Post Office Horizon Compensation Scheme

Baroness Ludford Excerpts

Thursday 27th February 2025 Lords Chamber

[Baroness Ludford (LD)]

My Lords, I look forward to the two maiden speeches.

I am a relative Johnny-come-lately to the story of this scandal. There are a number of people who deserve our thanks and regards: first, the sub-postmasters and their families, who have suffered terribly from the incompetence, arrogance and bullying of the Post Office. Sir Alan Bates, of course, stands out. The noble Lords, Lord Beamish and Lord Arbuthnot, have also been on the case for a long time and I thoroughly applaud their work. I thank the noble Lord, Lord Beamish, for instigating this debate. They both made excellent speeches.

ITV played a big role in reaching a wide and outraged audience with its admirable hit series “Mr Bates vs The Post Office”. There are lawyers, such as Neil Hudgell, battling for the postmasters. Among journalists, I must single out Nick Wallis. It was his BBC Radio 4 series five years ago that first alerted me, although he had been working on the issue for a decade previously, when he was a presenter on BBC Radio Surrey. An article on him three years ago described what happened:

“It was a tweet that any journalist might have ignored. It came … from a taxi owner asking if he could pitch for the local radio station’s taxi account … Davinder turned out to be the husband of Seema Misra who had been thrown into prison on her son’s 10th birthday while pregnant, for supposedly stealing £74,000 from the Post Office … Davinder insisted not only that his wife was innocent but that it was the Post Office computer in her sub-Post Office that was at fault”.


It was November 2010. The rest, as they say, is history; a very painful one.

Sir Alan Bates, brilliantly played by Toby Jones on TV, is of course the most famous of the wronged sub-postmasters. Lee Castleton is another well-known name. He recently tweeted:

“Why is it so difficult to be open, fair and quick. It is disgusting that Betty Brown at 92, is still waiting for the return of Her money. JUST PAY HER what she is owed”.


Someone replied:

“Still can’t help but feel they’re still putting 2 fingers up to us”.


The Financial Times reports that

“many victims are still locked in a glacial, bureaucratic process of offers and appeals that could end up back with the courts”.

Some 72% of the budget for redress has still not been paid. One recalls the adage, justice delayed is justice denied.

The worst problems are in the Horizon Shortfall Scheme—the HSS—which I will mainly speak about. Tony Downey is a former sub-postmaster caught up in this terrible injustice, together with his wife and business partner. He has been granted only 20% of his claim. Tony has written to Sir Wyn Williams, chairman of the Post Office Horizon inquiry, and is allowing me to quote from his letter:

“The Post Office agree we paid the shortfalls, they agree they made us both bankrupted with their action and they agree this made me sick and unable to work since, they agreed at the meeting that the forced sale of the property was related to the Horizon. However they will not pay me the lost income as in other schemes, they will not pay the bankruptcy or costs of my wife and business partner, they will not pay me the full amount of the head of claim for sickness, they will not pay for the loss of the property”,


which was, I think, the family home.

Tony Downey, Christopher Head OBE—another wronged postmaster—and journalist Nick Wallis have drawn attention to a curious feature of way the Horizon Shortfall Scheme is being administered by the Post Office that might help explain why claimant sub-postmasters with complex cases are receiving offers way below their claims. The HSS assessors seem to be—indeed are, and have said that they are—working to a set of guidelines different from the published principles and are refusing to share them with the claimants’ lawyers. One claimant has commented:

“We guess they include every get out clause possible”.


One of the claimant lawyers replied to Post Office lawyers as follows, and it bears quoting fully, which I have permission to do:

“The Post Office approach to HSS claims is on the basis of breach of contract and assessing damages had the contract been ‘validly terminated’. We fundamentally oppose that basis of calculation which is at odds with the Principles that are widely published in relation to the HSS, and therefore the narrow contractual approach taken by Post Office does not satisfy the tests presented in the Principles document. The document to which you”—


that is, a Post Office lawyer—

“refer appears to be fundamentally different to the widely published one and seems to be separate guidance used by the Panel and has never seen the light of day publicly, so how can we or a Postmaster be on an equal footing in this claims process, when you refuse to disclose guidelines used by the panel? This would not be an acceptable situation in any other claims or legal process in this country”.

As far as I can see, he is absolutely right that a narrow contractual approach, which effectively gives a sub-postmaster only redundancy money, is not at all the same as the Post Office’s published Horizon Shortfall Scheme Consequential Loss Principles and Guidance document, whereby:

“The object of the assessment will be … to put the postmaster into the position that the postmaster would have been in but for the Horizon Shortfall”.


For former sub-postmaster Tony Downey, this is the difference between getting redundancy money amounting to two years’ or so income and being fully compensated for inability to work since a nervous breakdown in 2007 after being suspended, audited twice, bullied to pay shortfalls in order to get reinstated, having to sell the business at a loss, both he and his wife having to declare bankruptcy, and losing their home. He says:

“We had gone from owning a mortgage free property now worth £900,000 with a successful business and savings to having nothing and the scheme is unable to put us anywhere near the position we should have been”.


Inquiry chairman Sir Wyn Williams wrote in his July 2023 first interim report on compensation:

“It would be tempting for some to be sceptical about whether”


full and fair compensation,

“can be achieved … a commitment to provide compensation which is full and fair is not the traditional stance taken by a defendant in our adversarial system of civil litigation”.

That was very prescient. What will the Government do to oblige the Post Office to follow the published principles on consequential loss, not revert to being a traditional adversarial defendant? Can the Minister ensure not only that the Post Office’s secret guidelines, which are not in accord with the published principles, are made available to all claimants and indeed to parliamentarians and everyone else, but that it stops using them?

The Business and Trade Select Committee reported on 1 January on redress for the Horizon scandal. The government response was not available yesterday or first thing this morning. I imagine the Minister can assure us that it is imminent; by my calculation, the deadline for the response is tomorrow at the latest. Your Lordships will probably all have read the committee’s recommendations, one of which was that the Post Office should be removed from administering any of the schemes. It says, and I strongly agree, that the Post Office acted as “judge, jury and executioner” when pursuing sub-postmasters and that now it

“should not be deciding on what financial redress is owed to victims of its own scandal”.

I do not have time to discuss the other recommendations from the committee, but I just point out that the present reality is that claimants not only have to fill out a complex form with no legal support but face a scenario of snakes and ladders. This is well-described in a letter that a former sub-postmaster, Christopher Head, wrote yesterday to inquiry chairman Sir Wyn Williams—he has made it public, so I can quote from it. He describes how a claimant faces

“the risk that should she pursue a claim above the Fixed Sum, she could be offered less and then have to enter the long drawn out dispute processes that could continue for years … There is also no guarantee she would get close to the fixed sum award let alone the sum claimed. All this must be done without any legal advice, unless the individual is willing to pay for their own representation, which is out of reach of most people”.

Mr Head rightly says:

“Claimants should be able to receive these awards”—


the fixed awards—

“in any of the schemes and then be invited to raise a further claim for the remainder of their claim should there be sufficient evidence to do so and a likely chance of success … without any risk”.

How does the Minister react to that suggestion, and can she tell us whether the department will take over the Post Office scheme?

I will conclude by quoting briefly from an interesting and heartfelt book by the former Prime Minister, the noble Baroness, Lady May, entitled The Abuse of Power. In her words, she,

“describes many examples of injustice against ordinary people perpetrated by the powerful and mighty”,

with

“often a sense that protection of the institution is more important than fairness, justice or seeking the truth”.

That is what we have seen with the Post Office. She concludes that

“we need to reconsider who we are as a country and the urgent need for those in authority to ensure that in all they do, they are putting the country and the people first”.

--- Later in debate ---

[The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Information and Technology (Baroness Jones of Whitchurch) (Lab)]

My Lords, first, I welcome my noble friends Lord Barber of Ainsdale and Lady Elliott of Whitburn Bay and congratulate them on their maiden speeches. I am sure this House would agree with me that they both bring a wealth of experience, particularly in speaking up for working people, and I look forward to working closely with them as they navigate their way through our shared UK growth missions. My noble friend Lady Elliott—I am sure the House agrees—will be an important northern voice in this Chamber. I am sure that the House will also agree that we will all benefit from my noble friend Lord Barber’s experience in arbitration and conciliation. We have a lot to learn from him in that regard.

I am pleased to respond for the Government and . I thank the noble Lord for bringing forward this Motion and allowing us to debate this very important issue. I pay tribute to the work of my noble friend Lord Beamish, alongside that of the noble Lord, Lord Arbuthnot, as members of the Horizon Compensation Advisory Board. They have helped guide and shape the Government’s work in this area.

Like my noble friend Lord Beamish, I pay tribute to Alan Bates and the 550 who took the case to court and finally shone a light on the role of the Post Office in deliberately hiding the truth. I also agree with the noble Baroness, Lady Ludford, that certain members of the press—ITV has obviously been mentioned—and in particular Nick Wallis, played an important role in shining a light on this in a very dogged and determined way, and brought it certainly to my attention for the first time.

I welcome this opportunity to provide an update on the progress of the Horizon redress schemes and to discuss the contribution of Fujitsu to the costs of the scandal. This scandal was one of the worst miscarriages of justice in this country’s history. Redress for the postmasters whose lives were scarred by it is of great importance for the new Government. A number of noble Lords, including the noble Lord, Lord Polak, and my noble friends Lord Beamish and Lady Elliott, gave very moving examples of the individuals impacted by the scandal and their lives being torn apart as a result. We recognise the devasting impact that the Post Office’s actions had on many postmasters’ lives, their families and their communities.

The Government remain focussed in our efforts to ensure that all postmasters receive full, fair and swift redress for the terrible ordeals to which they have been unjustly subject. That is why the Government have set aside around £1.8 billion for redress for the 2024-25 financial year onwards for those postmasters affected by this grievous miscarriage of justice. This is in addition to the around £200 million already paid to victims in previous years; this is not a ceiling but an estimate.

I turn now to the progress of the redress schemes. My department and Post Office Ltd publish monthly updates on progress. Since the end of June last year, the total amount of redress paid to victims of the Horizon scandal has more than doubled. Across this period, 1,409 more victims have settled their claims. Approximately £663 million has now been paid to over 4,300 claimants.

As we have identified, there are four separate redress schemes. This is by no means ideal, but, as noble Lords know, the reasons for it are historical. I will describe separately the progress of each scheme. I will start with the Horizon shortfall scheme, which covers postmasters who were not part of the group litigation and do not have a criminal conviction. It is run by Post Office Ltd, with funding, oversight and governance provided by the Department for Business and Trade. Approximately £315 million has been paid under this scheme. However, it has delivered redress too slowly, for two reasons. First, the scheme received many more applications than were originally anticipated: 7,000 and counting rather than a few hundred. Secondly, amounts are decided by a panel independent of the Post Office. This is intended to ensure fairness, but it makes the process slower. Combined with the huge volume of cases, this has caused real problems.

In March 2024, the Minister for Postal Affairs announced an optional fixed sum offer of £75,000 to those applicants who did not wish to complete a full claim. This has greatly accelerated progress. As well as providing speedy redress for those who accepted the offer, it has substantially shortened the queue for everyone else.

The Government have also acted to give postmasters assurance of fair redress. Many postmasters have had understandable concerns about any scheme run by the Post Office, even though redress offers are recommended by an independent panel, which the Post Office has never undercut. The noble Baroness, Lady Ludford, asked whether there was secret guidance to the Post Office lawyers on this issue. In response, I say that the principles of the Horizon shortfall scheme are public; offers are set by an independent panel, with a KC, an accountant and a retail expert. There is also a process to dispute the offer.

[Baroness Ludford (LD)]

I apologise for interrupting the Minister when we are time-pressed. Can she undertake to explore whether the Post Office really is operating to those published principles? The material that I have seen seems to give credible backing to the suggestion that it is not. Indeed, there is an exchange featuring Post Office lawyers saying that they are working on a contractual basis and not a consequences-of-loss basis, which is entirely different.

[Baroness Jones of Whitchurch (Lab)]

I hear what the noble Baroness is saying. Perhaps if she has some of that evidence, she could share it with us. I am not dismissing what the noble Baroness said. If she has that evidence, we will of course look into it. It is important that justice is done in this case, and is seen to be done.

In light of these concerns, in September the Minister announced that the Government are setting up an appeal process for postmasters who are unhappy with the full assessments of their claims, as recommended by the Horizon Compensation Advisory Board. We expect to receive the first appeals in the spring. The Government have committed to covering the reasonable costs of postmasters obtaining legal advice at each stage of the appeals process. The Government are also actively looking at other ways in which the pace of redress can be sped up and have been supported by the recommendations from the advisory board and claimants’ lawyers in this area.

Post Office prosecutions of innocent postmasters were perhaps the most reprehensible part of this scandal. Some 111 of these unfortunate individuals had their convictions overturned by the courts. The Post Office set up the overturned convictions scheme to ensure that such people get fair redress for malicious prosecution and other losses. Approximately £65 million has been paid under this scheme. So far, 82 of the 111 exonerated people have submitted full and final claims for redress. In response, 73 redress offers have been made and 66 accepted and paid. This scheme provides the option of an upfront offer of £600,000 to claimants, ensuring swift redress is provided to those victims who do not wish to submit a full claim. This is larger than the fixed offer in the HSS, reflecting the greater harm done to those who were convicted. As of 3 January, 58 people have chosen to accept that offer.

The House will recall the widespread concern that people convicted as a result of the scandal were not being exonerated by the courts, often because the evidence had gone or because they could not face a further legal fight. These people were therefore exonerated en masse by Parliament in May of last year. As of 7 February, 557 individuals in England and Wales have been sent a letter, informing them that they have at least one conviction quashed by the Act. The devolved Administrations in Scotland and Northern Ireland are running parallel exercises.

In July last year, the Government launched the Horizon convictions redress scheme to address the suffering of these people, wherever they are in the UK. I am pleased to report that it has made excellent progress. Under this scheme, eligible applicants are entitled to an interim payment of £200,000. They can then opt to have their claims individually assessed or take the fixed offer of £600,000. The noble Baroness, Lady Ludford, said that 72% of people in this redress scheme have not yet been paid. Most of the costs of redress relates to convictions which were rightly overturned by Parliament. No full claims have yet been received from those individuals and the Government are not going to slow down the redress. When people claim and we get the full claims, we aim to make to make an offer within 40 working days in 90% of the cases.

As of 31 January, 383 initial interim claims had been received, of which 364 have been paid; 232 full claims have been received, with 208 of those paid and 24 offers accepted and awaiting payment. The department’s target is for the first offers to be provided in response to 90% of full claims within 40 working days of receipt. A total of £156 million, including interim payments, has been paid to eligible claimants under this scheme. BBC News recently ran a story of two more claimants having received their £600,000 claims. It is very good to hear those individual cases of justice being done, even if it has taken far too long.

This brings us to the GLO scheme—the group litigation scheme. The group litigation court order case celebrated in last year’s ITV drama provided redress which proved to be unequal and unfair when compared with that provided by the HSS. The GLO scheme is intended to put that right.

The scheme is delivered by the Department for Business and Trade rather than the Post Office. Last year, Sir Alan Bates expressed concern that the scheme was not delivering fast enough. The Government agreed, but the problem was that we were not receiving the full claims. However, those concerns have now been eased. Out of the 492 postmasters eligible for the scheme, the department has received 408 completed claims. When it receives claims, the department acts quickly. It aims to make offers in 90% of cases within 40 working days of receiving a completed claim. As of 31 January, 89% of offers were made within that target period.

If any postmaster cannot resolve their redress through such bilateral discussions, they can go to the scheme’s independent panel. So far, only five cases have required help from the panel. By contrast, 257 cases have been by agreement between the department and the postmaster, either in response to the first offer or a subsequent challenge. This demonstrates that the department is making fair offers.

A total of £128 million, including interim payments, has been paid to postmasters under the GLO scheme. The Government expect to have paid redress to the great majority of the GLO claimants by 31 March 2025.

My noble friend Lord Sikka raised a question about the DWP convictions. I can assure him that the Minister for Transformation is looking into this, a review is being established, and I hope to provide more information about that. My noble friend also raised questions about the Lost Chances charity. A meeting has been arranged between it and my colleague, Minister Thomas.

We have been talking about the Horizon redress schemes but, as noble Lords have pointed out, a predecessor system known as Capture also involved errors and bugs which affected some postmasters. I pay tribute to the tireless advocacy of my noble friend Lord Beamish on behalf of this group.

In response, the Minister announced on 17 December last year that the Government will be providing full and fair redress to postmasters who were victims of errors and bugs in the Capture programme. The Government will continue to discuss this work with my noble friend Lord Beamish, and we will return to the House in the spring with an update.

Fujitsu supplied the Horizon software at the heart of this scandal. The sorry tale of its introduction has been fully explored by Sir Wyn Williams’ public inquiry. The Government of course welcome Fujitsu’s acknowledgement of a moral obligation to contribute to the cost of the scandal and continue to talk regularly to Fujitsu about this. The Post Office Minister will be meeting Fujitsu’s Europe CEO shortly.

The noble Lord, Lord Arbuthnot, asked: if Fujitsu were in jail, would we be giving it the millions that we are currently giving it? It is of course true that Fujitsu has admitted wrongdoing, but at the moment we do not know whether it is criminal. Deciding on that before reviewing the evidence is part of what has caused the scandal, and we should not repeat it. In its apology, Fujitsu recognised that it has a civil liability, and this will be dealt with through the financial contributions which it has promised.

The noble Lord, Lord Arbuthnot, my noble friend Lord Monks, the noble Earl, Lord Erroll, the noble Baroness, Lady Brinton, and others raised the issue of errors made by the Post Office auditors. The noble Lords have referred the performance of Post Office auditors to the Financial Reporting Council, and my department officials have also spoken to it. It is the right body to consider this, and the Government should not second-guess it. But, going back to the issue of Fujitsu’s contribution, the full amount cannot be determined until we have Sir Wyn Williams’ report, which will set out the full facts of what happened.

The noble Lord, Lord Arbuthnot, and my noble friends Lord Beamish and Lord Sikka raised the potential for an interim contribution from Fujitsu. I would say that it is too soon to decide on Fujitsu’s final contribution to the costs of the scandal, but I agree with noble Lords that an interim contribution would be very welcome and appropriate in these circumstances. Given the nature of the discussions that will need to take place on Fujitsu’s contribution, the Government will not be giving a running commentary on them. But I can promise that we will keep the House informed of progress at appropriate moments.

The Horizon system is still in place, unfortunately. A new version was introduced in the late 2010s, which the High Court accepted was “relatively robust”, but it is none the less very much in need of replacement. There can be no overnight fix for this lack of investment.

We are working with the Post Office to secure a new system which is fit for purpose, and which will not involve Fujitsu. In the meantime, the Post Office is, unfortunately, still dependent on the Horizon system to run its branches. I understand the widespread desire to see Fujitsu out of the Post Office picture immediately, but the only way to achieve this would be to shut down all local post offices and deny citizens the vital services which they provide. We do not think that we can do that, and so Fujitsu must remain for the time being. The Post Office has extended its contract until March 2026 but is looking to reduce its input as soon as possible.

Recognising its responsibility for the scandal, Fujitsu has voluntarily paused bidding for new government contracts. However, the Post Office is not the only area where government needs help which is only practicable to get from Fujitsu. So, while we agree with Fujitsu’s decision not to bid for government contracts in general, there will be situations where existing contracts need to be extended, or new ones begun, although generally in connection with existing services. Of course, we understand why that is undesirable, but it is being done only because currently there are no viable alternatives.

There have been allegations in the media that Fujitsu is seeking and receiving contracts beyond those limits. I assure the House that this is not the case. The Crown Representative and his team in the Cabinet Office, who oversee all the Government’s dealings with Fujitsu, are keeping a close watch on the situation.

I agree with noble Lords that individuals and companies responsible for the Horizon scandal must be held to account. The Metropolitan Police is keeping a close eye on the Williams inquiry and has a number of staff working on this. The noble Lord, Lord Hastings, asked about the involvement of law processes. The Solicitors Regulation Authority has said that it has more than 20 live investigations into solicitors and law firms relating to the scandal. There are other channels of accountability, too, and all of these need to be investigated in due course. My noble friend Lord Monks rightly raised the question of the wholesale culture change needed at the Post Office, and my noble friend Lord Sikka raised specific questions about the culpability of the directors. This will all be covered in Sir Wyn Williams’ report, which will establish what happened, what went wrong and why.

The noble Lord, Lord Beamish, raised the question of an independent body—