Post Office Ltd: Management Culture

Debate between Lord Beamish and Lucy Allan

Thursday 13th July 2023 Westminster Hall

[Mr Kevan Jones (North Durham) (Lab)]

It is a pleasure to serve under your chairmanship, Sir George. I congratulate the hon. Member for Motherwell and Wishaw (Marion Fellows) on securing the debate. I declare an interest that I am a member of the Government’s Horizon compensation advisory board. Many will know that I have been involved in addressing what has become known as the Horizon scandal for many years.

I am usually an advocate of the cock-up theory of history—mistakes happen—but my involvement in addressing the Post Office and Horizon scandal started when a constituent of mine, Tom Brown, who was being prosecuted by the Post Office, came forward. The more I looked into the issue over the years, the more I realised that these were not mistakes but deliberate lies, cover-ups and deceits, which, as has been said, led to innocent, upstanding members of the community being prosecuted, bankrupted and, in some cases, sadly taking their own lives. That takes us back to issue raised by the hon. Lady: it is the culture of the Post Office that led to the Horizon scandal.

I have described the culture of the Post Office as rotten to the core. Based on recent evidence, I do not think a great deal has changed. Let us see what that rotten culture led to. The hon. Member for Telford (Lucy Allan) has referred to the vicious prosecution of individuals. The evidence that came out of the inquiry—Lord Arbuthnot and I were aware of this—showed that the board knew in 2011 that the Horizon computer system was flawed. The argument that kept being peddled out—that somehow the system was infallible—was just not true.

In spite of that, the Post Office continued to prosecute individuals, including one horrendous case where it sent a pregnant mother to prison. Some 927 individuals were prosecuted. The numbers went up substantially, so why was nobody at the Post Office saying, “Wait a minute: have we suddenly got a load of kleptomaniacs employed as sub-postmasters?” Alarm bells should have been ringing, and yet the Post Office doubled down on prosecuting people. My constituent Tom Brown went through agony for two years after being arrested for allegedly stealing £84,000, only to get to the Crown court in Newcastle and be told that the case was dismissed. In that time, he had gone bankrupt and had his reputation completely ruined. There are many other stories. I and other Members have met some of these individuals, so we know of the mental strain and cruelty that they have experienced. It would take a heart of stone not to be moved by their situation.

The hon. Member for Telford also raised the issue of the board’s approach of resistance. I have referred in the past to a tsunami of public cash being used to defend the indefensible, as happened in the court case that Alan Bates and the Justice for Subpostmasters Alliance brought against the Post Office. There was also the ridiculous situation in which it challenged Mr Justice Fraser in the court and tried to have him removed. That was a delaying tactic—it was not about getting to the truth, but about trying to outspend the applicants. That all happened at our expense—the nearly £100 million it spent was our money—yet it knew back in 2011 that what it was arguing in court could not be defended.

The hon. Lady also mentioned the role of the board. There were faceless individuals sitting on the board and agreeing all of this. They were quite happy to get remuneration for sitting on the board, but they did not ask basic questions about what was going on. For many years I have not been able to get to the bottom of the role played by the UK Government Investments share- holder. That person was meant to represent the interests of taxpayers on the board, yet they were quite happy to sign off £100 million of legal fees for the Post Office. I shall make an exception for the present Minister, but I have dealt with many Ministers over the years, all of whom, to be frank, trumpeted the same rubbish every week, obviously guided by their shareholder on the board. It would be interesting to see what the shareholder said over the years. These faceless individuals are taking remuneration, and they need to be held to account for their actions. It is no good saying that time has passed. They have ruined people’s lives—that is the important thing.

The ironic one is Paula Vennells, who ran the Post Office from 2012 to 2019. It has already been mentioned that she got a CBE for services to the Post Office. Even in 2019, when she got it, we knew about the scandal that was going to break, yet somebody thought it was great to sign off on the CBE. They not only did that, but made her a non-executive director at the Cabinet Office and the chair of Imperial College Healthcare NHS Trust. What the hon. Member for Telford said is correct: it is a chummy club where we think good people—either good men or good women—can go on to these other things, and no doubt get, for those two roles, quite substantial payments. How was that allowed to happen? How did somebody in Government say, “Wait a minute; this scandal is about to break—we’ll give her a CBE and appoint her to two public bodies”?

Finally, I come to the present board. It has already been said that Nick Read’s salary is £415,000. He had a bonus of £455,000. The chief financial officer, Alisdair Cameron, gets paid £110,000 and got a £316,000 bonus. I ask them: where is their moral compass? How did they think it was right to accept such ludicrous bonuses when we are still fighting over compensation for victims of the Horizon scandal? That is wrong. I do not understand how someone can get nearly £1 million a year for running an organisation that is supposed to provide a public service and think that somehow it is right to get a bonus for doing their own job, while there are people who are broken, who are destitute and, in some cases, who still have the moral shame that came with prosecution. That is a moral issue. I do not know how these people sleep at night. How do they think it ethically possible to accept such a figure?

I think Nick Read has paid something like £7,000 back. Big deal! Let us be honest: that is pocket money in terms of his overall remuneration package. Part of the bonus was actually for their work on the Horizon scandal. It was complete nonsense: they said that Sir Wyn had to sign the thing off, but Sir Wyn did not even know about it. The Post Office made that up. At the end of the day, this is public money, not their money. This is not a private company; this is taxpayers’ money, which is the important point. I would not mind if it was actually good, but as has already been said, the inquiry has now been held up because the Post Office has not disclosed documents. The Post Office cannot argue that somehow it cannot find documents or that there has to be a delay. Somebody should have done a trawl of this. If certain people have kept money for work on the Horizon scandal, the Government should sue them, because frankly they are holding up the inquiry.

There is a lot of anger, quite rightly, among sub-postmasters, sub-postmistresses and their supporters, not only about what has happened in the past. There are some clear governance issues. I think that there is call to sack the board on various social media, and I agree with that: the present board needs to be sacked. We also need a fundamental change in the way the Post Office is structured and operated.

[Lucy Allan]

Does the right hon. Gentleman agree that the lawyers, Herbert Smith Freehills, should be sacked?

[Mr Kevan Jones]

Lawyers are lawyers. The hon. Lady said she was a lawyer, and I mean no disrespect, but let us be honest, if the lawyers are going to get a good living out of it, they will take the money and give the advice. A lawyer will say anything if they are paid enough. The point is that the board is still not performing its scrutiny role. As the hon. Lady rightly said, the role of non-executive directors is to challenge and question things, but they are not doing that.

There needs to be an emergency situation and the current board, including Nick Read, needs to go. We need to put in some interim arrangements, and then in the long term we need to look at how the Post Office is run. It is frankly a farce that it is considered to be a private, stand-alone company. It is not: it is 100% owned by taxpayers. Unless that is done, I fear that these people will keep taking large bonuses and salaries and, as the hon. Member for Motherwell and Wishaw said, our network will get smaller and smaller and the people who do the real hard work every day of the week at the front end will get less and less.

Funeral Plan Industry

Debate between Lord Beamish and Lucy Allan

Thursday 26th May 2022 Westminster Hall

[Lucy Allan (Telford) (Con)]

I beg to move,

That this House has considered the funeral plan industry.

It is a great pleasure to serve under your chairmanship for the first time, Mrs Cummins. I am grateful to the Chairman of Ways and Means, for her wisdom in selecting this afternoon’s debate; amid the noise and chaos that is the normal week in Parliament, she has provided a space to consider the needs and concerns of decent and often vulnerable people who are trying to do the right thing.

People who buy funeral plans are elderly, and they may be ill—perhaps terminally so. They may have struggled with the cost of a funeral when their spouse died, and they do not want to burden their children with the same anxiety. They may fear the shame of a local authority funeral—a pauper’s burial. These are people who have worked hard and saved hard, and they want some piece of mind at the end of life. They are not people who grab the headlines and demand the limelight or who, when something goes wrong, take to Twitter, call their lawyer or send emails in capital letters to their MP twice a day. They may even be quite reluctant to contact their MP, and if they do, it will be politely understated. For that reason it is all the more important that we are here today to ensure that their voices are heard in this place, and I am very grateful to all Members for attending the debate.

The funeral plan industry sees these people, who I think we can all agree are vulnerable, as a lucrative target market. Until now, it has certainly been a huge growth industry. Today, 1.6 million people hold a funeral plan, with 218,000 people taking out a new plan only last year and with over £4 billion in funds under management held in plans. There is huge trust placed in funeral plan providers by vulnerable people, yet this lucrative industry is unregulated.

[Mr Kevan Jones (North Durham) (Lab)]

Does the hon. Lady share my concerns about some of the practices and sales techniques that are used to get people to sign up to these plans? She has already mentioned that people are vulnerable, but when we read the small print in the glossy brochures that are provided, it is clear that these plans do not actually deliver what has been promised to many people.

[Lucy Allan]

The right hon. Gentleman is absolutely correct, and I will come on to some of those high-pressure sales techniques, which I very much hope the new regulatory regime will remove.

The Funeral Planning Authority held itself out as providing some form of oversight, giving itself a veneer of respectability as a quasi-regulator, but it was not, and we have to remember that the industry is entirely unregulated, despite any appearances to the contrary. The Minister rightly took steps some years ago to rectify that omission, and I pay tribute to him for that. Of course, there are good providers, such as Dignity and Co-op Funeralcare, which care about good governance and are working to ensure that this unregulated industry is brought within the perimeter of the Financial Conduct Authority by 29 July. However, that creates challenges for the industry, because some providers have not applied to be regulated and some have not been accepted for regulation, for good reason. There are concerns about where that will leave people who hold plans with those providers. I have had useful meetings with Dignity and the FCA, and I am grateful to them for their work in this area.

Let us make no mistake: as the right hon. Gentleman just alluded to, this is an industry with a record of using high-pressure selling techniques, such as cold calling, telesales and having a sales rep sit in someone’s kitchen until they sign on the dotted line. People sign up for some extraordinary fee arrangements, whereby 25% of the plan could be taken as commission. Then there is the use of intermediaries, such as will writers, to sell a funeral plan as if it were an add-on, when all people really wanted was a will. They are told that their money is held in trust and overseen by independent trustees, and that it will be ringfenced and invested in blue-chip equities, yet there is a complete lack of transparency as to how their money is invested. Then there is the playing on people’s fears, and I am afraid that even the more reputable companies tell people that a funeral plan is an essential part of end-of-life planning.

That brings me to the ironically named Safe Hands Funeral Plans, now in administration. While we can all agree that only a small number of providers pay scant regard to good governance, the industry as a whole has long known about these providers and their practices. I am sad to say that it knew about Safe Hands Funeral Plans and its methods, which were an open secret in the industry. As we move towards regulation, it was only a matter of time before any rogue operators would fail. A number of investigative personal financial journalists have covered this story, and I particularly pay tribute to Jeff Prestbridge for his sterling work in this area. I encourage him and others to keep up the campaign.

When my constituents, Don and Toni Haines, from Ketley in Telford, contacted me about their Safe Hands plan, sold to them by Equity Wills in Market Drayton, Shropshire, it did not take me long to see what had happened to the money supposedly held in trust for the benefit of plan holders. Yes, I am a chartered accountant and I specialised in insolvency, including administrations and liquidations, but even a cursory glance at note 8 on page 6 of the Safe Hands accounts, freely available to anyone online, makes clear that the company is entitled to receive any surplus declared following an actuarial valuation of the Safe Hands Plans Trust—the moneys held in trust for savers could be distributed to a director shareholder.

The surplus declared on the Safe Hands Plans Trust as at May 2020 was £2.4 million. In 2019 the surplus was £10.9 million. It is clear that moneys supposedly ringfenced for plan holders were distributed to director shareholders as a dividend. Did Equity Wills of Market Drayton tell Mr and Mrs Haines that this would happen if they bought a Safe Hands plan? Did Equity Wills check the Safe Hands accounting policies themselves before pocketing their commission? They did not even tell Mr and Mrs Haines they were buying a Safe Hands plan, so my constituents could not even check for themselves.

Digging a bit deeper into the accounts, which of course make full use of the small company exemption to file only limited information, we see that a loan of £3.5 million appears to form part of the assets of the trust, which are ringfenced for plan holders. This loan was advanced to a director of Safe Hands—a Mr Malcolm David Milson, and his wife. By 2020, he was no longer a director shareholder and the advances made to him were not recovered. In anyone’s book, this is clearly financial misconduct. The administrators believe that, out of a portfolio valued at at least £60 million, they can realise between only £10 million and £16 million, leaving plan holders with a return of between 10p and 20p in the pound—and we should not forget that that is after they have paid their 25% commission.

Let us call this what it is: theft. Anyone associated with this company should be disqualified as a director, along with anyone who signed off the accounts or certified the surplus. There is a duty of care to the vulnerable. As much as I admire what Dignity is trying to do, in the material that it circulated to Members it has not fully recognised or accepted that these people are vulnerable. It is important that that is acknowledged, and I am sure the Minister will do that in his response.

I am not somebody who uses exaggerated language, because it often diminishes the power of an argument, but what has been happening here is clear: it is what any accountant will call teeming and lading—in other words a Ponzi scheme. As long as the provider keeps selling to new customers to pay the maturing plans of existing customers, there is no problem, but if the music stops—as it did in this case when the provider was prevented from selling any new plans by the FCA as it moved to regulate the industry—the house of cards collapses, leaving vulnerable savers in this instance with 10p to 20p in the pound.

My fear is that Safe Hands plan holders will not be the only casualties. In fairness to Dignity, it has so far underwritten the plans that are now maturing and is working with the FCA to see how it can take plan holders on as clients. However, there is a big concern that its long -term proposal would require plans that are fully paid—we should not forget that most plans are fully paid—to make further payments to Dignity on the basis that people would at least be better off doing that than just having the 10p to 20p in the pound that the administrator would pay. That is not good enough.

The industry knows that nobody needs a funeral plan. Let us not pretend otherwise. A person can tell their children what they want when they die and put their monthly contribution into an ISA or bank account. Why risk it with a funeral plan? Why pay exceptional commissions? If their estate is valued at less than a few thousand pounds, the cost of the funeral gets the first call on the deceased’s assets. If there are no assets at all, the local authority picks up the cost.

I am very concerned that some industry lobbyists are seeking to water down the FCA regulatory proposals and are lobbying MPs to that end, and I urge the Minister and the FCA to stand firm. These are vulnerable savers and they must have the gold standard of protection. Watering down the proposed new regulatory regime for the industry would make it easier to become regulated. I understand that we do not want to exclude providers from regulation altogether, but it would be counterproductive. We have been there with the FPA, which, as we have seen, has provided no regulation whatever, just the veneer of regulation or some form of respectability.

Funeral plans are savings and investment products targeted at vulnerable people, and those savers should have at least the same level of protection as anyone else buying a savings financial product. There is a duty of care to protect the vulnerable from exploitation and mistreatment—I am sure the FCA and the Minister will agree.

[Mr Kevan Jones]

Does the hon. Lady agree not only that it needs to be clear what people are purchasing, but that if the people selling the plans are receiving commission —in some of the examples I have come across, the third party selling them has been on commission—that should be clearly stated, too?

[Lucy Allan]

The right hon. Gentleman is absolutely right. The lack of transparency is a significant feature of where this industry has gone astray.

Protecting funeral plan holders from some of their loss, which is what is suggested, is not good enough, and nor should the industry expect taxpayers to bail it out. This is a problem of the industry’s making, and it needs to work together to find a solution. If the industry cuts plan holders adrift, it will have sullied its own reputation, creating longer-term consequences for itself.

This is also about accountability. The auditors, the actuaries, the trustees, the directors and the fund managers cannot just walk away from these vulnerable customers. Why should plan holders with fully paid plans have to pay more to save their funeral plan? It is no good saying that a Safe Hands customer’s loss would be less if they paid to switch to a Dignity plan than what would otherwise crystalise from a distribution from the administrator. That is no comfort to anyone. I welcome the steps that Dignity has taken to date, but it must consider whether it, with other reputable members of the industry, can go further.

I know that the Minister wants to do the right thing, and I know that the industry understands that if it wants to survive this financial shock—this battering to its reputation—it too will go the extra mile to do the right thing. The voices of people who work hard, save hard and trust others to do what they say they will do with their money are being heard today by the Minister loud and clear.

I hope the FCA will have no truck whatever with the view that these vulnerable saving plan holders should be treated less favourably than other plan holders. There must in all circumstances be a duty to protect vulnerable customers, a requirement to hold capital to be able to honour the guarantees that are given, and an industry compensation scheme for the plan holders who will be excluded from the financial services compensation scheme. This is an important point. Anyone who will lose out prior to 29 July will not be protected by the financial services compensation scheme. Those people must have a scheme that protects them from losses, and that must be a funeral plan industry scheme. I do not think it should be topped up by the Government. The industry got into this mess, and it needs to work together to get out of it.

I know that, sadly, this matter will not be at the top of the Treasury’s in-tray, at what is a challenging and difficult time for all Treasury officials. The Minister is one of my favourite Ministers, and I urge him to make sure that the little people do not end up at the bottom of the pile, and to consider that how we treat the vulnerable says much about our financial services industry as a whole—and, indeed, about our society.

We want to build a reputation for probity and integrity in the financial services sector. There are vulnerable people whose vulnerabilities have been exploited. We cannot just hope that they will not know that they lost the money; that, if they do know, they will not have the capacity to fight for themselves; or that they might die, leaving local authorities to step in. If we do that, we will damage not only the funeral plan industry, but the financial services industry. There are MPs across the House who will not let that happen—I am one of them. These individuals are the people we are all here to represent. I hope that the Minister will allow us all to be part of the solution.

Horizon Settlement: Future Governance of Post Office Ltd

Debate between Lord Beamish and Lucy Allan

Thursday 19th March 2020 Commons Chamber

[Lucy Allan (Telford) (Con)]

I congratulate the right hon. Gentleman on his excellent speech and his stoical determination in trying to get to the bottom of this. Is he also aware that the head of Fujitsu UK is now working in the Cabinet Office?

[Mr Jones]

I do not know whether the hon. Lady has read my speech, but I am just coming on to the Cabinet Office, because lo and behold, guess where Paula Vennells also ended up? She was a non-executive member of the Cabinet Office. I am told that she was removed from that post yesterday; I do not know whether it was because of this debate. I welcome that, but why is someone who has overseen this absolute scandal still allowed to hold public positions? Worse than that, she is a priest. I respect those who have religious faith, and she does, but the way that she has treated these people cannot be described as very Christian—she certainly would not pass the good Samaritan test, given the way she has ignored their pleas. I hope she thinks about people like Tom, who have lost their livelihoods and are now living in social housing because of her actions. It angers me that these individuals have gone scot-free, and they need to be answerable for their actions.