Post Office Horizon Compensation Scheme

Lord Sikka Excerpts

Thursday 27th February 2025 Lords Chamber

[Lord Sikka (Lab)]

My Lords, I thank the noble Lord, Lord Beamish, for securing this debate, and I congratulate the noble Lord, Lord Barber of Ainsdale, and the noble Baroness, Lady Elliott of Whitburn Bay, on their wonderful speeches. I look forward to working with them.

The survivors of the Post Office scandal have already suffered enough, and the slowness and adversarial nature of the compensation schemes are simply adding another layer to the cruelty they have already suffered. I have a number of questions for the Minister. Can she explain why some claims are being minimised to as little as 5% when they have been fully prepared by financial assessors? Why are the claimants being asked repeatedly for more expert medical assessments? Why should Horizon shortfall scheme applicants have to wait for their first offer before qualifying for any legal help? Why is 92 year-old Betty Brown still waiting for compensation after the Minister, Gareth Thomas, pledged that he would find a solution six weeks ago?

We are seeing scandals within scandals. There is the tragic case of Mrs Gowri Jayakanthan, who I met last December here at a seminar organised in the House. In 2005, under pressure from the Post Office, her husband committed suicide. No wrongdoing was subsequently established. In summer 2020, Mrs Jayakanthan applied for compensation under the Horizon shortfall scheme. In November 2023, her application was refused because the company through which her husband contracted for his post office had gone into liquidation, and in the Post Office’s view her losses did not fall within the terms of that scheme. I urge the Minister to meet Mrs Jayakanthan and examine that case in detail, because justice must be seen to be done.

As has been mentioned, the cost of compensation must not fall solely on the public purse. What claims have been made against the directors’ and officers’ insurance taken out by the Post Office?

Then there are questions about Fujitsu. It played an active part in the prosecution of innocent postmasters and perverted the course of justice, but it has not returned even a penny of the fees that it collected over the years from the Post Office. Even worse, the company is currently bidding for a new £370 million government contract and is confident that it will be able to renew its contract with HMRC, which was worth £240 million when last signed in 2020. Why does Fujitsu continue to be indulged and why, despite massive evidence, has it not been prosecuted for perverting the course of justice? Why has it not been forced to make any contribution? As has been said, it should really bear at least 50% of all the compensation that is to be paid. Have the Government had any conversations with Fujitsu about funding Lost Chances? That is a charity set up to assist children whose parents were impacted by the Post Office scandal.

From a September 2024 report prepared by Kroll Associates, we know that Horizon’s predecessor, the Capture system, which operated from 1992 to 1999, was also flawed, and the Government are committed to redressing affected postmasters. The point here is that Ernst & Young was the external auditor of the Post Office from 1986 to 2018—the entire period of the Capture and Horizon scandals. Publicly available evidence shows that the firm knew the flaws. It could not have carried out effective evaluation of internal controls and satisfied itself that the Post Office kept proper accounting records, or that its directors were able to prepare true and fair statutory financial statements. Auditors did not qualify the Post Office accounts, which did not contain any provisions for contingent liabilities arising from wrongful prosecutions, which are now falling on the public purse.

On 11 February 2025, in reply to a call from the noble Lord, Lord Arbuthnot, for an inquiry into the conduct of Ernst & Young, the noble Baroness, Lady Gustafsson, told the House

“I look forward to ultimately hearing the outcome from the FRC”,—[Official Report, 11/2/25; col. 1105.]

implying that the regulator is looking at it. Can the Minister tell the House whether the Government have formally asked the Financial Reporting Council to investigate accountants involved with the Post Office? When was that request made? What is the scope of that request? Ernst & Young was the auditor for the duration of the Capture and Horizon scandals; therefore, all those audits need to be re-examined by an inquiry. Have the Government asked the FRC to look at the conduct of Deloitte and PricewaterhouseCoopers as well? PwC succeeded Ernst & Young.

I will now ask some questions about the 61 or more prosecutions of postmasters by the DWP for alleged frauds, none of which have been quashed. These prosecutions took place mostly between 2000 and 2006. The Government’s position is that these were not connected with the failings of the Horizon system. Well, they certainly took place when there was a conspiracy of silence and cover-up by the Post Office, the state, and government officials.

To accuse someone of fraud there is a presupposition that the underlying accounting records are 100% correct. We know that Horizon, Capture and the manual accounting systems used before them were flawed. We know that sub-postmasters were given minimal accounting training. So, what did the DWP use as a benchmark to say that somebody committed fraud? How did it know that that benchmark was reliable? I have not seen any evidence to support that.

The cases were handled by DWP solicitors, who would then instruct counsel to represent the DWP at court. Too many sub-postmasters, facing the full might of the state without any legal aid, were advised to plead guilty to a fraud they insist they never committed. Sadly, many have since passed away and their families have long sought to clear their name. Since the date of those DWP convictions, court transcripts and bundles of evidence relating to those convictions have been destroyed. The DWP has been unable to provide any court transcript to back up its insistence that its position was correct, so how sound could these convictions have been?

We have to remember that before the 2019 High Court case of Alan Bates and Others v Post Office Ltd, the authorities insisted that the convictions were sound. The rest, as they say, is history. We need an independent inquiry. I pursued this with the Minister on 24 July. She replied:

“On the individuals and the question of whether there should be an independent inquiry, we believe that the best way to deal with this issue now is through the current arrangements being set up, rather than by having another third party involved. I am sure that all these matters will be taken into account in the eventual recommendations”.—[Official Report, 24/7/25; col. 505.]


The problem here is that Sir Wyn Williams did not consider the DWP prosecution of postmasters part of his remit. I am sure the Minister is committed to securing justice for all, and I encourage her to revisit this issue and commission an inquiry. We can only win justice, and that is highly desirable.

--- Later in debate ---

[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—

[Lord Sikka (Lab)]

I apologise to the Minister for interrupting. I know she has had a lot of questions to answer; I very much hope she will send detailed replies to a lot of the questions I asked. One matter was the case of 92 year-old Mrs Betty Brown, who, despite promises from the Minister six weeks ago, is still waiting for her compensation. Secondly, I asked whether the Minister could meet me and Mrs Gowri Jayakanthan, who had been refused any compensation and whose husband committed suicide, unfortunately, under pressure from Post Office allegations. Would the Minister be good enough to meet us, please?

[Baroness Jones of Whitchurch (Lab)]

My Lords, I was going to go on to say that a number of noble Lords have asked very specific questions, and I will of course write. I will just deal quickly with the idea that there should be an independent body for redress in the future. That is certainly something that we are looking into, and it is a very helpful suggestion coming forward from the Horizon Compensation Advisory Board, among others.

Horizon was a terrible scandal, and it is right that we should continue to keep it in our minds through debates such as this. The Government are determined to learn the lessons from it, which is why Sir Williams’s report will be so important, to deliver full and fair compensation, as quickly as possible, to those postmasters who were so unjustly used. I thank noble Lords for this very helpful debate.