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UK Government Department for
usiness, Energy
Investments OFFICIAL - SENSITIVE & Industrial Strategy
Date: 6 April 2021
Director General: Charles Donald (UKGI)
Lead Official: Joshua Sc
Lead Official Telephone:
Recipient To Note / Comment To Approve / Decide
Minister Scully Xx
Special Advisors xX
POST OFFICE LIMITED (POL) - RESPONSE TO POL CEO REGARDING ADMINISTRATION
OF COMPENSATION ARISING FROM CRIMINAL APPEALS
Summary
1. On 5 March the POL CEO, Nick Read, wrote to you proposing that Government directly
administers the process of settlements arising from the appeal of criminal convictions (Annex
A). Nick also raised the proposal in his regular catch up with you on 15 March.
2. Having considered the proposal officials believe it presents a number of practical challenges,
as well issues around whether it would be ‘appropriate’ for Government to take ownership of
resolving historical POL issues. Officials therefore recommend that BEIS respectfully rejects
Nick's proposal and have drafted a response for your approval (Annex B).
Timing
3. Officials request that the response be considered over the recess period in conjunction with
POL's the request to appoint a Legal Non Executive Director
Recommendation
4. That you approve the draft response at Annex B.
Background
5. As per advice submitted on 12 March, there are a number of postmasters who we expect to
have their convictions quashed from April following hearings at the Court of Appeal w/c 22
March, and POL has been considering the best process for providing compensation.
6. We have previously advised that a compensation scheme for postmasters with quashed
convictions could be an option. However, POL and its legal advisers
REDACTION
REDACTION Is likely
that more postmasters will take the same approach. Postmasters whose convictions are
quashed could also bring a group litigation case in order to obtain compensation.
7. Inhis letter, Nick outlines his views that Government should administer such compensation
directly, and that he believes this would make the process more efficient and enable Post Office
to focus its attention on current postmasters and its retail offering.
8. The backdrop to this request is that litigation related matters continue to take up a significant
portion of Nick’s bandwidth, even after the creation of the Historical Matters Business Unit last
year. Furthermore, you will be aware that in recent months BEIS/UKGI officials have
undertaken a significant amount of work with POL to put in place sufficient governance
processes around the Historical Shortfall Scheme. This has slowed down progress on the
scheme but is vital to see that taxpayers’ money is being spent appropriately.
Response to Letter
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Investments OFFICIAL - SENSITIVE & Industrial Strategy
9. Officials have considered Nick’s proposal carefully. Broadly, there are three potential options
for responding to Nick's request:
a. Accept Request: BEIS accepts Nick’s proposal and officials work to “stand-up” a BEIS
team, with support from UKGI, to design and deliver the process for
compensation/settlement, and the governance around it. An agreement would need to be
reached between BEIS, POL and its advisers to access the relevant information.
b. Reject Request: BEIS respectfully rejects Nick’s proposal. POL designs and delivers the
process for compensation/settlement, in consultation with BEIS/UKGI officials who would
put in place appropriate governance arrangements. (Preferred option)
c. Hybrid Approach: BEIS agrees to explore Nick's proposal, noting the practical issues
that need to be resolved, in an attempt to reach a “middle-ground” whereby the burden of
administering the settlement(s) is reduced on POL, but that it is still clear the ownership
of the issue sits with POL. It is unclear how long this could take.
10. Officials are sympathetic to Nick's proposal however we believe it presents a number of
practical challenges, as well as wider issues around whether it would be ‘appropriate’ for
Government to take ownership of resolving historical POL issues. See our assessment below:
Officials believe it is more appropriate for POL to continue to have ownership over resolving
past POL issues rather than Government. We believe the public may also think it is right
that POL owns the process for addressing its past failings.
« Neither BEIS nor UKGI currently have the capacity nor the capability to take on such a role
in administering the process of settlements. Both teams have already undergone a
notable expansion to cope with the additional workload on POL.
«A third party administering such a process risks complicating the process due to access to
information currently held by the Post Office. There would also be issues around the
handling and assessment of confidential and legally privileged information.
«Government taking a direct role in this situation risks setting a precedent to other partner
organisations.
«Agreeing to administer this compensation/settlement raises the risk that the mechanism
and/or decisions relating to it could be amenable to Judicial Review (JR). For this, we
note the decision of 11 March to reject a JR application regarding the Historical Shortfall
Scheme, in large part due to the fact that it is a voluntary scheme set up and
administered by POL under private law and therefore is not subject to public law.
11. Furthermore, officials have raised some concern regarding POL’s governance arrangements
for the Historical Shortfall Scheme and the appropriate escalation of decisions to the POL
Board. We propose that in your response to Nick you also raise this issue.
12. Officials therefore propose option (b) and have drafted a letter for your approval. Minister
Scully - are you content for the letter at Annex B to be issued to the POL CEO?
Contributors
13. BEIS POL policy colleagues have been consulted on this advice and have cleared its contents.
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UK Government Department for
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Investments OFFICIAL - SENSITIVE & Industrial Strategy
Annex A - Letter from Nick Read to Minister Scully (5 March 2021)
TEXT OF LETTER SENT TO MINISTER SCULLY FROM NICK READ
Paul Scully MP
Minister for London and Parliamentary Under Secretary of State
Department for Business, Energy and Industrial Strategy
1 Victoria Street
London
SW1H OET
5 March 2021
Dear Paul,
Compensation for Postmasters with quashed convictions and Post Office vision for
2025
As I look ahead to the Court of Appeal’s deliberations commencing Monday 22 March, and
the convictions already quashed at Southwark Crown Court, I would like to share my thinking
about how best to meet the needs of those rightly pursuing further justice, and those of
current and future Postmasters and their customers.
Since taking up my post in September 2019, I have spent a significant proportion of my time
instituting wide-ranging reforms designed to prevent any possibility of recurrence of the
issues that affected too many Postmasters. This is clearly the right thing to do.
At every stage, I have worked closely with your officials, in both UKGI and BEIS, to navigate
the volume and complexity of the requirements for us as a business as we seek to put
matters right. While I understand completely the need for appropriate controls in the
management and spending of shareholder money, in the context of the criminal cases I
believe that there is a more efficient alternative to a model in which Post Office devises and
administers a scheme for redress but which the shareholder funds.
A scheme similar to Historical Shortfalls Scheme (HSS) for those successful in their appeals
of criminal convictions is unlikely to work, not least because the lawyers representing a
significant number of the appellants have already indicated that they will not participate in
such a scheme. The merits of each claim will be also be harder to assess than those in the
HSS.
Given that the funding of the compensation will inevitably have to be met by the shareholder
and that, quite rightly, the shareholder accordingly expects to exercise a tight control of that
expenditure, I consider it to be more appropriate for the shareholder to administer the
process of settlements directly.
This will, in my view, make the process more efficient for those seeking compensation and
would allow Post Office to place more of its focus on enabling current Postmasters to thrive
and serve their customers well in a retail environment that is changing dramatically in
response to the pandemic.
Having considered the matter carefully, I am of the view that it is only by acting decisively to
resolve these legal and compensation issues that we will be able to break from the past and
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UK Government Department for
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start realising a positive future for the Post Office.
On that subject, as the new financial year approaches, I will shortly set out [to Postmasters
and colleagues] a vision for the Post Office in 2025. This vision will focus on the traits of a
successful franchise which operates for the mutual benefit of Post Office Limited as
franchisor and Postmasters as franchisees. Most importantly, the vision will emphasise how
local Post Offices can be the retail anchor on high streets and help sustain communities
through the essential services they provide. I hope that this is a vision you will support in
Parliament, providing the appropriate counterweight to the scrutiny entailed in achieving
justice for Postmasters affected where things went wrong in the past.
Our next meeting is scheduled for Monday 15 March, with an agenda already focused on the
closure of Directly Managed Branches and the future size and shape of the Network. I would
be pleased to speak to you sooner to discuss compensation for appellants with quashed
convictions and the vision for the Post Office to 2025.
Yours sincerely,
Nick Read Group Chief Executive Officer
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UK Government Department for
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Annex B - Draft Response
Dear Nick,
RE: Compensation for Postmasters with quashed convictions and Post Office vi:
for 2025
Thank you for letter of 5 March and your time on 15 March at our catch up to discuss the
matter of compensating postmasters whose convictions are quashed and your Post Office
vision for 2025.
With the Court of Appeal hearings [set to commence w/c 22 March/underway], I am grateful
to you for raising such an important issue and the work of you and your team on what is a
very complex issue. As you know, my Department and I are keen to continue to work with
Post Office to address its past failings, ensure that lessons have been learned from the
Group Litigation, and that true change has happened or is underway at Post Office. Part of
this will be to ensure that all postmasters whose convictions are quashed are appropriately
compensated for the impact the conviction has had on their lives and livelihoods.
With that in mind, I have considered your proposal carefully and I am sympathetic to your
reasons however I believe this process should be delivered by Post Office, in consultation
with BEIS and UKGI officials. I believe it is more appropriate for Post Office to continue to
have ownership over its past historical issues rather than Government, however I can
confirm that BEIS will consider a business case for the funding at the appropriate time.
Your proposal also presents a number of practical issues. Neither BEIS nor UKGI currently
have the capacity nor the capability to take on such a role in administering the process of
settlements. Both teams have also expanded considerably in recent months to manage the
additional work on Post Office, this includes the Historical Shortfalls Scheme (HSS) but also
on other areas, and further expansion is unlikely. There is the issue regarding the access to
information currently held by Post Office; and including a third party such as BEIS
administering the compensation, and handling and assessing Post Office’s confidential and
legally privileged information risks complicating the process further.
I would also like to draw your attention to the decision on 11 March made by the High Court
to reject a Judicial Review application regarding the HSS and its rationale for doing so.
I understand this is not the outcome you were looking for, however my officials are
committed to working with Post Office to make the process as efficient as possible whilst
respecting our shared duties to protect taxpayers’ money and to see that public funds are
spent in line with MPM.
As we have previously discussed, we have been exploring solutions to improve the internal
governance of HSS, and the proposed approach is to appoint a NED with legal background
to the POL Board to oversee a Committee on legal settlements which will cover the HSS and
other legal action which is expected to continue over the next 3 years.
Finally, I support the vision for the Post Office in 2025 you shared with me in our catch up.
As the pandemic has shown, the Post Office and postmasters provide essential services to
communities across the UK, and as we come out of lockdown I share your belief that post
offices will be vital to the return of the high street. I invite you to continue to develop this
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vision with my officials, and at the earliest opportunity I will lend my support to it in
Parliament.
Yours sincerely,