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Department for
OFFICIAL-SENSITIVE Business, Energy
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Date: 19 March 2020
Director General: Sarah Munby
Lead Official: Shanice Swales
Lead Official Telephone:
Recipient To Note / Comment To Approve / Decide
Minister Scully MP X
Permanent Secretary Xx
Secretary of State X
Special Advisers x
BEIS SELECT COMMITTEE: POST OFFICE — HORIZON INQUIRY
Summary
1) You are attending the BEIS Select Committee oral evidence session on 24" March
with Carl Creswell and Tom Cooperfocussing on issues emerging from the
Horizon IT court case. Abriefing pack for the sessionis attached. We have
included a list of questions that the Select Committeeare likely to ask (see pages 4-
5 of the briefing). We will discuss the overall approach with you at the pre-brief on
Monday 23% March.
Timing
2) Urgent -— to be reviewed prior to the pre-brief with officials on Monday 23 March.
Recommendations
3) That you review the attached briefing including Annex A that outlinesthe written
evidence submitted to the Committee on 16’ March; Annex B that outlines a
historical timeline of events and Annex C that outlines key figures and statistics
ahead of the pre-brief on Monday 23' March. In paragraph 7 we have outlined the
key areas the Committee plans to focus on.
Background
4) The Committee has focussed their inquiry on issues emerging from the Horizon
Litigation. The Terms of Reference are as follows:
e What damage has Horizon caused to the relationship betweerPost Office Ltd
(POL) and sub-postmasters and will this impact on the st Office network?
e What role did the National Federation of Sub-postmasters play in the Horizon
scandal in terms of representing affected sub-postmasters?
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« What steps are the Government taking to help sub-postmasters to overturn
convictions if they were based on Horizon errors?
e Have the costs of the Horizon case adversely affected st Office services and
are there potentially more costs resulting from further civil and criminal
litigation?
e How transparent isPOL in its decision making and in its use of public money?
e What lessons has POL learnt and what steps is it taking to avoid similar
problems?
e What role did BEIS and UKGI (UK Government Investments) play and is it
reviewing its oversight of POL following Horizon?
The Committee held its first hearing on 10th Marci. In its first pane! it heard from
postmasters Alan Bates, Wendy Buffrey, Tracey Felstea: and in its second panel
from the CWU, NFSP and Second Sight. A range of issues surfaced including
POL’s need to be more transparent, litigation costs, criticism of NFSP and BEIS
and UKGI roles. On 24th March, the Committee is expected to also question POL
CEO, Nick Read, the former POL CEO, Paula Vennell: and a representative frorr
Fujitsu.
Carl Creswell, Director Professional and Business Services, Retail and Postand
Tom Cooper, Director in UKGI responsible for the Post Office and theshareholder
representative on POL’s Board, will give evidence to the Select Committee at the
same time as you
Advice
7)
The briefing pack is structured around the above terms of reference (see
paragraph 4 above) and also addresses the specific questions we expect the
Select Committee as summarised below.
Whether BEIS will revisit Post Offices’ powers to prosecute postmasters and
your position on the prosecution as a whole and how postmasters were
treated
a) Question 1: We have lines that acknowledge that POL’s prosecution
powers are no different to any other private company but that POL CEO,
Nick Read has assured BEIS ministers that they will consult BEIS.
b) Question 2: On your position on the prosecution we have lines referring to
the independence of the CCRC and next steps, depending on the
decision that may have made on 24". The lines also acknowledge the
account of the emotional and financial distress on postmasters that you
have personally heard (during your call with Alan Bates, Deirdre Connolly
2
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and Rajinder Bilkhu on 18 March) and the focus on moving forward and
ensuring POL rebuilds its relationship with postmasters.
UKGI’s push for POL’s changes in culture and processes and ensuring these
are sufficient
c) Question 3: Our lines focus on the key commitments POL have made
following the settlement and the BEIS and UKGI roles and collective steps
in monitoring these. This includes challenging Nick Read and POL Chair,
Tim Parker to personally strengthen POL’s relationship with postmasters,
which they have assured they will do and monitoring their commitments
through quarterly POL/NFSP working group, quarterly Shareholder
meetings and meetings that Nick Read will have with you.
BEIS and UKGI’s roles throughout the litigation process, with a particular
focus on the knowledge we had, what we were told and challenges we
provided (including the Second Sight reports and BEIS being misled by POL)
d) Question 4: Our lines focus on the respective roles of UKGI and BEIS and
f)
the actions that officials and ministers took at the time based on the
information they relied on from POL at the time (see Annex B — historical
timeline of events). We acknowledge that historically POL’s approach to
information sharing was via the POL Board and that UKGI challenged
POL on its overall handling over a number of years.
Question 5: On the question about POL/Fujitsu’s knowledge that they
could have changed Branch Horizon gaps, we have clear lines on the
advise Government was given. This is an area for POL to expand on in
their oral evidence session, which will have been earlier on the morning of
24".
Question 6: On the questions related to Second Sight reports, our lines
set out that BEIS and UKGI officials and ministers were provided with the
reports. We are likely to get pushed on what actions were taken as a
result of the Second Sight report and whether government could have
done more, particularly in light of the evidence given to the BIS Select
Committee in 2015 that it was not given proper access to the evidence it
required. We have focused on the steps that ministers took at the time to
repair relationships between POL and Second Sight including the
appointment of Tim Parker in 2015, whose first task was to undertake a
review of POL’s handling of Horizon complaints.
g)
=
Litigation
k)
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Question 7: The Committee asked the Permanent Secretary to attend, but
he has declined. We have lines on governance procedures and
procurement rules. We do not believe that POL did not follow any
Governance procedures required of them. The Post Office and BEIS has
regularly engaged with Parliament on Post Office issues.
Question 8: We have lines to explain that the Post Office, despite
challenge at the time, as found by Mr Justice Fraser, provided BEIS with
advice which is now known to have been flawed.
Question 9: Our lines focus on the issues associated with Horizon are
from its implementation from 2000, of which, none of the responsible
directors are with the organisation. With regard to more recent leadership,
Paula Vennells is no longer with the company, nor in her Cabinet Office
role, and Tim Parker, who was brought in as Chair in October 2015, has
been supportive of the transformational change needed within the Post
Office.
Question 11: Our lines show that, whilst BEIS was kept informed by the
POL of the status of the litigation and it was for the Post Office Board to
make the decisions with regard to the litigation. Tom Cooper, the
shareholder representative, was not part of the decision to recuse the
Judge, as a Government Official would have a conflict of interest in
making a decision with regard to the quality of a judicial decision.
costs and shortfalls scheme
Question 10: Our lines reiterate that litigation costs have been met by POL
and if pushed we can say that the financial cost of the litigation to POL is
circa. £97m (funded from POL’s commercial revenues) and that the former
CEO Paula Vennels confirmed this in writing to the Permanent Secretary in
January 2019 and that it was a Government condition for approval of the
settlement. If asked about the potential impact on the network subsidy or
changes to the Post Offices fees for transactions, particularly banking we
have clear lines on this.
Question 12: On the historical shortfalls losses scheme our lines reiterate
that POL engaged with claimants in the settled litigation on the design of
the scheme and that we will track the progress on this closely as a part of
the Independent Review.
BEIS position on NFSP as credible representative body
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m) Question 13: Our lines reiterate that whilst Government acknowledges the
criticisms of the NFSP set out in the Horizon judgment, that it is not for
Government to determine who represents the postmasters. We have also
highlighted the recent positive steps that NFSP has taken to challenge POL
e.g. on improving postmaster renumeration. Also we acknowledge the
importance of engaging with Communication Workers Union (CWU) to
understand the views of all postmasters.Ultimately, it is for the Post Office
to decide which representative bodies they engage with, not a role for
Government.
The issues the public inquiry will focus on and the process of this
n) Question 14: Our lines will focus on gettingthe Review terms of reference
right. You can say that you are committed, andwill make an announcement
shortly.
8) Given Horizon was first introduced in 1999 the issues go back over 20 years. We
have pulled together a timeline of what happened when informed by the available
records. See Annex B.
Media Handling
9) There is likely to be media interest in the Select Committee hearing. We will
prepare some reactive lines to take.