Post Office Governance and Horizon Compensation Schemes
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The Parliamentary Under-Secretary of State, Department for Business and Trade and Scotland Office (Lord Offord of Garvel) (Con)
There is a lot to unpack there. I will take it in three pieces, if your Lordships do not mind. I will start with the Henry Staunton spat; then we will talk a little bit about the compensation; and then we can talk about the convictions, overturning them, and general progress on that matter.
On the dismissal of Henry Staunton and the following row that has ensued, as I said before, it is a shame that we are doing this in public because obviously, there are HR matters here. A senior director has been removed from his post, and due process needs to be delivered and his confidentiality respected.
However, I can shed light on this. This has been helped by further documents today being put in the public domain. In addition to the file note of the Secretary of State’s conversation with Henry Staunton at the weekend, we now have Mr Staunton’s file note to himself after his meeting in January 2023 with Sarah Munby and very helpful clarification from Sarah Munby of her recollection of what happened, with back-up notes. Accordingly, all the minutes are now at the disposal of the public and in the Library.
In summary, the row here is on two allegations that have been made by Mr Staunton—that he was sacked because someone had to “take the rap” and that he was instructed by a senior civil servant, the Permanent Secretary, to slow down the process of compensation and justice for postmasters. It is now absolutely clear from the correspondence and the notes published, and even from reading Mr Staunton’s own note, that the reason for his dismissal was not that he had to take the rap, but quite the opposite. He was in post for just 14 months—from December 2022—and was given three specific priorities by Sarah Munby. The first was to accelerate and expedite the compensation to the postmasters. Therefore, he was not there to take the rap. His dismissal, which was designed to be done in private but has now come out in public, was simply because there were governance issues around his chairmanship.
Interestingly, taking account of the various discussions that we have had in this House on this matter, noble Lords, especially on the other Benches, have been quite clear that they feel that there has obviously been a breakdown in governance and that the Government were not exercising their governance powers appropriately. That is what Sir Wyn Williams will look at in detail. We have a new board. Three new non-execs of a higher calibre were appointed in 2023. There are now two postmaster directors on the board. A senior independent director is required to be appointed and, most importantly, the government shareholder, UKGI, is represented on that board.
In addition, you can imagine the amount of public and departmental scrutiny that is happening. There are monthly meetings with post office executives. A lot of conversations are going on with Post Office management. Within those conversations, quite rightly, without naming names, non-exec directors and UKGI have raised concerns on the governance and chairmanship of the Post Office.
Under previous regimes, it would appear that, when concerns were raised on other matters, they were ignored. In this case, concerns have been raised and not ignored but taken into serious consideration. That demonstrates that we have a different sort of governance now in the Post Office. If I was coming at this from a private sector basis, as a shareholder, I would want to know what is going on inside the company. If non-exec directors came and told me there was a problem on the board, I would take that very seriously. That was then discussed between the Secretary of State and Henry Staunton and specific governance issues and concerns were raised by the board. As I said, the board is run by the chair. If the board is at odds and therefore not functioning properly, we must change the chair. It is as simple as that.
So, on the first point, that he was there to take the rap, the memos and meeting notes clearly show that he was dismissed because we had a governance issue.
Lord Fox (LD)
That is fascinating and helpful. Given that there is not a SID and that it was the chairman, what was the conduit of the director’s disquiet from the board to the Secretary of State? How did the Secretary of State learn these things?
Lord Offord of Garvel (Con)
As I said, we are in a situation now where dialogue quite rightly is happening—and minuted, as always—between officials and representatives of Post Office Ltd. The appointment of the senior independent director was one of the issues that the board were at odds over. The chairman wished to promote an internal candidate and the Department for Business and Trade wanted to bring in an external candidate—which was also the advice of the UK Government, the shareholder executive.
In this situation, when an investigation of why this was happening was brought to bear, that too was blocked by the chair. So there was a situation where the board was not working properly and we had to change the chair. It was as simple as that. The chair had to be changed to make sure the board worked properly. There was no concept of him being there to take the rap for the Horizon scandal.
He has made a second claim, and I advise noble Lords to read the notes carefully to understand this. The conflation going on here concerns the discussion with Sarah Munby in January. The chairman was appointed in December 2022. There was a discussion with the Permanent Secretary in January 2023. That was the first discussion after she wrote the letter saying “Here’s your three priorities”. It was the first meeting between the Permanent Secretary and the newly appointed chair, to say, “Right, you’ve been in post for a month, you’ve looked under the bonnet, what have you found?”
Lord McNicol of West Kilbride (Lab)
This is a brief point regarding the Minister’s description of the situation between the Secretary of State and the chair of the board, and the appointment of the SID. I seek clarification and want to check that I heard the Minister correctly. The Statement refers only to the chair, Staunton, looking to bring in his own person. It does not deal with the appointment. The Minister said the Secretary of State was looking to appoint the SID, a different person, and Henry Staunton did not want that person coming in as a SID, so that was the tension that was there, not the fact that he had carried out some nefarious process in trying to bring someone in.
Lord Offord of Garvel (Con)
That is a reasonable clarification. The clue is in the name “senior independent director”. The Department for Business and Trade was of the view that we should not be appointing an internal candidate to the role but that an external candidate should come in. That was the reason for the dispute.
On the matter of trying to delay, save money and not budget for compensation, this is on the record to be refuted. The conversation was between the Permanent Secretary and the chair one month into his appointment. A businessman comes in to review the company that he is now chairing. “Please can I have a meeting with you for you to tell me what you have seen? What are the pressure points, what’s good and what’s bad?” The conversation was entirely about the business operating model, not the postmaster compensation. That is a completely separate matter and the finance for it is ring-fenced. It is not within his budgetary concerns. They were talking about how this business model was fundamentally compromised and would not exist in the private sector.
But it is a public corporation and it needs to exist in the public sector. This is why we have this hybrid model. We have 11,500 post offices, of which 5,000 are in rural areas and 3,000 are the last shop in the village. That is not financially viable and would not survive any daylight in the private sector, but we all agree that it is legitimate that this is a vital public service for these rural communities, which is why the Treasury funds that to the tune of £50 million, specifically allocated to run a network which, frankly, is not profitable. That is an immediate discussion between the two and when you add in the pressures of last year, with the minimum wage increasing and energy prices increasing, you can see that there are budgetary pressures inside the operating model.
There is also a discussion about the Horizon computer. The Government have allocated £103 million to building a system to replace Horizon—which is now working fine but is clunky and clearly has not been the right system. So now a new system has been put in place. Any noble Lord in this Chamber who has done an IT project will understand how these budgets go—so there is a second pressure.
There are a number of business pressures being talked about. In the very first meeting between the chairman and his reporting senior civil servant, it is quite appropriate that they should talk about those pressures, and it may well be that the Permanent Secretary was explaining to a businessman, who had not worked with government before, about how government works and how communication works. Undoubtedly, a conversation was had between them, but the record now shows—and the letter written by Sarah Munby makes it very clear—that those discussions did not ever stray into the territory of “By the way, please can you solve your budget pressures by stopping or delaying compensation to postmasters”—that is simply not the case, and we can put it to bed now. It has been conflated and confused, but it is now on the record to show that it is simply not the case.
I turn to the compensation, and the question of whether the Government have been dragging their feet and why. There is absolutely no evidence that the Government have been dragging their feet and I will provide some evidence for that. There are three schemes in place: a scheme for the 900 wrongful convictions; a second scheme for the GLO 555, which, if you take out the convictions, is 477; and there is the Horizon shortfall scheme—the 2,500. That comes to just under 3,000 postmasters, and, today, 78% of all claims are paid and settled. Interestingly, of the 3,000 postmasters, 2,700 have received some sort of payment. Either they are settled, or they are interim, which means more than 90% of the cohort have received either a full and final settlement or an interim settlement on their way to final settlement. That was pushed through largely during 2023, and if we take the £160 million that has been paid out now to the 2,700, £138 million of that was paid out by December last year—before the series and the Bates documentary and under the tenure of Henry Staunton as chairman. Therefore, it is interesting that, under his chairmanship, there is no evidence—the opposite, in fact—that there has been any dragging of feet when it comes to compensation being made to the postmasters, of whom now 78% are fully settled and more than 90% have received compensation.
The noble Lord, Lord Fox, mentioned that this compensation process is clunky and bureaucratic. My noble friend Lord Arbuthnot, who is in the Chamber, will substantiate that the process has been put together by the subgroup; that is, the advisory group that Mr Bates has been involved with on how to make the process work and be fair. To be clear, the appeal process is more for the benefit of the postmasters and postmistresses to appeal, not for the Government to push back. The Government will not push back on the claims given; we need to give a process that, where an offer is made to a postmaster or postmistress and that individual does not feel it is high enough, they can appeal that process. That process has been designed by the advisory council, so, again, there is no evidence that we are dragging our feet.
In fact, when you look at the cohort of 477, who are part of the brave 555 group who have arguably been through the most trauma, having had to go to court and having been some of the most egregious examples, we want to process those claims as quickly as possible. We can go only as quickly as we receive the claims. What is interesting to me is that, of the 477 who have received the interim payment so far, only 58 full claims have been submitted, of which we have settled 41—we have settled 41 out of 58, we are settling as quickly as we can. Why is it only 58 full claims? It is because those postmasters and postmistresses are now in a position, with legal help, to access all the information to put their claim in, and they are taking their time to do that, and quite rightly so.
I think I can make the point that on convictions and compensation, the money is fully ring-fenced; it is not in the conversation about the operational matter of the Post Office—that is a completely separate issue—and we have committed to go as quickly as we can to make the payments and that is also why we are putting through legislation on the overturning of convictions.
Lord Arbuthnot of Edrom (Con)
My Lords, I declare my interest as a member of the Horizon compensation advisory board. Of course, if you are a sub-postmaster, you do not really care who said what to who. There are two questions that a sub-postmaster would be interested in: when will the compensation be paid and when will the convictions be overturned? As for when the compensation will be paid, I would like to pick up a question raised by the noble Lord, Lord McNicol; namely, the accounts. In which department’s accounts is the £1 billion that it is expected will be paid out in compensation to the sub-postmasters? I hope it can be found in some department’s accounts. As to the convictions, this is an interesting Statement, but when can we expect a Statement on precisely how those convictions are going to be overturned and when can we expect a Statement on the legislation to come before both Houses?
Lord Offord of Garvel (Con)
I thank my noble friend Lord Arbuthnot. I will take the second one first: there are live conversations going on right now, at great speed, to finalise the legal process with the Ministry of Justice, which will result in the overturning of all the convictions in England and Wales by an Act of Parliament, excepting that there may be some small number of people who, in fact, have had legal or safe convictions, but they will be overturned—as we discussed before—because the greater good is to wipe the slate clean as quickly as possible. That will be coming to this House in short order, and I imagine there will be unanimous support for that.
As for the timing and the finance, the finance for this will come ultimately from the Treasury. The Treasury has been funding DBT, in order for it to fund the Post Office, and, in the course of last year, under the chairmanship of Henry Staunton, £253 million was paid by the Treasury, via DBT, to Post Office Ltd, of which £150 million was for the compensation schemes—and £160 million has now been paid—and the £103 million was for the replacement of the Horizon system. There are regular funding lines going to the Post Office via DBT.
This money has been ring-fenced and identified by the Government—it sits within the Treasury—but we have also had conversations in this House about the fact that there may be some other sources of compensation to be had from other places, and why it should not necessarily be just the taxpayer who picks up the bill for this when there are perhaps other stakeholders involved in this sorry saga who should pay their part. It may well be that that the taxpayer can be relieved of some of the £1 billion ring-fencing because it may be that we can get other sources, not least Fujitsu, to pay for that.
The commitment given by my department—we are working flat out on this—is to get 90% of the claims processed and settled within 40 working days. There is no going back from that; as we have said before, 78% of postmasters and postmistresses—a figure of 2,270—have been fully paid and settled. We are now at the sharp end of this process for those who were treated the most egregiously. Therefore, those cases are more complex, and perhaps need more time—not demanded by the Government—for the process of how they put their claim together. We have a situation where it is openly known that Mr Bates has submitted his claim and is not happy with the response: that is part of the process that we are in, and it will go on. We will move as quickly as we can to make sure that everyone is restored to the position that they should be in.
Lord Sikka (Lab)
My Lords, I have a question about the undated letter from Sarah Munby to Mr Staunton that has been released. It asks him to focus on
“effective management of legal costs”.
Can the Minister explain what those legal costs are? What does that mean? Such a letter could not have been written without consultation with lots of colleagues as to what kind of terminology to use. Will the Minister ensure that all the back-up notes to this letter are put in the public domain?
Lord Offord of Garvel (Con)
This is very straight- forward. If I am appointed as the new chairman of a company in this situation and, of my three priorities, the No. 1 is to manage a legal process to get compensation quickly to postmasters, I would expect to be told that formally by the Permanent Secretary and to be held accountable to manage those costs effectively. That does not mean to minimise or delay; it means to manage the process effectively to get compensation to the postmasters. What has been put into the public domain makes it very clear that there has been no dragging of feet and no instruction to the contrary on this matter.
As we have discussed many times in this Chamber, we now have a full statutory inquiry. The judge, Wyn Williams, will pick through this in fine detail. We are all very impatient and frustrated because we want the answer now, but we got into this mess because we jumped the gun before, and we are not going to do so again.
Baroness Brinton (LD)
My Lords, I return to the question from the noble Lord, Lord Arbuthnot, about where the £1 billion sits. If it comes from the Treasury, would it be in the Green Book following the Autumn Statement? It was all agreed by then. If it is not visible in the Green Book, can the Minister please write to the people speaking on this Statement to say where we might find it? It should be visible from the moment it was agreed, which was well before the Autumn Statement last year.
My second question, going back to the point raised by my noble friend Lord Fox, is about the bullying claims. I find it slightly extraordinary that in one part of the Statement the Secretary of State says it is important that she does not go into details, yet suddenly she alleges bullying—which, as the noble Lord, Lord McNicol, has pointed out, is not in the Written Statement. It is really important to understand when the allegations of bullying came about and the process that must now be under way to investigate them. You do not sack somebody without an investigation having got under way. If you do, that is the most appalling error of judgment. Can the Minister please confirm when and how Staunton was informed of the bullying complaint and whether he has been contacted by an investigator?
Lord Offord of Garvel (Con)
On the first point, I do not have the exact intricacies of which bank account the money sits in. I am happy to write about that, but it seems to me that if the Treasury and the Government have said we have a potential liability of £1 billion, we are good for the £1 billion. I will find out where it is sitting, if that is the question, but to me that is perhaps a lesser matter.
On the Staunton case, I am not prepared to do HR in the Chamber. That would not be fair or right. We should not talk about detailed conduct allegations in a Chamber such as this. The chairman was dismissed by the shareholder, the Secretary of State. In any company I have ever operated in, the shareholder is entitled to remove a chairman. The chairman’s job is to represent the shareholder, so if the shareholder is not happy with the chairman, it is absolutely valid that the shareholder can dismiss the chair. That is what happened in this case, and there is now a process that is better done in private. Let us not do HR in the Chamber.
Lord Browne of Ladyton (Lab)
My Lords, I recognise that the outcome of this competition of accounts between Henry Staunton and the Secretary of State could have significant consequences for them both, certainly for the Secretary of State if she is proved, at the end of the day, not to have been truthful to Parliament. She has another problem to do with what Canadian High Commissioner Ralph Goodale has said to the Business and Trade Select Committee, so she is in some difficulty.
I am in the space that I think the noble Lord, Lord Arbuthnot, is in. I do not think that this unedifying spectacle—this sideshow of mud-slinging—is the Minister’s priority. The priorities need to be full and proper compensation to the people who have lost out; the restoration of their good name in all the ways that will be necessary, which will involve exoneration; and, in the longer term when the inquiry is over, proper accountability for the people responsible for this. In the immediate term there is a simple way of resolving this competition of accounts: to put into the public domain all the information that it is proper to and to let the people out there see it and make up their own minds. They will in any event.
My real concern is that there is almost certainly an ongoing miscarriage of justice occurring in our justice system, as has been exposed, properly, by this Horizon scandal. It is the ludicrous presumption that if information comes from a computer, it is deemed to be reliable evidence. If that is to be challenged, it is up to the person who is claiming that it is not right—not the person who owns the computer—to show that the computer is not producing the right evidence. When on earth will we get this presumption changed around the right way? There must be daily cases in our courts that are not up to the level of the Horizon scandal, in spades and at every single level, creating other miscarriages of justice whose mess we may have to clean up in future at enormous expense to the public.
Lord Offord of Garvel (Con)
I absolutely agree that the Staunton issue is a distraction that none of us needs; it is certainly not in the interests of the postmasters and postmistresses, who want to see compensation paid and convictions overturned. As I said, the Ministry of Justice is working expeditiously to sort the overturning of convictions. As I have also said before in this Chamber, there will be serious ramifications regarding a number of matters that will come from the inquiry when it is finally published. I imagine that the matter about which the noble Lord has deep knowledge, the presumption that the computer is always right, will be one such. I imagine that will be taken forward following the inquiry.
Lord Mann (Non-Afl)
My Lords, there is an additional group of sub-postmasters affected by this scandal: those who paid the money back because of the potential or actual reality of dishonour in the communities in which they lived and worked. A significant number did nothing about it and simply paid the money back. Under the coal miners’ compensation scheme in previous years, government ensured that every former coal miner was invited to claim back money they were owed. Will government ensure that every single postmaster and postmistress, or their family if they are no longer with us, has the opportunity to make the claim that they wrongly had to pay back money and felt obliged to do so to avoid what they saw as the shame and dishonour of being seen to be dishonest in their local community?
Lord Offord of Garvel (Con)
I can assure the noble Lord that that is exactly the objective. The words that have been used are about restoring all postmasters and postmistresses to the position they were in before this sorry saga happened. The Government will make full compensation when all claims are received. We rely on the postmasters and postmistresses to come forward with their claims and cases. As we stand right now, the cases of 78% of the cohort of victims—more than 2,000—have been settled in full. There is a process to allow further claims to come through and an appeal process designed by the advisory committee to do that. The objective is to leave no stone unturned and to make sure that all compensation is paid as quickly and timeously as possible.