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Witness Name: Pat McFadden
Statement No.: WITN10250100
Dated: 20 June 2024
POST OFFICE HORIZON IT INQUIRY
FIRST WITNESS STATEMENT OF RT HON. PAT McFADDEN
I, Pat McFadden, former Minister of State in the Department for Business, Enterprise
and Regulatory Reform and former Minister of State in the Department for Business,
Innovation and Skills, will say as follows:
INTRODUCTION
4. I make this statement in response to the Inquiry's request for evidence dated 8
May 2024 (‘the Rule 9 request”). I have prepared it with the support of the
Government Legal Department and counsel. I have been dependent on others
putting documents before me to assist with the chronology of events as set out
herein, but any views expressed in this statement are my own. I would be very
happy to clarify or expand upon the evidence set out in this statement should it
assist the Inquiry.
2. I have answered the Rule 9 request in sequential order, adopting the same
numbering, and have endeavoured where possible to provide my account in
chronological order as requested.
Background
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After completing my undergraduate studies in 1988 I worked as a researcher for
Donald Dewar, then Labour's Scottish Affairs spokesman. From 1993, I served
John Smith QC, Labour leader, as a policy adviser. I then worked for the Rt Hon
Sir Tony Blair KG in several advisory roles, including as his Political Secretary
from 2002.
I was elected to Parliament in 2005 as the MP for Wolverhampton South East.
From 5 May 2006 to 28 June 2007, I served as the Parliamentary Secretary in the
Cabinet Office. I was appointed Minister of State in the Department for Business,
Enterprise and Regulatory Reform (“BERR”) on 2 July 2007, with responsibility for
employment relations and postal affairs.
In October 2008, when Lord Mandelson was appointed as the Secretary of State
for BERR, I led for BERR in the House of Commons across a range of different
issues as Minister of State. This was necessary because the Secretary of State
was a member of the House of Lords and could not appear or take questions in
the Commons.
My role at BERR concluded on 5 June 2009 when BERR was dissolved and
replaced by the Department of Business, Innovation and Skills (“BIS”) as part of a
machinery of Government change. I was appointed Minister of State in BIS on 9
June 2009 and served until the general election of 6 May 2010, when I left
Government.
In this statement I will refer to BERR and/or BIS as “the Department” unless
specificity is required.
Since the 2010 general election, I have continued to serve as the MP for
Wolverhampton South East. During the period between 2010 and 2024 I served
on the House of Commons Treasury and Exiting the European Union Select
Committees. I was appointed Shadow Secretary of State for Business, Innovation
and Skills on 12 May 2010 and served in that role for a brief period until 8 October
2010. From 20 October 2014 to 5 January 2016 I served as Shadow Minister for
Europe. From 10 April 2020 until 29 November 2021 I served as the Shadow
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Economic Secretary, and from 29 November 2021 to 4 September 2023 I acted
as Shadow Chief Secretary to the Treasury. Since 4 September 2023 I have
served as Shadow Chancellor of the Duchy of Lancaster.
Knowledge and understanding of concerns about the Horizon system
9. When I was appointed Minister of State at BERR on 2 July 2007 postal affairs
came within my policy portfolio. As Minister, my responsibilities included leading
on any legislation connected with employment relations or postal affairs, meeting
with external stakeholders, and being the main Ministerial point of contact for the
civil servants covering these areas in the Department. I would take debates and
questions in Parliament and represented the Government at European Council
meetings on matters touching those policy areas. It was my role to make sure that
the five-year strategy for Post Office Limited ("POL”) was implemented.
10. Upon appointment to the Department, I was given a handover note. It was
prepared by officials and was the sort of note made available to any new Minister
when taking up post in any Government department. The note is aimed at bringing
new Ministers up to speed with current issues in the Department and likely early
decisions the Minister will have to make.
11. The handover note is entitled “Post Office Network — Issues. Key Points &
Background Info” (BEISO000014 Post Office Network — Issues. Key Points &
Background Info) and is comprehensive in addressing the issues within the
portfolio in respect of which I would need to be making decisions.
12. The note focusses very much on the programme of Post Office closures about to
be implemented; a project known as the Network Change Programme. The
Network Change Programme was the central component of Post Office’s five-year
strategy. It involved the reduction of the size of the network by 2,500 branches out
of a total network of around 14,000 in order to make the network commercially
viable.
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13. The closure programme had been decided upon and agreed by previous Ministers
as part of Government policy, driven by losses in the Post Office network and
changing consumer habits (such as the decline in people sending letters). The
implementation was about to begin when I was appointed to BERR and it proved
very controversial, with heated opposition in local communities, and significant
Parliamentary activity such as petitions, a large number of adjournment debates
and debates in the House of Commons and Westminster Hall, parliamentary
written questions, and evidence to the Select Committee.
14. The closure programme helps to illustrate the relationship between the
Department and POL: whilst the overall policy was agreed between the
Government and POL, the implementation fell to POL. So, for example, whilst
there were criteria for the selection of branches for closure, the individual decisions
were left to POL". Although Ministers played no role in selecting which Post Offices
closed, as the Minister with overall responsibility for postal affairs I took most of
the debates in Parliament on the programme.
15. Another key area for me in the postal affairs brief was the search for new streams
of work for the Post Office. The Post Office faced technological challenges.
Greater direct payment into bank accounts of benefits and pensions meant fewer
people were using the Post Office for collecting these benefits.
16. Issues in the employment relations area of my portfolio included legislation going
through Parliament to improve employment rights. I spent considerable time on
the European Directives with implications for UK workers and businesses,
specifically the Working Time Directive, where the UK had an opt out from the 48-
hour week, and a proposed Agency Workers Directive which would guarantee
1 The requirement to ensure good national coverage of branches indirectly added to the
controversy of the programme. It meant that the Post Offices selected for closure were not
necessarily those where the sub-postmaster might volunteer for voluntary redundancy but rather
those which the Post Office selected based on the criteria of having adequate coverage in the
area. It also meant that where a local campaign was successful in saving a post office from
closure, POL picked another one for closure, sticking to the target of reducing the network size by
2,500.
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17.
18.
19.
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equal rights for Agency workers once they had been employed for a particular
period of time.
My portfolio and responsibilities for the first year or so focussed on the closure
programme, the Hooper Review into the future of Royal Mail, legislation to improve
employment rights, the vulnerable workers forum and the European Directives
referred to above. From 2008 the role broadened as I began to act as the
Departmental lead in the House of Commons. This meant involvement in a
number of industrial and business issues following the financial crash; for
example, the future of the UK steel and automotive industries, and work with
Regional Development Agencies to try to help business recover from the financial
crisis.
As to my knowledge of Horizon when I was appointed to the Department, I knew
by virtue of the handover note that Government had made an investment of £500
million in 1999 into the Horizon project “to bring modern computer systems into
every post office in the country for the first time — enabling Post Office Ltd to launch
a range of new products and to open its counters to potentially over 20 million
bank customers” (BEIS0000014).
The note did not mention anything in relation to any issues subpostmasters and
subpostmistresses (“SPMs”) were having with the Horizon IT system, and I did not
receive any oral briefing upon appointment to the Department in relation to any
such issues. Horizon was mentioned in briefings and statements when I was first
appointed only as an investment in the future of the Post Office. I did not at the
time of appointment know of complaints made by SPMs about the system, or any
Post Office Limited (“POL”) or Royal Mail Group (“RMG?) investigations into such
matters, or any prosecutions by RMG for fraud, theft or false accounting. My
knowledge of Horizon matters did not materially change or develop until early
2009, as I explain further below.
Government oversight of POL
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20. Every Minister has a private office of a few officials who help process all the
paperwork, prepare the Minister's box, arrange their diary and so on. Additionally,
the Department has lead officials on specific areas who would be the experts on
those areas, and would prepare any relevant submissions and attend any relevant
meetings. For Post Office purposes during my time at the Department the officials
were those working within the Shareholder Executive (ShEx).
21. At the time of my appointment in July 2007, both RMG and POL were publicly
owned, but run at arm’s length from the Government. This meant each had their
own chair, chief executive / managing director, and management team.
22. Royal Mail and the Post Office were different in character, though faced some
similar challenges from technological change. Royal Mail was a large nationalised
industry with many thousands of directly employed staff. The Post Office was a
huge network of small businesses run mainly by sub-postmasters who often ran a
shop or business alongside the post office, and several hundred Crown Post
Offices — mainly larger ones located in town and city centres — which were run by
directly employed staff. Of the two, the Post Office had more of a social benefit
character — an organisation providing a range of services in every community in
the country.
23. The arm’s length relationship between Government and Post Office was legislated
for in the Postal Affairs Act of 2000, which had the policy intent of day-to-day
operations in the Post Office being run by its own management rather than
Ministers in the Department, or their officials. Making a statement introducing the
Post Office White Paper of July 1999 which preceded the legislation the then
Secretary of State for Trade and Industry said?
“The White Paper proposes that the Post Office be subject to effective market
disciplines coupled with regulation, and be allowed new commercial freedoms.
Operating at arms length from Government, it will have the freedom to grow
and the means to succeed...
? RLITO000219
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Although the Government will set out clear objectives for the Post Office, they
will not be involved in day-to-day business operations. The Post Office Board
will be responsible for running the Post Office, based on a rolling five-year
strategic plan, which will be agreed with the Government...
Primary legislation will be necessary to transform the Post Office into a public
limited company. That will underline the new commercial freedoms and help to
establish clearly the separate functions of ownership and management, by
subjecting the Post Office to the full range of company law. In particular, the
directors will owe their duty to the company, not directly to the Goverment.”
24. This arrangement was in place for several years prior to the period in which I
served as a Minister. The arrangement meant that the executive team of POL had
responsibility for running the company. Issues regarding individual sub post offices
were regarded as operational matters to be dealt with by POL.
25. As with the Post Office, the Government owned Royal Mail which was also — and
again by design — run at arms-length with its own chair, chief executive and
management structure. Royal Mail faced significant challenges as a result of
technological change. Letter volumes were declining and parcel volumes were
increasing due to online shopping but parcel delivery was open to much more
competition than letter delivery. Alongside its competition and technology
challenges Royal Mail had to fulfil the social obligation of the Universal Service
Obligation. This is the obligation to deliver a letter at a single price anywhere in the
country. To address these challenges at the end of 2007 the Government
commissioned the Hooper Review into the future of RMG.
26. The Hooper Review recommended that the Government seek private capital for
RMG - in other words a partner who would invest and take a stake in the business,
3 The White Paper was followed up by the Postal Services Act of 2000 which enacted the above
provisions and established the Post Office as a Public Limited Company.
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27.
28.
29.
30.
31.
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to help it modernise and meet the challenges posed by new technology and
changing communications patterns.
For a Labour Government, proposing that a private partner take a stake in RMG
was challenging politically. Many Labour backbenchers were deeply opposed to
any level of private investment and ownership. The Communication Workers
Union (CWU) which represented Royal Mail’s staff was totally opposed to the idea.
Legislation was brought forward and introduced in the House of Lords, with its
second reading on 10th March 2009. The Bill passed in the Lords but in the end,
a combination of political opposition and the lack of a potential partner willing to
invest at what the Government considered good value for the taxpayer meant it did
not proceed through the Commons.
POL also faced technological challenges. Greater direct payment into bank
accounts of benefits and pensions meant fewer people were using the Post Office
for collecting these benefits. A major decision to continue the contract for the Post
Office Card Account offered some breathing space but the change in payment
practices continued. One of the features of the relationship between POL and
Government at this time was the search for new streams of work for the POL —
either Government services or financial services.
When it came to Horizon, this meant that issues to do with the proper functioning
of the IT system were issues for POL’s management. Treating these as
“operational matters” had been a matter of established policy for some years.
Legislation had separated the ownership and management functions of the
Government and the company. It was Government's role to set the strategic
objectives for POL and to help see them delivered, but POL was to be free of
Government intervention. That was the point of the legislation. Issues to do with
the proper functioning of the IT system fell within the scope of the day-to-day
running of the business, its operations. It was an operational matter for POL.
The Government's right and proper role was that of owner and shareholder. As
the Minister with overall responsibility in relation to RMG and POL, it was my job
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32.
33.
34.
35.
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to lead for the Government in any Parliamentary debates on matters related to
these companies, answer Parliamentary Questions, and lead on any relevant
legislation. I took no role in the day to day running of these businesses. That was
done in each case by the executive teams of those businesses.
ShEx exercised the shareholder function on behalf of Government. ShEx was
responsible for looking after the Government's shareholdings in a number of
publicly owned organisations (Ranging from the Nuclear Decommissioning
Authority to Channel Four to Royal Mail).
ShEx officials would prepare advisory papers, briefings, submissions on issues
relevant to POL and RMG, they would draft Parliamentary answers, sit in on
meetings with the management of the two companies, advise my private office on
these issues and were generally regarded as the experts on postal affairs within
the Department. During my time as Minister, much of the discussion with ShEx
was about the future of RMG; issues to do with the sustainability of its pension
fund, industrial relations and questions related to the Hooper Review.
Ministers receive large volumes of correspondence and documents across their
policy portfolios. Ministers are to a very large extent reliant on the objective and
impartial advice of officials and their steer as to what is required. They rely on
officials to determine what a Minister should review personally, to analyse
information accurately and to provide sensible recommendations for action, and
to draft responses to correspondence that are consistent with and advance
Government policy. Given the breadth of ministerial portfolios and the challenging
constraints on time that entails, Ministers must make decisions on the advice
given, trusting and with the expectation that officials are competent and have acted
with honesty and integrity. Whilst Ministers do and must challenge the advice
given when appropriate, the efficient functioning of Government necessitates that
Ministers work with the expectation that the information they are given by advisers
is given in good faith and in accordance with the Civil Service Code.
I relied on ShEx for briefings and, as with other policy areas, expected information
on these matters to be true, accurate, and reliable.
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36. My common practice at the time I served at the Department, and which I expect
was broadly typical for Ministers generally, was that correspondence and
documentation sent to the Department for my attention would be received by my
private office. My private secretaries would review the documentation and apply
their judgment as to how that documentation should be directed. The document
may be referred elsewhere; for example, the correspondence sent in November
2009 to Lord Mandelson’s office, which I address below, was redirected for my
attention.
37. If a document or piece of correspondence was to be dealt with by my office then,
depending on the nature and complexity of the issue, it may be addressed directly
by my private secretaries, referred to officials for analysis and advice, or referred
directly to me.
38. My private secretaries would regularly deal with correspondence on my behalf,
and I trusted them to do so. Documents referred to officials would usually be
returned with a briefing note containing advice and often with a draft response for
my consideration.
39. I believe I met with senior management of RMG and POL every few months.
Contact with the relevant officials in SnEx was more frequent. For example, during
the Post Office closure programme when there were lots of Parliamentary debates
about closures I would see Mike Whitehead, the lead Post Office official within
ShEx, quite often. With the Hooper Review and the issues surrounding it I would
meet with Stephen Lovegrove, the head of ShEx at the time. I would periodically
meet the chief executive of RMG and managing director of POL, as would the
Secretary of State, but it was officials from ShEx that had the most regular contact
with those companies. The managing director of POL during my time as Minister
was Alan Cook. The chief executive of Royal Mail was Adam Crozier.
Response to POL investigations of complaints about Horizon system
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40. I had overall policy responsibility in relation to RMG and POL, leading for the
Government in any Parliamentary debates on matters related to the companies,
answering Parliamentary Questions, giving evidence at Select Committees and
so on.
41. Correspondence related to the Horizon system was in most cases referred to POL
for answer because they were running the system. The Department would not
have held any information about individual sub post offices or the day-to-day
operation of the IT system. Where a reply on the matter was signed by me, the
substantive information within it would still have come from POL. In the case of
Parliamentary Questions about Horizon, these were in most cases referred to POL
for answer, mostly in the form of a letter from the Managing Director to the MP
raising the questions. Throughout my time as Minister POL maintained its position
that Horizon was robust and reliable.
Relevant conversations, meetings, correspondence and briefings about Horizon
42. On 13 January 2009, my private office received a letter from Jacqui Smith MP.
She wrote regarding one of her constituents, Julian Wilson, who she told me had
been suspended from his position as the subpostmaster at Astwood Bank Post
Office. Ms Smith set out that “the system gives a summary of transactions and a
total per week, but not a value per transaction. The charge is that the Post Office
is £27k adrift over the last five years”. Ms Smith goes on to say that Mr Wilson had
“heard of three other postmasters in exactly the same position as him within a six
mile radius of Redditch. He states that there are others that he knows of within the
West Midlands area. I feel that there could be a system problem here". Ms Smith
requested that I “investigate this issue and provide a response for my constituent
on this issue” (WITN10250102, Letter from Jacqui Smith MP dated 13 January
2009).
43. I replied to Jacqui Smith MP through my private office on 9 February 2009. I wrote
that “since March 2001, Goverment's role in Royal Mail Group — which includes
Post Office Ltd (POL) — is that of a shareholder in a public limited company. Under
the Postal Services Act 2000, Parliament gave Royal Mail greater commercial
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44.
45.
46.
47.
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freedom and Goverment established an arm’s length relationship with the
company so that the Board could run the business as it decides best to meet the
market developments and changing customer needs. Operational decisions,
which include decisions relating to the running of individual Post Office branches
are a matter for Post Office Ltd’.
I went on to say that “/ understand that Glenn Chester of POL has written to you
regarding the investigations at the Astwood Bank Branch. As you are aware, POL
have procedures in place to deal with issues of this nature and I am assured that
the appropriate action has been taken”. I concluded that “/ was informed that Mr
Wilson resigned from his position in September 2008 and was, therefore, not
invited to be interviewed by POL regarding this matter. In the circumstances I do
not believe there is anything more that I can usefully add’ (WITN10250103, Letter
from Pat McFadden to Jacqui Smith dated 9 February 2009).
Whilst I do not know for sure, I believe that this reply would have been drafted by
Officials in ShEx. In any event, the information in the reply would certainly have
come from ShEx even if the reply itself was drafted by my private office. I would
not have had any way of knowing about Glenn Chester of POL writing to Ms Smith,
or any of the detail surrounding Mr Wilson’s resignation, or any investigations,
absent ShEx’s involvement. This reply would have been clipped to the underlying
correspondence in my ministerial box. I would have read the reply and Jacqui
Smith MP’s letter and signed it off. I relied upon the information provided to me by
officials.
I do not believe that I was aware of the JFSA or its work whilst Minister at BERR
and later at BIS.
I do not recall having conversations with the NFSP or the CWU regarding the
Horizon IT system during my time at BERR or BIS. However, I note that George
Thomson, General Secretary of the NFSP, made a comment some years later to
the Business Select Committee on 3 February 2015, when asked about the
Horizon issues, as follows: “Well, for example, if a sub-postmaster happens to end
up being £30,000 short—! made this point to Pat McFadden many years ago when
he was Post Office Minister—they think, “Well, I know that I never took that money,
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48.
49.
50.
51.
52.
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so it has to be a Horizon mistake.” That is the postmaster's point of view. However,
a member of staff could have misappropriated the money or actually done the
transaction wrong.”
I do not believe that I spoke to the Secretary of State* regarding the issues this
Inquiry is interested in during my tenure. To the best of my recollection, the only
interaction I had with Lord Mandelson regarding the Horizon IT system was in
respect of the November 2009 correspondence, which I address below.
The Inquiry has asked me to look at the set of correspondence at POL00027890.
On 24 February 2009, Brian Binley MP wrote to my private office. I believe that
letter was received by my private office on or around that date.
In his letter, Mr Binley enclosed an email from Rebecca Thomson “regarding the
accounting IT system at Post Office”. Mr Binley said in his letter that “the content
of her email is worrying” and that he “would be very grateful if (I) would address
the points she is making and let me know the exact situation regarding this matter’.
The email from Ms Thomson is dated 10 February 2009. The email signature
records that she is a reporter at the publication Computer Weekly. I am now aware
that Ms Thomson later published an article about the Horizon issues in May 2009,
but I did not know that until many years after.
In her email, Ms Thomson says “/ have spoken to several current and former sub-
postmasters, who say that random flaws in the IT are causing deficits in their
weekly accounts, sometimes to thousands of pounds at a time. Their complaint is
that, instead of listening to their problems and investigating the software or
equipment, the Post Office is making them pay back this money without any
investigation into what is going wrong. Neither they, nor I, have any way of proving
that it is the IT that is causing the deficits. The problem is that the Post Office
refuses even to entertain the possibility that their system could be going wrong”.
4 Baron Hutton of Furness from 28 June 2007 to 2 October 2008; Lord Mandelson from 3 October
2008 to 11 May 1010.
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53.
54.
55.
56.
57.
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Ms Thomson goes on to say “the consequences for some of the Post Masters
have been extremely serious. Of the group I am in contact with, two have been
forced to file for bankruptcy. Others have lost their life savings. If post masters
cannot pay the deficits back, because their savings have been depleted, the Post
Office takes it out of their wages. In desperation a couple of the post masters I've
spoken to turned to false accounting: they were not getting help when they asked
for it from the company, and they did not have the money to pay the deficits back.
So they signed the weekly accounts, affirming the money was there when it was
not. The Post Office has then prosecuted these people, although no-one that I
have heard of has ever been prosecuted for theft’.
Ms Thomson concludes, “/ know the BERR select committee is currently
conducting an investigation into the future of the Post Office, but as a separate
matter I'd like if at all possible to talk to you to get your comments on the
allegations of these post masters’.
As far as I can tell from the documents this was the first time I was made aware
that POL was prosecuting its SPMs in respect of these shortfalls. It was also the
first time I became aware that there were complaints regarding POL’s investigation
of the issues.
Brian Binley MP’s letter would have been shown to me by my private office with
Rebecca Thomson’s email clipped to it. I would have read both the letter and the
email. I do not remember having any oral discussions with Ms Thomson, Brian
Binley MP, Alan Cook or other representatives of POL or officials in the
Department or ShEx, regarding the issues raised by Ms Thomson.
My private office sent Brian Binley MP’s 24 February 2009 letter to Alan Cook,
POL’s Managing Director on 30 April 2009, which I can see was received by POL
on 7 May 2009. The decision to handle the correspondence that way would have
been a decision taken by the officials in my private office. The source of the
information in the response would have been POL, whether or not it came directly
from Mr Cook or via ShEx/the Department.
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58.
59.
60.
61.
62.
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Forwarding this correspondence to POL’s Managing Director for reply was in line
with the Government's view and practice that this was an issue concerned with
the operation of POL’s IT system and that this was an operational matter for the
Post Office.
The Inquiry has also asked me to consider the reply which Alan Cook of POL sent
to Brian Binley MP on 22 May 2009 (POL00130687). I did not have any
discussions with Mr Cook about his reply.
Mr Cook says in that letter that “over the years since Horizon has been installed
we have scrutinised many Horizon transaction records to establish where a
discrepancy in the branch accounting may have occurred. This takes place prior
to notifying subpostmasters that an error has been made at their branch and
asking them to make good the loss, as per the terms and conditions of the
Subpostmaster Contract for Services. Any subpostmaster who is unhappy to
accept a loss has the opportunity to provide evidence to support why their belief
(sic) that they are not responsible for it’.
He goes on to say that “please be assured that we take the concerns of our
subpostmasters extremely seriously. No evidence, however, has been found that
shows the Horizon system has caused the errors to occur. The primary cause is
found to be mistakes in the input of data by subpostmasters and/or their
assistants’.
Mr Cook details the civil proceedings in respect of Mr Castleton, quoting from the
judgment of His Honour Judge Richard Harvey QC, dismissing the claim, and
saying that “the losses” which were claimed in the proceedings “must have been
caused by his own error or that of his assistants’. He says that the second
proceedings were withdrawn following the production of evidence by POL. Mr
Cook says that “in both of the cases referred to above, Post Office Limited
defended the claim vigorously and assistance was obtained from Fujitsu... All of
these reports proved that there was no problem with the Horizon system that
would explain the discrepancies that were reported at these times’. He concludes
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63.
64.
65.
66.
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that he is “satisfied that there is no evidence to doubt the integrity of the Horizon
system and that it is robust and fit for purpose”.
The reply from Mr Cook sets out the position of POL at the time in two important
respects. Firstly, POL’s emphatic assurance that the Horizon system was, as Mr
Cook said, “robust and fit for purpose”. Secondly, that the reliability of the system
had been proven in court. Some years later many criminal convictions were held
to be unsafe and overturned. However, at the time the civil judgment against Mr
Castleton and the convictions of others in the criminal courts were used by POL
as a proof point of the validity of the Horizon system. Ministers are discouraged
from ever interfering in court judgments for obvious and longstanding
constitutional reasons.
On 21 September 2009, Rosemary Buck of ShEx sent the generic Parliamentary
Questions email address an email attaching draft answers to five Parliamentary
Questions: question reference numbers 4995; 4998; 4999; 5000; and 5010. She
wrote that those answers were approved by Oliver Griffiths of ShEx. These were
then passed on to my private office for approval in the normal way
(WITN10250104, Email dated 21 September 2009 attaching draft answers to
Parliamentary Questions reference numbers 4995; 4998; 4999; 5000; and 5010).
My private secretary replied on 6 October 2009 saying that I had cleared all five
of the answers noting that answers to question reference numbers 4998 and 5000
had been amended and attaching copies (WITN10250104).
Question reference number 5010 is relevant to the Inquiry’s Terms of Reference
(WITN10250104). It is a question from Brooks Newmark, the then MP for
Braintree, dated 13 October 2009. Mike Whitehead drafted the response which
was approved by Oliver Griffiths.
I had not received any further reports of issues with the Horizon IT system in the
time between Alan Cook’s 22 May 2009 letter and this Parliamentary Question
from Brooks Newmark MP.
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67.
68.
69.
70.
71.
72.
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The question from Mr Newmark was, “fo ask the Minister of State, Department for
Business, Innovation and Skills, whether he has received reports of errors in the
Post Office Horizon system which have led to Postmasters or Postmistresses
being falsely accused of fraud; and if he will make a statement’ (POL00364601).
The draft answer was, “the Department has received no such reports. Any issues
relating to the Horizon system are operational matters for Post Office Ltd. I have
therefore asked Alan Cook, Managing Director of Post Office Ltd, to respond
directly to the Hon. Member and a copy of this reply will be placed in the House
Libraries” (POL00364601).
My formal reply was provided on 12 October 2009 (WITN10250106, Question from
Brooks Newmark MP dated 13 October 2009).
The first sentence of the answer looks to be incorrect. It may be that there was an
emphasis placed by ShEx on the term “falsely accused of fraud” given that the Post
Office replies did not accept the accusations were false, or an interpretation of
“reports of errors” as meaning an internal report from the Department or from within
the Post Office, but by that time the Department had received at least two
representations from MPs about Horizon and subpostmasters: one from Jacqui
Smith MP on 13 January 2009 and one from Brian Binley MP on 25 February 2009.
Mr Binley MP reported via Rebecca Thomson’s 10 February 2009 email that SPMs
had been prosecuted.
On 13 October 2009, Alan Cook, Managing Director of POL, replied to Brooks
Newmark MP’s parliamentary question reference number 2008/5010°.
Alan Cook wrote that,
“the system and the processes around (Horizon) offer a very high level of security
and resilience and are designed to ensure that should part of the system or
5 The Inquiry has provided me with a copy of this letter UKG100000028. It is the same as the copy
held by my private office WITN10250107, save that a manuscript note has been applied at the top
of the first page. That text is illegible to me.
Page 17 of 28
WITN10250100
WITN10250100
equipment fail that the integrity of the accounting records are maintained. The
system has proven to be very robust since its introduction some ten years ago.
The Horizon system was fully tested at the time of the nationwide implementation
and all new software releases are also subject to rigorous testing prior to going live
in order to assure the accuracy of the accounting processes. Additionally, our
ongoing monitoring and control processes ensure that any performance issues in
the ‘live’ operation are quickly identified and resolved at no detriment to individual
subpostmasters.
Over the years we have scrutinized many Horizon transaction records to establish
where a discrepancy in the branch accounting may have occurred. This takes place
prior to notifying the subpostmasters that an error has been made at their branch,
and asking them to make good the loss, as per the terms and conditions of the
Subpostmaster contract for services. Any subpostmaster who is unhappy to accept
a loss has the opportunity to provide evidence to support why they believe that
they are not responsible for it. We do take the concerns of our subpostmasters
extremely seriously and we do thoroughly investigate matters when they are raised
with us but there has never been any evidence found that shows that the Horizon
system has caused accounting errors.
In the ten years since Post Office Limited started using Horizon the integrity of the
system has also been tested in both the criminal and civil courts and has not been
found to be wanting.
I am satisfied that there is no evidence to doubt the integrity of the Horizon system
and that it is robust and fit for purpose” (WITN10250107, Reply from Alan Cook,
Managing Director of POL to PQ reference number 2008/5010).
Alan Cook’s response to Brooks Newmark MP’s parliamentary question of 10
September 2009 is very similar in content to his 22 May 2009 response to Brian
Binley MP’s letter of 24 February 2009. It is as emphatic in POL’s total confidence
in the system and also uses the convictions in the criminal courts to support that
position.
Page 18 of 28
74.
75.
76.
77.
WITN10250100
WITN10250100
The third to sixth pages of the document POL00107311 are a letter from Michele
Graves, Executive Correspondence Manager at POL to Mr G Ward dated 8 May
2009. Ms Graves says that she is responding to Mr Ward’s letter dated 21 April to
Alan Cook, POL’s Managing Director. I do not believe I have ever seen this letter
before.
On 19 November 2009 the private office of the Secretary of State, Lord
Mandelson, received a letter from James Arbuthnot MP dated 3 November 2009
(UKGI00011504, Letter from James Arbuthnot MP dated 3 November 2009). Mr
Arbuthnot wrote regarding correspondence he had received from a constituent,
David Bristow of Odiham Post Office. Mr Arbuthnot provided that correspondence.
He said that “/ note the Parliamentary Question raised by Brooks Newmark MP on
12 October and the reply dated 13 October from Alan Cook, Managing Director of
Post Office Ltd”.
Mr Arbuthnot said that “nonetheless there does appear to be a significant number
of postmasters and postmistresses accused of fraud who claim that the Horizon
system is responsible, including at least two in my constituency. Given the level of
impact this has on the personal lives of these postmasters and postmistresses
and their families, often involving bankruptcy and certainly significant financial
hardship, I should be most grateful if you would let me have your comments on
what can be done to investigate the matter’.
On 5 December 2009, I responded to Mr Arbuthnot MP as the Departmental lead
in the House of Commons (UKGI00011506, Letter from Pat McFadden to James
Arbuthnot MP dated 5 December 2009). I said that “under the Government's postal
sector reforms introduced in 2001, Royal Mail (which includes the Post Office Ltd
(POL)) was given greater commercial freedom, as the management and unions
had requested, and Government has assumed an arm’s length role as a
shareholder in a public limited company. Subject to agreeing its strategic plan with
us, the Board can structure the business as it decides best to meet the challenges
of market development and changing customer needs”.
Page 19 of 28
78.
79.
80.
81.
82.
83.
WITN10250100
WITN10250100
I went on to say that “the issues raised by your constituent are operational and
contractual matters for POL and not for Government. I understand from POL that
errors at the branch have been fully investigated and there is nothing to indicate
that there are any problems with the Horizon system. The company’s position as
regards the integrity of the Horizon system remains as set out in the reply dated
13 October from Alan Cook, Managing Director, to Brooks Newmark MP, to which
your letter refers”.
My reply would have been drafted by ShEx officials and as usual I would have
relied upon them and my private office to provide accurate information, whether it
came from them directly or from POL.
By this time there had been several letters and a Parliamentary Question
regarding the Horizon IT system. In each case I was advised on the issues arising
by ShEx and in each case POL, via ShEx, maintained their complete faith in the
robustness of the system. POL operated the IT system. They insisted it was robust
and fit for purpose and asserted there was no evidence it was responsible for
accounting shortfalls. POL backed up this insistence with reference to court
judgments as a proof point of its integrity, lest there be doubt or dispute. It was a
position they maintained for some years afterwards.
As a government Minister you cannot interfere with judgments of a court.
Brooks Newmark MP raised several further Parliamentary Questions on 8
December 2009. These covered the costs of implementing the Horizon system,
the mechanisms in place for independent audit of the system prior to
implementation and replacement, cost savings achieved, and the disciplinary and
appeal procedures for SPMs. The answer given to each was that Alan Cook would
respond directly and a copy of his reply placed in the House Libraries.
On 23 November 2009, Alan Cook, POL’s Managing Director, responded to
Brooks Newmark MP’s questions. Amongst other matters, Mr Cook said the
Horizon system had been independently reviewed and that there were various
features in place to ensure accounting integrity was maintained. Mr Cook also
Page 20 of 28
84.
85.
86.
87.
88.
WITN10250100
WITN10250100
provided answers about how an SPM's contract could be terminated for breach of
contract and the procedure that would be followed, including appeals.
On 12 January 2010, the Deputy Parliamentary Clerk emailed my private secretary
with a number of Parliamentary Questions and draft answers for my approval. The
email records that if I request a redraft then my office should contact the policy
official who drafted the answer (WITN10250108, Email dated 13 January 2010
from Deputy Parliamentary Clerk with PQs and draft answers ). I can see from the
email that the questions referred to are PQ 802 from Jacqui Smith MP; PQ
2009/798; PQ 2009/806 from Jim Cunningham MP; PQ 2009/786; PQ 2990/787;
PQ 2009/800; and PQ 2009/785 (WITN10250108).
To the best of my knowledge, the only Parliamentary Question from this group
relevant to the Inquiry’s Terms of Reference was question reference number
2009/802 from Jacqui Smith MP (WITN10250109, Parliamentary Question
2009/802 from Jacqui Smith MP).
The question was to ask, “the Minister of State, Department for Business,
Innovation and Skills, what recent representations he has received from sub-
postmasters on the effect on them of use by the Post Office of the Horizon
computer system; and if he will make a statement’. The question was tabled on
11 January 2010 with a response due by 14 January 2010 (WITN10250109).
The draft answer received, which I believe was drafted by Rosemary Buck and
Mike Whitehead of ShEx, was, “/ have, in recent months, received a small number
of representations from Hon members, and one direct from a subpostmaster,
about the Horizon computer system. Issues relating to the Horizon system are
operational matters for Post Office Ltd which investigates all concems raised by
subpostmasters about Horizon and remains confident in the integrity of the
system” (WITN10250109).
I did have amendments to make to the question reference number 802 from Jacqui
Smith MP. I can see that my private office sent my redrafted reply to Ms Buck and
Mr Whitehead on 13 January 2010 at 11.18am (WITN10250108).
Page 21 of 28
89.
90.
WITN10250100
WITN10250100
My amendment was as follows, “/ have, in recent months, received a small number
of representations from Hon members, and one direct from a subpostmaster,
about the Horizon computer system. Issues relating to the Horizon system are
operational matters for Post Office Ltd which investigates all concerns raised by
subpostmasters about Horizon and will continue to do so if any are raised”
(WITN10250110, Amended reply to Jacqui Smith PQ 2009/802) (my emphasis). I
omitted the line, “remains confident in the integrity of the system”
(WITN10250110).
In making that amendment I was saying to POL that they should continue to
investigate any reports raised on the issue. I wanted to ensure that POL would not
simply refer back to its previous investigations if issues continued to arise for
SPMs, but would actively investigate concerns if and when they arose. The actual
exchange in the Commons was as follows:®
Jacqui Smith
An increasing number of sub-postmasters face action for the misappropriation
of funds that, they believe, is based on shortcomings in the Horizon computer
system. Given those numbers, does my right hon. Friend agree that it is time
for the Post Office to review those cases and that system so that sub-
postmasters can be confident that the computer systems that are put in place
are there to support them, not to put their livelihoods at risk?
Mr. McFadden
I have received representations about that issue from hon. Members on behalf
of sub-postmasters in their constituencies. The Post Office tells me that it has
looked into all those complaints, and says that it has faith in the integrity of the
Horizon system. However, I am sure that if there are further complaints, the
Post Office will properly examine them, as it should do.
Involvement in Horizon issues since May 2010
° RLITO000218
Page 22 of 28
91.
92.
93.
94.
95.
96.
WITN10250100
WITN10250100
I was not involved with POL on these issues after standing down as a Minister,
though at the time of preparing this witness statement (May/June 2024) I have a
current constituency case involving a SPM who has asked me to make enquiries
about the timing of the redress system being established by Parliament as a result
of the legislation that was passed just before the general election was called.
The Inquiry has asked me to consider document POL00161954 which is a chain
of emails exchanged on 9 July 2013 between Mark Davies, Communications
Director at POL, and Sophie Bialaszewski, Public Affairs Manager at POL.
I have no knowledge of this email chain. I do not know what the email means by
“friendly MP”. I did not have sight of these emails before the Inquiry provided them
to me. I do not believe I received any communication about this from POL or
anyone else at the time and I did not have anything to do with the Parliamentary
Statement referred to in the emails.
The Inquiry has asked me to consider document POL00078369. The body of the
email suggests that it is an email from Jane Hill, Head of Public Affairs at POL, to
me. The information in the subject header suggests this is an email dated 4 August
2015 from Mark Underwood to Jane Hill with the subject “Pat McFadden email 39:
Complaint Review and Mediation Scheme Update”.
The email suggests there are two attachments, “CEDR Review letter 3107215” and
“M134”. I have not been provided with those attachments.
Ms Hill says that she writes regarding my constituent Ms Nachatro Kaur saying that
she had applied to the mediation scheme and the case was put forward for
mediation. She writes that JFSA, “an organisation advising a number of
postmasters in the Scheme, is recommending people not to engage in mediation
or in meetings we are offering with individual MPs. This is unfortunate since not
engaging will simply result in losing an entirely additional and cost-free opportunity
to resolve the complaint they have lodged with us”. Ms Hill told me that she had
Page 23 of 28
WITN10250100
WITN10250100
relayed to Ms Kaur that taking part in the scheme does not prevent her from taking
further action, that funding for independent legal advice is available, and that she
would be sending the attached report from CEDR on the mediations that had
already taken place.
97. Miss Hill says that POL had required in July that people who have been offered
mediation engage with CEDR within 6 weeks to agree dates such that if they do
not respond by 4 September 2015 then their case is considered withdrawn from
the Scheme and “any outstanding issues will be taken forward in accordance with
normal business practice”. She says she attaches the letter as background.
98. I am afraid I cannot assist with these documents. I do not recall them and my
constituency office does not keep records going back this far so we have no written
record of the case.
Reflections on time as Minister of State
99. POL’s insistence that the Horizon system was robust and reliable was proven over
time to be wrong, with terrible human consequences. Their reliance on court
judgments to back up that position was also to be proven wrong in the subsequent
court actions that were pursued over the years in order to overturn earlier verdicts.
100. Rereading this correspondence now, and knowing the injustice done to so many
SPMs, of course I wish I had done more to ask POL if they were really sure their
IT system was as robust as they suggested. Yet if I had done so, I suspect they
would have continued to insist that it was not to blame for these accounting errors
and they would have continued to use the court judgments as proof points. That
was what they said in all the replies at the time in very strong terms and was the
position they maintained for years afterwards. It was only through pursuing appeals
and litigation through the courts that the truth emerged and convictions were
overturned as unsafe. It is only now, 14 years on from my time in office, that
Parliament has taken the unprecedented step of legislating to overturn the
remaining cases which have not been otherwise dealt with through the courts.
Page 24 of 28
WITN10250100
WITN10250100
Suggestions relating to recommendations on Government oversight of POL and
governance, and any other issues
101. The question is how an arm’s length body like POL can be held accountable for
its actions. The Government is the 100% shareholder. Ministers do not run the
Post Office but Ministers answer questions about it in Parliament and are
responsible for reporting to Parliament on matters concerned with the Post Office.
102. In terms of the Departmental officials, they were responsible for the day-to-day
link between the sponsoring Department and POL. They would have been passing
the correspondence to POL and getting any information necessary for
Parliamentary answers. I have no evidence or reason to believe that the officials
in the Department were receiving any information different to that set out in the
replies from POL. Ministers are reliant on the information they get from officials.
At no point do I recall officials saying to me that they did not believe these replies
or that they thought a miscarriage of justice was underway. I expect this was
because they were being told the same thing by POL, as was set out in the replies.
103. At the root of all this was the Post Office’s insistence that its IT system was robust
and not to blame for accounting errors and their willingness to bring prosecutions
through the courts over many years. This resulted in many innocent people being
convicted or being held liable for debts they did not owe in the civil courts.
Ministers do not intervene in court judgments and cannot overturn court verdicts.
The separation of powers between the legislature and the judicial system is valued
by all Governments.
104. I pay tribute to the many years of courageous campaigning by the sub-
postmasters to overturn these convictions by appealing through the courts. And
because of these exceptional circumstances I support the legislation recently
passed by Parliament to overturn other verdicts where the appeals have been
withdrawn or not been dismissed by the courts.
105. I have referred the Inquiry to Brooks Newmark MP’s Parliamentary Questions
dated 8 December 2009, Alan Cook’s letter of 23 November 2009, Jacqui Smith
MP’s Parliamentary Question of 12 January 2010 and the documents associated
Page 25 of 28
WITN10250100
WITN10250100
with my amendment to the draft answer. Those issues have been addressed
above.
Statement of truth
I believe the content of this statement to be true.
Dated: 20/6 6/2 uy
Index to First Witness Statement of Pat McFadden
No.
URN
Document
Description
Control Number
BEIS0000014
Post Office Network
— Issues. Key Points
& Background Info
VvisSo0000909
RLIT0000219
Post Office
Volume 334:
debated on
Thursday 8 July
1999
RLIT0000219
WITN10250102
Letter from Jacqui
Smith MP dated 13
January 2009
WITN10250102
WITN10250103
Letter from Pat
McFadden to Jacqui
Smith dated 9
February 2009
WITN10250103
POL00027890
Chain of letters
dated 2009
POL-0024531
POL00130687
Letter to Brian
Binley from Alan
Cook dated 22 May
2009
POL-0124218
WITN10250104
Email dated 6
October 2009
confirming
WITN10250104
Page 26 of 28
WITN10250100
WITN10250100
clearance of PQ
answers.
POL00364601
House of Commons
Parliamentary
Question:
2008/5010
POL-BSFF-
0196409
WITN10250106
Question from
Brooks Newmark
MP dated 13
October 2009
WITN10250106
10
UKGI00000028
Letter to Brook
Newmark from Alan
Cook dated 13
October 2009
ViISO0000989
11
WITN10250107
Reply from Alan
Cook, Managing
Director of POL to
PQ reference
number 2008/5010
WITN10250107
12
POL00107311
House of Commons
Parliamentary
Questions
2008/5010
POL-0105619
13
UKGI00011504
Letter from James
Arbuthnot MP dated
3 November 2009
POL-0150399
14
UKGI00011506
Letter from Pat
McFadden to James
Arbuthnot MP dated
5 December 2009
viSo0000989
15
WITN10250108
Email dated 13
January 2010 from
Deputy
Parliamentary Clerk
with PQs and draft
answers
WITN10250108
16
WITN 102501 09
Parliamentary
Question 2009/802
from Jacqui Smith
MP.
I WITN10250109
17
WITN102501 10
Amended reply to
Jacqui Smith PQ
2009/802
WITN10250110
18
RLIT0000218
Oral Answers to
Questions
Volume 503:
debated on
Thursday 14
January 2010
RLIT0000218
Page 27 of 28
WITN10250100
WITN10250100
20
POL00161954
Chain of emails
exchanged on 9 July
2013 between Mark
Davies,
Communications
Director at POL, and
Sophie
Bialaszewski, Public
Affairs Manager at
POL
POL-0150399
19
POL00078369
Email from Mark
Underwood to Jane
Hill Re Pat
McFadden email 39:
Complaint Review
and Mediation
Scheme Update
POL-0074932
Page 28 of 28