BEIS0000984
BEIS0000984
OFFICIAL SENSITIVE COMMERCIAL
Sarah Munby
Permanent Under-Secretary of State
1 Victoria Street
London
SW1H.OET.
Tim Parker
Post Office Limited
Finsbury Dials
20 Finsbury Street
London
EC2Y 9AQ
Dear Tim,
STRATEGIC PRIORITIES FOR 2022/23
As you know, each year we write to you in your role as Chair at Post Office Limited (POL) to
set out the key priorities on which the Department would like you to focus in the coming year.
Your second, and final, term as Chair ends this September and I would first like to
acknowledge your service in leading POL over the last seven years. I am grateful to you for
the resilience and counsel you have shown steering the company through what has been an
exceptionally challenging and heavily scrutinised period in the company’s history.
The last year has been at times a difficult one. I recognise the company and its people will
continue to operate in challenging circumstances over the next 12 months following a tight
Spending Review settlement and increased public scrutiny of POL during the Inquiry. Clear,
candid, and transparent dialogue between the POL Board, UKGI and BEIS is key to our
successful working relationship, and my officials are committed to working openly and
collaboratively with you and your colleagues over the coming year.
Shareholder priorities
As we move into the new financial year, I know that POL continues to respond to the Post
Office Horizon IT Inquiry, resolve legacy litigation-related issues and develop the commercial
and network strategy to help position the company for future success. Please continue to lead
the Board and provide support and challenge to the Chief Executive and management team
in the delivery of these aims. For reference, UKGI's standard governance expectations of a
Chair are at Annex A.
Specifically, I would like you to focus on the following priorities:
Page 1 of 8
BEIS0000984
BEIS0000984
OFFICIAL SENSITIVE COMMERCIAL
1. Maintaining and improving POL’s capacity, capability, and resilience at all levels of
the organisation
I am pleased with the progress POL has made in increasing the capacity and capability of
the Board over the last year. The new Legal NED and two Postmasters NEDs are already
making a positive contribution to the Board. The recent appointment of a new Director to
provide strategic leadership to the Historical Matters Business Unit (HMBU) is another
important step forward. In your remaining time as Chair, I would be grateful if you could:
Continue to support the induction and integration of new Board Members and those
new to their role into the Board so they are operating cohesively, effectively and
with a good understanding of the role of government as a shareholder;
Challenge and support the CEO’s efforts to improve the expertise, depth, and
resilience of the Group Executive team and to refresh and upgrade POL's capability
at all levels of the organisation; and
Ensure that the Board and Group Executive team have a robust succession
planning process and people strategy in place.
I would be grateful if you could update my officials through the quarterly shareholder
meetings on progress in these areas, including key personnel risks and contingencies at
both the Board and Group Executive level.
2. Engaging with the Post Office Horizon IT Inquiry and implementing change
Thank you for the significant amount of time and effort that the Board and management
team has spent to date engaging with Sir Wyn Williams and his team. For FY22/23, POL
should:
Continue to engage fully with the Statutory Horizon IT Inquiry in a demonstrably
open and transparent manner;
Reflect on the Inquiry’s findings as they emerge and take proactive action to
address them;
Drive forward the Company's cultural change programme, embedding any
learnings and changes; and
Report to Ministers within a month of the Inquiry’s final report with your immediate
action plan and the strategy to implement its recommendations.
A key objective for POL’s current Board and management team is to demonstrate to the
Inquiry’s satisfaction that changes have been, or are in the process of being, made to
POL’s systems and processes so that they are fit for purpose. I should be grateful if you
would write, by the end of the parliamentary summer recess, to let me know what
assurance, both internal and external, the Board is putting in place to demonstrate this.
3. Resolving historical litigation issues
I am grateful for the considerable efforts undertaken by POL to work with officials to
comprehensively address historical matters in a timely manner. I was particularly pleased
to note that interim payments have now been received by 66 of the 73 postmasters who
have had their convictions quashed so far, and that the first initial full compensation offers
Page 2 of 8
BEIS0000984
BEIS0000984
OFFICIAL SENSITIVE COMMERCIAL
have been made to those postmasters who have sufficiently advanced their claims. I was
also pleased to note the successful set up of the Historical Shortfalls Scheme (HSS), with
POL having made offers to over 50% of claimants by the end of March. Finally, I welcome
POL’s decision to set up a Board Sub-Committee on Historical Remediation chaired by
the new Legal NED and a new standalone HMBU. It is right that these issues receive the
attention they require to ensure their swift resolution. For FY22/23, POL should:
Build on the successes of the HSS and the lessons learned to ensure effective
progress of the other compensation areas;
Deliver the HSS timetable with our ambition for 100% of offers made by the end of
2022 and progressing claimants through to the post-offer process;
Continue to work closely with officials to progress the timely delivery of
compensation to Postmasters with Overturned Historical Convictions (OHCs);
Work with officials on issues relating to GLO compensation;
Identify and deliver compensation to postmasters that have suffered detriment not
captured within the other areas; and
Challenge POL management so their activities are reflective of our shared
objectives for compensation: to see postmasters are treated with consistency and
they receive swift compensation that is fair for claimants and taxpayers.
We acknowledge that the delivery of compensation to claimants is raising a number of
difficult issues, given the challenging objective of balancing fair and swift compensation
consistently across the claimant groups with making appropriate use of taxpayers’ money.
We remain committed to working with you to resolve these issues.
. Effective management of legal costs and settlements with claimants
I recognise the difficulties that POL has faced in the quantification and management of
costs related to the various litigation workstreams, as reflected in the delays to the
approval of the budget for FY21/22 and the withholding of funds by BEIS. Our view is that
these costs remain too high and it was disappointing to see that, since your revised
Spending Review bid in January 2022 (which was reviewed by Interpath), POL’s expected
costs associated with delivering compensation and dealing with the Inquiry have risen by
over £40m, albeit we recognise this is driven in part by the Inquiry timing, which is outside
of your control.
Notwithstanding the above, I am grateful for POL’s continued engagement with UKGI and
BEIS officials to address and find a positive way forward on these challenging matters.
For FY22/23, POL should:
Enhance commercial expertise in the HMBU so that the process for managing
settlements with claimants is improved and delivers value for money for the
taxpayer, whilst also respecting the limitations on claimants to produce evidence in
many cases and the need to deliver fair outcomes for affected postmasters;
Ensure effective Board oversight of the forecasting, monitoring, and challenging of
POL’s accrued legal costs against HSF’s cost model and the delivery of the work
instructed by POL management to POL’s legal advisers; and
Page 3 of 8
BEIS0000984
BEIS0000984
OFFICIAL SENSITIVE COMMERCIAL
Work with officials to explore ways in which these activities could be delivered
differently, in particular to deliver redress in a timely manner and at a lower cost,
alongside continuing to review legal costs and controls.
Please provide us with an update, in the next quarterly shareholder meeting management
information pack, on the lessons learned from POL's management of legal costs so far
and the next steps POL is taking to reduce costs and improve cost management going
forward.
. Effective financial management and performance
Credit is due to POL for its successful negotiation of Banking Framework 3 and securing
of agreement from all banks to remain within the framework. I must also express my thanks
for POL having consistently exceeded its minimum branch network requirement of 11,500
branches since the Covid-impacted network waiver was lifted in June 2021. I was pleased
to note that the network size of 11,621 branches as at February 2022 was the highest
level since the onset of the pandemic in March 2020 and that the first independent third-
party audit, undertaken by PwC, of POL’s network report was completed successfully. I
also welcome the alignment of change spend and cash flow metrics in POL’s Short-Term
and the Long-Term Incentive Schemes, completing the transition away from the historical
focus on EBITDAS in favour of a new primary focus on cash flows. For FY22/23, POL
should:
Deliver the Spending Review outcome whilst ensuring that POL maintain a network
of at least 11,500 branches and adhere to the Access Criteria;
Implement Banking Framework 3 and make preparations for Banking Framework
4, working with UKGI to ensure Banking Framework 4 helps put POL on a path to
financial self-sufficiency;
Lead the Board to oversee delivery of POL’s FY22/23 annual budget and provide
ongoing effective challenge of POL’s management where actual trading
performance and/or investment spending deviates adversely from plan;
Oversee and challenge investment spend, particularly whether investment funding
is being used effectively to support the achievement of POL’s strategic priorities;
and
Begin serious consideration of a potential future sale of the Post Office Insurance
business in line with the conditions set out in the Spending Review settlement letter.
Although the Spending Review outcome was lower than the company had been seeking,
POL still has a substantial capital budget over the next three years. It is critically important
that the company executes well on the related programme of work including the delivery
of some longstanding mission-critical programmes such as the Strategic Platform
Modernisation Programme (see below), Belfast Exit and PCI-DSS. I have asked my
officials to provide me with a quarterly update on progress with the plan being adopted by
the Board. I would be grateful if POL continues to assist us with reporting change spend,
Page 4 of 8
BEIS0000984
BEIS0000984
OFFICIAL SENSITIVE COMMERCIAL
in particular highlighting risks to delivery, significant deviations from the plan and actual
and anticipated project overspends
6. Successfully delivering the Strategic Platform Modernisation Programme (SPMP)
I was pleased with the substantial progress on the SPMP to replace the Horizon IT system,
including the successful delivery of pilots of the new IT system. For FY22/23, I would like
POL to:
Ensure full Board challenge and scrutiny of the Horizon IT replacement
programme, SPMP, enabling effective delivery against the programme plan and
obtaining external assurance where appropriate; and
Ensure the SPMP is developed and implemented to address the historical issues
and builds postmasters’ needs into the heart of the design and roll-out.
I look forward to seeing the final business case for this project going through the BEIS
Portfolio Investment Committee for approval in May 2022. This is a critical project and I
will expect the business case to clearly set out the robust governance and assurance
arrangements required to safeguard its delivery.
BEIS also looks forward to working collaboratively with POL over the coming year on
reviewing the policy framework for POL. It is crucial that we develop a sustainable, long-term
approach for the network, as well as looking at key services (mails, cash and banking services
in particular) and ensuring that this remains fit for purpose for communities and vulnerable
consumers. We are keen to work collaboratively to ensure that our policy requirements deliver
the right outcomes for consumers and put POL on a sustainable footing for the future. We
also value POL’s cooperation across a wide number of other policy issues, in particular those
relating to POL’s continued critical contribution to the access to cash and anti-money
laundering agendas. POL’s continued collaboration on a wide range of network issues raised
by MPs is also much appreciated.
I look forward to discussing progress against these priorities at our next meeting and in your
exit interview.
Yours sincerely,
Sarah Munby
For and on behalf of the Department for Business, Energy and Industrial Strategy
Page 5 of 8
BEIS0000984
BEIS0000984
OFFICIAL SENSITIVE COMMERCIAL
Annex A: Governance Expectations of the Chair
This letter, issued by UK Government Investments (“UKGI"), sets out the standard
governance expectations of Chairs within its portfolio. This is not an exhaustive list of the
duties of a Chair, and should be accompanied by a letter, tailored to the needs of Post Office
Limited (“POL”), outlining the specific priorities and expectations of both BEIS and UKGI,
acting as shareholder. This document does not supersede or alter any responsibilities as set
out in POL’s Framework Document, Articles of Association, Funding Agreement or
Entrustment Letter.
UKGI, acting as shareholder on behalf of Departments, expects the Chairs of its Assets to
lead the Board in an effective and collegiate manner, and adhere to best practice corporate
governance standards where possible in undertaking their roles. It is your responsibility, as
Chair of POL to lead the Board, and ensure that it undertakes all of its responsibilities as set
out in POL’s Articles of Association and Terms of Reference, Managing Public Money and
the Corporate Governance Code. The Chair should set the tone from the top of the POL and
promote an effective and appropriate culture in both the Boardroom and the wider
organisation.
Your responsibilities are to act in accordance with the highest standards of corporate
governance, and are complemented by requirements and expectations of you by HM
Government. Below is a list of some of the core governance expectations of UKGI regarding
your duties as Chair encompassing both of these elements. This list is not intended to be
exhaustive, and does not supplant any responsibilities set out in the POL’s governing
documentation:
Set the Board’s agenda
You should set the POL’s Board’s agenda in good time ahead of a Board meeting. There
should be sufficient visibility of items for forthcoming meetings to allow Board members,
Executives, and stakeholders as necessary to prepare and engage with the Board. The
agenda should focus upon the POL strategy and any policies as set by BEIS. In addition, the
Board’s agenda should interrogate the POL’s ongoing performance, culture, and value for
money, all while being cognisant of its overall accountability to the Secretary of State, and
ultimately, the taxpayer.
Encourage engagement from Board members
You should encourage Board members to engage with POL both within Board meetings,
through active participation in discussions and decisions, and more widely. You should
encourage Board members to join Board committees where they can add value. You should
support Board members to contribute their expertise where relevant to POL on an ongoing
basis. You should foster effective relationships based on trust, mutual respect, and open
communication between Board members and the Executive team, both inside and outside of
the Boardroom. You should monitor and manage conflicts of interest among Board members
in order that the Board may function appropriately, in accordance with the conflicts of interest
policies of BEIS and POL.
Foster relationships between the Board and stakeholders, including Government
Page 6 of 8
BEIS0000984
BEIS0000984
OFFICIAL SENSITIVE COMMERCIAL
You should be the principal point of contact between stakeholders and the Board. You should
foster constructive relationships with all relevant stakeholders to POL, including postmasters
and employees. You should also maintain a constructive relationship with BEIS and UKGI in
the course of your work.
Develop a strong working relationship with the Chief Executive
The relationship with the Chief Executive is key to the long-term success of POL. You should
provide support and advice to the Chief Executive, while respecting their executive
responsibility. You should work with the Chief Executive to consider the strength of the
broader executive team. Under your leadership, the Board should consider executive
succession planning on a regular basis.
Work with HM Government on the composition of the Board, and the appointment of
new Board members
You should consider the composition of the Board in line with the requirements of POL on a
continual basis, providing regular feedback to BEIS and UKGI as appropriate. You should
work with BEIS and UKGI to consider appointments to the POL Board. You should engage in
the appointment process as appropriate as per the agreed framework, and in compliance with
rules or regulations governing appointments to the POL Board.
Provide mentoring and an induction to new Board members
You should lead the induction to new Board members on behalf of POL. You should make
sure new Board members are introduced to all relevant people both within POL and among
stakeholders. This should be done in cooperation with BEIS and UKGI. The induction process
should familiarise new Board members with POL and its overall governance framework.
You should encourage Board members to develop their knowledge and skills
You should continually consider the knowledge and skills that the Board requires to discharge
its duties to POL, this should be considered in conjunction with UKGI. Where the Board would
benefit from additional knowledge and skills, which can be met without the need to recruit
new or additional Board members, you should encourage Board members to undertake
relevant training and education where possible.
Lead the annual evaluation of the Board, which should be externally facilitated at least
every three years
You should ensure that a review of the Board's effectiveness is undertaken on an annual
basis. This should be facilitated by an external provider at least every three years. Where the
evaluation is not externally facilitated, you should lead the process, gathering feedback from
Board members regarding the Board’s functioning. You should also consider how
stakeholders, such as BEIS and UKGI, can input into the review, to provide comment upon
the Board's effectiveness in engaging with Government and stakeholders. You should be
responsible for overseeing the implementation of any recommendations arising from a review
as necessary.
Evaluate the performance of non-executive Board members at least annually
Page 7 of 8
BEIS0000984
BEIS0000984
OFFICIAL SENSITIVE COMMERCIAL
You should undertake a review, at least annually, of the performance of non-executive Board
members. This review should consider their contributions to the Board, and the value they
add to POL. You should write these reviews and be prepared to share them with BEIS and
UKGI in an appropriate manner. A written review of performance may be necessary to support
any reappointment decisions for Board members.
Be subject to an annual performance evaluation
You should engage with an evaluation of your performance on an annual basis. You should
allow the Senior Independent Director to gather feedback on your performance from the
perspective of Board members. BEIS and UKGI shall gather feedback from Government and
other stakeholders. This will be collated by UKGI and provided to the Principal Accounting
Officer in an appropriate manner. A written review of your performance may be necessary to
support any reappointment decision.
Page 8 of 8