Friday 12 June 2020

Post Office cans prosecutions of Subpostmasters - revealed in the Lords

The House of Lords
Following the commons debate on Wed 10 June during which MPs demanded a judge-led inquiry into the Post Office scandal, there was a follow-up discussion in a socially-distanced Lords on Thu 11 June. The minister representing the government was Martin Callanan.

I would recommend watching his responses here, or reading the transcript in Hansard or below.

As with the commons debate, there were many calls for a judge-led inquiry. There were another couple of other things of interest:

a) the Post Office has now completely stopped prosecuting anyone and "it has no plans to indulge in any further prosecutions."

It's hard to overstate just how vulnerable this leaves the Post Office to rampant fraud.

Last year the Post Office was told its interpretation of the Subpostmaster contract was wrong. Previously Subpostmasters had to make good any loss they couldn't prove wasn't their fault. Mr Justice Fraser decided this was unlawful and said it was the Post Office which had to prove the Postmaster was at fault before demanding money.

Now the Post Office has given up prosecuting people altogether, it makes it very easy for a corrupt Subpostmaster (or assistant) to take £10,000 out of their safe, put it under their mattress and then refuse to make good the subsequent discrepancy until the Post Office can prove it is their fault.

The Post Office security team might have to learn how to do proper investigations now, and then have their work checked by both the police and the CPS before anyone gets charged. Good.

b) Lord Arbuthnot raised the Ernst and Young management letter which we used in this week's Panorama to show the Post Office board was well aware of remote access possibilities to Horizon yet continued to deny them for a further six years.

As you'll see below, Lord Callanan says the government was told by Second Sight in 2013 that the Post Office could access branch accounts, but only in a way that would be visible to the Subpostmaster. Lord Callanan then goes on to say the government only found out this wasn't the case whilst reading witness statements in last year's litigation.

Yet a senior civil servant sits on the board of the Post Office. Either that civil servant colluded in the Post Office's cover up and didn't tell the government, was entirely oblivious to what was going on or knew exactly what was going on and did tell the government. Lord Callanan was only able to tell Lord Arbuthnot the situation "as far as I am aware".

No wonder Whitehall mandarins are keen to avoid a judge-led inquiry. Here's the full transcript:

Lord Stevenson of Balmacara (Lab)

My Lords, the whole country owes a considerable debt of gratitude to Kevan Jones MP, Andrew Bridgen MP and the noble Lord, Lord Arbuthnot, who have been campaigning tirelessly to expose this appalling scandal for over seven years. Too many sub-postmasters, often respected and hard-working pillars of their local community, have been imprisoned and many have been ruined financially, physically and mentally. By settling in mediation before the Horizon trial judgment was made public, the Post Office avoided public scrutiny and the facts of its transference of operational risk to sub-postmasters, persistent denials of fault and coercive behaviour were covered up. Thanks to recent TV and radio programmes we now have a lot of detail, but much more clearly needs to be uncovered.

The question that we have to answer first is whether the proposed independent review will do what is needed, as it is not a public inquiry under the Inquiries Act 2005. Can the Minister confirm that the review will have the same powers that a public inquiry would have had under statute to compel the disclosure of documentary evidence and to compel witnesses to come before it to give evidence in public?

Secondly, can the Minister confirm that the review, which presumably is being set up by Ministers, will have sufficient power to investigate the same Ministers who were responsible for the Post Office over the relevant period? Can he confirm that all the ​costs of the victims of this scandal who may be asked to testify and provide evidence, many of whom have yet to receive the full compensation that they seek, will be met?
Lord Callanan

The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)

My Lords, I join the noble Lord in paying tribute to all those Members from both Houses who have laboured for many years to draw attention to this unfolding scandal.

While the terms of reference for the review chime with that of an inquiry, we are undertaking a review in order to allow progress to be achieved in an accelerated timeframe. I can tell the noble Lord that the Post Office has committed to fully co-operating with the review, and Ministers will hold it to that commitment. The purpose of this non-statutory inquiry is to ensure that there is a public summary of the failings that occurred at the Post Office, drawing on the judgments from the Horizon case and listening to those who have been most affected, so that we make sure that those lessons have genuinely been learned and this cannot happen again. With regard to documentary evidence, as I said, the Post Office is expected to co-operate fully with the review.

Lord Fox (LD)

My Lords, I associate myself with the comments of the noble Lord, Lord Stevenson, regarding the campaigners in this case, because hundreds of people have had their lives ruined, and sometimes ended, by this terrible scandal. The Prime Minister in February committed to getting to the bottom of this, and we have to take that at face value, but in answer to the question of the noble Lord, Lord Stevenson, I do not think it is entirely clear what powers this independent inquiry will have. Yes, the Post Office has committed, but will this inquiry actually have legal powers to command people to give evidence and to sequester evidence? Unless it is able to do that, I do not think the Prime Minister is going to get his wish—we will not get to the bottom of this. I understand the time element, but can the Minister reassure the House that this will be an inquiry with teeth?

Lord Callanan

Well, we are committed to getting to the bottom of this scandal. I can tell noble Lords that, yes, the Post Office has committed to co-operate fully with the inquiry; Ministers will expect it to do that. We expect others involved to co-operate with the inquiry as well, and if we need to take further action to make sure that they co-operate, we will be prepared to look at that.
Baroness Neville-Rolfe
Baroness Neville-Rolfe (Con)

The Horizon case is an appalling matter. It was, as I have mentioned before, the most worrying issue that I had to deal with as a Minister, because it involved many respectable individuals with no record of criminal activity, many of whom we now find have had their lives ruined. Does my noble friend agree that the immediate need, from information already available, is to remove the Post Office’s unusual right to act as prosecutor itself, and to do this forthwith?

Lord Callanan

My noble friend makes a good point, but powers to bring a private prosecution are not specific to the Post Office. The Post Office has the same rights as any other person, whether an individual or a company, to bring a private prosecution. I can tell her that the Post Office is conducting no current private prosecutions and it has provided assurances to Ministers that it has no plans to indulge in any further prosecutions.

Lord Craig of Radley (CB)

My Lords, depending on court appeals, the Post Office may be liable to pay further compensation. Does it have insurance against computer system failure? Is it obligatory for businesses to take out insurance against any serious computer malfunction? If not, does this Horizon scandal suggest that it is required?

Lord Callanan

The Post Office operates as an independent business. As noble Lords would expect, it has all the necessary insurance in place for a company of this kind. It is not, however, obligatory for businesses, including the Post Office, to take out insurance against computer malfunctions or liabilities to third parties that could result from such malfunctions. It is therefore unlikely that any of the Post Office’s insurances would provide cover for any compensation payments the business may be required to partake in.
Lord Arbuthnot of Edrom
Lord Arbuthnot of Edrom (Con)

My Lords, when did the Government’s representative on the Post Office board first know that the Post Office had privileged access to sub-postmasters’ accounts, so that the Post Office or Fujitsu could alter those accounts at will without the sub-postmasters being aware of it? Was it from the Ernst & Young management letter to the board of 27 March 2011, or was it earlier than that? If my noble friend does not know, will he please write to me?

Lord Callanan

First, I pay tribute to the work my noble friend has done, both in the other place and in this House, to draw attention to this unfolding scandal. The issue of privileged access was discussed throughout the Horizon case and highlighted in the Horizon issues judgment. The Ernst & Young management letter he refers to was issued before Post Office Ltd was separated from Royal Mail Group. At the time, there was no government representative on the board. The first government representative was appointed to the board of the Post Office in 2012. The Government were aware from the information they received, such as that by the forensic accountants, Second Sight, in 2013, that branch records could be accessed remotely; however, we were then advised that any transactions entered remotely would be visible to sub-postmasters in branch. As far as I am aware, the Government were only made aware that this was incorrect early in 2019, via witness statements that were used by Fujitsu in the court case.

Lord Browne of Ladyton (Lab)
My Lords, it is a privilege to follow the noble Lord, Lord Arbuthnot, on this issue, for all the reasons that have been mentioned. He deserves significant recognition for his effective leadership on this issue. While I support the call for an ​inquiry, already every parliamentarian, including every Minister, believes that those damaged by this scandal deserve to be exonerated and properly compensated, so how much additional evidence do the Government need before that can be achieved? For more than a decade, while covering up the truth, the Post Office spent in excess of £100 million maintaining the convictions and the impoverishment of hundreds of innocent sub-postmasters. Not one director or senior executive has been held to account. What do the Government, who own the Post Office, plan to do about this shocking failure of corporate governance?

Lord Callanan

The Horizon IT system was put in place in 1999, with the first issues being raised by sub-postmasters in the early 2000s. Mr Justice Fraser has considered what happened over this period and has set out his findings in considerable detail in the court case. Of course, the senior directors responsible at the time of the prosecutions against sub-postmasters are no longer at the Post Office. Any further proceedings against such individuals is a matter for the Crown Prosecution Service, and the courts and the justice system.

Lord Mann (Non-Afl)

Being experienced, knowledgeable and of impeccable character, and having no vested interest, were seen to be the appropriate qualities required for the person to chair this inquiry. Can the Minister think of anyone better suited than the former postman Alan Johnson?

Lord Callanan

I thank the noble Lord for his question. We are actively considering who should chair the inquiry at the moment, and as soon as I have further information, I will refer it to the noble Lord.

Read my write up of the commons debate here.


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