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URGENT QUESTION ON POST OFFICE LITIGATION
JUDGEMENT
Department: Department for Business, Energy and Industrial Strategy
Contents
Speaking note — initial answer (page 2)
Speaking note — follow up to likely supplementary (page 3)
Killer facts (page 4)
Attacks and rebuttals (page 6)
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“Will the Minister/Secretary of State make a statement on the
judgement handed down on the Post Office litigation on x”
Initial Answer:
Today/’On XX March Mr Justice Fraser handed down judgement in
the litigation case ‘Alan Bates and Others v Post Office Limited’.
In summary he found that [insert after judgement known]
While the Post Office is publicly-owned and Government sets its
strategic direction, it operates as an independent, commercial
business. As such, the relationship with its postmasters and the
management of its IT systems are operational matters for Post
Office Limited.
It’s important to note that legal proceedings in this case have been
underway since April 2018 and are scheduled to continue until at
least March 2020 through four trials. The first “Common Issues”
trial, looking at the contractual relationship between the Post Office
and its Postmasters, concluded on 6 December 2018 and the
judgement was handed down today/on XX.
The second “Horizon” Trial, looking at the integrity of the Horizon
Point Of Sale system, will start on 11 March 2019. A third trial on 4
November 2019 will determine whether Post Office Limited
breached any legal obligations to specific individual test Claimants,
while a fourth trial in March 2020 will address issues relevant to a
wider group of Claimants. Therefore, the outcome will only be clear
once the overall trial process is concluded.
The legal defence of the ongoing litigation and the costs involved
are being handled by Post Office Limited.
This judgement is complex and runs to [xx] pages. It will take some
time for Post Office Limited to consider this in detail, including
whether there are any grounds to appeal. Either party could seek
leave to appeal, and have until XX to do so.
This remains a matter for the court and it is not appropriate for
Government to comment further.
[284 words]
Follow up to likely supplementary from questioner:
The legal defence of the ongoing litigation is being handled by Post
Office Limited. Both parties will consider whether they wish to lodge
an appeal and have 21 days to do so. Post Office Limited believes
that there is no merit to this case and it will not affect their ability to
provide services.
As the case is ongoing, it would not be appropriate for the
Government to comment further on it at this time.
Government committed in its 2017 manifesto to safeguard the post
office network, protect and enhance the provision of rural services,
recognising the key role post offices play in providing services to
their communities.
There are over 11,500 post office branches in the UK, the largest
retail network in the country. Since 2010, the number of branches
has been at its most stable for decades.
Between 2010 and 2018 Government provided nearly £2 billion to
maintain and modernise a branch network that meets nationwide
access criteria and to invest in transformation of the business. We
are investing a further £370 million from April 2018 to March 2021
to safeguard the network and invest in the future.
[188 words]
Killer facts
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Horizon
e Horizon is the electronic point of sale system used across all
11,500 Post Office branches to record and reconcile each
transaction.
e The Horizon system is operated successfully daily by
thousands of employees across the Post Office’s 11,500
branches, with 47 million transactions every week.
e Post Office estimates there have been half a million users of
the Horizon system since it was first introduced in 1999;
the claimants represent a tiny fraction of this number.
Training and Support for Postmasters
e Post Office continually reviews and enhances training and
support, with tools to help postmasters available 24/7.
e Training packages include in-branch support to provide new
postmasters with ‘live’ experience.
e There are also two helplines with various levels of support
depending on the nature of enquiries.
Network Stabilit
e There are over 11,500 post office branches in the UK, the
largest retail network in the country. Since 2010, the number
of branches has been at its most stable for decades.
e Post Office Limited is actively looking for areas of the country
where there is a demand for Post Office services, with over
350 local branches opened since April 2017 in new
locations.
« Access to branches is meeting the standards we set - 93% of
the UK population live within one mile of their nearest post
office branch. 99% of the UK population lives within three
miles of a Post Office.
e When Labour entered office in 1997/98 there were
19,251 post offices. When they left in 2009/10, there were
11,905 — meaning 7,346 post offices closed under
Labour’s watch.
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Government Commitment to the Post Office Network
e Government provided nearly £2 billion for the period 2010
to 2018 to maintain and modernise a branch network that
meets nationwide access criteria and to invest in
transformation of the business.
« Government is investing a further £370 million of investment
funding from April 2018 to March 2021 to safeguard the
network and invest in its future.
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Attacks and Rebuttals
Attack: will Post Office lodge an appeal against the
judgement?
e The legal defence of the ongoing litigation is being handled by
Post Office Limited. Both parties will consider whether they
wish to lodge an appeal and have 21 days to do so.
Attack: The Horizon IT system is not fit for purpose?
e The Horizon computer system is operated successfully by
thousands of employees, postmasters and their staff to
process 47 million transactions every week. The claimants
represent a very small proportion of the half million users of
the Horizon system since it was introduced in 1999.
e The second trial, due to start on 11 March, is intended to
determine whether historically any errors in the Horizon
system led to losses for postmasters. It is not appropriate for
government to comment further at this stage.
Attack: Did government fund Post Office’s defence in this
litigation?
e No, the costs involved are being handled by Post Office
Limited. The shareholder has specifically required that
government funding is not used for this purpose.
Attack: Will government give Post Office consent to spend
more than £50m on this claim?
e The costs involved in the legal case are being handled by
Post Office Limited. According to the Post Office’s Articles of
Association, the Secretary of State’s consent is required for
“... the incurrence of a commitment or liability, or the payment
of a sum, by any member of the group which is an amount in
excess of £50,000,000.”
Attack: The first trial has concluded, so why won’t government
comment?
e Formal legal proceedings have been underway since April
2018 and are scheduled to continue until at least March 2020
through four trials.
e This judgement relates only to the first stage of the ongoing
trial process and the outcome will only be clear once the
overall trial process is concluded.
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e It would be inappropriate for Government to comment at this
stage.
Attack: Will this affect POL’s ability to deliver services?
e No. Post Office Limited believes that there is no merit to this
case and it will not affect their ability to provide services.
e There will also be no change in Post Office’s requirement to
provide a nationwide network of 11,500 branches within
specific geographical parameters.
Attack: Is this why Paula Vennells resigned as CEO?
e No. Paula Vennells’ decision to step down as chief executive
of Post Office had nothing to do with the High Court trial.
e After 12 years with Post Office, seven as chief executive,
during which the business had a period of unprecedented
success, Ms Vennells is moving to chair the Imperial College
Healthcare Trust and take on a non-executive role with the
Cabinet Office, in addition to her non-executive directorship at
Morrisons.
e Paula Vennells was instrumental in turning Post Office from a
business losing £120m of taxpayers’ money to one making a
profit while also improving services for customers.
Attack: How can you justify the bonuses/pay rise for Post
Office Limited executives?
e Post Office has been turned from a business losing £120
million of taxpayers’ money to one making a profit, while also
maintaining a stable and modernised branch network.
e Assignificant proportion of Post Office executive pay is linked
to the company’s success in delivering a more financially
sustainable Post Office, thus reducing costs for the taxpayer.
e The Post Office operates as a commercial business in
competitive markets and executive pay is set at a level that
ensures Post Office Limited can attract and retain the talent it
requires.
Attack: The judge has been highly critical of the Post
Office. Does the Minister condone the Post Office’s apparently
aggressive behaviour and what is she doing to change the
culture of the company towards people who serve it?
e These claims have been in existence for a long time and we
welcome the light shed on events by the legal process. The
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claims are historic in nature and we believe that POL has
made considerable progress and does not have a problem
with its culture today.
Franchising
Attack: Crown branches are closing at record numbers up and
down the country?
e Crown post offices are not closing but being franchised, either
on-site or by relocating to other high street locations.
e Moving Crown post offices to retail partners has helped
reduce losses in this part of the network from £46 million per
year in 2012 to break-even today.
e These changeswill help keep Post Office services on our
local high streets throughout the country and bring further
investment and modernisation for customers.
Attack: franchising is merely privatisation via the back door —
why is the Government allowing this to happen?
e The Government has no plans to privatise the Post Office and
any move to do so by future governments would require the
approval of Parliament.
e Franchising is nothing new but has been undertaken
previously in many locations across the UK. Franchising has
proven to be a successful way of sustaining Post Office
services in these locations.
e Over 11,300 branches, almost 98% of the total network, are
operating successfully on a franchise or agency basis.
Attack: how can Post Office claim to consult when decisions to
proceed with franchising have already been taken?
+ Franchising decisions are commercial ones for the Post
Office to take, within the parameters set by government, to
ensure we protect our valued national network.
« Prior to finalising its plans for a franchising, the Post Office
runs local consultations to engage the local community and
help shape its plans. This is in line with its Code of Practice
on changes to the network agreed with Citizens Advice.
« Citizens Advice reported that the Post Office
consultation process is increasingly effective, with
improvements agreed in most cases, demonstrating that the
Post Office listens to the community.
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Postmaster Remuneration
Attack: What are you doing to help postmasters in relation to
banking remuneration?
e As banking services have developed and increased, I know
the Post Office is looking at ways to better recognise the
effort required by its postmasters for banking transactions to
reflect the additional time and training taken from
transactions.
e For example, last year Post Office increased remuneration
twice for banking deposits to reflect the increased demand for
services. Post Office also increased remuneration for mails,
dangerous goods and bar coding data capture.
- However, Post Office Limited is not complacent and is
working closely with the National Federation of Sub-
Postmasters to look at ways to improve things further for
postmasters, both in terms of remuneration and level of
support for postmasters to run their business successfully.
Attack: Will the Government reverse the harmful reductions in
postmasters pay implemented by the Post Office?
« While the Government sets the strategic direction for the Post
Office, it allows the company the commercial freedom to
deliver this strategy as an independent business.
- The Post Office has introduced automation and
simplifed transactions to deliver time and cost savings for
postmasters.
« The Post Office wrote to Postmasters in April 2018, notifying
them they will no longer be implementing the planned
reduction in remuneration resulting from phase 2 of their
simplification programme.
« This means that postmasters will further benefit from simpler
and more efficient processes without any reduction in
remuneration.
Attack: Why if Post Office profits rose to £35 million,
postmasters’ pay was cut by £17 million?
« With the modernisation of post offices through the Network
Transformation programme, Post Office services are now
provided alongside a wider retail offer rather than a
traditional, stand-alone Post Office.
« Asaresult, new contracts for postmasters in modernised
branches moved them away from fixed pay towards
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transaction-based remuneration, to reflect the
complementarity of the Post Office and the associated retail
business.
« These new contracts could mean that in some cases
postmasters’ remuneration goes down. Yet at the same time
the Post Office has increased remuneration rates for banking
transactions and is committed to look at additional
improvements.
Attack: the Post Office does not care about its postmasters,
but without postmasters there would be no network.
e The Post Office cares deeply about all its staff and the
thousand postmasters that play a key role in ensuring
branches remain at the heart of communities across the UK.
e If postmasters fall on hard times, the National Federation of
Sub-Postmasters, funded by Post Office Limited, can also
provide financial support through a benevolent fund.
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