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Post Office Historical Shortfall Scheme

Volume 705: debated on Tuesday 14 December 2021

Before we begin, I remind Members that they are expected to wear face coverings when they are not speaking in the debate, in line with current Government guidance and that of the House of Commons Commission. I remind Members that they are asked by the House to have a covid lateral flow test twice a week if coming on to the parliamentary estate. This can be done either at the testing centre in the House or at home. Please also give each other and members of staff space when seated, and when entering and leaving the room.

I beg to move,

That this House has considered the Post Office Historical Shortfall Scheme.

I am delighted to have the opportunity to serve under you in the Chair, Dame Angela. I welcome the Under-Secretary of State for Business, Energy and Industrial Strategy, the hon. Member for Mid Norfolk (George Freeman) to his place as a substitute for the Under-Secretary of State for Business, Energy and Industrial Strategy, the hon. Member for Sutton and Cheam (Paul Scully), who has executive departmental responsibility for this issue.

I have a number of specific concerns about the Post Office’s administration of the historical shortfall scheme, which I will come to in due course, but I want to say something to the Minister and his colleagues in Government. If he takes nothing else away from the debate, I want him to take this away: from assisting constituents in relation to the HSS, it has become apparent to me and, I have no doubt, to others in the House that the culture in the Post Office still leaves a great deal to be desired. It is probably not unique for the Post Office to have a poor culture, but I say that because it has been accepted by Ministers. In fact, it is now a universally accepted truth that what happened in relation to the Horizon scandal was allowed to happen, and happened for as long as it did, because of the culture in the Post Office.

My basic concern is that if the culture is still not right, such a scandal could happen again. This is an opportunity for Ministers. We do not expect them to be responsible for the day-to-day management of the scheme or anything else in the Post Office—there are plenty of people who are rather handsomely paid to do that—but Ministers can and should insist on seeing that there has been a demonstrable change of culture.

I thank the right hon. Gentleman for securing the debate. What he says is absolutely right, and the scheme almost entirely mirrors what we did with Lloyds bank. We asked the bank to mark its own homework in opening a compensation scheme, which proved to be a complete travesty. It has to be completely redone, at a cost of hundreds of millions of pounds to Lloyds, and it has obviously caused massive distress to the victims. Does the right hon. Gentleman agree that the HSS must be done impartially?

Yes, of course, although there would not be a cost to the Post Office, because there is only one shareholder—the Secretary of State—so it would ultimately come to the taxpayer. I will touch on that in a few minutes.

I thank the right hon. Gentleman for giving way. It was not just the fact that the system let people down. It was the mental and physical health issues that people suffered as a result. Some of them ended their lives early, experienced illness or depression, or lost all they had. The implications of all this go far beyond the system.

Absolutely. Indeed, as I will come to in a few minutes, my constituent Elena Kimmett, who was for many years the sub-postmistress in Stromness, illustrates truth better than anyone else I can think of.

I thought the question about culture was perhaps just me being a grumpy guy after a bad meeting, as I can occasionally be, but I had a recent lengthy discussion with the National Federation of SubPostmasters. In correspondence to me, the federation put it in the following terms:

“The culture of the Post Office of today and tomorrow must be significantly different to that of the past. In a recent survey of Postmasters conducted by the NFSP, only 29% believe they are being listened to by Post Office today. In terms of resetting the relationship between Post Office and the network, Postmasters gave Post Office a score of 5 out of 10 for their progress so far.”

The executive director with responsibility for the historical shortfall scheme, Declan Salter, was left in a position in July this year where the Post Office board did not renew his contract, and it has still not been renewed. I would like to hear about that from the Minister, either today or in due course in correspondence. It has left the administration of the scheme rudderless. We need to know the intentions of the board. If it is not going to renew the contract of the person it put in charge of the scheme, it should at least come forward and tell us what it intends to do instead.

Throughout this whole sorry affair, the strategy of the Post Office has been to use public money to outgun the sub-postmasters. The settlement with the sub-postmasters was forced on them by the Post Office. That is in the context of the Post Office knowing, by 2013 at the latest, that many of the convictions were unsafe.

I thank the right hon. Gentleman for securing this debate. Does he agree that it is actually worse than that, because the Post Office spent £100 million to defend the indefensible? He said earlier that the Government are the only shareholder. Does that not give rise to the question of what the Government, as shareholder, and Ministers were doing to actually stop the Post Office frittering away £100 million of public money?

It does. That has to be examined and established in the fullness of time. That is probably more than we will achieve today. It is still one of the outstanding questions in relation to this issue.

The question of public money being used to defend the indefensible, as the right hon. Gentleman raises, goes to the heart of the way in which the historical shortfall scheme is being administered. That hit me like a bolt of lightning on 23 November, when I was part of the good faith meeting—that is a term of art, not a description of what we actually went through—with representatives from the legal firm acting for the Post Office, Herbert Smith Freehills. I do not know what Herbert Smith Freehills charged the Post Office for that one hour, but the poor lawyer it put forward certainly earned her money in a way she had perhaps not anticipated at the beginning of the meeting. I pick my words with some care, because having checked the Herbert Smith Freehills website earlier today, I see that I was at university with its chief executive. However, I am left feeling that, if the Post Office just paid everybody what they asked for, it would probably end up still better off financially than it has by pursuing it in this way.

Nobody on that call was able to explain the position of the Post Office. We were told right at the start that there would be no recording of this meeting; in a good faith meeting, that seems a quite remarkable way of demonstrating good faith. I know myself, as a former legal practitioner—albeit more than 20 years ago; I would probably know just enough to be dangerous these days—that there are two ways in which lawyers can be used on these occasions. They can be used as an adviser, and indeed as a conduit for good information, or they can be used to insulate the client from the anger of the claimant. It was pretty clear from the Post Office putting nobody up for that so-called good faith meeting that it was the latter, rather than the former.

The meeting involved me and Anne Robertson, principal of JEP Robertson & Son solicitors in Orkney. Incidentally, as someone instructed to administer an estate, she has gone above and beyond anything that anybody could reasonably expect of a solicitor in that situation. Her client is in fact now the estate of the late Elena Kimmett, the postmistress in Stromness from 31 July 1989 until she resigned in October 2008, essentially because she could take no more. I first had contact with Elena in my early days as a Member of Parliament. I started talking about post offices and she got in touch and said, “Well, if you’re interested, come in and see me and I’ll tell you what it’s really like.” And she did.

We all talk about the role of sub-postmasters and sub-postmistresses. Elena Kimmett was somebody who instinctively took enormous pride in the fact that she was part of the Post Office, which allowed her to help so many people, including older people, within the community. She was caught in the Horizon scandal and was absolutely devastated by the apparent disappearance of cash within the new computerised system. She had a long sequence of relatively small losses, which gradually increased, and caused her enormous anxiety.

I have spoken to Elena’s sons about it. They tell me she balanced her books every Wednesday; they well remember the gradual change in her. She went from being a happy, competent, outgoing mother to somebody who was withdrawn, quiet and reserved. On Wednesday night, the balancing night for the post office, instead of coming home for the usual family meal, she started not to want to take part and would instead just eat a few biscuits and have a glass of wine. That is the change that the situation she was going through wrought in her. She was making up the losses from the Horizon system from her own pocket. She asked the Post Office on many occasions for help, but she was always told that the system was infallible and that if money was going missing and it was not her, then it must be her staff. Her staff had all worked for her for long periods of time, and included her mother and husband.

In May 2002, matters came to a head when there was a shortfall of £3,000. She contacted the Post Office again and was told, again, that the system was infallible. She inquired whether other offices were experiencing similar difficulties. She was told no, there were no others and that it was her problem and her responsibility. That was a significant amount of money for Elena and her husband to take from their own savings to put into the business.

Elena eventually gave up the post office in 2008. One year ago today, on 13 December 2020, just six months after she had made an application to the historical shortfall scheme, she died. Her two sons and her former employees have no doubt that Elena’s life was badly affected by the actions of the Post Office—she was devastated, and felt she could not continue in the job that she loved.

That brings me to my questions about the administration of the scheme. My concerns begin with the composition of what is called an application form, but which should properly be regarded as a claim form. The wording of the questions is clearly slanted towards fault and questions actions by employees that are completely unrelated to the employment. The wording actively discourages and gives no space or invitation to specify what the experience of the applicants has been or the effect that it had on them. The application form did not specify that it would be the only opportunity that Elena would be given to state her case. No advice was given that she should seek legal advice before completing and submitting what was a legal claim.

Can we hear from the Minister or the Post Office on who drafted the form? There was no warning whatsoever to applicants that any offer would be considered solely upon and restricted to the amount stated on the form. The form seems to be designed to steer applicants away from any thought of compensation, even to the point of the space given for the response.

The question then arises of consequential loss. There is nothing in the form that would allow for the sort of compensation that Elena should, in law, have been entitled to. The application form asks postmasters to identify any alleged shortfall losses, as well as any other losses that are caused by the Horizon shortfall—namely, consequential loss. That appears to limit any payment to the claimant to proven consequential loss as defined by the Post Office. There is no reference to compensation for anguish, upset or distress caused by its action. There is no reference in the form to any payment. In correspondence to me on 22 October 2021, the Post Office was sympathetic and apologised, but it could not extend the offer on the basis of the information available “at this stage”. Those are the significant words. Having subsequently given it information about Elena Kimmett’s loss, I would have expected it to entertain that, but there appears to be no opportunity for it to do so.

There is a lot more that I could say, but I am aware that others want to make brief interventions and I want to make time available for the Minister to give the fullest possible answers. I will finish with this one final nugget from that good faith meeting on 23 November. When we indicated at the end that we were not content with what we had been told and would not accept the offer, the representative of the solicitors acting for the Post Office turned round and said, “Be aware that if you go to the next stage, it is possible that the sum offered could be reduced or withdrawn completely.” If ever there was a point when we understood the lack of respect that still pertains between the Post Office, its representatives and the sub-postmasters whom we represent, that was it. That was the disgrace. That is why it has to change.

I thank the right hon. Member for Orkney and Shetland (Mr Carmichael) for securing this debate today. He talks about culture. I have been involved in the issue for more than 10 years. It was first brought to my notice by Tom Brown, a constituent, who came to me with a similar case. A highly respected individual in the community was suddenly accused by the Post Office of stealing £86,000 because of the Horizon system. He spent two years of hell, and when he went to go before a judge at Newcastle Crown court, he arrived at the door and was told by the Post Office that it was not pursuing the case. In that time, he would have gone bankrupt and paid £86,000 back to the Post Office. In the 10 years in which I have been dealing with his case and many other cases, the culture described by the right hon. Gentleman is spot on. It is arrogant and dismissive. There is a cover-up.

We are now into a scheme that needs to be abolished. It is designed to put the onus back on the individual postmaster and postmistress and to reduce the liability of the Post Office. The scheme was open for only three months in 2020, and if someone did not get their claim in by then, they could not get a claim at all, so that was designed to reduce the numbers and reduce liability. The Post Office has no idea. In its accounts, it budgeted for £35 million of compensation. The figure is now estimated to be more than £300 million.

The scheme also excludes the 555 people, including my constituent, Tom Brown, who took action against the Post Office. We got to the truth only when the case went to court. The Government used £100 million of public money to try to stop the case going forward. They had to settle with the claimants because they ran out of money. There was a tsunami of money from the Post Office. I welcome today’s written ministerial statement about those who were convicted and who can be included in the compensation scheme. However, the scheme needs to be abolished. It should be put to one side. We need a comprehensive scheme outside the Post Office. The Government will have to put in place a scheme for everybody, including the people they have already put forward and including the 555 who took the class action. Without their taking that action, we would not have discovered the lies, deceit and cover-up by the Post Office. I am sorry, I do not accept the Government washing their hands of this and saying that the Post Office is at arm’s length from the Government. They had an active shareholder on that board who did nothing to stop the scandal. I call for the scheme to be scrapped and a comprehensive scheme to be put in place that covers everyone to be compensated. Yes, it might cost hundreds of millions of pounds, but that is because it was not the postmistresses and postmasters’ fault. It was the fault of the Government and the Post Office.

I am grateful, Dame Angela, for the chance to serve under your chairmanship. I congratulate hon. Members for their contributions today and the right hon. Member for Orkney and Shetland (Mr Carmichael) for raising the matter. I am here with apologies from the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Sutton and Cheam (Paul Scully), who has been called into the House on primary legislation elsewhere. However, I relish the chance to respond on behalf of the Department for Business, Energy and Industrial Strategy, having experienced in my constituency the appalling injustice that the sub-postmasters suffered.

In one village in my constituency, Gressenhall, I saw the misery, the family disruption and the hell, as referred to by hon. Members, that the sub-postmasters were put through in a frankly disgraceful episode of institutional contempt for the little guy—if I can put it like that—at the bottom of the system. I am pleased today that, as hon. Members have remarked, we are announcing through a written ministerial statement—there will be an oral statement, subject to the Speaker’s permission, tomorrow—the Government’s commitment to fully fund the historical shortfall scheme and the losses for those who have not yet been compensated.

The Minister makes a fair point, but so does the right hon. Member for North Durham (Mr Jones). The scheme excludes those who took part in the group litigation. That is entirely unfair and unjust. Lee Castleton, who is not one of my constituents but somebody I have tried to help through a third party, got £28,000 in compensation but he lost more than £400,000. That is simply unfair and that route for compensation cannot persist.

I thank my hon. Friend for that intervention. My hon. Friend the Member for Sutton and Cheam is the lead Minister on this matter and I will raise that with him. For the record, I want to make clear what has happened. Those who settled have a settlement. Today, we are tackling the issue of those who were not subject to a settlement. Nevertheless, my hon. Friend makes an important point. This must be fair and it must be seen to be fair.

I want to begin by echoing the Government’s support for the point about culture. It is vital that the painful and difficult lessons from this disgraceful saga are properly learned. Let the message go forth from this Dispatch Box that we expect the Post Office to tackle that culture change properly. I am delighted that there is a culture change programme and two new non-executive directors. However, this is not a tick-box exercise; it is a serious commitment that an organisation wholly owned by the taxpayer delivers properly and learns the lessons from this disgraceful saga. I dealt with the issue when I was a Minister in the Department in the coalition Government in 2015. I saw what seemed to me to be institutional obfuscation and institutional defence of injustice. All those who conspired in that should hang their heads in shame.

The right hon. Member for Orkney and Shetland mentions a law firm. I signal that some lawyers have stepped up to the mark on this and in particular Patrick Green QC at Henderson Chambers, who worked pro bono to help many of the sub-postmasters; Neil Hudgell at Hudgell Solicitors; and Freeths, who did tremendous work speaking up for those who did not have a voice. It is only because of the bravery of those sub-postmasters and their lawyers that we are where we are today.

It is good news that we have announced that funding, but I do not want to focus on that today. The Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Sutton and Cheam, has campaigned hard on it and he will speak to the House tomorrow. However, I want to set the record straight on where we are today for those watching or reading this debate. As everyone in the Chamber will be aware, the Post Office introduced the Horizon scheme in early 2000 and subsequently recorded shortfalls in cash at post office branches, which the Post Office then blamed on sub-postmasters—completely unfairly, it subsequently turned out. That resulted in horrific suffering, not just in losses for the small businesses being run by the sub-postmasters, but family losses, divorces, depression, mental health problems and anxiety, not to mention the loss of a facility in many rural areas that is crucial to the community. Many people were sent to prison. That is an absolute disgrace. It is important that the lessons are learned properly and that the culture that conspired to allow that to happen is seriously changed.

In 2017, a group litigation order was brought against the Post Office by the 555 postmasters. The postmasters won two landmark trials in 2019 and reached a settlement with the Post Office for £57.75 million. Those court cases and subsequent cases in the Court of Appeal have demonstrated just how wrong the Post Office was to behave in the way it did. It has apologised, and is now working to overhaul its culture to address the findings of Mr Justice Fraser.

The postmasters had to settle because they ran out of money. My constituent Tom Brown got £20,000 in compensation; he paid £86,000 back to the Post Office. Can the Minister tell me where that £86,000 is, and why Tom is not entitled to get it back?

The right hon. Member makes a really important point. I will raise that specifically with the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Sutton and Cheam, and perhaps he can address it in his statement tomorrow. On behalf of the Government, I express our deep sympathies to those sub-postmasters mentioned today—to Tom and to those in Scotland, York and around the country. This is an injustice that must urgently be tackled.

The best way to demonstrate a change of culture and good faith would be for the Post Office to start the whole process again from the beginning, instead of insisting that people who have made applications under a flawed process will have to see them through to the end and get less than they are entitled to as a consequence.

I understand the point that the right hon. Member is making. Let me include, for the record, the history of how we got to this situation. As part of the 2019 settlement, the Post Office committed to putting in place a scheme for those postmasters who were not part of that settlement and did not have criminal convictions related to the Horizon scheme. The historical shortfall scheme was set up to meet that commitment, and it is an important step. It opened in May 2020 and closed to applications later that year.

To be fair, the Post Office made significant efforts—quite rightly—to reach out to all postmasters, sending 7,000 individual letters to current postmasters and a further 20,000 to former postmasters. It is fair to say that the Post Office was quite surprised—I do not think that any of us in this room will have been—by the response. The scheme received over 2,300 eligible applications. I hear the points that the right hon. Member for Orkney and Shetland made about the nature of that form. Because I am not the lead Minister on this, I have not looked at it, but he makes an important point, which I will raise with the Minister. The form needs to make clear to people what they are entitled to and needs not to discourage them from understanding their rights, the enforcement of which is long overdue.

The response to the HSS meant that the cost of the scheme went beyond what the Post Office could afford, and it turned to the Government as its 100% shareholder. The Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Sutton and Cheam, has set out that the Government will provide sufficient financial support to the Post Office to ensure that the historical shortfall scheme can proceed properly and that those people are fully compensated. I understand that that raises a question about the fairness for those who settled out of court, which is a point that the Minister will no doubt want to address. The Post Office is contributing from its own funds.

If the estimate is £300 million and there are 2,300 applications, that is £130,000 each. Lee Castleton got £28,000. The constituent of the right hon. Member for North Durham (Mr Jones) got £20,000. That just cannot be right.

My hon. Friend makes a powerful point, which I am sure that the Minister will want to address. I want to mention the question of speed. When the Government step up and say, “We will fully fund this,” it is incumbent on the Post Office to pull its finger out and get on with processing claims more quickly. I understand that the intention is that the vast majority of applications will be claimed within months, by the spring, and all of them will be claimed within the year —and that is long overdue.

I will close by picking up on a couple of the points that hon. Members have made. I will ask the Minister to write to the right hon. Member for Orkney and Shetland about the board. The hon. Member for Strangford (Jim Shannon) made the same points about his constituents. With the right hon. Member for North Durham (Mr Jones), I share the Government’s apologies to Tom Brown and others in his constituency, and I take the point about lessons for Ministers and for the Department for Business, Energy and Industrial Strategy. My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) made a very good point; we cannot have unaccountable quangos marking their own homework, and there are really important lessons about accountability.

It is good news that the Government are making a commitment to fully fund the HSS, but there are other issues that still need to be sorted so that this never happens again and that the injustices are properly resolved.

Question put and agreed to.

Sitting suspended.