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Briefing for Jo Swinson regarding recent reports on Horizon System — 10 September 2014
A report leaked yesterday is critical of POL’s Horizon accounting system which it claims has led to
subpostmaster losses. This is strongly refuted by POL, but is part of the continuing mediation
scheme which was announced in July last year. This briefing gives the background to this issue.
It is important to stress that despite over a year’s worth of investigation by POL and independent
investigators Second Sight, no systemic or technical deficiencies have been found with the Horizon
system.
Summary
Horizon is the accounting system POL and its subpostmasters use to operate the network. Following
criticism of the system last summer, a mediation scheme was announced which involved a joint
working group headed by independent chair and high court judge Tony Hooper, the Justice for
Subpostmasters Alliance (JFSA) consisting of concerned SPMs, and POL itself. Forensic investigators,
Second Sight, were jointly appointed to lead an independent investigation in to the issues.
As part of that process, Second Sight were asked to draft a “thematic report” that would set out the
factual position in relation to the relevant issues that could be covered during the mediation process
e.g. the contractual relationship between POL and SPM’s, the training requirements of both parties,
and the technical specifications and operational requirements of the system. It would also consider
common problems found. This would provide a neutral but informative reference point for parties
during the individual mediation sessions.
This report has recently been sent to the 150 SPMs or former SPMs proceeding through the
mediation process on a confidential basis. POL considers that it contains a number of inaccuracies
and unsubstantiated accusations and has written to SPMs accordingly.
It is important to note that in all of the investigations undertaken since July, no systemic issues
have been found with the Horizon system, and the flavour of the report reflects POL’s general
concern that Second Sight has not been as objective or forensic as they might otherwise have been
given their role.
Further detail
The mediation scheme has been a significant concern to POL for some time. Whilst no substantial
issues with the Horizon system have been found, their concerns include the following:
© They consider that independent investigators Second Sight have “gone native” and are
unduly taking the side of JFSA. This is supported by the fact that SS have admitted privately
that they find it emotionally difficult to opine against SPMs, regardless of the circumstances
of the case.
* Claims in the thematic report (and the individual reports on each case prepared by SS) have
generally been unsubstantiated. For example, SS claim that power loss can lead to data loss
for the SPM, creating discrepancies between cash accounted for in Horizon and cash in the
safe or till. There is no evidence to support these claims.
* SS do not sufficiently acknowledge that the relationship between POL and SPM is one of
principal and contractor i.e. not one of employer and employee. POL’s legal advice supports
the fact that the duty of care in the former case is less than in the latter, with the SPM taking
contractual responsibility for their cash count, training, and employees, for example.
« Anumber of the reports written by SS in relation to individual cases have been rejected by
Tony Hooper, on the basis that the claims are unsubstantiated. In such cases he has tasked
SS with re-writing the report. It is not clear why he has not treated this report similarly.
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e JFSA has had difficulty in accepting that some cases will not warrant mediation, because the
SPM was clearly at fault or was victim of fraud by their own staff.
¢ Second Sight has continued to widen the scope of the investigation rather than focus on the
Horizon system, prolonging the investigations and increasing costs (most of which fall on
POL).
¢ Meanwhile, whilst the mediation scheme continues, expectations around possible
compensation have grown to potentially unrealistic levels.
Of the 150 cases that were raised by SPMs, 63 have been investigated by POL, 22 draft reports have
been composed by SS (12 have been finalised) and 3 cases have been mediated. To date no systemic
issues with the Horizon system itself have been found although around a dozen have been settled
outside of the mediation process.
In those cases that have been mediated or settled, POL considers it should have conducted itself
better operationally, but it is important to stress that these are not system related. For example:
e In one case POL were aware that an employee at a branch that a prospective SPM was
attempting to buy was suspected of fraud. POL accepts that they should have made that
clear to the prospective buyer, who suffered losses as a result once he had bought the
branch.
¢ SPMs are responsible for flagging their own training needs and being comfortable in
operating the system. In one case an SPM made a number of calls to POL to book training
courses but these went unanswered, resulting in losses to the SPM.
Why does POL continue with the scheme?
POL has considered its options in terms of taking a different approach to bringing the cases to a close
(such as appointing other independent investigators, for example), given SS’s perceived lack of
independence, and the time and resources that the scheme takes. However, there are two main
reasons for continuing with the scheme in its current form:
¢ Legal: undertakings given to Parliament in July last year about the scheme and the key role
of Second Sight means that this poses significant legal (judicial review) risk.
e Presentational: as you are aware, there are a number of interested MP’s, most prominently
James Arbuthnot, who are very supportive of the JFSA and Second Sight. Despite the
difficulties with Second Sight, Tony Hooper’s view is that POL “have made their bed and
must lie in it”, and he would not be prepared to support the removal of SS or back POL in
pulling out of the scheme. There are doubts as to whether the JFSA and Second Sight are
necessarily complying with the Terms of Reference agreed at the start of the scheme (e.g. SS
neutrality), but efforts by POL to take a harder line risk the JFSA leaving the scheme and the
presentational issues this may cause.
POL is therefore continuing to work through the scheme.
Lines to take
We have discussed lines with colleagues in Comms. This is primarily a matter for the company and
the working group to address, and it would not be appropriate to comment on confidential leaked
documents.
Next Steps
We would be very happy to brief you in more detail should you so wish.