Post Office Horizon Compensation Scheme

Lord Arbuthnot of Edrom Excerpts

Thursday 27th February 2025 Lords Chamber

[Lord Arbuthnot of Edrom (Con)]

My Lords, I too declare my interests as a member of the Horizon Compensation Advisory Board and as chair of the advisory panel of Thales UK.

I congratulate my good friend, the noble Lord, Lord Beamish, on securing this debate. He has been with me every step of the way in his vigorous campaigning on behalf of the sub-postmasters. It is at least partly thanks to him that we are where we are now, and that we are getting somewhere. Discovering the Capture issue is thanks to him. We are getting somewhere, but we are not far enough along, and I will come to that.

I very much look forward to the maiden speeches of the noble Baroness, Lady Elliott, and the noble Lord, Lord Barber. What an excellent choice they have made in their topic for their maiden speeches. It is a hugely important topic, and your Lordships will all want to welcome them to this battle. There is no party politics in this, because all the political parties comprehensively failed the sub-postmasters—we are all to blame. We all need to work hard together to achieve an improvement in the position of the sub-postmasters and their redress, holding to account those who were responsible for this mess and establishing a better set of institutions to try to ensure that it does not happen again.

The debate is about compensation, specifically drawing attention to the role of Fujitsu. Before I come to that, there is one important matter that I ask the Government to consider. In doing so, I welcome the Minister back to her place—without a stick—and I hope that she is well on the way to recovery. The important matter is that the politicians failed in our initial attempts to get this matter sorted out through politics; I failed and even the noble Lord, Lord Beamish, failed. As he said, the only thing that got us to where we are today was Sir Alan Bates’s courageous group litigation, funded by litigation funders. Following the PACCAR judgment in the Supreme Court, it would probably be impossible today for Sir Alan to raise such litigation funding. A cross-party group of your Lordships’ House will meet the Attorney-General next week to discuss this, but I raise it now to flag up its importance and relevance.

Returning to Fujitsu, I am grateful to Mr Stuart Goodwillie and Mr James Christie for their fascinating and helpful briefings online. Let us not forget what Fujitsu did. ICL, the company that produced Horizon and that was bought by Fujitsu, provided a computer program to the Post Office which it knew was seriously flawed. As Richard Christou of ICL told the public inquiry, Pathway, the ICL front company in the contract negotiation,

“was determined to win the tender, and decided to undertake as little negotiation as possible in order to better its chances of obtaining the award”.

Fujitsu had a duty under its contract to provide evidence for prosecutions that was admissible and accurate. It did help the Post Office prosecute the sub-postmasters, but with evidence that was false. Knowing of the flaws in the Horizon system, it told the courts that there were no such flaws.

Moreover, Fujitsu had a large operation altering the accounts of the sub-postmasters without the knowledge of the sub-postmasters. It told everyone that it could not alter those accounts, despite carrying out an extensive operation doing exactly that. So Fujitsu did much more than stand idly by while the sub-postmasters were maliciously prosecuted; it was an active, knowing and essential participant in the whole ghastly fraud. If it were not a company but an individual, it would be facing years, or possibly decades, in prison. Yet it is a company, and one on which the Government have become unacceptably dependent. Each year in which the Government extend some contract or other, saying that there is no alternative, they should ask themselves, “If this were Prisoner Smith in cell block J4, would we really be giving him a contract worth tens of millions of pounds?”

What is Fujitsu doing about this? What money has it offered? As we heard from the noble Lord, Lord Beamish: nothing. It has accepted its “moral obligation”, but the taxpayer is paying out hundreds of millions now. There needs to be an interim payment from Fujitsu now. The noble Lord, Lord Beamish, suggested £300 million; £700 million would be less than half the cost that the taxpayer is currently estimated to bear. If it does not do that, why should the Government offer it further extensions of its existing contracts, still less grant it new contracts? That is Fujitsu.

But what about the auditors, Ernst & Young? A couple of weeks ago, I told your Lordships that I asked the inquiry to include the auditors in its scope, but the inquiry chair decided that that would extend the length of the inquiry disproportionately. But here we have Ernst & Young certifying that the audited accounts represent a true and fair view of the Post Office’s financial state—missing a liability of £1.87 billion. What on earth were they doing? I will tell you what they were doing. In 2003-04, they decided to audit, out of a total of 12,000 Horizon branches, not 10% of them—1,200—which would have been respectable; not 1% of them—120—which would not have been respectable; but one. One branch. When the Post Office’s chief operating officer, David Miller, was asked in the public inquiry,

“do you consider it was a satisfactory way for the Board to satisfy itself of the accuracy of the company accounts?”,

he answered: “It was very limited”. One, out of 12,000 branches.

On 5 June last year, Alice Perkins told the public inquiry of a meeting she had with Mr Grant, the partner at Ernst & Young, when she became chair of the Post Office. He told her: “With Fujitsu”, the Post Office

“drove a very hard bargain on price but they took back on quality/assurance”.

So, he knew that the quality of what Fujitsu was providing was suspect. Where does that appear in the Post Office audited accounts? As the noble Lord, Lord Harris, would say: spoiler alert—it does not.

Mr Grant also told her:

“Horizon – is a real risk for us … Does it capture data accurately ... Cases of fraud—suspects suggest it’s a systems problem”.


In her evidence, Alice Perkins said:

“Horizon is a real risk for us”,


meaning that Horizon was a real risk not to the Post Office, but to Ernst & Young. That too does not appear in the audited accounts. As James Christie says on his website:

“The Horizon system has never featured as a risk in any annual report. It surfaced only indirectly in the 2019 report, but as a litigation risk, which was incorrectly thought to be mitigated by contesting the litigation that took place”.


Well, we know how that ended up.

“Even this risk had vanished in the 2020 report”.

In a management letter to the Post Office—I am grateful to the noble Lord, Lord Sikka, for drawing my attention to it—Ernst & Young wrote:

“We were unable to identify an internal control with the third-party service provider”—


that is, Fujitsu—

“to authorise fixes and maintenance changes prior to development for the in-scope applications”,

that is, Horizon. If there was no internal control, what were the external auditors doing about it? Nothing. How were the owners—the taxpayers—meant to know this was going on if the auditors were not telling them? How were the sub-postmasters, those who were being sent to prison, made bankrupt, having their lives ripped apart, meant to defend themselves?

If the public inquiry will not hold the auditors to account, it is a task that must fall, first, to the Financial Reporting Council and, ultimately, to the Government. The Government need to drive this. It should not be down to the advisory board—this part-time group—to be driving this forward. We need action now.