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Witness Name: Lord Peter Mandelson
Statement No.: WITN00600100
Dated: 29 October 2024
POST OFFICE HORIZON IT INQUIRY
FIRST WITNESS STATEMENT OF RT. HON LORD PETER MANDELSON
I, Peter Benjamin Mandelson, Baron Mandelson of Foy and of Hartlepool, formerly
Secretary of State for Trade and Industry and Secretary of State for Business,
Innovation and Skills, will say as follows.
Introduction
1. I make this statement in response to the Inquiry's request for evidence dated 8
August 2024 (“the Rule 9 request’). I have prepared it with the support of the
Government Legal Department and counsel, and I have relied on others to
provide me with relevant documents.
Professional Background
2. I read Philosophy, Politics and Economics (“PPE”) at St Catherine’s College,
Oxford. I was elected MP for Hartlepool in the 1992 general election. After the
May 1997 general election, when the Labour Party entered government, I was
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appointed Minister without Portfolio in the Cabinet Office. I remained in that post
until 27 July 1998, when I was appointed Secretary of State for Trade and
Industry.
3. I resigned from that role in December 1998. I subsequently served as Secretary
of State for Northern Ireland between October 1999 and January 2001. I
continued as an MP until 2004, when I became the EU Commissioner for Trade
until 2008.
4. I was raised to the peerage in October 2008 in order to take up an appointment
as Secretary of State for Business, Innovation and Skills. I served in that role
between 3 October 2008 and the general election of 11 May 2010. From 2010
until the present I have been the co-founder and chair of Global Counsel, a public
policy advisory business.
5. As Secretary of State, both in 1998 and 2008-2010, my role was to shape the
Department’s priorities, pursue its main policy goals and be accountable to
Parliament for delivery of them. In addition, from June 2009 I was First Secretary
of State and worked part-time in that capacity from the Cabinet Office. The
Minister of State, Pat McFadden, deputised for me in the Department and the
House of Commons.
Design of Horizon
6. During my first period as Secretary of State in 1998 I was ultimately responsible
in the Department for the oversight of the Horizon IT system. However, lan
McCartney, as the relevant Minister of State, had day-to-day responsibility. I
understand Sir lan gave detailed evidence to the Inquiry about his involvement
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in that work on 30 November and 1 December 2022, as did David Sibbick, the
lead civil servant on the project, on 23 November 2022. My knowledge and
involvement was necessarily only from a high-level, strategic perspective.
The Secretary of State for Social Security (Alistair Darling) was also involved in
the Horizon IT system project, as the Benefits Agency and Post Office Counters
Limited (“POCL”) were joint service providers and users of the technology. As
well as his engagement, I recall a couple of ministerial meetings about Horizon
involving the Chief Secretary to the Treasury, because in addition to the external
review of the programme (which had found it to be robust) there was also a legal
and contractual dispute with ICL/Fujitsu concerning the delivery of the
programme, in terms of both timescale and cost. I understand that Lord Darling
gave evidence to the Inquiry on 29 November 2022.
Concerning the integrity of the new system itself, this was not called into
question. The external review’s findings were accepted both within my
Department and in No 10, albeit with some conditionality. The recommendation
to confirm the Horizon system was made to the Prime Minister and the final
decision was his. I do not remember No 10 putting a brake on the programme at
any stage.
Although I was given no reason to doubt the technical integrity and robustness
of the Horizon system in this period when I was Secretary of State (had I been,
of course, my view of it would have been different), there was the serious
contractual dispute. The Secretary of State for Social Security also had
misgivings about the Benefits Agency becoming locked into what he regarded as
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10.
11.
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outdated technology. I think he wanted to terminate the contract with the
providers.
My Departmental interest was different: the new system had been agreed as a
means of sustaining the post office counters network and there were compelling
social and political reasons for maintaining this network. If the new system was
cancelled this would have had serious financial implications for POCL and the
Government would have to consider an alternative direct subsidy to the Post
Office. This was not attractive to the Treasury. POCL, furthermore, maintained
strongly that if Horizon was scrapped there would be need for a different Horizon
type system (albeit without the benefit payment card). Given the time and
expense already involved in developing the Horizon system this was very
unattractive. My recollection is that Ministers decided to go ahead with Horizon
— with legal and contractual adjustments — because it was the only system on
offer that would equip the Post Office with the modern IT system it needed, and
which could handle the envisaged benefits payment card and other banking
facilities.
There was considerable pressure to go ahead from the Post Office itself (Letter
from Dr Neville Bain to Rt Hon Lord Peter Mandelson on 11 December 1998
(BEIS0000404)) and from Fujitsu who delivered a strong message to HM
Ambassador in Tokyo regarding the possibility of the Government reneging on
the contract (Note of meeting between Mr Naruto and Ambassador regarding
Horizon (BEIS0000336)). The alternative was very unclear, technically and
financially, and it was accepted that cancellation would have significantly set
back the modernisation (and viability) of the Post Office. This was not a scenario
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Ministers wanted to embrace. I definitively set out this position to my colleagues
and to the Prime Minister on 10 December 1998 (Letter from Secretary of State
to Stephen Byers MP (Treasury) regarding POCL Automation Project
(BEIS0000418)) and lan McCartney responded to issues raised by Alistair
Darling a few days later, repeating our position with further reasons (Letter from
lan McCartney MP to Stephen Byers MP on 14 December 1998 (BEIS0000400)).
Oversight of POL
12. I was supported by Departmental officials in exercising all my responsibilities as
Secretary of State. On both occasions I was ultimately responsible for all policy
areas dealt with by the Department but day-to-day handling was devolved to
other Ministers and not routinely brought to my attention.
13. During my first period of time as Secretary of State it was lan McCartney who as
the Minister of State had day-to-day responsibility for the oversight of the Post
Office, as with the Horizon IT system project specifically.
14. Issues connected to Horizon were not flagged to me at all, to the best of my
knowledge and recollection, during my second term as Secretary of State for
Business. I was fully supported in all matters relating to the Post Office by the
Minister of State at that time, Pat McFadden, in whom I had complete confidence.
All submissions concerning Post Office Limited (“POL”) and the Horizon system
would have been made to him in the first instance.
15. I had no particular personal views about the responsibilities of the Department
concerning Royal Mail Group (“RMG”) and POL. Such views as I did have were
informed and bound by the role of the Department as sole shareholder and the
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16.
17.
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principle that these organisations were to have full operational independence, as
I believe Pat McFadden has explained to the Inquiry. By this I understood that
the Government was accountable to Parliament for RMG and POL and therefore
had to explain and justify their actions, without exercising control over them. The
practice of the Department and its Ministers was to refer particular Parliamentary
queries regarding Post Office issues to POL. I do not remember a reply ever
coming from me. This was standard for any part of Government where
operational independence existed for organisations like POL.
I also understood that the Shareholder Executive (“ShEx”) represented the
Government's shareholding in financial not operational terms. Relevant civil
servants from ShEx would have liaised between the Minister responsible (Pat
McFadden) and POL. In effect, they would have been the Minister’s eyes and
ears.
To what extent the ShEx officials did this at the time efficiently and effectively is
not possible for me to judge at this juncture. What I can say is that nothing was
brought to my attention during my time as Secretary of State in 2008-2010 that
might have caused me to review the division of responsibilities concerning the
Post Office.
There was not to my knowledge any monitoring facility for the Secretary of State
to oversee ShEx’s exercise of their responsibilities, except in the usual sense of
civil service management through the Permanent Secretary. No doubt they
worked closely with other Departmental officials and anything that they thought
needed to be brought to the attention of the Secretary of State could have been.
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19.
20.
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The operational independence of POL was, I believe, clearly established when
POL was created and there was no reason at the time to question it when I was
Secretary of State. Further questions might have arisen later when the Horizon
and subpostmaster prosecution issues emerged and coalesced, but that was
after my time.
I have been shown a briefing document I was given on the governance of RMG
and POL in January 2009 (Governance Submission to Secretary of State, 26
January 2009 (BEIS0001177)), covering both the existing structure and the
proposed structure after changes to bring private capital into RMG. I cannot now
recall the details of this issue, and as with other postal affairs matters it would
have been handled primarily by Pat McFadden as the relevant Minister. The
document confirms at Annex A that the Board had operational responsibility for
day-to-day matters, and the Secretary of State as shareholder had various
consent or veto rights over the strategic plan, certain financial or remuneration
decisions, and the appointment of the Chair and CEO.
I can also see from the documents with which I have been provided that I had
numerous briefings about the future of the post office network and the financial
position of POL (e.g. Submission to Secretary of State regarding Post Office
strategy, 21 November 2008 (BEIS0001173) (sent as an attachment to email
dated 21 November 2008 from Will Gibson to Secretary of State regarding
Submission to Secretary of State regarding Post Office strategy
(BEIS0001174)), Post Office Strategy Submission to SoS, 21 November 2008
(BEIS0001181), POL funding commitment brief (BEIS0001176), Briefing for
Secretary of State’s meeting with Consumer Focus Board, 16 March 2009
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(BEIS0001175)). I do remember recurring issues about the post office closure
programme (the ‘Network Change’ programme) in this period and discussing this
with the Minister of State, officials and POL representatives (e.g. Final
Background Note for PAC briefing with Simon Fraser, 11 May 2009
(BEIS0001179)). This was at times an intensive matter because of the
Parliamentary pressures; MPs of all parties did not like their local post offices to
close. There was concern from a Departmental perspective about the possibility
that POL would lose the Post Office Card Account (“POCA”) contract (Master
electronic version of reshuffle briefing for Secretary of State as at 20.00hrs, 3
October 2008 (BEIS0001185) and Master electronic version of reshuffle briefing
for new ministers (part 2) as at 20.00 hrs, 3 October 2008 (BEIS0001186)) but
this was awarded during my time in office. I also note from the documents that
there was significant work done on linking up the post office network with a
greater range of banking services (Draft Post Office Consultation Final, 18
November 2009 (BEIS0001171) (sent as an attachment to email dated 19
November 2009 from Private Secretary to Pat McFadden to Jerome Glass and
Secretary of State regarding Draft Post Office Consultation (BEIS0001172)).
There was considerable time spent exploring options for government business
to be done via POL.
The work being done following the Hooper Review on a Postal Services Bill to
bring private capital into RMG took up considerable time, but as with other
aspects of this brief Pat McFadden mainly took the lead (Simon Fraser - final
brief on Royal Mail and POL (BEIS0001182) (sent as an attachment to email
dated 29 June 2009 from Craig Jones to various regarding final brief on Royal
Mail and POL cleared by the Secretary of State and Pat McFadden
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(BEIS0001183))). The Postal Services Bill was also concerned with governance,
regulation, financing and the threats to universal service. It was designed, at least
in part, to increase the transparency of POL’s performance, whilst ensuring that
it was equipped to operate in competitive markets. POL’s operational
independence was recognised as an important feature of its commercial viability.
This was accompanied by strategic support and funding from Government.
Problems with Horizon were not mentioned or discussed as part of that work, to
the best of my knowledge.
23. Essentially, in terms of governance or oversight, I understood that if there was
some form of crisis involving the Post Office it might end up on my desk, but I
only expected that to happen in situations of real extremis. It never happened in
my time as Secretary of State in 2008-2010. Were that to have occurred, I
understood that the ultimate power I would have had as Secretary of State was
to sack the Board or CEO and replace them, but I did not give much thought, if
any, to what levers I had other than that because day-to-day operations were a
matter for the POL Board and management team, and oversight of them was a
matter for ShEx and the Minister of State unless there was a significant crisis.
Reports of errors in the Horizon IT system
24, I do not recall any relevant meetings held by me conceming the Horizon IT
system while I was Secretary of State 2008-10. Indeed, I do not recall any
Departmental meetings to discuss POL matters in which I was involved, apart
from the thomy and sensitive post office closure programme. I cannot be
absolutely sure that Horizon was never mentioned, given how much time has
elapsed since then, but I have had no relevant documentation drawn to my
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25.
26.
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attention that contradicts this memory, In terms of postal affairs, whilst this did
take up some of my time as Secretary of State, about 90% of it concerned the
Royal Mail rather than Post Office.
I can see from the documentation that, for example, I met with the National
Federation of Subpostmasters shortly after taking on the role of Secretary of
State on 15 October 2008 and again on 6 May 2009, but the briefing notes do
not mention any issues involving Horizon on either occasion (Secretary of State
briefing regarding meeting with General Secretary of NFSP, 15 October 2008
(BEIS0001178) and Note of Secretary of State meeting with NFSP on 6 May
2009, dated 18 May 2009 (BEIS0001180)).
I can also see from the documents provided to me that during my time in office
the “Post Offices — Securing their Future” report was published on 7 July 2009,
in which some critiques were raised of Horizon. However, these were about
general user-friendliness and did not include reference to unexplained shortfalls
or prosecutions. For example, “the Committee heard from subpostmasters that
transactions needed to be simplified and streamlined’ and transactions were
“more complex and difficult to use than they need to be” (see paragraphs 63 &
64). The report noted that POL was upgrading Horizon technology in the “Horizon
Online” project (at paragraph 64). I cannot recall to what extent I personally had
sight of this report, although it was the product of a task force of MPs that I had
given my support to, in order to examine post office strategy (Letter from
Secretary of State to Peter Luff MP, 10 December 2008 (BEIS0001184)). My
Office was sighted on a briefing in response to this report which referenced the
Horizon upgrade as a welcome development (Letter from Mike Whitehead to Pat
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27.
28.
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McFadden regarding Government Response to BEC Report, dated 22
September 2009 (UKGI00017948)).
I was not conscious at the time of RMG or POL prosecutions of subpostmasters
for theft or fraud. I do not recall complaints being made by subpostmasters about
the integrity of the Horizon system in 2008-2010. As a result, I did not ever
consider requesting or commissioning a further investigation into the system, nor
was it suggested to me.
Had complaints been received it would have been usual for the Post Office
Minister, Pat McFadden, to deal with them as I did not have day-to-day
responsibility for the Post Office. For examples, the letters from James Arbuthnot
MP to me in November and December 2009 (Letter from Rt Hon James
Arbuthnot MP to Rt Hon Lord Peter Mandelson regarding Post Office Horizon
system: possible errors leading to postmaster being accused of fraud, 3
November 2009 (UKGI00011504) and Letter from Rt Hon James Arbuthnot MP
to Rt Hon Lord Peter Mandelson requesting comments on correspondence from
Mr David Bristow and Councillor John Kennet, 10 December 2009
(UKGI00011501)) were given to Pat McFadden for reply in accordance with
normal practice so I was not aware of the issue he raised. I do not recall further
parliamentary correspondence or submissions on these cases. I do not know
who was responsible for these matters in RMG or POL and I did not meet them
to discuss the matter. I had no involvement in the response provided by Pat
McFadden (Letter from Pat McFadden MP to Rt Hon James Arbuthnot MP
regarding Post Office Horizon system, 5 December 2009 (POL00234111)).
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29. After I left government in 2010 I did not have any correspondence about or
involvement with these matters, that I can recall. It was not until much later on,
long after I left the Department and government, that I heard of the Horizon
prosecutions. My knowledge, therefore, did not materially change until the last
couple of years when I have followed the story in the media.
Reflections
30. The Inquiry has asked me to reflect on my time as Secretary of State and whether
there is anything I would have handled differently, with hindsight, in relation to
the oversight of POL.
31. I was familiar with the Post Office’s overall strategic and financial challenges and
met the chair of POL from time to time when I was Secretary of State but I cannot
say that, even with the benefit of hindsight, matters should have been handled
differently given the operational independence of the Post Office and the fact that
the true information surrounding the Horizon prosecutions only emerged later on.
Nothing that came to my attention or that was raised with me in Parliament
caused me to consider handling matters differently in relation to POL and Horizon
when I was Secretary of State.
32. 1am not familiar with current Ministerial practice in relation to POL and so I am
unable to suggest how this might be changed. Nor I am in a position, through
lack of knowledge, to make any relevant suggestions to the Inquiry except to
express the profound regret I share with others that so many SPMs have been
subjected to such appalling treatment which has inflicted great unfairness and
cost on them.
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Statement of truth
I believe the content of this statement to be true.
Dofob) ff olor
Dated:
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Index to First Witness Statement of Lord Peter Mandelson
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Document Description
URN
Control Number
1.
Letter from Dr Neville Bain to Rt
Hon Lord Peter Mandelson on 11
December 1998
{o
BEIS0000404
BEIS0000384
Note of meeting between Mr
Naruto and Ambassador re
Horizon
BEIS0000336
BEIS0000316
I Letter from SoS to Stephen Byers
I MP (Treasury) re POCL
Automation Project
BEIS0000418
BEIS0000398
Letter from lan McCartney MP to
Stephen Byers MP on 14
December 1998
BEIS0000400
BEIS0000380
26 January 2009
Governance Submission to SoS, I BEISO001177
I
BEIS0001177
Submission to SoS re Post Office
strategy, 21 November 2008
BEIS0001173
BEIS0001173
_I strategy
Email dated 21 November 2008
from Will Gibson to SoS re
I Submission to SoS re Post Office
BEIS0001174
BEIS0001174
Post Office Strategy Submission to
SoS, 21 November 2008
I BEISO001181
BEISO001181
POL funding commitment brief
BEIS0001176
BEISO001176 I
10.
Briefing for SoS's Meeting with
Consumer Focus Board, 16 March
2009
BEIS0001175
BEIS0001175
11. I
Final Background Note for PAC
I briefing with Simon Fraser
BEIS0001179
BE!IS0001179
I 12.
I Master electronic version of
reshuffle briefing for SoS as at
20.00hrs, 3 October 2008
BEIS0001185
BEIS0001185 I
13.
I 14.
Master electronic version of
reshuffle briefing for new ministers
(part 2) as at 20.00 hrs, 3 October
2008
BEIS0001186
BEIS0001186
~ I Draft Post Office Consultation
Final, 18 November 2009
I BEISO001171
BEISO001171 I
15.
Email dated 19 November 2009
from Private Secretary to Pat
McFadden to Jerome Glass and
I
I BEISO001172
BEIS0001172
Page
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SoS re Draft Post Office
Consultation
16.
Simon Fraser - final brief on Royal
I Mail and POL
BEIS0001182
BE!IS0001182
17.
Email dated 29 June 2009 from
Craig Jones to various re final brief
on Royal Mail and POL cleared by
SoS and Pat McFadden
BEIS0001183
BEIS0001183
18.
SoS briefing re meeting with
I General Secretary of NFSP, 15
October 2008
BEIS0001178
BEISO001178
19.
Note of SoS meeting with NFSP on
6 May 2009, dated 18 May 2009
BEIS0001180
BEIS0001180
20.
21.
Letter from SoS to Peter Luff MP,
r 2008
BEISO001184
BEIS0001184 I
like Whitehead to Pat
I McFadden re Government
Response to BEC Report, dated
22 September 2009
UKG1I00017948
I UKGI027955-001
I 22.
Letter from Rt Hon James
Arbuthnot MP to Rt Hon Lord Peter
Mandelson Re: Post Office Horizon
system: possible errors leading to
postmaster being accused of fraud,
3 November 2009
UKG100011504
UKGI022312-001
23.
Letter from Rt Hon James
I Mandelson requesting comments
on correspondence from Mr David
Bristow and Cllr John Kennet, 10
December 2009
I Arbuthnot MP to Rt Hon Lord Peter I
I
I
UKGI00011501
UKGI022309-001
24.
Letter from Pat McFadden MP to
Rt Hon James Arbuthnot MP Re:
Post Office Horizon system, 5
December 2009
POL00234111
POL-BSFF-
0072174
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