Post Office reveals estimates for its legal costs over IT scandal

By Tony Collins

The Post Office’s maximum legal costs over the Horizon IT scandal are estimated to be about £177m – 16 times the compensation received by 500 victims whose High Court case exposed the UK’s widest miscarriage of justice.

A breakdown of the Post Office’s estimated costs is set out in a  letter from the postal affairs minister Paul Scully to Labour MP Darren Jones who chairs the House of Commons Business, Energy and Industrial Strategy Committee. Scully’s letter follows a hearing of the committee in January 2022 on compensation related to the scandal. 

The Post Office, which is 100% owned by the government, used its own prosecutions unit to accuse about 700 sub-postmasters and sub-postmistresses of fraud, theft or false accounting on the basis of financial discrepancies – shortfalls – shown on the organisation’s Horizon accounts system. 

Dozens went to jail or were made bankrupt on the basis of unreliable data from the faulty Horizon system which was supplied by Fujitsu. The Post Office and Fujitsu hid Horizon’s faults from the courts.

In 2019, former sub-postmaster Alan Bates and his legal team won a group litigation against the Post Office which exposed Horizon’s faults and institutional mendacity on a grand scale.

Following the litigation, the Post Office set up various schemes to compensate victims of the scandal but Bates’ group is excluded from claiming under any of them.

To compound the group’s sense of injustice, Scully, Boris Johnson and other ministers have left Bates’ members to pay a £46m legal tab for taking on a state-owned institution in the High Court.  This means that the group’s members have received a total of about £11m in compensation – an average of only £20,000 each – from a £57.75m settlement. Many of the group’s members lost hundreds of thousands of pounds. But Scully’s ministerial speeches – which were drafted by officials at the Department for Business, Energy  and Industrial Strategy – say the High Court settlement was “full and final”.

Now it has emerged that the Department for BEIS expects maximum legal and related costs of about £177m for dealing with the Horizon IT scandal. This is 16 times the amount about 500 members of the Bates group have received in compensation.  

Below is a breakdown of costs and compensation as set out to the BEIS committee. Scully’s letter emphasises that some of the figures are the maximum possible cost, rather than the expected amounts. Scully also suggests there may be further costs in the coming year that have not yet been finalised.

The figures cover only the period after 2016 when the Bates group litigation began. The costs before the group litigation, including the Post Office’s Complaint Review and Mediation Scheme, are not included in the figures.

These are the figures from 2016 to 27 January 2022:

Costs

Horizon-related costs made within BEIS budgets and costs. The sums include maximum anticipated legal costs.

-£43m related to the Bates v Post Office High Court hearing which included the Post Office’s legal and professional consultancy fees connected with the litigation and other costs indirectly related to the litigation.

– £69m legal and administrative costs of the Historical Shortfall Scheme. It includes design, set-up and running costs of the scheme and is an estimate upon closure of the scheme once all payments have been made

– £16m current forecast of legal and administrative costs of paying compensation following overturned convictions (about £6m has been paid in such compensation to date).  

– £30m of “other Post Office costs” up to the end of 2021. This comprises legal fees relating to legal obligations, response and support activities in relation to postmasters who wish to appeal their Horizon-related convictions. It includes costs associated with identifying and contacting potential future appellants, discovery and disclosure of more than 4.5 million documents and preparation and representation at hearings before the Court.

– £19m of “other legal, project management, governance, operational reviews, improvement implementation and contracts, regarding Horizon-related issues and requirements, to the end of FY2021/22”.

Total £177m

*Additional cost estimates for the rest of 2021/22 and 2022/23 are not yet finalised. Scully says these figures will be provided in a future update to the BEIS Select Committee on Horizon-related costs.

Compensation

– £57.75m settlement of the 2016-2019 Bates v Post Office High Court case, of which about £46m went in Bates’ costs, leaving the “successful” litigants with £11m, an average of £20,000 each. Many lost hundreds of thousands of pounds in the scandal, including Lee Castleton who lost £348, 000 and went bankrupt.  

– £153m for the Historical Shortfall Scheme (likely estimated overall amount). There are 2,361 eligible claimants, about 900 of whom have received offers to date. How many have refused offers is unclear but the Post Office says the “vast majority” of the 900 have accepted an offer and have been paid.  

– £780m is the maximum potential spend on compensating those whose convictions have been overturned. It covers an interim payment of up to £100,000, which is paid within 28 days of an overturned Horizon-related conviction, and the final settlement. Actual costs will be determined by the total number of overturned convictions and the individual settlements reached. The £780m estimate comprises £94.4m for interim payments and £685.6m for final settlements.

Total: £990.75m

Government costs to date of the Horizon IT public inquiry

– £1.6m costs of running the inquiry in the years 2020/21 and 2021/22. The inquiry is not expected to finish until the summer of 2023 or possibly later.  

Comment

In the current era of Covid-related state spending that runs into hundreds of billions, £177m for the legal and related costs (excluding compensation) of dealing with Horizon IT scandal seems a small amount – until it is set against the paltry total of £11m paid to the Bates 555 group.

The business minister Scully and the prime minister Johnson express much sympathy for the ordeals suffered by the Bates 555. But ministerial sympathy costs nothing; it doesn’t return the 555 to the financial position they would be in now had the state not tried to ruin many of them.  

Nearly 120 MPs have signed an Early Day Motion calling for the Bates 555 litigants to “receive compensation that is commensurate with the suffering they have faced” and strongly urges the Government to “put in place an external compensation scheme that is outside the scope of the Post Office and provide this group with the redress they not only deserve but are entitled”.

In addition, the BEIS select committee has produced an excellent report this month that demands fair compensation for the Bates group.

But perhaps if Bates had access to the Post Office’s pot of money for lawyers, his campaign for fair compensation would not have to rely on a Parliamentary campaign for justice, a complaint to the Parliamentary Ombudsman and pressure on the government through media coverage.

Since the early 2000s, Bates’ campaign for justice has been a David and Goliath affair. Without access to the seemingly unlimited funds the Post Office enjoys, it still is.     

**

The British people are waking up to a scandal that happened under their noses – Computer Weekly

33 former staff died before getting justice in Post Office IT scandal – Daily Mail’s front page – 14 Feb 2022

The Great Post Office Scandal – by Nick Wallis

43 years of state IT disasters – and they’re still happening– Part 1

43 years of state IT disasters – and they’re still happening Part 2

43 years of IT disasters – and they’re still happening – Part 3