Will Post Office need state bail-out if it loses Horizon IT trial?

By Tony Collins

The Government is now aware, if it wasn’t before, that Horizon IT trials could end up costing the publicly-owned Post Office hundreds of millions of pounds.

Is continuing the case a gamble with public money?

Tom Cooper, the Government’s shareholder on Post Office board

Journalist Nick Wallis has questioned a minister and a senior official on the possible cost implications if the Post Office loses a High Court case over the Horizon IT system.

His questions to the Post Office minister Kelly Tolhurst and civil servant Tom Cooper, who is the government’s representative on the Post Office board, could help to ensure that the Government is aware that the Horizon IT trial may end up costing the Post Office hundreds of millions of pounds if it loses.

This awareness could raise questions among ministers and civil servants about whether the Post Office will face financial problems or even insolvency if it loses the Horizon trials.

The litigation began in 2017 and the Post Office has lost all of the several rulings so far. Judgements have been strongly critical of the Post Office, its approach to the litigation and its behaviour.

Hundreds of millions of pounds?

Tom Cooper joined the Post Office’s board as non-executive director last year. On the board he represents, on behalf of the Department for Business, Energy and Industrial Strategy,  the Government’s 100% shareholding in the Post Office.

He is a director of UK Government Investments, which is wholly-owned by HM Treasury and represents government interests on the boards of arm’s length bodies including the Post Office.

Wallis asked Cooper about the government’s strategy if the claimants win the case. Claimants are about 550 former sub-postmasters who are suing the Post Office – potentially for hundreds of millions of pounds – because they say they were unjustly forced to make good non-genuine losses shown on the Horizon system.

The Post Office is strongly defending the case, arguing that Horizon is robust and that the sub-postmasters were to blame for actual losses.

In his reply to Wallis, Cooper explained that claimants have not declared the size of the damages they seek. Wallis cited Freeths solicitors, which represents the former sub-postmasters, as saying the litigation could cost the Post Office hundreds of millions of pounds.

Cooper replied that no sums of that nature had been mentioned in court. At this point, one of Cooper’s colleagues politely terminated the interview.

Bail-out?

Wallis also questioned Post Office minister Kelly Tolhurst on the possible cost implications if the Post Office loses the case. She politely declined to answer directly saying, “I can’t really go into the litigation stuff… I’m not being evasive. I can’t speak to you about it.”

Wallis asked whether, if the Post Office loses, the government could end up bailing out the Post Office. Tolhurst said she wouldn’t “get into theoretical-based outcomes of the litigation.”

But Tolhurst disclosed that there were conversations going on between the Post Office, civil servants and the ministry [Department for Business, Energy and Industrial Strategy which is the Post Office’s parent ministry].

HM Treasury’s UK Government Investments is responsible for ensuring the Post Office has enough investment and subsidy funding to ensue it is commercially sustainable in the longer term, whilst meeting its social obligations, particularly around minimum network coverages requirements.

UK Government Investments also advises ministers on Post Office commercial and policy issues.

Comment

Wallis’s interviews with Cooper and Tolhurst are important developments: they mean that officials and ministers cannot credibly deny in future that, if they end up bailing out the Post Office, it has come as a shock.

In Wallis’ questions, he made it clear that solicitors Freeths had said the litigation could end up costing the Post Office hundreds of millions of pounds.

Cooper tacitly acknowledged in his reply that he had heard what Wallis said. Indeed, Cooper’s impressive financial background indicates that he will have a good understanding of the possible cost implications for the Post Office if it loses the case.

Cooper was global co-chairman of mergers and acquisitions at Deutsche Bank. He was at UBS Investment Bank for 21 years where his various roles included head of European merger and acquisitions.

Of course, ministers and officials could argue internally – at the moment – that taxpayers are not funding the litigation.

Indeed, Whitehall officials have obtained a written assurance from the Post Office that it will fund the Horizon litigation from its own money, not public money that is allocated to modernisation and new investment in the Post Office’s network.

But it’s a different story if the Post Office runs into financial trouble.

The Government would have no choice but to use public money for a bail out. It could not allow the Post Office to go bust.

And thanks to Wallis’ questions yesterday,  ministers could not argue they were unaware of the full possible cost implications of losing the case.

Indeed, it is incumbent on civil servants now to make sure ministers are aware of what could happen if the Post Office loses the case and cannot afford to pay damages and costs from its own money.

When fully aware of the risks – the gamble with public money – will ministers and officials allow the Post Office to continue spending large sums on the High Court case – or will they urge it to settle now before many more millions of pounds are spent on legal costs?

The judge in the trials, Mr Justice Fraser, has said the case will continue for “years”. Ministers and officials could therefore take the attitude that they may be long gone by the end of the trials and therefore costs are a matter for their successors.

Or they could do the right thing and urge the Post Office to limit its potential liabilities by settling now.

Wallis has a full account of his conversations with Cooper and Tolhurst on his postofficetrial blog.

Post Office Ltd and the money tree – Tim McCormack’s blog

Post Office ordered to pay £5m towards claimants’ costs – part of Computer Weekly’s coverage of Horizon trials

2 responses to “Will Post Office need state bail-out if it loses Horizon IT trial?

  1. Thank you so much for posting this report.

    I have been following Nick Wallis’s excellent reporting and am so grateful he is there to shine a bright light in a murky area.

    I am hoping that Tolhurst and Cooper will influence/pressurise/persuade the PO to stop digging itself further into a hole and settle these matters as quickly as possible. Of course, they may not do so primarily for the sake of the innocent but ruined sub-postmasters, but for political and financial reasons.

    Thanks again, Tony.

    Like

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