Witness Name: John Lloyd
Statement No: WITN03431
Dated: 16 October 2024
POST OFFICE HORIZON IT INQUIRY
FIRST WITNESS STATEMENT OF JOHN LLOYD
I, JOHN LLOYD, of an address known to Kingsley Napley LLP, will say as follows:
Background
My professional background 1970-1998
1. I graduated from Cambridge in 1970 with a 2:1 honours degree in History.
2. During my working career, I have been appointed to two academic posts w
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hile
mainly working as a trade union official. While at Warwick University in the early
1970s, I was part-author in 1972 of ‘Industrial Relations and the limits of Law’.
I wrote a published history of the electricians’ union, entitled ‘Light and Libe
rty’,
for which the University of Cambridge awarded me a PhD in1995, by which time
I was a lecturer in Human Resource Management and Industrial Relations at
Cranfield Business School.
3. I was also the Ward Perkins visiting fellow at Pembroke College, Oxford in
1992, a visiting fellow at Cranfield School of Management from 1992-1993 and
again from 1997-2004, and a visiting fellow at Henley College of Management
from 2004-2007.
4. The centrepiece of my career was my different trade union work, which I set
in detail at WITN0343101. In summary:
out
(a) From 1970-1972, I was the Assistant Research Officer at the National Union
of Seamen (NUS).
(b) From 1972-1974, I was a Research Associate at the SSRC Industrial
Relations Research Unit at Warwick University.
(c) From 1974-1993, I worked for the Electrical Electronic, Telecommunication
and Plumbing Union (“EETPU”), later known as the Amalgamated
Engineering and Electrical Union (“AEEU”). During those 19 years at
the
EETPU/AEEU, I became a trade union manager of different functions and
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resources. As a Research Officer, I wrote the EETPU’s 1975 evidence to
the Bullock Committee of Inquiry into Industrial Democracy, giving me a
lifelong interest in employee involvement. While the National Officer for
Education, I ran two residential trade union training centres, including the
first one to introduce practical vocational education alongside trade union
studies. This was to lead to later involvement at Council level with the BTEC
Council, London East TEC and London East LSC.
(d) From 1993-1997, I was a Lecturer in Industrial Relations/Human Resource
Management at Cranfield School of Management, Cranfield University and
vice-chair of the trustees of Ruskin College Oxford .
(e) From 1997-2004, I worked closely at the AEEU with the general secretary
and others in the leadership of the union at a transformational time for
unions, largely stimulated by the new government in 1997. In 1998, I was a
member of the design and implementation team for the University for
Industry and later sat on the Cabinet Office PIU inquiry into Workforce
Development. Within the AEEU, I rose to a senior role in the union, National
Secretary. My main focus was achieving new recognition agreements,
developing the partnership agenda with employers, managing the union’s
interest in lifelong learning and designing the huge merger between the
AEEU and Manufacturing, Science, Finance (“MSF”), to form Amicus, a
trade union merger that came to fruition in 2001.
(f) From 1997-2002, I wrote and helped deliver many of the AEEU/Amicus
trade union recognition agreements in companies such Honda, Virgin
Atlantic, Tibbet and Britten, Mastercare and Exide Batteries.
Post Office Limited (“POL”)
Relationship with POL
5. Up until I was invited to join the Post Office Board as a non-executive director
on 6 October 1998, I had no connection or relationship with POL at all, beyond
being aware of the general union positions of the Communications Workers
Union (the main trade union for the Royal Mail, but not the main union for Post
Office Counters, which was the National Federation of Subpostmasters
(“NFSP”)). I never had anything to do with the NFSP throughout my career.
My role at POL 1999-2001
6. Apart from the general responsibilities associated with attendance at Post
Office board meetings, each of the non-executive directors (‘NEDs”) brought
complementary skills and experiences in working life that POL could draw upon.
The three other NEDs appointed in 1998 were Mike Kinski, Rosemary Thorne
and Miles Templeman.
7. Clearly, my contribution revolved round my experience of human resource
management, industrial relations systems, institutions and governance along
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with a fairly broad knowledge of the trade union world and what made its
leaders, executive committees, conferences and politics tick.
8. POL at the time recognised the Communication Workers Union (“CWU”) for the
overwhelming majority of its mail and parcels businesses, and I was able to
comment at the Board and represent the views of the Board to the CWU from
time to time, (speaking at their annual conference and giving a full page
interview for their magazine), along with occasionally speaking to POL
management training events at their Rugby training centre and elsewhere.
My 1999 experience in respect of major IT projects
9. I had then, or now, almost no experience of major IT projects.
Board Meeting 10th November 1998. Responding to questions arising out of
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10.This Board meeting was my first meeting following my appointment on 6
October 1998. I was listening to wholly new information across a wide range of
issues and therefore knew little, if anything, of the history of the Horizon project.
11.As it was my first meeting, and because I therefore knew very little of the
Horizon project, I had no view at all about the quality or reliability of Horizon.
12. Therefore, as I had not formed a view, I was not in a position to action.
Board Meeting 8th December 1998. Responding to questions arising out of
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13.The meeting's concerns over the Horizon delays are summarised in minute
PO98/127 paragraph (iv) in which the Chief Executive said, inter alia, “.....ICL,
who to date had not responded how they intended to finance the programme.
It was important that, in the event of Horizon being ceased, Counters could
work with the Benefits Agency on an alternative automated solution. Counters
could not afford to lose the BA income, at least in the short term.” In reading
such minutes, it seems the main delay was caused by ICL/Fujitsu’s need to
ensure their own financial viability to enable them to continue to supply the
Horizon project to modernise and extend POCL’s range of financial services.
14.1 had no clear understanding at only my second Board meeting of the
relationship between the government and ICL in delivering Horizon, but I was
well aware that the government's overall vision for the Post Office involved the
possibility of every Post Office becoming a one-stop shop for customers —
particularly from poorer backgrounds — to carry out banking, interact with
government in all sorts of ways and conduct postal business, as well as
achieving a reduction in benefit fraud. Fraudulent or stolen benefit books and
coupons were sometimes believed to be presented at post offices. All those
ambitions required the modern electronic management system that Horizon
appeared to be promising.
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15.1 was not made aware of the technical details of the software testing.
16. I was aware of POCL’s concern about whether ICL could afford to continue to
take forward the Horizon project, and whether the government would terminate
the programme. Alongside this, there was the need for Horizon to work in order
to ensure POCL’s future role in handling the myriad of citizen/government
interactions identified in Stuart Sweetman’s “Vision and Strategic Direction for
POCL (PO98/129). I felt that I should support Mr Sweetman’s vision and any
eventual contribution by Horizon to that. The announcement made by Stephen
Byers on 7 December 1998 confirmed the government's ambition to reform the
Post Office in order to reflect the new state-owned corporation’s market
discipline and commercial freedom [WITN0343102].
17.1 took no specific action in addressing these matters because — as the minutes
record — matters were being dealt with by Stephen Byers and the government
was seeking legal advice.
Response to the correspondence of May 1999 between the Post Office and
Stephen Byers, contained in POL00028611
18.As recorded in Neville Bain’s letter to Stephen Byers, I was the non-executive
director who was absent from the Post Office Board meeting on the evening of
23 May 1999. I addressed the Communication Workers annual conference in
Bournemouth that same day.
19.As far as I can remember, the government was trying to get ICL/Fujitsu to
provide an Horizon system that worked at a reasonable cost to the government.
But they also had to bear in mind the worries of the Post Office concerning the
affordability of either/or the cancellation or developing a new technical system
if Horizon failed at a time when the Post Office was about to launch as a publicly
owned but independent commercial operation.
20.1 never talked to the Prime Minister or anyone else at no 10 Downing St
concerning anything to do with the Post Office and I did not know what his
position was. I did later talk to people at 10 Downing Street throughout this
period about other issues, but never about the Post Office.
21.1 do not recall the detail of the Treasury Review of Horizon and although I was
not at the meeting at which it was discussed, I accepted the outcomes outlined
in John Roberts's letter of the 24 May 1999.
22.The circumstances were as laid out in the correspondence. I do not have any
independent recollection.
23. I am not aware of any pressure brought to bear by the government in relation
to the Heads of Agreement. The government had a legitimate interest in the
Post Office’s views because it was the Post Office’s shareholder. The
correspondence identifies the concern about the way in which the issue has
been handled; however, I was not present at the meetings in the days before
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23 May 1999, when the Board met to discuss the Heads of Agreement. I have
no recollection of the handling of events beyond the correspondence.
24.1 did not concentrate on the technical performance side of Horizon during these
deliberations, which concerned the finances of Horizon.
25.In retrospect it is clear that the main focus of the Board was on the financial
concerns of both Horizon’s possible cancellation and how the government
would ensure both the project’s continuation and a firm protection of the Post
Office’s finances, whatever happened. The technical issues were not the main
concern while those financial concerns were most immediate.
Board Meeting of 20 July 1999
26.1 have been asked to comment on the Board Minutes of 20 July 1999
[POL00000352], which I refer to below at paragraph 40 onwards.
27. There had been a Board “Away day”, the previous day, on 19 July 1999, which
included a presentation to the Board titled “Implications of the Horizon
Agreement” [WITN0343103]. Due to the passing of time, I cannot remember
who delivered this presentation; it was most likely to have been David Miller
because he delivered updates on Horizon to the Board.
28.1 made handwritten notes on the presentation [WITN0343103]; however, I have
looked at and reflected upon the slides and my handwritten notes and I cannot
recall in every instance whether the notes that I made on the slide deck refer to
the speaker's comments or my own personal reflections.
29.1 believe the purpose of the presentation was for the Board to understand the
impact of signing the Horizon contract. The agenda on page 1 of the slides
covers the context, impacts of existing strategies (POCL and Post Office),
proposed strategic responses and next steps.
30.Under the heading ‘Proposed strategic responses’ [WITN0343103 p.66] my
notes record: “Technical criteria 25 pages — any ‘severes’ — 20 and 1 highly
severe (training) — they will all be solved 18 August’.
31.One of Board members appears to have asked if there were “any severes’”,
which I believe refers to technical problems with Horizon. I have noted that there
were 20 severe risks and 1 highly severe risk. I wrote that “they will all be solved
[by] 18 August” which indicates that I was given assurance that these were
manageable and would be dealt with quickly.
32.On the back of the document I have written:
a. “Mike is wary — does it work? What about the finances of ICL/Fujitsu.
i. Software is 300 offices and then 5,500.
ii. Milestones properly supervised.
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b. (1) Don’t let them off the VAT issue (...Byers letter)
(2) And what about the McCartney group getting it done!
(3) POL status (An under Sec, of State and not a minister of state. Policy
unit- M Mowlem - Alan Johnson.
c. Training package reformed :-
Horizon — ICL own systems help-desk
What's wrong is it self-taught tutoring.
System contract or 19,000 post offices.
d. ICL post-sign off — they are repairing their help-line”.
33. My best recollection is that “Mike is wary” was a reference to Mike Kinski, who
I greatly respected. Upon re-reading my notes, I believe it is most likely that
Mike was leading the charge and asking challenging questions such as “does
it work?”, “what about the logistics” and “are the milestones properly
supervised?”. The notes appear to suggest that Mike was scrutinising aspects
of the deal before the contract was due to be signed. The PO Board minutes of
20 July 1999 refer to “An action plan to progress these issues with milestones
reporting to the Executive Board” [POL00000352, p.44] I would expect the
action plan included the concerns raised by Mike; I would have certainly
endorsed Mike’s proposals about milestones as would the rest of the Board.
34.1 do not recall whether my note about “What is wrong is self-taught tutoring”
refers to something highlighted by the speaker or me. Online education was
starting to emerge and I was sceptical about solely relying on it. I do remember
that the Board recognised the difficulty facing people running post offices in
rural towns, who were unfamiliar with computer software and who would need
“hand holding” in relation to the implementation of the project. I would have
expected that one of the milestones would have related to this, and the 20 July
1999 Board meeting minutes go on to refer to adding 300 managers to hand
hold staff [POL00000352, p.45].
35.1 cannot now recall whether the note on “system contract or 19,000 POs” was
highlighted by the speaker or me. I am now not sure what that meant. It is most
likely a reference to training, but I cannot remember the details and it could
alternatively have referred to the importance of having a modernisation system
contract covering every post office and not 19,000 separate contracts, one with
each post office.
36.My handwritten notes refer to lan McCartney, the Post Office Minister in the
Department of Trade and Industry (“DTI”). He announced the setting up of a
working group to study the problems around the Horizon Project on the 28 May
1999, a step warmly welcomed by the Communication Workers Union (“CWU’”).
I cannot remember anything coming of this or seeing a report or hearing
complaints or plaudits about its work from anyone.
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37. I noted comments about the “POL status” I cannot remember precisely what
my note refers to. The political context at the time was that the government
were going to effectively relaunch the Post Office as a state-owned corporation,
with the DTI as its ‘shareholder’.
38. The letter from Neville Bain to Stephen Byers on 23 May 1999 sets out that the
POCL “was largely exempt from VAT” and that VAT payments to the ICL should
not be paid by the PO. The last paragraph of Stephen Byers’ letter
demonstrates that he was aware of the problem and although the DTI could not
make up VAT policy that might have “wider implications” elsewhere in
government, he was supportive of Neville Bain’s attitude to the issue.
39.The slides also indicate that we were informed of the financial impact of the
Horizon Project [WITN0343103, p.65]. It was expected that it was going to be
expensive and lead to a loss: the expensive implementation was seen as the
reason for this.
20 July 1999 Board Meeting — relating to POL00000352
40.1 understood at the time that Horizon was ‘robust’ in the sense that it worked.
PO99/79 (vi) and (vii) minutes show David Miller, Horizon Programme Director
‘considered the system robust and fit for service’. I cannot remember differing
from that assessment. I refer to the technical issues raised at the away day at
paragraphs 30-31 above, and that I was reassured that these would be resolved
by 18 August. I did not think there was anything profoundly wrong with the
implications of the number of sub- postmasters experiencing difficulties
operating the system. I was aware that any new technology would challenge
workers in almost every industry and the Horizon managers seemed to
acknowledge that by notifying the Board that they were adding 300 managers
to ‘hand hold’ staff who were struggling, in addition to providing new training
packages [POL00000352].
4
a
.My knowledge of the technical issues I was aware of is described above
paragraphs 30-31. I did not worry about my comparative lack of technical
comprehension as I was assured by the responsible and knowledgeable senior
managers that the ‘robust’ nature of the system was assured.
42.1 knew very little of the problems facing sub-postmasters, beyond the
information provided to me on 19 July 1999 and taking the view that as with any
new impact of technology, some unspecified number of people would struggle
to immediately be comfortable with it.
43.1 did not singularly raise technical concerns with anyone; however, as
mentioned at paragraph 33. I believe the Board required an action plan to
address issues of concern.
44.1 don't remember the Board’s decision to sign the contract with ICL being
remitted to the Chairmen and Chief Executive posing a problem. As the Board
minutes of 20 July 1999 remind me, the real emphasis in the discussion was
driven by the financial arrangements the Post Office might come to with the
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government over paying for Horizon. The decision was imminent with
associated time pressure. The Chairman and Chief Executive knew the
collective mind of the Board, and could speak for us. In my experience of
professional life, this was normal professional practice.
The Board minutes of 20 July 1999 remind me that much of the emphasis in
the discussions was driven by the financial arrangements that the Post Office
might come to with the government, over paying for the Horizon project. This
was part of the over-arching atmosphere of the discussions and I believe that
government ministers met on 21 July 1999 to discuss who would pay for the
project. There was pressure on the Post Office to carry the costs.
Board Meeting of 26 October 1999. Responding to questions arising out of
POL00000354
45.My answers are broadly the same as my responses to the minutes contained
in POL00000352. The Board's concerns were focussed on the financial
implications of the cost of Horizon. The roll-out of the system had started, but
would be paused after the 8th of November and assessment of implementation
would be undertaken. I cannot remember being disturbed by this process. I
now see that that the meeting notes of 26 October 1999 [POL00000354]
suggest that issues in relation to Horizon were raised at the Board meeting on
14 September 1999. I did not attend that meeting and I have not seen the
minutes.
46. I continued to rely on David Miller's assessment of the robustness of Horizon
paragraph 40. Having reviewed the meeting minutes, I can see that the Board
discussed the Horizon project as per the description in paragraph (iv)
[POL00000354, p.72]. From what I remember, the discussion of “remedial
work” was likely to satisfy any concerns I might have had and confirm that the
milestones that had been envisaged to rectify any outstanding issues were
being addressed.
47. The pause is mentioned in the minutes at paragraph (vi) [POL00000354, p.71].
I believe this was to ensure that the project was working properly, and would
have provided me with additional reassurance.
48. The fact that the Chief Executive was satisfied that he was able to sign the
contract and implement it across the network would have given me further
confidence. I had no reason to doubt his assessment.
Board Meeting of 11 January 2000 [POL00000336]
49.Once again, my answers to the questions are similar to those I gave in
response to the other sets of board minutes. In looking at these minutes after
over 22 years have gone by, I cannot remember being suspicious of the
technical robustness of the Horizon system. These minutes, especially clause
PO00/9 (i), described an awareness of difficulties, but emphasised that much
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effort was going in to resolving them, so much so that the issues would not
prevent rollout re-commencing. I cannot remember being uneasy about that.
50.The Annual Reports from the years 1999-2000 go on to mention that the
Horizon project would be rolled out to the entire network by spring 2001 at a
rate of 300 branches a week. The government's decision to pay benefits
directly into bank accounts from 2003 required the Post Office to write off over
half the cost of automation.
June 2000
51. There are a number of documents that I have reviewed in preparing my witness
statement and which I refer to here, but do not recall in sufficient detail to
comment on further now.
52.The appraisal objectives and feedback of John Robert’s [WITN0343104] in
referring to Horizon state “All revised milestones for 1999-00 achieved”. Those
for Neville Bain state that “Major IT projects need to deliver to the agreed
milestones” [WITN0343105]. There is also reference to the need to provide ‘an
effective away day that adds value for NEDs and management as well as ‘an
occasional forum of NEDS with the CE and Chairman for informal discussions
and to ensure that top management development and succession planning is
addressed’.
53.On 27 June 2000, Neville Bain wrote to Alan Johnson MP setting out various
concerns which had been raised by the NEDs [WITN0343106]. Neville Bain
detailed the fact that “Recommendations of the Board and the Remuneration
Committee are usually ignored” and NEDs are not being used as the
“representatives of the [government]” they were appointed to be.
54.0n 10 October 2000 Neville Bain sent a Memorandum to the Board
[WITN0343107] which stated “While the Board exercised good judgment on
issues, it was felt that perhaps the board did not always offer a robust challenge
to papers put forward”. I am not sure how this view was formed and whether it
was linked to Horizon in particular.
General
55.1 cannot recall any other meetings that I was party to that were significant in
respect of the procurement, design, pilot, rollout and modifications of the
Horizon IT system.
56.1 personally never sought reassurance from ICL/Fujitsu on any subject.
57.The political input into the contract discussions with ICL/Fujitsu are outlined in
the Board minutes, and I am unable to add any further detail at this remove.
58. There was no political pressure on the timing of the rollout that I recall beyond
the government in the guise of the Benefits Agency being keen to get on with
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the modernisation of the payment of benefits, and the general time pressures
referred to above at paragraph 44.
59.At the time (1999-2001) I think the Board felt they were abreast of the Horizon
issue and sought to address issues in the ways I outline above.
60.1 was impressed by the regular level of expertise displayed on all sorts of
subjects by Board members, both Executive and non-Executive. Similarly, the
senior managers who came to the board meetings seemed to be completely
on top of their specialisms which was particularly important on technical
(including Horizon), legal and financial issues.
61.1 am not sure how much more effective the Board’s scrutiny could have been.
62.1 cannot think of anything further that will assist the Chair in this Inquiry beyond
one remark that is heavily influenced by my retrospective consideration of
Board procedures from 1998-2003. It would have been useful to have had at
least a quarterly or half-yearly report to the Board concerning the level and
nature of prosecutions of sub-postmasters and sub-post mistresses. Such
data could have alerted the Board to changes in the numbers and nature of
such fraud prosecutions apparently revealed by the Horizon system.
Questions sent by the Inquiry 30 July 2024
63.On 30 July 2024, the Inquiry asked me a series of additional questions
following the submission of my draft statement in August 2022. My response
to these questions is as follows:
64.1 was not aware at any time of any specific process by which I now know the
Post Office prosecuted SPMs for theft, fraud and false accounting.
65.1 am unaware now, as I was from 1998-2003, of the internal Post Office
corporate structures in place at the time for prosecuting SPMs for theft, fraud
and false accounting. Consequently, I was not involved at all in what processes
did exist, and I remain unaware of any other Board members direct concern
with such matters during that time.
66.In thinking of reflections on the adequacy of oversight of Post Office
prosecutions by the Board, I can only repeat what I wrote in paragraph 62 of
my Witness statement, submitted to the Inquiry in August 2022.
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I believe the content of this statement to be true.
John Lloyd
Date: 16 October 2024
Index to First Witness Statement of John Lloyd
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No.
URN
Document description
Document
date
Control number
WITN0343101
Summary of John Lloyd’s
Trade Union Career
23/08/2022
WITNO0343101
RMG00000015
Minutes: Post Office Board
Minutes of 10/11/98
10/11/1998
V1S00007423
RMG00000012
Minutes: Post Office Board
Minutes of 08/12/1998
08/12/1998
V1IS00007420
WITN0343102
Statement by Secretary of
State for Trade and
Industry — Monday 7
December 1998
07/12/1998
WITN0343102
POL00028611
Letter from John Roberts
to Mike Kinski, John Lloyd,
Miles Templeman and
Rosemary Thorne re
letters exchanged
between PO Board and
Secretary of State for DTI
on Heads of Agreement
with ICL, 24 May 1999
24/05/1999
POL-0025093
POL00000352
Post Office Board Minutes
of 20/07/1999
20/07/1999
VIS00001326
WITN0343103
Implications of the Horizon
Agreement Presentation to
the PO Board — 19 July
1999
19/07/1999
WITN0343103
POL00000354
Post Office Board Minutes
of 26/10/1999
26/10/1999
VIS00001328
POL00000336
Post Office Board Minutes,
Meeting of 11/01/2000
11/01/2000
VIS00001310
10
WITN0343104
Objectives 2000/2001 of
John Roberts
WITNO0343104
11
WITN0343105
Appraisal, objectives and
feedback for Neville Bain
dated — 12 June 2000
12/06/2000
WITN0343105
12
WITN0343106
Letter from Neville Bain to
Alan Johnson MP — 27
June 2000
27/06/2000
WITN0343106
13
WITN0343107
Memorandum to the Board
from Neville Bain — 10
October 2000
10/10/2000
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