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House of Commons Hansard
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Post Office - Horizon System
09 July 2013
Volume 566

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Yesterday evening, an interim report into alleged problems with the Post Office’s Horizon computer system was published. The report was commissioned by Post Office Ltd from external forensic accountants, Second Sight. The Horizon system records all transactions conducted at every post office counter across the country. The Government welcome the publication of the interim report and the Post Office’s statement in response.

Although Post Office Ltd is 100% owned by the Government, the company operates at arm’s length as an independent commercial business. The Government do not play any role in operational matters. It is important to note that the issues in the report have no impact on Royal Mail, which is an entirely separate business. It is also important to be clear that, contrary to misleading media reports, the review explicitly confirms that

“we have so far found no evidence of system-wide problems with the Horizon software”.

The very small number of sub-postmasters who have experienced issues with the Horizon system are a minute proportion of the tens of thousands of people who have been successfully using the system across the network of 11,500 branches on a daily basis since 1995. Out of 68,000 users, only 47 cases have been put forward to the review.

I want to emphasise that the interim report makes no comment on the safety or otherwise of any conviction of a sub-postmaster for fraud, theft or false accounting. Equally, even if it had, the Government cannot intervene in the legal process to review or appeal past convictions. These matters can properly be dealt with only by the relevant judicial authorities. The interim report published yesterday analysed four cases. It found that there was scope for the Post Office to improve aspects of its support and training for sub-postmasters, and it has already taken steps to do so. The Post Office has further proposed a number of measures to build on some of the points made in the Second Sight report on support and training for sub-postmasters. I welcome those initiatives as, I understand, does my right hon. Friend the Member for North East Hampshire (Mr Arbuthnot), who has played a key supporting role in identifying cases for examination in the review.

The Post Office statement issued yesterday welcomed the broad thrust of the report’s findings and outlined three initiatives to deal with the issues raised. First, it will set up a working party to complete the review of cases started by Second Sight, and will consider all 47 cases brought forward by the Justice for Subpostmasters Alliance—the JFSA—and MPs. The JFSA has been invited to join the working party. Secondly, an independent figure will chair a review to determine how best to adjudicate disputed cases in future. The JFSA and other stakeholders will also be invited to take part in this process. Finally, a new branch user forum will provide a channel for sub-postmasters and others to raise issues at the highest level on business processes, training and support. The company will take forward the proposals as an urgent priority. I commend this statement to the House.

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I thank the Minister for the advanced copy of the statement and for coming to the House.

This is a disturbing affair. At a time when sub-postmasters’ income is being squeezed, the last thing they need is to lose confidence in the system they use to operate their businesses. The people in the post office network are the lifeblood of our communities and must be supported in every way possible. A recent National Federation of SubPostmasters survey found that operating costs were rising while personal drawings were falling, and that one in four sub-postmasters take no salary from their businesses. Most sub-postmasters earn little or no income from either financial or Government services, the two areas that Ministers identify as having real growth potential for post offices. The NFSP removed its support for the Postal Services Bill on the basis of the abject failure of the Government to deliver the “front office for Government” services they promised at the previous election. That is what makes today’s revelations on the Horizon system all the more worrying.

I welcome the steps taken by Post Office Ltd to investigate the concerns raised by the Justice for Subpostmasters Alliance and the right hon. Member for North East Hampshire (Mr Arbuthnot). Its website has a case-by-case analysis of sub-postmasters who did nothing wrong, but for whom alleged defects in the system had resulted in problems with cash reconciliation and processing payments. Press reports this morning say that the Post Office has admitted to software defects in the Horizon system, but the Post Office press release would have us think that this is a mere training problem.

Second Sight, the independent company employed by the Post Office to investigate these issues, said that while there was no fundamental problem with the Horizon system, there were bugs in the system that resulted in it identifying defects resulting in a shortfall of up to £9000 at 76 branches. The Post Office has recognised, however, that the report raises questions about the training and support being offered to some sub-postmasters. This raises wider questions on the current network transformation programme. Training concerns have been consistently raised by Opposition Members, the Select Committee on Business, Innovation and Skills and Consumer Futures, but the move to a Locals model could result in fewer fully-trained staff in our post offices.

If post office services are merely being administered from the front counter of a newsagent or shop, can we guarantee that the servers will be fully trained to ensure that the issues with the Horizon system do not arise in the future? The Minister did not address that question in her statement, and the National Federation of SubPostmasters has raised this issue time and again. It responded today by welcoming the Post Office statement, but also said

“We are encouraged to see that Post Office Ltd (POL) concedes that there is scope for improvement in its training and support programmes—issues which the NFSP has raised repeatedly with POL.”

This is all at a time when Crown Post Office staff are in industrial action, the transformation programme is struggling to be delivered, sub-postmasters’ incomes are dropping, there is a dispute with Royal Mail on the segregation of mail payments, the future of the inter- business agreement is unclear due to Royal Mail privatisation, and Post Office senior management have awarded themselves bonuses of more than £15 million.

What processes will be put in place to compensate sub-postmasters and former sub-postmasters who have been disadvantaged, fined, lost their businesses, homes or even jailed, as a result of the problems with the Horizon system? The Minister said that the interim report makes no comment about any convictions, criminal or otherwise, but will those serious issues be dealt with? When did the Government know about this investigation and the problems with Horizon? How will she ensure that all staff are adequately trained in the transfer to a Locals model? Can she confirm or deny recent reports that there are ongoing talks to change the voluntary Locals network model to a compulsory model, due to the slow take-up of the transformation?

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I thank the hon. Gentleman for his wide-ranging remarks and questions. He is right to say that it is important for people to have confidence in the post office network. In terms of tone, I understand that the remit of Opposition is to ask questions and to be challenging, but it is important that we do not talk the Post Office down. Members on both sides of the House recognise the vital role that post offices play in our communities, that they are doing an excellent job and that there can be a bright future for the Post Office. This Government have stopped the decline in the numbers in the post office network under the previous Government. The hon. Gentleman will be aware that the Post Office has won 10 out of 10 Government contracts recently. We want more income for Post Office Ltd to come through Government services. It has a good record of winning contracts.

The hon. Gentleman mentioned the bugs in the system that have been reported in the media. It is important for the House to have clarity on this, because there are two separate issues. The Post Office itself identified issues on two occasions: through a routine systems check and as a result of a query from a sub-postmaster. That led to a small number of transactions being queried across 76 branches. Post Office was proactive in identifying and rectifying those problems so that no sub-postmaster was out of pocket. That is a separate matter from the issues considered in the report, and which were raised by the JFSA and Second Sight. No system-wide software issues were found. There were issues relating to the interface for dealing with multiple computer systems. The training on offer, and the helpline that sub-postmasters can call if they have a problem, were identified as areas for improvement.

The hon. Gentleman asked specific questions on compensation. There is no new evidence of further problems. Where the Post Office has identified defects, sub-postmasters have already received compensation to right underpayment. On convictions, it is up to individuals to go through the usual judicial processes if they are concerned about the safety of a conviction, and that can be done through the Court of Appeal. Clearly, if any evidence were to come to light that had an impact on the safety of convictions—I stress that that has not happened as a result of this interim report—Post Office Ltd would have a duty to look further at those issues as a prosecuting authority to ensure that convictions remain safe.

The report was commissioned by Post Office Ltd, but the Government were aware of it and there have been meetings with MPs in the House at various points in the past couple of years. On the transfer to the Locals model, I confirm that proper training will be in place. Customer satisfaction in the branches that have already gone through network transformation is significantly higher, and the experience that customers have is important. We are looking to ensure that network transformation continues and is successful, but any discussion on its future will be done in conjunction with the National Federation of SubPostmasters to ensure that we move ahead with a plan in which everybody has confidence.

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I thank my hon. Friend for making this valuable statement to the House. Does she accept that the Post Office, which has acted highly commendably in commissioning this independent review, has a conflict of interest—or, rather, a conflict of duty—in both looking after its sub-postmasters and protecting public money, and that the review has shown that it has fallen too far on the asset recovery side of that conflict? Does she agree that it is essential that the work that needs to be done is not only independent, but seen to be independent of the Post Office? Does she also agree that some sub-postmasters would never have been prosecuted, sued or disciplined had the new procedures now in place or proposed been in effect earlier, and that we must look after them and try to provide them with redress, perhaps through the Criminal Cases Review Commission?

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I sincerely thank my right hon. Friend not only for his question and comments, but for his work acting as a collecting point for some of the concerns. Importantly, it ensured that cases could be looked at anonymously and confidentially, meaning that nobody had to fear bringing them forward. That has played an essential role in this process.

Post Office Ltd is the guardian of large amounts of public money, and it is important that it is properly looked after, but that does not mean it cannot also support sub-postmasters in ensuring that their systems work properly and ensure that there is reconciliation and that things tally up. In fact, I would argue that those are complementary duties, because ensuring that sub-postmasters are well supported helps the Post Office with its role in looking after public money.

It is important that any further work is not only independent, but seen to be independent, and clearly the role of Second Sight in that is important, as is the role of the JFSA. I would not go as far as my right hon. Friend, however; there is no evidence to suggest that any convictions would have been different had these processes and training systems been in place, particularly given that in most of the prosecutions dealt with in the report—not all 47 cases in the report resulted in a prosecution—the sub-postmaster pleaded guilty in the first place. It is difficult to second guess when somebody has entered a guilty plea.

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I thank the Minister for her statement. She stresses the need for independence in the continuing process of looking at the outstanding queries and issues, and no doubt she is mindful that when the Post Office talks about Horizon, it does not just mean the software in the computer system; it means the wider issues, including the interface between that system and other systems; training staff how to use it, and so on. Given that she has made a commitment on the need for independence, will she assure the House that if we are to move to a working party to continue the process, Second Sight, which has done such good work up to now, will be part of it?

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I shall happily give the hon. Gentleman that assurance. The continued input of Second Sight is incredibly important, given its familiarity with the case so far and the fact that it enjoys the confidence of many of those involved. It is also important to recognise, however, that to date this system has handled more than 45 billion transactions and that there have been issues with only a tiny, tiny number of them. As the report itself found, the vast majority of sub-postmasters in branches were at least reasonably happy with the Horizon system. I suspect that Members would say that, where IT systems are concerned, “reasonably happy” is probably as good as we are going to get. Generally, it is working well, but we need to ensure that the further work on cases where there are outstanding queries is independent.

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Clearly, it has now been ascertained that the Horizon system has problems, even if, as the Minister says, they are not systemic. Does she not feel that that is unacceptable, however, given the delays from Post Office Ltd in working out what went wrong? This matter has meandered on for years, resulting in serious reputational damage risks to sub-postmasters. Will she give us her views on whether that is acceptable?

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It is to the Post Office’s credit that it has commissioned this independent review, which has been transparent and accountable, as my right hon. Friend the Member for North East Hampshire (Mr Arbuthnot) also said. It is easy for organisations to say there is not a problem and to try to sweep these things under the carpet, but Post Office Ltd decided to be open about it and to ensure that the report was published. In fact, its newsletter to all branches contained an article encouraging anyone who had difficulties or queries they wanted to raise to ensure they were put into the Second Sight review.

The Post Office has taken significant steps to ensure that there is transparency and accountability and that people’s concerns are taken forward. Clearly, sometimes these issues take time, and of course there are lessons to be learned. Improvements will be made to ensure that when queries are raised, they can be investigated more thoroughly, but again I highlight the context: we are dealing with a system that processes billions of transactions, so it is very complicated and it cannot be expected that nothing will ever go wrong; what is important is how the organisation responds when things do go wrong.

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Being a Minister allows the hon. Lady not only to ask questions but to right wrongs. To dismiss cases such as that affecting a constituent of mine, Mr Tom Brown, as minuscule does not change the fact that he has lost his livelihood, his wife has died, his name has been dragged through the local community and he is stilling awaiting an outcome from the Post Office. He was arrested by the police, but they did not take the case forward; the Post Office did. His good name is now being questioned, he has had to sell his house and is still waiting for the Post Office to produce the evidence. I am sorry, but the Minister’s statement has done none of the things she could have done to put right some of these wrongs.

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I appreciate the situation that the hon. Gentleman’s constituent finds himself in—it is important that he is speaking up for him—and I understand that this has had a massive impact on those involved. When I referred to “minuscule”, I meant the number of transactions queried out of the overall number of 45 billion. I do not know the details of the individual case, so I hope he will appreciate that it is therefore difficult for me to comment. What is important is that we have an independent procedure to get the answers that people such as his constituent are looking for, and everyone involved must have confidence in that procedure. I know that there have been meetings of MPs and that the JFSA is involved; getting those answers is important, but it is also important to stress what the report shows, rather than to suggest that it contains things that it does not.

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I welcome the Minister’s statement, particularly the commitment from the Post Office to improve aspects of its support and training for sub-postmasters. I recently visited St Johns post office in Worcester, which is an enthusiastic early adopter of the network transformation programme. Will she join me in celebrating the fact that the Government are investing in the post office network, rather than running a closure programme, as the last Government did?

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I very much welcome my hon. Friend’s comments. He is quite right that the Government are investing £1.34 billion in the post office network, and I know from speaking to Members on both sides of the House that where these new models are open and working, they have had a really positive reaction from consumers. The Post Office has a bright future, but part of that is about ensuring that where issues arise, they are properly investigated. That is what this independent process has been doing, and that is why we are discussing it today.

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The number of sub-postmasters affected might be small, but none the less it has led to terrible consequences for many of them. One reason many people pleaded guilty, paid back money or had money taken off them by the Post Office at source might have been the latter’s insistence that there was absolutely nothing wrong with the system. It has now been proved that there is doubt about at least part of the system, so is it not imperative that all these cases be dealt with speedily and that justice be done for these sub-postmasters?

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The hon. Gentleman is right that it is imperative that these cases be looked at speedily, although I think he would also agree that that needs to be done comprehensively, and clearly when forensic accountancy work is going on, things can take time. We need to be clear about what the report says about the Horizon system. It did not find evidence of systemic failures; that is not to say there has never been a bug in the system, but I defy anyone to find an IT system that has never had a bug. What is important is that when bugs are found, they are dealt with and the problems are rectified. What has not been found, however, is any systemic problem leading to the issues faced by sub-postmasters, although there have been issues with the support and training provided alongside Horizon.

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Like many colleagues, I have a constituent, Mrs Seema Misra, whose life and family life is in ruins after suffering reputational damage and receiving a custodial sentence. I see from the Minister’s statement that an independent figure will chair a review to determine how best to adjudicate disputed cases, but will she assure me that the working party set up to complete the review of current cases will also by chaired by an independent figure? That is important.

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Yes, I am happy to give my hon. Friend an assurance that the working party will be independent. As I have already confirmed to the House, the continuing involvement of Second Sight, which is independent of the process, is crucial as part of that working group.

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The Minister has said that the network is working well. Will she share with the House the numbers of sub-post offices that are temporarily closed or have had to move to an alternative, temporary service delivery system?

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I will certainly ensure that that information is sent to the hon. Gentleman in writing. As he, and I hope the House, will appreciate, these numbers change regularly by their very nature. To ensure accuracy, I will write to him and place a copy in the Library. What is important is that we have a commitment to maintain the network of post offices at 11,800. We are ensuring that we invest in the network, rather than embarking on closure programmes, which, as I know from my constituency and elsewhere, unfortunately had a negative impact on the post office network up and down the country.

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Having been involved in this issue for some time and having initially been told by Post Office representatives that the Horizon software system was perfect and could not be infiltrated, I am pleased that the Post Office is co-operating with the independent investigation, whose interim report indicates that the system is clearly not perfect. I urge my hon. Friend to ensure that Second Sight continues with its investigations. Does she accept that if the system was perfect, the modifications would not be needed and many—or some—of the historic convictions may well be unsafe?

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I certainly agree with my hon. Friend that no system is perfect; perhaps it is a bit of a hostage to fortune for anyone to proclaim a system as perfect. I would not agree with the second part of his question—that that therefore means that those convictions are obviously unsafe. The evidence is not there in today’s report, but if evidence emerges to suggest that, there are legal channels that can be followed to ensure that those issues are taken up.

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It seems to me that two groups of sub-postmasters fall outside the remit of today’s statement. The 47 past cases brought forward by the Justice for Subpostmasters Alliance will be taken forward by the independent working party, but what about somebody—I have one such case in my patch—who for very good reasons does not feature in those 47 cases? Can that be looked at again? Secondly, what about live cases? The statement refers to “disputed cases in future”, but I have two live cases in my constituency that do not fall within anything that has been described today.

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Clearly the procedures that the Post Office is putting in place to improve its training and support will, I hope, assist those cases that are live at the moment. On the hon. Gentleman’s first point, I can certainly give an assurance that if there are other cases that need to come forward, we would not want to deny those people the opportunity for that to happen.

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For the purposes of clarity, can the Minister confirm that all the issues we are talking about today are business, process and training-related, and not software-related? Is that what we are saying?

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Yes. The report mentions a couple of bugs in the Horizon system, which the Post Office proactively found and rectified, but basically what it has found to be lacking in Horizon is not the software, but the support and other issues around the software.

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The Minister has given some full answers to the questions posed, but she was unable to give a direct answer to one of the questions put by my hon. Friend the Member for Edinburgh South (Ian Murray) from the Front Bench. Let me give her another opportunity to confirm whether the Government and Post Office Ltd are considering changing the Locals programme from a voluntary to a compulsory basis. A simple yes or no answer would be adequate.

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I am always keen to be concise. I think I did answer the question earlier. I pointed out that the transformation programme is an important part of the Post Office’s future. We are making sure that we look at how it will be delivered with the new strategy for the Post Office that will published, and we are working closely with all the stakeholders to ensure we can do that. What is important is that whatever the future system looks like, there will be a choice for sub-postmasters, rather than forcing them down a particular route.

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Being a sub-postmaster is a very worthy profession, at the heart of many local communities and helping highly vulnerable people. With respect, I think the Minister dismisses too lightly the devastating impact that the Horizon system has had on a small number of people. The very least that Post Office Ltd should be doing is setting up a legal fund to review each case, because many will have pleaded guilty to false accounting, given the situation with the system and the legal advice they received at the time.

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I absolutely recognise that the impact on individuals has been intensive and considerable, and I think I have made that point to other Members who have raised this issue. Constituency MPs are absolutely representing their constituents in taking forward these proposals, but I think there is a distinction to be drawn before assuming that convictions are therefore unsafe. It is important that we draw that distinction and that we are careful about what we say, particularly when it comes to legal proceedings that have taken place outside this House—and rightly independently of this House—and where people have entered a particular plea.

If individuals are concerned about the quality of the legal advice they received at the time, there are routes for them to challenge that, such as the Legal Services Commission. If evidence comes to light that materially affects the conviction, that would also need to be looked at by Post Office Ltd as the prosecuting authority, as I have said. However, that is not where we are yet. We will of course remain open minded about that as the review process continues. So far, only four of the 47 cases have been looked at in detail. Therefore, we await to see what more will come out of the review.

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I thank the Minister for her statement. She will have heard a number of Members putting information before the House about the lives that have been ruined. Injustice has been done, and that needs to be corrected. Will she tell us the exact details of the training that Post Office Ltd intends to carry out?

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Training is carried out as a matter of course when new postmasters join the network. That can vary between a little over two weeks to three weeks. The Post Office is now ensuring that it visits new sub-postmasters after one month, and again after three months for the new local and main operating models, to deal with any teething issues or further questions that have arisen from their working the process for a few weeks.

Improvements to the helpline are also important, so that it does what it says on the tin and is actually helpful to people who call it. One thing that has improved the helpline is making it available for extended hours. As other Members have mentioned, sub-postmasters work very hard for long hours, so assistance needs to be available to them when they happen to be doing their reconciliation at the end of the day. That is not likely to be within office hours, so the service needs to be available after branches have closed. Those are just some of the improvements that the Post Office has been making.

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I thank the Minister for coming to the House and making today’s statement. She is an excellent Minister, but on this occasion she has got it wrong. Indeed, I think she got the mood of the House wrong. The House is concerned about a very small number of people who have had their lives ruined. It is no good saying, “Oh, they can appeal,” or that they can do this or that. We need proactive action from the Government. I suggest that she talk to the Attorney-General to see whether he can look into those cases and review them.

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I thank my hon. Friend for that question and for his kind words. I accept that this is a serious issue for the individuals involved, and it is absolutely natural that their constituency MPs are putting their cases. However, we have to be careful about going from the understandable sympathy for individuals in a difficult position to an assumption that all these issues are therefore unsafe and the result of problems in a way that is not borne out by the evidence in the report. That is why it is important to have a continuing independent review process in which people can have confidence, but it is also important to go by the evidence found in the report.

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For how long are my constituent and many others going to have this appalling cloud hanging over them? Has the Minister put a time limit on the next stage of the review?

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The review is independent of the Government and of the Post Office, so it would not be appropriate for me or for the Post Office to put an arbitrary time limit on it. That said, I absolutely understand the hon. Gentleman’s point that there is a need for speed and for the prompt resolution of these issues, but that has to be balanced against ensuring that they are looked at in a comprehensive way. The independent working group, which will include representation from the Justice for Subpostmasters Alliance, will help to ensure that that happens swiftly and without compromising the details that need to be gone into.

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rose—

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The hon. Member for Strangford (Jim Shannon) has bobbed up, as is his common practice, at the last minute. I should not want him to feel excluded.

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I have bobbed up at the right time.

I thank the Minister for her statement. The Horizon system has been blamed by some sub-postmasters who have been accused of false accounting. Does the Minister agree that red tape makes it difficult to run rural sub-post offices, especially those in isolated locations? What steps is she taking to restore confidence in the system, especially in relation to rural post offices?

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The hon. Gentleman is quite right to raise the issue of rural sub-postmasters. The communications systems depend on communications technology, which can be more of an issue in rural areas. Many post offices have a main phone line and also a back-up system, perhaps using a mobile telephone. Rural areas often have difficulties with broadband connectivity, which is why the Government are moving ahead with plans to ensure that rural broadband is much better spread out. The support for rural post offices is certainly significant, and we recognise that there are many branches that need subsidy from the Government to continue. That is why the Government are injecting £1.34 billion into the post office network. We also recognise that there will be a continuing need to ensure that rural post offices are supported in providing their excellent services. They might be the last remaining shop in a village, or the only post office serving a large, far-flung area.