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Rt Hon Jonathan Reynolds MP
Secretary of State
Department for Business and Trade
Old Admiralty Building
Department for citona
London
Business & Trade Swia 20Y
Nigel Railton
Chair
Post Office Limited
100 Wood Street, London, EC2V 7ER
By email: Nigel.Railton
04 September 2024
Dear Nigel,
Strategic Priorities for 2024/25
I was pleased to speak to you in July to discuss your reflections and priorities for Post Office. As you
know, the Government is committed to finding ways to strengthen the Post Office network and
ensuring compensation is delivered swiftly for postmasters impacted by the Horizon IT scandal. I
look forward to working with you on these issues to deliver for all those affected.
When we spoke, we discussed the next steps that we may wish to take and agreed to meet again in
the coming months. With that in mind, I would like to take this opportunity to set out the Shareholder’s
objectives for you, as Chair of the Board of Post Office Limited (“POL’, or “the Company”), and the
topics on which we would like to see progress over the financial year.
These objectives cover priority areas for positive change at POL. This is, of course, a challenging
time for the Company, as it seeks to fix the issues of the past and transform its business for the
future. These objectives will stand alongside your responsibilities as Chair set out in your
appointment letter, the standard Governance Expectations of the Chair at Annex A, and the
Principles of Public Life at Annex B.
POL will need to deliver on its commitment to address its historic failures and provide redress to
postmasters. With Phase 7 of the Horizon IT Inquiry due to begin in September, and the Inquiry
expected to conclude oral hearings later in 2024, it is also evident that the level of scrutiny facing
POL will remain considerable. The Company will need to perform under significant pressure. You
should ensure that you provide the necessary support and challenge to the Chief Executive and
Strategic Executive Group (SEG), as they lead the company.
In this capacity, your objectives include:
1. Intensifying existing workstreams to address POL’s historic failures and setting the
business up for future success. You will need to:
e Enable, wherever possible, swifter redress for claimants, both through the Post
Office-administered schemes and the HMG-administered schemes.
e Participate openly and constructively with the Post Office Horizon IT Inquiry, engaging
on a timely basis and in a demonstrably open, transparent, and efficient manner.
« Continue to demonstrate, with external assurance where appropriate, the Company's
conformance to the Common Issues Judgment and Horizon Issues Judgment rulings.
e Ensure that lessons from the Company’s past failures are incorporated into the
successful delivery of the Strategic Platform Modernisation Programme (SPMP), in
terms of both the development of the technology and the rollout to postmasters.
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2. Supporting the cultural transformation of the Company and focusing on improving on
POL’s capacity, capability, and resilience at all levels. You will need to:
e Engage with postmasters, trade unions, other key stakeholders, and the public, giving
particular consideration to how you communicate your strategy for the future of POL
and the Post Office network.
e Assess the strength and skillset of the executive and Board and identify opportunities
for efficiency and productivity gains, making changes where necessary.
e¢ Support and challenge the Chief Executive's efforts to improve the expertise and
resilience of the organisation, particularly at the level of the Strategic Executive and
Senior Leadership levels.
e Update the Shareholder on how cultural transformation is being established.
e While your tenure is interim, make progress towards longer-term goals, including:
o Delivering a diverse Board (one member from an ethnic minority by end
2024 and 40% female by end 2025).
o Ensuring governance arrangements address emerging cyber-security risks.
3. Enabling the future success of POL, including effective financial management and
performance to ensure medium-term viability. You will need to:
e Continue to oversee the Strategic Review of POL and provide Ministers with your
conclusions. To ensure the work covers all the key areas of interest to HMG, we would
request that you ensure the approach and objectives are aligned with DBT’s priorities.
e In view of the Strategic Review, give consideration to how the Board can support POL
to develop transformation plans that strengthen the network. These plans should
focus on ensuring the sustainability of postmasters’ incomes and the provision of new
products, services, and business models that will help reinvigorate the high street.
e Assist the Shareholder with the ongoing review of POL’s Framework Document.
e Ensure effective financial management and performance against the Business Plan.
e Maintain stringent cost control and a focus on value for money and efficient delivery
across the cost base, including the programme of work to replace the Horizon IT
system and IT projects, legal costs, acceleration of the network strategy, of the
approach to directly-managed branches, and measures aimed at reducing central
costs.
e Ensure robust monitoring of financial performance, including investment spending
and liquidity monitoring, maintaining early and transparent flagging of risks to the
Shareholder and making progress on the establishment of rolling 3-5-year forecasts.
e Ensure delivery of IT projects crucial to POL’s operations, specifically the programme
of work to replace the Horizon IT system.
I would be grateful if you could keep myself and Minister Thomas updated on your progress. You
will also need to provide a written report in advance of each Quarterly Shareholder Meeting (QSM)
with an update on your progress against the above priorities and including commentary on key
personnel risks at the Board and executive level.
As you know, the Post Office is a national institution with a unique heritage. Postmasters are central
to communities up and down the country. The challenges ahead for POL are considerable but not
insurmountable. As interim Chair, you will need to rise to meet them. I am grateful for your act of
service in taking up this role.
Yours sincerely,
Rt Hon Jonathan Reynolds MP
Secretary of State, Department for Business and Trade
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Annex A: Governance Expectations of the Chair
This letter, issued by UK Government Investments (“UKGI”), sets out the standard governance
expectations of Chairs within its portfolio. This is not an exhaustive list of the duties of a Chair, and
should be accompanied by a letter, tailored to the needs of Post Office Limited (“POL”), outlining the
specific priorities and expectations of both the Department for Business and Trade (“DBT”) and
UKGI, acting as shareholder representative. 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 representative 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, Terms of Reference, Managing Public Money, and the UK Corporate
Governance Code. The Chair should set the tone from the top of POL and promote an effective and
appropriate culture in both the Boardroom and the wider organisation.
Your responsibilities are to act in accordance with the highest standards of corporate governance,
and are complemented by requirements and expectations of you by HM Government. 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 exhaustive, and does not supplant any
responsibilities set out in POL’s governing documentation:
Set the Board’s agenda
You should set 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
POL’s strategy and any policies as set by DBT. In addition, the Board’s agenda should interrogate
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 encourage 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 members in order that the Board may function appropriately, in
accordance with the conflicts of interest policies of DBT and POL.
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. 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
The 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 succession planning on a regular basis.
Work with HM Government on the composition of the Board, and the appointment of new
Board members
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You should consider the composition of the Board in line with the requirements of POL on a 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 process should familiarise new
Board members with POL and its overall governance framework.
You should encourage Board members to develop their knowledge and skills
You should continually consider the knowledge and skills that the Board requires to discharge 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. Reviews should produce a written report. You should be
responsible for overseeing the implementation of any recommendations arising from a review as
necessary.
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 support 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 should 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.
For additional best practice guidance regarding the role of the Chair, see the “Guidance on Board
Effectiveness” published by the Financial Reporting Council. This can be found here.
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Annex B: The Seven Principles of Public Life (“Nolan Principles”)
The Seven Principles of Public Life
The Seven Principles of Public Life (also known as the Nolan Principles) apply to anyone who works
as a public office-holder. This includes all those who are elected or appointed to public office,
nationally and locally, and all people appointed to work in the Civil Service, local government, the
police, courts and probation services, non-departmental public bodies (NDPBs), and in the health,
education, social and care services. All public office-holders are both servants of the public and
stewards of public resources. The principles also apply to all those in other sectors delivering public
services.
Selflessness
Holders of public office should act solely in terms of the public interest.
Integrity
Holders of public office must avoid placing themselves under any obligation to people or
organisations that might try inappropriately to influence them in their work. They should not act or
take decisions in order to gain financial or other material benefits for themselves, their family, or their
friends. They must declare and resolve any interests and relationships.
Objectivity
Holders of public office must act and take decisions impartially, fairly and on merit, using the best
evidence and without discrimination or bias.
Accountability
Holders of public office are accountable to the public for their decisions and actions and must submit
themselves to the scrutiny necessary to ensure this.
Openness
Holders of public office should act and take decisions in an open and transparent manner.
Information should not be withheld from the public unless there are clear and lawful reasons for so
doing.
Honesty
Holders of public office should be truthful.
Leadership
Holders of public office should exhibit these principles in their own behaviour and treat others with
respect. They should actively promote and robustly support the principles and challenge poor
behaviour wherever it occurs.