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Department for
Business, Energy
Date: 28 February 2020 & Industrial Strategy
Director General: Sarah Munby
Lead Official Carl Creswell
Lead Official Telephone:
Recipient To Note / Comment To Approve / Decide
1. Permanent Secretary xX
2. Minister Scully Xx
3. Special Advisers xX
4. Secretary of State x
Post Office: Follow-up to PMQs
Summary
1. Following the exchange at this weeks PMQs about the Post Office, we are seeking
your views on our proposed approach to implementing the PN& response to calls
for an independent inquiry. We willthen seek approval from No 10.
Timing
2. Urgent— we would welcome your steer ahead of BEIS oral PQs.
Recommendations
3. That you agree that we should recommend to No 10 that we invite an independent
reviewer to assess whether the Post Office has sufficiently learned the lessons
from the Horizon case and will behave differently in future. We recommend that
the best timing for this would be later this year, following the conclusion of the
current inquiry by the Criminal Cases Review Commsgsion (CCRC).
Advice
4. As you are aware, the Prime Ministerat PMQs on Wednesday answered a
question raised by Kate Osborne MP, who asked if he would commit to launching
an independent inquiry into the issues that postmasters had faced in relation to the
Horizon accounting system including ‘errors [that] have resulted in bankruptcies,
imprisonment and even suicidé. The Prime Minister responded as follows: ‘I am
indeed aware of the scandal to which she alludes and the disasters that have
befallen many Post Office workers and I am happy- I've met some of them myself
— and I am happy to commit to getting to the bottom of the matter in the way that
she recommends: (A full transcript of the exchange is at Annex A.)
5. Following those comments, you have requested advice on ways to respond to this
commitment. Our understanding is that No 10 is open to our advice about the best
way to proceed.
6. Post Office Limited (POL) has been involved in a long-running dispute with its
postmasters, which culminated in an agreed settlement of group litigation claim
for £57.75m in December 2019. In the past, anumber of postmasters were
prosecuted by POL following allegations of theft and fraudsee Annex B). The
company has operational independence, with Government as the sole shareholder.
Over the last year, BEISand UK Government Investmentshas provided challenge
to the Post Office on reaching an agreement with thepostmasters and changing its
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culture to take a more positive approach to engaging them in its & Industrial Strategy
business. Mr Justice Fraser has also said in court- based on expert evidence—
that the Horizon system is now’relatively robust.
7. The December settlementfollowed two lengthy trialsand a number of legal
judgments, in excess of 1000 pages which carefully detail what went wrong at
POL. There are also two live independent reviews into alleged miscarriages of
justice:
(i) The CCRC is assessingthe cases of some of the convicted postmasters,
including some of theclaimants, and is due to consider them on 24 March.
It may resultin some or all of the cases they are assessingbeing referred to
the Court of Appeal. This is clearly of great significance for the individuals
and we need to be careful not to undermine the live review or create delay
to the process. It should be a priority for the postmasters to have access to
justice in relation to a potential overturning of their convictions.
(ii) The Director of Public Prosecutions has also received a referral fronMr
Justice Fraser on Fujitsus behaviour in this and their involvement in
individual postmaster trials
8. These are the appropriate bodies to review tase issues and should be allowed to
proceed without the risk of delay to obtaining remedies for any convicted
postmasters who may have been wrongly convicted
9. We advise that those steps on their own however, are not sufficient. Although the
Post Office (under the leadership of its new CEO, Nick Read), are showing positive
signs of starting to change, we believe that we need assurance that people can
have confidence that POL has learned the lessons and will behave differently in the
future. We have already written to the POL Chair, Tim Parker, outlining our
expectation that the Post Office change its approach in light of the postmasters
concerns and explain to the Government what it is doing.We have also asked
them to tell Ministers before undertaking any enforcement action. Nick Read
promised that POL would notexercise its right to bring a privateprosecution under
the Prosecution of Offences Act 1986 in a call with Lord Callanan this week.
These powers are not specific to the Post Office. We could also release into the
public domain information aboutthe commitments that POL made within its
settlement agreement to improve its relationships with postmasters.
10.Beyond this, we recommend that we should commission an independent
assessment of whether the Post Office has properly moved on. We believe that the
best time for this would be after the CCRC has completed its consideration of the
criminal cases because we do not want to colour this independent review. If you
agree with the proposal, weadvise that you commit to launching a review by the
end of the year. This would provide an independent assessment of whether the
Post Office has properly learned and changed, focusing on the relationship
between POL and the postmasters and the controls that they have in place. We
could also point to encouraging the CCRC and DPP to conclude their inquiries as
quickly as possible.
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11. If you agree, we will subsequently provide advice on a potential & Industrial Strategy
candidate whom you might wish to approach to undertake this revievand
proposed terms of reference
12.We would not recommend commissioning another review into the facts of the case.
Those have been comprehensively detailed through a series of extensive legal
judgments from Mr Justice Fraser, at cost to the public purse and it is important
not to undermine what has already been determined in court. Any such review
would be lengthy. The policy decisions that established POlLs practices in the past
relating to actions against postmasters originated in the late 1990s when Horizon
was introduced and early 2000s when POL was still part of Royal Mail.
Furthermore, the vast majority of claims in the litigation and all the prosecutions
relate to events in the period from the late 1990suntil around 2013 when POL
stopped prosecuting in its own name. All the people involved in Board and senior
management positions in the company during this period are no longer with the
Company.
Communication Handling
13.The Prime Ministers comments were reported in TheDaily Telegraph, which noted
that the government‘will commit to holding an independent inquiry. His comments
were also reported in trade titles Better Retailing and Computer Weekly, as well as
in Kate Osborne's local newspaper, ChronicleLive. Until there is agreement from
No 10 on the proposed approach, we recommend continued use of lines agreed
with No. 10 in response to the Prime Ministets comments:
A Government spokesperson said:
“We take the Post Office's relationship with its postmasters very seriously and
closely monitored the situation during the legal proceedings. The Post Office, under
its new CEO, has since accepted it got things wrong, apologised and has said it
aims to re-establish a positive relationship with postmasters. The Department for
Business, Energy and Industrial Strategy is working actively with the Post Office on
this matter and will hold them to account on their progress. We are also looking into
what more needs to be done,”
14.When No 10 are content with the proposed approach, we will provide an updated
holding line (agreed with No 10) to be used until Collective Cabinet Agreement has
been reached. Following the conclusion of write round, we will work with No10 on
the timing and nature of any announcement and prepare reactive Q&A on the
timelines and nature of the inquiry, both of which are likely to disappoint some
parties who are seeking this to cover compensation, oversight by Government and
accountability of individuals within POL.
Contributors
15. This advice contains financialconsiderations, asagreed with Vanisha Patel. There
is no allocated budget for the cost of a independent reviewin BEIS’s 2020/21
Budget. Depending on the cost of the inquiry, BEIS would either look to manage
the pressure within existing budgets or seek further funding from HMT.
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16.Legal: Patrick Kilgarrif, Louise Jackson and Richard Watsonhave
been consulted and agreed the content of this advice
17.Communications considerations havebeen taken into account and agreed with
Calum Grant
18.This advice does have parliamentary handling implicationsas there have been a
number of PQs and Debates in his area, as agreed with Carl Creswell
Annexes
A. Extract from PMQs, 26 February 2020
B. Background to Horizon case
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Annex A: Extract from PMQs, 26 February 2020 & Industrial Strategy
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Kate Osborne (Jarrow) (Lab
Like many other sub-postmasters, my constituent Chris Head was victim to the Post
Office Horizon IT system scandal. These errors have resulted in bankruptcies,
imprisonment and even suicide. Will the Prime Minister today assure Chris and others
that he will commit to launching an independent inquiry? [900849]
The Prime Minister
I am indeed aware of the scandal to which the hon. Lady alludes and the disaster that
has befallen many Post Office workers—I have met some of them myself. I am happy
to commit to getting to the bottom of the matter in the way that she recommends.
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Annex B: Background to HorizonLitigation & Industrial Strategy
1.
In 1999, POL introduced a computerised electronic point of sale and accounting
system called Horizon, which postmasters were required to use in their branches.
Horizon requires postmasters to account for stock, sales and takings, and, as part
of their balancing process, identifies shortfalls or discrepancies. Under the terms of
their contracts, postmasters are required to make good any shortfalls out of their
own funds.
. Over the years Horizon recorded shortfalls which POL investigated and
implemented various audit and collection procedures to minimise losses from the
network. Many of the postmasters had their contracts terminated, some summarily
for breach and others on notice. Up until 2013, in cases they deemed appropriate,
POL also prosecuted postmasters for criminal offences- principally theft, fraud and
false accounting.
In 2009, some postmasters formed the “Justice for Subpostmasters Alliance”
(JFSA) claiming that bugs in Horizon had caused the shortfalls in cash, that they
were not the fault of the postmasters and that POLs approach to their cases was
unreasonable and unjust. This subsequently attracted significant parliamentary and
media interest.
. Between 2013 - 2015 there was an independent mediation scheme set up by POL
in which postmasters could have their case investigated and then potentially put
forward for mediation. There was disagreement between POL and postmasters for
which cases were accepted for mediation accompanied by negative media
coverage and attention from MPs.
. In April 2016 this litigation was commenced led by Alan Bates (Alan Bates and
Others v Post Office Limited) involving 555 postmasters. 61 claimants have
criminal convictions and many of these make up the 55 cases that are currently
being considered by the Criminal Case Review Commission (CCRC), who have
the power to refer cases to the Court of Appeal to consider whether convictions are
unsafe).
. The Group litigation was widely publicised by the postmasters legal
representatives (Freeths LLP) and funded by a third-party hedge fund Therium
Group).