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Kevin Hollinrake MP
ey Parliamentary Under Secretary of State
ws Department for Business and Trade
Old Admiralty Building
Department for Admiralty Place
. Whitehall
Business & Trade London
SW1A 2DY
Henry Staunton
Chair
Post Office Limited
Finsbury Dials 29 June 2023
20 Finsbury Street
London
EC2Y 9AQ
Dear Henry,
STRATEGIC PRIORITIES FOR 2023/24
I write to you to set out the key priorities on which the Department would like you to focus
on in the coming year. I appreciate that this is a difficult time for the Post Office and that you
are facing significant headwinds and immediate challenges.
I am pleased to note that, as of June 2023, over 99% of eligible applicants under the
Historical Shortfalls Scheme have received an offer and that POL is working to make offers
to the rest, as well as late applicants, as soon as possible. With regard to the 86 claimants
whose historical convictions have been overturned to date, most have now received an
interim payment of £163,000, and 53 non-pecuniary claims are settled and paid. This
progress has been hard won and I am pleased to note the collaborative approach between
our respective teams.
POL’s Board has now made its funding ask for the remaining two years of the Spending
Review. This reflects increasing costs primarily driven by the New Branch IT programme, as
well as the growing complexity of the Inquiry and historical matters. I am also aware of the
current forecast that, without additional Government funding, POL will be in breach of its
financial covenant during the fiscal year 23/24. We will consider the funding request carefully
to ensure it aligns to policy priorities and delivers value for the taxpayer. It will clearly require
hard choices both by POL and by HMG. I have asked DBT officials to work with yours on
improving good governance around business planning, cost control and remuneration.
I look to you continuing to lead the Board and provide support and challenge to the Chief
Executive and management team in stewarding the company through this challenging
period. For reference, UKGI's standard governance expectations of a Chair are at Annex A.
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Specifically, I would like you to focus on the following priorities, and align the reward package
to the shareholder priorities:
1. Effective financial management and performance, including management of le-
gal costs, to ensure medium term viability
For FY23/24, POL should:
e Manage financial performance effectively against the agreed business plan
and annual budget (noting that an agreed position on the 3 Year Plan will need
to be reached to facilitate this);
e Provide robust options for the Shareholder to consider with regards to NBIT,
so informed difficult choices about risk, cost and value for money can be made
as part of the 3-year plan;
e Ensure that we agree a pipeline of upcoming approvals for spend above the
£50m threshold, so that alignment with Shareholder objectives can be consid-
ered when developing the spend proposal;
e Maintain stringent cost control, and maintain a clear focus on value for money
and efficient delivery, across the cost base, including:
NBIT and IT projects;
Legal costs;
Accelerating the network strategy;
Funding of DMBs; and
o Other measures aimed at reducing central costs wherever possible.
e Ensure robust ongoing monitoring of financial performance including invest-
ment spending and liquidity monitoring with early and transparent flagging of
risks to the Shareholder.
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2. Address POL’s historic failures and set the business up for success in the fu-
ture.
For FY23/24, POL should:
e Continue to engage positively with the Post Office Horizon IT Inquiry on a
timely basis and in a demonstrably open, transparent and efficient manner;
e Demonstrate, with the support of external assurance where appropriate, the
company’s conformance to the ClJ and HlJ rulings;
e Provide fair compensation to those affected by its historic failures and, in par-
ticular, inject pace into its delivery of compensation for those with overturned
convictions; and
e Ensure that lessons from the past failures are incorporated into the successful
delivery of the Strategic Platform Modernisation Programme in terms of both
the development of the technology and the roll-out to postmasters.
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3. Maintain and improve POL’s capacity, capability, and resilience at all levels of
the organisation
For FY23/24, POL should:
e Ensure the Board is providing effective challenge and scrutiny to management
proposals;
e Support and challenge the CEO's efforts to improve the expertise, depth, and
resilience particularly at the Group Executive team to ensure the team is ca-
pable to deliver the business plan presented; and
e As part of building POL’s resilience, update the Shareholder on how cultural
transformation is being incorporated and embedded into the organisation.
4. Facilitate the sharing of information with UK Government Investments (“UKGI”)
and the Shareholder in an open and transparent manner
For FY23/24, POL should:
e Proactively share information with UKGI and the Shareholder on material issues
in an open and transparent manner;
e Robustly challenge the invocation of any restrictions on information sharing (in-
cluding pursuant to undertakings made in connection with the POL Horizon IT
inquiry) as to their applicability and whether they prevent all information on the
relevant matter being shared with the Shareholder; and
e If.and to the extent possible, provide the Shareholder with an explanation if such
restrictions cannot be avoided and a confirmation from the Chair or the CEO that
they have received legal advice which supports the invocation of such restrictions.
I would be grateful if POL could keep the Department updated on your progress against
these priorities through the regular 1:1s between the DBT Permanent Secretary/Chair and
DBT Director General/CEO. I would also ask that you and the CEO provide a signed written
report on progress in advance of each Quarterly Shareholder Meeting (QSM) ahead of a
standing agenda update against priorities at the QSM. The progress update should include
commentary on key personnel risks and contingencies at both the Board and Group
Executive level.
I look forward to seeing you soon and continuing to work with you on delivery of a successful
and sustainable Post Office.
Yours sincerely,
KEVIN HOLLINRAKE MP
Parliamentary Under Secretary of State - Department for Business and Trade
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Annex A: Governance Expectations of the Chair
This annex, produced by UK Government Investments (“UKGI”), sets out the standard gov-
ernance expectations of Chairs within its portfolio. This is not an exhaustive list of the duties
of a Chair, and should be read together with the covering letter, which has been tailored to
the needs of Post Office Limited (“POL”) and outlines the specific priorities and expecta-
tions of both DBT 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
or Funding Agreement.
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 or-
ganisation.
Your responsibilities are to act in accordance with the highest standards of corporate gov-
ernance, and are complemented by requirements and expectations of you by HM Govern-
ment. 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 exhaus-
tive, and does not supplant any responsibilities set out in the POL’s governing documenta-
tion:
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 en-
courage 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 mem-
bers in order that the Board may function appropriately, in accordance with the conflicts of
interest policies of DBT and POL.
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Foster relationships between the Board and stakeholders, including Government
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 post-
masters and employees. You should also maintain a constructive relationship with DBT and
UKGI in the course of your work.
Develop a strong working relationship with the Chief Executive
Your 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 suc-
cession 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 ona
continual basis, providing regular feedback to DBT and UKGI as appropriate. You should
work with DBT 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 DBT and UKGI. The induction pro-
cess should familiarise new Board members with POL and its overall governance frame-
work.
You should encourage Board members to develop their knowledge and skills
You should continually consider the knowledge and skills that the Board requires to dis-
charge 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 DBT 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 re-
view as necessary.
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Evaluate the performance of non-executive Board members at least annually
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 DBT and
UKGI in an appropriate manner. A written review of performance may be necessary to sup-
port 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 shoud
allow the Senior Independent Director to gather feedback on your performance from the
perspective of Board members. DBT 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.