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NFSP OVERSIGHT
COMMITTEE PROPOSAL
Draft Report: November 2024
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OVERSIGHT COMMITTEE WORKING DOCUMENT
(updated 2 December 2024)
INTRODUCTION...
Aims and purpose of the Oversight Committee — Executive Summary....
Background to governance of Post Office ....
The Government and Post Office
Current Postmaster Representation
Current Postmaster views of Post Office
OuUuu sp w
Current Postal Landscape ....
OVERSIGHT PROPOSAL.
Purpose of the Oversight Committee...
Aim of the Oversight Committee...
Key Aims...
Role of the Oversight Committee ...
© wow oN NY
Committee Membership...
Meeting Frequency...
What the Committee will use as its foundation.......
What the Oversight Committee offers that isn’t currently met
Suggested scope for oversight committee ..
Proposed hierarchy structure for oversight committee ...
Monitoring...
Measuring success.
Post Office/ Government
BONUSGATE: A CASE STUDY...
Current Process.
Proposed Process.
NEXT STEPS...
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INTRODUCTION
The NFSP has sought to update its 2022/2023 draft proposal for an Oversight
Committee. The idea of an Oversight Committee came out of the serious concerns
about culture and governance which led to the Horizon scandal. The initial draft was
provided by the NFSP to Government and others for discussion and consideration.
However, given the evidence which has been heard by the Inquiry across Phases 5, 6
and 7, in particular, the seriousness and urgency of the changes needed in terms of
oversight, risk identification and recommendations, the need for such an Oversight
Committee has never been greater.
The NFSP will continue to update and promote the Oversight Committee proposal in
light of the Inquiry’s findings when they are published in due course. However, the NFSP
is providing this updated version with background, the purpose and aims, and examples
and operation/membership
Aims and purpose of the Oversight Committee — Executive Summary
The aim of the NFSP's proposal for an Oversight Committee is to expand on the existing
Shareholder Relationship Framework that currently exists between the Government
and Post Office, whilst retaining its social purpose. The NFSP believes the Oversight
Committee would be a vital new tool in the toolkit of Post Office governance. It is used
and seen in a number of other public sector areas, including heath boards. It is not the
creation of an additional layer of meaningless bureaucracy, rather it would be as an
active reviewer and interrogator of risk, strategy and delivery of culture and governance
improvements, providing checks and balances in a way that evidence to the Inquiry has
demonstrated did not happen and has not yet happened
It is also to ensure the nothing even similar to the Horizon scandal can ever happen
again whilst securing the future of the network. As has been heard through the ongoing
statutory Inquiry, the lack of expertise, scrutiny and accountability were key elements of
how this scandal continued for so many years, with a failure over many years and across
different Board members, Chairs and Senior Management to either identify risks or ask
questions which would have identified risks to the business and avoided the scandal, or,
at least, prevented it from getting worse.
Postmasters invest in the network via their retail businesses, which host post offices.
However, their ability to understand or feed into the short and long-term strategy of
Post Office Ltd is limited, as is that of the public, who are the ultimate owners and users
of the Post Office. For the NFSP, there remain questions over whether Government as
the Shareholder and Post Office as the operator, can, on their own, make effective
changes in governance and culture and ensure the oversight necessary for proper
safeguarding of the investment Postmasters make in the network or not to act ina
manner that is not actually a detriment to the investments of Postmasters. It is therefore
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the aim of this proposal to bring together a committee of people with specific Post
Office knowledge, alongside those from a wider social perspective to ensure the social
purpose of the Post Office remains key.
The relationships between Post Office, Government, representative bodies and
consumer groups need to be repaired following the damage done by the Horizon
scandal and the cultural and governance failures which led to it, as well as the ongoing
failure to transform culture and governance. It is true to say that the reputation of the
Post Office has been severely impacted by past and present events. The Oversight
Committee is proposed as a way of repairing the relationships, restoring public and
Postmaster trust in Post Office.
The preferred option in terms of ownership of the Post Office is via mutualisation,
however, the financial stability of the Post Office must be secured first to ensure
feasibility. The secondary aim of this proposal therefore is to prepare the ground for
mutualisation
Background to governance of Post Office
The Post Office separated from Royal Mail (RM) in 2013 when RM was privatised. Post
Office remained a state-owned public corporation, accountable to the UK Government
via UK Government Investments (UKGI). UKGI is an agency of Treasury and ensures
public service requirements and financial performances are met. Parliament, via the
Department of Business and Trade (DBT), oversees the organisation and it is treated as
being “arms length".
A Framework Document was drawn up between BEIS (now DBT) and UKGI in
collaboration with POL, and covers: (i) Certain parameters within which POL is expected
to operate; (ii) Certain obligations with which POL is expected to comply; and (iii) Certain
aspects of the relationship between the Shareholder, the Shareholder's Representative
and POL and how it is expected that the Shareholder, the Shareholder's Representative
and POL will interact with each other. The Agreement is expected to be reviewed every
three years
The Secretary of State holds a “Special Share” in POL, and within these rights and
privileges, can attend or speak at any meeting, however the position does not hold
voting rights. For the Oversight Committee to be adopted, the Secretary of State would
have to approve this.
The governance of Post Office is overseen by a board of directors, responsible for
ensuring the organisation meets its objectives. The postal market is regulated by Ofcom,
which ensures that Post Office keeps to its set universal service obligations (USO), and
that postal services are available to all communities.
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The Government and Post Office
UKGI manages the government's portfolio, with Post Office being one of 17 government
shareholdings. The UKGI role on the Post Office board combines the role of company
director with the role of government representative. Combined, these roles appear at
times to be in conflict with each other, which could impact on information flow, and it
has been seen through evidence to the Inquiry that Ministers and their senior civil
servants were not being given full and accurate information about the Horizon issues. As
an example, Greg Clark, Secretary of State for Business 2016-19, highlighted in his
evidence to the Inquiry the failure of UKGI to share with Ministers the Second Sight
report, and the lack of Board confidence in the then Post Office Chief Executive, Paula
Vennells.
The government holds both ‘hard and soft levers of power' in respect of Post Office, both
of which need to be exercised with caution. An additional element is that UKGI do not
themselves capture Post Office risks. Instead, Post Office reports any risk to DBT as sole
shareholder, which can leave the possibility of UKGI/DBT/Government not knowing the
risks,
Current Postmaster Representation
There are currently two formal representative voices for Postmasters who both hold a
contract with Post Office
e The National Federation of SubPostmasters (NFSP}
« Postmasters NEDs
Current Postmaster views of Post Office
A lack of governance is not the only factor within Post Office. The behaviour of Post
Office management over recent years has resulted in a significant lack of trust in the
Post Office by many Postmasters, as depicted via the 2023 Postmaster survey which
found
e a9% decrease on how Postmasters felt valued as a business partner of Post
Office
e a14% decrease on how supported a Postmasters feels by Post Office
* a12% decrease in the number of Postmasters who believed Post Office were
genuinely trying to improve the relationship.
Yet despite these figures, the Post Office Board rewarded senior management with
bonuses in 2023 which were greater than, or in some cases double, the average
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Postmaster earnings, all overseen and signed off by Board and government (discussed
later in this document)
In 2024, Postmaster perceptions of Post Office continued to erode, as found via the 2024
YouGov Postmaster Survey, commissioned by the Inquiry, which found:
© 48% felt dissatisfied with their role as a Postmaster
« 72% reported feeling undervalued by POL
e 74% disagreed that the POL board understands the concerns of Postmasters
Current Postal Landscape
In addition to the past scandals and the ongoing erosion of Postmaster trust in the Post
Office, is a postal landscape undergoing significant change and challenges. This
changing environment, and the very apparent need for greater scrutiny over the
government subsidy to ensure the viability of the network, means that an open and
transparent oversight is imperative.
In November 2024, POL Chair Nigel Railton, announced the launch of a five-year
strategic plan for the Post Office. At this present time, the plans have not been made
publicly available, however it provides a roadmap for the next five years, through which a
new governance process could test the strategy and scrutinise decision-making.
In addition, it appears from evidence to the Inquiry that there are real questions as to
ability of Post Office and Postmasters to rely on the current Horizon system and real
concerns about the procurement, design, cost and delivery of its supposed replacement,
NBIT. A fit for purpose IT system which delivers what Postmasters and the public needs
is an absolute priority, but it appears from evidence to the Inquiry that even now there is
inadequate knowledge, understanding or scrutiny by the Board and Government of this
vital project. The Oversight Committee is a way in which questions about such issues
would be raised and the issues interrogated and reported on.
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OVERSIGHT COMMITTEE PROPOSAL
As set out, given the clear governance problems within the Post Office Board and the
lack of Postmaster trust in Post Office, it is clear that confidence urgently needs to be
restored. Postmasters and relevant interested representatives need to be involved in
future strategy given the level of investment they provide, and key decisions scrutinised
by those with the relevant knowledge.
Purpose of the Oversight Committee
The purpose of this proposal is to expand on the existing Shareholder Relationship
Framework which currently exists between the Government and Post Office, whilst also
protecting its social purpose such as: a sense of belonging within communities and
posting and banking accessibility to rural communities.
These proposals also seek to ensure that a situation similar to the Horizon scandal is
never able to occur again, whilst securing the future of the network. It must be noted
that Postmasters invest in the network via their retail businesses, which host a post
office. However, their ability to understand or feed into the short and long term strategy
of POL is extremely limited. There remain questions over whether Government as the
Shareholder, and Post Office as the operator, make strategic decisions that safeguard
Postmasters investment, or act in a manner that is actually detrimental to Postmasters,
investment.
One of the main purposes is to ensure the long-term strategy for POL is adhered to in
line with the needs of stakeholders.
Finally, a key purpose of this proposal is to deal with the damaged brand and
breakdown of trust of the organisation. Ultimately, this would begin with a ‘fresh start’,
however the key to rebuilding confidence with all stakeholders would be to ensure
thorough scrutiny of all decisions to ensure a similar incident to the Horizon Scandal
could not ever occur.
Aim of the Oversight Committee
The aim of this proposal is ensure a viable post office network for future generations,
with stakeholder trust reestablished in the POL leadership.
The preferred option in terms of ownership of the Post Office is via mutualisation,
however, the financial stability of the Post Office must be secured first to ensure
feasibility. Therefore, the secondary aim of this proposal is to prepare the ground for
mutualisation
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A lack of expertise, scrutiny and accountability were found to be key elements of how
the Horizon scandal continued for so many years. The Oversight Committee sits outside
of POL, which will enable constructive challenge. The aim of this proposal to bring
together a committee of people with specific Post Office knowledge, alongside those
from a wider social perspective, to ensure all voices are heard, and key decisions
scrutinised
Key aims
e Toreview and, where relevant and appropriate, challenge the strategy of Post
Office and ensure the strategic goals are achieved
e Toidentify potential risks, interrogate those risks and report to the Board and
Government what action the Oversight Committee consider may need to be
taken
e Toenhance the role of the Government as sole shareholder thereby protecting
the public interest and taxpayers’ money while working with Government and
Post Office to secure the future of the network
e Toensure the Government uses its powers to improve the culture at POL, rebuild
trust in the Post Office brand and improve transparency and corporate
accountability
e Toensure the Post Office's current IT system is externally audited, that any
improvement recommendations are implemented and to ensure the delivery of a
modern IT system fit for purpose by interrogating the procurement, design and
delivery for such a System.
e To demonstrate that a diverse group of people with a range of interests in the
success of Post Office can work together successfully and in the public interest for
the needs of the network prior to mutualisation
The role of the Oversight Committee
Examples of the role an Oversight Committee can play within the governance structure
of an organisation, involve ensuring:
e Due diligence takes place before key decisions are made
e Policies and strategies are being implemented as intended
e Key risks are identified, monitored, and mitigated
e Business processes and systems are working well
e Expected results are being achieved
e Value for money is obtained
e Activities comply with policies, laws, regulations, and ethical standards
e Developing areas of concern are being dealt with
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e Assets are being safeguarded
e Continuous improvement is taking place
e Consideration of the annual board effectiveness review and ensure gaps of
knowledge are rectified
Committee Membership
The Charity Governance Code proposes that a Board should comprise of between 5-12
trustees, however, given the number of stakeholder bodies, our proposal would be for a
minimum of 12
The Oversight Committee is to include representatives of all Post Office stakeholders.
The membership below is proposed to ensure a wide range of interests and views are
represented.
e¢ Government DBT civil servant]
¢ Membership bodies/unions (dependent on number represented)
o NFSP1
o CWUl
o Unite
e External legal representation 1
e Representative bodies for:
o Older people!
o Those with disabilities 1
o Rural network]
o Economically deprived 1
o Consumer champion (CA) 1
e Temporary role]
It is proposed to have one temporary role for individuals who could offer advice on
specific issues pertinent to the agenda
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‘AgeUK
Disability charity
OVERSIGHT
COMMITTEE
ESP
Lo Rural network
Economically -
Unite
Consumer
champion
Temporary role
Diagram 1: Organisation chart of committee members
Meeting Frequency
e¢ Following each POL Board Meeting to scrutinise the outcomes and decisions
made
e Annually to ensure alignment to Group Strategic Plan and to oversee bonus
process
e By exception when issues arise, past such examples being Inquiry non-disclosure
and Bonusgate’
What the Committee will use as its foundation
e Equality legislation
e Access to cash legislation
e Access Criteria
¢ Postal Services Act 2000 and 2011
e Ofcom and regulatory bodies annual workplan
e Post Office's Business Plan
e Government subsidy
¢ Government policies
e Social purpose of the Post Office
e Services of General Public Interest
e Devolved government compliance
e Shareholder Relationship Agreement
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What the Oversight Committee offers that isn't currently met
¢ To prepare for mutualisation or similar
e Toensure the transparent distribution of subsidy is where the network most
needs it
e Toensure future viability of the network
e To offer a solution to the findings to be shared by Sir Wyn in 2025
e Scrutiny of the daily running of Post Office - currently only limited access to
strategy and financials
e To protect the investment made by Postmasters
e To offer key invaluable insight from those at operational level, which can be fed
into short / medium term strategy
e Ensure The Seven Principles of Public Life (Nolan Principles) are adhered to in all
aspects of Post Office decisions
e Ensure the Hillsborough Law Duty of Candour, due to be passed in April 2025, is
adhered to within all decision-making
Suggested scope for oversight committee
Accessto Postal & Meeting customer * Long and short-term strategic
Banking services needs
planning
* Customer satisfaction
Rebuilding trust
Reducing
inequalities Rictheles * Safeguarding the network
* Transparent use of tax-payers
Access to Services Toney.
‘Meeting PO's of General
social purpose Economic interest * Fair access for all
{SGEI) * Safeguarding community services
Group strategic &
Use of subsidy corporate
business plan
Diagram 2: Scope of Oversight Committee
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Proposed hierarchy structure for oversight committee
Prime Minister
Postal Minister
=» Questions Raised
DBT
Oversight
Committee
PO Board
+
POL
Diagram 3: Oversight Committee hierarchy structure
The structure above shows that this proposal does not insert another level of hierarchy,
just of scrutiny. If serious issues are raised, the committee should have direct access to
the Postal Minister or the POL Board
Monitoring Consumer Needs
& Social Value
+ PO strategic plan + Access to banking and
+ Subsidy postal services
* Governance + Access to Government
= Inquiry outcomes services
+ Potential risks + Supporting the most
+ Robustness of PO IT vulnerable and excluded in
system society
Diagram 4: Three scrutiny columns
Monitoring
Postal Services Act
Access criteria
‘Ofcom
Equalities Act
+ FCA
Services of General Public
Interest
It is proposed that sub-groups be formed to allow time and expertise to properly
scrutinise key areas. These would be:
e Finance & Legal
e Operations and culture
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e Strategy
e Stakeholder and social value needs
e IT
e Risk
Measuring success
A key outcome of successful implementation will be early identification of issues and
concerns throughout the network. As success is subjective, it is important to establish
what success looks like to stakeholders when it comes to the Post Office
As Post Office has social purpose at its core, any measurement of success must include
this as a key performance indicator. This social purpose has to include the Post Office's
ability to maintain a nationwide network providing services of general public interest
(SGPI's). These SGPI's include:
e Mails - At present this is a provision of access to postal services which the
Universal Service Obligation (USO) provider is required to provide via both legal
and regulatory conditions and directions. This needs to expand beyond the USO.
to ensure a national access to a broad range of mails services, especially in rural
locations
e Banking - whilst at present, banking services are limited to basic community
facilities such as cash withdrawals and depositing of cash and cheques, it is
important that the needs of consumers around the country, in terms of wider
banking services are met.
e Bill payments - those who rely on cash on a day-to-day basis, or the digitally
excluded require an easily accessible face to face provision
e Government and Local Authority services - all demographics require access to
government and local provision within their locality
In October 2024, Post Office Chair Nigel Railton, launched a five-year strategic plan for
the Post Office, with aims to deliver by 2030
e A£250m increase in overall Postmaster remuneration
e Strengthening the Postmaster voice across POL
e Enhance support from POL
These medium-term aims should be included within the measurement of success
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Post Office/Government
Post Office Limited is classified as a ‘Public Non-Financial Corporation’ under the Office
for National Statistics national account system, and BEIS (now DBT) is its sponsoring
department. As previously highlighted, the Secretary of State was granted a Special
Share in Post Office with the rights and privileges set out in the Articles,
Asa public corporation, the Post Office Board retains responsibility for the operations of
the Post Office. Neither the Shareholder nor the Shareholder's Representative have any
involvement in the day-to-day operations of Post Office or in the management of its
network of post offices and staff. Whilst the Post Office Board retains operational control,
it is accountable to the Shareholder for the performance of Post Office and is required to
seek consent for certain matters, as set out in the Articles.
The Oversight Committee does not seek to take the ownership or control of day-to-day
operations from the Government or POL, instead the proposal is to insert a scrutiny
function between the Board and government as seen in diagram 3.
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BONUSGATE: A CASE STUDY
Asa result of past actions, there is real benefit for Postmasters and the public in an
improved culture
An example of an incident from 2023, involving senior management awarding
themselves large bonuses (#Bonusgate) further eroded Postmaster and the public's
confidence in the institution. Parts of these bonuses had apparently been triggered by
allegedly achieving the assistance which had been required by the Inquiry (which had
not actually been achieved) and for an improved relationship with Postmasters (which
was measured from the results of only two survey questions).
The moral and ethical argument of basing bonus metrics on helping a statutory Inquiry
dealing with the mistakes of the Post Office would be apparent to most, yet these
metrics were approved during a lengthy review process. The image below shows a
process map of how the bonus metrics were approved, alongside possible missed
opportunities to flag these.
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NEXT STEPS
e To review the Inquiry recommendations when the Chair's Report is issued
e Toreview the Green Paper findings
¢ Toreview Post Office's strategic/transformation plan
e Toensure delivery of Grant Thornton Post Office Governance Review for the next
12-18 months, it being essential for foundational governance documentation to
enhance clarity by being reviewed and updated
18