thank you very much.

The Witness: Thank you.

(1.09 pm)

(The Short Adjournment)

(2.00 pm)

Mr Beer: Good afternoon, sir. Can you see and hear us?

Sir Wyn Williams: Yes, thank you.

Mr Beer: I’ll just wait for the room to quieten down before we start the questions.

Thank you, everyone. Ms Badenoch can we turn to the issue of Henry Staunton, please. In your first witness statement, you deal with the dismissal of Henry Staunton as we had asked you to do. Just by way of background, is it right that he was appointed as the Chair of Post Office back on 2 September 2022, and so pre-dated your appointment as Secretary of State by about five months?

Kemi Badenoch: Yes. I’m not exactly sure of his appointment date but it certainly pre-dated me.

Mr Beer: He wasn’t, in any event, one of your appointments?

Kemi Badenoch: No, he was not.

Mr Beer: When you started your position as Secretary of State in February 2023 and were briefed, was anything said to you about Mr Staunton being problematic or an unsuitable person to be the Chair of the Post Office?

Kemi Badenoch: Not when I first started. There were issues around general – there were general issues around the Board finding the right people, and so on, and that it was not a happy place, being at the Post Office. But nothing specific or personal, no.

Mr Beer: So nothing specific or personal about him?

Kemi Badenoch: No.

Mr Beer: Nothing of the order of magnitude that was suggested to you the following year in January 2024?

Kemi Badenoch: No, nothing at all.

Mr Beer: Okay. Can we go back to the briefing you received, BEIS0001061. Can we go to page 9, please. This briefing to you sets out the key stakeholders. The first bullet point refers to Mr Staunton, Post Office Chair, Henry Staunton, and it says that it’s recommended that you meet him.

Did you meet Mr Staunton?

Kemi Badenoch: No. No, I did not.

Mr Beer: Why not?

Kemi Badenoch: I don’t know. There was a recommendation that I met him and I didn’t say no to that, but nothing was ever organised. It may be that something was and it fell through, but I remember at this point I’m still trying to carry out a lot of my Trade Secretary work, I’m travelling a lot. So if people weren’t sort of banging on the door to meet, the meetings didn’t necessarily happen. And, remember, the Post Office is one of very many arm’s-length bodies. I didn’t meet the people running a lot of them unless there was often an issue. I would get updated. They tended to meet with the Department Director General or with the junior minister.

So a Secretary of State meeting was not necessarily prerequisite to doing the job. But those that wanted to meet me did meet me. There was never any requests from Mr Staunton, either.

Mr Beer: When you subsequently came to inform Mr Staunton on 27 January the following year, 2024, in the course of a phone call that he was being dismissed from his position as Chair of the Post Office, you made a number of comments about the fact that the pair of you had never met –

Kemi Badenoch: Yes.

Mr Beer: – over the course of that year, didn’t you?

Kemi Badenoch: Yes, yes, I did.

Mr Beer: Can we look, please, at a transcript of a recording of that call, BEIS0001059. You can see this is a transcription of the phone call that you had with Mr Staunton on 27 January 2024. Now, I think you didn’t have this transcript when you first made your first witness statement?

Kemi Badenoch: No, no, I didn’t.

Mr Beer: You said you very much wanted to have it and you’d asked Departmental officials to track down a copy of the tape?

Kemi Badenoch: Yes.

Mr Beer: I think you worked in your first witness statement from a note – a near verbatim note – taken by an official –

Kemi Badenoch: Yes.

Mr Beer: – and then a summary to that note which was published to the media?

Kemi Badenoch: Yes.

Mr Beer: Now, we’ve now got the tape and, therefore, this transcript of it. You’ll see that it starts up sort of mid-sentence and doesn’t include the introductions at the beginning, nor the part where you actually informed him that he was being dismissed?

Kemi Badenoch: No.

Mr Beer: But we’ve got a verbatim note of that and I needn’t go back to that. Can you help us, why was the call recorded?

Kemi Badenoch: To help the notetaker carry out a good summary of minutes.

Mr Beer: Is that usual?

Kemi Badenoch: I don’t know. I don’t know; I don’t take the notes. It may be, it may not be.

Mr Beer: Did you know that it was recorded?

Kemi Badenoch: Not at the time.

Mr Beer: Okay, so this was something that was going on by –

Kemi Badenoch: This was something I discovered after Mr Staunton had made the false allegations to The Sunday Times, and when I asked for the transcripts and the notes, I didn’t – you know – explaining that I know I had not said the things which he said, I was then made aware there was a recording which would prove that as well.

Mr Beer: Do you know whether Mr Staunton was informed that it was recorded at the time of the –

Kemi Badenoch: If I wasn’t, I suspect he wasn’t as well. The purpose of the recording was to get minutes written accurately and probably they would have been disposed of immediately and maybe retrieved from deleted place, I don’t know.

Mr Beer: Is it normal, then, for all your calls to be recorded?

Kemi Badenoch: I don’t know because I’ve never had – I’ve never needed – never had this situation before, so it probably isn’t, but I suspect, on this occasion, it was just to make sure that the minutes were very accurate, given the severity and the media interest, that the minutes were very accurate. That’s certainly what I was made to understand at the time, that it wouldn’t necessarily be usual to have a recording.

Mr Beer: Let’s read through this. Mr Staunton, in mid-sentence, says:

“… change anything that requires the government civil servant where we get whistleblowed and whatever, whatever. You can – it is a massive, massive problem here in terms of trying – at least you’ve got training going much better now, things are moving in certain direction. But it’s a handful and, I’ve got to say, I’ve chaired some companies, a lot of companies, very successfully but this one’s – this one’s a bit of a nightmare. But we could have got through it but it needed UKGI to be onside and I didn’t feel they were onside for a moment. And I’m sure that UKGI was talking to the journalist. That’s what they did before, not actually sorting out the business.”

The context of that is, by the time you’re speaking, the fact that you were to dismiss him had already been leaked.

Kemi Badenoch: Yes, which was extremely frustrating because I had wanted to do it in a particular sequence and spare him embarrassment where I could.

Mr Beer: You say:

“I know. I’m sorry to hear that but why didn’t you get in touch with me?”

Him: “Because I had an inkling only last week with the Chairman and Chief Executive UKGI and was I was going to tell them all this. I know it’s UKGI but I never met you, you see, and it’s just – but it’s …

“I’ve chaired so many companies you would not believe. I’m working on this business 60 hours a week, whereas I can take Swiss, despite – I chose Swiss as an international company where the share price more than quadrupled and I could do that on 15 hours a week. This is four times the time. You just wouldn’t know the half of it, Secretary of State.”

You: “I do know, I do know. This is what, this is what the world is like today within the public sector. What I did find out of the ordinary was that of all the arm’s-length bodies that I’m responsible for, the Post Office was the one where I never heard from you directly. You know the CMA, UCES” –

Kemi Badenoch: That would have been “UKEF”, UK Export Finance.

Mr Beer: “… the British Business Banks, the chairs of all these organisations would reach out to my office fairly frequently. And Kevin Hollinrake did manage the relationship very well, but there didn’t seem to be much interest in doing much more.”

Just stopping there, what did you mean by that, “Kevin Hollinrake did manage the relationship very well, but there didn’t seem to be any interest in doing much more”?

Kemi Badenoch: In that Kevin did have meetings with him and he fed back to me how that relationship was going, and so, in terms of making sure that he was staying in touch with the Post Office, that was going well. But what I was trying to signal to Mr Staunton, and which I do believe now, is that he didn’t seem to want to meet me. And, you know, one can speculate on the reasons from a hindsight perspective but, at the time, I simply assumed that he was perfectly happy having meetings with Kevin Hollinrake. In hindsight, I think that he did not want to meet me.

Mr Beer: So “there didn’t seem to be any interest in doing much more”, you’re saying interest by you, Mr Staunton?

Kemi Badenoch: Yeah, interest in Mr Staunton doing much more with, you know, in terms of relationships with ministers.

Mr Beer: So, by that, you mean “but you didn’t seem to have any interest in doing much more”?

Kemi Badenoch: Yes. That’s what that –

Mr Beer: So that’s directed towards Mr Staunton not Mr Hollinrake?

Kemi Badenoch: No, no, no, no. I think Mr Hollinrake did an excellent job.

Mr Beer: You continue:

“I’ve been given a very, very high level overview of the government’s issue that has led to the advice given to me about the decisions which I have now taken, but I want to make sure that you have had a chance to make your views known as well. But, given where we are and what I’ve just said, what would you like to see happen now?”

Him: “Right. So what we need to do is actually I think – it’s a very difficult one with regard to the CEO, who’s very unstable and actual I said to Lorna …”

That’s Lorna Gratton, yes, UKGI?

Kemi Badenoch: Mm-hm.

Mr Beer: “… we need to have an adult conversation with him to say, look, stay through the Inquiry and we’ll treat you as a good leaver – nail him down for 12 months. Well, of course she says, oh, well, in this government it’s very difficult to offer could leaver status. If we have a crisis, it’s not a big deal; he might get an extra 100,000 that he wouldn’t get if he wasn’t a good leaver but at least we nail him down for a year and the money he would get for good leaver status actually seems to be more important to him than actually the sums involved. So I think we need to nail the Chief Exec down.”

That’s the first things. The second thing he goes on to address:

“We must do something about – we must make this organisation more postmaster centric. I said we need to have an oversight committee chaired jointly by the two Postmaster Directors, we need to introduce a third Postmaster Director, so the message will get out to the network that the Post Office is changing. And, trust me, at the moment it is terrible the view of the Post Office out in the network. So have a third postmaster.

“We’re really then, Secretary of State, starting this journey towards demutualisation. We’re not to say that, but that’s what you need to do. The SID process, it’s six for two. Never mind what Lorna thinks and the fact that we’ve gone outside. The fact is when the facts change, you change your decision. We need to have an internal policy – if you met Darfoor you’d recognise this is a class act which ought to be asked so we can – I can quite see why everyone’s got there. And the fact that we started out on a public journey – it was a different world two months ago. I mean, we were just – you know, it’s just been horrific the last four weeks. We need to get on the front foot and I think that postmaster centric does that for you.”

Then moving on:

“There’s a feeling within the business – Richard Taylor said all the postmasters are on the take and they’re all guilty as charged, we wrote to the Lord Chancellor stating that was our view, and that would be Peters & Peters. That’s not my view and I don’t think it’s the view of the majority of the Board but I think that UKGI and people sending that letter with (unclear) it was very – it was actually contrary to what the Government ministers were trying to do and in fact you’d be surprised [at] the sort of things your civil servants say about ministers.

“So it’s a mess. But the fact is ‘you are guilty as charged, postmasters are on the take’ it’s got to change and we need a massive cultural shift in this organisation to do that. And most of the directors are on side and the UKGI director is not. She couldn’t – she couldn’t run a bath, let alone run a company. We’ve got a big problem there. We need to take some very tough business-like decisions in terms of culture to change it. And when we talk about culture, as Nick said, Lorna thinks it would just be a crusade for female diversity. It’s not that. It goes to the heart of how we operate Post Office, this cultural shift. It’s enormous what we need to do but I think it’s possible.

“But I don’t think it’s – you know, we need to have Andrew as the SID. The Chairman would put it through. I think you need to change the UKGI Directors and just get to the core. And it’s a battle that’s winnable but, by God, it’s going to be a battle.”

You say: “It certainly is …”

What in that previous passage were you agreeing with?

Kemi Badenoch: That it’s going to be – that sorting things out is going to be a battle.

Mr Beer: Specifically, what did you think was going to be a battle?

Kemi Badenoch: I think that the conversation here was about the general Board. So he says, “We need to change the UKGI Directors and just get to the core”, but he is giving personal view about Lorna Gratton, and he thinks that the issue is between the Post Office and UKGI. I am, you know, being amicable and saying “Yes, it is going to be a battle”. The Board, in my view, was the issue and there’s a lot that needed to be done. That’s what I’m alluding to there: it’s not just about UKGI.

But what I wasn’t trying to do was give an opening for him to pick apart particular individuals on the Board. I didn’t think that that was a helpful road to go down. I did want to get his view about what had happened and I didn’t want to have an argument with him. So I’m agreeing where we thought we could find some kind of agreement and then moving the conversation on to the things that I was trying to elicit from him.

Mr Beer: Can we move much further into the call and turn to page 9, please. This is you speaking at the top of the page and this is about whether he should turn up to the Board meeting that was going to happen on Monday or Tuesday of that week, and you were saying, “No, you should not”.

You say: “I’m sorry but that would need to be the case given the conversation we’ve had and what I suspect the media after going to be doing.”

Kemi Badenoch: Sorry, could you let me know where in the hard copy I could find that?

Mr Beer: B19.

Kemi Badenoch: B19?

Mr Beer: Yes.

Kemi Badenoch: Bear with me. Ah, thank you.

Mr Beer: We’re at the top of page 9.

Kemi Badenoch: Yes.

Mr Beer: So we dealt at the bottom of page 8 with not turning up at the next Board meeting and you say, “I’m sorry but that will need to be the case”.

Kemi Badenoch: I think I’m talking about his leaving and about not giving reasons. Am I looking at the wrong –

Mr Beer: Yes, you are. Bottom of page 8.

Kemi Badenoch: Bottom of page 8. So I’m saying, “I’m sorry but that will need to be the case”.

Mr Beer: If we just go back on the screen to the bottom of page 8, please.

Kemi Badenoch: Sorry, yes, I’ve found it. It’s page 9 on mine. I’ve found it. Thank you.

Mr Beer: We can see that on this passage here –

Kemi Badenoch: Yes, that’s right this is about –

Mr Beer: Immediately beforehand, you were trying to arrange some contact details –

Kemi Badenoch: Yes, that’s right –

Mr Beer: – and you couldn’t get anyone on the call that was listening in to acknowledge that they were listening in, so you had to write down his mobile phone –

Kemi Badenoch: Yes.

Mr Beer: – or his email address?

Kemi Badenoch: I think that when the – the way that the Government does these calls it was a switch call that they were muted and so they were unable to join the conversation.

Mr Beer: So looking at the bottom of page 8, he says:

“– therefore, I won’t turn up to the Board meeting on Monday or Tuesday.”

You say: “Yes, that is correct.”

He says: “Fine.”

Then we go to the top of page 9, you say:

“I’m sorry but that will need to be the case …”

Kemi Badenoch: Yes.

Mr Beer: Which is why I said the context of you saying that –

Kemi Badenoch: Thank you.

Mr Beer: – was not turning up. Anyway, you carry on, third line:

“… if it’s any consolation at all, I doubt it will be, but I’m very angry about the fact that this has been leaked without us doing this properly.”

He says: “Appalling. Appalling.”

You say: “It is appalling and I have noted what you have said about UKGI. I do think that they have been part of the problem and that is the next step.”

What problem were UKGI a part of?

Kemi Badenoch: I think that the communication channels between myself and UKGI should have been – there should have been more information passing direct to me, not just through Kevin. And Kevin would, of course, give me a summary, but there were some times that we actually ended up coming to different views on things. So we had different views, for example, on Nick Read, the CEO, not problematically but we just had a different – we just came to different conclusions.

And I felt that my own interactions with UKGI were very limited and I didn’t actually meet Lorna herself until it was – the issues with Henry Staunton had come to light and we were in the process of sacking him.

And also, I was giving him the benefit of the doubt with what he had said earlier on in the conversation about issues with UKGI. If you remember, the views I have about Henry Staunton now are different from where I was at the time of this conversation, where this is – where I was thinking this is someone who’s made too many mistakes, the position is untenable, but he was probably in his own way doing his best, to where I am now, where there’s just been repeated uses of misinformation, and so on.

I took it in good faith that his complaints about UKGI were well meant and true from his perspective. Given everything that has happened since then, I don’t think that his complaints about UKGI are well founded.

Mr Beer: So were you just saying I think UKGI are part of the problem as a sop to him?

Kemi Badenoch: No not so much as a sop but, if a chair feels that way, then UKGI should have been aware and should have been made me aware as the sole shareholder, not just told Minister Hollinrake. There was no note, for example. Just because I wasn’t meeting them on a day-to-day basis doesn’t mean they couldn’t have sent a note to me for me to review, and that didn’t happen either. So these are the sort of processes which I would recommend to the new Secretary of State to ensure that UKGI are giving a full and frank view, rather than just the vanilla view of what’s going on.

There’s too much vanilla in terms of reporting and, actually, it’s very hard to know early when problems are occurring.

Mr Beer: What do you mean, “there is too much vanilla”?

Kemi Badenoch: That the way notes are written in the Civil Service is often too – in a way that too much isn’t said. For me – and I’m speaking for myself now – other ministers may not necessarily want this – I prefer to just have the detail unvarnished, “We think this person a problem. We don’t think they’re doing a good job. We think they are dishonest”, and so on. People tend not to like writing things down, maybe because of inquiries like this or an FOI request or who knows.

So, instead, you get what I call a vanilla version of “There are concerns”, and that could mean anything. It could mean that there are minor concerns which you don’t need to worry about or there are very significant concerns which we don’t want to put on paper. And as a minister who is getting 100 pieces of information a day where you have to prioritise, you might not recognise that there’s a big red flag because of how a note has been written.

This is standard across the Civil Service. It’s just the way things are written, probably to not alarm people, to not create panic, and to keep the discretion there because it’s very hard to keep all notes secret, even when they are marked “Official Sensitive”. And maybe UKGI didn’t have this view, I don’t know, but I do find that the unvarnished truth is more helpful than the vanilla version.

Mr Beer: Can we take that down and go back to the process that led to the dismissal of Mr Staunton, by looking at your first witness statement, please. That will come up on the screen for you. It’s page 2, paragraph 10. If we just go down, under the heading, “Concerns regarding Mr Staunton’s conduct”, you say, “On 24 January”, so that’s three days before this call we’re speaking about.

Kemi Badenoch: Yes.

Mr Beer: “… I received a written submission date 23 January prepared by UKGI and Departmental officials, in which I was advised of specific concerns in relation to Mr Staunton’s conduct and his suitability for office. [They] were”, then you list them 1 to 5. It goes over the page.

That fairly reflects the documents. I am going to read them out.

Kemi Badenoch: Okay.

Mr Beer: “(1) That he had repeatedly attempt to shut down a whistleblowing investigation into his conduct.

“(2) That he had engaged in aggressive, intimidating and disrespectful behaviour to other Board members and members of the POL Executive Team.

“(3) That he showed poor understanding of the public sector aspect of POL’s work and poor judgement.

“(4) That he had disregarded proper governance processes as [the] Chair, most recently by announcing the appointment of a new Senior Independent Director for [Post Office] without following formal consultation with the Board, following Board processes or sharing shareholder approval as required.

“(5) That he had failed to provide constructive support to [the Post Office’s] CEO.”

I think it follows that, so far as you were aware, none of the issues that were set out for you included the speed at which compensation was to be paid by the Government or the Post Office to subpostmasters arising from the scandal, nor a dispute between Mr Staunton and the Government and or Post Office about that speed.

Kemi Badenoch: No.

Mr Beer: In particular, the go-slow suggestion that he was subsequently to make did not feature in the list of five issues that were brought to your attention?

Kemi Badenoch: No. They had nothing to do with that submission. And, you know, from our earlier session, the letter that I wrote to Treasury showed that we were not – that’s certainly not what my Department was doing.

Mr Beer: “11. The submission recommended that I should decide that Mr Staunton could not continue in his role as Chair and that if [you] agreed [you] should offer him the opportunity to resign rather than excise [your] power under [the] Articles of Association to remove him.”

You record, and this is backed up by the documents you refer to, that submission was referred, in paragraph 13, to your Private Office by email, with a covering text that said that the submission reflects the Permanent Secretary’s view as well as that of Government Legal Department and UKGI lawyers.

The submission was placed in an overnight box, together with a box note, and the box note – and you give us the reference there – stated that the recommendation to remove Mr Staunton came from the Senior Independent Director and then Remuneration Committee Chair. The concerns included allegations of misogyny and racism against Mr Staunton and that officials agreed that his conduct and judgement made him unsuitable to continue as Chair.

Was it on that basis that you decided to dismiss him?

Kemi Badenoch: It was on the basis of everything that had come to light: a conversation with Kevin, with Kevin Hollinrake, but also, going back to the point that I made earlier about doing it the right thing and being seen to do the right thing, I think that we should always be clear about what we are doing and, if you are sacking someone, then giving them the opportunity to resign can mean that a different story is communicated to the public. And I wanted people to be clear about what was happening. I didn’t want him to have a huge amount of embarrassment. I wanted us to have a controlled story about why we’d asked him to leave, which we lost because of the leak.

But the initial recommendation, which I was considering, about giving him the opportunity to resign, I did not think was the right one, given the detail of the allegations, the seriousness of them, and the sheer number of issues that we were having with him as Chair.

Mr Beer: Thank you. You refer in that series of documents to the initial note, the submission that came up to you in the box.

Kemi Badenoch: Mm.

Mr Beer: Can we look at that, please, BEIS0000868. This is the submission that came up to you, as you’ve said, on the 24th; it’s date the 23rd. It’s addressed to Kevin Hollinrake and you, addressed to you by Lorna Gratton, and Carl Creswell from UKGI and the Department respectively. Then in the first line, it says:

“We have previously expressed concerns to you about Henry Staunton’s suitability to be Chair of the Post Office Board.”

Firstly, is that accurate: that they, either Lorna Gratton or Carl Creswell, or both, or their Department’s, had expressed previously concerns to you about Henry Staunton?

Kemi Badenoch: Yes. It isn’t just accurate, it’s also illustrating the point I made earlier about the vanilla – you know, the vanilla update. Concerns had been expressed but not detail. So it was statements like, “We don’t think it’s going to work out with the Post Office, we have some concerns” and I would ask what’s happening? “Well, there’s an investigation, we can’t really talk about it. We’re not supposed to know, we don’t want to prejudice but we’ll let – you know, eventually we’ll let you know”, by which time it’s time to sack.

So it is true that they had previously expressed concerns but the strength of the concerns was not clear until the submission, which we just referred to in January.

Mr Beer: Can you recall anything in more detail about the substance of the calls?

Kemi Badenoch: No, no. If what came out in the submission had been said previously, I would have taken much more of an interest but the way that the information had been conveyed was that there was a problem and the processes were in place to handle them, and I didn’t need to worry about it Minister Hollinrake would look more but, at the right escalation point, I would be informed. So, from my perspective, the system was – the system was working. There was a problem, it wasn’t yet Secretary of State level issue, they were trying to resolve it, and because we had had other issues – there was the problem with the Inquiry metric and the bonuses which had been paid – it felt at that point like one of those things, where they just weren’t getting a handle of the job.

Mr Beer: Do you think the Department should have acted sooner in dealing with and/or removing Mr Staunton?

Kemi Badenoch: I don’t know. I think it’s hard to carry out a significant action like that in terms of removing someone when the processes haven’t been followed, because of the unfair dismissal, you know, Employment Tribunal type repercussions, which could come from not doing things properly. So when it comes to acting quickly, I always start from the perspective of who is impacted. So with the acting quickly in terms of getting postmasters compensation, yes, because we want to make sure that they’re treated properly and fairly. But acting quickly, in terms of sacking a chair, creates the opposite issue, where someone may not necessarily be treated properly and fairly because we’re trying to move in haste, so it’s always about what is the impact on the person; what is the outcome we’re trying to achieve?

I would rather make some mistakes and get compensation out to postmasters quickly but I would rather take some time and act slowly in order to make sure that we don’t sack someone unfairly or give them a right of appeal or right to a fair hearing where a process demands that.

And I also believe very much in the concept that people are innocent until proven guilty. I think if we’d acted much faster than that, that would have been against that principle.

Mr Beer: Were you aware before you accepted the advice to dismiss Mr Staunton, that he was a strong advocate and supporter of the Subpostmaster Non-Executive Directors?

Kemi Badenoch: No, I was not aware but I am not sure that is necessarily true given what I remember people saying when I did visit the Post Office. There were a lot of subpostmasters who did not like Mr Staunton, so that’s his word, and, you know, there’s no reason for us not to believe him, but the evidence of that I didn’t think was much.

Mr Beer: I’m referring specifically to being a strong supporter of the Subpostmaster NEDs on the Board?

Kemi Badenoch: Again, that’s actually what I did mean, both the subpostmasters and the ones on the Board. He always said that, he certainly said that in his call to me but of course that’s a call we’re having after he’s just been relieved of his position.

Mr Beer: Thank you. That can come down.

You, I think, were party to the appointment of Nigel Railton as POL’s Chair, at least Interim Chair; is that right?

Kemi Badenoch: Yes.

Mr Beer: Can we look, please, at BEIS0001070. This is a letter from you to him in May 2024, in which, in the opening paragraph, you extend your congratulations to him on his appointment as Interim Chair of the Post Office and welcome him in your role as the sole shareholder. Yes?

Kemi Badenoch: Yes.

Mr Beer: I just want to look at the strategic priorities. You’ll see that’s the heading of the letter. “Strategic Priorities for 2024/25”.

Can you help us, what’s the purpose and status of a letter like this?

Kemi Badenoch: So it is to formally let someone know what you’re expecting them to do in the job.

Mr Beer: Is it what you’re expecting them to do in the job or what you’re expecting Post Office to do as an organisation?

Kemi Badenoch: Well, specifically in this case it was what I wanted him to look at as Chair of Post Office. I can’t remember whether this had been done for the Post Office. It wouldn’t be an annual – it’s written in an annual way now but it wouldn’t necessarily be an annual – a set of priorities. We’d normally do those sorts of things over several years. So if strategic priorities had been done the previous Secretary of State would have done them. We tend to have policy statements for regulators and arm’s-length bodies about what we expect them to do, but 2024/25 was very much a focus on conversations which I’d had with him about urgently turning things around for the Post Office.

Mr Beer: I should have said that this is a draft, hence the date and the passage in grey. You tell us in your second witness statement – no need to turn it up – in paragraph 36 that this is a draft version but that you understand that the final version cannot be located by the Department, although you believe it would have been in very similar terms?

Kemi Badenoch: Mm. Yes.

Mr Beer: If we scroll down, please. You say:

“… I would like you to focus on the following priorities for the” –

Kemi Badenoch: Sorry, can you tell me where in the hard copy I can see this?

Mr Beer: Yes, BB25.

Kemi Badenoch: BB25. Thank you.

Mr Beer: So the main paragraph from the bottom, highlighted:

“In this capacity, I would like you to focus on the following priorities for the Financial Year 2024/25 …”

Then there are three priorities set out in bold, number 1:

“Intensifying existing workstreams to address [Post Office’s] historic failures and setting the business up for future success.”

Then over the page:

“2. Supporting the cultural transformation of the Company and focusing on improving on [Post Office’s] capacity, capability and resilience at all levels.”

Then:

“3. Enabling the future success of [the Post Office], including effective financial management and performance to ensure medium-term viability.”

Then particulars are give in bullet points under each of those three strategic objectives.

Kemi Badenoch: Yes.

Mr Beer: One of the points that you mention under 3, and it’s the fourth sub-bullet point under 3, is:

“Maintain stringent cost control and a focus on value for money and efficient, delivery across the cost base including on the New Branch IT (NBIT) and IT projects, legal costs, acceleration of the network strategy, of the approach to directly-managed branches and measures aimed at reducing central costs.”

Now, I don’t think NBIT, the New Branch IT Programme, is mentioned in your witness statements. Can you recall when you first became aware of NBIT?

Kemi Badenoch: No, I can’t recall when I first became aware of NBIT. It might have been in that initial briefing or in subsequent meetings about the Post Office. But the most substantive conversation I had about NBIT was when I visited the Aldwych branch of the Post Office, and spoke to them about how that project was going and what they needed from me.

Mr Beer: Were you consulted or provided with updates regarding the development of NBIT?

Kemi Badenoch: No, not directly. I imagine Kevin was but I was not.

Mr Beer: Did you have any oversight of the Post Office’s approach to and the rolling out of NBIT?

Kemi Badenoch: No, and I wouldn’t expect to. That’s the sort of thing which I think the Post Office has to do itself. Having political direction is very different from the sort of operational day-to-day decisions which would have been taken but this is – this was put in as a strategic property, because I’d had that meeting and I was quite concerned, just from my own background in technology, about the direction the project was going.

Mr Beer: Does it follow that, so far as you’re concerned, Post Office’s engagements regarding NBIT were limited to essentially funding requests?

Kemi Badenoch: Yes, certainly – well, that was my experience. It might not have been Minister Hollinrake’s experience or previous Secretary of State’s experience but that was my experience. But I also would not expect to be getting into the detail of the IT projects of the Post Office. I would have been expecting a high level overview of what they were trying to achieve and how much money they needed.

Mr Beer: Government ministers said the same to us when they gave evidence to the Inquiry about the development and rollout of Horizon: “I wouldn’t expect to be getting involved in that kind of thing”.

Kemi Badenoch: Mm.

Mr Beer: Does it follow that you have not been made aware of any issues with the development of NBIT?

Kemi Badenoch: Well, the project is overrunning and it’s requiring a lot more than was budgeted for it. That, in my view, is an issue. But, in terms of how it is working, no, and I would not expect to see that. I did have some conversations about how to extend the new Horizon system, which Fujitsu had been supporting, because that would have – we needed something in place. That ending would cause a serious problem for postmasters. So managing the day-to-day contract, and ensuring that that continued until a replacement was ready was very important to me because, otherwise, everything would fall over.

Mr Beer: Thank you. That can come down, that document.

Just lastly, then, from me, you tell us in your witness statement – I’ll read it out without turning it up:

“If it [the Post Office] was a private organisation it would have disappeared in its current form long ago. We are keeping it alive. The result is that it is in a permanent state of stress. We will need to make sure that we’re recruiting with that in mind.”

Would you agree that it’s imperative not merely to keep Post Office alive but to transform it?

Kemi Badenoch: Yes, yes, I would.

Mr Beer: What, in your view, is essential, in terms of what needs to be done in order to change or to transform the Post Office?

Kemi Badenoch: Well, this is a very difficult question. Because the fundamentals which underpin the Post Office are very difficult to manage in the age that we live in. When – pre-Internet, the Post Office would have been a commercial entity that any organisation would bite its hand off to run. You know, the universal service it effectively provided just meant that it had a very easy stream of cash. Now, that is not the case. But we believe, certainly when the Conservatives were in Government, we did believe that this is an entity that has not just operational significance but also a cultural significance that should not be lost.

How we maintain that going forwards, given how much it costs, is very difficult. The sort of transformation that you might have in a commercial organisation just doesn’t work in Government. The sort of decisions which you would take which are around profit and profit for the shareholder just don’t come into – they don’t come into play. And that, I think, is what I was alluding to in my witness statement when I say it’s just in a permanent state of stress.

I am – well, I was the sole shareholder. The Business Secretary is the solicitor shareholder but even they aren’t the ones who provide the money. It’s a totally different department. So it just doesn’t make sense the way a commercially structured organisation in the private sector would be run. And any sort of transformation, in my view, needs to start from the objectives which we have in mind for what the Post Office needs to deliver, how it works within that universal service obligation, which goes with Royal Mail, making sure that everybody has access to post, given that there’s, you know, just a lot of competition.

That’s quite difficult to do within the restricted funding environment which is expected for every single public sector organisation. It is not the customer’s money; it’s taxpayers’ money as well. We subsidise this organisation. How do we do so in a way that can keep it going, that can refresh it for the 21st century? It is a labour of love. That’s one of the reasons why I had to make a direct appointment for Nigel Railton, rather than an open one.

People are simply not interested now in going to work for the Post Office at that level because of the intense levels of public scrutiny, because of the difficulties in making decisions which you would be able to do very easily in a private sector organisation. You need people who are prepared to do a difficult job, as if they were public servants, even though that’s not quite the case, and I think that’s a huge challenge in terms of transformation for the Post Office. I don’t know how we do it. It requires its own piece of work. I know that there have been reviews. I don’t think anyone has come up with the correct answers yet.

Mr Beer: Thank you. Then in terms of Government’s role in this, I just want – the very last thing – to ask you about a sentence or two in your witness statement. If we look at it, please, I think it’s your second witness statement. It’s page 12, paragraph 41. At the top of paragraph 41, you’re dealing here with decision making within Government and you say something that you said to us more than once today:

“There is a cautious, risk-averse culture within the Civil Service, which is … baked in.”

But then, do you see about three lines from the bottom there, it says:

“If we want our Government to make decisions faster, we need to reduce some of the public law burden …”

Can you see that?

Kemi Badenoch: Yes, I do.

Mr Beer: “… and if we choose not to do so, we must accept this has consequences for speed and efficiency of Government. Every time we create more public law to hold [the] Government to account, it is slower to deliver for people.”

I just want to make sure we’ve understood what you mean by those sentences. Is it your evidence that the Government’s accountability to the courts is that which prevents it from acting with speed?

Kemi Badenoch: It does slow things down. If, as a minister, you make a decision and every decision is open to challenge on the basis of judicial review, it is quite rational the civil servants will do every single thing they can to make sure that you don’t end up getting taken to court. All of those things which they do end up slowing down the process. It is just part and parcel of, you know, of creating more accountability, that you add extra processes. Those will take time. Those will need to be followed.

It is a trade-off that is baked in; it is a part of creating accountability. The thing is you can’t just have someone making a decision and saying, “Do this” and the thing happens instantly. It means that things never happen instantly because you have to create an audit trail, you have to go through the checks and balances, you have to have more meetings, you need to consult, consultations can take months. All of those things slow down the pace of delivery. And it’s not about criticising accountability: it is about understanding where the opportunity costs are and making sure that we can see where it is that perhaps these things might need to change in order to stop the sort of injustice which we saw take place around Horizon or, in fact, with delays to paying compensation.

And it’s also the same thing, even within the case of Henry Staunton, you know, you asked the question why didn’t we remove him earlier? If we had done that, then we could have created more problems in the future by not providing the evidence and the audit trail. It’s just part and parcel of accountability but the more Government does, the bigger Government gets, the more it has to do these things, the more requirements there are on the Treasury, the more likely it is that the Treasury is going to be saying no or creating value for money arguments that mean that it’s salami slicing everything, and everybody is just getting a little bit of what it needs rather than a big chunk to deliver and perhaps provide transformation.

Mr Beer: Can I summarise that: it’s your view that the rule of law stands in the way of delivery of services by the Government to people?

Kemi Badenoch: No, that’s not what I’m saying. This not about the rule of law; this is about the burden of regulation. The Burton of regulation is not the rule of law. You can have the rule of law without an excessive burden of regulation. But if you keep adding more and more rules, that will slow things down. It doesn’t mean that you don’t want the rule of law but the rule of law has a purpose and that is to create a fair system which everybody is treated equally and where everyone can receive justice. If you keep creating more regulations and people aren’t getting justice then something has gone wrong.

And we should be able to look at that without assuming that this is a criticism of the entire system of the rule of law. It means that we should be able to look at how we can reform public law. The law is not above criticism. We should be able to say that, actually, this isn’t working well, what can we do to improve it? Rather than what is happening now where people say, “Oh, it’s the rule of law, we can’t too much. Let’s not do anything”, and then there’s more and more injustice.

We shouldn’t be afraid to challenge ourselves. We shouldn’t be afraid to challenge the system, we shouldn’t be afraid to challenge Government and we shouldn’t be afraid to challenge the law, if we think the law is not delivering for the people.

Mr Beer: Ms Badenoch, those are my questions. Thank you very much for answering some of them.

The Witness: Thank you.

Mr Beer: Can I hand over to Core Participants and I’d ask them to be mindful, please, of the time limits we’re operating under, thank you.

Questioned by Mr Stein

Mr Stein: Ms Badenoch, with the (unclear) of time in mind, can I take you to a document, please. BEIS0001061. It will come up on your screen in a moment.

Kemi Badenoch: Okay. Is there a hard copy reference for that?

Mr Stein: There’d probably is but I’m going to look to Mr Beer to provide the hard copy reference, as I don’t have it. It was a document you were shown earlier on in your evidence, which if we go to the first of the two-page 5s within the document –

Mr Beer: BB3.

Kemi Badenoch: BB3, thank you.

Mr Stein: Thank you. Do you have the document –

Kemi Badenoch: I do.

Mr Stein: The page I’m looking at is Post Office strategy. There are two page 5s within this document, which I think you commented on with Mr Beer, that it’s probably a document that’s been reworked for your purposes.

Kemi Badenoch: Yes.

Mr Stein: If we look there under “Post Office Strategy”, Ms Badenoch, it then says this, final bullet point:

“Recent ministers have been more cautious about going public on this work than their predecessors. As a result we are taking this strategy/policy work forward only internally within HMG and together with POL. We will then advise ministers of findings and ministers, (including with HMT ministers) will then decide whether they want to make any changes to the current policy framework and if so, when to proceed with the necessary public consultation.”

Just help us unpack that. Recent ministers. Now, since let me see, 2019, which is when the High Court litigation, what we call the GLO litigation, took place, and essentially the Post Office was found in two seminal judgments to have failed subpostmasters, all right?

Kemi Badenoch: Mm.

Mr Stein: So since that time, we had Ms Andrea Leadsom in 2019 to 2020; and then from 2020 to 2021 Lord Alok Sharma; after that, in 2021 to 2022, we had Mr Kwarteng; and then in mid-2022, so 2022 to the middle of 2022, we had Mr Rees-Mogg; and then your immediate predecessor was Mr Shapps.

So we had a revolving door of ministers, really, going through, I’m afraid, the role that you then took up as Secretary of State. So the ministers that we seem to be being referred to here in the final bullet point, “Recent ministers have been more cautious about going public on this work than their predecessors”, the title of the work being Post Office strategy. When you came into post, did you find that any work had taken place regarding Post Office strategy?

Kemi Badenoch: I believe that there had been some work being done.

Mr Stein: What was it?

Kemi Badenoch: I mean, I don’t have the documents in front of me. But I remember us looking at what the Post Office was doing in three buckets: dealing with compensation claims under the fallout of Horizon; managing the day-to-day running of the Post Office; and the future transformation, the NBIT IT programme and also thinking about how and where this might interact with Royal Mail, which of course we also had some responsibilities for in terms of delivering its universal service obligation.

So the issue here around revolving ministers, I think, can often be overstated. Primarily because people often don’t understand the difference between setting political policy direction and company policy direction, and it was one of the questions which counsel asked right at the beginning, in terms of who is carrying out the policy work.

There is policy, in terms of internal company policy which officials might have some view on, but general overview that comes from ministers is often political in nature. So I’m not surprised, for example, that it says that recent ministers had been cautious about going public because there’s a lot of deliberation which takes place, which in a commercial company, just wouldn’t happen, but because it’s a public company, people are more interested in, but it’s not necessarily helpful when you have not come to a final conclusion or a decision.

Listening to ministers and officials and the Post Office Executives deliberate is not helpful until you actually have a clear sense of direction of where the Post Office wants to go, and the strategy work, which had come back, was often very, very speculative in nature: demutualisation, do we even need a Post Office? Having those sorts of conversations in public is very alarming for people who are hearing the conversation happen before you’ve actually settled on a direction. So that’s not surprising to me at all.

Mr Stein: The judgments, which were the starting point for this Inquiry, on which this Inquiry is based, were in 2019. Now, we finally hear this year from Mr Railton who comes to this Inquiry to give evidence, and he says, “Well, there’s been a submission up to Government this year”, after your time in office –

Kemi Badenoch: Mm.

Mr Stein: – setting out a proposal for the forward looking strategy to govern the Post Office into the future. It doesn’t seem as though, frankly, anything has been done, Ms Badenoch, from 2019 until after your appointment of Mr Railton, when he decides that, well, something ought to be done about this, really and maybe we ought to nudge Government’s arm?

Kemi Badenoch: No, that wouldn’t have been the case. Nothing had been decided but, if you recall looking at the strategy – strategic priorities that I set out for Nigel Railton, I also asked him to have a look again because I did not think that we were getting anywhere with the previous strategy discussions. And I seem to remember that some consultants had been brought in – I can’t remember whether that was Grant Thornton – and what their remit had been, but this was something that had been worked on but never concluding, and I wanted something that was specific with the proper outcome, which was viable to deliver because, at the end of the day, we would have to go to the Treasury rather than the public for the money.

But this is, in my view, not as a result of changing ministers. This is actually more as a result of other things that are happening in the background: spending review settlements, changes in Government more generally, it wouldn’t have mattered if the same person had stayed in if you had a Prime Minister who’s dealing with the fallout of perhaps Covid, when these conversations starts its before a pandemic, priorities change. So you have to have all of those things in mind. We as ministers aren’t just dealing with one organisation.

Even I, as Secretary of State, was dealing with about to be 30 or 40 different bodies and that’s something that would have an impact in terms of the priorities of the Post Office, and this also alludes to the final point which I was making: that the nature of this organisation sitting in the public sector throws up all sorts of issues which you just wouldn’t have in the private sector. And that’s what – you know, the questions you’re asking are in that vein, they’re showing up what some of these tensions are.

Mr Stein: In fact, the strategic direction that you asked Mr Railton to take in the document that you’ll find within your pack at BB25, I note from Mr Beer’s direction to that earlier, that says at bullet point three, the first bullet point at 3, and I’ll read out what it says, that says to Mr Railton:

“Oversee a strategic review of Post Office and provide ministers with your conclusions.”

So by the time we’ve gone from 2019 to your time as Secretary of State, to your time as Secretary of State to May 2024, we get within your letter to Mr Railton, who you’ve appointed, your general request of him that he is to oversee a strategic review of POL, the Post Office, and “provide ministers with your conclusions”.

Now, hang on, that’s 2019-24, okay, let’s be generous, just under five years where you’re having to go to the new chair that you’ve appointed and say, “Look, honestly, give this some thought”, and that’s a bit more than just problems with a revolving door. That seems to be that nothing has happened since 2019.

Kemi Badenoch: I disagree. Just because there is not a strategy that’s being implemented doesn’t mean that no work on strategy is taking place. But clearly there are unsatisfactory conclusions and also, which is part of the reason why we’re having this Inquiry, the organisation itself is bogged down in dealing with historic and current issues. It is very hard to create a strategy for the future when the Board itself and the organisation is dysfunctional. It doesn’t make sense to demand a strategy when the entire financial world in which we live in has changed.

So whatever strategy was worked on would not have been something which would have been viable for the future, which is why I, as Secretary of State, ask the Chair, “Can you start again and look at what we can do, given what we know now”.

Mr Stein: Five years after, or just under five years after, the GLO litigation was concluded.

Let’s move on to Fujitsu. Now, we know that the European Director of Fujitsu, Mr Patterson, gave evidence before the Select Committee. I can’t really ask questions about that, they’re subject to Parliamentary privilege. He came along to this Inquiry to give evidence and he expressed his concerns about Fujitsu’s operation within the scandal. Secondly, essentially, we know that Fujitsu have committed to providing something by way of a contribution towards compensation. Lastly, with Mr Patterson, he answered my questions, which was about restorative justice, making sure that the wider range of people that have been affecting by this scandal, in other words family members, he said in the positive – he answered my questions positively and said that that’s something that ought to be looked into, and seemed to be approving of the suggestion.

So we know that Fujitsu are saying, essentially, “We’ll put hand in pocket”; did they ever come to you and say, “Secretary of State, we really mean that, what can we do to, you know, to help and provide money?” Did they have a meeting with you or arrange a meeting with you.

Kemi Badenoch: Well, we did have meetings, I can’t remember the names of the executives who I did meet but that included the global CEO or global Chairman, but it was – they had expressed that sentiment but it was I who was asking for specifics, dates, times. I recall a meeting where I asked if they could do something early to show goodwill, being mindful that, if they didn’t and not knowing when the Inquiry would end, that there could be a change of Government, the revolving door of ministers, you know, moves again, and conversations could start from scratch.

But, in terms of them proactively offering, which I think is what you’re asking, then the answer is no.

Mr Stein: You see the commitment they’ve made, and we know from Mr Patterson – I anticipate his evidence will be that essentially they’re prepared to do something after the close of this Inquiry: they await the report of this Inquiry.

Kemi Badenoch: That’s certainly the impression that I was given.

Mr Stein: Did they provide any reasons as to why they need to wait until the close of this Inquiry?

Kemi Badenoch: Well, this is now recall, which may not be 100 per cent accurate, but I think it was about making sure that it was done properly. They seemed reluctant to start off with making payments before the Inquiry was concluded, not dissimilar to the reasons that officials made or advised when we asking for some of the compensation payments, about just wanting to make sure they do it properly and do it at the right time, and that, they felt, was when the Inquiry had given them an appropriate figure of something or that they could judge what an appropriate figure would be.

Mr Stein: There seems to be a certain irony about Fujitsu’s operation because they continued to operate the Horizon system and they continued to operate other contracts of Government, and they continued to take the Government pound, and yet they don’t appear to want to contribute within the lifetime of this Inquiry to compensation or indeed restorative justice in real terms, ie financial terms?

Kemi Badenoch: Well, certainly that was the conversation that I had. I look at what the Government is doing with Fujitsu in other areas completely differently because they are different arms of Fujitsu and not everybody can deliver on what they are doing, and simply yanking away contracts would not necessarily be what’s right for the taxpayer or the consumer at the end. So I think we need to look at those things quite separately. What is the right thing to do here and does provide need to provide compensation? I believe that’s absolutely right. Should they have done so in some form earlier? I would have liked to have seen that but that does not preclude them doing so in the future.

I imagine that they definitely will. I know that they’ve had an impact on their share price, for example, just from that documentary being aired at the beginning of this year. But I think we should also look at that very separately from Fujitsu’s other operations, many of which have nothing to do with the branch that caused the Horizon issue and, of course, Fujitsu is still providing the software which the postmasters are using, and which they depend on.

Mr Stein: Lastly, you’ve only just started in your most recent post as Leader of the Opposition. From that perspective, do you have the opportunity to reach out to Fujitsu and put your weight and the Conservative Party’s weight with behind engagement with Fujitsu, to encourage them to perhaps do something perhaps sooner rather than later?

Kemi Badenoch: Not in the way that a Secretary of State would. It has to be the Secretary of State who does that. This is a Government issue, not a Parliament issue.

Mr Stein: Thank you, Ms Badenoch.

The Witness: Thank you.

Questioned by Ms Patrick

Ms Patrick: Good afternoon, Ms Badenoch. My name is Angela Patrick and I act for a number of subpostmasters who were wrongly convicted and have since had their convictions quashed and you’ll be glad to hear I only want to cover two topics with you.

The first is one you’ve covered with Mr Stein about compensation and families. Did you hear the questions we asked the Secretary of State this morning?

Kemi Badenoch: No, no, I did not.

Ms Patrick: We asked some very specific questions about one organisation. Are you aware of the organisation Lost Chances for Subpostmaster Children? They’re an organisation focused on securing financial support from Fujitsu to address the lost opportunities and trauma they experienced as children due to the impact of the scandal on their families?

Kemi Badenoch: No, I’m not aware. I know that there are many organisations but not specifically this one.

Ms Patrick: Okay. Well, Katie Downey, Rebekah Foot and Katie Burrows from Lost Chances are sitting with me here today. You’ve given evidence, just now and before lunch, about your own personal objective to ensure you did right by the subpostmasters, and being seen to be right and to be doing the right thing.

Now, Mr Stein has asked some questions about the contact you might have had with Fujitsu. Did those conversations with Fujitsu at any time cover the trauma and the lost opportunities experienced by the children of subpostmasters?

Kemi Badenoch: No, I did not specifically speak about the children of the subpostmasters. I simply talked about compensation for postmasters and their families.

Ms Patrick: While in post as Secretary of State, had there been, as far as you’re aware, any discussion within Government about the question of redress or restorative justice for the families of subpostmasters?

Kemi Badenoch: The conversations were always about financial compensation for subpostmasters and their families.

Ms Patrick: And their families?

Kemi Badenoch: I believe so because, specifically in the context I remember having these discussions, where a subpostmaster had passed away, and what could be done for the families.

Ms Patrick: When you were in Government, can you recall if there was any discussion at all about creating any specific route or scheme to ensure redress specifically for the lost chances and trauma experienced by children of subpostmasters?

Kemi Badenoch: There was a conversation I recall us having about these requests being made but I wouldn’t be able to give you anything more specific than that, I’m afraid.

Ms Patrick: Thank you. Would you accept, looking back and knowing the experiences that you had, and your objective as Secretary of State, if the concern was really to do the right thing and to be seen to do the right thing, can the whole question of compensation, redress, restorative justice, really truly be answered if those lost chances are overlooked entirely?

Kemi Badenoch: Well, I don’t think that they should be overlooked. I think they certainly should be considered because compensation isn’t just about financial – it’s not just about financial loss. Reputational loss also took place, as well as other things. But what I was not able to do was look into specific cases of postmasters or their families. It was about the principle of what we were trying to do, which was to make sure that we were being seen to be fair, being fair, and ensuring that justice was delivered.

How justice – what justice looks like and how it is delivered is not always the case for ministers. It’s something that we may have a view on, but this is what I believe the purpose of the Inquiry is, so that everyone can see and hear and a fair conclusion is made.

Ms Patrick: Okay, and moving on, the second thing I wanted to ask you about was to return very briefly to something you said this morning, and you have had covered decision making in Government on value for money, and your correspondence with the Treasury, and the rule of law, most latterly, with Mr Beer.

Kemi Badenoch: Mm.

Ms Patrick: I just want to ask you about something you said, when you were asked this morning about what caused delay in compensation, you referred to the Government machine. Very briefly, what is the Government machine?

Kemi Badenoch: It is all of those processes, procedures, decisions, consultations, reviews, submissions, all of those things which need to be done to evidence decisions and all of the people who are involved in that. It’s not any specific individual. There is, in my view, nobody who wanted to slow down compensation. That was not the objective of anyone. There, of course, were people who quite rightly wanted to make sure that there was value for money, that is something that is part of, you know, the principles which we, as ministers and Government officials need to make sure, we can’t just do what we like because it is not our money, the money belongs to people.

But as more and more checks and balances are created, more and more accountability, more and more rules and regulations, these things do have an impact and those things do tend to slow down processes where you just want to get people money out the door as quickly as possible.

Ms Patrick: Now, Mr Stein has also given you a rundown of the individual ministers who came before you. If it is believed the Government machine is broken or if it isn’t working very well, whose responsibility is it to take the steps needed to fix it?

Kemi Badenoch: Well, there needs to be an acknowledgement that the Government machine and the system is broken, and I think you well find that I am actually in a minority of opinion when I say that. And I think you’ll find that the Government does not necessarily – we have a new Government – does not necessarily believe so. That is an argument that I’ve been making for a long time but, as you can see, given that I’m Leader of the Opposition, not Prime Minister and not Secretary of State, that is not an argument that I am winning.

I think this is something that we need to examine in and of itself. The way that we can have some reforms to improve the system need looking at, and I hope that that’s one of the outcomes from this Inquiry.

Ms Patrick: I can just pause you there. We’re here, in the whole of this Inquiry, dealing with what’s been described as one of the biggest miscarriages of justice in modern legal history. From your last responses to Mr Beer, I suspect you’ll accept whatever change is made to that machine, the machine must respect the rule of law?

Kemi Badenoch: Absolutely. The machine must respect the rule of law but we must also make sure that the laws are good. If you have bad laws then the rule of law will not work out the way people want it to. We need to make sure the laws themselves are good and that is to the job of legislators.

Ms Patrick: Thank you, Ms Badenoch, nothing else from me.

The Witness: Thank you.

Sir Wyn Williams: Where are we now, Mr Blake?

Mr Beer: In fact it is me, sir. Just Mr Henry to go.

Sir Wyn Williams: What about an afternoon break?

Mr Beer: Could I just urge upon you to just let Mr Henry ask his questions and then take a break, so we can then switch the witnesses.

Sir Wyn Williams: All right but I’m becoming very concerned about the time left this afternoon, Mr Beer.

Over to you, Mr Henry.

Questioned by Mr Henry

Mr Henry: Thank you, very much, sir.

I just want to go to a little bit of your [draft] evidence where you stated:

“I think the communication channels between myself and UKGI should have been [and then you paused] there should have been more information passing direct to me, not just through Kevin, and Kevin would, of course, give me a summary, but there were some times that we actually ended up coming to different views on things. So we had different views, for example, on Nick Read the CEO …”

Then it reads “but problematically, but we just” –

Kemi Badenoch: “Not problematically”. That’s “not”.

Mr Henry: Exactly, I was going to – “not problematically”. What were the different views that you held to Mr Hollinrake on Mr Read?

Kemi Badenoch: It was, in terms of whether Nick Read was doing the best that he could as CEO and I felt of the issue was less Nick Read but more about the difficulties of running that sort of organisation in the first place and, of course, yes, mistakes had been made but I did not think that Nick Read was a bad CEO. He may not have been the right CEO, given what we know now. I don’t think that when he was appointed, that that was certainly an issue, but I saw someone who was trying to do his best. Kevin had a different view but we’re all entitled to our different opinions.

Mr Henry: He had a different view but, of course, you were very clear in the course of your evidence – and there’s no criticism at all because you had a huge portfolio – that you delegated considerable responsibility to him, although you were the ultimate decision maker?

Kemi Badenoch: Yes, that’s right.

Mr Henry: So therefore he had a direct and far more firsthand grasp of the issues, would you agree, than you?

Kemi Badenoch: Not necessarily, because he gave me his full and frank view, but I also was able to observe CEOs across a whole number of arm’s-length bodies, which Kevin was not. So I was also able to make a comparison, and I was also making a comparison to CEOs who I’d seen in the private sector. But also, Kevin was looking at this very much from the perspective of what was going on at the Post Office at that particular time.

As a Secretary of State attending Cabinet and looking at what other Cabinet ministers were doing, talking about and dealing with, I was taking a much broader view, and it is very often the case that people will look at the same facts and come to very different conclusions. People often witness the same events and give completely different witness statements.

So I do not think that it is the case that just because I had delegated to Kevin, that his view must have been the correct one and mine not.

Mr Henry: But you definitely differed on this?

Kemi Badenoch: On that point, yes. Not – and, as I said, not problematically because, in terms of conclusions, I did not think that we were going to change very much in terms of how we needed to manage the organisation. My view was what Nick needed was a Chair who was a little bit more hands on, and that was why we made the direct appointment of Nigel Railton, so that he could provide support during Nick Read’s tenure.

Mr Henry: Right. Well, there’s no need to I go any further than we have done, so I shall pause there.

The Witness: Thank you.

Mr Beer: Sir, that is it.

Questioned by Sir Wyn Williams

Sir Wyn Williams: Right, there’s one question I want to ask you, Ms Badenoch, and it arises from a sentence in your second witness statement, and it’s at paragraph 38.

Kemi Badenoch: Okay.

Sir Wyn Williams: I don’t think we need to have it on screen because I’m just going to read the one sentence:

“The Post Office, on the other hand, is caught in this awkward halfway house where it is given only enough to exist in a state of permanent starvation.”

All right? Those are, if I may say so, very powerful words.

Kemi Badenoch: Mm.

Sir Wyn Williams: If it is to continue to exist in a state of permanent starvation, can it exist at all?

Kemi Badenoch: Yes, it can exist in that state. I don’t think that that is what is best for the Post Office but, in order for this to change, I think what we ask the Post Office to do and how we ask it to do it will need to change. It may be the case that, in order to save money in the future, a lot more needs to be given right now. But it is also the case, as I saw when I looked at NBIT, I did not think that what the Post Office was doing with that IT programme was value for money.

So there are things going wrong on both sides. I am not sure that the way that the Post Office commissioned and carried out the delivery of that IT programme was done properly, which would justify the Treasury believing that it shouldn’t just be given more money, if it is not spending it judiciously.

However, I do know that the way that Government works in terms of providing money, those one-year spending review settlements, where we decide what we’re giving to education and what we’re giving to the NHS making a decision about what the Post Office gets, when you’re deciding how much we’re going to fund health, the Post Office will always lose that battle. If you are deciding what’s going to happen to children, what’s going to happen to sick people, oh, and here’s the Post Office, the Post Office will always lose. We need to find a different way of making those decisions.

Sir Wyn Williams: Right. So can I take it that you agree with that which Mr Reynolds told me this morning: that, despite all its problems, it’s still worth saving the Post Office?

Kemi Badenoch: Yes, I absolutely do agree with that. The challenge is where we find the money –

Sir Wyn Williams: Yes, sure.

Kemi Badenoch: – and making sure the Government has the money to do so is absolutely key. It’s a different question entirely but should we have a Post Office? Yes, I think it a cultural institution that’s absolutely essential for us to keep, and I support it wholeheartedly.

Sir Wyn Williams: Thank you very much.

Well, thank you, Ms Badenoch, for giving evidence to me – well, I think it’s all been this afternoon, albeit it started before lunch. So thank you for taking the time to come to the Inquiry and thank you for making two witness statements.

The Witness: Thank you, Sir Wyn.

Sir Wyn Williams: Right. So we’ll now have our break, and can I tell everyone that my cut-off point this afternoon has to be 5.00, so I urge counsel to agree between them how we manage that time.

Mr Beer: Thank you, sir. Mr Blake will have heard that.

3.35, please.

Sir Wyn Williams: Yes, fine.

(3.23 pm)

(A short break)

(3.35 pm)

Mr Blake: Good afternoon, sir. Can you see and hear me?

Sir Wyn Williams: Yes, I than, thank you.

Mr Blake: Thank you very much. This afternoon we’re going to hear from Mr Patterson.

Sir Wyn Williams: Yes.

Paul Patterson

WILLIAM PAUL PATTERSON (sworn).

Questioned by Mr Blake

Mr Blake: Thank you very much. Can you give your full name, please?

Paul Patterson: William Paul Patterson.

Mr Blake: Mr Patterson, you have previously appeared at this Inquiry. You have produced five witness statements, the second and third witness statement you have already confirmed the truth of their content but I’ll just like to address all of them at once, please. The first witness statement, it doesn’t need to be brought up on screen, WITN06650100, dated 28 September 2014, related to Phase 2; the second witness statement, FUJ00126035, dated 29 December 2022, related to Phase 3; the third witness statement, WITN06650300, dated 14 September 2023, relates to Phase 4; the fourth witness statement, WITN06650400, dated 8 August 2024, relates to Phases 5 and 6; and finally, the fifth witness statement, WITN06650500, dated 23 September 2024, relates to Phase 7.

Can you confirm that you have copies of those in front of you and, in respect of those which you haven’t already addressed, so that’s the first, the fourth and the fifth statements, that you can see your signature on those statements?

Paul Patterson: Yes, I can, Mr Blake.

Mr Blake: Can you confirm that all of those statements are true to the best of your knowledge and belief?

Paul Patterson: Yes, they are.

Mr Blake: Thank you very much. All of those statements, or the ones that haven’t yet been published, will be published on the Inquiry’s website.

As I’ve said, you have previously given evidence to this Inquiry, and you have been called back today principally address two issues. The first is the current state of Horizon and the use of Horizon in respect of actions against subpostmasters, and the second is the issue of redress or compensation. As we established last time, you are the Director of Fujitsu Services Limited – is that correct –

Paul Patterson: Yes.

Mr Blake: – and the Executive Vice President and Chief Executive Officer of the Europe region?

Paul Patterson: Yes.

Mr Blake: You joined Fujitsu, I think, in 2010; is that correct?

Paul Patterson: Yes.

Mr Blake: Thank you very much. If we could then bring on screen your fifth statement, that’s WITN06650500. Thank you very much. Could we please look at page 6 of that statement. It’s paragraph 14 I’d like to ask you about. You say at 14:

“… Fujitsu accepts that there have been failures to meet the standards expected.”

Can you assist us with what specifically those failures are, so far as Fujitsu is concerned?

Paul Patterson: So I think I cover a number of the topics inside the statement but, as I reflect on my previous evidence as well, the prosecutory support clauses in the contract meant that we put too much focus on the clauses in the contract, rather than on the impacts on the subpostmasters. I think there was a second topic for me, which is about the support of our employees when they flagged up concerns, and my third issue was around the whole industrialisation of witness statements, which I thought was and we think is completely inappropriate.

Mr Blake: Page 27, paragraph 72, you’ve said that there is still substantial work to be done. Is it your view that the failings insofar as Fujitsu are concerned were substantial?

Paul Patterson: Well, the three examples I’ve just given you, I think they are substantial and they resulted, and they contributed to, a miscarriage of justice on an enormous scale. So, yes, I think they were substantive.

Mr Blake: I won’t be going into the detailed evidence, we won’t be looking at the who, what, where, when, how, but it’s important to understand Fujitsu’s corporate position on what it accepts. I just want to see, in respect of three propositions: the first is, does Fujitsu accept that it provided a witness or witnesses in criminal proceedings who provided evidence that was, at a minimum, incomplete or otherwise should not have been relied upon?

Paul Patterson: So I’m not a lawyer, Mr Blake. So my reading of the evidence and what was submitted, I think, they were exactly as you just described.

Mr Blake: Thank you. Second of all, does Fujitsu accept that it provided audit data, ARQ data, that was at certain points also unreliable?

Paul Patterson: Yes.

Mr Blake: Third, does Fujitsu accept that there have been occasions in the context of enforcement action against subpostmasters, where information that was provided by Fujitsu was unreliable, inaccurate or otherwise incomplete?

Paul Patterson: So I don’t know about all the cases. I’m not familiar with all the cases and where witness statements were given. But I think there is a general theme which is that they were – and I seem to recall in evidence, witness statements being edited and being adjusted by Post Office lawyers. So I think there was a number of those areas where they were inaccurate, incomplete, yes.

Mr Blake: Thank you. Moving on then to the current position and operation of Horizon, can we bring up the expert report from YouGov EXPG0000007, can we please turn to page 17. As you’re aware, this YouGov report is based on responses from approaching 1,000 current subpostmasters. Have you read this report?

Paul Patterson: Yes, I have.

Mr Blake: Looking at page 17, we saw there that the net dissatisfaction in respect of how Horizon currently operates is a clear majority as between those dissatisfied and those satisfied. We have 49 per cent net dissatisfied. If we could turn over the page, please. It says there the vast majority, that’s 92 per cent of subpostmasters surveyed, reported experiencing some form of issues with the Horizon IT system in the last 12 months. It gives an example, if we scroll down, of an open-ended comment:

“In my opinion Horizon is still flawed. I regularly have unexplained discrepancies often altering daily or manifesting at balance.”

If we scroll over the page, we have the list there at figure 8 of issues experienced within the last 12 months. Unexplained discrepancies, 57 per cent of those who responded said that they had experienced unexplained discrepancies with Horizon in the past 12 months; we have there unexplained transactions, 19 per cent; missing transactions, 14 per cent; double entry of transactions, 10 per cent.

Do you have any reason to doubt those figures or experiences of the subpostmasters?

Paul Patterson: So when I look at this report and I had my team try and decode it, my concern is the term “Horizon” is being used to cover everything inside the Post Office’s complete supply chain. So if you are a subpostmaster, this is exactly the view you would get because you would look on your screen and these are some of the problems or discrepancies or issues that they are experiencing. So it is absolutely correct from their experience. But screen freezes could be caused by multiple things.

The Post Office has its network provided by a third party. Issues with PIN Pads have nothing to do with the Horizon system, they are provided for and maintained by another organisation. And when I listened to Melanie Park’s, I think, evidence around discrepancies and innocence, actually, in some cases, innocent double keying, or whatever, all of that told me that these things need to be properly investigated, not to rely on a very narrow definition of Horizon or very narrow definition of where a problem would be.

Mr Blake: Do you think that the system that is provided by Fujitsu could be, at least in some part, to explain for those unexplained discrepancies, unexplained transactions, missing transactions?

Paul Patterson: So Fujitsu has been clear all the way along: there continues to be bugs, errors and defects; there continues to be end of life. This application, the Horizon application, as I think was covered in the witness statement earlier today is end of life. It was meant to be end of life some years ago and a new system was meant to be in play. So all of those things are correct and could be or could not be causing those problems, which again is why I made point a moment ago, any accusation to a subpostmaster needs to be properly investigated and not rely on one data point.

Mr Blake: Perhaps we can see your reflections in respect of the end of life situation. Could we please turn to FUJ00243299, please. It’s correspondence that the Inquiry has seen from 15 December 2023, to Mr Brocklesby and it relates to the extension of the contract. I’ll just read to you a few passages. At paragraph 1 there if we scroll down, it says:

“The risks associated with the continued provision of the Horizon system (including the audit archive) on end-of-life IT infrastructure. Understandably, Post Office has historically been strategically focused on alternative solutions to Horizon rather than investing in the existing infrastructure. Due to the age and consequent end of service life status of the underpinning Horizon infrastructure there is an increasing risk of failure of the infrastructure that could result in adverse impact in the delivery of services to the public.”

Is that one of the points that you were just making, that, as time goes on, the end of life status means that there is an increasing risk of failure?

Paul Patterson: There is an enormous increase in risk. The Post Office have rightly been focused on their other suppliers and building their new system and the Horizon application was meant to be retired so they put their efforts and focus, understandably, into the new world and not into the old world. To give this some context, we have not turned off some of this equipment because it is so old.

Mr Blake: Another challenge to the feasibility and continued delivery of the Horizon system, number 2, is:

“The technical complexity and risk associated with (i) updating infrastructure at various states of obsolescence and compatibility, and (ii) delivering new system requirements, including because of lessons learned and commitments to end users. These activities are increasingly risky and technically challenging given the End of Service Life Horizon system noted in paragraph 1 …”

So those are the challenges in respect of making changes to the Horizon system going forward?

Paul Patterson: Yes, and, as I mentioned a moment ago, the Horizon application is one of many applications which are all interconnected inside the Post Office’s supply chain. When you change one part, you need to make sure that it connects with Credence, with POLSAP, with all the other systems that the Post Office uses directly, and with other third parties. When something is this old, and you make that change, it has consequential impacts on all of those other systems, which you need to be super careful about.

Mr Blake: We’re going to look at some of the correspondence between yourself and the Post Office, Mr Read (sic), in due course, but could we just quickly go through a few of those letters, a few lines in a few of those letters. If we start with FUJ00243204, it’s a letter that we’ve already seen in great depth of 8 July 2024 between yourself and Nick Read. As I said, we’ll come to the context of these letters but, if you scroll down, there’s only one passage that I’d like to draw your attention to. It says there:

“As the Post Office is well aware, there have been and there continued to be bugs, errors and defects in the Horizon system. Further, [Fujitsu] currently has, and previously had, access to branch transaction records.”

Two points you’re highlighting there: one is bugs, errors and defects and the other is what has come to be known as remote access; is that correct?

Paul Patterson: Yes.

Mr Blake: Thank you. Could we please then turn to FUJ00243303. A further letter of 23 August. This one is to an investigator at the City of London Police. If we could scroll down the first page, please. Under (a), it says:

“As discussed, the Horizon system has had and continues to have bugs, errors and defects, some of which may not have been detected at this time.”

So not only an acceptance that the current system has bugs, errors and defects but also there are effectively unknown unknowns?

Paul Patterson: Yes, but I think the second sentence is also important, which is the Horizon application is fed from other third-party systems and business processes. So as well as Horizon may well have unknown, I cannot attest to the validity or performance of those other systems.

Mr Blake: Thank you very much. That letter can come down, and we’ll return to it shortly. Are we to understand from that correspondence and from your evidence that there are currently reliability issues with the Horizon system?

Paul Patterson: So the Horizon system, as far as I understand today, is performing to its contractual performance levels in terms of its SLAs. If I – last week, I got an update on where we are with bugs, errors and defects. There are currently 16, and we have patches, which is the technical term for the fixes cited to go in in February, after the Christmas peak. So I think there is good understanding of where there are bugs, errors and defects, and a process, which is well communicated with the Post Office. There is a weekly session with the Post Office, and we’re told they communicate that to the subpostmasters.

But there will continue to be, Mr Blake, with changes and with age, bugs, errors and defects that may well arise.

Mr Blake: Does the system that Fujitsu provides operate in a way – and I’m going to use the language of a letter from Ernst & Young that we saw in Phase 2 of this Inquiry, it’s a 1999 letter – does it operate in a way that would allow subpostmasters to produce their accounts to a suitable degree of integrity?

Paul Patterson: I couldn’t answer that question.

Mr Blake: Do you consider it to be sufficiently reliable for subpostmasters to produce their accounts?

Paul Patterson: So Mr Blake you’re asking me to comment on audit and accounting processes, which I don’t have any professional understanding of. What I can say is that the system today performs to the SLAs that the Post Office require us to do – to perform to. I can’t comment on whether that document that’s produced at the back and what its contents or whether it’s appropriate for them to legally sign off. That would be massively overstepping my capability.

Sir Wyn Williams: Sorry, Mr Patterson, I’ve forgotten what “SLA” stands for.

Paul Patterson: Forgive me, service level agreements.

Sir Wyn Williams: Sorry, yes. Fine.

Mr Blake: Subpostmasters up and down the country use a system where the fundamentals are provided by Fujitsu. That system, as far as you are aware, is it sufficient to produce reliable accounts?

Paul Patterson: So I think in all the evidence we’ve seen and all the Inquiry have seen, the reporting that comes out of Horizon, whether it’s appropriate or not, may have bugs, errors and defects, may have been fed bugs, errors and defects, may not be reflecting the accuracy of what’s gone on in the Post Office – in the subpostmaster’s branch. Whether the – what is the document that’s required by the Post Office signed off by the subpostmaster, I have no idea.

Mr Blake: Not the Post Office; I mean the taxman, for example.

Paul Patterson: I have no idea, Mr Blake. I’ve never seen one of those documents about what would be presented to an accountant or to the HMRC. Is it – I don’t believe it’s in my evidence.

Mr Blake: Are you confident, for example, that somebody could come to the Inquiry from Fujitsu, and say, where you’re sitting, that, as somebody who operates Horizon – and of course individual cases have to be taken on their own basis and their own facts – but as somebody who operates Horizon, the system, so far as they are concerned, is reliable for accounting purposes?

Paul Patterson: Mr Blake, again, I’m going to answer it, I don’t know. If that question was being posed, I would expect the Post Office to be sitting here, as well, as well as the engineers on our side, to determine whether the information required is appropriate to be able to sign those things off.

Mr Blake: Mr Patterson –

Paul Patterson: It’s very clear – forgive me, it’s very clear, in all the evidence in this Inquiry, that there is level of unreliability, an unreliability, I’ve said at the start of this particular evidence, around bugs, errors and defects, and the whole end-to-end. Horizon in some respects represents the end-to-end of what goes on inside a subpostmaster’s branch and what happens in the Post Office, Head Office. So for me to sit here and say I think there’s enough in that documentation to allow HMRC or an accountant to sign off, I’m not qualified to answer that and neither are my colleagues.

Mr Blake: Mr Patterson, you are presumably somebody who goes up and down the country bidding for contracts. If you are selling Horizon as a new system, would you be able to tell the person who you are selling that system to that, at the end of the day, the accounts that it produces are reliable?

Paul Patterson: So we do not sell this system. This system is end of life. At the Public Accounts Committee, when I gave evidence, this is not a product that we’ve ever sold to another customer. It is bespoke to the Post Office and it is bespoke to the Post Office’s requirements. So again, I would ask – that would be a question I would be asking the Post Office: is the documentation and the material that comes out of it reflecting what is required?

Mr Blake: Can you see how that is an issue if you’re –

Paul Patterson: I do.

Mr Blake: – a current subpostmaster who operates that system, who produces accounts, who relies on the system day in, day out, that the head of the company in Europe who produces that system can’t say that what’s coming out of it is reliable?

Paul Patterson: So I’ll give you a slightly different example. If in a cash pouch a subpostmaster inadvertently puts in two extra zeros and that cash pouch gets to the other end of the line and doesn’t have those two extra zeros of money, that’s a discrepancy. Horizon has just reported what was keyed in on one end and what was counted on the other end. Forgive me, do I then say that the Horizon system its accurate? Well, in that example, I can’t say that because I don’t know what’s gone on.

Mr Blake: Are we again repeating the words “user error”?

Paul Patterson: No, far from it. I use that as an example. Please forgive me, Mr Blake, please forgive me, I am very respectful for the subpostmasters and what they’ve gone through, but you’re –

Mr Blake: What I’m asking about is not the individual user making an error. I’m purely asking about the system that you provide?

Paul Patterson: Well, I’ll take it away from being the user. Does the POLSAP system feed into the Horizon system correctly? I don’t know the answer to that.

Mr Blake: That’s a third-party system?

Paul Patterson: But Horizon reflects all of that, and that’s the transactions, in fairness to the subpostmaster, that he or she are representing, which is why we’ve been consistent, since the very start of the Inquiry that there have been bugs, errors and defects, there will continue to be unreliability in the front end, and in the rest of the supply chain, I do not know the answer to that, which is why, when we get to the next set of questions, we’ve been so keen to make sure that investigations take in the entire system and don’t rely on a very narrow point of view.

Mr Blake: Let’s move to that correspondence’s. If we start with FUJ00243157. If we start, please, on page 4. Thank you. This is an email exchange that you’ll be familiar with, the Inquiry is familiar with it. It relates to a City of London Police investigation in April this year. Simon Oldnall of the Post Office says:

“Can I ask that you help with any conversations that City of London Police need to have with Fujitsu Services Limited.”

If we scroll over the page, please, to page 3, the response from Mr Walton of Fujitsu, is:

“As this is a legal matter, [Fujitsu Legal] are communicating with the City of London Police. I am not involved in those communications, and in any event, [Fujitsu] considers it to be inappropriate for Post Office and [Fujitsu] to be discussing a police investigation.”

If we go to page 2, please. If we scroll down, we can see, this is an email we saw with Mr Bartlett, he says:

“[City of London Police] has informed us that they have not had any, in information or contact with Fujitsu after the single exploratory and inconclusive conversation. They left that conversation with the feeling that they were indirectly being told that the Horizon system was unreliable and so the case could not progress. We really need to explore this as this is not the nuanced impression Simon Oldnall has given me.

“As the potential victim in this case, the Post Office would be grateful if you could provide me with contact details for either the equivalent person in Fujitsu to my role or an appropriate person in your Legal Team. I will then pass those details on to the City of London Police who are looking to have a trilateral conversation with Fujitsu, Post Office and City of London Police.

“It is impossible to overstate how important this is. I need to advise both the police and the Post Office as to evidentially established reliability or not of data that is being used every day in establishing outcomes with postmasters and potentially to be presented to the criminal justice system by the police and the three public prosecuting agencies. The non-provision of relevant witness statements from the Post Office and Fujitsu will rightly be interpreted by the police and prosecutors as Post Office and Fujitsu not having faith in the reliability of the data with the obvious outcome resulting.”

If we go on to page 1, please. We see there the response from the solicitor at Fujitsu’s Legal Team saying:

“Please refer any correspondence to me rather than Mr Walton.

“I note your comments, which aren’t accepted.

“It is not appropriate for Fujitsu to discuss with Post Office the nature and substance of its cooperation with an ongoing police investigation.”

If we scroll up to the top, we have there Mr Bartlett’s response.

“We have had a call with City of London Police following your email below and they will be in touch with you again to arrange the taking of a witness statement or statements. We would be grateful for Fujitsu to extend any and all assistance to [City of London Police City] to aid their objective understanding and assessment as to the reliability of the Horizon system and the admissibility of evidence produced from it relating to the investigation they are conducting following [Post Office] making a crime report to them as a potential victim.”

As we have seen, that then sparks a number of letters between yourself and Mr Read. I will take them as quickly as we can. If we start, please, at FUJ00243199. We have there the letter of 17 May, where in the first paragraph, you explain the serious concerns. You say:

“To be clear, Fujitsu will not support the Post Office to act against postmasters. We will not provide the support for any enforcement actions, taken by the Post Office against postmasters, whether civil or criminal, for alleged shortfalls, fraud or false accounting.”

Then you address each one of them. “Criminal investigations”, you refer to that City of London Police investigation, and you say:

“The approach of Fujitsu is to cooperate with the police and any other third party, exercising independent investigative, prosecutorial, regulatory or judicial powers. However, we are concerned by the behaviour of the Post Office Investigation Team on this matter.”

You address the concern there relating to, for example, reference to the Post Office being a victim –

Paul Patterson: Mm.

Mr Blake: – and that’s something we have already addressed.

The second in relation to the “Pursuit of shortfalls from subpostmasters”, you say:

“It seems that the Post Office may be continuing to pursue postmasters for shortfalls in their accounts. We would have expected that the Post Office has changed its behaviour. It should not essentially be relying on Horizon data as the basis for that enforcement.”

You then address the issue of redress and say that you will continue to provide data in relation to redress.

Sorry, before I get to a question, I’ll just quickly take you through two more letters, the first is FUJ00243201. This is the response from Mr Read – thank you very much. At the bottom of the page, he reassures you that the Post Office won’t be undertaking their own prosecutions. He explains, over the page, please, that:

“Post Office requests the use of Horizon data for a number of day-to-day business reasons, including supporting postmasters with their branches. In terms of enforcement, the Post Office’s requests only relate to cases where our teams are supporting criminal investigations or prosecutions pursued by independent third parties.”

He says:

“In response to the specific case you raised, potential criminal activities were identified in the branch and Post Office therefore reported the matter to the police. We have assisted with the police’s investigation, including providing supporting data …”

He says:

“Naturally, it is vital for the police’s investigation that it can rely on the Horizon data it has received.”

In respect of shortfalls, he says that:

“Horizon data isn’t currently being used but the Post Office data for a range of key day-to-day business activities, including supporting its postmasters with resolving discrepancies on their accounts”, is necessary to have your assistance.

If we go over the page, please. He says there:

“Post Office sees reliance on Horizon data as essential to supporting postmasters with understanding and remediating discrepancies.

“Post Office relies on Fujitsu and the services it provides to ensure that it can continue to support postmasters in that way.”

Then, finally, he addresses the same topic: redress.

The final document before I ask the question is at FUJ00243204. This is your response of 8 July. I’ll take that slightly more slowly. If we scroll down, please, you say there:

“In simple terms, the Post Office is requesting that Fujitsu give expert opinion evidence to be used in criminal proceedings against postmasters and post office workers.”

You say:

“In your letter, you rightly note that the content of any witness statement is a matter between the police and [Fujitsu]. However, I consider it necessary to address this issue with you because the request was made by Post Office and because I consider the request to be entirely inappropriate, particularly in the light of the evidence being uncovered at the Inquiry.

“I enclose with this letter an email chain”, and you refer to that email chain that we saw.

Then you say:

“A witness statement from [Fujitsu] attesting to the reliability of the Horizon system, and of data from it in criminal proceedings would amount to expert opinion evidence. [Fujitsu] is incapable of providing expert opinion evidence, as it is neither independent nor has it sufficient information to provide such an opinion.”

Now, you’re not a lawyer and I’m not asking you for a legal answer to this question but why do you understand Fujitsu couldn’t provide a witness statement, not purporting to be an independent witness statement, not purporting to be an independent expert, but just simply evidence of the personal experience of the author in respect of the reliability, with whatever caveats it may require?

Paul Patterson: So first of all, we are actively supporting the police in their enquiries. There’s evidence, I think, in the pack, in the bundle, of the comprehensive set of correspondence with the police, drawing their attention to a number of areas directly from this Inquiry. A witness statement from us on what comes out of the Horizon application is still a problem to us, for exactly the reasons I said earlier, because the Horizon system is one lens on the entire supply chain in the Post Office, and we can’t attest to everything that goes on in that, from left to right.

My other concern about the email from Mr Bartlett was just trying to narrow things down. So what I’ve – as I’ve tried to pay close attention to this Inquiry, one of the topics that came up was people flagging things, did executives flag things; were we being transparent; were we being curious? This is Fujitsu trying to be very transparent, very curious, around what has gone on and what is going on day-to-day. So that was why we didn’t feel like we could give a witness statement, but the material that we have given to the police at the moment – and I don’t know the state of those cases – may still require us to give that in due course, Mr Blake, but at this point in time, we felt we couldn’t.

Mr Blake: In the email chain, it explained from the Post Office’s perspective that they considered that the police had been given the impression that the system was unreliable.

Paul Patterson: Mm-hm.

Mr Blake: That may, in fact, be consistent with the evidence that you’ve given to the Inquiry today. But is there not some way in which Fujitsu could provide a statement that at least speaks about its own system that it operates, subject to the caveats of the third parties, that goes to, in some way, reassure the police in respect of the current reliability of the system?

Paul Patterson: So again, what I’ve learnt – what I’ve learnt and what our company has learnt from the Inquiry in its earlier stages is, it just is very narrow, containing questions, “was this correct at this point in time from 9.00 to 4.00?” We feel that is completely inappropriate and I think the evidence during this Inquiry suggests that is also inappropriate. You need to take a holistic view and, in fairness to the subpostmasters, that’s what they need as well: they need to see the whole system that they’re engaging with, not just a window which is Horizon, but all the other parts of the components.

It is impossible for Fujitsu, even with all those caveats. The other thing I’ve learnt about caveats is nobody reads them and people only then pick out the paragraph that they want to pick out, and that was one of your first questions to me. So that is why we felt we couldn’t.

Now, evidence may well transpire, you know, there’s a number of other cases going through. I think there’s 33 prosecutions which the police are looking into at the moment. We are only aware of four. So, again, this point of transparency – and we were aware of none before January/February, when we got that email. So everything was silent to us, and then suddenly we get these two requests, which made us very suspicious, very curious, hence why I wrote to Mr Read.

Mr Blake: The next paragraph, I think I may have referred you to this already, it says:

“As the Post Office is well aware, there have been and there continue to be bugs, errors and defects in the Horizon system. Further, [Fujitsu] currently has and previously had, access to branch transaction records.”

You also say:

“In addition to [Fujitsu] the Horizon system is reliant on services by Post Office and third parties retained by the Post Office.”

That’s the point you’ve also made today.

Paul Patterson: Mm.

Mr Blake: If we scroll over the page, please. It says:

“Based on the evidence which has been seen and heard in the Post Office Horizon IT Inquiry, Fujitsu considers that all of the matters management above would need to be investigated carefully by the Post Office and the police, with the assistance of an independent technical IT expert, and possibly also a forensic accounting expert, to ascertain proper explanations for branch account discrepancies. Fujitsu considers that only after such an investigation has been undertaken could a meaningful expert witness statement be made in subsequent criminal proceedings, which addresses the reliability of the Horizon system and the relevant data produced. For the reasons I have mentioned above, [Fujitsu] cannot provide such a statement.”

Putting a statement to one side, what about an independent investigation into the reliability of the system? We’ve heard evidence that the Post Office are looking for some sort of independent statement from an IT expert. In respect of their investigation, do you commit to fully cooperating, opening up your books, your warehouses, your data, to an expert for that purpose?

Paul Patterson: I think anything that helps the subpostmasters in the entire end-to-end be confident about the systems that they are using, I welcome, Fujitsu would welcome, yeah. I have no problem with that at all.

Mr Blake: In respect of opening up your books to that expert, so they can work out for themselves the reliability of the system?

Paul Patterson: Indeed. And I think, you know, back to the earlier comment: this is a complex environment, which is, in parts, 25 years old, and we are applying today’s, you know, computing standards to some of those things. So I think it would be difficult, hence why the system is end of life, hence why it should not be being extended, hence why it should have been replaced.

So I have no problem at all in opening up to any analysis that a third party would wish to do.

Mr Blake: Has Fujitsu had an independent company report on the current reliability of the Horizon system?

Paul Patterson: Now, I don’t know the answer to that. I don’t know the answer to that, Mr Blake.

Mr Blake: We’ve seen some evidence, for example, back in 2012, that Fujitsu were going to obtain a KPMG report. I think it was stopped in light of the Second Sight Report. Is that your understanding or do you have a different understanding?

Paul Patterson: I don’t have much understanding. I saw that document in my bundle and I don’t have an opinion why it was stopped or didn’t go ahead. I read the email traffic, and –

Mr Blake: Focusing on the present, though, people may be interested in why the burden is being placed on the Post Office to obtain that independent report, why it is that Fujitsu themselves, in the time that’s been available, haven’t commissioned an external investigation into the reliability of a system that they produce?

Paul Patterson: So I think again it’s about we’re expanding what the system is, and our definition of what the Horizon application is. There are multiple things in this supply chain which Horizon touches or is fed with. I think it’s right and proper that the whole system end-to-end is examined, not just the Horizon application, which is – and whether we should be partly funding that or doing it, I think that’s perfectly sensible for us to have that conversation with the Post Office. Why we haven’t done that in the past, well, frankly, it’s been end of life. We’re not meant to be maintaining this system and, in fact, we have not been doing any material investment in it, or the Post Office haven’t, for several years. And I’m sure we’ll come on to that question in a moment.

Mr Blake: I’ll take you to how this correspondence with the Post Office ends, and we can start with FUJ00243209. A 23 July 2024 response from Owen Woodley, I won’t go into the detail. If we scroll down he says he shares your commitment, the Post Office has unquestionably changed its mindset. Post Office will never again take a prosecutorial role. He addresses the question of expert evidence, he says:

“As you rightly say, Fujitsu is not able to provide expert opinion evidence and it is not sufficiently independent for any statements that it may provide to be deemed expert evidence by the Crown Prosecution Service. Post Office is aware that it has not and would not request that [Fujitsu] provides expert opinion evidence.”

If we scroll over, he then says in that top paragraph, about halfway through, he says:

“The police have raised questions regarding the data and the Horizon system, and the AC&I [I think it’s A&CI] team referred the police to [Fujitsu] – as Post Office’s provider of the system – to obtain answers to those questions. The feedback they received in April 2024 was that police had only been able to have one conversation with [Fujitsu] at that time and the investigation officer’s impression from the conversation was that they were indirectly being told by [Fujitsu] that the Horizon system was unreliable. As a result, the police told the team that the investigation could not progress.

“In light of that feedback from the police, Mr Bartlett sent the email …”

He’s explaining the background to the email and why it was sent:

“[He’s] not asking Fujitsu to act as an independent expert witness in this case. He asks that [Fujitsu] engage with the police and provide a statement when requested to do so by the police, regarding the reliability of the data, which was informing the police’s investigation. I understand from your previous correspondence that Fujitsu has confirmed it will engage further with the police in this matter.”

He then goes on to address criminal investigations and prosecutions. If we go over the page, please, he says:

“To get the right checks and balances in any of these investigations processes, data will be required from the Horizon system, along with analysis of any known bugs, errors or defects.”

He then addresses the victim point. He moves on to postmaster shortfalls:

“Thank you for confirming [Fujitsu] will continue to deliver its contractual obligations, including reporting promptly and transparently on branch impacting incidents.

“While the Post Office does not currently take civil recovery action to recover established losses from postmasters, this may be necessary in future to establish a fair, transparent and consistent approach to recoveries.”

So he’s referring there to potential actions to recover apparent shortfalls.

Paul Patterson: Mm-hm.

Mr Blake: He says:

“I welcome your commitment that [Fujitsu] will work collaboratively with Post Office over the coming months so that together we can achieve the best outcome for the postmasters and your offer to work collaboratively on the future of the Horizon system is much appreciated.”

We then turn to your response. It’s FUJ00243211.

It’s a response dated 26 July this year, and you say:

“It is unfortunate that Nick [Nick Read] was not able to attend the meeting as discussed. The original purpose of writing to Nick was to escalate, CEO to CEO, the concerns relating to certain behaviours within the Post Office. It seems clear that the Post Office continues to have significant cultural issues, sees itself as the ‘victim’, with the enforcement and prosecution of postmasters considered as business as usual activity of a commercial retail company. As I stated in my correspondence to Nick and during our discussion, Fujitsu finds the language and the suggested behaviour unacceptable from Post Office Investigators.

“I do not intend to engage further with the Post Office on the matters I raised. We completely trust in Sir Wyn and the Inquiry process, which will examine the extent of the Post Office’s change in Phase 7.”

It might be suggested that that is a rather petulant response to a serious letter from the Post Office. What is your view on that?

Paul Patterson: It’s not petulant at all, and I also heard the term being used, it was schoolboy playground things. I take all of this matter personally really, really seriously. So seriously, which is why I wrote to Nick Read because, as I said earlier, I’ve learnt in the evidence in this Inquiry too much – or lack of transparency, lack of clarity, lack of curiosity, on a very, very complex set of material and environments. So it’s not petulant at all.

I felt it was really serious, particularly when I’m contacted as a company by the police, accusing subpostmasters of very serious offences and, given what I have heard in this Inquiry, I felt it was really important that I lay out clearly that we will not be supporting the Post Office.

However, Mr Blake, we are actively supporting the police in those inquiries, and I know it has also come up in this Inquiry whether we are or not. I think you’ve seen some of the material. They are very comprehensive. I saw some material this morning also on this very matter with the police. So we are actively supporting the police, and sharing with them all the material that we’ve got, as well as the material obviously from this Inquiry.

Mr Blake: What about that second paragraph there:

“I do not intend to engage further with the Post Office on the matters I raised.”

I mean, why was it this summer you couldn’t say to the Post Office, “Of course we’ll supply to the police whatever witness statements they ask for”?

Paul Patterson: So in our statement to the Select Committee in 2020, we made it clear in that we will continue to support the police in their investigations. It’s in my corporate statement here, I think on the back paragraphs, we will continue to support the police in any investigations. I felt, having – there’s been a number of changes in the Executive Team in the Post Office. I met Nick early on when we were both appointed. I’ve now met Mr Woodley, I’ve now met their new Acting CEOs as well. And one of my other concerns, as you will have seen in my notes, was just about the continuity of that understanding about how serious Fujitsu takes for his matter. And, therefore, I wasn’t going to engage any further with the Post Office but would with the police.

Mr Blake: Does that, in some way, signify a quite serious breakdown in the relationship between Fujitsu and the Post Office?

Paul Patterson: So operationally, we are very well engaged, and delivering against our contract to the Post Office. I – on Friday evening, I spoke to two executives from the Post Office about their request on an extension. So we continue to focus on the day to day and what needs to be done. But on this particular matter about prosecutions, I will not engage with the Post Office – we will not engage with the Post Office on it.

Sir Wyn Williams: Right. I understand that, Mr Patterson. Let me just ask you this: as we are talking to each other now, how many, if not exactly, approximately, cases are you – and I’m using these words completely neutrally – having correspondence or discussions with the police?

Paul Patterson: Four.

Sir Wyn Williams: Four, right. In those four cases, to the best of your knowledge and belief, has Fujitsu answered the questions or tried to answer the questions that the police have posed to them?

Paul Patterson: Yes, Sir Wyn. In fact, one of the documents was 33 pages laying out the answers to those questions.

Sir Wyn Williams: Hang on. That’s fine. In those four cases, if the police has asked for documentary material, has it been provided?

Paul Patterson: Yes.

Sir Wyn Williams: If the police have asked for data from Horizon, has that been provided?

Paul Patterson: No, I don’t know whether they have asked for that yet, Sir Wyn.

Sir Wyn Williams: If they haven’t, that’s fine. But –

Paul Patterson: But if they do, absolutely.

Sir Wyn Williams: Right. In any of the cases to date, has the police asked Fujitsu to nominate a person to make a witness statement?

Paul Patterson: I don’t believe so.

Sir Wyn Williams: Right. So far as you are aware, if the police made such a request of Fujitsu, would you at least try to find a person who could make a witness statement?

Paul Patterson: Absolutely, Sir Wyn. Absolutely.

Sir Wyn Williams: Right. Fine. Okay. So that’s the current position.

Right, back to you, Mr Blake.

Mr Blake: Thank you very much, sir.

We’ll move on, then, to the extension of the contract. Could we bring back onto screen your fifth witness statement at page 30, please. It’s paragraph 77. Page 30, paragraph 77. You say there:

“As noted above, the Horizon contract is due to end on 31 March 2025. However, in the event that it is not possible, Fujitsu is currently discussing with [the Post Office] (at its request) the potential for a short-term extension) which [Post Office] envisages to be approximately two years) to facilitate an orderly exit and transition to occur. In light of the evidence that has emerged in the Inquiry in relation to [the Post Office’s] conduct and culture, and the challenges that Fujitsu has faced with regard to visibility over [the Post Office’s] use of Horizon data and/or records, Fujitsu’s position will be that any extension to the Horizon Contract should necessarily see the removal of the Court Case Support Services provisions.”

Can you assist us with what you mean by the Court Case Services provisions?

Paul Patterson: So I don’t have all the clauses in my head but there is a set of responsibilities placed on Fujitsu, back when this contract was agreed in 1999, which had a number of activities and responsibilities. Fujitsu will not sign any extension if those conditions are still in the contract.

Mr Blake: Are you able to assist us with whether Fujitsu will be able to assist the Post Office in respect of the investigations of shortfalls, putting aside historic criminal matters, in respect of current shortfalls experienced by postmasters?

Paul Patterson: So I think I also say in here somewhere about the ARQ data is moving, so that all the historical data will be under the Post Office’s control and, in fact, when I was talking to Mr Railton a few weeks ago, it was very important to him. So I think, actually, that Post Office, by early February, will have all of the data inside their own control to support any investigations that they wish to do.

Mr Blake: In respect of matters after February, so let’s say in a year’s time, there needs to be an investigation into a shortfall, is that something that you will be assisting the Post Office on or not?

Paul Patterson: Yes, I would expect those types of operational engagements to continue, and I think they are quite different in tone to Court Case Support Services and my very earlier comment around the industrialisation of witness statements.

Mr Blake: Thank you. We’ve seen in other documents discussion of potentially a five-year extension, five more years of Horizon. Would it be possible, in light of what you’ve said, to improve the reliability of Horizon data over that time or do you anticipate that in fact it may get worse over that time?

Paul Patterson: So the first correspondence, I think, was December, with the request for five years. In my meeting with the acting CEO at the time, Owen Woodley, I think the request was two years. We’ve had the request for three years, and this morning, as I walked into this building, I had another request, which was for four years.

So this continues to move around in terms of what the requirements are from the Post Office. I am encouraged by the new leaders who seem to be getting more understanding and clarity around what the actual business requirements from – from the Horizon system will be but, to your question, I am very worried about it. And, in fact, my correspondence and my commentary to them as well is it needs to be the shortest possible time entirely, because this system is not meant to be continuing and it’s not had any material investment in the last four years, while the attention has been on NBIT or versions of NBIT.

My earlier comment also around Horizon is one part – this application is one part of an incomplete supply chain and, in fairness to the Post Office, that means it’s got to have multiple tests of all their other systems as well. So if you change one part, you have to test everything else. So I think it’s very, very difficult to know whether three years, four years or five years will be required – will be possible, to your question.

Mr Blake: Thank you. I want to look at current use of Horizon data. If we could bring back onto screen your witness statement, WITN06650500, page 25, paragraph 66.

Thank you, it’s the bottom of page 25.

You say there:

“Fujitsu continues to provide the Post Office with Horizon data, including ARQ data, when requested as part of its provision of services related to the Horizon system.”

Over the page, please.

“While Fujitsu has informed the Post Office that it will not provide support for enforcement actions taken against postmasters, whether civil or criminal, Fujitsu, has as a result to verify the purpose to which the Post Office intends to put this data, or what the data is in fact used for.”

Can you assist us with what you mean by “struggled to verify the purpose”?

Paul Patterson: So I think it came up in some of the Post Office Executive’s evidence as well. So one of the things that we are very concerned about, again, this narrow use of information, is information being requested and used for – in the concern here, for prosecutions. And what we are asking for and what we did on a very simple form, which is an ARQ form, is could you tick a box to say is it used for redress or management information, or for prosecution? And the Post Office felt that was inappropriate and didn’t accept that change, but that was the reason for the change.

If I go back to what Fujitsu has learnt through this Inquiry, it’s that curiosity topic again, you know, what is the data being used for, rather than just handing over the data without any context to it?

Mr Blake: Perhaps we could bring onto screen the forms, the new form and the old form, FUJ00243213, and, if it’s possible to bring that on screen alongside FUJ00243227. Is this the ARQ form you were referring to?

Paul Patterson: Yes, I think it is. I think it is, yes.

Mr Blake: If we have a look at the one now on the left-hand side there are two additional questions there that are said to be mandatory. First asks:

“Is this request related to either the investigation of or action being taken or intended to be taken by the Post Office against a postmaster or Post Office worker in connection with potential fraud, theft, breach of contract or any other potential impropriety which is suspected to have occurred at the relevant Post Office branches?”

The second is.

“Will this information be used to support either a postmaster or a Post Office worker to achieve financial redress?”

So they are provided with two options: one presumably is one that you have absolutely no issue with: the second one, providing information in relation to redress?

Paul Patterson: Correct.

Mr Blake: In respect of the first, what is the position, if I were to tick “Yes”?

Paul Patterson: So the Post Office have not accepted the change in the form, is my understanding. So we are still reverting to the old ways.

Mr Blake: There is another option, at least one more option, isn’t there, that the Post Office might need the data to assist a subpostmaster in understanding and discussing their current shortfalls; is that something that is missing in this mandatory section?

Paul Patterson: So that would be, wouldn’t it? Yes, I’d agree with you on that.

Mr Blake: There has been, we’ve seen in an email chain, a dispute between the Post Office and Fujitsu in respect of this new form. Can we please turn to FUJ00243233. If we start on page 4, please, the bottom of page 3 and into page 4., you have somebody from the Remediation Team. If we scroll down, we can see their name. It says as follows:

“Please find attached an updated ARQ request tracker with a brief summary of all previous and new request(s) since our last ARQ Requests.”

If we scroll up we can see a response, at the bottom of page 3. Thank you. The response there from Fujitsu is:

“Thank you for your recent request. Unfortunately, as it is not on the latest template, we are unable to process it. Please resubmit your request using the attached template.”

If we scroll up, we can see the response from the Remediation Team:

“As you can see below, we again sent our ARQ requests through to Fujitsu using the older process of master tracker and summary table. It was returned refusing to complete the request without us completing the updated form.

“Could you please advise next steps as we have ten ARQ requests outstanding.”

If we scroll up, please. The response:

“Further to my earlier emails on this topic, we are now accumulating a backlog of requests, potentially delaying postmaster redress.

“Can you confirm that [Fujitsu] will process these requests without further delay?”

If we turn to page 1, it says as follows:

“We introduce the updated ARQ form to clarify the intended use of ARQs requested by Post Office. Fujitsu does not accept that the introduction of this amended form has caused delay to redress activities. Since it was introduced, the Post Office has requested over 60 ARQs to support redress activities and these have been processed in the usual way. As you have now clarified that the ARQs referred to in your email below are intended to be used to support postmaster redress, I will instruct the team to process those received on the previous version of the form and they will not be subject to additional charges.”

If we please look again at page 4, I said that the request came from an email address called the Remediation Team. We see that the requester has the job title or team of Remediation Admin Support Team, Remediation Unit.

Has distrust between Fujitsu and the Post Office reached such a level that, where somebody from the Remediation Admin Support Team in the Remediation Unit requests ARQ data, they are not trusted to be requesting data for that purpose?

Paul Patterson: The date of this request is 18 June? Am I reading it –

Mr Blake: If we scroll up, yes, 18 June?

Paul Patterson: I think the response from Dan Walton was when?

Mr Blake: 19 June.

Paul Patterson: So one day later?

Mr Blake: Yes.

Paul Patterson: So –

Mr Blake: Sorry, the Daniel Walton email on page 1 is 21 June.

Paul Patterson: So about four days later, three or four days later. So I don’t agree with the premise of the question. I think we’re dealing with these matters as speedily as we can do. I think everybody inside Fujitsu is very, very nervous about any documentation, any data that relates to prosecutions or redress. So this is just a natural nervousness. The management team, I think, in this example got to it very quickly, so Simon very quickly flagged it with Dan and it was dealt with very quickly, I would say in three/four days.

Mr Blake: That can come down and I’ll move to my very final topic of today, which is compensation and redress. Could we please bring up on to screen RLIT0000276, please.

This is an article on the BBC website, addressing pay that was received by Fujitsu bosses during the Horizon contract. There is a section on you from page 7, if we go down and look at page 8, and into page 9. I’ll just read to you a few passages from that report. It refers to you, and if we scroll down, it says that you:

“… gave evidence last month, and is due to do so again later this year.

“He admitted to the MPs on the Business Select Committee this year that there had been ‘bugs, errors and defects’ with Horizon from the start, and apologised for [your] firm’s role in the scandal.

“[You now face] the prospect that Fujitsu may be asked to contribute to the compensation fund for the victims, something he has said the firm has a ‘moral obligation’ to do.”

Can you assist us, what do you understand by “moral obligation” or for what purpose did you use that form of words?

Paul Patterson: Because the legal process, I think, allows lawyers to spend a lot of time litigating. I think, from my standpoint and from my company’s standpoint, and in Tokyo, we felt it was a moral obligation. Now, when I said that back in January, you know, we’ve learnt an awful lot in the last several months of this Inquiry around what other people and organisations did or didn’t do. So I stand by, and the company does stand by, we see ourselves contributing morally to redress to the subpostmasters.

Mr Blake: If we scroll down and over the page, please, it quotes a spokesperson from Fujitsu to say:

“Based on the findings of the Inquiry, we will also be working with the UK Government on the appropriate actions, including contribution to compensation. The Fujitsu Group hopes for a swift resolution that ensures a just outcome for the victims.”

The Inquiry’s evidence has now effectively come to an end, we have our expert witnesses tomorrow but that is the end of the final phase of the Inquiry. You have had an opportunity, Fujitsu have had an opportunity, to hear all of the evidence that has been heard in this Inquiry. Having heard that evidence, how are you going to compensate those affected by Fujitsu’s failures?

Paul Patterson: So what we’ve said all the way through is we expect to contribute to redress. We see that as going through the Government, who are the shareholder, and I heard the evidence earlier today. So we see that as being a conversation with Government about what our contribution would or would not look like.

Mr Blake: What have you suggested to Government that your contribution be?

Paul Patterson: I have not suggested any particular number. I heard the questions earlier previous Secretary of State, and I think she’s used the term “gesture”. We don’t feel that this is a gesture conversation. This is too serious. But we do want to sit down with the Government and talk about that frankly, and very openly. I thought what Mr Reynolds said this morning as well would be very helpful to that. I have been in constant contact with the Department for Business and Trade, so the Department for Business and Trade and me, and with the Post Office, have been in constant communication around one extension and also about evidence or not providing evidence. So I welcome the opportunity to talk to the new Secretary of State in due course.

Mr Blake: You outlined at the beginning of your evidence today a number of things that you accepted, insofar as Fujitsu’s role was concerned. The Inquiry, is, as I say, coming to the end of its evidence taking what are you able to say to the Inquiry about what you are proposing by way of compensation?

Paul Patterson: I can’t put a number on it, and I think, if I reflect on what I’ve heard from subpostmasters and the families, there are a number of areas that they need help in, and we would like to sit down with Government and figure out how we contribute to that.

Mr Blake: Which in particular?

Paul Patterson: Well –

Mr Blake: What would you like – let’s assume there is a pot of money from Fujitsu. What, in particular, do you consider Fujitsu should be contributing to?

Paul Patterson: So I’m not going to put number on it, Mr Blake. I think that’s –

Mr Blake: I didn’t ask for a number but just in terms of how it is. There are existing schemes. Is your plan to give the Government money towards the redress that has already occurred or operate a separate fund?

Paul Patterson: Sorry, we are not an organisation that can set up new funds or charities, or what have you. We see ourselves contributing to whichever scheme the Government and the subpostmasters agree is the most appropriate one.

Mr Blake: Can I please take you to RLIT0000433. It’s the final document I’ll take you to today. This is a recent article in The Financial Times. The headline is “Post Office IT provider Fujitsu won £1.4 million public sector contracts since promise to stop bidding”. I’ll just read a passage from that, if we scroll down, please. It says:

“After a public outcry, Fujitsu said in January that it would ‘voluntarily pause bidding for future public sector contracts’ while a public inquiry into the scandal was ongoing.

“However, it did not rule out continuing to bit for work with existing public sector customers, or when the Government needed its ‘skills and capability’.”

If we go over the page, please, it says:

“According to government procurement data provider Tussell, the Japanese group has won six public sector contracts worth an estimated total of 1.4 million since making this commitment. Two of these contracts have been awarded as recently as September.”

We can see there it sets out below in the tables the various contracts. Can you assist us, to what extent were these existing bids, to what extent is that new work that falls under that caveat that has been provided?

Paul Patterson: So I believe the MoD is where we have a contractual obligation to provide hardware. So I think that’s what that one is about. We have – I think, this article talks about 33 – there it is at the bottom of the page, 33 public sector contracts. So these are existing contracts that we have obligations within. I think the Nuclear Laboratory one, they have stated that this is the last – this is a software contract and they are moving off that software platform, and that was the licence for the final year, I think it was.

So these were existing contracts where we have contractual obligations to provide those – either the hardware or, in this case, software.

Mr Blake: It says in the article that the pause is a voluntary one while the Public Inquiry was ongoing. How do you see that in the future?

Paul Patterson: I think in due course we’ll sit down with Government and discuss it.

Mr Blake: Do you intend to resume bids once the Inquiry has finished?

Paul Patterson: No, I don’t intend to resume bidding. I think this is a very emotive topic and we would want to sit down with Government and discuss that. We do some things in Government, particularly in quite a dangerous area, which we would like to talk to the Government about in due course, but I’m not going to say here today that we are going to start bidding for new contracts. We have not done that for the last several months and my current intention is not to start that tomorrow or the day after.

Mr Blake: Thank you.

Sir, that brings us to questions from Core Participants. I think we only have two sets of questions, one from Ms Patrick and one from Mr Stein. I’m in your hands, sir, as to whether we can complete those today or whether we return tomorrow morning. They’ve been allocated one topic each.

Sir Wyn Williams: Right. Can I please have, as best you can, Mr Stein and Ms Patrick, what are you talking about in terms of time?

Ms Patrick: Sir, I think –

Mr Stein: On behalf of Howe+Co we’ll be 10 to 15 minutes.

Ms Patrick: Sir –

I apologise, Mr Stein.

Sir, I think we’d be around five to six minutes.

Sir Wyn Williams: Right. So it’s now 4.50 and, as you know, my powers of concentration are limited to a normal court day but I think we are all in agreement that it’s better for Mr Patterson to finish if he possibly can; is that right, do you both agree?

Ms Patrick: Yes, sir.

Mr Stein: Sir, yes. There’s one difficulty. I’ll need to have two minutes to speak to Mr Blake about one particular question.

Sir Wyn Williams: All right.

Mr Stein: So that will take me two minutes.

Sir Wyn Williams: So we’ll have a five-minute break and resume at 4.55 and finish by 5.20.

Mr Stein: Thank you, sir.

Sir Wyn Williams: Fair?

Mr Stein: Yes, sir.

Sir Wyn Williams: Fine.

(4.49 pm)

(A short break)

(4.54 am)

Mr Blake: Thank you, sir, we’re going to hear from Ms Patrick and then Mr Stein.

Sir Wyn Williams: Fine.

Questioned by Ms Patrick

Ms Patrick: Mr Patterson, good afternoon.

Paul Patterson: Sorry.

Ms Patrick: Are you okay?

Paul Patterson: Yes, indeed, yes. Thank you.

Ms Patrick: My name is Ms Patrick and I ask questions on behalf of a number of subpostmasters who were wrongfully convicted and have since had their convictions quashed. I only want to raise one topic. When you gave evidence in January, at the end of your evidence you committed to meeting subpostmasters and their families; is that right?

Paul Patterson: I committed to meeting subpostmasters and the families contacted me.

Ms Patrick: Yes. In August, early August, seven months on, you met then with representatives of the children who suffered as a result of their parents being prosecuted and convicted.

You’re nodding, Mr Patterson. You have to say “yes” or “no”.

Paul Patterson: Oh, sorry, yes, yes.

Ms Patrick: In that meeting, there were nine children of former subpostmasters, including Katie Downey, Rebekah Foot, and Katie Burrows, who sit next to me today. Again, you’re nodding. You have to say “yes” or “no” for the transcript.

Paul Patterson: Yes, I recognise them now, yes.

Ms Patrick: I think you might be aware that their group is called Lost Chances for Subpostmaster Children?

Paul Patterson: Yes, I am.

Ms Patrick: Lost Chances for Subpostmaster Children, affected by the Horizon scandal, they’re campaigning for financial support to address chances and opportunities lost or, as they would say, taken from them, during their childhood as a result of the experiences of their families.

Now, today, perhaps coincidentally, or fortuitously, while we raised your contact that you’d had with their group with the Secretary of State during his evidence, they’ve had a response from the Post Office to their request for a meeting with them. But you have met their group, haven’t you?

Paul Patterson: Yes, I have.

Ms Patrick: During that meeting, they did something that was quite painful for them: they’d written down their stories and they shared each of them with you, everything that they had gone through, didn’t they?

Paul Patterson: Yes, they did.

Ms Patrick: It was in very moving terms, to be frank, wasn’t it?

Paul Patterson: It was.

Ms Patrick: They explained that their lost opportunities and their trauma, it just isn’t caught by any existing compensation redress or restorative justice scheme; is that fair?

Paul Patterson: That’s my understanding, yes.

Ms Patrick: You listened to what they had to say and you said you would take it away and you would come back to them?

Paul Patterson: Yes.

Ms Patrick: That’s over three months ago now, August, isn’t it?

Paul Patterson: Yes.

Ms Patrick: Yes. Now, Hudgells Solicitors has regularly sought updates on their behalf from Fujitsu as to what would happen and when; is that fair?

Paul Patterson: I believe so.

Ms Patrick: Just very briefly, we don’t have to go through the detail, in September, on the 13th, your solicitors for Fujitsu replied and said that your team were continuing to study what you had learned during your meeting in August. Can I just ask briefly, very briefly, what had you learned in your August meeting?

Paul Patterson: So the – I think the two or three colleagues – sorry, the three members of the group sitting beside you, it was a very difficult day for them and it was a very difficult day to listen. They had a number of ideas, some of which I had no – I’ve got no experience of personally. I don’t know even how we would execute those things and I think I said in the meetings we are not the right people to – the right organisation to do some of those things. But let us think about could we find organisations. But, equally, I think the group were also structuring themselves differently to allow us to potentially engage with them in a more structured way than the way that it was previously.

So we do want to engage in that way. I’m still unclear about what things we can do other than sums of money, the list of – I think, the education topic that we talked about, the mental health topic that we talked about, how we can, as a company help, help in that way, and I think there was also a conversation around legacy on education. I didn’t bring my notes with me on that particular meeting.

So we still want to do that. Frankly, we’ve struggled, though, to figure out how.

Ms Patrick: Can I ask you to pause there for one moment because I know we’re very short of time. The last reply they received, I believe, suggests you would revert with the timetable around engagement towards the end of this year but that you had no further updates at this time, and that came through Fujitsu’s solicitors. Does that mean that it will be the end of the year before you can take a position on whether you can engage further with the Lost Chances organisation and with the people sitting here; is that what that means?

Paul Patterson: So I think there was something else that happened today with the Secretary of State, where he also said he thought there was a theme in here or topic in here that we could be involved in.

I don’t know what format that engagement with two of you, three of you, the nine of you, could be before the end of the calendar year but I won’t stay silent. So I won’t stay silent.

Ms Patrick: So you won’t stay silent. Can I just ask, you said before the end of the year. Now, given everything that you’ve said today, and we know what you’ve said about waiting until the end of the Inquiry, given everything you’ve said today about that meeting and Fujitsu’s role in the scandal, is there really any need for this work, this engagement, to wait until the end of the Inquiry to decide where Fujitsu might fit?

Paul Patterson: So for us as a company, it’s very difficult to understand, when we had the first conversation, very difficult to understand where that engagement could be, what could we do. You had a list of several topics that we think we could help with. I think that we’d want to explore those again, not to – I think, in fact, Rebekah, you made a point about kicking the ball down the road – not to do that, but we struggled, frankly, to find a way to engage it.

Now, I think, if my memory is right, you’ve also structured yourself slightly different now, I believe. I owe it to you to have a look at what that new structure looks like and is there a way we could engage with before the end of the calendar year.

Ms Patrick: Thank you, Mr –

Paul Patterson: And I don’t know off the top of my head what your new structure looks like. Okay.

Ms Patrick: Thank you, Mr Patterson. There have been updates provided to Fujitsu and I’m very grateful for your indication that there would be further engagement.

Sir Wyn Williams: Before Mr Stein asks you any questions, Mr Patterson, can I just get clarity about one point. So far as Fujitsu is concerned, does the end of the Inquiry for taking steps mean at the close of play on 17 December, when the last final oral submissions are made, or does it mean when I report?

Paul Patterson: I haven’t given it, Sir Wyn, any practical thoughts, actually. I am hoping, once you finish taking all the evidence, we can sit down with Government, given that we’ll know a number of themes and a number of conclusions, shall we say, given everybody has listened to it. But I hadn’t given it a definitive date, sir.

Sir Wyn Williams: Well, that’s all right but I would like you to ponder that because I think everybody will realise that there is bound to be a period of time, I won’t commit myself to any particular period of time, between 17 December and when I produce a report, and I think it would help both clarity and transparency if Fujitsu did clarify that.

Paul Patterson: I will take that up with the Department as well. Thank you, sir.

Sir Wyn Williams: Yes, all right. Mr Stein.

Questioned by Mr Stein

Mr Stein: Thank you, Mr Patterson. We’ve met before.

Can we go to straight to a document which is FUJ00243199. That’s the letter dated 17 May that you’re familiar with. On that first page, can we scroll down, please, to (ii), “pursuit of shortfalls from postmasters”. Let’s just read through that together. So this is a letter from you to Mr Read and the relevant part that I’m going to take you to therefore says:

“It seems that the Post Office may be continuing to pursue postmasters for shortfalls in their accounts using Horizon data. We would have expected that the Post Office has changed its behaviour in light of the criticisms and is appropriately circumspect with respect to any enforcement actions. It should not be relying on Horizon data as the basis for such shortfall enforcement.”

Now, this appears to be a fairly serious letter. Did you mean what this says?

Paul Patterson: I know what I wrote.

Mr Stein: Did you mean it?

Paul Patterson: Well, it’s what I wrote, Mr Stein.

Mr Stein: Well, you either mean something or you don’t, Mr Patterson. Is that correct in what it seems to say, which is that the Post Office should not be using Horizon data to go after subpostmasters for shortfalls?

Paul Patterson: I think, as I’ve said during the last hour or so, there is multiple data points that the Post Office should be using before they conclude whether a shortfall or a theft has taken place.

Mr Stein: Let’s try it one more time. Well, let’s try it again.

“It should not be relying on Horizon data as the basis for shortfall enforcement.”

When you wrote that, was that what you felt?

Paul Patterson: Yes, Mr Stein.

Mr Stein: Do you still stand by that?

Paul Patterson: I think, as I’ve given in evidence today several times, you cannot rely on just one data source.

Mr Stein: Well, that’s not quite the same thing, is it?

Paul Patterson: No, it is exactly the same thing. It’s Horizon data, and I’ve said you can’t rely on one source of data.

Mr Stein: Right. So Horizon data should not be used by the Post Office to go after subpostmasters for what the Post Office reckons may be money owed by the subpostmaster? Is that right?

Paul Patterson: So Mr Stein, there’s four investigations at the moment with the police. We have given material to the police which talks about all the data that they could – should, frankly – be looking at to determine whether a theft has taken place, or whatever the crime is.

Sir Wyn Williams: Does it amount to this, Mr Patterson: that perhaps with, to use that phrase much loved of in this Inquiry, “with the benefit of hindsight”, this sentence should read: “It should not be relying solely on Horizon data”, et cetera?

Paul Patterson: Yes, Sir Wyn, yes.

Sir Wyn Williams: Fine. Thank you.

Paul Patterson: I have the words “basis” and “solely” as interchangeable.

Sir Wyn Williams: Right.

Mr Stein: The point you made earlier in your evidence, Mr Patterson, was one whereby you referred to it as one data point, in other words that there should be something else outside of Horizon data. Is that what you’re trying to say here in your evidence?

Paul Patterson: Yes, and that was my point earlier about the complete supply chain that provides information to Horizon, or actually to subpostmasters themselves. You cannot rely solely – forgive me – solely on one data source.

Mr Stein: Right. So on its own, Horizon data its insufficient to mount a case against a subpostmaster for a shortfall? Is that what you’re trying to say?

Paul Patterson: So I am not a legal person. I’m not a legal – in my view and in our company’s view, you cannot rely on that solely for the data.

Mr Stein: To pursue people for shortfalls?

Paul Patterson: Yes.

Mr Stein: Right. Fujitsu’s position on this: will you support the Post Office in pursuing subpostmasters for shortfalls?

Paul Patterson: We’ve said we won’t do that.

Mr Stein: Right, okay. So let’s add this all together. Fujitsu will not support the Post Office if the Post Office is going after a postmaster for a shortfall either in, I suppose, correspondence with that subpostmaster, or in court? Is that correct?

Paul Patterson: I thought you were going to add another sentence: “based solely on Horizon data.”

Mr Stein: Well, that’s the one you’ve added today, prompted by Sir Wyn.

Paul Patterson: Well, I’ll go the other way. Based on shortfall data.

Mr Stein: Right.

Paul Patterson: So whether you want to use “basis” or “solely”, the same thing applies.

Mr Stein: So what’s going to have to happen: you’re going to have to be persuaded that there’s something else other than Horizon data before you provide support to the Post Office? How’s it going to work, Mr Patterson?

Paul Patterson: So, as I’ve said in my evidence today, there are multiple data sources, and if you look at the YouGov data, look at the YouGov data about different places where errors or omissions or issues can occur, all of that needs to be in play and the investigation needs to be not taking a narrow view, but a holistic view.

Mr Stein: So are you going to get the Post Office to come to you, provide the data, and then see what else comes up, or do you need the support, in other words something other than Horizon data, before you hand over the Horizon data? Which is it?

Paul Patterson: So Horizon data, as I said earlier, will be inside the Post Office’s house by February, all historical data. So they’ll have all the data that is required. And I think in evidence from several members of the Post Office Executive, they’ve got that data already. So they’ve got the data that they need. My evidence point is I would like to be satisfied that they are using more than just one data source. And I’ve not seen anything, anything, which tells me that they’re using more than one data source.

Mr Stein: I see. So in that sense, if we put this all together, frankly, you don’t trust the Post Office in order to get this right?

Paul Patterson: On this particular topic, I absolutely don’t trust the Post Office.

Mr Stein: You mentioned one further point in your evidence to Mr Blake. This is about the age of the system, okay? You said this:

“To give this some context, we have not turned off some of this equipment because it’s so old.”

Paul Patterson: Mm-hm.

Mr Stein: Help us understand what would happen if you did turn it off?

Paul Patterson: I’ve got no idea. So in my experience of 35 years in this industry, you know, if you do not do disaster recovery, if you do not turn things off, if you don’t keep them upgraded, I cannot determine what will or will not happen, which is part of our nervousness about any extension.

Mr Stein: Let’s turn back to the questions that I asked you now so many months ago in January of this year. Now, I asked you these questions, which was:

“You’re aware of the effect of this scandal upon subpostmasters. It’s felt by their families, by their loved ones, by their partners, by their children. This devastated not only the subpostmasters’ individual lives but everyone around them. Subpostmasters, because they could not see what was going on, would sometimes blame their own partners or their employees, and the effect, therefore, of this scandal is much more widespread than on the subpostmasters themselves, whose lives sometimes have been terminated by this scandal.”

Then I asked you this:

“Will Fujitsu commit to providing funds in recompense for all those hurts to others outside of subpostmasters and the contribution scheme? In other words, financial redress to support others that have been affected?”

I asked this:

“You may want to think that what could be done by Fujitsu is supporting people in the future, subpostmasters in future entrepreneurial endeavours, their families in such, or in education; will Fujitsu consider that type of support?”

You said this:

“Mr Stein, the Inquiry and the explanation of the history of all of this is getting a great deal of attention and support from us. Our company here in the UK has many things in society, around the country, around the UK. I think the suggestion you’ve just made, and clearly [the transcript says ‘clearly in a conversation’, I think it means ‘is a conversation’] if I were able to come to and engage with subpostmasters and their representation, their representatives, we would – would be absolutely something we would like to consider.”

So you appeared to be giving a positive answer to the general suggestion, which is providing some way to provide support.

Today, in answer to the questions on such matters, you’ve said that Fujitsu wishes to engage in a discussion with Government – you mentioned also subpostmasters – as to providing the financial support that would go to Government.

Now, has Fujitsu written off doing something more creative than that? In other words, setting up a fund, bursaries for the children, for the families, for the people with lost opportunities? Have they written that off, or is it just going to be money to Government?

Paul Patterson: So when I met the subpostmasters there were many, many suggestions, and in fact one subpostmaster made it clear to me the company should not be giving any money to Government at all. We are not a – we’ve got no experience of setting up these things or doing these things. Or, as I just said to the Lost Families, we were hoping that through Government channels we’d be able to provide funds to contribute to some of those areas. To be more creative, we’re struggling to find out how we can be more creative, frankly, because that’s not something that we’ve got any experience in.

I was hoping, equally, from this morning’s conversation, that there would be more activity in and around the law in changing the law or lobbying for the law to change, because I was personally, as a normal citizen, surprised that the families did not have recourse to some of those other areas of compensation. But I haven’t written it off, Mr Stein. I’m just not quite sure where to go.

Mr Stein: Well, where to go, Mr Patterson, is to go back to the representatives representing people that have been in this situation, and say, “Can you help? We are” – if this is right – “Fujitsu is trying to see what can be done. Do you have experience with compensation, frameworks, redress schemes, restorative justice schemes?”

You will find that Howe+Co, Mr Enright, who sits to my left, who sits to Mr Kelly’s right – you may recall Mr Kelly from meeting him –

Paul Patterson: Yes, I do.

Mr Stein: – he does have that expertise. The people are out there, Mr Patterson. Why haven’t you reached out since January of this year to those people that can provide such assistance for you on these important queries?

Paul Patterson: Sir, there’s no reason why I haven’t reached out. I’ve had the meetings, Mr Stein. Thank you for the suggestion. We’ll have the conversation in due course with the colleagues.

As an IT company, we are unsure where to go and what to do about this. We were hoping that the compensation schemes and contributing to the Government compensation schemes would be a suitable vehicle for redress.

Mr Stein: But you know that those compensation schemes are not providing this type of support to the wider family. So all that appears to be happening is Fujitsu is contemplating a contribution, subbing the Government for the compensation schemes that are currently in place. That’s what you seem to be saying.

Paul Patterson: Sir, that is what I was saying earlier. And what you’re suggesting to me is that your organisational colleagues may have some expertise in these other areas, and we’ll have that conversation.

Mr Stein: Is there a standstill agreement between the civil action from the Post Office and Fujitsu as to whether the one, Post Office, will sue the other, Fujitsu?

Paul Patterson: Yes, there is.

Mr Stein: So in essence, what may be happening here, do you agree, Mr Patterson, is Fujitsu is considering paying some compensation towards the compensation funds in order to stave off, as a way of settling the action from the Post Office against Fujitsu? That’s what it appears to be, Mr Patterson.

Paul Patterson: Well, it’s not, Mr Stein.

Mr Stein: So any funds committed by Fujitsu towards compensation will not be in settlement to the claim between Post Office and Fujitsu is that what you’re saying?

Paul Patterson: So, Mr Stein, I have had no conversation with the Post Office about the standstill agreement. That’s our legal teams and our legal teams. As far as I’m concerned, if there’s any contribution to compensation, it will always be outside that conversation.

Mr Stein: Lastly, where in all of this is the situation that’s been described: which is that Fujitsu awaits the close of the Inquiry? Now, Sir Wyn has asked you some questions: “What do you mean by the end of the Inquiry? Is that this year, or is that at some point next year when the Inquiry reports?”

Okay, fine.

Why is it that Fujitsu wants to wait until the end of the Inquiry before dealing with such matters? What’s the rationale?

Paul Patterson: So when I sat in this room in January, there were some things I knew, and I didn’t know. I’ve now spent the last seven months, as you have, listening to evidence about what other people in other organisations did or didn’t do. The notion that this is all down to a software bug and has contributed to the largest miscarriage of justice in the United Kingdom is incorrect. These are complex matters, as you well know, based over many, many decades, and we have learnt, as an organisation, a great deal about the causes of this miscarriage of justice.

Mr Stein: Yes, well, let’s go back to my question: why is it that Fujitsu needs to await the close of this Inquiry before it deals with matters such as compensation or contributions towards compensation?

Paul Patterson: For the reasons I’ve just given: these are complex matters which we need to understand all those components. Now, what we do know, and as I said to Sir Wyn just a moment ago, by the time we get to the end of this week we’ll have a better idea on a number of those topics about how we can contribute. You have given me a suggestion here, and I’ve already committed to meeting with the Lost Families.

Mr Stein: But Mr Patterson, you already accept that there is a need for Fujitsu to put its money where its mouth is. You would accept that there is at least a discussion to be had about supporting people that have been affected by the scandal. Why wait? Is this legal advice: wait until the end of the Inquiry when it’s all gone quiet?

Paul Patterson: Far from it, gone quiet. I don’t expect this to go quiet at all. Why should it go quiet? These are serious matters.

Mr Stein: But is this your decision to wait until the end of the Inquiry, or is it legal advice? What is it, Mr Fujitsu (sic)? Who is telling you to wait until the end of the Inquiry?

Sir Wyn Williams: I’m not sure about answering that question fully. He can say, “I’m not going to tell you about our legal advice”, can’t he?

Mr Stein: That’s true, but it is his choice.

Sir Wyn Williams: Yes, well I’m just reminding him he has a choice.

Mr Stein: Yes.

Mr Patterson?

Sir Wyn Williams: I mean it is the reality, Mr Patterson, isn’t it, that by listening to all the evidence first, you will have a much better idea about the culpability of Fujitsu, if any; isn’t that the reality of it?

Paul Patterson: Yes, it is, Sir Wyn.

Sir Wyn Williams: Fine. Thank you.

Mr Stein: So the end result of this is that we know the Post Office has indicated that they wish to bring forward restorative justice proposals. Will Fujitsu commit to supporting that?

Paul Patterson: So you asked me a question a moment ago: do I trust the Post Office?

Mr Stein: Well, you’ve got a choice, Mr Patterson. You can reject working with the Post Office as you like. Will Fujitsu commit to supporting restorative justice proposals?

Paul Patterson: So the new management team inside the Post Office, I would welcome that opportunity to sit down and talk to them about those topics, yes, Mr Stein.

Mr Stein: Sooner rather than later, Mr Patterson?

Paul Patterson: I spoke to the Post Office Executives on Friday, and I’m speaking to them again on Thursday. So sooner rather than later, yes.

Mr Stein: Avoiding any other problems, will you commit also to meeting with Mr Enright and his team from Howe+Co sooner rather than later –

Paul Patterson: Mr Stein, you’ve asked me that question before as well, and the answer is I won’t commit to that.

Mr Stein: You won’t commit to that?

Paul Patterson: No, not sooner rather than later. You’ve just given me a whole bunch of caveats to that meeting. You’ve just offered to me that you’ve got some experience in those areas. I will talk to my team about how do we get the value from that conversation. But I’m not going to sit down and commit to meeting Mr Enright tomorrow or today or whenever. I need to have that conversation first.

Mr Stein: All right, well that’s avoiding tomorrow –

Paul Patterson: Well, you said the words “tomorrow” and “today” and you gave me a number of caveats.

Mr Stein: How about before Christmas, Mr –

Sir Wyn Williams: That’s enough, gentlemen. That’s enough. I think I’ve got the picture.

Thank you very much, and it’s finishing dead on time, Mr Stein, so well done.

Mr Stein: Thank you, sir.

Sir Wyn Williams: Right. Good.

We’ll resume again at 10.00 tomorrow, but first – or lastly, today – I should thank you, Mr Patterson, for appearing again at the Inquiry, for producing witness statements on behalf of Fujitsu, and making the commitments to the extent that you have. Thank you.

The Witness: Thank you, Sir Wyn.

(5.21 pm)

(The hearing adjourned until 10.00 am the following day)