25 July 2024 – Vince Cable and Gregory Clark
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(9.45 am)
Mr Beer: Good morning, sir. Can you see and hear us?
Sir Brian Langstaff: Yes, thank you very much.
Mr Beer: May I call Sir Vince Cable, please.
Sir Vince Cable
THE RIGHT HONOURABLE SIR JOHN VINCENT CABLE (sworn).
Questioned by Mr Beer
Mr Beer: Good morning, Sir Vince. My name is Jason Beer and I ask questions on behalf of the Inquiry. Can you give us your full name, please?
Sir Vince Cable: John Vincent Cable.
Mr Beer: Thank you. For those listening and watching, if I’m speaking in more than usually loud voice today and if I’m getting closer to the microphones than is usual, there is a good reason for that, which Sir Vince understands?
Sir Vince Cable: Thank you very much. I appreciate it.
Mr Beer: Can you look at a witness statement that you’ve kindly prepared for the Inquiry, please, it’s in front of you. So it should be 53 pages long and dated 27 June 2024. If you look at the last page, page 53, do you see your signature?
Sir Vince Cable: Yes, I do.
Mr Beer: Are the contents of that witness statement true to the best of your knowledge and belief?
Sir Vince Cable: Yes, they are true to the best of my knowledge and belief.
Mr Beer: Thank you very much. You can put that to one side now. All of the other documents I will show you will come up on the screen.
I think by training and background you are an economist; is that right?
Sir Vince Cable: Yes, that’s right, yes.
Mr Beer: After university and the like, you entered the Civil Service; is that correct?
Sir Vince Cable: For a couple of years, yes, and then I was later a Special Adviser within the Department of Trade and Industry but mostly not in the Civil Service, but I had a stretch there.
Mr Beer: Then you worked in business before being elected to Parliament in 1997; is that right?
Sir Vince Cable: Correct, yes.
Mr Beer: So far as concerns this Inquiry, the most important office you held was as Secretary of State for Business, Innovation and Skills, and was that between 12 May 2010 and the 12 May 2015?
Sir Vince Cable: Yes, that was the full length of the Coalition Government.
Mr Beer: So five years?
Sir Vince Cable: Five years, yes.
Mr Beer: During that period, is it right that there was a junior minister responsible for postal affairs?
Sir Vince Cable: Yes, I think there were six or seven junior ministers and one was responsible for postal affairs, amongst other things, most notably, I think, labour relations, consumer protection.
Mr Beer: You list them in paragraph 21 of your witness statement – no need for it to be turned up – but there were a succession of junior ministers with responsibility for postal affairs in that five-year period; is that right?
Sir Vince Cable: Yes, there were four.
Mr Beer: Was that a regular or normal number of junior ministers holding down a post over that kind of period?
Sir Vince Cable: Well, I think there was quite a high turnover generally. The four ministers we’ve referred to were people from my party, the other junior ministers were Conservatives, but they had a turnover which was really directed by the Prime Minister. My group of ministers were essentially appointed by Nick Clegg and worked with me.
Mr Beer: Did you get any sense that there was churn, as it’s sometimes referred to, in that ministerial post that may have made it difficult for the person occupying it to grasp/fully understand/get to grips with post Office issues?
Sir Vince Cable: I wouldn’t say abnormally so. I mean, I was unusual in having five years in my office. I think under the government that has just passed, we had Cabinet Ministers who held jobs for a few months but I was unusual. I think, in Jo Swinson’s case, there was an interruption because of the maternity leave. That was, I think, very understandable, that wasn’t really churn. But the others were changed because of an overall mix in our ministerial portfolio: Ed Davey became a Secretary of State, for example.
Mr Beer: Did you get any sense in your period of office that the brief held by the person responsible for postal affairs, the minister responsible for postal affairs, was too broad, ie there was too much to do?
Sir Vince Cable: Well, there was a vast amount within the Department, I think we may come to this in more detail later, but in the briefing pack, the topical briefing pack, I noticed there was a list of 100 items which came within my portfolio, roughly, and Post Office was one of them, and the portfolio had to be divided up between ministers and civil servants. The Post Office was part of a junior minister’s portfolio and I think that was proportionate, given the wide range of things that we had to do.
Mr Beer: Did any of the Junior Ministers in your time ever raise with you a problem as to capacity, such that they couldn’t give postal affairs sufficient attention?
Sir Vince Cable: No, I don’t think so. I mean, in my judgement they were highly conscientious and very intelligent ministers and very capable and perfectly capable of handling the responsibility. I met them regularly as party colleagues and ministers, we talked formally and informally and they kept me abreast of issues which they found particularly important.
Mr Beer: In paragraph 2 of your witness statement – again, no need to turn it up – you say:
“I am informed that a large number of documents which should have been retained cannot be located, such as my official diary and minutes of meetings.”
Sir Ed Davey and Jo Swinson have said similar things to the Inquiry. Do you know why such papers, including your official diary, which is presumably an important record of your activities, was not retained?
Sir Vince Cable: I have no idea why they weren’t retained but there were – in my case, there were some what I call seminal meetings which were never recorded. I had a first courtesy call meeting with Paula Vennells and Alice Perkins, for example. There doesn’t seem to be any record of that, though I registered with them some of my concerns about the Post Office at that point. There was a meeting where a Member of Parliament, Mr Bridgen, brought the Federation to tell me about some of the distressing cases of subpostmasters. There appears to be no record of that either.
Mr Beer: Have you asked why there is no record?
Sir Vince Cable: Yes, I was told that people had searched and couldn’t find it. I think probably it has to do with the transition which was taking place from paper to digital. When I first started the job, almost everything was done on paper, letters came into the Department. I think, by the end of it, it was email based and, for a variety of reasons, complete records were not kept.
Mr Beer: You tell us also in paragraph 2 of your witness statement that, in your five years in office, problems with Horizon barely came across your desk; is that right?
Sir Vince Cable: That is correct and, when they did, it was usually in a very uncontroversial way and it was not drawn to my attention as an issue I should focus on.
Mr Beer: That five-year period was a significant one in relation to the unfolding events concerning Horizon, including, within that five-year period, because campaigning work was being undertaken by the Justice for Subpostmasters Alliance; there was the threat of a class action being brought against the Post Office in the courts; there had been the discovery of evidence in that five-year period which cast doubt on the safety of criminal convictions obtained by the Post Office when acting as a private prosecutor; the CCRC, the Criminal Cases Review Commission, had commenced an investigation into the safety of some convictions; second Sight, the forensic accountants, had been instructed and had produced four reports in that five-year period; it marked the beginning, middle and end of the initial Complaint and Mediation Scheme run by the Post Office; Deloitte, forensic accountants, had completed reports on the Horizon system.
I’ve given you a smattering of things that happened in that five-year period where you say Horizon barely came across your desk. Looking at it in the round, how do you think it is that Horizon barely came across your desk in that five-year period?
Sir Vince Cable: Well, I think the general reason is that the officials who were briefing me and the ministers on the subject hadn’t seen it as a particular problem. I think, with hindsight, I should have been told at the outset about Horizon, what it was. It was just a word. I should have been told that people were querying it – you know, good, competent people. Computer Weekly, for example, I knew nothing of their work. We should have been told that people were suggesting there was a risk factor and I should have been told about Mr Bates and the Justice group. I never heard his name until I’d been in the job five years at the end, when the whole issue came to a head. But, certainly, I wasn’t briefed on them and I think probably this came down to civil servants making a judgement that, because I had a vast area of responsibility and because it was being well handled at a minister level, that I didn’t need to be told about them.
Mr Beer: Thank you. You tell us in paragraph 4 of your witness statement that governments across the political spectrum share some responsibility for the fact that the scandal happened on their watches and that you accept your share of responsibility.
Sir Vince Cable: Yes, I – to be frank, I found it very difficult to pinpoint particular events or decisions that I could have done differently but, simply as a matter of formal responsibility, this was a state enterprise that came within the remit of my Department and I accept the fact that it happened on our watch. I know that’s a cliché but it’s something that ministers have to recognise.
Mr Beer: I was about to ask you, when you say that you accept your share of responsibility, what are you accepting responsibility for?
Sir Vince Cable: Well, general oversight of the Department, and this was an area of the Department where clearly there was a policy failure.
As far as I recall, there weren’t any specific interventions that I made or was asked to make that would have changed any of those long list of things that you described.
Mr Beer: Can we get down to some specifics then and start with the issue of your knowledge of key issues relating to subpostmaster challenges concerning Horizon. If we just turn up paragraph 33 of your witness statement, it’ll come up on the screen, please. It’s on page 12, page 33. You’re here dealing with, as part of your chronological account, the period of time when you took up office, and you say in 33:
“I was not briefed by officials on, or otherwise aware of, any issues to do with the Post Office’s IT system at this time.”
If we go back to paragraph 13 of your witness statement, which is on page 5, thank you. This is years before you took up office.
Sir Vince Cable: Yes.
Mr Beer: In this part of your witness statement, you’re telling us more generally about your knowledge of the Post Office.
Sir Vince Cable: Yes.
Mr Beer: You say:
“I became aware of allegations of fraud when a constituent was charged and lost his post office. [You] cannot recall exactly when this was – probably around 2001-2002. [You] approached the family and offered help. They told me that the charges were unjustified but they wanted to rely on ‘justice’ and not involve me as MP. The family never mentioned IT.”
Then, thirdly, in paragraph 92 of your witness statement, which is on page 37, you say:
“Before I came into government, I think I had 8 closures in my constituency … I organised and collected numerous petitions against branch closures … Usually postmasters did not want to become involved, because they were afraid of the consequences.”
Then this:
“When we came into Government, Ed Davey and I agreed based on our experience as constituency MPs that [Post Office Limited] middle management were, as I described [and you refer to a debate in Parliament in 1999] ‘authoritarian’. Mr Bates has, I believe, described them as ‘thugs in suits’ and I recognise this description. [Post Office] dealt with us in an arrogant way when we campaigned against closures.”
Drawing the threads together there, you had been involved in a separate issue, a closure issue, and that had given you some insight into the way that POL middle management the behaved; is that right?
Sir Vince Cable: That’s correct. Just to elaborate a little bit, I had raised a debate in Parliament, I think probably I was one of the first, about the way postmasters were treated by the Post Office, and there was a particular case, which you haven’t referred to, but there’s a particular case of a woman in my constituency who had invested, I think, £75,000 in her post office. It was taken away from her for reasons that were never clearly explained, she lost all the money. Another post office opened up nearby for reasons that were never explained.
I never got good answers for why this was happening, so I called the debate and it basically chimed in with other experiences I had of the Post Office. For example, I’d been campaigning for months on Post Office closures in my own constituency and others and I took them to the Post Office and it was all sort of brushed aside, I was an interfering politician, it was nothing to do with me, operational matters were matters for the Post Office and not for ministers or politicians. And so I’d formed a very negative impression, in the case, and it was reinforced in Government because, as I think I mentioned a few minutes ago, that I think the one occasion when I was a minister where these distressing cases were brought to me was by a deputation – not a deputation – a single man, a man from the Federation, I think, about 50 to 100 cases, he brought a scrapbook of photographs to illustrate it. So I knew that these expulsions, fraud cases, and so on, were taking place but, throughout the whole of that, in none of these cases did anybody, as far as I remember, ever say anything about the computers.
It was seen as – as I saw it – I had a theory which may have been proved to be wrong but, essentially, the Post Office had what I would call a ‘one strike and you’re out’ policy, that if a postmaster made a mistake they would be punished severely – not necessarily anything to do with computing mistakes, that emerged subsequently. And if I can just add one final point, that when I was campaigning on behalf of postmasters at that stage, and it was 10 years before I went into the Government, I did get a lot of help from the Federation, Mr Baker, who was in charge at that point, and they helped me to obtain compensation for the postmistress who had been evicted in my constituency. She was fully compensated and it was with the help of the Federation.
So I, thereafter, tended to have a very positive view about them and trusted their judgement.
Mr Beer: You say here that POL middle management was authoritarian and you recognised the description of them applied by Sir Alan as “thugs in suits”; what about your dealings with them led you to those views?
Sir Vince Cable: Well, it was the description of what happened when – well, in the particular cases I brought to Parliament, but I’d heard of others – about what happened when a postmaster made a mistake. I mean, in the case of my constituent, the only thing that we had identified was that Twickenham residents had gone into the post office and found that the person behind the counter didn’t know that Santiago was the capital of Chile, and a complaint had been made and, on the basis of this complaint, she had been – had her franchise taken away from her.
Certainly, when I raised that issue and closures with the Post Office officials who I met around closures, the attitude came across to me very much as it was described here.
Mr Beer: It was as a result of meeting them face-to-face?
Sir Vince Cable: It was indeed and through the attitude that was revealed in correspondence at the time.
Mr Beer: If we turn to the period when you took up office – that can come down from the screen, thank you – when were you first aware of individual subpostmasters challenging the Post Office’s enforcement action against them?
Sir Vince Cable: I wasn’t aware of that at all. I knew that there were these fraud cases because, as I’ve mentioned, I had this delegation brought to me by Mr Bridgen, and I had asked the Post Minister what action we were taking, and it was at that point that I was told about Second Sight, the forensic accountant, and I think reasonably assumed that there was now a process to deal with it. That was the only occasion on which this came to my attention.
Mr Beer: When did you first become aware that Post Office both investigated and privately prosecuted its own subpostmasters and mistresses?
Sir Vince Cable: Well, I wasn’t aware specifically about that differentiation. I think the kind of common way of looking at it was if somebody was charged with fraud it was all a matter to do with the police and the courts. The distinction that you draw and subsequently emerged was not something I was aware of.
Mr Beer: Not aware of at any time in your period of office?
Sir Vince Cable: Well, I think right at the end, when we had this coming together of Mr Arbuthnot’s question in Parliament and the report of the Select Committee, I started to ask a lot of questions about what was going on and I think that was one of the issues which emerged but, until then, the question had never arisen.
Mr Beer: When did you first become aware of concerns that subpostmasters had been prosecuted on the basis of Horizon data, which may not be reliable?
Sir Vince Cable: Well, I think it was then, very much at the end of the Parliament when we had that coincidence of events, and I was brought in to the picture.
Mr Beer: If we turn up your witness statement, please, at page 14 and paragraph 40, you say:
“In the course of preparing this statement, my attention has been drawn to an unsigned letter dated ‘August 2012’ to David Miliband MP, apparently a draft prepared by officials on my behalf … I understand this letter to have been held by UKGI, and it is therefore reasonable to assume that it was drafted by officials in the Shareholder Executive. The draft letter indicates it is a response to a letter from Mr Miliband dated 23 July 2012, which apparently enclosed a letter from his constituent, Kevin Carter. I have seen neither David Miliband’s nor Kevin Carter’s letter.”
You then quote from the letter, which I’ll skip over. If we go over the page, please, and look at paragraph 41, you say:
“I have no recollection of this correspondence at all. I’ve not seen a signed and dated version of this letter, though it is fair to assume that someone in the Department responded, and did so along the lines of this draft referred to above. As David Miliband was a Privy Counsellor, normally I would have been asked to sign the response as a matter of courtesy – though … this was in the summer recess and [you] may not have been available …”
Can we look at the letter, please. UKGI00013690. This was the draft letter to which you were referring in those paragraphs and it begins, you’ll see, by thanking Mr Miliband for his letter of the 23rd, enclosing a letter from Mr Carter, and continues:
“I have noted Mr Carter’s experiences and concerns as subpostmaster [but] note that Post Office remains fully confident about the robustness and integrity of its Horizon and related accounting processes.”
Next paragraph:
“… in the light of discussions with James Arbuthnot and a number of other MPs with ex-subpostmaster constituents [Post Office] recently agreed to an external independent review of a small number of individual cases that had been raised with them by several MPs.”
If we go down, please, we’ll see it’s got your name at the bottom but, as you say, you’ve not seen a signed version of this letter. For letters like this, would you read the letters before signing them?
Sir Vince Cable: Yes, I would, but let me just explain a little bit of the background. I think the clue to this particular letter is in the date. It was August. I was rarely, if ever, in the Department in August because that was the month I was sent on overseas visits to China, India, whatever, to negotiate trade and investment agreements. It was also the month I took short holidays with my wife. So I almost certainly never saw the letter or the incoming letter but maybe it will help answer your question, I think, if I describe the process by which correspondence was dealt with in my office and I personally related to. The situation –
Mr Beer: Just before you do, we’ve got a very detailed account from you in your witness statement as to how correspondence was dealt with. I just wanted to ask you a few questions about how the correspondence was managed within the Department and your private office.
Sir Vince Cable: Yes, maybe I can help with that. The problem was that I think there were about several hundred letters a day and emails, would come addressed to me personally. I never saw them they would be directed by the Correspondence Unit to the relevant civil servants who would prepare replies, either by other civil servants or by the Post Minister and very, very occasionally to me, if there was a special reason – as I say, Mr Miliband was a Privy Counsellor – and a letter of this kind would come to me probably in a folder and it would be explained by the civil servants, and my private office, that this was a standard letter, that it had been agreed with the Post Minister’s office, it was the Departmental line, and all I needed to do was sign it because there was nothing controversial or difficult in it.
Mr Beer: Just stopping there, Sir Vince, when you say it would have been explained by officials in your private office to you –
Sir Vince Cable: Yes.
Mr Beer: – in a covering submission, covering document, or explained orally to you?
Sir Vince Cable: Well, I think in a case like this there may not even have been a covering document because it was seen as a routine bit of correspondence, and I would sometimes have put in front of me a pile of letters for signing on totally different subjects, and I would be told “These are standard letters, you don’t need to study them in the way that, you know, other controversial issues needed to be studied”.
I mean, if I’d had time and opportunity I would almost certainly have spent as much time as I could reading them and absorbing them but, as I say, in this particular case, I almost certainly never saw the letter and it would have been sent out by my office PP’d on my behalf.
Mr Beer: You see in the second paragraph it refers to Post Office remaining fully confident about the robustness and integrity of the Horizon system and related accounting processes. What enquiries would you expect to have been undertaken and by whom, whether in private office, ShEx, or otherwise, in order to confirm or stand up what is said there?
Sir Vince Cable: Well, I would have expected – and I think I said this to you earlier, that when I first came into office I would have expected to have been told that there were questions being raised about this system, both by Computer Weekly and by the Justice group, but I wasn’t and all I was ever told was – and it appeared in letters and in annexes to briefs that I was given – that this was an issue that wasn’t controversial.
I mean, bear in mind, I think, that, like, I think, most politicians and most officials, I wasn’t computer literate. If somebody had said to me there was a problem of integrity in a computer system, I wouldn’t have understood what on earth they meant. So I was very reliant, as we all were, on the competence and integrity of the people who were giving advice.
Mr Beer: My question was more what enquiries would you expect, if any, officials to have carried out before recommending the inclusion of a line like this in a letter to be signed by you?
Sir Vince Cable: Well, I think the civil servants who dealt with it – I find it difficult to put myself in their minds, these were people who were working full time on computer related issues, I would certainly have expected them to consult somebody independent, to have validated this claim and probably to have taken time to interrogate the people who were offering criticisms, and it appears there were, at that time. But, no, I wasn’t in their mind. It wasn’t a subject I was remotely familiar with and I had to accept and trust the advice I was given because, I mean, that is ultimately how Government works.
Mr Beer: Yes.
Sir Vince Cable: You have to trust advice.
Mr Beer: Would you have regarded it as sufficient if officials had lines provided for them by Post Office and simply incorporated those into letters that were to be sent out in your name or junior ministers’ names, without the kind of testing or challenge that you’ve just mentioned?
Sir Vince Cable: Well, there should have been a testing or challenge at some point but, having established, as they seemed to have done, that there wasn’t a problem, it would have been reasonable then to have accepted the Post Office wording.
Mr Beer: So you would have expected at some point a moment of challenge or deep investigation to –
Sir Vince Cable: Yes –
Mr Beer: – have occurred –
Sir Vince Cable: – I think that’s reasonable.
Mr Beer: – in order to start up the use of the lines provided by Post Office about Horizon, even if, thereafter, the line was perpetuated without further investigation?
Sir Vince Cable: Yes, I would have expected an interrogation of the issue, of course.
Mr Beer: In paragraph 31 of your witness statement, if we turn that up, please – it’s on page 11 – you say:
“Upon my appointment I set three objectives for the Department and Ministers …”
Then if we go over the page, please, and the third of them – it hasn’t got a (c) next to it but I think it is the third of them – is:
“To address the imbalance in the relationship between the Post Office and subpostmasters, giving postmasters a greater say in the running of the network, and to advance, in partnership with the Federation, the idea of mutualisation.”
What lay behind your understanding that there was an imbalance in the relationship between the Post Office and subpostmasters?
Sir Vince Cable: Well, it was based on – largely on my own personal experience, which I’ve already described to you that I had called a debate in Parliament 10 years earlier, expressing my unhappiness with the way that postmasters were dealt with. And there was actually a broader policy issue which engaged me, in the sense that I was responsible, overall, for competition policy and there are, in the country, a whole set of cases where you have a what you might call a monopoly – the technical word is monopsony but, sorry, I don’t want to get into complex economics here – but where you had a powerful organisation with large numbers of suppliers, and we had that situation with, say, farmers and supermarkets, we brought in legislation to protect the farmers.
We did the same with publicans and pub-goers, which took a great deal of time and Jo Swinson’s time, and I was aware there was a similar problem with the Post Office, and I had thought, at the outset, we needed to change this situation.
And the idea came up, I think it was Ed Davey in his discussions with the Federation, that the best way to deal with this problem was to create a mutual structure which would effectively put the postmasters in charge of the post office.
It was an ambitious idea and, unlike the other two objectives, this didn’t come to fruition unfortunately but that was where the idea came from.
Mr Beer: Can we look, please, at POL00059303, and look at page 2, please, and scroll down a little further. You’ll see this is a letter from Yasmin Qureshi, the then MP for Bolton South East. Then if we go back to page 1, please, you’ll see it’s dated 25 October 2012, and it’s addressed directly to you. It concerns Chirag Patel. If we scroll down, please, if you just read to yourself what is said in the first six paragraphs.
Sir Vince Cable: Yes.
Mr Beer: You’ll see in the seventh paragraph it says:
“The person who did the audit even said there was a problem with the computer because all the money in the post office was accounted for and it was not Mr Patel.”
Scrolling on, he had to pay £12,500 and then, over the page, if you just read what’s on that page.
Yes. If we just go back to page 1, looking at the letter, is this the kind of letter that you would have seen yourself?
Sir Vince Cable: No. As I’ve explained –
Mr Beer: In this instance, why would you not have seen this type of letter?
Sir Vince Cable: Well, I never saw any of this kind of letter for the reasons I described. Because of the way the Correspondence Unit operated, there would be very large numbers of incoming letters, they were immediately sent to the relevant part of the Department to prepare an answer and the answer would come back through either a civil servant or through the Post Minister. In this case, it was judged that I didn’t need to be involved and, certainly, I never saw the letter. But the content of it is familiar, because of the case I was familiar with in Twickenham, it sounded very similar to this, except that the IT dimension wasn’t in evidence there, and it was the same kind of issue which was presented to me by the Federation when the representative met me with Mr Bridgen.
Mr Beer: One of your objectives was addressing the imbalance in the relationship between Post Office and its subpostmasters and this kind of complaint speaks to that very issue, doesn’t it?
Sir Vince Cable: Yes, I thought a lot about how you dealt with this question of imbalance but the proposal I had made to Parliament 10 years earlier was that we did need to set up an arbitration mediation mechanism. You may say it was just serendipity but this is ultimately what happened and, certainly, in my first meeting with Paula Vennells, I had suggested that this is what the Post Office should do. But when I came into Government and discussed this matter with Ed Davey, and I think separately the Federation, we thought a more radical solution was required and that’s how the idea of mutualisation came up.
In retrospect, probably we should have been more modest and perhaps insisted that postmasters should be on the Board of the Post Office. I believe this has now happened but, at the time, they weren’t directly represented. But that would have achieved some of the objectives of mutualisation, without the full process which took an inordinately long time.
Mr Beer: Given that one of your three key objectives for Post Office was to address the imbalance in the relationship between Post Office and subpostmasters, do you know why correspondence of this kind, which speaks to that very issue, was not flagged to you?
Sir Vince Cable: Well, I think the reason it wasn’t flagged to me was the reason I gave in my earlier answers: that I had a vast portfolio, the civil servants in my private office and in the Department knew that this was – I don’t know, 1 or 2 per cent of my workload, and clearly judged that they didn’t need to deal with me, if necessary, there was a Post Minister who would deal with it on my behalf. So, you know, it was a judgement on their part, it was perfectly fair, that I simply would not have been able to cope with the volume of correspondence.
Mr Beer: Can we look at some of the responses that junior ministers sent out. UKGI00013863, please.
Thank you. If we go to the bottom of the second page and the top of the third page. In fact, we can see it from that first page. We can see this is a letter sent out by Ed Davey MP. You can see it’s to Norman Lamb who, ironically enough, was subsequently to be a Postal Affairs Minister but here he is being written to in his capacity as a backbench MP. Here, Ed Davey is replying to a letter that had been sent to you by Norman Lamb on behalf of his constituent, Allison Henderson, setting out her concerns about Post Office audit procedures and accusations levelled against subpostmasters:
“I am replying as Minister for Postal Affairs.”
So there are number of these. Just looking at what we have seen this so far, is this what you would have expected to have happened, namely a letter coming in to you from a backbench MP, being passed to the Postal Affairs Minister to respond to?
Sir Vince Cable: Yes, I would have expected that that was the process. I have to say when I first came into Government, I got a lot of complaints that MPs weren’t getting answers, so I asked for more resources to beef up the Correspondence Unit. So the fact that proper letters were going out was, in itself, an advance on where we’d been before. But, yes, I recognised the letter, and there are several messages in it, which were, I think, fairly consistent and consistent with what I’d heard.
For example when I’d held my debate in Parliament in 1999, the first thing that the Labour minister told me was, “I can’t deal with this because this is an operational matter, and operational matters are the responsibility of the Post Office”; and the second issue which was pointed out to me is that, you know, there are legal issues involved, there are court cases, ministers cannot get involved in matters relating to the criminal law. So, ministers replying to letters were probably, at each stage, having to explain that.
Mr Beer: You’ll see that, as you say, in the second paragraph, it says:
“The issues raised in your [Norman Lamb’s] letter are operational and contractual matters between Post Office and [the postmistress] Mrs Henderson … neither I nor the Department can intervene in cases which are sub judice or where court action had been determined.”
The constituent was charged to appear at Norwich Crown Court. She pleaded guilty to false accounting. Then it is said:
“… I understand, at no time during the case were any problems with … Horizon IT system raised by Mrs Henderson or separately identified.”
That line there, that no problems with the IT system were raised by Mrs Henderson at any time, we know to be false. She had raised in the course of the court proceedings, on two occasions, including in formal documents, her suggestion that the losses were caused by the IT system.
For this kind of correspondence, what kind of inquiry would you expect officials to make before including in a letter information such as that?
Sir Vince Cable: Well, in a way this is your earlier question in a different form –
Mr Beer: It is.
Sir Vince Cable: – which is basically, at the outset, there did need to have been an interrogation of the claim by the Post Office that there wasn’t a problem but that, having been satisfied, as apparently the civil servants were, it was perfectly reasonable to incorporate that kind of comment in an outgoing letter.
Mr Beer: This goes slightly further. It has a bit of a dig at Mrs Henderson, saying it’s all very well complaining now, she didn’t complain when she had the opportunity to do so, namely in the court proceedings.
Sir Vince Cable: Yes.
Mr Beer: What would you expect officials to do, if anything, before including that kind of line in a letter?
Sir Vince Cable: Well, this is a level of detail I’d never got involved in, drafting and preparing letters of this kind. So how much detail – I think there is a serious point, though, which is that this issue about commenting on court cases. Throughout –
Mr Beer: Put that to one side for the moment. I am asking you, as the Secretary of State, what you would expect officials to do before including this kind of content in a letter? If you say you don’t know, and are not in a position to judge –
Sir Vince Cable: Well, this is in a level of detail that I really can’t make any useful comment on. As I said, I think it was incumbent on the officials in the Department to have established, in general terms, that the Post Office were acting correctly but, having established that, it was not unreasonable for them to reproduce versions of events that they were given.
Mr Beer: Ie given by Post Office?
Sir Vince Cable: Yes.
Mr Beer: So you wouldn’t see anything objectionable in, if they were given that line by the Post Office, simply to cut it into a letter?
Sir Vince Cable: Well, it is a little odd, now you mention it but I don’t really have anything add. I mean, this is a very high level of detail and I wasn’t involved in drafting letters of this kind, so I can’t really make any intelligent comment on it.
Mr Beer: No, I know you weren’t involved; I’m just trying to explore with you whether, before you or your ministers put their names to letters, you had an understanding of what had gone on in the back office. If somebody had asked me to sign something, I’d either want to know if what’s in it is true from my own personal knowledge or a little bit about the process which has gone into finding out the information and testing it?
Sir Vince Cable: Yes, well, I’d imagine that what happened was that the civil servants in BIS spoke to their opposite number on – in the Post Office, and said, you know, “Can you give me the background to this case because I need to be able to give a full reply, and will you please tell me what happened in the case of Mrs Henderson?”, and would, I think, simply on matters of fact, have had to trust the reply they were given.
Mr Beer: Thank you. Can we look, please, at UKGI00014038, March 2011, a letter out from Ed Davey to Glenda Jackson. The first paragraph thanking her for her letter of 22 February 2011 to you on behalf of her constituent, Bhavisha Parekh, whose father was prosecuted for cash losses. It records that the constituent suggests that the Horizon computer system caused these losses?
So, again, similar to what we see before in the terms of the architecture of the thing: letter in to you but letter out from Ed Davey.
Sir Vince Cable: Yes.
Mr Beer: That would be the system operating as it should?
Sir Vince Cable: Yes. That was how it worked.
Mr Beer: There are quite number of these letters but just to see this is a repetition, in the second paragraph:
“The issues raised in your letter are … operational and contractual matters between Post Office”, et cetera.
Was that a line that you were familiar with, a line to take?
Sir Vince Cable: Yes, I was very familiar with that because that was exactly what I was told when I had raised cases in Parliament on behalf of the postmaster, that they had – I think I had a 15-minute reply from the then Labour Minister and the first five minutes were explaining the legislation under which the Post Office operated, ‘69 Act, which made it very clear that they had responsibility for operational matters.
And certainly when I, I think, first met Paula Vennells, the first courtesy meeting, I’d explained my history and I think she reminded me that this is exactly the way in which the relationship between me as a minister and her as a Chief Executive, must operate.
Mr Beer: You mentioned the ‘69 Act there, are you referring to the Post Office Act 1969?
Sir Vince Cable: Yes, yes.
Mr Beer: What did you understand that to say, by the time of the years 2010 to 2015, as to operational independence?
Sir Vince Cable: Well, my understanding, which framed the way I dealt with issues, was that I had responsibility for the general kind of strategic direction of the Post Office and its financing, and that the Post Office were responsible for their relationships with individual postmasters and operational decisions about the opening and closing of post offices. That was how I saw the distinction.
Mr Beer: We’ve got in our pack a series of letters – I’m just going to list them – from MPs or constituents. I’ll list them, one in October 2013, POL00195964 at page 3; one, December 2014, POL00218852, pages 1 to 4; and one where the date isn’t clear, POL003454283. So letters in to you raising matters concerning the operation of the Horizon system and action taken against subpostmasters.
Would you expect anyone, in your office or otherwise, to draw together correspondence which was of the same or substantially the same nature, ie was complaining about the same thing?
Sir Vince Cable: Well, I would have expected the operational civil servants, not necessarily my private office, to have been alert to a systemic problem if there was one. But perhaps if I can just add another note, because the letters you’re drawing to my attention are letters from MPs. I was very conscious from the outset that I didn’t want to be caught in what you might call a Sir Humphrey situation, of being blindsided by officials who had, say, a biased view. So I set up in Parliament, through my so-called PPS, a system of surgeries so that MPs could come and talk to me on a Monday evening with or without officials present, if there were any problems they had.
Mr Beer: Just stopping you there, you explained some of this in your witness statement.
Sir Vince Cable: Yes.
Mr Beer: Can you explain to those watching and listening what you mean by a “Sir Humphrey situation”?
Sir Vince Cable: Well, the fact that civil servants may have had a view of the world which was different to mine and I needed to be aware of that, and that’s why I set up this system and people came to see me every week, MPs, on Post Office issues, not related to postmasters, but on Post Office issues. And I’m very surprised that, in the whole of the five-year period, with the single exception of Mr Bridgen, who brought the Federation, who didn’t raise the IT issue, why none of the MPs who were concerned about this ever came to talk to me about it.
That was the way in which I could have challenged the officials but I was never given the ammunition to do so.
Mr Beer: Did you know that groups of MPs, quite a large number of MPs, were seeking to progress, during your period of office, the complaints of their constituents, led essentially by James Arbuthnot?
Sir Vince Cable: Well, I discovered this in March 2015. Before that, I wasn’t aware of it, no.
Mr Beer: This may sound an awkward question: do you know why you weren’t aware of it?
Sir Vince Cable: Well, I – optimistically, I would say it was because they had complete trust that the Post Minister was dealing with it properly. But the way Parliament worked was that I walked past Mr Arbuthnot and the other MPs several times a day and, if they were concerned, they would surely have stopped and said something to me. I mean, they did on other issues.
Mr Beer: Sorry, Sir Vince, are you saying it there that James Arbuthnot was not concerned because he didn’t raise the matter with you?
Sir Vince Cable: No, I have read about his work and it was monumental, and he did enormous amount of good work. But, for whatever reason, the MPs who were concerned about this issue never raised it with me in Parliament. They had abundant opportunities to do so.
Mr Beer: You’re not being critical of them for failing to do so?
Sir Vince Cable: No, not at all –
Mr Beer: You’re simply saying they took a different route?
Sir Vince Cable: No, they took a different route and different MPs operate in different ways. No, I’m not remotely critical, particularly Lord Arbuthnot, as he is now, did a heroic job. I wouldn’t dare to criticise him.
Mr Beer: Were you aware that, essentially, a boilerplate reply was being sent out in response to each and every one of these letters in from MPs that were being sent to you?
Sir Vince Cable: Well, I wasn’t aware of the letters as coming in or going out but, yeah, it clearly was a boilerplate response. But that was actually how Government dealt with most issues. Department/Government had to have a line on issues and, having established it, reproduced it and it would have caused chaos if there’d been a different response to every individual.
Mr Beer: The alternative view might be that having a boilerplate response and sticking to it means that there’s never any real investigation of the issues?
Sir Vince Cable: Well, as I said several times already, I think, you know, there should have been at some point a careful interrogation of the issues but, having established a clear line of argument, it was entirely appropriate to be consistent in dealing with everybody who wrote in about it.
Mr Beer: Can I turn to the second issue, then: the Second Sight investigations and the Mediation Scheme. Can we turn to paragraph 46 of your witness statement, which is on page 17. You say:
“I am told that on 8 July 2013 the Second Sight Interim Report was published; I was not aware of this report or its contents at the time …”
When did you first hear about the Second Sight investigation and its Interim Report?
Sir Vince Cable: Well, I don’t think I did, except I did meet, you know, the ministers on a very regular basis. They may well have said in the course of reporting to me on what they were doing that this forensic investigation was taking place and was proceeding normally. But I certainly was never given a formal, detailed report on the work of Second Sight. I only heard about it when I had this visit from Mr Bridgen and the Federation, and I wanted to follow it up and ask the postmaster – the Post Minister what was going on, and they told me that the Second Sight investigation was taking place.
I didn’t realise, incidentally, that it was an IT investigation. I thought it was just a general investigation into why so many postmasters were being charged with fraud and losing their post offices.
Mr Beer: When were you first aware that Second Sight were undertaking an investigation?
Sir Vince Cable: Well, when I told the Post Minister that I’d had this delegation and I was very worried about it and the numbers of people and the distress of some of the cases, and I said, “What are we doing about this?” And she said – I think it was Jo Swinson at that time – “We have just launched this forensic audit and investigation and I’m sure that all your cases will have been dealt with properly”.
Mr Beer: Would that be in the course of her first period of office, 6 September 2012 onwards?
Sir Vince Cable: Yes, I’m sure it was. It may not even have been Jo; it may have been, I think, Norman Lamb, briefly. But no, from memory, I think it was Jo’s time.
Mr Beer: If we look, please, at UKGI00013690, we can see the letter from you to David Miliband and, if we just look in the third paragraph:
“Nevertheless, in the light of discussions with James Arbuthnot and number of … MPs [Post Office] recently agreed to an external independent review of a small number of individual cases that had been raised by them …”
That’s, I think, a reference, would you agree, to the Second Sight investigation.
Sir Vince Cable: Yes.
Mr Beer: So you signing this letter off in August 20 –
Sir Vince Cable: ‘12. As I said, I didn’t sign it off.
Mr Beer: No, so you simply would never have seen this?
Sir Vince Cable: Almost certainly.
Mr Beer: Didn’t see the letter in; didn’t see the letter out?
Sir Vince Cable: Almost certainly not.
Mr Beer: So we can’t take this as knowledge by you of Second Sight at this time?
Sir Vince Cable: No, absolutely not.
Mr Beer: Can we look, please, then, at UKGI00019389, and look at the bottom of the page, please, and over to the second page. Can you see an email dated 22 July 2013 from “Cable MPST”; is that your private office’s email address?
Sir Vince Cable: Yes, it is, yes.
Mr Beer: To the private office of Jo Swinson and others within ShEx. The subject is “Subpostmasters News Story”, can you see that?
Sir Vince Cable: Yes.
Mr Beer: It says:
“Hi all
“Vince has seen this news article and thought it was a good news story for the Post Office and good link to the Trust and Transparency work. Any suggestions on what we can do to take this forward?
“Thanks
“Anna.”
Was she one of your private secretaries?
Sir Vince Cable: I don’t remember – there were a lot of private secretaries. I don’t remember an Anna but I’m sure it was, yes.
Mr Beer: We can see the second highlight is the attachment, “Subpostmasters news story.pdf”. Can we look at that, please. UKGI00019390.
You may recognise the style and font and text. It’s an extract from Private Eye.
Sir Vince Cable: Yes.
Mr Beer: It reads:
“At last some encouraging news for subpostmasters who have been sacked, sued and even jailed over shortfalls that hoe up on the Post Office’s [Horizon system].
“The Interim Report of a review of the IT system, following a campaign by Tory MP James Arbuthnot, sets out a raft of failings. These include the brutal way the Post Office investigated financial errors; unreliable hardware; the absence of training or support for subpostmasters on a system said to be more complex than that at a high street bank; and an unfair business model which automatically makes subpostmasters responsible for any discrepancy.
“These failings have led to false accounting prosecutions as inexperienced individuals with unexplained discrepancies have been faced with either reporting false figures or losing their business, with nowhere else to turn.
“Arbuthnot has applauded the Post Office on the open way in which, through the review, it has allowed the flaws to be exposed. But the next big test is whether scores of people who have lost their livelihoods and sometimes liberty will win any redress.”
Mr Beer: Now, it seems from the covering email that you had read the article?
Sir Vince Cable: Well, I had seen it, yes.
Mr Beer: What’s the difference between seeing and reading?
Sir Vince Cable: Well, the difference is I was given every morning a pack of 30 or 40 press cuttings, everything relating to the Department, and I would normally judge from the gist of it, the headlines, whether this was something we in the Department needed to react to in some way. Part of my was job to be conscious of the public impact of what we were doing, and I just glanced and this one and it did refer to the brutal way the Post Office investigate, and I thought you know, “Well, this chimes with what I know”, and I –
Mr Beer: Do you recall now only glancing at it?
Sir Vince Cable: Yes, I’m sure I only glanced at it. I only glanced at almost all of the press cuttings. It wasn’t an important part of the day’s routine; it was just picking up important issues. I just noticed that – I’d been lecturing businesses on how they needed to be much more transparent about how they dealt with consumers and workers, and so on, and here was somebody who had been a critic of the Government saying that, actually, a Government agency under our remit was doing a good job. So I thought “Oh, yeah, why don’t we make more of this?”
And, as you see from the private office response, they were at pains to dampen my enthusiasm because they realised that this was a complex issue, so I think we simply moved on and I didn’t take it any further.
Mr Beer: We’ll come to all of those steps in a moment. You’ll see the article says that the Interim Report, which is a reference to the 8 July 2013 Second Sight Report, sets out a raft of failings: the brutal way Post Office investigated errors; unreliable hardware; the absence of training or support; an unfair business model leading to false accounting prosecutions, leading to people losing their business with nowhere else to turn. Why did you think this was a good news story?
Sir Vince Cable: Well, I thought it was a good news story because I’d simply picked up the fact that, I think it says Mr Arbuthnot applauded the Post Office on the open way in which it allows these flaws to be exposed. I mean, as I say, I didn’t read it carefully. It wasn’t a policy document; it was just one of 30 press cuttings that I’d glanced at, but I’d picked up that somebody was saying something positive about the Department and the agencies we’re responsible for.
Most of the press coverage was negative. I mean, that’s the way – you know, the way of Government and here, at a quick glance, was something positive. So I suggested to the Press Office maybe they should take this a bit further.
Mr Beer: Looking back at the email, please, UKGI00019389, see the reply. So again, it’s from Anna Bartholomew, a private secretary in your office, so she’s essentially replying to her own email with the same distribution list. She says:
“I have spoken to officials working on [Post Office] and compiled the following advice for [you] – this will go in the box tonight with the article.
“Officials recommend not following up on the article – it presents a very skewed picture and does not cover all the facts.
“The Interim Report clearly said that there was no evidence of systemic failures or flaws, whereas the report suggests [Post Office] has admitted to system errors. There were 2 minor discrepancies which [Post Office] identified and rectified independently of the report. This affected a very small [proportion] of the network … no subpostmasters lost money …
“Arbuthnot is closely involved in the investigation, and provided a chance for the submission of individual cases … Although the article correctly refers to [him] applauding the Post Office on the open way it responded to allegations, there remain significant differences in opinion. Following publication on the Interim Report [he’s] tabled an Urgent Question requiring a Government statement … despite conversations with Jo Swinson to explain the operational nature of the issue.
“With regards to the possibility of redress, it must be remembered that prosecutions were subject to the judicial process. There is no automatic redress and nothing the Government should or could intervene on. Additionally, number of the subpostmasters pleaded guilty.
“… this is only an interim report.”
So, essentially, pouring cold water of a different kind or a different variety in a number of ways on your idea to take forwards what you had read?
Sir Vince Cable: Yes, it was. Obviously.
Mr Beer: Are you able to recall whether that’s what happened?
Sir Vince Cable: No, I don’t recall this episode at all but it – we’d had this kind of discussion constantly about the kind of public relations/communications issue, about how to deal with them, and I had got the point fairly quickly that this was something the Press Office and the officials didn’t want to make something of. So I’d deferred to their judgement on public relations grounds. I certainly didn’t study the content of this minute in any detail.
Mr Beer: What about studying the reports, “Can I see the report, there’s obviously a difference of view here”?
Sir Vince Cable: Well, I could have done but I think it didn’t ring a bell at the time that this was an issue. As I say, it was just – I was focusing on a different question, which is the fact that the Government and Government agencies were being more transparent, and I thought that was the theme of the issue, rather than getting into a debate about what the Government was actually doing in relation to Second Sight. So I saw it entirely as a rather simple one-line PR issue, and I was warned off it and – as I often was, and took no further action on it.
Mr Beer: Would you expect to have been provided with a copy of the report by your officials?
Sir Vince Cable: Not necessarily. Independently of this press issue, it was proceeding under the overall oversight of the Post Minister. I’d no reason to believe that it wasn’t being well handled by her and, indeed, it was being well handled. So I didn’t need to see the report and nobody suggested that I read it.
Mr Beer: Would you expect to be provided with an impartial and objective summary of the report?
Sir Vince Cable: Not necessarily, depending on whether it was potentially controversial and might lead to difficult decisions but this was – I think it goes back to the earlier part of our exchange, that this was a very small part of my portfolio, I left it to the discretion of my private office and my ministerial colleagues to decide what was sufficiently important to bring to me, and they clearly judged that this wasn’t necessary.
Mr Beer: You had, it seems, seen or read the Private Eye article and realised that it raised an issue of substance?
Sir Vince Cable: Well, I’d seen the Private Eye article. I didn’t realise that it had raised an issue of substance, no.
Mr Beer: Why did you not realise that it raised an issue of substance?
Sir Vince Cable: Well, because I’d probably glanced at it in two or three seconds. That was the way we – you know, I had to deal with press cuttings. As I say, it was a very rapid exercise, took ten minutes in the morning and I would just pick up, usually from headlines, what were the issues in the news that I needed to be abreast of.
Mr Beer: Is that why you focused on it being a good news story, rather than all of the parts of the article –
Sir Vince Cable: Yes, exactly right.
Mr Beer: – which point in the other direction?
Sir Vince Cable: Yes, exactly.
Mr Beer: Sir, it’s 11.00 now. I wonder if we might take the first morning break until 11.10.
Sir Wyn Williams: Yes, of course.
Mr Beer: Thank you very much.
(11.00 am)
(A short break)
(11.11 am)
Mr Beer: Good morning, sir, can you continue to see and hear us?
Sir Wyn Williams: Yes, thank you.
Mr Beer: Thank you.
Sir Vince in your witness statement you tell us in paragraphs 61, 68, 69, 76 and 77 about some letters that you received from James Arbuthnot MP and Adrian Bailey MP –
Sir Vince Cable: Mm.
Mr Beer: – on 11 and 17 March 2015. I’d like to just look at those, please, and see what happened in relation to them?
Sir Vince Cable: Sure, yeah.
Mr Beer: These are about the Second Sight investigations and the Mediation Scheme and a report that they were publishing or providing. Can we look, please, at the first letter in, UKGI00003781. Can we see this is from James Arbuthnot, it is dated 11 March 2015, to you. Scroll down, please, he says:
“In [PMQs] today the Prime Minister told me that he would ask you to write to me about the Post Office Mediation Scheme. While there are many things that are very worrying about it, what particularly concerns me is that the Post Office has recently been refusing to give to Second Sight the documents and information that Second Sight feel they need in order to determine whether a miscarriage of justice has occurred. I believe that the only legal folder, for example, that Second Sight has seen is that relating to my constituent Jo Hamilton – but that folder did show that there was no evidence (as the Post Office knew at the time) of theft. Yet the Post Office charged her with theft. And as a result she then pleaded guilty to false accounting, having untruthfully been told that she was the only person going through these difficulties.
“That suggests to me that there is more disclosure of documents that needs to take place and that our constituents will never believe that the truth has been reached without that disclosure. Equally, that disclosure needs to be made to Second Sight, who have now built up the expertise to deal with it.”
If we look at the letter in from Mr Bailey, POL00176637, page 3 and 4, please. If we just pan out, 17 March 2015, to you.
“Dear Secretary of State,
“As you will be aware, on 3 February the [BIS] Committee heard evidence on the Post Office Mediation Scheme. During this session, we were concerned to hear that the Mediation Scheme was not operating in the matter envisaged when it was established.
“I was pleased to hear that since our evidence session Post Office has agreed to take most cases forward to mediation. However, I have a number of specific concerns regarding Post Office’s approach to the mediation process, which I expect the Government to be actively involved in addressing in order to ensure they do not cause further issues in the future.”
Then Mr Bailey lists them. I’m not going to go through them.
You tell us in your witness statement that you replied to both letters, indicating that you had read both letters, and that your response is in detail, and that you did not accept your private office’s advice that you should approve the revised draft of the letters out without reading them. Correct?
Sir Vince Cable: Yes, that’s correct. I only became aware of these when I was asked to sign an outgoing letter and, of course, they are different sources – one is Mr Arbuthnot and the other is the Select Committee – but, in my mind, they were dealing essentially with the same set of issues. And I got a draft letter from officials, and I wasn’t happy with it. It was partly, I think, stylistic. I thought we should be a little bit more deferential, respectful, to the senior gentleman, but I think more a substance that I’d read the letter and I realised that it entirely hinged on accepting the view of the Post Office.
And I said “Well, are the postmasters happy with this? I mean, that whole Mediation Scheme was for their benefit, so do they accept it?” And so I said “I want you to go” – I asked the officials, who clearly wanted me to sign this in a hurry, because we were almost at the end of the Parliament, I said, “Look, I want to be satisfied that the postmasters share the view of the Post Office about this question”.
So I declined to sign the letter until I had been given evidence on that point.
Mr Beer: Just on that point, you said that the reason for you not following your advice was that the draft that had been supplied to you depended on the accuracy entirely of that which the Post Office was saying.
Sir Vince Cable: Yes, and I –
Mr Beer: A number of the earlier letters that had gone out also depended entirely upon the accuracy of what the Post Office was saying. What differentiated this occasion for you to say, “Hold on, I’m not signing that draft”?
Sir Vince Cable: Well, the difference – I’m not sure that I did commit myself in quite the same way earlier but, anyway, what’s happened here was that I realised that there’s something really rather important and bad going on because it isn’t just a campaigning MP, this is the Select Committee, who were there to have oversight of what I did, being very critical of the Department.
So I needed to really concentrate on the issue and think about it, and I think it was only in March 2015 I realised there was some really – something really seriously bad going on. It was actually quite difficult. I mean, I remember this period quite clearly because I was in the middle of a crisis, the last big crisis of my period in office, when I was having to decide about the export of weapons to Saudi Arabia that were being used to bomb civilians, and I was keeping awake at night because either I’d have blood on my hands or I’d make a decision that would put large numbers of British workers out of work, so I was totally preoccupied with that problem.
And in the middle of it, I was being asked to sign letters about this Mediation Scheme. So I needed time to think about it and I refused to sign the first draft, for the reasons I’ve just given you.
Mr Beer: Can we look at the draft you did sign, UKGI00003910. This the letter back to James Arbuthnot, dated 17 March:
“I am writing to you further to your question to the Prime Minister regarding the Post Office Mediation Scheme on Wednesday last week, and your subsequent letter.
“I appreciate you raising your concerns about the Mediation Scheme in general, but particularly regarding your constituent Mrs Jo Hamilton, who I understand has a case in the scheme. I must first of all reiterate that the Mediation Scheme is independent of Government, and decisions relating to the scheme or its operation are matters for the parties involved and not for the Government.”
Then if we go over the page, please, if you look at the penultimate paragraph at the foot of the page, you conclude by saying:
“… I note, through Second Sight’s Report and the subsequent investigations, there is no evidence of system-wide problems with Horizon and that conclusion has stood firm through nearly two years of investigation. As such, the priority must be to ensure that those applicants remaining in the scheme can have their cases considered swiftly and fairly, and I am hopeful that all parties will continue to work constructively to ensure this can happen.”
That sentence, “there is no evidence of system-wide problems with Horizon and that conclusion has stood term through nearly two years of investigation”, was that a suggestion put to you by officials?
Sir Vince Cable: Well, it was but because I was confronting the issue really for the first time, I wanted reassurance from the postmasters that that was indeed the case, and I had asked the officials to check with the Federation whether this was indeed their understanding, and I was told that it was and that the General Secretary or the head of the union had appeared before the Select Committee and has said he was satisfied that there was no problem.
So I was now being told by the officials, the Post Office and the union that there wasn’t a problem, so it seemed to me perfectly reasonable for me to accept that collective view.
Mr Beer: Was that, in your mind, the critical turning point: the views expressed by, I think, the General Secretary of the NFSP?
Sir Vince Cable: Yes, it was. I had dealt with them before –
Mr Beer: Had you dealt with him?
Sir Vince Cable: Not with him. Well, he’d met me, I think, on a couple of courtesy calls –
Mr Beer: Sorry, just to make clear, who are you referring to?
Sir Vince Cable: Sorry, my first dealings with the Federation, 15 years earlier, had been with Mr Baker.
Mr Beer: Colin Baker, yes.
Sir Vince Cable: My second interaction had been when a representative – I’m not sure who it was, whether it was Mr Thomson or a regional head – had come to see me about individual cases, and I had met Mr Thomson. I think on couple of occasions he had come to talk about the progress of the Transformation Programme and the progress we were making on mutualisation. So that was my extent of my dealings with the union –
Mr Beer: That he, in your dealings with him, ever struck you as a tool – meaning a tool of the Post Office?
Sir Vince Cable: Absolutely not. All my dealings with the Federation and him personally, they’d struck me as people of high integrity, who believed in what they were doing, as trade union officials do. I had no reason to doubt their integrity whatever.
Mr Beer: Do you not need to see Second Sight’s Report in order to include a sentence or sentences such as these in the letter?
Sir Vince Cable: Well, I think, given time, I probably would have done and should have done but I think the context was that we, within a day or so of the end of Parliament, I was being pressed by the officials to get this letter out, I think even when I was given the reassurance about the Federation’s view, I declined still to sign it, because I had the – I was beginning to smell a rat. I mean, there was something going on here and had I – had Parliament continued or had I been returned to office, I would have got all these people around the table – the Select Committee, Mr Arbuthnot, the Post Office people and, for the first time, Mr Bates, I’d not heard of him until this point – and I’d have got them all around a table and asked “What the hell is going on here?” But I didn’t have time to do that and I had to make a snap judgement about whether to send out this letter.
Mr Beer: Can we look at the reply to Mr Bailey please, POL00039281. Can you see 26 March and, if we just go over the page to page 2, signed by you. Then if we go back, please, to page 1:
“Thank you for your letter … I am grateful to the Committee for considering this matter and am pleased to provide a response … attached to the letter.
“It is important to reiterate that the Mediation Scheme is independent of Government. Given that the cases in the scheme are disputes between independent business people and the Post Office, and are of course sensitive and confidential, it would not be appropriate for Government to intervene or seek to influence the outcome.”
Is that what you understood you were being asked to do, to influence outcomes?
Sir Vince Cable: No, I think that wasn’t the part of the letter that I was focusing on. It was the implication that the Horizon scheme was or wasn’t functioning properly. I wasn’t – as explained to you before the break, I hadn’t been given any briefing about the Second Sight and the mediation process. I was, I suppose, privately pleased that the suggestion I’d made 15 years earlier, about setting up a mediation process, was actually happening. The fact that it had not gone in an ideal way was not something I was aware of until that point.
Mr Beer: Then there’s the line:
“Since the issues were first raised over two years ago, [the system] has been under considerable scrutiny, and … it remains the case there is no evidence of systemic problems with Horizon. That conclusion has stood firm through independent investigation by Second Sight.”
Then:
“The vast majority of subpostmasters continue to use Horizon successfully every day in operating their branches … There are fewer than 150 cases in the Mediation Scheme, while there have been around 500,000 users who have worked with Horizon since it was introduced, [it] processes over 6 million transactions every working day.”
Is that a line, a comparison, of the said to be small number of cases where individuals were raising a problem versus the number of users and the number of transactions that was put to you by officials as an important point?
Sir Vince Cable: Yes, it almost certainly was. I mean, I – it’s an issue that troubles me, and I’m sure the Inquiry to this day, about – those of us who don’t really understand computers and computer system, is why it works almost all the time, but in some cases not, with disastrous consequences. I mean, it needed somebody, I think, to explain why –
Mr Beer: Did anyone ever explore that with you or –
Sir Vince Cable: No, I wish they had. I wish they had –
Mr Beer: – and suggest that it doesn’t really matter if there’s a large number of okay transactions because if –
Sir Vince Cable: No, clearly –
Mr Beer: Hold on. If you let me finish, Sir Vince.
Sir Vince Cable: Sorry.
Mr Beer: If you’re the person that has been sent to prison whilst pregnant, if you’re the person who has committed suicide, if you’re the person who has been made bankrupt, it doesn’t matter that quite a few other people have been getting on fine with the computer?
Sir Vince Cable: Of course it matters, it matters immensely, and enormous harm was done. I think the problem, as I was just trying to explain, for policymakers, is who – who don’t understand anything about computers and computer systems, is how it is that they seem to work almost all the time but not all the time.
It’s a concept here that I still struggle to get my head around, why this was the case.
Mr Beer: We’ve received a lot of evidence on precisely that issue and the Inquiry understand how that occurs, concerning code regression and the combination of a set or a series of circumstances which, when they interact with each other, can lead to undesirable outcomes?
Sir Vince Cable: Well, indeed, and I’ve read about that. But it would have been helpful, when I was in Government, for somebody to have explained how that was possible. I believe the Computer Weekly people had some insight into it but I went aware of their existence. And Mr Bates too, it was only then, March 2015, I was aware of his existence and he may have been able to explain that.
Mr Beer: Can we turn, please, to POL00153177, and page 15, please. It’s the top two paragraphs. We don’t actually have the Computer Weekly article that’s here quoted and so I’m using this as a source of the information. This briefing note says, in the top paragraph, that:
“James Arbuthnot … has been the most vocal of a group of 140 MPs campaigning for redress …
“Speaking to Computer Weekly this week, [he] expressed disappointment that a written answer to his question during Prime Minister’s Questions on 11 March, which subsequently came from [you], followed the Post Office’s line closely.
“In response to the written answer to his question, written by [you], Arbuthnot told Computer Weekly: ‘The Secretary of State has chosen to listen carefully to his advisers and the Post Office on this matter rather than seeking to understand why over 140 of his fellow MPs have outstanding cases and unresolved concerns about the matter. This is a shame. I remain quietly confident that the truth will be revealed in due course and I intend to pursue this matter until that happens.”
Do you agree that 140 outstanding cases or 140 MPs having outstanding cases represented a significant number?
Sir Vince Cable: Yes, it is. It’s appalling.
Mr Beer: Was Mr Arbuthnot’s statement that you had listened to the Post Office and had not sought to understand why 140 of fellow MPs have outstanding cases accurate?
Sir Vince Cable: No, I hadn’t just listened to the Post Office. That’s the whole point of what I was telling you: I only agreed to support the official line on this when I was reassured that the people who represented the postmasters were content. It wasn’t based on an acceptance of the Post Office view at all. I would never have signed it if that was all I was asked to do.
And I would just add a point, which I think we did discuss briefly before, that what is strange about this whole episode is that none of these 140 MPs ever came to talk to me about it. I had some of them coming to talk to me in my – the privacy of my House of Commons office about Post Office issues, like the last bank in town, where the Post Office were not being very proactive. Nobody came to talk to me about the Post Office and, for example, the Chairman of the Select Committee, who I knew very well and respected, he was a very good Parliamentarian, had actually come to see me a few weeks before this episode and all he wanted to talk to me about was about the pub legislation, and never raised the issue about postmasters. So I think I could be forgiven for not understanding the weight of this 140 MP campaign because none of them ever talked to me about it.
Mr Beer: He wrote you a detailed letter setting out his and the committee’s concerns –
Sir Vince Cable: Yes, but I think –
Mr Beer: Was that not enough?
Sir Vince Cable: It certainly wasn’t, no. I think all MPs realised that writing polite letters to departments isn’t necessarily the way to get through to people at the top of Government. You have to talk to them face-to-face.
Mr Beer: So you do blame them for failing to come and see you?
Sir Vince Cable: No, I’m not blaming them. As I say, different people have different styles. Some people operated through the formal processes of Parliament, others didn’t. No, it’s not a question of blame. As I say I had a great – having seen the mountain of work that they did, have enormous respect for them but it was – let’s just say it was unfortunate that I never had any personal contact with the MPs about this matter.
Mr Beer: Would the outcome have been different; is that what you’re saying, Sir Vince?
Sir Vince Cable: Yes, I think it probably would have been.
Mr Beer: In what way?
Sir Vince Cable: Well, because I would have realised much earlier than March 2015 that there were serious problems that were not being properly addressed by the Post Office and the Department, and I would have started to interrogate it much more aggressively, as I did long quite a lot of other issues where MPs came to see me.
Mr Beer: Don’t you think you would have been provided with exactly the same Post Office lines by officials, and they would have been sent out in the same way as we’ve seen?
Sir Vince Cable: I might well have been and it might well have led to the same conclusion but I would have been more alert to the challenge that was being made in Parliament.
Mr Beer: Can we go towards the end of this episode and look at paragraph 79 of your witness statement on page 33. Page 33, paragraph 79:
“On 15 April 2015, my Private Office was copied into an email from Laura Thompson [a ShEx official] to the BIS Communications Team concerning the imminent publication of the Second Sight second report … It essentially said that the report was about to be published, [Post Office] considered it to be of poor quality and had prepared a response, that the report would be provided to BIS in line with my response to the BIS Select Committee and that there may be some media interest. My Private Office responded to say that [you] had noted the [concerns] of the email and was grateful for the update. By this time, Parliament had dissolved and preparations were under way for the general election. [You] were unable to take non-urgent decisions.”
Can we look at that exchange, please, UKGI00004225, and go to page 4, please. Email, 15 April, Laura Thompson to, amongst others, your private office. Can you see that?
Sir Vince Cable: Yes. Yes, I can.
Mr Beer: “Hannah, Ashley
“… we expect the next development in the Post Office Horizon issue to happen tomorrow … or possibly Friday.
“Second Sight … have completed their final report into the matter. This report will be issued to all remaining applicants … later today …
“Post Office advise that the report is poor, containing unsubstantiated allegations and misrepresentations … they are issuing their own response to the report alongside it.
“The report is designed to inform those applicants in the scheme awaiting mediation. It is not designed to be published … once it is received by applicants … it will be leaked. Post Office anticipate this will happen and are prepared to release the report in full, alongside [its] response, to journalists on request …
“[Post Office] will send a copy of the report and their response to BIS later today … This is in line with the commitment that [you] made in [your] letter to the BIS Select Committee last month.
“I understand from [Post Office] that, while the report does not make any particularly new accusations, it still contains criticism of [Post Office] and these could be picked up by interested parties (probably Nick Wallis from the One Show). However, it is important to note that the report maintains the conclusion that there are no systemic flaws in Horizon capable of causing the issues that have been claimed.”
Your office, I think, was told to direct all calls to Post Office and seek Post Office lines; is that right?
Sir Vince Cable: It appears so, yes.
Mr Beer: Would you have seen this email chain?
Sir Vince Cable: I doubt it. It’s possible. There was a great flurry of activity, in the last few days of Parliament. I think the judgement would have been that my sending those letters to Mr Arbuthnot and the Select Committee was the end of my involvement but it’s possible I was shown.
Mr Beer: So this being the last days of Parliament, or a Parliament, it affected the extent of your involvement?
Sir Vince Cable: Yes, and, indeed, the issue I referred to earlier around Saudi Arabia was absorbing more and more of my time and I think my officials understood I had to focus on that.
Mr Beer: Would anything be done in those circumstances to alert the new Secretary of State, if there was going to be a new Secretary of State, as to the issues that weren’t being addressed because of the ending of this Parliament?
Sir Vince Cable: Well, I guess I was hoping I would be the new Secretary of State and I would have an opportunity to deal with this issue properly. I mean, I’d realised, as I’d just said to you, that there was something bad happening. I tried to respond to it as best I could. I think the rational approach of an incoming Secretary of State who I hoped would be me would be to get the various parties together, including Mr Bates, who I’d heard of for the first time, the critics of the Post Office in Parliament, in order to thrash out why these discrepancies in interpreting the work of the computer and the mediation system had arisen.
I mean, it would – part of my role as Secretary was convening, and I think what I should have done and would have done, had there been time, would have been to have dealt with the matter in that way.
Mr Beer: Thank you, that can come down.
You tell us in your witness statement, it’s paragraph 140, that the Post Office Board was, in retrospect, clearly a failure:
“I wish I had spent more time thinking about the role and constitution of the Board and whether it was doing its job properly.”
Can you tell us in greater detail, please, what you think you should have spent more time doing, concerning the role and constitution of the Post Office Board?
Sir Vince Cable: Well, in retrospect we know that bad things were happening in the Post Office and that the Board were the people who would have surfaced any disquiet and reported it back to ministers and, if necessary, me, and so there was a failure at that level. As to what I could have done about it, I think, as I said earlier, I was wanting to change the institutional arrangement so that the postmasters had a bigger voice and an easy way of doing it would have been to have insisted that postmasters and their representatives were put on the Board.
At the time, it hadn’t occurred to me to do that but I know it’s now been done.
Mr Beer: You tell us in paragraphs 141 and 142 of your witness statement that:
“I should have also noticed that there was something wrong about Paula Vennells and Alice Perkins attending meetings together, where Alice Perkins was supposed to be supervising and independently scrutinising the Post Office’s Executive Team’s performance. On these issues, though it’s fair to ask whether it’s really for a Secretary of State to be surfacing these issues or for the officials in ShEx, whose focus was the Post Office.”
Firstly, can you tell us what the something wrong might be about two individuals, one the Chairman and the second a CEO, attending a meeting at the same time?
Sir Vince Cable: Well, I suppose it’s observations that have come from later years and now, since I’ve left politics, I’m involved in a Non-Executive Director role in companies and I’m directly confronted with this whole issue of Cadbury principles in business and the separation of roles of Chairs and Chief Executives. I probably hadn’t appreciated at the time why that was important.
The Chair and the Chief Executive, when they came to see me – and I think it was only on two or three occasions on courtesy calls – were a double act and, you know, in one sense, it’s, you know, understandable that the Chair would want to give encouragement to the Chief Executive in delivering our big programme of transformation. That’s understandable, but I think I now appreciated, having had personal responsibility for corporate governance, that there is a separation of roles and it might have been better in hindsight if they had separated the roles themselves.
Mr Beer: Did you ever have concerns about the competency of the Post Office’s senior management?
Sir Vince Cable: No, I didn’t. I – as I think I mentioned earlier, I think at my first ever meeting with Paula Vennells, I’d told her I didn’t think much about Post Office Management. I’d had very negative views about them and I’d recommended, I think, that she should read my Hansard report and think about it. But she had nothing to do with that, she came much later and I certainly had no reason to believe that she and her senior colleagues were a problem.
Mr Beer: Was it ever escalated to you that members of the Board, individuals within ShEx, and some ministers, had concerns about her competence and abilities?
Sir Vince Cable: No, it was never communicated to me.
Mr Beer: Did the consistent complaints from subpostmasters that were addressed to your Department not cause you to have concerns about Post Office’s management?
Sir Vince Cable: Well, I didn’t know about the volume of them. As I say, the one occasion I – when an MP brought the Federation to me, concerned, I think, 100 postmasters, which was 1 per cent of the total, I think, something of that order of magnitude. Indeed, I asked the question at the time, of my officials would they do some research, as to into whether a 1 per cent prosecution rate was abnormal in franchise networks. I said go to Londis and Spa, and so on, and ask if this is normal. And the message came back to me that it was normal and there was nothing worrisome about it.
So the fact is that my limited knowledge of complaints didn’t suggest to me that at that point, that there was a failing at the top management.
Mr Beer: Can we turn, lastly, to some reflections you make at the ending of your witness statement it’s page 51 and paragraph 144. You say:
“[You] have naturally reflected on what lessons can be learnt from the Post Office scandal. A few thoughts”, and you set out five of them:
“[First] The relationship between the Post Office and postmasters was, and is, highly unequal. In comparable situations [you] promoted legislation establishing independent regulators to protect the weaker [parties].”
You’ve mentioned that already:
“In the case of the Post Office, a different approach was tried … but for a variety of reasons it did not work. In future an independent regulator/arbitrator should be appointed.”
Can you expand, please, on what you mean by an independent regulator and arbitrator?
Sir Vince Cable: Well, I can’t expand a great deal because it was a sort of concept and we actually, as we now know, the Second Sight project led to a form of arbitration or dispute settlement, which didn’t work, once – because the details were wrong. So the concept was tried and didn’t work brilliantly well. But I think in the other cases I had taken action, in respect of pubs and supermarkets, a set-up had worked. The difference being that we were dealing here with a state agency, and to have introduced that kind of arrangement, I would have been asking to set up an arrangement where the Government would have to investigate complaints into Government, which would have been a rather circular process. But I think the concept of having an entirely independent arbitration process is right, though, of course, the details also need to be right.
Mr Beer: You say, secondly:
“A related point is that UK competition law is forced on distortion of competition resulting in detrimental impacts on consumers. It does not address market imbalances between large corporations and smaller subcontractors or [franchises]. Consideration should be given to addressing this.”
Can you expand, please, on what you have in mind there?
Sir Vince Cable: Well, I think the answer is the one I’ve just given to you: that I’d – one of the things I’d done as a minister was to set up these regulatory bodies for industries where this was a common problem, which was agriculture and supermarkets, and pubs and pubcos. In introducing the legislation, it proved to be a lot more complicated than I’d realised when I was putting the idea out in general terms. But I think we should be looking at those models and applying – drawing on those lessons to apply it in the case of the Post Office.
Mr Beer: Over the page, please.
Sir Wyn Williams: Before we go on, Mr Beer, can I just ask one question about the first subparagraph, just to clear my mind.
Sir Vince, as you probably are aware, the Mediation Scheme in 2013 to 2015 was just that, in the sense that the parties, in effect, were free to choose whether to accept what the mediator was trying to achieve. Does your phrase “independent regulator/arbitrator” convey to me that you think that there should be some kind of scheme which, in effect, imposes a solution on the postmasters and the Post Office, whether they like it or not?
Sir Vince Cable: No, that’s exactly what I envisaged.
Sir Wyn Williams: Fine. All right. Thank you. Yes.
Mr Beer: Thank you, sir.
Over the page to 3, please. You say:
“The experience of Horizon has been that Post Office Management, government officials and ministers did not understand the workings and limitations of complex, advanced computer systems. There have been many other failures (as in the NHS). There is a case for Government Departments and entities like the Post Office to have a Board-level Technology Officer who is legally responsible for validating the integrity of technology systems in the same way that the Permanent Secretary is Accounting Officer and company Chief Finance Officers are responsible for accounts.”
“Legally responsible”, do you mean through legislation?
Sir Vince Cable: Yes. Not that the individual would be subject to prosecution, no; indeed, through legislation. I mean, I was just attracted to this idea because of the experience I had with the Permanent Secretary, who was the Accounting Officer for BIS, and, if there was something wrong in the accounts of the Department, he would be hauled up before the Parliamentary Public Accounts Committee. So there was a real accountability here. There is analogous behaviour in the private sector, obviously, with due diligence, and I thought, since very few people in public life have any understanding of computers and systems, there needed to be somebody who was properly qualified/knowledgeable, who would take that level of responsibility, because, I mean, some companies and Government departments, stand or fall by whether their technology is working, and so having a specific line of accountability would, in my view, be useful.
Mr Beer: Thank you. Fourthly:
“There appears to have been a failure of governance in as much as the Board failed to identify a serious failure and alert ministers to it … When government appoints members of supervisory boards of this kind it is important that members are aware that their primary duty is to protect the wider public interest. This may involve creating a bespoke corporate structure with specific legislative underpinning.”
A couple of questions on that: you say that when the government appoints members to a board it is important that that member is aware that their primary duty is to protect the wider public interest?
Sir Vince Cable: Yes.
Mr Beer: Do you say that that is established already, that that was the members’ duty?
Sir Vince Cable: I think it is implicit. But I think it was obvious –
Mr Beer: Implicit how? I’m so sorry.
Sir Vince Cable: In this case, of course, the – there was a Government representative on the Board –
Mr Beer: Yes.
Sir Vince Cable: – but he or she was, I think, probably looking in terms of the public interest, in terms of spending £2 billion of taxpayer’s money and making sure it was properly and effectively spent, but there were other public obligations, the welfare of postmasters being one of them, and it was quite difficult for, you know, one shareholder representative to carry out different, possibly on occasions conflicting, aspects of public interest.
So I think we probably hadn’t thought through how these different aspects of public interest were best captured in the composition of the Board.
Mr Beer: So the first question, your answer to the first question is you think it was established that Mr Callard’s primary duty was to protect the wider public interest?
Sir Vince Cable: Yes, I think so. We can debate, you know, academically about what public interest was but, yes, I think that was clearly the case.
Mr Beer: Why do you think that was clearly established, that his duty was to protect the wider public interest, rather than to be – to hold and discharge the duties that any other Board member held?
Sir Vince Cable: Well, because he was there to represent the Government and the Government represents the public interest. As I say, we can debate the different components of public interest but he was the Government – the Government was the shareholder, he was there to represent the Government and the Government, if it – in a democracy, is there to represent the wider public interest.
Mr Beer: Do you think that was obvious at the time?
Sir Vince Cable: No, it wasn’t, probably obvious and maybe, as I’ve said in this note, we should have been, and should be thinking a little bit more about the composition of the board.
Mr Beer: You say, secondly, that this would:
“… involve creating a bespoke corporate structure, with specific legislative underpinning.”
Do you have this idea in mind in relation to the whole range of public corporations in which the Government is a shareholder?
Sir Vince Cable: Well, I don’t want to redesign Government but we know from the private sector, sometimes you have two-tier boards, which is necessary to capture the variety of stakeholder interest. I mean, when we talk about public corporations, we’re talking about some very controversial bodies, like the BBC, and so the word “bespoke” is to take account of the fact that these are very different animals and require different treatment.
Mr Beer: Fifth, lastly:
“There will need to be a review of the precise role of Government in relation to [ALBs] as in the status of Public Corporation under the 1969 Act. There is no appetite at any level for politicians to be micro managing organisations, like the Post Office (or hospitals, colleges and government laboratories). But an explicit mandate to deal with failing organisations (as with schools, NHS Trusts and police forces) might be helpful.”
Can you explain what you mean by an “explicit mandate”?
Sir Vince Cable: Well, the question I’m addressing here is one that runs, I think, through the heart of this Inquiry: which is this whole question of the distinction between operational questions and strategic questions and where you draw the line. And I think, in general, it is sensible policy that agencies of Government should not be micromanaged from the centre, whether they’re schools or public corporations.
But that does require some mechanism to ensure that, when they go very badly wrong, there is an opportunity for Government, the Minister sitting behind them, to interfere, and I think this has been thought through in the case of schools and hospitals. It is clear that in this case there wasn’t a kind of emergency mechanism, where probably my successors would have been able to move in very quickly and take over the organisation, appoint new management and start from scratch.
Mr Beer: In colloquial language, special measures –
Sir Vince Cable: Special measures.
Mr Beer: – type enterprises?
Sir Vince Cable: Yes.
Mr Beer: Sir Vince, those are my questions. Thank you for answering them.
Sir Vince Cable: Thank you.
Mr Beer: There will be some questions from Core Participants. May I suggest we have our second break now until 12.10. There are about 45 minutes’ of questions, sir, which will take us to the lunch break.
Sir Wyn Williams: All right. Thank you very much. 12.10.
Mr Beer: Thank you very much.
The Witness: Thank you.
(11.57 am)
(A short break)
(12.10 pm)
Mr Beer: Sir, before the Core Participants ask their questions, there’s one matter that I’d omitted to ask on behalf of a Core Participant, so I ought to do that first. It’ll only take a couple of minutes.
Sir Wyn Williams: Certainly.
Mr Beer: Thank you, sir. Can we turn up paragraph 90 of your witness statement, please. It’s on page 36. About five lines from the bottom, you say:
“It was clear that in my period in office the operational failures were sufficiently widespread and serious as to justify Government intervention. But these were not identified or recognised within the Government. The reason, so far as I can tell, was that officials in ShEx were misinformed or lied to by their counterparts in the Post Office.”
Then similarly page 41, at the foot of the page, paragraph 110, two lines from the bottom:
“It is clear that in my period in office the operational failures were not identified or recognised as systemic, or engaging strategy. The reason, so far as I can tell, was that officials in ShEx were misinformed or lied to by their counterparts in the Post Office.”
Firstly, would you agree that there is a distinction between ShEx misinforming, on the one hand, or lying to, on the other, their counterparts in the Post Office?
Sir Vince Cable: Yes, indeed. There is an important distinction, yes.
Mr Beer: Are you able to assist the Inquiry as to the basis for the assertion that any officials in ShEx were lied to by their counterparts in the Post Office?
Sir Vince Cable: No, nothing specific. I’ve been trying to follow the Inquiry at some distance and that is the kind of language and interpretation that I’ve heard, and you’ve given – you’ve taken evidence from Ed Davey, who certainly felt very strongly that he had been very seriously misinformed or lied to, he wasn’t clear which, and that matters might have been addressed if that information had been given to him.
Mr Beer: Are you able to assist the Inquiry from your own knowledge, rather than having watched the Inquiry proceedings, as to the identity of any individual within ShEx who was lied to by their counterpart –
Sir Vince Cable: No, I certainly can’t do that. ShEx were one of many departments within the BIS. As far as I was concerned, they were just part of the BIS Civil Service. We had, I think, 3,000 to 4,000 civil servants and I had no particular reason to reflect on who ShEx were in this context and who the individual civil servants were or, indeed, their relationships with the Post Office.
Mr Beer: Thank you very much.
Sir, those are the supplemental questions. I think it’s Ms Patrick first and then Ms Page and then Mr Jacobs.
Questioned by Ms Patrick
Ms Patrick: Sir Vince, good afternoon. My name is Angela Patrick and I represent, together with Mr Moloney KC and Hudgells Solicitors, a number of subpostmasters who were convicted and have since had their convictions quashed, including Mrs Hamilton, who I’m sure you can see sitting to my right.
Sir Vince Cable: Yes.
Ms Patrick: You’ll be glad to hear I’ve got one issue I want to cover with you in questions and it’s looking back at your witness statement. At paragraphs 117 to 118 you deal with your knowledge and experience on the backbenches before you came to Government, and you’ve dealt win that a little with Mr Beer this morning. I just want to look again at paragraph 118, if we could, and if that could be brought up for you, I’d be grateful. It’s WITN10830100, and it’s page 44 at the top.
Can you see that, Sir Vince?
Sir Vince Cable: (No audible answer)
Ms Patrick: It says:
“From 1999 until 2003, I was the Liberal Democrat Trade and Industry spokesman …”
You make clear you’ve never been the Shadow Secretary of State and you say you are extensively involved in issues related to Post Office closures and you remembered Alan Johnson introducing Horizon as a system. You’ve dealt with that a little this morning with Mr Beer.
It’s the second part I want to look at particularly and if you see that there:
“When I was a backbencher, there were continuing debates about government IT systems (the NHS and Inland Revenue systems were complete disasters) so there was a certain amount of scepticism about this new IT system [Horizon], but we had no information indicating that this one didn’t or wouldn’t work.”
I just want to ask you a few questions about that. So before you took up your ministerial role, you were aware of continuing debates about Government IT systems being problematic?
Sir Vince Cable: Mm.
Ms Patrick: Those debates were about IT failures in multiple public IT projects?
Sir Vince Cable: Mm.
Ms Patrick: You’re nodding, Sir Vince. For the transcript, unfortunately, you have to either say “yes” or “no”?
Sir Vince Cable: Sorry, I was – I didn’t quite hear your question.
Ms Patrick: Sorry. You were aware, looking at your evidence, that there had been IT failures in multiple different –
Sir Vince Cable: Yes.
Ms Patrick: – public projects?
Sir Vince Cable: The answer is, yes, yes.
Ms Patrick: You give examples of the NHS and the Inland Revenue but there had been others, hadn’t there?
Sir Vince Cable: Yes, indeed.
Ms Patrick: This had informed the public narrative that Government and other public bodies, when it came to IT, came with a particular known susceptibility to a degree of risk; is that fair?
Sir Vince Cable: I’m not sure this was necessarily just public bodies. I think probably private companies had the same problem.
Ms Patrick: Okay. But there had been disasters which had been particularly costly to the public purse, hadn’t there?
Sir Vince Cable: Yes, there had. In fact, I – shortly before I went into Government, I remember taking Gordon Brown to task because of the problems with the Inland Revenue and large amounts of loss of money.
Ms Patrick: Yes, and there had been projects that were just, as you put it, simply complete disasters in the sense that they just simply didn’t do what they were intended to do; is that fair?
Sir Vince Cable: Yes, I think it is fair, yes.
Ms Patrick: You refer there in your witness statement to a certain amount of scepticism about Horizon. Would you have expected that kind of scepticism that you held about public IT systems, and Horizon itself, to have been adopted by others, including in the Post Office, in the Civil Service and in other public agencies, contracting for IT or managing IT systems?
Sir Vince Cable: Yes, I would have expected people to be in inherently sceptical. I think, in the case of the Post Office, I remember this was this flurry of concern when Alan Johnson was the Minister, and quite a lot questions were asked, including by me, but, by the time I had been in Government, that was 10 years later and they’d had 10 years to get their system organised and iron out any problems and as I – I had no reason to assume that it wasn’t the working properly.
Ms Patrick: Putting Horizon to one side just for a minute, you were aware of continuing reporting of problems in these kind of IT projects, including in the public sector, at the time you became Secretary of State?
Sir Vince Cable: Yes, that’s fair.
Ms Patrick: I mean, just to be really obvious, from 2010 on, the historic risk about IT, public or private, didn’t go away with the forming of the Coalition, did it?
Sir Vince Cable: No, I’m sure.
Ms Patrick: No. So if I take just one example, to see if I can spark your memory a little. If I mention Libra, a system that was running in the Magistrates Court and another system that had been developed by ICL Fujitsu and it having been criticised in the mainstream media, following what if it is work by the NAO in 2011, would that have been something you’d have been aware of?
Sir Vince Cable: Not that specific case, I don’t think so.
Ms Patrick: Again, stepping away from Horizon for a second, if there were allegations and concerns about a third-party contractor who was contracting across Government and different public IT platforms, were there systems in place for information sharing across Government departments or public agencies where there were different commercial contracts with different departments or different public bodies?
Sir Vince Cable: I certainly knew nothing about that. The only – trying to help answer your question, that I think in the middle of my period of Secretary of State, the computer systems actually broke down in my Department and I tried to find out why that was, and it was being blamed on me because I had given instructions that contracts should be awarded to small companies, rather than big multinationals, where there was a choice. And it turned out that the small guys hadn’t been able to operate the system properly. And unfortunately, the decision had to be reversed. So I was aware that there had been systems failures, yes.
Ms Patrick: I think we are at slight cross purposes, Sir Vince. I’m suggesting – I’m just asking if you can help the Inquiry understand, where you have different commercial contracts with a third-party contractor, in different Government departments or different public agencies, is there a system across Government for sharing intelligence about concerns that might arise in respect of one contractor, albeit that there are different contracts with different bodies or different public departments?
Sir Vince Cable: Well, the answer is I don’t know but I think that the Cabinet Office were the people in Government whose job it was to ensure that that kind of coordination took place.
Ms Patrick: Okay. I think you’ve told Mr Beer this morning that Horizon wasn’t on your radar until fairly late in your ministerial appointment. Whether in 2013, at the time of the Private Eye article being circulated to you, or later in March 2015, when you were dealing with the correspondence around the Select Committee and James Arbuthnot, if you had been aware either of difficulties in the early development of Horizon and, separately, if there were other difficulties arising in projects developed or managed by ICL Fujitsu, would either of those matters have increased or decreased your scepticism?
Sir Vince Cable: Well, as I explained to Mr Beer, I think the 2013 case, I just saw as a public relations issue. I didn’t realise it was anything to do with policy. Perhaps I should have read it more carefully but I didn’t realise at the time. And the 2015 case, yes indeed, all of these issues came together, and I did realise there was a systemic problem here because a lot of serious people were questioning it. I don’t remember the name of the contractor to ever have been mentioned in this context, but I’m – as your question suggests, there was an issue with them.
Ms Patrick: Separately, would you have expected, if anyone in the Post Office or in ShEx, or in any role responsible for representing the interests of the shareholder, if they’d had information about difficulties in the early development of Horizon or difficulties arising in other projects run by the contractor, would you have expected them to have similarly increased scepticism?
Sir Vince Cable: Yes, I would but I think your phrase about the early stages – I mean, I think it was introduced in, was it 1999? So I think 10 years later, I would have expected that, if there were any problems, they’d been dealt with.
Ms Patrick: Indeed, and the Inquiry has heard evidence about the development and the management of Horizon throughout the years and I’m not asking you questions about that evidence.
But one final question: we’ve talked about issues arising, can you recall whether there was any discussion about the performance of Fujitsu as a repeat Government contractor across departmental lines at any time when you were Secretary of State?
Sir Vince Cable: No, I can’t recall them. My dealings with Fujitsu were in a totally different context because we had an industrial strategy designed to develop manufacturing industry and I think they were partners or part of the ICT arm of the industrial strategy, and they contributed to thinking about Government training, and so on. But I certainly was never involved, to my recollection, in any discussions about Fujitsu as a contractor.
Ms Patrick: Just to raise you having said that, and their role in the wider industrial strategy, we know that the campaign run by subpostmasters, including Mrs Hamilton, was running well before you became Secretary of State in 2010. At any time when you were talking to civil servants or other officials around the strategy and any role played by Fujitsu, did anyone mention that they were involved in these concerns around Horizon issues?
Sir Vince Cable: Not that I recall, no.
Ms Patrick: Would you have expected that ought to have been something that was raised with you?
Sir Vince Cable: Well, as I said, and in response to Mr Beer’s question, I did expect to have been briefed at the beginning of my term of office, that questions were being raised about the computer system by serious people, which they were. But I was not briefed about it, no.
Ms Patrick: Thank you very much, Sir Vince. Those are all the questions that we have.
The Witness: Thank you.
Questioned by Ms Page
Ms Page: Over to me now, I think, Sir Vince.
I’d like to ask you about your strategic objectives.
Sir Vince Cable: Yes.
Ms Page: No need to bring it up but in paragraph 31 of your witness statement you set out three strategic objectives. The first was to secure funding for the network and Network Transformation specifically, with a view to stopping closures, yes?
Sir Vince Cable: Yes.
Ms Page: Then your second was to separate the Post Office from Royal Mail Group with a view to then privatising Royal Mail Group?
Sir Vince Cable: Correct.
Ms Page: Then, finally, you hoped to mutualised the Post Office?
Sir Vince Cable: Correct.
Ms Page: How did you come up with those three strategic objectives?
Sir Vince Cable: Well, it was – I was responsible for the Department, I’d had a background in Post Office issues, to a limited extent. I think the overriding one of those three was getting of funding for Network Transformation. It was difficult because this was a time of austerity, most Government services were being cut. I could see from my having dealt with the Post Office Network that it was in a state of collapse, it had fallen from, I think, 17,000 to 11,000 branches in the decade since I first raised it and, unless something dramatic was done, there wasn’t going to be a network, although it mattered enormously to millions of people.
So it needed an injection of cash and commitment to turn it round and, certainly, whenever I met Post Office officials – I didn’t very often but, when I did, the issue that was at the top of my mind was were they doing this effectively, was it working? And it was, actually, because I think, to my recollection, there haven’t been any more post office closures net since that time.
Ms Page: So that objective was your pre-eminent one. Your second strategic objective, was that interlinked to it?
Sir Vince Cable: I don’t think they were necessarily linked. The issues around the separation of the Post Office and the Royal Mail were essentially sort of technical and legal, and I think they were handled very effectively by Ed Davey, who did a lot of the preparations for that and the legislation around it. I didn’t get involved in that.
The third one, which I did care about, goes back to when I was campaigning for the postmasters. You know, we felt as a matter of principle that this was a very unequal and unfair relationship, it needed to be addressed and it needed radical change and we had support for that idea from the Federation. So that was how that originated. It wasn’t – it was quite disconnected from the others.
Ms Page: Well, the second one, of course, was pre-existing in the sense that the previous Labour administration had made moves in the direction of separation and privatisation; that’s right, isn’t it?
Sir Vince Cable: Yes, that’s correct, yes.
Ms Page: Obviously, your first objective of securing the £2 billion funding for the network, that did happen and there was then a period of time over which that funding was released.
Sir Vince Cable: Yes.
Ms Page: Your second objective was also a success though, wasn’t it, in at least this sense: that when all shares were sold in Royal Mail Group, that brought in 3.3 billion for the Treasury, didn’t it?
Sir Vince Cable: Yes, there was a big dispute as to whether we could have got more but, in retrospect, actually, the Royal Mail is worth less now than when we sold it. So yes, I think that was considered a success. I mean, the issue was not actually simply a question of raising money; the main reason we did it was to enable the Royal Mail to survive. Its business was dying because –
Ms Page: To bring in private injections?
Sir Vince Cable: Yes, so the Treasury would not allow the Post Office to raise – would not allow it to borrow when it was under public ownership. So if it was to finance its – you know, modernise, it could only happen in the private sector.
Ms Page: But I asked you whether the two were interlinked and you have suggested not. Are you saying that George Osborne’s Treasury would have given out £2 billion for the network if there hadn’t have been the promise of £3.3 billion coming in from the sale of –
Sir Vince Cable: No, I think they were completely separate issues. We had no idea at the time that the sale was launched how much would be realised, and there was no connection.
Ms Page: Even though, as you said yourself, this was a time of cutting back, a time of the launch of austerity, and the Treasury was very reluctant to give out money?
Sir Vince Cable: Yes. No, actually, the big cost to the Treasury was the cost of the pension fund. It swamped all the other financial consideration.
Ms Page: That’s certainly another factor, isn’t it, because there was some –
Sir Vince Cable: If I could just finish my answer. The reason we pressed for it was for political reasons. It was – certainly I believed and my party colleagues believed, that the Post Office Network was a major national priority and it needed funding, and we, in the negotiations with the Treasury, identified certain key issues – and that was one, and Catapult Network was another, I could list half a dozen – where we wanted more money, even at a time frame when cuts were having to be made.
Ms Page: But you couldn’t sell Royal Mail Group with the problems that it had with the pension pot, could you? There was a £28 billion pension pot there that needed to cover £37.5 million of liabilities, didn’t it?
Sir Vince Cable: Yes. It had to be dealt with before a sale could take place. No shareholders would have taken it on otherwise.
Ms Page: Although that was a problem in the sense that the liabilities were greater than the sum of money there, in the short-term, for the Treasury, that was £28 billion straight in the door, wasn’t it?
Sir Vince Cable: Yes, indeed.
Ms Page: Albeit that there was then, for future administrations, a long-term problem of £37.5 billion that needed to be paid out in the future?
Sir Vince Cable: Yes, well, as you know, there has been a big argument about the measurement of the liabilities of pension funds, depending on the interest rate and the discount rate. So, I mean, we could have a long debate about the privatisation of Royal Mail but I’m trying to see the connection with the Post Office –
Ms Page: Well, the simple point is this: those issues were interrelated, weren’t they? There was no way there was going to be funding for the Post Office unless the Treasury was going to get in both the £28 billion pension pot and what was ultimately, although not known at the time, £3.3 billion in shares?
Sir Vince Cable: I didn’t see them as interlinked. I saw them as separate problems.
Ms Page: How did the people within Post Office and Royal Mail Group know about your three strategic objectives?
Sir Vince Cable: Almost certainly because I told them. I had a courtesy meeting with the Chief Executive and the Chair, shortly after the Post Office was separated and I spelt out what I wanted them to do and the Post Ministers were aware that those were our priorities and very aware of them and carried them out.
Ms Page: Can I just then turn to some of the specifics about how they may have related to what happened within Post Office. In July 2013, you were making an announcement in Parliament about privatisation and, shortly before that, Jo Swinson had to give a short reaction in Parliament to the Second Sight Interim Report. What I’d like to be brought up, first of all, is her statement. It’s POL00141558. If we just zoom in to the middle of the second paragraph, there is just a one-liner and it says this – sorry, this is the second paragraph as we see it on the page:
“It is important to note that the issues in the report [that’s the Second Sight Interim Report] have no impact on Royal Mail, which is an entirely separate business.”
If we also go to a Whip’s briefing that lies behind that statement from Ms Swinson, if we could go, please, to UKGI00001679, and we go to page 2, please, and under a heading of “Wider impacts”. As I say, this is the Whip’s briefing that sits behind the statement that Jo Swinson made on 9 July:
“The timing of Arbuthnot’s intended statement [that’s his intended statement about the Second Sight Interim Report] should be considered in the context of the Royal Mail privatisation …
“Vince Cable and Michael Fallon are making a statement to Parliament on Wednesday, 10 July [that’s one day after Ms Swinson’s statement], setting out the steps towards a Royal Mail transaction. In the eyes of many MPs, the media and the public at large, Royal Mail and the Post Office are the same entity. Although not related, the adverse coverage that Arbuthnot is seeking to attract is likely to have a significant and diversionary impact on the messaging of the Royal Mail statement.”
So those can come down. So here’s the point, isn’t it, Sir Vince: that it was seen as essential not to let problems with the Second Sight Interim Report get in the way of a statement that you were about to make that related to privatisation?
Sir Vince Cable: Well, that’s your assertion, but I – I don’t think that’s correct, actually. I mean, I became involved in the Royal Mail privatisation because it was highly controversial and I had to lead from the front. It was being led by a Minister of State but I got sufficiently involved to be aware of some of the risk factors, I don’t recall this ever being mentioned. The big risk factor was around the trade union, the CWU, who were threatening to go on strike. That was a big risk factor for the investors, and that was the one – the only one that I recall being discussed with any seriousness.
Ms Page: So this going on in the background, we can take it that it wasn’t something that was coming directly from you but, nevertheless, this was, because you had communicated your three strategic objectives, something which people knew you needed to have happen. Right?
Sir Vince Cable: Yes, that’s correct.
Ms Page: So whilst you may not have become involved in what people at Post Office and, indeed, in Government supporting Ms Swinson were getting up to, they were helping, because they thought it was necessary, to get the privatisation over the line?
Sir Vince Cable: Yes, well getting the privatisation over the line depended on managing a group of risk factors. I don’t recall this being one of them. As I say, the risk factors overwhelmingly centred on industrial relations issues. It may be, as you say, that there were people in the – who were involved in the Post Office who were worried that they might be creating a problem. The people who had identified risk factors were the brokers and the investment managers, and they would have said, “This is worrying us”. I don’t recall they ever did.
Ms Page: You may not have seen some of the evidence in the Inquiry about Ms Vennells’ work on the prospectus?
Sir Vince Cable: Okay.
Ms Page: She, in fact, managed to get a section in the prospectus taken out that was going to be about the Horizon problems.
Sir Vince Cable: Mm.
Ms Page: She told her Chair, Ms Perkins, that she had earned her keep on that one. So that may have been an example, may it not, Sir Vince, where you didn’t know but the people acting within the Post Office knew that there was a risk factor that they wanted to take out of the picture in order to help your strategic direction?
Sir Vince Cable: Yes, what you say seems to be perfectly fair. All I can say is that I didn’t – I wasn’t aware of it as a risk factor, and I was involved in the privatisation, so I would have, I think, known.
Ms Page: Yes. Well, let me just give you another example, perhaps, of what may have been going on behind the scenes. If I could bring up POL00296944, please. This is an email between the Chief Executive and the Chair, and it’s about finessing the Second Sight Interim Report. In that second paragraph, she’s referring to conversations that she had with her General Counsel, Susan Crichton. She said:
“I caught up with Susan this evening after we finished. She had finished her meeting with [Second Sight] …”
She says “wade” but I think we can take it that she “was”:
“… of the view that they do now understand the risk of being caught up in something bigger and more sensitive. She is hoping their report should be more balanced, should say they have found no evidence of systemic Horizon (computer) issues but will confirm shortcomings in support processes and systems, and that Post Office has already identified and corrected a number of these.”
Then she talks about James Arbuthnot:
“I hope when they speak to James tomorrow that they will confirm all this. They will also want to say their work is not finished and therefore still not conclusive.”
Now, something bigger and more sensitive, this email is on 1 July 2013. Ms Swinson was to make the statement about the Interim Report in Parliament on 9 July, and your statement about privatisation was on 10 July. This again, rather looks as if this is people within the Post Office worrying about Second Sight tying into something bigger and more sensitive, ie the privatisation; does that make sense to you?
Sir Vince Cable: Yes, it does make sense.
Ms Page: Yes. So this appears to be an attempt to have the Interim Report’s findings managed in a way so as not to disrupt your strategic plans. Are you confident that there was no one in Government putting any pressure on Post Office to do that sort of thing?
Sir Vince Cable: Well, I simply I don’t know. The ShEx, who were the unit responsible for Post Office, were also the people who were managing the privatisation from the BIS point of view, so it was the same group of people. Whether they acted the way you describe, I have absolutely no way of knowing but I can see that, if you’re looking for – no, conspiracy is too hard a word but, if you’re looking for attempts to manage the issue then what you say makes sense.
Ms Page: Thank you. Those are my questions.
Questioned by Mr Stein
Mr Stein: Sir Vince, my name is Sam Stein, I appear on behalf of a very large group of subpostmasters and staff that worked in branches.
I work with Mr Jacobs, who appears on my left, and we are instructed by a firm of solicitors who have long been a thorn in the side of the Post Office, called Howe+Co.
Now, you’ve been asked a number of questions by Mr Beer about the correspondence that either was or wasn’t sent through to your office, when you were Secretary of State for BIS, and what happened to that. I am just going to quote from paragraph 37 of your statement. We don’t need it on the screen. Sir Vince, you say there this:
“Whilst Horizon was on a few occasions raised in correspondence addressed to me, with very few exceptions, my correspondence were dealt with by officials at the level of the responsible junior minister, none of whom flagged these issues to me as needing my engagement.”
That’s what you’ve been said in your statement. You’ve been asked a large number of questions about that by Mr Beer. Okay.
Sir Vince Cable: Mm.
Mr Stein: I’m not going to repeat those questions. I’m going to go to a different type of information that BIS was aware of.
Sir Vince Cable: Mm.
Mr Stein: Can we go, please, to a document which is POL00141382. The date of this document is May 2012. If you’ll take that from me, I’ll be very grateful. Helpfully, for me, you started as Secretary of State for BIS in May 2010, so this is pretty much two years into your time as Secretary of State dealing with these matters.
You’ve just been asked a few questions that touched upon Post Office Network Transformation. You’re familiar with the discussions about that and you’ll recall, I hope, that there was a BIS Select Committee that was set up to consider issues that related to Network Transformation at around the same time in 2012?
Sir Vince Cable: No, I don’t actually recall that but I appeared before the Select Committee every year and they interrogated me about the things that they thought I should know.
Mr Stein: Right. Now, this is the written evidence, as you’ll see, submitted by Shoosmiths solicitors, and you can see there that, if we go to just a few of these paragraphs, paragraph 2:
“Access Legal from Shoosmiths, a national law firm, have been contacted by almost 100 SPMs [subpostmasters] who have suffered losses they cannot explain and have been subject to disciplinary measures by POL. All are adamant that they or their staff have not stolen any money. They claim that the Horizon system … an Electronic Point of Sale and accounting system POL require them to use, has caused the errors or not enabled them to work out why the errors have appeared in the first place.”
They go on to say there:
“They claim there has been no real investigation by POL as to the cause of the losses that have appeared – SPMs are expected to pay it back regardless of how it was caused.”
Go to paragraph 3:
“POL are adamant that the Horizon system has no faults.”
Go down to paragraph 7, please. What is being said here is about:
“If the SPM ever faced with a loss when balancing, the SPM is presented with two options on the Horizon system: ‘Settle Centrally’ or ‘Make Good Loss’. Settle centrally means that, according to POL, the loss can be investigated. However the description of this from SPMs means that it just means the loss will be taken from the SPM’s remuneration either as a lump payment or in stages. If ‘make good loss’ is selected the SPM must make good the loss there and then out of their own pocket. One of these options must be selected otherwise an SPM will not be able to trade the following day.”
I’m just then going to touch on paragraph – I think it is 8. Yes:
“Some of the SPMs have told Horizon that they have made good the losses when in actual fact they haven’t. The reasons they do this vary, but are typically related to an inability to pay (often due to have made various repayments previously) and a desire to keep the post office open for their community. When doing the above an SPM is committing false accounting, albeit not to enrich themselves, or to deny POL what is rightfully theirs.”
So by the time we get to paragraph 8 we’ve got a description, by a national law firm, representing 100 subpostmasters in May 2012, setting out real fundamental difficulties with the Horizon system, people being made to do things within their branches that they shouldn’t have to. So these are complicated, cogent submissions being made by this law firm, Shoosmiths; do you agree?
Sir Vince Cable: Absolutely. Yes.
Mr Stein: Now, did this information, this submission, get through to you?
Sir Vince Cable: No.
Mr Stein: Right. Help the rest of us understand why not. This is a public consultation by a Select Committee in Parliament, where these issues, which are serious, are being raised in relation to Network Transformation, which is meant to be informative for the Post Office, “Get this thing up and running, get it back on its feet”, but the Shoosmiths solicitors are saying, “Hang on, there’s a real problem here”; how come that didn’t get through to you as the Secretary of State for BIS?
Sir Vince Cable: I don’t know why it didn’t get through to me. My own perceptions, as I tried to describe earlier, were based on the contacts I had with individual postmasters, and I was aware, as I’ve described, that there were some terrible things happening, and the one that I cared most about was in my constituency, and I’d contacted the family and I said, you know, “What’s happened? We’ve lost our post office, you’re being charged with fraud. What happened?” And the explanation from the family – I didn’t speak directly to the postmaster – was “We think that we made a mistake, and we’re being punished in a ridiculously excessive way”.
So that’s how I started thinking about this problem and, as I also said, I think around about 2012/13, I was visited by the Federation – a regional head or a national figure, I don’t know – but I was visited by the Federation, who had this scrap book full of photographs of some of these postmasters who were in terrible situations – I mean, you know all about them, they’ve been in the Inquiry – and clearly very emotional about it, and we sat in a meeting trying to understand why this had happened.
And the theory they had, and I agreed with, was that what was happening was that mistakes were being made, you know, obvious mistakes but, you know, postmasters are handling vast sums of money and large numbers of transactions, you know, perfectly honest, understandable mistakes we all make in every aspect of live, and they were being brutally punished for it. And that was my understanding, it was this kind of ‘one strike and you’re out’ policy which – the way I interpreted it, and the Federation, when they came to see me, confirmed that view.
I don’t ever recall this being discussed in terms of Horizon problems. I mean, it may have been mentioned, but it didn’t register with me because other people were giving a very clear explanation about why this was happening. It reflected very badly on the Post Office but it wasn’t about computers.
Mr Stein: Well, let’s have a look at what is being said in a very clear explanation a little bit further. Paragraph 8, the description there of what is happening by SPMs that are having to make good the losses, when they haven’t, and related to an inability to pay, desire to keep the Post Office open for their community. When doing that, the Shoosmiths submissions say this:
“When doing the above an SPM is committing false accounting, albeit not to enrich themselves or deny POL what is rightfully theirs.”
Paragraph 9, last sentence, losses that have been discussed by Shoosmiths Solicitors, losses between £6,000 and £150,000.
Paragraph 10:
“The SPM then has, according to POL, an opportunity to explain the losses [and so on]. Typically the SPM’s contract will be terminated and POL will request any losses that are repaid under the contract.”
Paragraph 12 we’ll touch on and then I’ll move on to something that may assist in relation to the NFSP:
“If the loss is not repaid POL will prosecute the SPM for false accounting. SPMs are typically advised by their legal advisers to plead guilty to false accounting, as in the above circumstances they will have committed it. Many will be charged with theft or fraud but these charges are typically dropped in these circumstances. SPMs have been imprisoned as a result of convictions for false accounting.”
So, Sir Vince, my point, on behalf of the group of people I represent, the subpostmasters, people working in branches, is that these were all matters that could have been investigated, that could have been looked into by BIS, essentially the Department in control over the Post Office, but this was never taken to your level; is that right?
Sir Vince Cable: That’s correct.
Mr Stein: Well, let’s deal with the NFSP, paragraph 17:
“National Federation of SubPostmasters – the NFSP are the trade association for SPMs. They negotiate with POL on behalf of SPMs and provide representation at disciplinary meetings. They state publicly that there are no issues with Horizon. Many SPMs report that they receive no useful assistance from the NFSP when they have accounting difficulties.”
Then it goes on to reference to the Communications Workers Union, the CWU:
“… the relevant union for POL employees, have recently set up a branch to assist and represent SPMs.”
So there the Government, BIS, is being told that there is a problem with the NFSP and, if that had been looked into, it would have been discovered that the NFSP was being paid off by the Post Office. To so all of these issues were being set out lucidly, cogently, in simple submissions, that 14 years later, we’ve been examining through the Post Office Inquiry; all of these points now we know to be true. But BIS did what, as far as you know, with these submissions?
Sir Vince Cable: I have no idea what they did with them. On this particular point about the Federation, I think I’ve explained, in answers to Mr Beer, my dealings with them were very limited but positive. I first brought to Parliament the case of a postmistress who had lost her post office, lost upwards of £100,000, and I asked for help from the Federation to advise me, and they succeeded in getting full compensation. So why would I not think of this as an effective trade union?
And, similarly, in the other cases that were brought to me, which I’ve already described, it was clear that they cared passionately about the hardship that postmasters were experiencing. I had no reason whatever to doubt their integrity or their competence.
Mr Stein: Let’s move on through the chronology. This is 2012, two years into your time as Secretary of State for BIS, okay? Now, you’ve said this in your evidence: that by the time we get to 2015, you’d realised something bad was happening –
Sir Vince Cable: Mm.
Mr Stein: – and you say, and you’ve said to this Inquiry that what happened at that stage was that that was the end of your term as Secretary of State and you wish, essentially, that you’d been able to stay on so that you could do something about this. So your words were you realised something bad was happening. Well, you’re right. Jacqueline Falcon was prosecuted in 2015 by the CPS for fraud. She was prosecuted for her work at the Hadston post office, she’d worked there for eight and a half years, in total she had worked in branches for 15 years, from the year 2000, Hadston branch for eight and a half years, and losses below £1,000, a shortfall, was discovered in that particular branch. The end of 2014, that was discovered. In 2015, early 2015, she by that point, based upon advice, pleaded guilty to fraud, into a suspended sentence for three months.
In 2015, Jacqueline Falcon was pregnant, going through all of that, she was prescribed antidepressants. So you’re right, Sir Vince: something bad was happening.
Now when we try and understand what happened at that point, when you hand over to the next person to take on the job of ignoring the problems with the Post Office, at that particular point, what did you do to say to the next person, “Hang on, there’s a real problem here. Something bad is happening”?
Sir Vince Cable: Well, the answer is I was unemployed after the election for two years, until I got my job back. But it appears to be the case, and I was frankly shocked by this, nothing to do with the Post Office but that when a new Government comes in, they start with a completely blank sheet of paper. I was never – when I became Secretary of State, the Civil Service would not tell me what my predecessors had been advised on a whole range of issues. It was thought to be improper, that we start again with a new Parliament and we have to reinvent the wheel. That unfortunately is the way government operates.
But, certainly, if I’d met Sajid Javid, who was my successor, and this issue had come up, I would have certainly passed on that advice. But the way Government works, there isn’t a transition, there is no carryover. It’s entirely reliant on the Civil Service to maintain continuity.
Mr Stein: Sir Vince, we understand that that happens certainly between the transition of one government from one party to another, so recently, as we understand it, the position is that the Labour Government will not have access to Conservative Government papers. Does that also happen, to your knowledge, in relation to the next administration, even though it may be the same individuals involved?
Sir Vince Cable: Well, it wasn’t the same individuals.
Mr Stein: No. It could be, though?
Sir Vince Cable: It could be.
Mr Stein: Yes. Does that happen in the same way?
Sir Vince Cable: I don’t know but I – it’s common sense to suggest that it should.
Sir Wyn Williams: Didn’t we have evidence from the Conservative minister who succeeded the Conservative minister, I forget the precise dates, that that’s exactly what happened?
Mr Stein: Yes, well, I think we’re establishing that, sir. The question is whether it relates to –
Sir Wyn Williams: I think Ms James said she didn’t have a briefing from Baroness Neville-Rolfe.
Mr Stein: My question related to whether, even if it’s the same minister, whether, essentially, they’re not allowed background to their own papers, if they carry on.
Sir Wyn Williams: Sorry, that’s a variation on it. Sorry, Mr Stein.
Mr Stein: Now, we’re going through time. As you say, you spent two years outside of Parliament, then you come back into Parliament. Yes?
Sir Vince Cable: Yes.
Mr Stein: So the timing we’re now getting to, 2017/2018, you’re aware by that point that there are then, in 2019, the judgments in the High Court.
Sir Vince Cable: No, I wasn’t aware. No.
Mr Stein: Well, when were you first aware of the judgments by Mr Justice Fraser, now Lord Justice Fraser, in the High Court?
Sir Vince Cable: Well, I wasn’t aware, I think, until this whole Inquiry process started and journalists started asking me about it and what I knew, and following the evidence. I certainly had lost all contact with this issue after 2015.
Mr Stein: Okay. So when you came back into Parliament, and we know that there were issues that were in relation to the Post Office going through the High Court, you’re saying you were aware of that later, and you know that there are issues being raised in relation to the criminal appeals, did you look into any aspect of those matters?
Sir Vince Cable: No, I would have looked into aspects of those matters if any of my constituents had become involved. I’d reverted to being a backbencher – I happened to be leader of the party but that was a separate matter – but in relation to Parliamentary business, I would only have encountered them if postmasters in Twickenham had been in this situation. I don’t think there were any.
Mr Stein: You see that represented an opportunity for you to do what you’ve criticised other MPs for. So if you had engaged with these issues, if you had read the judgments from the High Court, had paid attention to what was going on, you would have been able to say to the Government at that time, in 2019, “Hang on, there’s been a problem here. When I was looking at matters such as this, nobody brought this to my attention”.
Sir Vince Cable: Well, had I known about it, I could possibly have intervened in the way you describe but, when I came back into Parliament in 2017, Government and opposition were completely overwhelmed by the big new issue, which is called Brexit and, as the leader of my party at the time, I was having to devote 100 per cent of my time to focusing on that, apart from the time I spent on the constituency issues, and I raised issues for constituents in Parliament in debate and questions.
I didn’t range outside that – well, there were many outstanding issues. One of the things which followed me was this Saudi arms deal, for example, and there were half a dozen issues like that, that I dealt with in Parliament, and I realised were still hanging around two years later and I was being asked about them, and – but for the reasons I have given, I wasn’t then in the business of dealing with Post Office issues.
Mr Stein: Last question. Let’s turn it round the other way. Did anyone in Government go to you and say, “Sir Vince I’ve got these issues at the High Court. You may not or may not know about them but let me tell you about them. They’ve raised serious, deep rooted problem within the Post Office about the Horizon system. It’s a mess. Total debacle. People being sent to prison under horrendous circumstances, lives being ruined”.
Did anybody come to you and say, “Sir Vince, what were you told about this during your time at BIS”?
Sir Vince Cable: Nobody came to me and asked that question. I wish they had –
Mr Stein: Yes, thank you Sir Vince.
Sir Vince Cable: – but they didn’t.
Sir Wyn Williams: Thanks, Mr Stein.
Is that it, Mr Beer?
Mr Beer: Yes, it is, sir.
Sir Wyn Williams: Well, thank you very much, Sir Vince, for making your witness statement and for coming to the Inquiry this morning and answering questions from number of people. I’m very grateful to you.
The Witness: Thank you very much, Sir Wyn.
Mr Beer: Sir, could we reconvene at 2.00 pm, please?
Sir Wyn Williams: Yes.
Mr Beer: Thank you very much.
(1.03 pm)
(The Short Adjournment)
(2.00 pm)
Mr Blake: Good afternoon, sir. Can you see and hear me?
Sir Wyn Williams: I can, thank you.
Mr Blake: Thank you, sir. This afternoon we’re going to hear from Mr Clark.
Gregory Clark
THE RIGHT HONOURABLE GREGORY DAVID CLARK (sworn).
Questioned by Mr Blake
Mr Blake: Thank you very much. Can you give your full name, please?
Gregory Clark: My name is Gregory David Clark.
Mr Blake: Thank you. You should have in front of you a witness statement.
Gregory Clark: Indeed.
Mr Blake: Is that dated 28 June this year?
Gregory Clark: It is.
Mr Blake: Could I can you to turn to the final substantive page, that’s page 47.
Gregory Clark: Yes.
Mr Blake: Can you confirm that that is your signature?
Gregory Clark: It is.
Mr Blake: Is that statement true to the best of your knowledge and belief?
Gregory Clark: It is.
Mr Blake: Thank you very much, that has a Unique Reference Number of WITN10900100 and that will be uploaded onto the Inquiry’s website.
Mr Clark, you were a Member of Parliament between 2005 and this year; is that correct?
Gregory Clark: That’s correct.
Mr Blake: You’ve held a number of different ministerial posts, you served as Minister of State in the Department for Communities and Local Government; is that right?
Gregory Clark: That’s right.
Mr Blake: You were Financial Secretary to the Treasury?
Gregory Clark: I was.
Mr Blake: Minister in the Cabinet Office?
Gregory Clark: Yes.
Mr Blake: Minister for Universities and Science?
Gregory Clark: Correct.
Mr Blake: Secretary of State for Communities and Local Government?
Gregory Clark: That’s right.
Mr Blake: And, relevant to today, you were Secretary of State for Business, Energy and Industrial Strategy, and that was between 14 July 2016 and 24 July 2019.
Gregory Clark: That’s correct.
Mr Blake: That was during the premiership of Theresa May?
Gregory Clark: That’s right.
Mr Blake: I’m just going to begin with a little bit of background before your time as Secretary of State and if I can ask to be brought up on screen POL00097393, please. I’m going to take you to some correspondence relating to a constituent of yours, and this is a letter from yourself to the Right Honourable James Arbuthnot, and you’re in conduct with him regarding your constituent, Mrs Pauline Thomson, who the Inquiry has heard from in an earlier phase, who wished you to refer her case against the Post Office on to Second Sight.
“Mrs Thomson has now stated that she is happy for Second Sight to proceed with an investigation of her case and she has confirmed that she understand her details will be seen by the Post Office.”
Did you have a number of different cases around this period from subpostmasters, as a constituency MP?
Gregory Clark: This was the only one in my constituency that I was aware of at the time.
Mr Blake: Thank you very much. You were corresponding with Lord Arbuthnot in relation to –
Gregory Clark: Correct.
Mr Blake: – the Second Sight investigation into her case?
Gregory Clark: That’s right.
Mr Blake: Could we please turn to POL00232847. We’re now moving on from January 2013 to March 2015, so quite a considerable time has elapsed and it relates again to the same constituent, Mrs Thomson. In this letter, you’re corresponding with Paula Vennells about a letter that Mrs Thomson received only a couple of days after being told that her case would proceed to mediation?
Gregory Clark: Correct.
Mr Blake: If we turn over the page, we can see the letter that you have enclosed. The letter is marked as “Confidential – Not to be disclosed outside of the Scheme and mediation”, dated 5 February 2015, so it’s during a period where we know that the Working Group is being shut down.
Gregory Clark: Yes.
Mr Blake: I’ll just read to you a couple of passages from the letter that was sent to Mrs Thomson. It says:
“You will be aware that your case has been looked at afresh and thoroughly reinvestigated by Post Office. Your case has also has been considered by the Scheme’s independent forensic accountants, Second Sight Support Services Limited. The reports of both of these investigations have been shared with you.
“As you will know, Second Sight recommended that the question of responsibility for losses incurred in your branch should be mediated. In the event, the Scheme’s Working Group considered that the issue was suitable for mediation on a deferred basis.”
So it seems as though Second Sight and the Working Group both considered that Mrs Thomson’s case was suitable for mediation.
Gregory Clark: Indeed.
Mr Blake: Then the letter continues:
“I regret to inform you that, after careful consideration, Post Office takes a different view and has decided against proceeding to mediation in your particular case for the reasons I set out below.
“Responsibility for Losses
“Post Office considers that the question of responsibility for the losses suffered in your branch was appropriately addressed at the time of the suspension of your contract with Post Office on 12 September 2008 and your subsequent prosecution and conviction. It remains Post Office’s view that the conclusions drawn at the time were correct and nothing in our own reinvestigation, nor in the review of your case by Second Sight, represents a challenge to that position.”
So a refusal to mediate the case on behalf of the Post Office.
Gregory Clark: That’s right.
Mr Blake: Did you meet with this particular constituent at the time?
Gregory Clark: I can’t remember. I certainly met with her on several occasions during the long period in which I’ve been trying to help her resolve the case.
Mr Blake: We’ll come on to talk about the particular case in a moment but, before I do, I will just take you to a response that was received to your correspondence, that can be found at POL00117339. Thank you very much. So this is a response from Ms Angela van den Bogerd to you and, if we scroll down, she says:
“There is, in fact, no inconsistency in the two communications she received.
“The first communication she received enclosed Second Sight’s final independent review of her case, including Post Office’s investigation into the matters it raised. In these reviews, Second Sight offer their view as to whether a case might be suitable for mediation. However, while this is their view, all mediations are entirely voluntary. The final decision on whether or not to mediate a case ultimately rests with the parties involved. It follows that either party can decline to take part.
“Mrs Thomson’s case has been thoroughly reinvestigated through the Scheme and, after careful consideration of all relevant facts (including Second Sight’s final report), the Post Office has concluded that mediation does not offer any realistic prospect of resolving your constituent’s complaint for the reasons set out in our letter to her.”
Prior to becoming Secretary of State, so in this period, what was your understanding of the issues relating to Horizon and Second Sight?
Gregory Clark: My principal understanding, I think, in fact all of my understanding, came from dealing with Mrs Thomson, and it conditioned my view of certainly the management of Post Office Limited. I mean, on the documents that you’ve just put up – I don’t know whether we can have that second one again – that reply from Angela van den Bogerd, I think she was called, I thought was an impudent reply. She didn’t answer the question as to why Mrs Thomson was being refused the ability to arbitrate.
Indeed, if we look at it, I think they even get her name wrong. I’ve just noticed that –
Mr Blake: That’s going to be brought up on to the screen.
Gregory Clark: – now. “Mrs Paula Thomson”; she’s called Pauline Thomson. It doesn’t say why, it merely asserts that, despite the fact that Second Sight and this panel had recommended it, they say that “We simply decided that we don’t want to”; either party can decline to take part and so they’ve done so. I thought it was an impudent letter to receive in reply to mine to the Chief Executive and it conditioned, as I say, my view of the management of Post Office Limited.
Mr Blake: Thank you very much. That can come down now. You took office in July 2016.
Gregory Clark: Yeah.
Mr Blake: I’d like to take you to the introductory brief that was provided to you. That can be found at WITN10900103. At paragraph 33 of your witness statement, you have said that you received introductory briefs from each of the 40 or so directorates in your Department; is that right?
Gregory Clark: Correct, as a standard, yes.
Mr Blake: So is this kind of a brief that we’re going to see, is this typical of the kinds of briefs you would receive in relation to the areas for which you had responsibility?
Gregory Clark: Fairly typical. I mean, some were more substantial than others, for example at the time that I took office, one of the first decisions I had to make was whether to approve the – Hinkley Point, the nuclear power station, which was and is the biggest construction project in Europe, I think, at the time. So, obviously, the briefing for that was necessarily more substantial but this was not untypical of many briefs that I received.
Mr Blake: Are you able to assist us with who might have been responsible for drafting this?
Gregory Clark: I infer from knowing, I think, with the benefit of hindsight, the structure of things now, that this would have been from UKGI – someone in UKGI, perhaps Mark Russell, who was the CEO, who we may come on to discuss, regularly briefed me, because I think I’m right in saying that there was not a Post Office team within the Department at that point, and so I assume that came from them.
Mr Blake: Thank you. If we scroll down, we can see it begins by outlining some key facts about the Post Office. It then addresses the Department’s role, and I’d just like to read to you the first paragraph from the next page. It says:
“The BEIS Secretary of State is the sole shareholder of [Post Office], and UKGI manage that shareholding for BEIS, representing Government as [the Post Office’s] shareholder and with a position on the Board. UKGI also acts as a voice/guide for [the Post Office] within Government and it maintains relationships with key Department’s such as HMT, Cabinet Office and DWP.”
So it seems as though UKGI represent Government as POL’s shareholder but, at the same time, act as a voice/guide for the Post Office within Government. How does that work?
Gregory Clark: Well, how it worked then, before there was a team in BEIS, was that regular meetings and briefings and communications to do with the Post Office would come from UKGI, principally, actually, to the Post Office Minister at the time, rather than me directly as Secretary of State. But, as I say in my witness statement, one of the things that I instituted right at the beginning of my tenure was to require each of the Directors General, which is to say the layer below the Permanent Secretary, to give me a weekly report, just to me, of anything on their mind, and one of them came from Mark Russell, who was the Chief Executive and, therefore, the equivalent of the DG of UKGI.
And so, each week, I would get what was on his mind through that directly, but most of the detailed submissions and contact would have been with the Post Office Minister.
Mr Blake: Irrespective of individual personalities, is there a tension between representing Government at the Post Office and also acting as a voice/guide for the Post Office within Government?
Gregory Clark: I think there is a tension in many respects that we may come on to talk about in more detail. I actually think there is a structural tension and, arguably, at least in the view of the Department, something of a legal tension, in that, in a fiduciary board, the responsibility of a director, and the UKGI director was, as it were, a fully fledged the director of the organisation, there is a kind of unitary responsibility to the company and, in particular, my understanding, and certainly it’s consistent with advice during this period, was that, in terms of the Department, and indeed the Government, directing or influencing the Board through that director, that that was a perilous thing to do, that it was something known as the shadow director risk, in which if you – if, from the outside, whether collectively or through an individual, you directed the Board’s decision, then you could be counted as a director yourself.
In my view – I’m sure we’ll come on to talk about this – rather than seek to dance around that I think it would have been better for it to be perfectly legitimate for ministers and officials in the Department to input directly without any of these – this kind of tiptoeing around, to the decision making of the Board. But no, it was constituted that way, and that’s how it was at the time.
Mr Blake: Moving down to policy areas, it says:
“Government’s policy on the Post Office is to set the parameters within which we expect it to operate (reach of network, types of services it should seek to offer) and then allow the business to operate commercially, at arm’s length from Government. [Post Office] is a public corporation with a fiduciary Board … Operational decisions are made by the CEO, Paula Vennells, and her … team, supported by the Board. CFO Al Cameron, who are meeting, is the other Executive on the Board.”
That’s another thing that we’ve heard quite a bit about: operational decisions.
Gregory Clark: Yes.
Mr Blake: Was that something that could be easily separated out, when it came to, for example, matters relating to subpostmasters?
Gregory Clark: Well, I think – as other witnesses have said, I think there is no bright line, certainly there is no definition that sets this out. The view of the Department – the inherited view across different administrations of different parties – was that certainly what counted as operational included matters like IT systems and the relationship with the subpostmasters and, therefore, that was definitely in that category. Things that were strategic, or obviously was Government requirement on how many post offices were to be there. But, clearly, and no doubt we’ll come on to talk about this, within the middle, there are questions as to when operational matters become strategic or certainly kind of proper for ministers, and my view, as set out in my witness statement, is that I think in certain government-owned organisations, of which Post Office Limited is one, I think there is a greater likelihood of that to happen than in some others, for example Lloyds Bank, when it was owned by – at least in part by the taxpayer.
Mr Blake: Thank you. It seems there that you were going to be meeting with the CFO, Al Cameron; do you recall a meeting with Mr Cameron?
Gregory Clark: I do recall meeting with Mr Cameron and, indeed, other executives throughout my period in office. What has been a bit frustrating, and I think other witnesses – including Sir Vince this morning – have said, is that, for reasons I don’t understand, the Department don’t have access to – whether they don’t have at all – ministerial diaries and minutes of meetings. That is – that surprises me and disappoints me. So, in a three-year tenure, meeting literally thousands of people a year, I’m unable to say how often and when, but certainly I met Mr Cameron and I probably, from this, I met him shortly after this note was sent.
Mr Blake: If we scroll down, we can see various headings, we have “Ownership”, “Services and Long-Term strategy”, “Network” – if we keep on scrolling – at the bottom of the next page, “Pensions”, “Cash supply chain”, “Industrial relations”, then we come to “Other issues”.
Gregory Clark: Yes.
Mr Blake: Under “Other issues”, it says as follows:
“Following complaints from a small number of subpostmasters regarding the [Post Office’s] Horizon IT (point of sale) system, an investigation was undertaken by an independent firm, Second Sight, over two years. Whilst this received relatively high profile press attention no systemic issue with Horizon has been found. However, affected subpostmasters continue to put pressure on [the Post Office], the Criminal Cases Review Commission are considering some cases where individuals have received criminal convictions, and group civil litigation is being launched against [the Post Office] in the High Court.”
It seems as though that is the only mention of Horizon related issues within this brief; is that right?
Gregory Clark: It is, yes.
Mr Blake: Do you consider that brief to be sufficient?
Gregory Clark: Well, it contains, in my view, the crucial information which is in that last sentence, I think it is, that the Criminal Cases Review Commission are considering some cases, by implication the safety of the convictions, and that litigation is about to begin in the High Court. That was – that communicated what I thought was the essential information on that.
Mr Blake: Did it give you, for example, an idea of the scale of the Group Litigation?
Gregory Clark: No, it didn’t, clearly.
Mr Blake: It begins by saying that there were complaints from a small number of subpostmasters –
Gregory Clark: Yes.
Mr Blake: – regarding Horizon IT systems. Now, looking at it, do you consider this summary to be an accurate and fair summary?
Gregory Clark: Well, certainly it wasn’t a small number. I think, if I were to be fair to the authors, I think the number of subpostmasters that were part of the group civil litigation increased. I think it started off not small but, you know, smaller than it ended up and that grew over time. But, in some ways, the number was not the most important point. It is an important point, certainly, but I didn’t think it was the most important point because the most important point is that people are talking about criminal convictions that are in front of the CCRC.
My view is, and bearing in mind that I was working with a constituent who was absolutely sort of an example of this, if she’d been the only one, that would be enough.
Mr Blake: It refers there to Second Sight investigation and no systemic issue with Horizon has been found. Were you aware, for example, that Second Sight had produced a report which identified two bugs that they went into detail on, and a further bug?
Gregory Clark: I wasn’t aware of that.
Mr Blake: Were you aware at this stage of any concerns about an expert witness who had appeared in a criminal case or criminal cases?
Gregory Clark: I certainly was not.
Mr Blake: You, in your witness statement – it’s paragraph 36, you say that you’ve re-read all 150 or so weekly updates –
Gregory Clark: Yes.
Mr Blake: – that were provided to you while you were Secretary of State and there’s minimal reference in there to issues relating to Horizon.
Gregory Clark: Referring to the lit – to Horizon, yes, and it was through the lens of the litigation, essentially, it was an update on that.
Mr Blake: We’ll come to examples and to detail but do you think you were sufficiently briefed in relation to matters relating to Horizon?
Gregory Clark: Well, were it not for the fact that these cases were before the courts, what I say in my witness statement is that view of the Department, and you may ask me about, as it were, my own view of this, the view of the deposit were that these matters were, essentially, sub judice and were perhaps not technically so, but they were being tested in two judicial forums, if I can put it that way: one with the Criminal Cases Review Commission and the other in the High Court and, therefore, the determination, the discovery of the truth about this, was taking place through that process.
So, in that sense, I think it was proper that the court was, you know, sitting, in some cases daily, to examine that, and so the updates, when it came to Horizon, were on the progress of the litigation.
Mr Blake: So the courts had charge of the matter?
Gregory Clark: Yes –
Mr Blake: You were being updated about –
Gregory Clark: – and the CCRC.
Mr Blake: – and you were being updated about their progress.
Gregory Clark: Yes.
Mr Blake: But looking at this, this one paragraph, plus the weekly briefings you’ve looked at, do you think that was sufficient in relation to the overall picture of problems with the Horizon system?
Gregory Clark: Well, I describe in my witness statement as “this period” being a period, I think as I described it, between two times and what I mean by that is that up until, I think, 2015 prosecutions were being made of subpostmasters. They had come to an end. The legal processes had commenced – both the CCRC, I think, had commenced the year before, and the Group Litigation had started – I think I was appointed in July, in the April. But they clearly neither had been resolved.
So this was a time of limbo, in some sense, between the entered of the Post Office making – taking forward prosecutions but before the opinion of the courts, High Court, and the Court of Appeal had been issued.
So the role of the Government, I would say, in resolving those problems, was – and certainly sort of mounting prosecutions – was not the same as it was before or after.
Mr Blake: Could we please turn to POL00117715, please. On becoming Secretary of State you received a letter from Paula Vennells. That’s 25 July 2016. If we scroll down, she congratulates you on your appointment. If we scroll down, we can see the significant strides in modernising the network that she refers to and, if we go over the page, please, it says:
“We are therefore developing a new strategy to 2020/21 designed to strengthen our market position, improve our digital capabilities and radically reduce our operating costs. While this will require investment to execute, it provides an historic opportunity to complete the commercial turnaround of the Post Office and put the network on a self-sustaining footing.”
Do you recall receiving this letter?
Gregory Clark: I don’t recall it but I’m sure I did.
Mr Blake: There’s no mention in this letter of Horizon issues?
Gregory Clark: Indeed.
Mr Blake: Do you recall, in your early time as Secretary of State, or even thereafter, discussing Horizon issues with Paula Vennells?
Gregory Clark: I don’t have any recollection of that.
Mr Blake: How about Al Cameron, who you met perhaps more regularly?
Gregory Clark: I can’t remember that but, again, I would say that the litigation and the Court of Appeal, the CCRC, they were the most important parts of that. And as I say, the view was that these were effectively being determined in court, rather than between ministers and the Post Office at that stage.
Mr Blake: You say the view, that was of those who advised you; was that your view as well?
Gregory Clark: Well, so, going back to your first questions to me, Mr Blake, I had an insight into this through one particular constituent and it led me, I think, that correspondence – and there’s others we might have looked at – that I didn’t trust the management of the Post Office, to be frank. So take that unilateral refusal of – to Mrs Thomson to have her case arbitrated, despite the fact that the panel, whatever it was, recommended it – that led me to suspect that the current management of the Post Office were not to be trusted to resolve some of these questions.
So the view of the Department, as I say, the inherited view that Horizon IT systems, contracts with subpostmasters, et cetera, were kind of operational, and therefore, litigation around it was for the Post Office itself. My view was to welcome the fact that court was going to look at this, the High Court in particular. I thought the authority of a High Court judge, and the requirements of disclosure and all the rest of the things, was a better way of resolving this than, as it were, a process that involved the Post Office – any kind of arbitration with the management of the Post Office.
Mr Blake: So pausing there at, say, 2016, who, if anybody, did you think should have been providing you with more information about the Horizon system, or is it your evidence that, in fact, you are satisfied with the level of information you were being given at that time?
Gregory Clark: I would say that what I was – I was relieved that the High Court and the CCRC were, with the powers available to them, going to determine the truth about what went on. I had no evidence to think that the – or to know that the Post Office were behaving improperly but, certainly, the experience of a constituent, who I should say was a well-respected person in the community, was a person of sort of blameless character, had been treated in this way, not just charged and convicted, but subsequently been treated in this predatory way by the Post Office. There are letters about demanding repayment of funds even after she was sentenced.
I was very keen that the courts would determine the truth here, rather than relying on the Post Office.
Mr Blake: Moving on in time now to 2018, can we please turn to UKGI00007712. There seems to have been a letter to you from Ms Eleanor Shaikh in respect of a subpostmaster. This is a response from your minister, Margot James. This particular version is unsigned, we have two different versions, one from Margot James and we also have a later one from UKGI as well. I don’t think whether we can say this particular one was sent or wasn’t sent. I think the assumption is that this did go.
She writes as follows, you had been written to in relation to the suspension of Farncombe village’s subpostmaster, following a sub post office audit in 2017. She sets out there that the Government recognises the importance the Post Office plays, and then this paragraph, she says:
“I should explain that the Government sets the parameters in which the Post Office operates – including its geographic reach and the key services it offers – and then allows the Post Office to operate as an independent commercial organisation within those parameters. As such, we do not play a direct role in the day-to-day responsibilities of the company, and this will include matters concerning the investigation and suspension of subpostmasters.”
Just pausing there, is there a difficulty with this clear distinction when it comes to, for example, prosecutions of subpostmasters? Do you consider prosecutions of subpostmasters to be purely operational matters or might there be more to it?
Gregory Clark: First of all, I didn’t know that the Post Office itself prosecuted at that stage subpostmasters. In the case of my constituent, I’d known that the police arrested her and so I kind of inferred from that that it was a normal process. So I was not aware of that.
Mr Blake: Irrespective of what happened in that particular case, as a principle, do you see the prosecution of subpostmasters to be a purely operational matter for the Post Office or are they something else?
Gregory Clark: Well, I think that would – I think it depends. Every organisation will, from time to time, have instances in which they have to take disciplinary action against either an employee or, in this case, someone that it has a contractual relationship with, whether that’s, you know, a retail group, whether it’s a corporation. So leaving aside whether they should have the power to prosecute themselves, the fact of people being prosecuted, I don’t think is necessarily a strategic thing.
Whether – I mean, what clearly does make it strategic is whether those prosecutions were mounted in a way that was, I’m afraid, corrupt and we now know, from what has been disclosed, that the Post Office was in receipt of information that at least one of its witnesses, during those trials, was unreliable and, certainly, I’m not sure of the timing, whether people, once they knew it, were continuing to be prosecuted, despite the knowledge of that. But, certainly, the case that people that had been prosecuted had to live their lives as convicted people because of it.
Now, that not only raises it to the level of strategic, it raises it to the level of being totally unconscionable. So from the spectrum of, you know, one or two people in a large organisation being prosecuted for misdemeanours from time to time, to what seems to be the case, that at least in some parts of the management of the Post Office, people were prosecuted, in some cases jailed, in some cases people lost their lives, on the basis of information that we now know, and was known to them, to be wrong, is of a whole different order.
Mr Blake: If we look at the final paragraph there, it says:
“The Post Office have also assured me that they are confident that their Horizon system is robust and reliable. It is used by over 11,600 branches for numerous services every day and has been for a number of years. It is right that the Post Office should investigate these sorts of instances thoroughly given it is charged with overseeing substantial amounts of public and third party funds.”
Were you aware of these kinds of stock lines being sent out to people who wrote to either yourself or to your ministers?
Gregory Clark: I can’t remember but it wouldn’t surprise me. They were, as you say, standard lines that had, I think, prevailed for many years under different administrations.
I – if I saw this, I would have regard it as, in effect, a holding line. It says, “The Post Office have also assured me”. It comes from Margot James but it says “The Post Office have assured me”. I wanted to see the Post Office’s assurances tested rigorously in court, and that’s what was going on during this time.
Mr Blake: Can we turn, please, to UKGI00007733. This another response to Ms Shaikh, this time February 2018. It says:
“Thank you for your email of 13 January 2018 to Greg Clark MP about Farncombe Post Office.”
If we scroll down, very similar terms towards the bottom.”
Gregory Clark: Yes.
Mr Blake: Again, same number referred to there, it’s used over 11,600 branches, et cetera, and this one was sent by Stephen Clarke of UKGI. Was he somebody that you worked with?
Gregory Clark: I can’t remember, I mostly dealt with Mark Russell who was the head of the organisation but he may well have been in meetings accompanying Mr Russell.
Mr Blake: I want to turn now to the Common Issues judgment.
Gregory Clark: Can I just make a comment on that –
Mr Blake: Absolutely.
Gregory Clark: – since you put it up? I think, looking back – does it say what date of the letter –
Mr Blake: If we scroll up, 13 January was the letter to you?
Gregory Clark: 2018. Beginning of 2018. I think, if I look back, what it would have been better to have said is what I’ve just said to you: that actually these matters are being tested by the High Court and we – and will be determined shortly.
Mr Blake: Thank you. I’m going to move to the Common Issues judgment, the judgment itself was 5 March 2019.
It seems, certainly from the paperwork that we have, that Horizon didn’t really feature very much in your briefings between 2016 and March 2019; is that a fair summary?
Gregory Clark: Well, only to the extent that it was before the High Court, it was obviously until the judgment was issued. That was where, as it were, the action was, and there were updates on that. The Post Office Minister at the time, I think, got a regular update. I say in my witness statement that there was some reluctance even to give those factual updates of what was going on, but that’s not to say that I didn’t regard that court process, as I hope is evident, as being very important, and the respective judgment as being important, because, before we get to that judgment, you will see from my witness statement that I took steps to, as it were, to prepare for the receipt of that judgment, even to the point of asking whether the Government Business Department could have early sight of that judgment. I was advised that this was not possible because we weren’t a party to the litigation.
I asked the Permanent Secretary, outside the UKGI process, to advise me and the then Post Office Minister in anticipation of the judgment as to what his assessment of how we should handle it was. So this – throughout it I’d regarded this court process as being extremely important and, therefore, the judgment I had no idea what it was going to say, but I was looking forward to it, shall we say.
Mr Blake: Can we turn to the advice in relation to the draft judgment. That can be found at UKGI00009076. This is a ministerial submission to you of 1 March 2019, and we see there you are noted there “To Note”.
Gregory Clark: Yes.
Mr Blake: Do you know who drafted this? There are a number of names there?
Gregory Clark: I assume from deciphering the norms on these things, that Tom Aldred, who was marked as the Lead Official, I assume that he would have drafted it, but that it would have been approved by Mark Russell. In fact I required that Directors General approve statements like this.
Mr Blake: Thank you. It is headed “Judgment in Post Office Common Issues Trial”, and it says:
“A judgment in the Common Issues trial will be sent to the parties next week …”
If we scroll down, there’s some advice. It says on paragraph 5:
“You have asked for advice on whether we should seek permission from the judge for ministers to have advanced sight of the judgment.”
Gregory Clark: Yeah.
Mr Blake: If we scroll down and over the page to page 2, please. We can see at paragraph 10, it says:
“Regardless of the legal findings, Post Office expect the judge to continue to be critical of some aspects of Post Office’s handling of the case and its treatment of claimants. We expect these largely to relate to historic behaviour and do not believe that [the Post Office] currently has problems with its operational culture.”
Did you have at this stage any views as to the current operational culture at the Post Office?
Gregory Clark: Yes, I – my views of the – well, whether it’s current, I don’t know. Drawing from my experience with my constituent, I am minded to think, inclined to think that the management of the Post Office was insensitive to and dismissive to the point of abject rudeness to subpostmasters.
Mr Blake: Paragraph 11:
“While [Post Office Limited] is 100 per cent owned by [Her Majesty’s Government], it operates as an independent, commercial business. As such, the relationship with its subpostmasters and the management of its IT systems are operational matters for Post Office Limited.”
So again, reference to operational matters:
“The legal defence and the costs involved are being handled by them.”
If we scroll down and over to page 3, please. Paragraph 14 says:
“[Your Department’s] Legal and UKGI legal advisers have consulted relevant [Government Legal Department] litigation advisers and advise that such an application is highly unlikely to be successful.”
So it’s unlikely to be successful if you did apply to see the judgment in advance.
Then at paragraph 15:
“As well as being unlikely to receive permission, the application for permission and the judge’s response will be made public. An application would run counter to the position the Department has taken thus far regarding this litigation (including in Parliamentary Questions), namely that it is an operational matter for [the Post Office].”
Reference here to a position that the Department has taken. Can the distinction between operational matters and other matters, can that sometimes be used to advance a particular position?
Gregory Clark: Well, it was the longstanding position of the Department over many years, over different administrations, that it was the case that the contract between the Post Office and subpostmasters and IT systems were operational and, therefore, litigation around it was also operational.
My view was that that was entirely dependent on the judgment of the court and, were the court to find, as it did, that the Post Office had behaved as disreputably as it had, then that marked it very firmly as strategic. So he is reporting – or repeating the inherited line. In my own mind, I was very clear that the – this judgment was going to determine whether this was operational or strategic.
Mr Blake: Then at paragraph 16:
“Therefore, we advise that the Minister does not seek permission to have early sight of the judgment. UKGI will work with BEIS communications and with POL to ensure that appropriate responses are made as soon as the judgment is out.”
Can we please turn to UKGI00009137, please. And this is a further submission a few days later, 5 March, now. This is a submission from Alex Chisholm, the Permanent Secretary, to you.
Gregory Clark: Yeah.
Mr Blake: He says:
“You asked me yesterday to look into some issues relating to the Post Office and to advise both you and Kelly on the way ahead.”
Do you recall the conversation that you had with Mr Chisholm at –
Gregory Clark: Not in detail but I recall enough about it to be able to make some observations, if I may?
Mr Blake: Yes, please.
Gregory Clark: So the timings you say, I think it was shortly after that submission that we’ve just looked at. My view was that the result of this court case, which I regard as important, was about to come out. I had a notion that this would be significant, and I didn’t entirely – trust is the wrong word. I wanted a different view to the UKGI view, which we saw in the last submission. So in the weekly meeting – I had a meeting one to one with the Permanent Secretary every week, normally every Monday morning, and I said, “You give me, Alex, your own view of this, write to me separately”, and it’s why I think he describes it as a kind of personal minute or something like that.
It’s not a submission, which tend to be kind of agreed across the Department by sort of multiple people. This was direct from the Permanent Secretary to me and Kelly Tolhurst, who was then the Post Office Minister.
Mr Blake: It says:
“The two most pressing issues relate to the court case and the appointment of an interim Chief Executive …”
Then in relation to litigation, he says:
“I agree with the legal and policy advice that we should not seek permission to see the judgment in advance of it being made public, and not comment when it is published. To obtain an advance copy we would need to satisfy the judge that there was a clear public interest in such. This is difficult in any case but especially in one such as this where there are no immediate consequences, and we have presented the trial as being an operational matter for the Post Office.”
That comes up back to the same point I was making before as to the use of the word “operational” to perhaps distance the Department from it.
Gregory Clark: Yeah.
Mr Blake: Is that something you would agree with, that it was, to some extent used, for purposes?
Gregory Clark: Well, it’s hard to know what was in the Permanent Secretary’s mind when he wrote that. My own view was that the court case and the judgment would determine whether this was an arm’s-length matter or something that was directly for the Department. It may be that he took that view, it may not be. So I think it would be unfair for me to read into his mind on that.
Mr Blake: Thank you. It then says:
“This is only the first of four trials scheduled to continue until at least March 2020, and the final outcome will not be clear until they have all completed. Ministers will want to keep an appropriate distance from the trial and not comment directly while it is sub judice”, which is the point that you made.
Gregory Clark: Indeed.
Mr Blake: “([The Post Office] may wish to appeal if the judgment goes against them). Personally I would not be surprised if the proceedings uncovered some faults on both sides of the litigation. Hence it would be especially advisable to stay above the fray for now, leaving you free to speak and act as necessary and in the public interest once the matter is decided.”
He then addresses the position of the interim CEO, and is satisfied that Al Cameron is the right person for that particular job.
Gregory Clark: Yeah.
Mr Blake: Moving now to the judgment, so the judgment was 15 March –
Gregory Clark: So perhaps to just kind of comment on that. Certainly, paragraph 1 about the early sight of the judgment and suchlike, that was a kind of second opinion that I’d sought on the UKGI advice. That’s just in summary.
Mr Blake: That was broadly consistent –
Gregory Clark: He was effectively supporting the advice of UKGI on that.
Mr Blake: Where he says, “I would not be surprised if the proceedings uncovered some faults on both sides” –
Gregory Clark: Well, I had more in mind – I think it did echo that but also that we shouldn’t seek – the key issue to hand was whether the Department, rather than UKGI, who were getting it anyway, should try to obtain the judgment in advance, and UKGI said you shouldn’t because there’s no precedent for this ever happening for a shareholder, and the Permanent Secretary agreed. So, on that basis, I think we didn’t apply.
Mr Blake: At this point, was there a difference in view that you could sense between the Permanent Secretary and UKGI in relation to where the fault may lie?
Gregory Clark: I don’t – I’m not aware of – I can’t recall any difference at that stage, not to say that there wasn’t any, but I don’t recall it. Although I think the fact that I went to the Permanent Secretary and asked him to give advice, as it were, on UKGI’s advice, I’m sure, in my mind, was that the Permanent Secretary was not, as it were, wholly on the same page in general as UKGI.
If I’d known him to have the identical view, there’d have been no point going to him in the first place but I didn’t, and it was direct and personal to him.
Mr Blake: Thank you. That can come down.
The judgment was 15 March, paragraph 51 of your witness statement, you described it as seminal.
Gregory Clark: Yes.
Mr Blake: Can you briefly assist us with why you considered it to be seminal?
Gregory Clark: Well, it was seminal, as I set out in my witness statement for – in a number of respects. I mean, first is that this was a long-awaited verdict, after a long period of litigation, perhaps too long, and the parties to it, the subpostmasters and mistresses, wanted to see it. So – but that’s probably the most trivial sense in which it was seminal.
It was seminal in another sense, in which it is the first time, in my recollection or in my view, that a court, a court of the land, had opined on this question of justice for subpostmasters and mistresses since the individual court that had handed down criminal convictions. There’d been, you know, arbitrations that had gone nowhere, there’d been, by now discovered but didn’t know at the time, a review by the Post Office Chairman, commissioned by a silk and his assistant on that. There’d been all sorts of things done internally but this was the first time, since those convictions were made, that a court had opined on it.
It was – so that was, as it were, it was seminal in anticipation. It was seminal in terms of its content, because the judge was very clear the subpostmasters and mistresses were right, and that the Post Office had behaved disreputably, as I think I describe it, and to the considerable detriment of the claimants.
Mr Blake: Can we please turn to UKGI00009213. There was a meeting on 16 March. If we could scroll down on this page, please, at the bottom of the page we can see – is this is an email from your private office?
Gregory Clark: Yes, “Clark MPST” is my private office.
Mr Blake: “All,
“Thanks for joining the call this morning. A quick readout below with actions.”
So it seems as though there was a call with a number of participants, if we scroll down we can see who attended.
Gregory Clark: Can I just describe the context of that?
Mr Blake: Absolutely, please do.
Gregory Clark: So the judgment was handed down on a Friday afternoon at a time when I was in my constituency with engagements, and, that evening I had an important commitment, an irrevocable commitment in my constituency, but I wanted to have a meeting to discuss the judgment, so we did, at the first opportunity, which in this minutes, this readout, is 9.45 in the morning, so I assume it would have been 8.30 or something like that on the Saturday morning.
Mr Blake: Thank you. If we scroll down, can you assist us to with who these participants are?
Gregory Clark: Yes, SoS, obviously me, Secretary of State; Kelly Tolhurst was Post Office Minister at the time; Will Holloway and Jacob Willmer were my inter-department Special Advisers; Gavin Lambert was, by then, the Director General, that’s to say one below the Permanent Secretary with responsibility for this area of policy; Tom Cooper was the UKGI representative on the Board of the Post Office; Tom Cartlidge was one of my private secretaries, the duty private secretary – it wasn’t, as I recall, his specialism but it was Saturday morning, and he obviously had drawn the short straw to be on duty that weekend; and Hibaq Said, I assume – it says “PS” on there, it must be Kelly Tolhurst’s private secretary.
Mr Blake: If we scroll down to the detail, it says as follows:
“Kelly brought [the Secretary of State] up to date on the judgment against [the Post Office], indicating that the judgment was close to the worst-case scenario.”
There’s some detail there from Tom Cooper.
It then says:
“[Secretary of State] asked about the prospect of an appeal by [the Post Office]. Tom Cooper discussed the legal advice received by the Post Office. This advice will require careful consideration. Tom indicated that there are both legal and tactical reasons for the Post Office to appeal and that it is most likely they will do so. Appealing may be [unhelpful] in reaching a settlement.”
Gregory Clark: “May be helpful”.
Mr Blake: I was going to say, just pausing there, can you assist us with the discussion regarding legal and tactical reasons?
Gregory Clark: So I was incensed by that remark. It seemed to me that this was a very important judgment that was strongly critical of the postmaster – of the post office, and supportive of the subpostmasters, and it was instantly evident that that needed to be accepted and acted upon. And what really stung me was the use of the word “tactical” in this:
“… there are … tactical reasons … to appeal and that it is most likely that they will do so.”
That suggested to me that this wasn’t because there was something unclear in the judgment. It wasn’t that there was some kind of area of law that needed to be clarified or some material fact that was wrong. But that it was, I could – well, at least I inferred that this was, in effect, to disadvantage to the subpostmasters and their litigation, which should not have been in anyone’s mind.
Mr Blake: There aren’t speech marks around the word “tactical”, is that something you actually remember from this meeting being mentioned?
Gregory Clark: Well, tactical, I assume, was mentioned because it’s a very specific word, and it’s – I mean, the fact that it says – I mean the private secretary is – was a very experienced private secretary. He captures two aspects, both legal and tactical. So it was clearly pointing to something other than the legal. And – I mean, I say in my witness statement that my reaction may have been unfair, it might have done an injustice and perhaps it wasn’t intended in the way that I interpreted it.
But all I can tell you, and what I recall, is that I took that as meaning that they – there was an intention to play – it was a pretty appalling thought – a kind of legal game with this rather than to respect the judgment.
Mr Blake: It then says:
“[The Secretary of State] made clear his primary objective is to see justice done.”
I think in your witness statement you’ve said that that is a diplomatic way of putting it.
Gregory Clark: So, for those that are not – have the good fortune not to be connoisseurs of kind of ministerial minutes and readouts, there is a general understatement to what is kind of recorded in this. But there is a kind of code that I think people understand if they read it, and whenever it says something like “Secretary of State made clear”, that means that I intervened with some force on the issue. It’s not “Secretary of State said” or “Secretary of State observed” or “Secretary of State suggested”. “SOS made clear” is, if you take evidence from other civil servants, I’m sure they will confirm, that means something. That means that this was a pretty emphatic.
Mr Blake: Is that one level below “full and frank”?
Gregory Clark: I think it’s probably a level above. I think it probably implies that I was pretty direct about it.
Mr Blake: It then continues:
“Where postmasters” –
Gregory Clark: Before you go on, can I have a quibble with this?
Mr Blake: Yes.
Gregory Clark: I think I recall my demeanour on that call. I was quite angry about it and, in terms of making clear, I don’t think I would have said, you know, “Let me tell you my primary objective is to see justice done”. I think I would have said – did say, “my only objective” and that’s how it should be read.
Mr Blake: It then continues:
“Where postmasters and mistresses have been treated improperly they should be treated justly. It will be necessary to consider the legal advice carefully to ensure no activity by [your Department] will prejudice any appeal.
“[The Secretary of State] and Kelly discussed the possibility of making a statement. [Secretary of State] resolved not to make a proactive statement. He asked that an [Urgent Question] rebuttal be prepared for Monday morning. He also asked that the Department put at a statement making the point that we are aligned with the interests of the postmasters but that we are still going through the legal process.”
Do you recall if that statement went out or not?
Gregory Clark: Yes, it was a – I think in the evidence that was disclosed, there was a written ministerial statement that I think was issued on the Monday morning.
Mr Blake: So that’s a written ministerial statement –
Gregory Clark: Yes.
Mr Blake: – when it refers to a statement?
Gregory Clark: Correct.
Mr Blake: Yes. “We should also” –
Gregory Clark: It was probably a press statement as well. Actually I think – I suspect it was both.
Mr Blake: “We should also do a Dear Colleague letter promising to revert to the House when the legal matters are completed. It should be robust in tone and making clear that the litigation is ongoing and that [Her Majesty’s Government] will keep the House updated.
“[The Secretary of State] made clear that where [the Post Office] can fix problems internally before the conclusion of the legal process, it should do so.”
It then says:
“He agreed with Tom Cooper’s assertion that caution would be required to ensure that justice is done for legitimate claimants, but that restitution may not be appropriate in all circumstances.”
Now, I think you’ve said in your witness statement that the reference to “your agreement” is, again, the Civil Service speak of –
Gregory Clark: So I think both of these are a little opaque. The first sentence of that paragraph, “[Secretary of State] made clear that where POL can fix problems internally before the conclusion of the legal process”, my recollection is I told them to get on with giving restitution to postmasters and mistresses. There was enough in the Common Issues judgment to – for that to be any initiated.
They’d waited long enough and they shouldn’t, as it were, wait for the conclusion of the process. They should get on with it.
To this last point, so Tom Cooper – so – and I think – I infer from the last sentence that, in the sentence before, that they should give restitution to the postmasters and mistresses, I think I said comprehensive restitution. They should all be put in – financially, at least, in the kind of position that they should have been in, had this not taken place, to which Tom Cooper clearly made an observation that I think has been familiar from other evidence that the Inquiry has taken, that, well, you know, there may be some people that actually were convicted and were genuinely guilty of criminal deeds, and it would be an abuse of public money if they were compensated when they shouldn’t be.
To be frank, I didn’t have much patience with that. I didn’t think that was the import of the judgment. I don’t recall Mr Justice Fraser as having made a kind of great play of that. But, you know, it’s hard to dissent from noting that, yes, of course, if someone clearly isn’t entitled to it, they shouldn’t get it. But I – there’s not much emphasis I would have placed on that aspect.
Mr Blake: Thank you. I’m going to turn to two related documents. Can we please turn to UKGI00009296, please. This is internal UKGI correspondence. If we scroll down, we can see an email there from Richard Watson to Tom Cooper, and he says:
“Tom, I spoke again to BEIS Legal. While they agree it is a Board decision we think that if [the Post Office] decides to make the application it should leave open the possibility that the Minister, after her discussion with Tim tomorrow, would want to say the shareholder disagrees.”
This is talking now about the recusal application.
Gregory Clark: It is.
Mr Blake: “Legally the shareholder cannot force the Board not to make the application and our advice to the Minister is not to get involved but if she is adamant she does not want it made that may be a matter the Board will want to consider.”
So this is 19 March and it’s a discussion about whether or not the Minister should have a say in the decision to recuse.
Gregory Clark: That’s right.
Mr Blake: If we scroll up, Mr Cooper responds:
“Really?”
Then Mr Watson said:
“Are you free to speak?”
There is a further correspondence on the same point, if we turn – the last document before the break – to UKGI00009308. Perhaps if we could start with the bottom of page 3. We have, if we scroll up, Mr Chisholm’s view, as expressed to Mr Cooper, regarding recusal. He says:
“I have now read all this legal advice.
“Personally I find Justice Fraser in this case (as in the Magnox case) to be opinionated, exacting, and rather inclined to personalise matters. But not (to my layman’s mind) obviously wrong or biased.
“I also share the concern that a recusal attempt risks further antagonising him (if unsuccessful) and also positioning [the Post Office] in public as aggressive and in denial about its shortcomings (which impression would be consistent with the judge’s findings to date).
“However my personal view of the case – formed from a rapid perusal of the judgment and all the legal commentary you’ve kindly provided – does not matter as (a) I am not a lawyer and, anyway (b) the Department is not controlling the case – that is properly a matter for the Post Office and their advisers.”
If we just scroll down, I will just read a few passages from the bottom of that email, it goes on to say:
“Proceeding with the appeal and recusal attempt, risks identifying the organisation’s leadership today with the negative historic behaviours of which [the Post Office] stands accused. But it is not obviously mistaken or otherwise inappropriate.
“The Board will want to reflect carefully on all these matters. For my part I am satisfied that [the Post Office] Board is the right body to do this; and that it has been properly advised.
“The Department should maintain its clearly distinct and detached position, so that it is free and credible for dealing with the consequences as they unfold. Ministers may want to show appropriate concern about the criticisms and may express a desire for [the Post Office] to act appropriately but should not comment substantively in ongoing litigation in which the department has a clear interest but no direct involvement.”
If we scroll up, we can see that Mr Watson, Richard Watson, says:
“Thanks. Alex sums up my view perfectly.”
If we scroll up, we have a further email, from Mr Watson, that says:
“All
“Are we agreed that we should not try to engineer a position today whereby if the Board decides to proceed with recusal the Minister is given a chance to object, ie some sort of conditional Board approval. As shareholder, I don’t consider she has the legal power to prevent this even if it was an appropriate thing for her to express a view on, which I think we agree it isn’t but instead is properly a matter for the Board.
“It is of course proper for the Minister to understand [the Post Office’s] decision and why their position might have changed since her call with the chair on the weekend. I understand that might be subject of a call with the Minister later today.”
Then Tom Cooper responds and he says:
“I have no intention of engineering such an outcome of the Board meeting.”
Finally, if we scroll on to the first page, Mr Evans, who was Deputy Director, in BEIS Legal Advisers, he says:
“Clearly the Minister should be given an opportunity to understand [the Post Office’s] decision but it is for the Board to decide whether to apply for a recusal (or the variant described by Tom) guided by their officials and counsel and there should not be a situation where the Board takes a decision subject to endorsement or otherwise by the Minister. This should be a decision that is taken by the Board, on the merits of the litigation advice.”
Can you assist us with what your view was on the recusal application at that point in time?
Gregory Clark: Yes. I think it’s a very important episode because it indicates that, notwithstanding the strength, and I would say unambiguous nature of the view that I and Kelly Tolhurst – I should say, throughout this, the Post Office Minister’s view, from whom you heard earlier this week, was identical to mine in this – in every conceivable respect, that the Post Office needed now to accept the judgment, give restitution to subpostmasters, and change their whole approach.
And yet, we discovered – I only discovered, I think it was on the Tuesday evening – so that call was on the Saturday morning on the Tuesday evening, I got a message from Kelly Tolhurst asking to speak to me to say, “You’ll never guess what, they’re now tying to recuse the judge and I’m completely against it, as being incompatible with what we said”. My view, again, was the same as that. They were going to do it I think the next morning.
From memory, I think I was either out of Parliament or the Department, I suspect it was an evening, I was probably speaking at some industry dinner somewhere. So I don’t have access to these things, unfortunately, from my private office but I think that I called the Permanent Secretary and asked him to get to the bottom of this and to advise Kelly and the Board as to what we could do about it, and I think that is why his advice – I note this email is 9.23 on the Tuesday evening, so it to suggests that it’s late at night.
If I may make a couple of observations on the handling of this.
So the first is to say that I thought it was outrageous that UKGI contrived to keep the unambiguous view of ministers from the Post Office Board in making the consideration of this. It was my view, it was Kelly Tolhurst’s view, even to the point – and you had it in the email that was up – about looking for an opportunity even for the Minister, once they’d made their decision, and the strong legal advice from two sets of legal advisers was that it had to be made by the Board but, even after they’d made it, should it be for recusal, we were minded to want to disassociate ourselves from it at the time. And that exchange about, you know, I’m not going to – I can’t remember what the words were – “I’m not going to engineer a situation that was possible” –
Mr Blake: “I have no intention of engineering such an outcome at the Board meeting.”
Gregory Clark: I thought that was wrong and appalling.
In terms of the discussion at the Board, I haven’t seen – perhaps the Inquiry has seen – any kind of verbatim account of what was discussed at the Board, but the advice that Alex Chisholm as Permanent Secretary gave on my request, it went to Tom Cooper, as to what he could do and what he could say. Even though it was, to my taste, a bit to on the one hand and on the other, I would have preferred a more robust piece of advice, saying ministers are strongly opposed.
Actually what he does say – and you highlighted it when you called up the document:
“Proceeding with the appeal and recusal attempt, risks identifying the organisation’s leadership today with the negative historic behaviours of which POL stands accused.”
Then he says:
“The Board will want to reflect carefully on these matters.”
Now, in my view, that aspect of the Permanent Secretary’s advice should have been put to the Board so that they could consider that not only were ministers strongly opposed to this, even accepting that it was a decision for the Board but that the Permanent Secretary had some apposite things to say on what they should have in mind.
I’m not certain but it was – the impression that I’ve formed, is that there was a discussion in which – forgive me, it’s not clear to me whether Tom Cooper said anything. He recused himself from the vote but whether he did what was advised by the Permanent Secretary and set these concerns out, in my view, he should have done.
Mr Blake: Thank you.
Sir, that might be an appropriate moment to take our mid-afternoon break.
Sir Wyn Williams: Yes, certainly.
Ms Price: Can we come back at 3.30, please?
Sir Wyn Williams: By all means, fine.
(3.17 pm)
(A short break)
(3.30 pm)
Mr Blake: Thank you, sir. Can you see and hear me?
Sir Wyn Williams: Yes, thank you.
Mr Blake: Can we turn to BEIS0000070. Sticking with the recusal application, this is a submission of 21 March 2019. The summary is that:
“Following independent legal advice, [the Post Office] Board has approved an application to recuse the judge. We expect this to be tabled today.”
If we scroll down, please, it says:
“[Over] the weekend you spoke to the Secretary of State and separately with the [Post Office Limited’s] Chair Tim Parker”, so this isn’t a ministerial submission to yourself, although you are –
Gregory Clark: It was to the Post Office Minister, I assume, is it?
Mr Blake: Yes.
“… and interim CEO-designate Al Cameron. [The Post Office] informed you that they were taking independent advice on whether to seek an application for the judge to recuse himself from hearing the rest of the litigation. At that stage, Tim thought if it unlikely that an application would be taken forward. Following these calls, on Monday, 18 March, you sent a Dear Colleague letter to update MPs on events.”
Were you aware that it was originally Tim Parker’s understanding that it was unlikely that there was going to be an application for recusal?
Gregory Clark: Only from this, I didn’t know that there was any thought given whatsoever to a recusal application until Kelly Tolhurst called me on the Tuesday evening, I think it was. But I note – I think, this thing into which I was copied would be the first I knew.
Mr Blake: We –
Gregory Clark: The confirmation of it. That wasn’t the first I knew but this was the first kind of official submission.
Mr Blake: Thank you. If we scroll down, we can see it says:
“On 20 March, [the Post Office’s] Board met to hear legal opinion on the recusal application, and to take a decision on whether to proceed. Tom Cooper attended as the shareholder’s representative to the Board, but following advice from UKGI Legal, he took no part in the decision making.”
Your Department ultimately would have been funding this application; is that fair?
Gregory Clark: No, I don’t think that’s strictly right. So the Post Office were funding the application. Now, of course, the Government stood behind the Post Office and there’s a perfectly legitimate question you might go on to, is again, how arm’s length can that be? But, certainly, throughout it, the Post Office, were – and I think the – there’s some evidence that the Permanent Secretary reiterated that this had to come from the Post Office’s own resources.
So this wasn’t, as it were, sort of coming to the Department to fund that, not that it makes it any more acceptable, in my view.
Mr Blake: Is it right for the UKGI member of the Board not to vote, not to be part of that decision-making process, in light of the reasons you’ve already set out about the relationship between Government and the Post Office?
Gregory Clark: Well, I’ve discovered quite a bit about this through this Inquiry and its disclosures. At the time, it was an evening call from the Post Office Minister and then a later night call to the Permanent Secretary. But what I understood and I recollect – I’m sure accurately from my conversation with Kelly – was that she was being essentially told, given strong legal advice, which is to say that, you know, you can’t intervene in this, you can’t make this decision yourself, and I discovered ex post that it applied to Tom Cooper as well.
Now, there is a very interesting thing here in the evidence that’s been disclosed. Some of that advice, it seems to me from reading the to and fro, was advice from UKGI Legal, that’s to say from lawyers, but it was essentially presentational advice, not a requirement of the law, shall we say, and, since that was summarised, I think possibly – well, certainly in other correspondence, that legal advice was that the Minister shouldn’t intervene and Tom Cooper shouldn’t intervene. You know, I’m not sure that it’s the right thing for presentational advice – which, in any case, frankly, should be a matter for others and the ministers – for that to be passed off as legal advice. And if there were no legal bar on Mr Cooper taking part in that decision, I was clearly – I was certainly of the view that he should have participated and should have spoken against it.
As it happens, I could understand a genuine sort of legal objection to, as it were, the Executive being involved in a criticism of the judiciary, but that would more apply, it seemed to me, if the Department, UKGI and Mr Cooper were wanting the judge to be recused, which – whereas certainly the ministerial view, and I think consistent with the reading between the lines of the Permanent Secretary’s view is: we didn’t want that. We wanted the opposite.
Mr Blake: Thank you. Could we please turn to UKGI00009464.
So the submission I just took you to was 21 March. A few days later now, 25 March, and you have received correspondence from another member of the Department, Anne-Marie Trevelyan, writing on behalf of a constituent, Peter Holloway, and she discloses, if we scroll over to page 3, please, an email from her constituent. He says:
“I am sure you’re aware that judgment in the first part of the trial came down very strongly for the subpostmasters, with strong criticism of the management of Post Office. We are currently in the second phase of the trial looking at the Horizon system operated by the Post Office. We are confident often a similar outcome.
“The Post Office are fighting the case vigorously and are already considering appealing the first judgment. However, two of their Senior Managers have been found lying understanding oath in the court whilst giving their evidence with the severe adverse comments by the judge.
“I respectively request that you raise questions with the Minister responsible for Post Office, as to whether they have seen the judgment of the court and what is the Minister proposing to do about it. The Government is the single shareholder of the Post Office and that Government, in its own words ‘has an arm’s length’ approach to managing the Post Office, and it is this very ‘arm’s length’ approach that has created this position whereby Post Office is in the middle of a train crash and refuses to see it. Meanwhile people like me have been fighting for ‘justice’ for over ten years having lost many hundreds of thousands of pounds at the hands of the Post Office. There are 550 of us in this Joint Action and many have been forced into bankruptcy, some sent to prison, all severely … disadvantaged. AND the Post Office has been, and is still, spending millions of pounds of public money to defend its entrenched position and the reputations of an incompetent Executive and a Board that either doesn’t care or doesn’t understand what is going on.
“Over the last ten years there have been three enquiries all of which the Post Office refused to accept their findings, an attempt at mediation, at which the Post Office refused to mediate. It’s time for the Post Office to accept the true position and agree to settle with us who have been so badly treated.”
Is this correspondence you recall receiving; was it sent directly to you?
Gregory Clark: It isn’t and I don’t expect I would have seen it for reasons that Vince Cable, I think, set out today. I think it would have been directed by the Department straight to the Post Office Minister.
Mr Blake: Were they sentiments that you were aware of more broadly?
Gregory Clark: Well, I’m not sure I was aware of them more broadly but I couldn’t have written it better myself. It basically reflects my views on the judgment.
Mr Blake: Were they your views at the time?
Gregory Clark: Certainly. From might Saturday – from the Friday night when I first saw the judgment in my box to the conversation on the Saturday morning when I, in effect, directed that it needed to be respected and, to the point here about the financial detriment that had been longstanding, my clear instruction was that needed to end and there needed to be a restitution.
Mr Blake: Could we turn, please, to BEIS0000071. This is a ministerial submission of 12 April. If we could scroll down, it updates you on developments, since the submission of the recusal application. It says in the first paragraph:
“The judge dismissed the application on 9 April and refused permission to appeal, but [Post Office] will now seek the Court of Appeal’s permission directly. In parallel, [the Post Office] is preparing an appeal of the Common Issues judgment.”
The “Recommendation” is:
“To note the contents of this advice and indicate if you wish [the Post Office] to give you an oral briefing to supplement this, as well as to outline its appeal strategy once the Board has decided.”
If we scroll down, please, over the page to paragraph 8, we can see a section entitled “Legal Team”, and it says as follows:
“[The Post Office] has decided to boost the Legal Team and has provisionally appointed Herbert Smith Freehills to oversee the litigation with a direct mandate from the Board rather than … through the company legal counsel. Their mandate will be to revisit the approach to the litigation (both substance and tone), which in the short-term means looking at the appeal relating to the Common Issues trial, the currently adjourned Horizon Issues trial, and the strategy for reaching resolution.”
What did you understand by the reference to substance and tone?
Gregory Clark: Well, I think the Common Issues judgment – I described it as seminal and it was. It was finding, it was in effect directing that the Post Office needed to accept the unfairness of its treatment of subpostmasters and mistresses, and that it needed to – the tone thing is to conduct itself in a more respectful way.
Mr Blake: It continues:
“[The Post Office] is open to making other changes depending on the advice received from the new firm. Given the unexpected outcome of the Common Issues trial we have been pressing [the Post Office] to ensure that their litigation strategy is considered with a fresh set of eyes, so this is a good outcome and we expect it to have a significant bearing on the way the litigation is conducted.”
We then have a further ministerial submission in May. That’s at BEIS0000073, 10 May. By this stage, Herbert Smith Freehills has reviewed the legal strategy. If we scroll down we can see paragraph 5:
“Following the appointment of [Herbert Smith Freehills] to oversee the litigation with a direct mandate from the Board, [they have] reviewed [the Post Office’s] legal strategy. [They] presented their advice on the proposed approach to the Common Issues [trial]. This approach was endorsed by the Board’s Group Litigation Subcommittee … In broad summary [they] will be appealing …”
Then it sets out (a), (b), (c) and (d), the points they will be appealing. Then it says below, in relation to recusal application:
“[The Post Office] applied on 11 April directly to the Court of Appeal for permission to appeal the judge’s decision and for the second ‘Horizon Issues’ trial to be stayed in the meantime.”
It doesn’t seem at this stage as though the litigation strategy has actually changed very much, does it?
Gregory Clark: No, to coin a phase, nothing has changed.
Mr Blake: Were you aware by this stage of any changes to the substance and tone as proposed at earlier submissions –
Gregory Clark: That first submission that you put up did indicate that they were taking the direction that had been given by me and Kelly Tolhurst immediately after the Common Issues judgment. I don’t know whether you can put it back up, the end of that first – of the two that you have just shown. They were appointing this new team to review the strategy, to report direct to the Board and to change the substance and the tone. So that was encouraging.
What was very disappointing in this, I should just say for completeness, I’ve seen this in what was disclosed to me but I don’t think this submission was sent to me, it was to the Permanent Secretary and to the Post Office Minister.
Mr Blake: That’s correct.
Gregory Clark: But through conversations, I would be aware – would have become aware of it, you know, I was, I suppose, looking forward, you know, with some anticipation to seeing the outcome of this review by a fresh pair of eyes, and then to find that it, in effect, is taking the same approach, was bitterly disappointing.
Mr Blake: Could we please turn to BEIS0000075. This is the final significant ministerial submission that I’m going to take you to today, and it’s from 11 June. So this is a ministerial submission to you, to approve and it says, as follows:
“At the industry meeting on 4 June, you [Secretary of State] asked for advice on how the ongoing Post Office Limited litigation could be brought to a swift and satisfactory conclusion, ensuring subpostmasters who had been treated unfairly were appropriately compensated.”
So starting at the beginning there, what was the industry meeting of 4 June, do you recall?
Gregory Clark: So I describe in my witness statement that my pattern, as well as having every Director General give to me their thoughts every week, direct to me, I had a series of what I regard as important internal meetings in which we would discuss with the relevant minister present, in this case the Post Office Minister, usually the Permanent Secretary and senior officials, things that were on my mind, or a decision that one of the junior ministers was going to take, that they wanted or I felt that they should have some collective discussion. So this was a weekly meeting of these things, and senior officials were present.
I would observe that it says at the industry meeting on 4 June, and we will certainly have had a discussion resulting in this commission.
My recollection is that there were discussions before that as well, from around the time of the two submissions that you put up, in other words the weeks ahead. They quite probably were or quite possibly were at one of the other industry meetings. Unfortunately, the Department doesn’t have minutes of those meetings and, certainly, I would have, in my weekly discussions with the Permanent Secretary and with the Post Office Minister, have been, essentially, kind of preparing the ground for a major intervention in the Post Office to cause them to do what manifestly I’d hope that they would do, from that Saturday after the Common Issues judgment, in other words to settle, to set up a restitution scheme, to change their whole legal approach. I hoped that they would do that, as it were voluntarily.
By this stage, I had essentially given up on them and concluded that they needed to be forced to do it.
Mr Blake: There’s reference there to appropriate compensation. At that point in time, what did you have in mind?
Gregory Clark: Oh, the full detriment. I mean, the detriment can never be overcome. I mean, the – the loss of reputation, you know, the disruption of people’s lives can never be properly compensated. But certainly financial compensation, and something that was, you know, an attempt to deal with that.
There are various references, you’ll probably see later in this submission, to, you know, kind of worrying about the costs of this. If there’s one thing I would communicate very clearly, is that there was no way that I was going to see the compensation, the entitlement to the subpostmasters, see them sort of bilked to protect the – for the convenience of the Post Office or even the Treasury and the Government. They needed to get what were their desserts.
Mr Blake: There are a number of recommendations. The “Recommendations” are:
“That you note the advice and our recommendation that you choose from the following options (which are not mutually exclusive):
“1. Challenge [the Post Office] Chair and Board to review their litigation strategy …
“2. Commission [the Post Office] to carry out a project on how to structure and operate a settlement …
“3. BEIS Ministers to state publicly that they want to see justice resulting from litigation for claimants with valid claims.
“4. Challenge Post Office to announce that it is taking on board some of the legitimate criticisms of the judgments and is taking action …
“5. Put UKGI lead legal counsel (or other legal adviser) on [the Post Office] Litigation Subcommittee as director or observer
“6. Invite Nigel Boardman, Chair of the BEIS Audit and Risk Committee, to carry out some independent due diligence on [their] litigation strategy
“7. Put in place clear information-sharing arrangements via the proposed Framework Agreement for [the Post Office].”
Then it says:
“More radical steps are presented in options 8-10; we recommend these are not pursued at this stage.”
I think, did you ask for –
Gregory Clark: I did.
Mr Blake: – what was called “nuclear options”?
Gregory Clark: I did.
Mr Blake: – or what you called “nuclear options”?
Gregory Clark: My purpose in requesting and requiring this package of advice, which I think took some time to put together, so that – the interval between the industry meeting and this submission, I think, is slightly misleading, I think this was in train before that – was essentially that I wanted the direction that I’d in effect given on that Saturday morning to be put into effect, up to and including dismissing the Board, taking over the litigation by the Department.
Mr Blake: Thank you. If we scroll down over the page on to paragraph 6, it says there:
“The current status of the litigation is that at a hearing on 23 May the judge denied [the Post Office] permission to appeal his judgment in the first ‘Common Issues’ trial and awarded the claimants their costs of the Common Issues trial rather than reserving this judgment until later in the litigation. Setting out his reasons in a written judgment of 4 June, the judge criticised [the Post Office’s] conduct again, namely [the Post Office’s] ‘veiled or implied threat that mirrors the approach adopted by Post Office on the recusal application, namely that in adopting a course of action in the face of opposition by the Post Office … runs the risk that the Post Office will say that the overall outcome of the litigation … has already been decided’. The Judge also expressed concern about the escalating costs of the litigation …”
In your witness statement at paragraph 96, you have said that the Post Office had not accepted the significance of the previous judgment –
Gregory Clark: Well, it’s to my remark that nothing can change. Clearly, you know, even at this stage on 4 June, so I had commissioned this advice, probably better more accurately described as a kind of set of actions to force them into line. I’d commissioned it before this judgment, suspecting that they were not doing what I had directed them to do and, lo and behold, the judgment of Mr Justice Fraser, who seems to have been very alert to the Post Office’s conduct, says that, even now, they’re engaged in the kind of behaviour that he deprecated in the first Common Issues judgment – almost unbelievable.
Mr Blake: If we scroll down, please, to paragraph 14 there’s a section there regarding the role of Government as sole shareholder. It says at the bottom:
“This does not include explicit powers to direct the Board to take a specific course of action …”
Although, over the page, it says:
“… though ultimately ministers have the right to appoint or remove any member of the Board …”
We will get to it but I think those were one of the nuclear options that were proposed?
Gregory Clark: Indeed. There is throughout this a continuing anxiety on the part of the Department that, you know, it’s an arm’s-length Limited company, in which the power of ministers is confined to approving the strategy and to appointing or firing individuals, not to direct them, and there was – I think it’s here, there’s a kind of – in fact, there it is in paragraph 16 – there’s a warning that, you know:
“… care needs to be taken that Ministers do not risk being regarded as shadow directors. A shadow director is someone in accordance with whose directions or Customs the board are accustomed to act.”
Now, it was very much my intention that the Board should act in accordance with my instructions, they were alive to that, they were drawing my attention to it, so we were skating on somewhat sort of thin legal ice, as it was described to me, which is one of the reasons in my recommendations that I don’t think we needed to tiptoe around it in quite that way for – God forbid that there should ever be a future case but, in future, that sort of advice should not need to be given.
Mr Blake: Was there a point at which you actually considered, in effect, becoming a shadow director?
Gregory Clark: Well, it was in my mind from the Saturday morning that I had a clear view as to what the Post Office Board should do and that I was going to do everything I could to make sure they implemented it, within the law, hence the – this discussion. But I was – I was prepared to push the envelope, shall we say.
Mr Blake: If we scroll down, at 19 the recommendation was you choose from options 1 to 7, either individually or collectively.
If we briefly turn to BEIS0000076. We can see the annexe to the submission, which sets out the options and the advantages and the risks. If we scroll down, we can see at page 4 the additional options that were potentially available:
“Go public with a stronger [Secretary of State] statement …
“Change Chair/[change the] Board.”
Scrolling down:
“Change management team.”
Further down:
“BEIS to take shared responsibility for the litigation …”
So those were options 8 to 11.
Gregory Clark: Correct.
Mr Blake: Very briefly, why did you discount those options?
Gregory Clark: Well, so, as you said Mr Blake, these were options that I’d asked to be included and I didn’t so much discount them as start with the – so I think what I said is I want all of the above in terms of the top seven, and to keep on the table these to see whether they could be – obviously whether they would act in the appropriate way.
I think the top one of these additional ones, to make a strong statement, actually I don’t think that very different from what I did direct, which was to say we were on the side of the subpostmasters and the litigation had to change.
But, in terms of – so the others essentially amount to, one way or another, dismissing the Board, either explicitly, in terms or through perhaps the option 11, taking responsibility for it. They, I think, might be likely, probably would have been likely, to quit on the basis that, you know, it’s a lack of faith in our competence.
So, essentially, they boiled down to a question of, at that point, should you – should I fire the Board? Now, that’s something that I certainly wouldn’t shy about doing. I have used my powers in other organisations to remove people that I thought were not competent or performing or had certain problems associated with them.
But it’s a step that one has to take advisedly, it seems to me, as a kind of Secretary of State. This was an organisation without a Chief Executive, at this point in time. The interviews, I think, were being conducted that week for the new Chief Executive. Nick Read was someone that was appointed a few weeks after that.
So it’s an organisation, you know – running the Post Office is, it’s a complex organisation, it’s absolutely essential for national infrastructure of paying benefits and applying for passports, and all the rest of the things. So to – I would have had in my mind that, in order to instantly summarily, as it were, dismiss the Board, you’d have to have an alternative arrangement in place. To have an organisation as important without any leadership would be quite a big step. In addition to that, I would certainly have had to consult the Prime Minister and others, were I to do that.
So my view – it was certainly not taken off the table. Quite the opposite, I just –
Mr Blake: Shall we turn to your confirmation of the options that you did choose?
Gregory Clark: Yes.
Mr Blake: That can be found at UKGI00010205.
So this is 18th June 2019, I think you were only in post for about a month after this.
Gregory Clark: Yes.
Mr Blake: It says:
“[Secretary of State] has reviewed this advice and has expressed a preference for the first 7 options to pursue. Content for you to proceed on this basis and we can discuss further at industry meeting when next scheduled.”
Can we turn back to the submission, so that is BEIS0000075. Thank you. If we could scroll down and look at the recommendations. How many of those recommendations are you aware were actually fulfilled?
Gregory Clark: I can’t say. There were various actions that were implementing the recommendations, much of which was about the Minister appearing at a POL Board meeting, which I think was in a few weeks’ time.
Mr Blake: In respect of public statements, for example, were they carried out during your period in office?
Gregory Clark: I can’t remember. I think we did, in terms of – well, for – I mean, some of these we’ve already done. For example (3), I think in the communication after the Common Issues judgment, we said that we were aligned with the postmasters and mistresses and we wanted to see restitution. So, actually, I think that was already in train.
Mr Blake: Could we please turn to POL00285354. The suggestion might be made that you should have done more of those more quickly.
Gregory Clark: Mm-hm.
Mr Blake: What do you say about that?
Gregory Clark: Well, I – when one takes a decision like that, it – there are different ways of implementing it. One was – and I don’t know whether we got the date. There was an important appearance that Kelly Tolhurst was going to make at the Post Office Board to tell them what to do. One of the other aspects was that the new Chief Executive was about to be appointed and, no doubt, he would be – he or she, turned out to be a he – would be the conduit of that.
But, in general terms, I think it would be fair to reflect that, given how dilatory the Post Office were, that actually to have been more directive a few weeks earlier might have saved a few weeks in this. I think that would be a reasonable reflection to make.
Sir Wyn Williams: Can I just get one thing straight in my head though. Unless I’ve got this fact wrong, there would seem to me to be quite some difficulty in actually doing very much at all in June 2019 because was it not in June 2019 that the Horizon issues trial started? So it’s very difficult to imagine doing anything while you’re actually conducting that litigation.
Gregory Clark: Thank you, Sir Wyn. I was aware that the Horizon Issues trial was going on, but I, for example, in the drawing up of a scheme of compensation –
Sir Wyn Williams: Sorry, perhaps I put it too broadly, so I’ll stop you. In terms of generally the litigation strategy, as opposed to the broader issues –
Gregory Clark: Yes.
Sir Wyn Williams: – of compensating the postmasters, I’ve just been musing to myself about how anything meaningful could be done while the Post Office lawyers are on their feet busily fighting the postmasters’ lawyers before Mr Justice Fraser again.
Gregory Clark: Sir Wyn, I would say that my hope and intention was that the approach that was taken to that Horizon trial would be different from the approach that had been taken throughout the common issues period, that they would be looking to acknowledge the –
Sir Wyn Williams: I might be trespassing well beyond my terms of reference but it seems to me that, once the Horizon Issues trial started, of course there could be a difference in tone and the way you approached people – I don’t mean you personally, I mean the Post Office and the Government – but, effectively, the choice was either to fight the case properly and legitimately, or to give up. That’s what it boils down to.
What I mean by “give up”, start making real overtures about settlement. I mean, those were the only two practical options in those days, weren’t they?
Gregory Clark: Well, I would agree with you that, in terms of settlement, that was going back to the readout of that Saturday morning conversation. I can’t remember the exact words, but it was something to the effect of that we shouldn’t wait for the end of the legal processes to settle, in effect.
So that was part of it. Part of these points that we’ve just been talking about were to begin setting up the structure of a compensation scheme but I am not a legal – not a lawyer, let alone a legal expert, so to what extent the – my hopes that the conduct of the – of that – of the Post Office’s participation in that trial could have been changed, I had hoped and intended that it – that was possible, that it should happen.
Sir Wyn Williams: All right. Thank you. Okay.
Mr Blake: Can we please turn to POL00285354. This is the final document I’ll take you to before we move on to recommendations.
This is an email of 30 September 2019, so it’s after your time in office. It’s an email from Alisdair Cameron to Nick Read and it relates to potential changes, structural changes. It says:
“In the conversation there are multiple stakeholders with varying needs which I have tried to set down in the attached (which should not be forwarded please). I don’t think a [I think that’s some sort of responsibility assignment matrix] is the answer because they won’t abide by it.”
It seems to be relating to UKGI –
Gregory Clark: Yes.
Mr Blake: – and how to manage that relationship.
The document that’s attached to that can be found at POL00285355, and there are various comments from Mr Cameron. I’d just like to get your view on these because I think you did meet Mr Cameron on a number of occasions.
Gregory Clark: I did.
Mr Blake: So BEIS Secretary of State – that may be a reference at that stage to Andrea Leadsom rather than yourself, or to the post, it’s not entirely clear. But it says:
“Usually the [Secretary of State] has no strong feelings except not being embarrassed by us. The [Group Litigation Order] is important because we are being sued by Postmasters – politicians have mixed feelings about us but LOVE constituency postmasters and will always side with them versus us if they can. When we make that difficult it is stressful.”
Were you aware of those views, as expressed there?
Gregory Clark: Well, when I first saw this document I assumed, wrongly, that it was referring to me, and I don’t believe anyone can think I didn’t have strong feelings on the matter, but I think it’s my successor.
I thought this whole document was pretty cynical. It’s looking, as we go on, to – looking at ways in which the stakeholders can be, as it were, sort of managed, it seems to me. I was –
Mr Blake: There’s a section there on Alex Chisholm –
Gregory Clark: (Unclear)
Mr Blake: – and it says:
“Alex doesn’t want us to do anything that might damage his career prospects.
“Alex meets us very rarely to date. His views have been developed, starting with the last funding round, when he and Greg Clark concluded that UKGI had gone native and they were anxious about Government investing, via us, commercially (not their skillset) and how did they stop us throwing ‘good money after bad’?”
It’s that, in particular, I want to ask you about, where it says that you “concluded that UKGI had gone native”; is that a fair reflection of your view at the time and, if so, why?
Gregory Clark: I don’t think I would have put it in necessarily those terms but certainly, during the funding round, as it’s referred to, it was my responsibility, as Secretary of State, along with the Permanent Secretary, to ensure that public funds were not wasted and I felt, and I think the Permanent Secretary felt, that there were proposals that were being made to invest in quite large sums of money in different ventures that seemed to be dubious, in terms of their likely value for money.
And I think there’s a structural problem here, in that UKGI – we may come on to talk about this a bit more – UKGI is a sort of deal-making – it’s a kind of, you know, it’s a private equity-type organisation who I think the people in it, structurally, are kind of keen to do deals and to do the things that you do in corporate finance. And so, in our scrutiny of UKGI, I think we were pretty wary about their views and they were more aligned with encouraging the Post Office to do things that we didn’t necessarily think were judicious.
Mr Blake: It says:
“[Mr Chisholm] has been infuriated by the GLO which he thinks we should have settled ages ago – and said so last year.”
Do you recall Mr Chisholm having said that the GLO should have been settled considerably earlier?
Gregory Clark: I don’t. I don’t recall him having said that. For the reasons that I gave, I think, earlier in our discussion this afternoon, I thought it was important that that litigation concluded, that it were not – I can see from a sort of Department – from a Permanent Secretary’s point of view, to have it sort of dealt with might have had its attractions, but I think a lot of what was in the very comprehensive judgment would not have been in the public domain. And if you take the view that I do, and did, that the criminal convictions, the unsafety of the – the lack of safety of the criminal convictions was, as it were, the keystone of the edifice, I think pursuing that litigation, I think, was important for that.
My concern, having seen partly what happened, going right back to the beginning of my evidence of the supposed settlement mediation through Second Sight, that was not satisfactory, and so I think it needed that resolution. But that’s a long digression. I did not know that Alex Chisholm took that view.
Mr Blake: If we scroll down, finally, on this document, there’s a reference to UKGI, and it says:
“UKGI has the role of overseeing Government’s commercial interests. They’re generally ineffective and pleasant.”
Very briefly, what was your view of UKGI?
Gregory Clark: Well, I’ve got great respect for the people who, often after distinguished commercial careers, give up their time to be on the Board of UKGI and to serve in the public interest, and I don’t want to say anything critical about them. But I think there is – I have reflected on this over the weeks and months ahead – I think there’s something of a kind of Emperor’s New Clothes quality to UKGI, as an organisation, that, with hindsight, I think I and perhaps others should have pointed out.
I mean, let me give you some examples, some of them perhaps trivial. It talks about its “assets”, the whole time, “We are managing the asset”, “We are dealing with” – “These are our assets”. It’s a peculiar way of talking. These are, you know, the Post Office, the Nuclear Decommissioning Authority, Ordnance Survey. They’re not assets. It denotes – no one in Government would talk about the “assets”. They are organisations, they are public bodies; why not call them public bodies?
I think the fact that it’s a limited company is a bit peculiar. You know, why do you have a limited company with all of the downsides, in terms of being able to direct, and that we’ve discussed, when it doesn’t charge for its advice? I don’t see why it should be a limited company.
And to have a limited company giving advice on another limited company, I think, is a bit peculiar. And this whole thing of having memorandums of understanding with departments, you know, the Business Department didn’t have a memorandum of understanding with the Treasury, or with the Communities Department, they wanted to work together. So I think there was a kind of cod corporate finance arrangement to this that, actually, I don’t think was appropriate and necessary.
Mr Blake: If I could bring on to screen the memorandum of understanding that was in place during your period in office. That’s UKGI00017461. It explains, under “Background”:
“UKGI is a limited company wholly owned by HM Treasury …”
Then it says, at 2.2:
“To facilitate UKGI in managing its work and resources, and to enable the constructive engagement of UKGI with the department it advises, memorandums of understanding are expected to be put in place for the benefit of UKGI and the departments it works with.”
“UKGI Service
“UKGI will provide independent advice to BIS and its ministers to deliver BIS objectives. Any direct engagement with Assets or Projects will formally be as an agent of BIS.
“UKGI will provide its advice in a manner consistent with the Civil Service’s core values of integrity, honesty, objectivity and impartiality.”
It then has a section on accountabilities and responsibilities, and it says:
“The accountability to Parliament for the Activities UKGI is involved in will be …”
Then it says:
“Ministerial level: BIS Ministers.”
Then, if we scroll over to the fourth page, it sets out there what it defines as the activities as at 1 April 2016, and one of the assets, as you say, defined under “Assets” is the Post Office.
If we scroll back to the first page, it says on the first page, paragraph 4:
“The accountability to Parliament for the Activities [ie the Post Office]:
“[At] Ministerial level: BIS Ministers.”
Irrespective of the legal interpretation of this memorandum of understanding, do you understand there to be a clear link of accountability of UKGI?
Gregory Clark: No, and I think it’s obscured somewhat by its organisation as a limited company. I mean, in other – I think I say in my witness statement that it describes itself as being, you know, owned by the Treasury, and accountability is to Treasury Ministers.
I think it obscures. It seems to me that sort of simplicity is the best way to proceed. I never had any difficulty in understanding the role of civil servants. Again, they’re not part of the Civil Service, I don’t know why not. There are norms in the Civil Service as to how to proceed. I don’t think it needs that.
I understand that one reason – I suspect, I don’t know, but I suspect one reason for creating this limited company, arm’s-length body is to be able to pay people more than the Civil Service pay scales allow.
But that’s a good example, it seems to me, of, you know, setting up something to get round a problem rather than to address it. If you need, you know, senior corporate finance people in Government to advise Ministers and Permanent Secretaries, then, rather than sort of set up a limited company to employ them, why not have an exception and be direct about it, it seems to me?
Mr Blake: How would you improve, very briefly, the line of accountability?
Gregory Clark: Well, I would certainly have UKGI reporting – well, I would prefer the advice to be within the Department, in essence to be from officials within the Department.
There’s another example of this, and I – in preparing for this hearing, a number of the other public bodies, the Nuclear Decommissioning Authority, an asset in the terms of UKGI, had obviously not a similar but a kind of related problem in which it got into a contractual tangle. UKGI were not very effective in spotting it and bringing it to the attention of the Department and ministers.
As Secretary of State, I commissioned a review by a man called Steve Holliday into that and it reported, I think a couple of years ago. And, interestingly, one of its recommendations is that the complexity of this sort of governance is excessive and it should be – there should be BEIS civil servants directly on the Board, and that’s, it seems to me, a preferable way of operating.
Mr Blake: One of the things that you’ve referred to in your proposed recommendations is something called a public interest company. Very briefly, how do you envisage that would work?
Gregory Clark: Well, it’s a thought, rather than a blueprint, but the thought is this: that some of what we’ve been talking about has been, you know, advice about, you know, whether you’re going to be a shadow director; is this the responsibility of the Board; do you have standing, as a minister, to direct it or not? And a lot of this comes from using the kind of vehicle of an ordinary Companies Act company to contain businesses/organisations like the Post Office, and it seems evident, I think from our conversation this afternoon, that there is a combination of public interest and commercial interest.
In other spheres – in charities, for example – we have a corporate form. The Charity Law states – I’m the trustee of a charity – how that should be because it’s a particular way of organising things. There are things like community interest companies that have their separate governance. So, just for simplicity, to recognise that there are some organisations in which there is, pretty much sort of jointly and severally, a public interest, as well as a commercial interest, and to make it very clear that ministers and officials are absolutely at liberty to have information to direct, as it were, proceedings there, it seems to me, would make life a whole lot easier.
Mr Blake: Some people have blamed individual actions as well as structures. How would you guard against that?
Gregory Clark: Well, there will always be individuals who don’t discharge their duties as well as they should. When we’re talking about UKGI, I have been very struck – and I’m the latest in a series of witnesses who have been members of the Government – that many of my predecessors have been critical about individuals who have been employed by UKGI: I think Jo Swinson was, Baroness Neville-Rolfe, Margot James, Kelly Tolhurst and others.
I think that actually points to a kind of structural problem that they are in a dilemma, or at least are – perhaps because of the requirement to be a member of a unitary board, are drawn into a certain way of proceeding at the expense of another, and this is not a kind of trivial observation.
I mean, you know, one of the purposes of UKGI is to be good at governance, to improve the Government’s capacity at governance. But I have to say, on the evidence of this, and I think on the NDA, the evidence is that they have not been very good at that, in important instances.
For example, the failure of UKGI to bring to the attention of the Post Office Board, let alone ministers, the Parker Review/the Swift Review, which was highly consequential, that seems to me to be a failure of corporate governance, in which UKGI was part. I might also add – which was news to me until the evidence of this Inquiry was disclosed and reported – I had no information given to me that the Board had a lack of confidence in Paula Vennells, for example. UKGI did.
You’ve had conversations, I know, about, you know, ministers from successive administrations being aware of what happened in the previous one. I think that would have been very material, to know that the Board had expressed, in the past at least, a lack of confidence there.
So even as corporate governance specialists, I don’t think the record of UKGI is all that robust, shall we say.
Mr Blake: Thank you. Very finally, you’ve clearly watched a lot or heard a lot of the evidence from this Inquiry. Are there any recommendations that didn’t make its way into your statement that you can think of now, briefly?
Gregory Clark: I tried to reflect on all of these. I do say something about the pattern of evidence. I mean, it seems to me kind of standing back, and I think it – you know, in public policy and public life generally, one of the things that I’ve become – been interested in, in recent years – I was chairing the Science and Technology Committee at the House of Commons – is the development of artificial intelligence.
Artificial intelligence – I’ll explain the relevance in a second – spots patterns that, actually, as it were, the naked eye may not spot. I think if the pattern of prosecutions/convictions had been spotted better and earlier then certainly a lot of the time to resolve these matters might have been shortened and, in many cases, by getting to a recognition of injustice earlier, some people might have been saved the appalling effects that they had. And so some of the recommendations I make in my witness statement is to give responsibility, whether it’s to the CPS or other bodies, to actively monitor unusual patterns, so that they can be brought forward earlier.
But here am I, as it were, sort of freelancing into an area that is judicial, in which I am not really qualified. So I mention that because you asked me whether there was anything else I included in my witness statement, and that was a reflection that I made.
Mr Blake: Thank you very much.
Sir, I don’t think there are any questions from Core Participants, unless you sir, have any questions?
Sir Wyn Williams: No, I asked the few that I needed to as we went along.
So thank you very much, Mr Clark, for your witness statement, for your oral evidence and also for your reflections. A number of your fellow current or past politicians have addressed their minds to reflections, so I think I’m right in saying that, currently at least, you are the last politician who is going to give evidence in this phase and so I would thank all of you, and you’ve used the vehicle for providing me with plenty to think about in terms of how I make recommendations for the future.
The Witness: Thank you, Sir Wyn, and if I’m put in the position of my colleagues, to thank you and the Inquiry for the meticulous approach that you’re taking to it. Thank you.
Sir Wyn Williams: Right, Mr Blake, tomorrow we resume at 9.45?
Mr Blake: That’s correct, sir, yes.
Sir Wyn Williams: We have a part-heard witness, do we not, and then Mr Edwards, is it? Yes, it is.
Mr Blake: That’s correct, yes.
Sir Wyn Williams: Fine. All right, then. 9.45 tomorrow.
Mr Blake: Thank you very much.
(4.28 pm)
(The hearing adjourned until 9.45 am the following day)