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Witness Name: Stephen Robson
Statement No.: WITN0336_01
Exhibits: None
Dated: 13 September 2022
POST OFFICE HORIZON IT INQUIRY
FIRST WITNESS STATEMENT OF STEPHEN ROBSON
I, Sir Stephen Robson, will say as follows:
This witness statement is made to assist the Post Office Horizon IT Inquiry
(the “Inquiry”) with the matters set out in the Rule 9 Request dated 9 June 2022
(the “Request’).
1. As you will appreciate your request for information relates to a period over 20
years ago. At the time I was involved with the Horizon project for a period of
less than 6 months. My recollection of these times is limited so that everything
in what follows should be read with an unstated “as far as I recall”.
My responses follow the numbering in the annex to Ms Ambler’s letter of 9 June
2022.
My background
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2. After graduation from Cambridge University and Stanford University, I joined
the Civil Service in autumn of 1969 as an economic assistant at HM Treasury.
Apart from a 2 year secondment in the mid-1970s to a financial company, I had
a series of posts in the Treasury until I took early retirement in 2001.
My involvement in the Horizon project
3. In January 1999 Ministers instructed me to look at the Horizon project with a
fresh set of eyes to see if there was a way forward. My involvement ended in
May 1999 when Ministers had agreed on a revised project.
Problems faced by Horizon in January 1999
4. In January 1999 Horizon was running late and was over cost. ICL was in breach
of contract. There were tensions and disputes between the public sector clients
who were on the one hand Department of Social Security (DSS) and the
Benefits Agency (BA) and on the other the Post Office (PO) and Post Office
Counters Ltd (POCL). The issues between them did not appear to be being
resolved. There were also problems between the clients and ICL. The
atmosphere around the project was one of complaint, criticism and lack of trust.
Position of Government departments on the future of Horizon
5. There appeared to be agreement on the objective of developing a benefit
payment card (BPC) but such were the disputes about the working of the project
that it was not possible to see how the objective was ever going to be delivered.
DSS/BA wanted to move quickly from paying benefits using order books to
paying by automatic credit transfer (ACT). PO/POCL wanted to retain footfall in
post offices, to automate post office counters and to enable post offices to
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provide services for High Street banks such as cash withdrawal from personal
accounts (called network banking).
Relations between the Government and ICL and Fujitsu in January 1999
6. In the context of the Horizon project, relations between ICL and DSS/BA and
Post Office/POCL were difficult. Wider relations between the Government and
ICL were workmanlike, but the troubles of Horizon were a running issue. I had
no direct exposure to relations with Fujitsu at that time.
My involvement in negotiations with ICL over Horizon in February 1999
7. At that time, I was a lead at official level in discussion with ICL over Horizon. I
dealt with Mr Todd and Mr Christou.
8. I was instructed by the relevant Ministers to undertake the role described in
paragraph 9 below.
My negotiating brief
9. I was instructed to look with fresh eyes to see if Horizon could be refined to
meet Ministers’ objectives which were:
- to move as quickly as possible to payment of benefits by ACT
- to maintain Post Office footfall revenue to safeguard the network of post
offices
- to develop a smartcard to support Government services and to offer
support to High Street banks
10.1 was to explore the best ways of achieving these objectives without increasing
public expenditure on the project.
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My understanding of the technical viability and robustness of Horizon at that time
11.In mid-1998 an independent group of experts had looked at the Horizon project.
It had been chaired by Adrian Montague who was head of what I think was then
called the Government Private Finance Taskforce. It had concluded that the
infrastructure was robust by industry standards. In my view the issue of
technical feasibility could not be assessed as the three parties involved — ICL,
DSS/BA and PO/POCL - took different views on a range of technical issues and
were critical of each other. My conclusion was that the organisation and
management of Horizon as a project were dysfunctional and most unlikely to
deliver the BPC.
Influence on my negotiations of the financial consequences of termination, concerns
about foreign investment and issues relating to the technical integrity and robustness
of Horizon
12.The financial consequence of termination was an important consideration
13. Ministers were concerned about the views of Fujitsu as a major inward investor.
14.See the answer in paragraph 11 above as regards the technical aspects of
Horizon.
New proposal put forward as a result of my negotiations
15.Under the new proposal the BPC would be abandoned. PO/POCL would set up
credit only bank accounts for individual benefit claimants who were currently
using order books. The claimant could access his/her account using a
smartcard. DSS/BA would pay money into these accounts using ACT. The
proposal needed more work on specification and cost.
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Reasons for the new proposal
16. The proposal offered the prospect of an earlier move to ACT. The smart card
offered the prospect of POCL developing other services. However, the key
attraction of the proposal was that it removed DSS/BA from the project leaving
PO/POCL a single client to deal with ICL. This should provide clearer incentives
and accountability for ICL and POCL and deal with the key problem of Horizon
which was the dysfunctionality arising from the existence of two public sector
clients with different objectives and incentives.
Response of DTI and DSS to this proposal
17.DTI were prepared to see more work on the proposal as long as the BPC was
kept in play.
18.DSS/BA were content to pursue the proposal.
Seeking Prime Minister's endorsement and his response
19.The Prime Minister's endorsement was sought as the proposal represented a
substantial change in a major public sector project with potential cost and risk
issues spanning several Departments and the Post Office. It would affect
benefit claimants and sub-postmasters and was likely to attract of good deal of
comment if it went ahead. It had potential implications for the Modernising
Government agenda and would mean delaying a White Paper on the Post
Office. Ministers also felt it would help progress if the Prime Minister spoke to
the Chairman or CEO of the Post Office.
20.In response the Prime Minister was concerned about cost and risk. He did
attach importance to the provision of a platform for electronic delivery of
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Government services. He agreed that the proposal should be pursued with a
review at the end of April. He did not at the time speak to the Chairman or CEO
of the Post Office.
2
=
.Ministers mainly dealt with the Prime Minister by correspondence. I recall the
Chancellor met the Prime Minister on one occasion and other Ministers may
have had meetings with him. Along with others I attended a meeting between
the Prime Minister and Mr Naruto (Futjitsu) in April 1999 at which Mr Naruto
said he wanted a legally binding agreement before the next Fujitsu Board
meeting on 23 April. The Prime Minister gave no commitment.
My role in negotiations with ICL on Horizon between March and May 1999
22.My role remained as described in paragraphs 7 and 9 above. In addition, in May
the Prime Minister set out three political requirements. He wished to avoid
criticism from the Post Office or from sub-postmasters that the entire rural
network of post offices had been put at risk. He wished to avoid putting the
whole future of ICL at risk. He wanted the Government to have a fully defensible
position before the Public Accounts Committee.
The Government's relations with ICL and Fujitsu at that time
23.Relations with ICL were quite tense at times but were generally workmanlike. I
had no direct exposure to Fujitsu apart from the meeting referred to in
paragraph 21 above.
The options for the future of Horizon under consideration at that time
24.The options were:
1. continue with the BPC
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2. the proposal in paragraph 15 above. Some variations of this were
raised at times but none proved attractive
3. a further proposal was put forward in early April 1999. POCL would
purchase the basic Horizon infrastructure without any commitment to
the BPC or smartcard. BA would continue with the order book system
for a period while POCL developed its network banking strategy. At
the end of this period BA would move claimants as quickly as
possible to payment by ACT.
4. termination of the Horizon project.
BA and PO stance on the future of Horizon at that time
25.1 do not recall any agreement between BA and PO on the future of Horizon in
March-May 1999. BA wanted a way forward without the BPC and with an early
move to payment of benefits by ACT. The PO were concerned about footfall in
post offices, cash flow, profits and risk and the future of their strategy for
network banking. They were also understandably concerned who would cover
any additional costs and revenue losses which they might face.
The influence on negotiations with ICL of the financial consequences of termination.
concerns about foreign investment in the UK and issue about the technical integrity
and robustness of Horizon
26. The negotiations were influenced by the financial consequences of terminating
the Horizon. There were concerns about the impact on Fujitsu as a significant
inward investor. See paragraph 11 above on technical integrity and robustness.
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27.Negotiations were also influenced by the Prime Minister’s points in paragraph
22 above and by the concem of ICL and Fujitsu to avoid having to make
provision in Fujitsu’s accounts for the cost of ICL’s work on Horizon. Such a
provision would have been some £300 million. To avoid this Fujitsu needed to
have Heads of Agreement signed by late May. The Government sought to meet
this concern. This target helped bring negotiations to a conclusion.
My understanding about the technical viability and robustness of Horizon in March-
May 1999
28.See paragraph 11 above. The key issue on Horizon centred on the
management of the Horizon project not on its technical aspects. The
management was dysfunctional and was most unlikely to succeed in delivering
the BPC.
My understanding of the position of the BA on the software testing by ICL, the
specification of acceptance and the grant of release for live trial
29.In April 1999 BA took the view that more testing of the BPC project was needed
before proceeding with live trial.
The relevance of the concerns of BA to negotiations on the future of Horizon
30. The discussions in April 1999 were focused on alternatives to the BPC project.
The BA concerns underlined the need for any alternative to have sound
specification and acceptance procedures.
My understanding of the concerns of PO and ICL about the risk of Horizon failing the
acceptance tests
31.In April 1999 PO/POCL wanted to move to live trials on the BPC project and
considered that the issues raised by BA could be addressed during the live trial.
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There would be some weeks to observe the impact of these fixes before
acceptance. ICL and Fujitsu were said to share this view. POCL were
concerned that more testing would delay the project
The relevance of these concerns to negotiations on the future of Horizon
32.Only to the extent described in paragraph 30 above.
Action to address the issue
33.See paragraph 34-36 below.
Conclusion of negotiations
34.The outcome was that the BPC was abandoned. POCL would purchase the
basic Horizon infrastructure. The BA would move to ACT over the period 2003-
05. The infrastructure would enable the automation of POCL counters e.g., in
bill paying and stamp transactions and should fit with its network banking
strategy. It might also be a platform for modern Government services.
35. The cost in terms of public expenditure was lower than that of termination which
was the alternative option. Therefore, termination was not pursued further. The
cost would have been much greater for the option in paragraph 16 above.
36.An agreement was signed with ICL which was unconditional. It included a
waiver by HMG and ICL of all claims. It also provided for a period of about 3
months during which ICL and POCL would negotiate detailed contracts. If, at
the end of this period the parties could not agree, POCL had the right to
terminate. If POCL did terminate they would pay ICL £150 million in full and
final settlement. At that time POCL were uncertain whether they preferred
termination to the arrangement in the settlement.
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37. The outcome included an aspiration, but not a commitment, that POCL and ICL
would work together to try and create a platform for modern Government
services.
38.ICL had made an offer on 13 May for a settlement. This had been more
favourable to ICL than the eventual settlement. The cost to the Government
was higher and higher than that of termination. It placed too much risk on the
public sector.
The end of my involvement in matters relating to Horizon
39.As far as I remember, I ceased to be involved around the end of May 1999.
I did not have any concerns about Horizon after the period of my involvement.
Looking back did the Government effectively scrutinised the technical integrity and
robustness of Horizon?
40.From an early stage of my involvement, it was clear that the BPC project was
most unlikely to succeed. This was the result of fundamental differences in the
priorities and incentives of the three parties involved rather than the technical
aspects of the project.
Other matters which I consider would assist the chair.
41.None
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Statement of Truth
I believe the content of this statement to be true
Signed:
Gaxrowte © 2
Ay
Dated: i
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