Category Archives: Fujitsu

Southwest One – a positive postscript

By Tony Collins

somerset county council2IBM-led Southwest One has had a mostly bad press since it was set up in 2007. But the story has a positive postscript.

Officials at Somerset County Council now understand what has long been obvious to ICT professionals: that the bulk of an organisation’s savings come from changing the way people work – and less from the ICT itself.

Now that Somerset County Council has the job of running its own IT again – its IT-based relationship with Southwest One ended prematurely in December 2016 – the council’s officials have realised that technology is not an end in itself but an “enabler” of headcount reductions and improvements in productivity.

A 2017 paper by the county council’s “Programme Management Office”  says the council has begun a “technology and people programme” to “contribute to savings via headcount reduction by improving organisational productivity and process efficiency using technology as the key enabler”.

Outsourcing IT a “bad mistake” 

It was in 2007 that Somerset County Council and IBM launched a joint venture, Southwest One. The new company took over the IT staff and some services from the council.

In the nine years since then the council has concluded that outsourcing ICT – thereby separating it from the council’s general operations – was not a good idea.

The same message – that IT is too integral and important to an organisation  to be outsourced – has also reached Whitehall’s biggest department, the Department for Work and Pensions.

Yesterday (8 February 2017) Lord Freud,  who was the Conservative minister in charge of Universal Credit at the Department for Work and Pensions, told MPs that outsourcing IT across government had proved to be a “bad idea”.  He said,

“What I didn’t know, and I don’t think anyone knew, was how bad a mistake it had been for all of government to have sent out their IT…

“You went to these big firms to build your IT. I think that was a most fundamental mistake, right across government  and probably across government in the western world …

” We talk about IT as something separate but it isn’t. It is part of your operating system. It’s a tool within a much better system. If you get rid of it, and lose control of it, you don’t know how to build these systems.

” So we had an IT department but it was actually an IT commissioning department. It didn’t know how to do the IT.

“What we actually discovered through the (Universal Credit) process was that you had to bring the IT back on board. The department has been rebuilding itself in order to do that. That is a massive job.”

Task facing Somerset officials

Somerset County Council says in its paper that the council now suffers from what it describes as:

  • Duplicated effort
  • Inefficient business processes
  • A reliance on traditional ways of working (paper-based and meeting-focused).
  • Technology that is not sufficient to meet business needs
  • Inadequate data extraction that does not support evidence based decision making.
  • “Significant under-investment in IT”.

To help tackle these problems the council says it needs a shift in culture. This would enable the workforce to change the way it works.  

From January 2017 to 2021, the council plans “organisation and people-led transformational change focused on opportunities arising from targeted systems review outcomes”.

The council’s officers hope this will lead to

  • Less unproductive time in travelling and  attending some statutory duties such as court proceedings.
  • Fewer meetings.
  • Reduced management time because of fewer people to manage e.g. supervision, appraisal, performance and sickness.
  • Reduced infrastructure spend because fewer people will mean cuts in building and office costs, and IT equipment. Also less training would be required.
  • Reduction in business support process and roles.
  • Reduction in hard copy file storage and retention.

 The council has discovered that it could, for instance, with changes in working practices supported by the right technology,  conduct the same number of social services assessments with fewer front- line social workers or increase the level of assessments with the same number of staff.

Southwest One continues to provide outsourced services to Avon and Somerset Police. The contract expires next year.

Comment

Somerset County Council is taking a bold, almost private sector approach to IT.

Its paper on “technology and people” says in essence that the council cannot  save much money by IT change alone.

Genuine savings are to be found in changing ways of working and thus reducing headcount. This will require very close working – and agreement – between IT and the business end-users within the council.

It is an innovative approach for a council.

The downside is that there are major financial risks, such as a big upfront spend with Microsoft that may or may not more than pay for itself.

Does outsourcing IT ever make sense?

Somerset County Council is not an international organisation like BP where outsourcing and standardising IT across many countries can make sense.

The wider implication of Somerset’s experience – and the experience of the Department for Work and Pensions – is that outsourcing IT in the public sector is rarely a good idea.

Thank you to Dave Orr, who worked for Somerset County Council as an IT analyst and who has, since the Southwest One contract was signed in 2007, campaigned for more openness over the implications of the deal.

He has been more effective than any Somerset councillor in holding to account the county council, Taunton Deane Borough Council and Avon and Somerset Police, over the Southwest One deal.  He alerted Campaign4Change to Somerset’s “Technology and People Programme” Somerset paper.

One of Orr’s recent discoveries is that the council’s IT assets at the start of the Southwest One contract were worth about £8m and at hand-back in December 2016 were worth just £0.32m, despite various technology refreshes.

Somerset County Council’s “Technology and People Programme” paper

Whitehall’s outsourcing IT a “bad mistake” – and other Universal Credit lessons, by a former DWP minister

Post Office Horizon IT – for Julian Wilson time ran out on justice

By Tony Collins

Julian Wilson was a subpostmaster, one of the founding members of Justice for Subpostmasters Alliance.

He and his wife Karen had their lives turned upside down after the Post Office’s centrally-run Horizon system, which was installed at the local branch they ran, showed unexplained losses.

He was one of more than 150 subpostmasters across the country whom the Post Office has blamed for losses shown on Horizon.

Subpostmasters run smaller post offices under a contract issued by the Post Office. Under their contracts, subpostmasters are personally responsible for deficits at their branches.

MPs and TV documentaries have raised concerns about whether the Post Office has accused subpostmasters of criminal actions when technical faults might have caused the losses.

The concerns of MPs were reinforced by the findings of forensic accountants Second Sight. At the request of MPs, the Post Office brought in Second Sight to investigate each of the subpostmaster complaints.

The Post Office criticised Second Sight’s findings and said there was no evidence that faults with the computer system caused money to go missing. “There is evidence that user actions, including dishonest conduct, were responsible for missing money,” said the Post Office.

Julian Wilson

TV investigative reporter Nick Wallis, who has reported on the Post Office Horizon IT system for the BBC’s The One Show, and has followed the story for many years, has written a moving post on the death of Julian Wilson who fought for justice for as long as he was able.

On his blog, Wallis says of Julian, “He was, I suppose, what we journalists call a contact.

“But his gentle manner, generous spirit and calm good humour made me think of him as more than that.”

Julian was prosecuted by the Post Office for false accounting. He pleaded guilty and went to his grave a near-bankrupt convicted criminal, says Wallis.

When Julian died, his conviction was one of 20 subpostmaster cases being considered by the Criminal Cases Review Commission.

Technical fault or crime?

More than 11,000 post offices have used Fujitsu’s £1bn Horizon system for branch accounting and rarely have had problems. At the close of each day, the system has balanced money coming in from customers and money going out.

If the system showed a shortfall, subpostmasters had few options: make up the deficit out of their own money, sign off the accounts as correct, or refuse to sign off – which might have meant closing the post office (and upsetting customers) while a financial audit took place.

The Post Office prosecuted subpostmasters who signed off the accounts as correct knowing there were unexplained losses; and it prosecuted in some cases for theft.

Dozens of subpostmasters have been jailed, made bankrupt or had their lives ruined after the Post Office took action against them in the light of discrepancies shown on Horizon.

Tears

Julian Wilson was determined to clear his name.

Wallis interviewed him in December 2014 alongside his wife Karen in a village hall in Fenny Compton, where the Justice for Subpostmasters Alliance met for the first time in 2009.

“Karen stood there with tears streaming down her face as Julian explained in his measured, Hampshire burr how problems with the computer system at their Post Office in Astwood Bank had caused their lives to fall apart.”

Wallis says there was never a trace of bitterness about Julian. “He accepted things with great patience even though he was still in danger of losing his house because of the Post Office’s pursuit of him.”

Julian found out he had terminal cancer towards the end of last year. “This summer he deteriorated rapidly,” says Wallis.

One of the comments on Wallis’s blog says of Julian,

“He carried on campaigning against the Post Office until he had no strength left to fight and I made him a promise – in the last few days of his life – that I would keep going along with the JFSA [Justice for Subpostmasters Alliance] until we got our long-overdue justice.

“What an absolute tragedy that such a good man should be taken from his beloved wife Karen and wonderful daughter Emma before his name had been cleared.”

Another said,

“RIP Julian – I am so sorry that we could not let you leave this world with the vindication you will certainly, but now posthumously, receive.”

Comment

Subpostmasters represented by Justice for Subpostmasters Alliance have issued a writ against the Post Office and the legal action is well and truly underway – but Julian Wilson’s untimely death shows that not all the individuals involved in complaints against the Post Office can afford the time to wait for justice.

In some cases, complaints go back at least eight years – so far.

The Post Office’s argument all along has been, in essence, that there is, and never has been, any evidence that Horizon caused the losses.

But neither is there evidence that more than 150 subpostmasters stole the money in question.

Institutional blindness?

In a BBC Panorama documentary on complaints about Horizon, Ian Henderson, a Second Sight investigator, told reporter John Sweeney,

“Horizon works reasonably well if not very well most of the time. In any large IT system it is inevitable that problems will occur.

“What seems to have gone wrong within the Post Office is a failure to investigate properly and in detail cases where those problems occurred. It’s almost like institutional blindness.”

The Post Office denies this and maintains that it has investigated each case thoroughly.

What strikes me, though, is the insularity of the Post Office’s case.

Crashes

Imagine if airlines and aircraft manufacturers were allowed to be the judge of whether pilots were to blame after major incidents.

The RAF’s hierarchy wrongly blamed two pilots for the crash of a Chinook helicopter on the Mull of Kintyre in June 1994. It took 17 years for the families of the dead pilots to win justice for their dead sons.

It was only after numerous independent inquiries, Parliamentary hearings and leaks of a mass of material about problems with the helicopter’s computer systems that the RAF’s finding of gross negligence against the two pilots was quashed.

The case showed that, despite the sincerely-held beliefs of two air marshals that the pilots were, without any doubt, at fault, the RAF was eventually found to have failed to take sufficient account of the possibility of a technical malfunction, or a chain of events involving a technical malfunction.

The restoration of the pilots’ reputation came about not because the RAF’s hierarchy changed its mind about the pilots’ gross negligence, but because there was a change of government in 2010 and setting aside the finding against the pilots was the will of Parliament.

The then Coalition government decided that a technical cause of the crash could not be ruled out.

Of course there was no air crash in the case of the subpostmasters. But there was a similarity: the RAF and Post Office are State institutions that dismissed complaints about their equipment and blamed the system “users”, with devastating consequences for the reputations and lives of the families involved.

There is also a fundamental difference: a regulatory authority always undertakes investigations into air crashes.

Airlines and aircraft manufacturers are not the legal investigating authority. In the UK it is the Air Accidents Investigation Branch. In its investigations into possible equipment failings, the AAIB has powers set out in law [including the Civil Aviation (Investigation of Air Accidents and Incidents) Regulations 1996] to require information from airlines and manufacturers.

In the case of the subpostmasters, the Post Office was the owner of the computer equipment that showed the losses; it was responsible for investigations into that equipment; and it was the prosecuting authority.

Contradictory evidence

There have been numerous commercial air crashes where regulatory investigating authorities have uncovered evidence that contradicted evidence from the airlines or manufacturers.

Sometimes it took regulatory authorities several years to discover the truth. Eventually they found technical faults where manufacturers had said initially there were none.

In the case of the Post Office Horizon controversy, there are no regulatory investigating authorities.

When accused subpostmasters have blamed the system for the losses, they have been unable to rely on an Air Accident Investigation Branch to produce a final report that could not be contested by the airline or manufacturers.

The Post Office could argue (rightly) that it operates under completely different laws, rules and regulations to the legal and regulatory framework that governs investigations of air crashes. In the Post Office cases, no public safety is involved.

But the Post Office has had a succession of serious incidents: the lives of 150 or more subpostmasters and in many cases their spouses have been thrown into turmoil.

Is this not a succession of serious incidents in which none has been the subject of an inquiry backed by a regulatory authority?

It’s a credit to the tenacity of Justice for Subpostmasters Alliance that legal proceedings have been issued. But the wheels of justice turn slowly. With appeals, the case could drag on for years.

More uncertainty and suffering for the families involved?

It’s also obvious that the Post Office has deeper pockets than those of individual subpostmasters.

That’s one reason why, after serious air incidents, the independent investigating authorities have complete control over their inquiries. Air accident investigators recognise that lawyers for airlines and manufacturers may seek to defend their organisations after a serious incident.

Sometimes air accident investigators will conduct parts of their investigations without relying on evidence from the manufacturers.

In the case of the accusations against subpostmasters, what powerful independent organisation exists to challenge the evidence of the Post Office?

The Post Office was able to commission Second Sight and later to discontinue its contract. The Post Office was also able to issue a point-by-point denial of Second Sight’s findings.

Imagine an airline or aircraft manufacturers being able to order independent investigators to discontinue their inquiries after a succession of serious incidents?

The Post Office said in response to Second Sight’s reports that it was “unable to endorse” the findings. After serious air incidents it would not matter if the airline or manufacturers disputed the report of regulatory authorities. The regulator’s report would stand.

Fairness?

The Post Office has a duty to prosecute subpostmasters who steal. But could it also do more to recognise that the imbalance of power and resources puts subpostmasters who have gained nothing – and lost much as a result of losses shown the system – at a severe disadvantage?

As the prosecuting authority, and the investigating authority, the Post Office is not open to serious challenge except through the courts where it has the money and resources to sustain costly and protracted battles.

Is this fair? Is this just?

The Post Office has every legal right to carry on exactly as it is, but could it not instead consider the cases on the basis of “benefit of doubt?”

In other words concede that there is doubt over whether subpostmasters had criminal intent?

Taking into account ordinary fairness and magnanimity in the face of its extraordinary power, the Post Office could settle the cases now, and not put the families of so many subpostmasters through any more suffering.

Nick Wallis’ post on Julian Wilson

Post Office faces group litigation over Horizon IT as subpostmasters fund class action

Justice for Subpostmasters Alliance

Jailed and bankrupt because of “unfit” Post Office IT? What now?

Communication Workers Union warns subpostmasters of flaw in Post Office Horizon accounting system

Horizon not fit for purpose at some branches?

Labelled as criminals – Telegraph

DWP “evasive” and “selective” with information on Universal Credit programme

By Tony Collins

Has the Department for Work and Pensions put itself, to some extent, beyond the scrutiny  of Parliament on the Universal Credit IT programme?

Today’s report of the Public Accounts Committee Universal Credit progress update was drafted by the National Audit Office. All of the committee’s reports are effectively more strongly-worded NAO reports.

If the Department for Work and Pensions cannot be open with its own auditors – the National Audit Office audits the department’s annual accounts – are the DWP’s most senior officials in the happy position of being accountable to nobody on the Universal Credit IT programme?

The National Audit Office and the committee found the Department for Work and Pensions “selective or even inaccurate” when giving some information to the committee.

In answering some questions, the committee found officials “evasive”.

Today’s PAC report says:

“We remain disappointed by the persistent lack of clarity and evasive responses by the Department to our inquiries, particularly about the extent and impact of delays. The Department’s response to the previous Committee’s recommendations in the February 2015 report Universal Credit: progress update do not convince us that it is committed to improving transparency about the programme’s progress.”

On the basis of the limited information supplied by the DWP to Parliament the committee’s MPs believe that the Universal Credit has stabilised and made progress since the committee first reported on the programme in 2013, but there “remains a long way to go”.

So far the roll-out has largely involved the simplest of cases, and the ineligibility list for potential UC claimants is long.  By 10 December 2015, fewer than 200,000 people were on the DWP’s UC “caseload” list.

The actual number could be far fewer because the exact number recorded by the DWP by 10 December 2015 (175, 505)  does not include people whose claims have terminated because they have become ineligible by for example having capital more than £16,000 or earning more so that their benefits are reduced to zero.

The plan is to have more than seven million on the benefit, and the timetable for completion of the roll-out has stretched from 2017 originally to 2021,  although some independent experts believe the roll-out will not complete before 2023.

Meanwhile the DWP appears to be controlling carefully the information it gives to Parliament on progress. The committee accuses the DWP in today’s report of making it difficult for Parliament and taxpayers to hold the department to account. Says the report,

“The programme’s lack of clear and specific milestones creates uncertainty for claimants, advisers, and local authorities, and makes it difficult for Parliament and taxpayers to hold the Department to account.”

These are more excerpts from the report:

“In February 2015 the previous Committee of Public Accounts published Universal Credit: progress update … The Department accepted the Committee’s recommendations.

“However, we felt that the Department’s responses were rather weak and lacked specifics, and we were not convinced that it is committed to ensuring there is real clarity on this important programme’s progress.

“As a result, we recalled both the Department and HM Treasury to discuss a number of issues that concerned us, particularly around the business case, the continuing risks of delay, and the lack of transparency and clear milestones.

“Recommendation: The Department should set out clearly how it is tracking the costs of continuing delays, and who is responsible for ensuring benefits are maximised.

“The Department does not publish accessible information about plans and milestones and we are concerned by the lack of detail in the public domain about its expected progress.

“For proper accountability, this information should be published so that the Committee, the National Audit Office and the general public can be clear about progress…

“… the Department did not acknowledge that the slower roll-out affects two other milestones, because it delays the date when existing claimants start to be moved onto Universal Credit and reduces the number of Universal Credit claimants at the end of 2019.

“The flexible adaptation of milestones to circumstances is sensible, but the Department should be open about when this occurs and what the effects are. Instead, the Department’s continued lack of transparency makes it very difficult for us and the public to understand precisely how its plans are shifting.

“Claimants need to know more than just their benefits will change ‘soon’; local authorities need time to prepare additional support; and advisers need to be able to help people that come to them with concerns…

“Recommendation: By May 2016, the Department should set out and report publicly against a wider set of clearly stated milestones, based on ones it currently uses as internal measures, including plans for different claimant groups, local authority areas and for the development and use of new systems. We have set out the areas we expect these milestones to cover in an appendix to this report…

“The Department was selective or even inaccurate when highlighting the findings of its evaluation to us.”

The DWP has two IT projects to deliver UC, one based on its existing major suppliers delivering systems that integrate the simplest of new claims with legacy IT.

The other and more promising solution is a far cheaper “digital service” that is based on agile principles and is, in effect, entirely new IT that could eventually replace legacy systems. It is on trial in a small number of jobcentres.

The DWP’s slowly slowly approach to roll-out means it is reluctant to publish milestones, and it has reached only an early stage of the business case. The final business case is not expected before 2017 and could be later.

The committee has asked the DWP to be more transparent over the business case. It wants detail on:

  • Projected spending, including both investment and running costs for:
  • Live service (split between ‘staff and non staff costs’ and ‘external supplier costs’)
  • Digital service (split between ‘staff and non staff costs’ and ‘external supplier costs’)
  • Rest of programme (split between ‘staff and non staff costs’ and ‘External supplier costs’)
  • Net benefits realised versus forecasts.

Meanwhile the DWP’s response to those who criticise the slow roll-out is to give impressive statistics on the number of jobcentres now processing UC claims, without acknowledging that nearly all of them are processing only the simplest of claims.

Comment

To whom is the DWP accountable on the Universal Credit IT programme? To judge from today’s report it is not the all-party Public Accounts Committee or its own auditors the National Audit Office.

No government has been willing to force Whitehall departments to be properly accountable for their major IT-enabled projects or programmes. Sir Humphrey remains in control.

The last government with Francis Maude at the helm at the Cabinet Office came close to introducing real reforms (his campaign began too forcefully but settled into a good strategy of pragmatic compromise) but his departure has meant that open government and greater accountability for central departments have drifted into the shadows.

The DWP is not only beyond the ability of Parliament to hold it accountable it is spending undisclosed of public money sums on an FOI case to stop three ageing reports on the Universal Credit IT programme being published. The reports are nearly four years old.

Would that senior officials at the DWP could begin to understand a connection between openness and Lincoln’s famous phrase “government of the people, by the people, for the people”.

Public Accounts Committee report Universal Credit, progress update

DWP gives out “selective” information on welfare reform even to its auditors (a similar story in 2015)

Department for Work and Pensions “evasive” – Civil Service World (This article is aimed at its readers who are mostly civil servants. It is likely it will find favour with senior DWP IT staff who will probably mostly agree with the Public Accounts Committee’s view that the DWP hierarchy is, perhaps because of culture, evasive and selective with the information it gives to Parliament and the public.)

 

Post Office closes amid Horizon broadband problems

By Tony Collins

A Post Office has closed – temporarily perhaps – because the postmistress is refusing to spend more of her own money balancing the books on the Horizon IT system.

The York Press has published an article on the concerns of Wendy Martin who runs a Post Office branch in Clifton, York.

A broadband connection from her branch to the Horizon system goes down regularly, which she says stops payments being processed centrally. This has left her business hundreds of pounds down at the end of the month and her covering the shortfall.

Under her contract with the Post Office – and all such contracts – subpostmasters are responsible for any losses shown on Horizon.

About 150 sub-postmasters have complained to the Post Office about shortfalls which they say were accounting discrepancies related to Horizon problems rather than theft or fraud.

The Post Office’s legal action following cash shortfalls has led to the ruin of  dozens of subpostmasters who have lost their livelihoods, been made bankrupt or gone to jail. There were criminal convictions in 43 cases.

Subpostmasters claim the Post Office failed to investigate irregularities properly before launching criminal proceedings.

Wendy Martin has closed her Post Office until the connectivity problem is corrected.

The self-employed postmistress, who has worked in various shops during an 18-year career, says she is concerned that the problem will increase and could leave her paying in more money each month until the shop goes bust.

She told The Press: “The public feel I’m doing them a dis-service because the shop is shut but I could be in a situation where I may end up in prison.

“It costs me £400 just to keep the shop closed and if I keep putting in the money I will go bust. I hope the Post Office takes this seriously and come out to sort this, but until they do I’ll have to stay shut.”

Since the York Press article was published on 29 August Wendy Martin says the Post Office told her it would be “out asap and will sort this out”. She says she “cannot afford to keep putting money in for lost transactions due to this”.

Some subpostmasters have set up a Facebook page to air some of their grievances.

The Post Office says it does not prosecute people for making innocent mistakes and never has. In response to a BBC Panorama documentary last month on Horizon and the complaints of subpostmasters, the Post Office said:

“There is no evidence that faults with the computer system caused money to go missing at these Post Office branches. There is evidence that user actions, including dishonest conduct, were responsible for missing money.

“We are sorry if a small number of people feel they have not been treated fairly in the past but we have gone to enormous lengths to re-investigate their cases, doing everything and more than we committed to do…

“The Horizon computer system is robust and effective in dealing with the six million transactions put through the system every day by our postmasters and employees at 11,500 Post Office branches. It is independently audited and meets or exceeds industry accreditations.”

Mediation latest

John Munton, a director of the Centre for Effective Dispute Resolution, which is mediating in the disputes between the Post Office and subpostmasters, has written to the Post Office on the results of his review of the mediation so far.

Of the 20 cases that have gone through mediation, 8 have been resolved which is 40%.  Munton says this settlement rate is “somewhat lower than the average settlement rate that we see across all the mediations that CEDR conducts”.

In an average year its settlement rate “tends to range between 65% and 75% with a further 10% to 15% of cases resulting in some progression towards final resolution”.

Munton suggests there is a fundamental mismatch between the expectations of the subpostmasters and the object of mediation which is not to award compensation but to achieve an agreement between the parties.

Subpostmasters expect to enter into talks on compensation for their lost livelihoods and money they have paid to the Post Office to cover accounting shortfalls. The Post Office’s representatives make it clear they need credible evidence to justify the claims for compensation.

The mediation process has been more effective, says Munton, “where a continuing contractual relationship is still in place between subpostmasters and the Post Office, and where both parties would like it to continue.”

Comment

The Post Office, in mediation and its entire approach to the complaints of subpostmasters, is taking an empathetic but legalistic approach. To subpostmasters who say Horizon was responsible for losses, the Post Office’s lawyers say in essence: “Prove it.”

The subpostmasters can prove little or nothing, perhaps because Horizon is not owned or run by them. All the information subpostmasters possess is supplied and owned by the Post Office or its main supplier Fujitsu. The Post Office says there is no evidence that Horizon has caused the discrepancies complained of by the subpostmasters.

This is not like a train crash where there would be an independent statutory investigation, the findings of which would have a statutory authority. In these cases, the Post Office has chosen to commission an independent investigation from forensic accountants Second Sight. The findings have no statutory authority. The Post Office is entitled to reject Second Sight’s findings. And it has.

It is unclear whether all the facts in these cases have surfaced, whether the Post Office still possesses all the potentially relevant data from disputes that date back many years, or whether it has made any mistakes in its interpretations of the facts.

The Post Office will continue to benefit from a purely legalistic approach because subpostmasters may be able to prove that Horizon can go wrong but they will never prove that it did go wrong in their particular case.

Even when statutory investigations take place into public safety incidents, it may take years to find possible or likely causes. And that’s the point. There are only possible or likely causes. In fatal air crashes involving large passenger jets, for example, the outcome is a “probable” cause or “probable” causes.

By requiring evidence of a definite cause or causes of shortfalls, the Post Office is demanding the impossible.  On the other hand, why would it pay compensation when subpostmasters cannot prove that Horizon and the Post Office’s training or procedures were at fault?

Perhaps the only sensible way for these disputes to be settled is for lawyers to stand aside and allow managers to resolve cases on the balance of probabilities.

It’s clear to outsiders that 150 subpostmasters have not had criminal intent when, as happened in some cases, they signed off unreconciled accounts as correct. Many are victims of miscarriages of justice and deserve to have adequate compensation and their names cleared. The sooner this happens the sooner the Post Office can reclaim its reputation for fairplay.

If the cases are not settled the campaign for justice could go on indefinitely.

Mediation – letter from Centre for Effective Dispute Resolution to the Post Office. CEDR – mediation review

York Post Office closes amid cash row

Post Office Horizon and last night’s Panorama

 

Universal Credit at “amber/red” says latest DWP report

By Tony Collins

The Major Projects Authority, which is part of the Cabinet Office’s Efficiency and Reform Group, has today published its annual report on 188 projects including Universal Credit, about which it makes only positive comments.

But the authority’s annual report is, it appears, economical with the actualité. At the same time as the MPA published the report, the Department for Work and Pensions published a spreadsheet with statistics and its own narrative on the state of its major projects including the Universal Credit programme.

The spreadsheet said that the UC programme had an “amber/red” rating – but neither the MPA nor the Department for Work and Pensions has given the MPA’s reasons for the rating.

At the request of permanent secretaries the MPA has agreed not to publish its comments on the traffic light status of certain projects, including Universal Credit. The MPA and the Cabinet Office have agreed to allow officials in each departmental to give their own narrative to explain the traffic light status of their projects.

So the DWP, on its website, gives a summary of the state of its major projects, but its narrative on Universal Credit says nothing about the programme’s problems. Neither is there any of the MPA’s recommendations which related to the “amber/red” rating.

In a further shrinking from openness, the MPA and Cabinet Office have agreed with permanent secretaries that the traffic light status of major projects will be published only when they are out of date. So the “amber/red” rating on Universal Credit, although published today, is dated September 2014.

Comment

It is odd in a modern democracy that a large central government department – the DWP – can spend £330m on the IT for a major project and get away with publishing such obviously contradictory information on the scheme.

On the one hand the MPA, the Cabinet Office and the DWP publish only positive comments about progress on the Universal Credit programme.

These are some of the MPA’s comments on Universal Credit:

“Delivery remains on track against plans announced in September 2014. Additionally the Programme has brought forward testing of initiatives from which the programme can learn including the:

• Continued trialling of Universal Support in partnership areas to ensure the right integrated local foundations are in place to support UC expansion.

• Extending In work progression trials to help households increase their earnings once they have found work. • Extending the role of UC Work Coaches to engage with households at their work search interview to assess financial capability.”

Similarly the DWP’s comments in its spreadsheet on the status of its major projects reads like a government press release. Why was one of the government’s major projects – the whole life project costs of UC are estimated at £15.8bn – given an amber/red status?

We don’t know. Except we know that the MPA gives an amber/red rating when it regards a programme as not on track – a programme that needs an assurance and action plan to improve confidence in delivery. Why is the programme not on track? What does the assurance and action plan say? What is the rating today?

So much for open government. Indeed the DWP’s external lawyers are going to an FOI tribunal in London next month as part of a long legal battle to stop four old reports on Universal Credit being published.

Any ministerial announcements about open government in future should, perhaps, take this unedifying FOI episode into account.

Major Projects Authority annual report 2014/2015

What do Ben Bradshaw, Caroline Flint and Andy Burnham have in common?

By Tony Collins

Ben Bradshaw, Caroline Flint and Andy Burnham have in common in their political past something they probably wouldn’t care to draw attention to as they battle for roles in the Labour leadership.

Few people will remember that Bradshaw, Flint and Burnham were advocates – indeed staunch defenders – of what’s arguably the biggest IT-related failure of all time – the £10bn National Programme for IT [NPfIT.

Perhaps it’s unfair to mention their support for such a massive failure at the time of the leadership election.

A counter argument is that politicians should be held to account at some point for public statements they have made in Parliament in defence of a major project – in this case the largest non-military IT-related programme in the world – that many inside and outside the NHS recognised was fundamentally flawed from its outset in 2003.

Bradshaw, Flint and Burnham did concede in their NPfIT-related statements to the House of Commons that the national programme for IT had its flaws, but still they gave it their strong support and continued to attack the programme’s critics.

The following are examples of statements made by Bradshaw, Flint and Burnham in the House of Commons in support of the NPfIT, which was later abandoned.

Bradshaw, then health minister in charge of the NPfIT,  told the House of Commons in February 2008:

“We accept that there have been delays, not only in the roll-out of summary care records, but in the whole NHS IT programme.

“It is important to put on record that those delays were not because of problems with supply, delivery or systems, but pretty much entirely because we took extra time to consult on and try to address record safety and patient confidentiality, and we were absolutely right to do so…

“The health service is moving from being an organisation with fragmented or incomplete information systems to a position where national systems are integrated, record keeping is digital, patients have unprecedented access to their personal health records and health professionals will have the right information at the right time about the right patient.

“As the Health Committee has recognised in its report, the roll-out of new IT systems will save time and money for the NHS and staff, save lives and improve patient care.”

[Even today, 12 years after the launch of the National Programme for IT, the NHS does not have integrated digital records.]

Caroline Flint, then health minister in charge of the NPfIT,  told the House of Commons on 6 June 2007:

“… it is lamentable that a programme that is focused on the delivery of safer and more efficient health care in the NHS in England has been politicised and attacked for short-term partisan gain when, in fact, it is to the benefit of everyone using the NHS in England that the programme is provided with the necessary resources and support to achieve the aims that Conservative Members have acknowledged that they agree with…

“Owing to delays in some areas of the programme, far from it being overspent, there is an underspend, which is perhaps unique for a large IT programme.

“The contracts that were ably put in place in 2003 mean that committed payments are not made to suppliers until delivery has been accepted 45 days after “go live” by end-users.

“We have made advance payments to a number of suppliers to provide efficient financing mechanisms for their work in progress. However, it should be noted that the financing risk has remained with the suppliers and that guarantees for any advance payments have been made by the suppliers to the Government…

“The national programme for IT in the NHS has successfully transferred the financing and completion risk to its suppliers…”

Andy Burnham, then Health Secretary, told the House of Commons on 7 December 2009:

“He [Andrew Lansley] seems to reject the benefits of a national system across the NHS, but we do not. We believe that there are significant benefits from a national health service having a programme of IT that can link up clinicians across the system. We further believe that it is safer for patients if their records can be accessed across the system…” [which hasn’t happened].

Abandoned NHS IT plan has cost £10bn so far

Is HMRC spending enough for help to replace £10.4bn Aspire contract?

By Tony Collins

Government Computing reports that HM Revenue and Customs is seeking a partner for a two-year contract, worth £5m to £20m, to help the department replace the Aspire deal which expires in 2017.

HMRC is leading the way for central government by seeking to move away from a 13-year monopolistic IT supply contract, Aspire, which is expected to cost £10.4bn up to 2017.

Aspire’s main supplier is Capgemini.  Fujitsu and Accenture are the main subcontractors.

HMRC says it wants its IT services to be designed around taxpayers rather than its own operations. Its plan is to give every UK taxpayer a personalised digital tax account – built on agile principles – that allows interactions in real-time.

This will require major changes in its IT,  new organisational skills and changes to existing jobs.

HMRC’s officials want to comply with the government’s policy of ending large technology contracts in favour of smaller and shorter ones.

Now the department is advertising for a partner to help prepare for the end of the Aspire contract. The partner will need to help bring about a “culture and people transformation”.

The contract will be worth £5m to £20m, the closing date for bids is 6 July, and the contract start date is 1 September.  A “supplier event” will be held next week.

But is £5m to £20m enough for HMRC to spend on help to replace a £10.4bn contract?

This is the HMRC advert:

“HMRC/CDIO [Chief Digital Information Officer, Mark Dearnley] needs an injection of strategic-level experience and capacity to support people and culture transformation.
“The successful Partner must have experience of managing large post-merger work force integrations, and the significant people and cultural issues that arise. HMRC will require the supplier to provide strategic input to the planning of this activity and for support for senior line managers in delivering it.
“HMRC/CDIO needs an injection of strategic level experience and capacity to help manage the exit from a large scale outsourced arrangement that has been in place for 20+ years.
“HMRC is dependent on its IT services to collect £505bn in tax and to administer £43bn in benefits each year. The successful supplier must have proven experience of working in a multi-supplier environment, working with internal and external legal teams and suppliers and must have a proven track record of understanding large IT business operations.
“HMRC/CDIO needs an injection of strategic level experience and capacity to help HMRC Process Re-engineer and ‘Lean’ its IT operation. HMRC/CDIO requires a Programme Management Office (PMO) to undertake the management aspects of the programme.
“It is envisaged that the Lead Transformation Partner will provide leadership of the PMO and work alongside HMRC employees. The leadership must have significant experience of working in large, dynamic, multi-faceted programmes working in organisations that are of national/international scale and importance including major transformation…”

Replacing Aspire with smaller short-term contracts will require a transfer of more than 2,000 Capgemini staff to possibly a variety of SMEs or other companies, as well as big changes in HMRC’s ageing technologies.

It would be much easier for HMRC’s executives to replace Aspire with another long-term costly contract with a major supplier but officials are committed to fundamental change.

The need for change was set out by the National Audit Office in a report “Managing and replacing the Aspire contract”  in 2014. The NAO found that Capgemini has, in general,  kept the tax systems running fairly well and successfully delivered a plethora of projects. But at a cost.

The NAO report said Aspire was “holding back innovation” in HMRC’s business operations”.

Aspire had made it difficult for HMRC to “get direction or control of its ICT; there was little flexibility to get things done with the right supplier quickly or make greater use of cross-government shared infrastructure and services”. And exclusivity clauses “prevented competition and stifled new ideas”.

Capgemini and Fujitsu made a combined profit of £1.2bn, more than double the £500m envisaged in the original business plan. Profit margins averaged 16 per cent to March 2014, also higher than the original 2004 plan.

HMRC was “overly dependent on the technical capability of the Aspire suppliers”. The NAO also found that HMRC competed only 14 contracts outside Aspire, worth £22m, or 3 per cent of Aspire’s cost.

Although generally pleased with Capgemini,  HMRC raised with Capgemini, during a contract renegotiation, several claimed contract breaches for the supplier’s performance and overall responsiveness.

When benchmarking the price of Aspire services and projects on several occasions, HMRC has found that it has often “paid above-market rates”.

HMRC did not consider that its Fujitsu-run data centres were value for money.

Comment

HMRC deserves credit for seeking to replace Aspire with smaller, short-term contracts. But is it possible that HMRC is spending far too little on help with making the switch?

HMRC doesn’t have a reputation for caution when it comes to IT-related spending.  The total cost of Aspire is expected to rise to £10.4bn by 2017 from an original expected spend of £4.1bn. [The £10.4bn includes an extra £2.3bn for a 3-year contract extension.]

Therefore a spend of £5m to £20m for help to replace Aspire seems ridiculously low given the risks of getting it wrong, the complexities, the number of staff changes involved, the changes in IT architecture, and the legal, commercial and technical capabilities required.

The risks are worth taking, for HMRC to regain full control over ICT and performance of its operations.

If all goes wrong with the replacement of Aspire, costs will continue to spiral. The Aspire contract lets both parties extend it by agreement for up to eight years. HMRC says it does not intend to extend Aspire further. But an overrun could force HMRC to negotiate an extension.

As the NAO has said, an extension would not be value for money, since there would continue to be no competitive pressure.

Campaign4Change has never before accused a government department of allocating too little for IT-related change. There’s always a first time.

Government Computing article

 

Raytheon/Home Office IT dispute rolls on

By Tony Collins

Another big, old government IT contract goes wrong. It’s part of civil service tradition that officials blame the supplier for missing milestones and not delivering what the end-users needed or wanted; and the supplier blames the customer for causing or contributing to the alleged defaults.

The Raytheon Systems/Home Office eBorders legal dispute is going along these lines – as did the Department of Health’s dispute with CSC over parts of the failed National Programme for IT [NPfIT].

It’s tradition for the civil service not to take big IT suppliers to court: a hearing could mean that civil servants have to talk about government business in an open courtroom.

Senior Whitehall officials do not want the public knowing how departments are really managed, or not managed.

In 2002 a 44-day court case between National Air Traffic Services and EDS [now HP] ended suddenly – minutes before a senior civil servant was due to give evidence.

Arbitration is different. It’s in secret so a long dispute can be tolerated.

And so a Home Office mega-contract awarded to US company Raytheon in 2007 has ended up in arbitration and is set for a sequence of hearings and appeals that could last years.

It took 10 years for an IT dispute between HP and BSkyB to be settled, and it could take this long for Raytheon and the Home Office to settle their dispute.

Chronology 

In 2003 Tony Blair launches the eBorders programme. He wants a database of foreign travellers entering and leaving Britain to help fight the war on terror.

A year later the Home Office launches Project Semaphore with IBM to pilot an electronic borders system.

In 2007 Jacqui Smith, Labour’s home secretary, signs an eBorders contract with Raytheon Systems as lead supplier and Serco, Detica, QinetiQ and Accenture as subcontractors. It’s worth £750m. Within two years Home Office officials are expressing concern that milestones are being missed.

In 2010 a new coalition government that’s determined not to put up with big, underperforming IT deals, terminates the Raytheon contract after a recommendation by the Major Projects Authority and a coalition review group.

In 2011 it emerges that Raytheon is threatening to sue the Home Office for £500m for repudiating the contract. Raytheon blames project delays on UK Border Agency mismanagement. It’s far from clear that officials knew what they wanted from the systems.  Arbitration proceedings begin.

In 2013 it emerges that IBM, Fujitsu and Serco are carrying out some of the original eBorders work.

Home Office loses arbitration

Last year an arbitration tribunal ruled that the Home Office must pay £224m to Raytheon. It found that the decision to terminate Raytheon’s contract was unlawful on a number of grounds. The Home Office had not fully considered the extent to which the Home Office and the UK Border Agency had caused or contributed to the alleged defaults.

Home Office wins appeal

Now the Home Office has won an appeal against the arbitration tribunal’s ruling. A good account of the appeal judgment is on the Pinsent Masons website. Pinsent Masons was acting for the Home Office.  The appeal judge found that the arbitration award had been tainted by legal irregularities that could have caused a substantial injustice. The judge took the unprecedented step of setting aside the arbitration award and ordered that the dispute be resolved by a new tribunal.

Raytheon appeal

Raytheon has announced that it is appealing. It points out that the arbitration had 42 days of oral hearings with testimony from multiple witnesses, and had issued a 276 page award decision. Raytheon says it is determined to recover the sums it is due because of the “wrongful” termination of the contract.

Comment:

It’s five years since Raytheon’s contract was cancelled. It could easily be another five years before all the rulings and appeals are finally over.

It’s easy in hindsight to say, but would it have been better if the Home Office and coalition ministers had spent longer negotiating with Raytheon rather than doing the macho thing of cancelling the contract?

Pinsent Masons – latest ruling

Raytheon contests Home Office’s High Court verdict over e-Borders
 

Some lesser-known costs of outsourced IT?

By Tony Collins

An outsourcing contract may work well in general, but what when things go wrong and the customer needs  non-routine or extra-contractual information and answers from the supplier ?

 

The Post Office has received a reliable, nationwide IT service from Fujitsu for more than 14 years. A centrally-imposed contract ties in post offices across the country to using Fujitsu’s Horizon accounting system

The Post Office is delighted with the system and the service, and always has been. For some years its officials considered Horizon infallible, according to evidence given to the Business, Innovation  and Skills Committee last week.

Fujitsu has continued to enhance the system and service – sometimes at its own cost.  Most post office staff have had no complaints with the system – but more than 150 subpostmasters say they have had problems that, in some cases, have ruined their lives.

During a hearing that lasted nearly three hours, the Committee’s MPs heard that the Post Office’s contract with Fujitsu meant that investigating some complaints or queries with the system was not always contractually straightforward.

Kay Linnell, a forensic accountant and fellow of the Institute of Chartered Accountants,  told MPs:

“My understanding is that the Post Office had to pay for metadata from their contractors Fujitsu. This meant that when a shortage or overage arose and subpostmasters tried to investigate it and asked the Post Office about it, there was an extreme reluctance to investigate each and every shortage or overage.”

And Ian Henderson, a chartered accountant and forensic computer specialist with 2nd Sight, told the Committee:

“… The software … works well most of the time. Like any large system, it occasionally generates errors.

“Our concern is the response by Post Office to supporting sub-postmasters when they face those problems. Yes, there is a helpline facility, and, yes, training is provided, but there is no formal investigative support.

“Under the contract, sub-postmasters are not entitled to investigative support when they say, ‘Look, we’ve got this discrepancy. I don’t understand how it happened.’

“They are left largely to their own resources, supported by the helpline and so on, to get to the bottom of those problems.

“As we have seen time and again, they have failed to do that. In some cases, Post Office has refused to provide information to them on the grounds of cost – this comes back to the contract with Fujitsu. They say, ‘It is too expensive. It is outside the terms of our service level agreement. We cannot provide you with the detailed information that Post Office holds…'”

Investigations into some of the more serious complaints by subpostmasters require access to Horizon’s audit trails. These were available for up to 42 days before 2010 and 60 days since.  MPs heard that sometimes the audit trails would be needed for investigations when they were no longer available.

Missing emails?

Henderson  claimed that 2nd Sight had requested copies of emails for 2008 but was given them for 2009. He told MPs he has still not had the emails for 2008,which the Post Office disputes.

Henderson said:  “Unfortunately, the e-mails that were provided were for the wrong year. We were investigating a specific incident in 2008 and the year’s worth of e-mails that we were given related to 2009. Therefore, it was not surprising that we said, “We have asked for 2008, please provide it.” We have still not had that…

“We were told at the time that with the first batch there were some technology issues relating to the provision of the 2008 e-mails. Two years down the line, we still don’t have those.”

But Angela van den Bogerd for the Post Office replied:  “We provided what we were asked for at the time, so, clearly, there must have been some misunderstanding. We would not have pulled a year’s worth of e-mails for a wrong year.”

Costs of storing data 

Like most commercial organisations the Post Office has to pay to store data, so it has a policy of destroying data after several years. The Committee heard that “some of the cases [being investigated] are regrettably very old, so some of the data are simply not there”.

Comment

When big organisations, particularly councils, outsource their IT, do they always take into account the costs associated with investigations of problems – accessing old audit trails, retrieving other old data such as emails, or searching for information that might have been destroyed to save money?

It’s unclear whether the outsourcing of its IT has helped or hindered the Post Office’s investigations into the complaints of subpostmasters.

Lives ruined by IT glitches? Post Office officials face the critics

By Tony Collins

post officeAfter dozens of subpostmasters were jailed, bankrupted or lost their livelihoods because of irregularities and shortfalls they say were not their fault, MPs met on Tuesday [3 February 2015) to question senior Post Office officials and their critics.

It was the first time, in public, that Post Office officials have answered a comprehensive set of points made by their critics.

Ian Henderson of forensic accountants Second Sight, who were brought in by the PO to investigate possible miscarriages of justice and complaints by subpostmasters, made some trenchant criticisms of Post Office IT, processes, attitudes and culture.

Dozens of subpostmasters were accused of false accounting, fraud or theft because of shortfalls in their daily balances that, they say, were due to  a lack of training or IT problems related to the Post Office Horizon system.

Some were jailed. Some have had their lives ruined by having to pay back to the Post Office tens of thousands of pounds they say they did not owe. Some have had to sell their homes to pay the Post Office.

Those answering questions at a hearing this week of the House of Commons’ Business Innovation and Skills Committee included Paula Vennells, Chief Executive of the Post Office.

The uniqueness of the hearing and the incisiveness of the points raised make it worthwhile to report on the proceedings in depth. Excerpts are below.

The campaign for justice is important not only because of the impact that accounting discrepancies have had on the lives of more than 150 subpostmasters but because of the wider questions:

–  how has it come to be that the output of a computer system has been trusted over the integrity of individuals who are – were – pillars of their local communities?

– should independent controls exist to ensure innocents are not branded criminals because of output from a complex system that has multiple interfaces and known fallibilities?

Excerpts from Business, Innovation and Skills Committee, House of Commons, 3 February 2015.  Witnesses:

– Andy Furey, Assistant General Secretary, Communication Workers Union

– Mark Baker, National Branch Secretary, Postmasters Branch, Communication Workers Union

– George Thomson, General Secretary, National Federation of Subpostmasters

– Alan Bates, Chairman, Justice for Subpostmasters Alliance

– Kay Linnell, Chartered Accountant, Kay Linnell & Co, adviser to the Justice for Subpostmasters Alliance

– Ian Henderson, forensic computing expert, Advanced Forensics (Second Sight Ltd). The Post Office commissioned Second Sight to investigate complaints by subpostmasters.

– Paula Vennells, Post Office Chief Executive

– Angela van den Bogerd, Head of Partnerships, Post Office Ltd

 

Mediation Scheme [set up by the Post Office in August 2013 to deal with complaints by subpostmasters that they have been incorrectly blamed for shortfalls in daily balances shown on the PO/Fujitsu Horizon system].

Paula Vennells: “As you have heard, 136 cases have come into the scheme. We set it up [the mediation scheme] with the ambition to find out exactly what those people are concerned about, because it is of concern to me and the Post Office that we do that…

“What we have seen from the scheme is that yes, as you heard earlier, it has taken longer than we would have liked. The reason for that – this is one of the benefits of having put the scheme in place –  is that we have investigated every single case in the most thorough detail.

“We have been rigorous about this. As chief executive of the Post Office, I could not put this scheme in place and not do it properly. The system and the people who work in our branches are too important for that.

“Perhaps the most significant finding from it is that we can continue to have confidence in the Horizon system and how people are running post offices across the country…”

**

Andy Furey (Communication Workers Union): “Our concern overall is the hundreds of postmasters who seemingly have not had justice.

“They were dismissed for irregularities that were not down to them as individuals or their staff, and which are seemingly a problem of the system.

“We were pleased that the mediation scheme was erected and set up, but we do not think it has delivered as it was envisaged to in the first place. We are concerned about the pace of the process of mediation, and the number of cases that seem to have fallen out of the process. Overall, we are not particularly happy with the way that the mediation scheme has been conducted.

**

Angela van den Bogerd (Post Office):  “I am part of the working group, and I have been the Post Office person who has been in there from the start until today. As you heard earlier, the investigation—the whole process of cases into the mediation scheme – has taken longer than we all anticipated it would, at every stage, from the applicant putting in their initial application, through to asking whether they want an investigation to Second Sight doing theirs.

“These are individual cases and very complex. What we have wanted to do, and are very committed to doing, is a thorough investigation of each of the issues raised by each of the applicants to the scheme. That has been a very long process.

“We have not dragged our feet. I have had 20 people working on this full-time for over a year. We have produced thousands and thousands of pieces of evidence in support of each of the cases that we have put.

“I would have liked it to have been quicker, but not at the expense of a thorough investigation.”

George Thomson (National Federation of Subpostmasters):  “Can I just say, firstly, 99% of postmasters are dead straight and honest? But on this very important issue about mediation, I think it was probably the training.

“Some people believe that money went missing and it had to be Horizon where it was maybe staff error. But the third point, and this is contentious, the difficulty the Post Office must have is that some of the people are chancing their luck…

**

Alan Bates (Justice for Subpostmasters Alliance): “… from what I am hearing from the membership who received these [mediation] reports of their cases from the Post Office, basically the Post Office are saying that they have done everything right and the sub-postmaster did everything wrong. That seems to be the summary of the majority of the cases at the moment.”

**

Mark Baker (Communication Workers Union):  “I have three members in the mediation scheme and from our experience, it is agonisingly slow. I have only got one member who got to the stage where he gets the Post Office response…I do not know why Mr Thomson comments on the mediation scheme; he does not have any members in it.

“The scheme could do with some form of external body sitting on it that could perhaps keep the pace of progress going a bit faster and maybe offer a bit more of a robust challenge to the Post Office on some of the reasons it gives why things have to be done the way they are. ..”

**

Kay Linnell (Fellow of the Institute of Chartered Accountants and Liveryman of the Worshipful Company of Arbitrators): “The reason the working group is not as fast at pushing this scheme through to mediation as it was, is because some of the goalposts have been moved by the Post Office…”

**

Katy Clark (Labour MP and member of the Business, Innovation and Skills Committee): “Is there anyone with an IT background on the mediation scheme?”

Vennells: “The mediation scheme is the scheme where the individuals go into -”

Clark: “I understand that, but can you answer the question of whether there is anyone on the scheme with an IT background?”

Vennells: “When you say on the scheme, as part of the working group? No, there is not.”

Clark: “Are you aware that that is a major criticism?”

Vennells: “Yes, I am.”

Clark:  “Are you able to address that at this stage?”

Vennells:  “For each of the 150 cases for which we have now concluded our investigations, where there have been IT issues, we have looked into those and taken the right advice from our IT experts in the business. Yes, we have.”

**

Contract between Post Office and subpostmasters

Kay Linnell:  “When the Post Office moved to a computerised system in 2000-01, they did not amend the contract between the sub-postmasters and the Post Office. The individual subpostmaster remained totally responsible for all gains and losses, but they were no longer able to check each and every transaction because there were no slips.

“My understanding is that the Post Office had to pay for metadata from their contractors Fujitsu. This meant that when a shortage or overage arose and subpostmasters tried to investigate it and asked the Post Office about it, there was an extreme reluctance to investigate each and every shortage or overage…”

**

Ian Henderson (Second Sight, forensic accountants investigating individual cases):  “Over a period of time, Post Office has quite sensibly introduced a number of system changes.

“Some have benefited sub-postmasters and Post Office, of which the changes to lottery and scratch cards are a very good example.

“Bearing in mind that, under the contract, the sub-postmaster is responsible for making good all losses, I am concerned that a number of those process changes have reduced costs to Post Office or have benefited Post Office, and have acted to the disadvantage of sub-postmasters.

“A number of those changes have been implemented without any consultation or adequate consultation. I am concerned that, over time, Post Office has been gradually transferring risk from itself to sub-postmasters, which is ultimately being reflected in the losses they are bearing…

“While the contract has been changed in part, it has remained substantially the same for 20 or 30 years. We think that it does not provide sufficient safeguards for sub-postmasters.

“For example, there is no entitlement to investigative support. We have been told that many sub-postmasters were not even provided with a copy of the contract.

“In the contract, it states that investigative support will be provided only in cases of suspected criminality – in other words, if a criminal prosecution can or may be brought by Post Office.

“It does not seem to cover a situation where a sub-postmaster identifies a problem, has exhausted all the readily available help mechanisms and wants some serious, professional help from a trained Post Office auditor.

“To his surprise, he will find that he has no entitlement to that. Bearing in mind that Post Office holds all the data, we find that surprising. In the context of modern business practices and best practice, we think that that is unfortunate.

“Our view is that the contract needs a fundamental overhaul to reflect far better an appropriate relationship. It strikes us that it is written very much in words reflecting a master/servant relationship that perhaps was appropriate 70 years ago but should not be part of a modern contract.

“Sub-postmasters are described as partners, but it is certainly not a partnership of equals. The risk is largely borne by sub-postmasters, and some of the changes that have happened recently have benefited Post Office.”

Training

Brian Binley (Conservative member of the Committee): I would like to take a vote. Was the support and ongoing training good enough when this sizeable system was launched? Yes or no?

George Thomson: Yes.

Andy Furey: No.

Mark Baker: No.

Alan Bates: No.

Kay Linnell: No.

**

Mark Baker: “As a serving sub-postmaster, live, as we speak—I should be back at the branch, but I am here—perhaps I should tell you that training is generally received by serving subpostmasters through the form of manuals. We call them Branch Focuses.

“They arrive every week and we read them to receive training and instructions on how to operate certain transactions. They are hopeless.

“My wife prepared a 54-page dossier, randomly taking one month’s selection of Focuses and highlighting all the misinformation and errors contained within them, which she sent to the board of directors. She did not get a single reply from any director.

“The file was passed on to a functionary further down the line, who made a hopeless job of trying to explain everything my wife was trying to point out. She was trying to point out that we are reliant on receiving the correct instructions in order to be able to operate Horizon and perform the transactions, and the people who are telling us how to do it cannot even get it right. That is the reality in the Post Office world as we speak today.”

**

Mark Baker: “The training started off reasonably good, but as the system evolved there was no back-up training of any adequacy. Postmasters are just sent manuals and are expected to not only teach themselves but have to teach their staff as well. So training is a huge issue.”

**

Alan Bates: “I was also involved with the training at that point when the system came in, and I was a sub-postmaster then. I had one and a half days’ training, my staff had one day’s training and I believe that the regional people who worked for the Post Office had two and half days’ training.

“I, too, received a 500-page pack to take away and learn how to use the system afterwards. That is how it was dropped on everyone. I had five members of staff who did training at that session. One of them had never even turned on a computer before, but she did a day’s training and then she was certified as being sound and correct and fine to use the system at the end of one day.

“It was madness; she had no idea what she was doing. Staff were just abandoned at that point.”

 Chaotic IT?

Mark Baker: Apart from representing postmasters nationally, I am still a serving sub-postmaster. I have been doing the job now for 27 years, and 10 years prior to that I was working for the head Post Office. Horizon was introduced for a specific purpose: mainly to fulfill the wishes of the Department for Work and Pensions to have more automated process for pension allowances.

“Horizon could also do other things in its early says, but its basic requirement changed as the DWP changed their requirements and the Post Office needed to use Horizon for more commercial reasons and had developed application upon application upon application. They had more and more data centres talking to each other, exchanging information.

“It is a very chaotic, behind-the-scenes set of circumstances in IT terms.”

Glitches?

Ian Henderson: “… the Post Office disclosed to us that a number of software defects had been identified that affected 76 branches. It took some time for those defects to be identified—somewhere in the order of 12 months.

“A feature of a number of the matters reported to us appeared to be the old and unreliable hardware that features in the Horizon system – old Horizon and new Horizon.

“We have heard about communication failures and the consequences of that. We have been advised that approximately 12,000 communication failures occur each year, and all of those can have consequences for sub-postmasters…

“Particularly under new Horizon, the servers are located centrally. All the branches, and indeed Crown offices, have to communicate electronically with those servers. There are fall-back procedures…some rural branches have broadband and technology problems. Some of those branches also suffer from a poor mobile phone signal…

“Failures are inevitable with that infrastructure. In general, Horizon has a robust recovery mechanism to cope with those failures. The cases we have looked at are primarily the 150 applications to the mediation scheme.

“They have shown that when there has been an unusual combination of circumstances – they are relatively rare, and I would emphasise the point made previously that, most of the time, Horizon works well – such as power and telephone communication failures, errors being made at the counter or some of the other errors that we have now highlighted and that we will report on in our next report, it is how the Post Office has responded to those that has contributed to the problem. This is partly about a lack of training, partly about a lack of support and, in particular, about a lack of investigation.”

**

Kay Linnell:  “If you talk to anybody who has served in one these smaller, independent subpostmaster branches, you will see that there is a succession of people who have had problems with the hardware, the software or the support, and there are unanswered questions as to why the differences arose—small or large. It is that not knowing how the difference arose for which they are responsible that has, frankly, driven some of them to the edge of sanity.

**

Mark Baker:  “I think there are a lot of areas which have been highlighted since Second Sight issued their first report. I have the benefit, because it was issued to one of my members, of reading their report that they prepare for the mediation scheme, where they are now highlighting lots of areas that have the potential to cause discrepancies.”

**

Andy Furey: “I think it is that question of whether there are some glitches in the system that have created problems for some individual postmasters. Let me put this into scale. There are 11,500 post offices and 30,000 or 40,000 Horizon terminals up and down the length and breadth of the country, so this is not a wide-scale problem, but nonetheless it is a problem for the individuals who were impacted, who have lost their livelihoods.”

**

Mark Baker: “There will always be human error when humans interact with computers. However, what has been systemic and consistent throughout Horizon’s life is the failure to recognise that parts of the infrastructure could be to blame for some of these discrepancies occurring.”

**

Kay Linnell: “We have evidence of historic failures. A lot of the connections on very complicated things like ATMs were done through a mobile phone connection, which sometimes dropped before both ends of the transaction were captured…”

**

Mark Baker: “I have a lot of experience in another life in IT network systems working over virtual private networks, and I have been doing a lot of research into data flow disruption. Horizon just produces packets of data. It has to be transmitted, and it needs a secure network over which to be transmitted. The ADSL lines are not interleaved. If you do not interleave an ADSL line and put other equipment on it, you run the risk of disruption happening to the data flow.

“Power can cause the same kind of disruption. The infrastructure in branch has not been maintained at all since it was introduced. The power lines have never been checked. The plugs have never been PAT tested.

“The trip control switches, which are designed to protect the electrical circuitry, have never been looked at since the day they went in. I have no idea whether they still work, so what damage can power surges and power outages cause.

“The interaction of Horizon when it loses its ADSL connectivity for whatever reason and defaults to its modem is another area of concern to me. We are doing highly encrypted secure banking transactions on a mobile phone chip, and that is a recipe for disaster.

“In the rural areas, it will be worse than in the urban areas. Urban areas get the same problem, but in the rural areas, you are a long way away from your BT exchange.

“The signals are not always very good if you have to go on to the backup through the modem, and it is a recipe for disaster. This is not only my opinion. Second Sight have raised this issue, particularly if you read the report that they have provided to the mediation scheme.

**

Angela van den Bogerd: [Regarding telecommunications problems and a loss of power]. “The system is designed to cope with that. If there is a loss of power or of communication mid-transaction, none of those data are lost. It freezes in time, and when the system comes back on, the screen asks the user to give it some information about what point in the transaction you were at. Did that transaction complete? Had you given money? Had you taken money?

“That recovery process, as it is called, actually resets the system to that moment in time, so no data are lost. Yes, it is inconvenient, and yes it is frustrating for branches and sub-postmasters and assistants, who want serve their customers, but that does not cause the discrepancies that it has been claimed it does. It does not do that.”

**

Ian Henderson:  “In terms of IT support, we are concerned about some of the interfaces with third-party partners such as Bank of Ireland and other banks, ATMs and so on. The issue is those interfaces and the flow of information from those third parties, which of course would not happen in a high street bank where everything is integrated. It is those third-party interfaces that seem to cause a disproportionate number of problems… In 2009, when the Post Office performed an audit of 20 branches relating to the lottery scratchcards. Those 20 branches caused £147,000 in losses, and as a result of that, certain process changes were eventually developed.

“In 2010, over a three-month period, more than 1,000 transaction corrections –TCs – were issued to branches, the financial value of which was £744,000.

“To our minds, that indicates that there was a system-wide problem with lottery scratchcards. Two years later, the Post Office introduced a number of changes that largely prevented that problem occurring. However, it was three years before those early problems that had been identified were fully resolved, and I am sure there were other examples.”

Mike Crockart (Lib-Dem member of the Committee): “And during those three years, sub-postmasters would have been expected to make up the loss?”

Henderson: Correct.

Angela van den Bogerd:  “We have tried to automate products, so that less human interaction is required. In the case of lottery scratchcards, those error notices were particular to cases where sub-postmasters had sold scratchcards before they had booked them in.

“They were selling scratchcards with a value of, say, £200 that they had not actually booked into that account. So they would have had a surplus of £200, which if you scale up reaches a sum of £700,000. So it is not an actual loss; it is just that they have accounted for it incorrectly at the start.”

Aren’t Crown-owned Post Offices hit by discrepancies?

George Thomson:  “If there was a systemic issue … there would be big problems in the Crown offices as well. I cannot recall a single big issue where someone in Crown offices has blamed Horizon.

“If it was systemic, it would be a nonsense to suggest that the only time there are computer faults is to do with independent sub-postmasters or franchise sub-postmasters; and yet there does not seem to be any noise at all that has developed with the Crown offices over 15 years. That is very strange, given they are doing 16% of all the volumes.”

**

Alan Bates: “One of the few documents that has come to light in all of this is a 2007-08 internal report from the Post Office, which showed that the Crown offices lost £2.2m across their counters that year. So Crown offices do lose money.

Henderson:  “Crown offices have one significant difference compared with branches: they have the ability to write off losses up to certain levels. A sub-postmaster cannot do that; he is accountable for every penny.

“If there is a discrepancy, he has to make that good. The same principle does not apply to Crown offices.

“Another of the outstanding questions we have put to Post Office is that we want data comparing and contrasting losses written off by Crown offices and the equivalent losses borne by sub-postmasters.

“Our work to date has indicated that they both suffer from the same underlying problems. However, the solutions are very different because, generally speaking, a sub-postmaster cannot write off a loss; he has to make it good.”

Is the Federation of Subpostmasters supporting members hit by shortfalls?

Alan Bates: “The reason why the Justice for Subpostmasters Alliance was set up was that the Federation refused to support sub-postmasters in any cases about Horizon. It never once supported people in court cases or anything like that.

“It was just saying to people, ‘Right, you’re saying it’s a Horizon problem. Oh, I’m sorry. There’s nothing wrong with Horizon. The Post Office has told us there’s nothing wrong.’ That is why the JFSA came about. Every one of our members wants their dues back from the federation because of its so-called support -or lack of support – over the years.

“It is really frustrating to have to sit here listening to somebody who is meant to be representing sub-postmasters – it is like they are in a paid position in the Post Office.”

**

Kay Linnell: “Frankly, it [the Federation] is supposed to be representing sub-postmasters who have lost their livelihoods, their homes, their money and their reputation because of faults put at their door by the Horizon system.”

**

George Thomson: “We have to be careful that we are not creating a cottage industry that damages the brand and makes clients like the DWP and the DVLA think twice…

“We pay out £18bn a year for the DWP in Government benefits. The DWP would not have re-awarded the Post Office card account contract … in the last month if they thought for a minute that this computer system was not reliable…

“If we are not careful, we damage the brand, we damage the franchise and we cost my members’ ability to sell the franchise.

“If we lose big contracts, Andy’s members lose their jobs as well. So we have to be careful that we do not create a cottage industry that is built on supposition.”

Proper investigation of shortfalls?

Kay Linnell: “My understanding is that the Post Office had to pay for metadata from their contractors Fujitsu. This meant that when a shortage or overage arose and SPMs tried to investigate it and asked the Post Office about it, there was an extreme reluctance to investigate each and every shortage or overage.

“When they [subpostmasters] made calls to the helpline supporting them, these were not dealt with, or were marked with low priority…”

**

Mark Baker:  “The Post Office failed to recognise that they needed to drill down into each and every kind of discrepancy – whether that was a surplus or a shortage is irrelevant: it is a discrepancy; and refused to look at their system and analyse, ‘Is it fit for purpose in the modern day? Is it independently audited by accredited IT professionals?’

“It was not supporting the postmasters – the ones that find themselves in the JFSA group – or looking into their cases. Why has that happened over the years that Horizon has been in life? That very much is the core reason why we find ourselves here today.

**

Alan Bates:  The Post Office never investigate cases if a sub-postmaster has an issue. If they raise that they have a problem, they suddenly get landed on by Post Office’s audit and, more than likely, they will be thrown out or even charged afterwards.

“That is what has gone on in the past. I think they are trying to change it these days, but I do not know how successful because two or three new people a week call me, and these are serving sub-postmasters having problems as well. There are ongoing issues.

**

Henderson:  “… we think that there have been prosecutions brought by the Post Office where there has been inadequate investigation and inadequate evidence to support some of the charges brought against defendants -sub-postmasters and former sub-postmasters.

“In particular, we are aware -this, again, is why we need to see the full prosecution files – that a common tactic employed by the Post Office, or lawyers acting on its behalf, is to bring charges for both false accounting, which is a relatively easy charge to prove, and theft; then, as a bargaining point -a plea-bargain, almost – before trial, they drop the charge for theft on the basis that, first, the defendant will probably avoid a custodial sentence and, secondly, the evidence is much simpler.

“When we have looked at the evidence made available to us – bear in mind that I have been an expert witness for the Crown Prosecution Service, instructed by the CPS on fraud cases – I have not been satisfied that there is sufficient evidence to support a charge for theft. You can imagine the consequences that flow from that. That is why we, Second Sight, are determined to get to the bottom of this matter, which we regard as extremely serious.”

How many postmasters are affected?

Mike Crockart:  “I want very briefly to try to get a feel for the size of the problem because we are talking in generalities here. Andy, you just said that hundreds of postmasters have had this problem. How big is the problem? How many postmasters have reported incidents?”

George Thomson:  “I will put it in perspective over the whole 15 years. At one time, 100,000 postmasters and their staff were dealing with Horizon every week on the computers when the network was bigger; that is down to 50,000. It has always been a tiny amount. Going on to Paul’s point to put it together, some of it is training. A small element is that –

Crockart: “I am trying to get an idea of the size of the problem. You said that it is a small number – what does that mean?”

Thomson: “It’s tiny, because you are talking about something in the region of more than 30 million transactions every single week. It used to be about 60 million transactions.

Crockart: “The question was: what number of postmasters are affected by this? Perhaps I can turn to somebody else.”

George Thomson: “Tiny.”

Alan Bates: “During the 12-week period in which the mediation scheme was open, we had 150 people apply for it. Since then, probably a similar amount have been trying to get into the scheme, but it is closed.

“Before that, the JFSA was going for maybe two or three years and we had probably a similar amount. There are still people finding out about all of this all the time, so it is a growing number.”

Crockart: “There are 150 in the mediation system and roughly 150 that you know about that would have liked to, but have missed the boat.”

Bates: “And there are more coming along.”

Did postmasters have full control over their accounts?

Kay Linnell:  “The problem that the members of JFSA and the complainants have is that the analysis and evidence has not been produced…  What has happened with the small sub-postmasters is that, even where there is only the subpostmaster operating the tills, money has gone missing which is outwith their control.

“For example, if cash collection is picked up and remitted to head office, it is sometimes not logged against them in head office and a shortage arises.

“Sometimes, an entry goes through -a transaction correction or credit – and they do not know about it. Although the sub-postmaster is personally responsible to pay cash, they are not aware of how the differences have arisen.

“If this mediation scheme had told the complainants – the applicants – where the money had gone, there would be a lot of settlements, but we still do not know. The accounting is outside the subpostmasters’ control.”

Binley: “But how can the sub-postmaster be responsible?”

Linnell: “Because, under the contract with the Post Office, they are responsible…”

Binley:  “How can they be expected to be responsible when in fact they do not have the tools to carry through that responsibility? Is that the nub of it?”

Linnell: “That is absolutely the key question.”

Support when things go wrong?

Linnell: “People today are still getting shorts [shortfalls] and overs [surpluses] on a daily basis and still have no clue why the accounting systems that they can see do not balance.

“To my mind, that is the support that the subpostmaster on the ground needs today. Helplines are all very well, but you get a person on the end who may log the call and mark it low priority. That doesn’t help you.”

**

Ian Henderson: “The core system – the software, for want of a better word – works well most of the time. Like any large system, it occasionally generates errors. Our concern is the response by Post Office to supporting sub-postmasters when they face those problems.

“Yes, there is a helpline facility, and, yes, training is provided, but there is no formal investigative support.

“Under the contract, sub-postmasters are not entitled to investigative support when they say, ‘Look, we’ve got this discrepancy. I don’t understand how it happened.’ They are left largely to their own resources, supported by the helpline and so on, to get to the bottom of those problems.

“As we have seen time and again, they have failed to do that. In some cases, Post Office has refused to provide information to them on the grounds of cost – this comes back to the contract with Fujitsu. They say, ‘It is too expensive. It is outside the terms of our service level agreement. We cannot provide you with the detailed information that Post Office holds.’ It is not prepared to disclose that information to sub-postmasters, even though, under the contract, it has a legal obligation to make good those losses. It is matters such as that that we are looking into.”

**

Paula Vennells:  “We monitor very carefully the training and support that we give. The first point that I want the Committee to hear is that there are always opportunities for us to do it better. I have no doubt about that; it applies to any organisation. We are not perfect, and we continually try to improve things.

“The satisfaction rate for the support desk for the sub-postmasters is running at about 87%. It has improved since we put in place changes last year, but it has always been good.

“As you heard from George Thomson, the vast majority of people have no issue with the system, and they are actually quite satisfied with the training and support around it. We are dealing with a very small number of people who have had some really difficult things happen to them.

“Going through this process, which Angela has built on, we have learned where we could have done some of those things better. However, that is not to say that throughout that period—we are talking about 10 years—the system, the support and the training were not good. In the vast majority of cases, they were. Angela will tell you about what we have done and the improvements that we have made.”

**

Angela van den Bogerd: “If a branch finds that it has a large unexplained loss, the first port of call is for them to ring the helpline. There is a process in place for them to be helped remotely. If the helpline cannot solve their problem at the time, it goes to another team—a branch support team, which has a bit more expertise and can dive a bit deeper into the information.

“If that fails, we send someone out to visit the branch and see if they can help them there. That process is in place.

“Looking back over the cases that we have investigated, we could have done that a bit better in some of those cases. It is not that there is a culture of denial here. I have personally been involved in each of those 150 cases and got into the detail.

“Where we could have done better – it is only a handful of cases – we have absolutely said that. I cannot accept that we are in denial about that, because we are looking at it…

Is PO/Fujitsu forthcoming with information?

Ian Henderson:  “I have spent a lot of the past 12 months, frankly, dealing with Post Office, requesting access to documents that have been challenged, as I understand it, on legal advice.

“One issue we have been looking at relates to the Fujitsu office in Bracknell. We first requested documents relating to that in February 2013 – almost two years ago. We have still not been provided with those documents.

“We are very concerned about the operation of the suspense account by Post Office. We have been asking for that information since July last year. Perhaps the most important failure to disclose to us is the full access to the legal and prosecution files.

“When this scheme first started we were given full access to those files. Again, presumably on legal advice, that access has been extremely restricted. We feel that this is a very severe constraint on our ability to conduct an independent investigation into what has happened.”

**

Alan Bates: “It [the mediation scheme] was originally launched in 2013 and it closed on 18 November that year. There were thoughts that it would be a matter of weeks for the Post Office. I think the Post Office allowed four weeks to look at cases and investigate them, whereas it has been taking them four, five, six or seven months to investigate a case.

“Second Sight is also taking not quite as long, but it is certainly taking considerably more time to investigate these cases. So it is taking far longer than was thought. One of the problems is trying to get hold of information. I think people have been struggling to get hold of information from Post Office and from Fujitsu down the way to investigate records. No, it is not satisfactory how long it has taken. You are quite right.”

**

Angela van den Bogerd:  It is not that we are not sharing information; it is about understanding the format the information is in.

**

Paula Vennells:

Second Sight are independent; there will be disagreements about requirements for information at some stage. I do know that where we are able to we have shared everything we possibly can.

**

Nadhim Zahawi (Conservative MP on the Committee):  “Mr Henderson, did you ask for the e-mails from 2008?”

Henderson: “Yes, we did.”

Zahawi:  “And you were provided with 2009 instead?”

Henderson: “We were provided with 2009. We were told at the time that with the first batch there were some technology issues relating to the provision of the 2008 e-mails. Two years down the line, we still don’t have those.”

Zahawi:  “You are saying that you actually asked for the correct ones, and you still don’t have those?”

Henderson: “Yes.”

**

Henderson:  “The final category, and probably the most important, is full access to the legal and prosecution files held by Post Office.”

Chair: “I understand that they did do that initially.”

Henderson: “Initially, yes; but for the past year access to those files has been blocked…”

**

Henderson: “When we were first appointed, we were told that the principle behind what we were doing was to seek the truth, irrespective of the consequences.

“We could look at anything that we felt,  as an independent investigator, was necessary to conduct our investigation. Unsurprisingly, with cases that came into the early part of the scheme that involved a criminal prosecution, we were provided with full access to a small number of files.

“As further cases were accepted into the scheme, we unsurprisingly asked for full access to those legal files. Responses were to the effect, ‘Under no circumstances are we going to give you access to those files. You are entitled to the public documents that would normally be available to the defendant if the case had gone to trial.’

“We felt it was necessary for us to review the internal legal files, looking at the depth of any investigation that had happened and possibly even legal advice relating to the prosecution…”

Zahawi:  Angela, will you provide it? If your CEO cannot answer, will you provide the prosecution files as requested by Ian Henderson?”

Angela van den Bogerd: Mr Zahawi, as Ian said, we have previously provided them, and we have provided the information necessary for those investigations as a pack. So there are thousands of pieces of information already provided to Second Sight.”

Zahawi:  “But we have heard already that he has been obstructed from getting the legal files that you use internally, which he used to get before. That is what I have heard. Will you now commit to providing those files going forward?”

Angela van den Bogerd:  “We provided them to Second Sight early in the investigation.”

Zahawi: Will you provide them?

Angela van den Bogerd:  “Just let me finish, please. We have been working with Second Sight over the last few weeks to get to an understanding of what we need to provide. We are working through those, and information has been flowing.”

Zahawi: “So you do not understand what you need to provide?”

Angela van den Bogerd:  “We have been providing what we agreed we would provide at the outset. In some cases, Second Sight have concluded their investigation on that basis. What has been asked in the last few weeks is for access to further information that we were not providing under the agreement that we had.”

Zahawi:  “What he is asking you for – there is no wriggle room – is to provide the prosecution files going forward. Will you commit to doing that? That is all I am asking.”

Angela van den Bogerd: “What I am saying is that we have already been exchanging that information over the last few weeks.”

Zahawi: “So you have been providing them?”

Angela van den Bogerd:  “We have been providing that over the last few weeks.”

Zahawi: “Is that right, Mr Henderson?”

Henderson: “No, it is not, I am sorry to say…”

**

Henderson: “Chairman, may I add something by way of clarification? It is the general counsel of Post Office, to whom I have spoken, who said that he is not prepared to disclose to us the full legal files. I do not know to what extent he gave the same answer and advice to the chief executive of the Post Office.”

Binley: “Thank you, Mr Henderson.”

Chair: “That is very helpful indeed. Could you just repeat who it was for the record?”

Henderson: “The general counsel -the head of legal for Post Office.”

**

 PO approach to mediation dominated by lawyers?

Alan Bates:  “At the outset, the people who were involved with it, JFSA, Post Office and Second Sight, all thought we were doing one thing. We were heading in one direction.

“But since the scheme has moved forward, I think we are finding ourselves at odds with each other. People are becoming far more partisan in their approach. Post Office has gone straight to lawyer-based support and response to queries. So it has become very unsatisfactory.”

Culture of denial?

Paul Blomfield (Labour MP on the Committee)  … “It appears that there is a culture of denial about the problems…”

Vennells:  “In terms of the culture, the reason I came today, is that I really want the Committee to hear that that is not the case. We put this scheme in place because we wanted to find out what was going on.

“Inevitably, because of their distress, the people who have gone through this are very vocal and very challenging about what they have been through – quite rightly so. As we have gone through the investigations, we have looked at where there are things we could improve. There were things that we could improve, absolutely.

“The only point I am trying to make to the Committee is that for the vast majority of people—70,000 people are using the system today, and half a million people over the last 10 years have not had those problems.

“I am not denying at all that there are problems. Of course there are—there are problems in any organisation – but this is about the reputation of the Post Office.

“This system works well for the vast majority of people. For those it does not work for, we are doing our utmost. I have worked for huge businesses before, but I have not worked for any that could have done this as well as we have, in terms of our rigour and the detail we have gone into to try to get to the bottom of this.”

Blomfield:  “We have heard considerable evidence from all involved that the system usually – overwhelmingly works well, but the focus of this inquiry is how the Post Office handles that small number of cases where it does not.”

Vennells: Yes.

**

Henderson:  “On the culture point, until we issued our interim report, the mantra that we regularly heard from Post Office was, ‘Horizon is perfect. We have total confidence in the Horizon system’.

“That position is slowly changing; however, in the limited cases that we have looked at – we are very concerned about the prosecution cases – we have seen no evidence that the Post Office’s own investigators were ever trained or prepared to consider that Horizon was at fault. That was never a factor that was taken into account in any of the investigations by Post Office that we have looked at…”

Audit trails

Angela van den Bogerd: … “The information that the sub-postmaster needs to balance their accounts is available in branch. There has always been an audit trail in branch. Before we went on to the online system in 2010, the reports were available for a period of 42 days.

“They could look back into their accounts for 42 days. Since 2010, that has extended to 60 days, so the information has always been available in branch. The difficulty with some of those cases is that they did not declare their loss at that time. In some cases, they have hidden the loss and falsified their accounts, and we have only discovered later that the error occurred. Those reports in branch have then obviously expired.”

**

Ian Henderson: May I come back on a couple of points made by Angela? She is quite correct on the numbers that she has quoted, referring to the audit trail available to sub-postmasters; for a long time, there was a limit of 42 days. Unfortunately, the transaction corrections that they are asked to accept – if they do – often generate losses for that branch and that sub-postmaster.

“When the audit trail was 42 days, the delay in producing the corresponding TC [transaction correction] that they needed to investigate was in the order of three months. It was three months late, and therefore outside the 42 days of the audit period.

“That, I would argue, is another example of a systemic flaw in the overall process, because we have a mismatch between the TC – the adjustment made by Post Office – and the audit data available to the sub-postmaster.

False accounting

Henderson:  “False accounting is a relatively easy charge to bring. When we have spoken to sub-postmasters who have been charged with that – some of whom have pleaded guilty – their response has been, ‘I had no options; I was not aware at the time of the range of options available to me at the end of a trading period, when I was faced with a substantial discrepancy that I didn’t understand and hadn’t investigated properly, and on which I had had inadequate support by the help desk. I therefore did the only thing that I felt was possible or sensible at the time: I entered false figures into my month-end balances. I did that out of desperation because I did not know what else to do’

“Bear in mind that the help desk does not operate 24/7. At the end of trading periods, often when sub-postmasters are working late at night to try to resolve a significant discrepancy, the help desk is not even available.”

Angela van den Bogerd:  “The help desk has always been available after the trading hours of the post offices – until 10 o’clock at night, back in those days – and if they were unable to get hold of somebody, they were able to leave a message for a call back.

“There was always some access to help in those situations… a sub-postmaster has a choice. At the time that they make their balance and find that they have a discrepancy, they have a choice to declare that loss and make us aware of that, or – as happened in some cases, unfortunately – cover up that loss and hide it from the Post Office. That is false accounting.

As Ian said, that charge is quite easy to bring, because it is evident, but they have a choice at that point and they are not forced to do anything; it is a conscious decision.”

Are subpostmaster  “losses” in a secret PO suspense account?

Henderson:  “We know that every year Post Office takes the credit of its profit and loss account, generally a six-figure number, from a suspense account. The concern raised by a number of sub-postmasters is that some of those credits actually relate to transactions where they have suffered a loss.

“We have been asking for that data since July last year. We had a meeting with the new finance director of Post Office yesterday and we hope we will make some further progress, but it is already almost nine months since we first asked for that data.”

Thousands of abandoned helpline calls

Binley:  “Evidence has been submitted to us by a very high-level person, James Arbuthnot (MP – leader of Parliamentary campaign for justice for postmasters), who has been looking into this matter for a considerable time. As part of his evidence, he says: ‘The Post Office has accepted that its support systems left much to be desired, and as a result it has changed them. The sheer number of calls to the Post Office helpline is astonishing. The calls are from professional users,’ and this is the bit that counts, ‘but tens of thousands of them were abandoned; they were not just made, but abandoned.’ Does that cause you considerable concern?”

Angela van den Bogerd: “… We do not want to have tens of thousands of calls abandoned … Obviously, as you are aware with contact centres, when people ring up initially, there might be other options that take them to a different route and they therefore go a different route and they put the phone down. It does not necessarily mean they are not answered.”

Destroyed documents

William Bain (Labour MP on the Committee):  “We have heard some evidence that some documents that could be relevant in mediation have been destroyed as a result of your particular policy. What steps are you taking to ensure that that does not happen?”

Vennells:  “As soon as we went into the scheme, I had a conversation – in fact, I have had it several times because I know that people are concerned about this – with Mr Arbuthnot and Mr Bates – to reassure them that nothing would be destroyed when the scheme was set up.

“Prior to that, we did not know that we were going into the scheme. We have a data retention policy that is the same as many businesses. Some of these cases are regrettably very old, so some of the data are simply not there. As soon as the scheme started, we made sure that we did not destroy any data related to it at all. That would have lacked integrity.”

Bain:  “And your policy is to keep everything from the last seven years?”

Angela van den Bogerd:  “Sorry, not everything. The seven years is the information in the Horizon system. The hard files for post offices are kept for six years. Within branches, there are different retention periods, but the majority of where we got the information from is the Horizon system, and that is seven years.”

Bain:  “Why did you make that particular distinction when you drew up the policy?”

Angela van den Bogerd:  “So normal retention policies for commercial organisations are for six years. That is in line, usually, with the statute of limitation. We have gone a little bit further with the Horizon system, where it is seven years.

“In branch, we ask them to keep some reports for two years and others for six years. It comes down to volume and how you store paper. That is a decision that most commercial organisations take, because it costs to store all the data.”

PO deficient  in duty of care to subpostmasters?

Chair: “Do you not accept that the Post Office has been deficient in its duty of care towards the sub-postmasters who are so important in reinforcing that positive brand?”

Vennells:  “Not at all, in terms of the vast majority. As we have said to you today, yes, in some cases we could have done better in terms of training and support.”

Improvements

Katy Clark:  “The Post Office will obviously be very aware of the high level of concerns among MPs on a cross-party basis about this issue – a huge number of MPs have been involved in the group that Sir James Arbuthnot has been involved with – and they have no doubt read the transcript of the recent Adjournment debate, which made very clear the anger among many MPs about how this whole matter has been handled. What do you think you are doing or could do to address these concerns?

Vennells:  “I completely understand that MPs are concerned, quite rightly, because people have suffered some pretty terrible things as a result of what has happened.”

Clark: “Yes, with people going to jail.”

Vennells: We have listened very carefully. We have been in contact with all the MPs. We offered all the MPs with constituents involved in the meetings, at the beginning of the process and throughout it, after the Westminster Hall debate—

Clark:  “I am not particularly concerned about the MPs; I am concerned about what the Post Office is doing to get its own act in order. What lessons are you learning from everything that has happened so that you can improve your organisation?”

Vennells:  “I think we have learned a number of lessons as we have gone through this. You have heard about the improvements we have made in training and support. The other thing that is important for us today is that the Committee can hear both sides, because the Post Office has put a huge amount – ”

Katy Clark: I asked a question, and I would like an answer to the question. What are you doing, or what have you done, to improve the way that your organisation works?

“For example, one of the issues that has been put to me is that there is a lack of qualified people within the Post Office hierarchy with whom it is possible for a sub-postmaster to have a discussion when there is a technical issue to do with the Horizon system. What are you doing to improve that, for example, and what other lessons have you learned?”

Vennells: I would say that that isn’t true. If sub-postmasters have queries, they can escalate them as high as they need to. I get phone calls and e-mails, and I personally take them on a regular basis.

Clark:  “But you are not an IT specialist?”

Vennells:  “If they have an IT query, I will immediately go to my CIO, and she is prepared to talk to any sub-postmaster about it. The organisation wants to help sub-postmasters to run post offices properly- of course we do- and we have put ourselves out as much as we possibly can.

“Where we have got it wrong, because human error happens, then we have put in really significant changes in terms of the training and support that is available. The fact that you can access training 24/7 has to be a significant improvement.

“We have set up a branch user forum – we have sub-postmasters coming to it who are very critical of us, which is why we did it – is to learn the things that we can improve.

“We would not have wanted to be in this situation. As soon as I found out about it, we set up the [mediation] scheme. We put in hours and hours and hours of detailed work to make sure that we have done investigations as thoroughly as we can. At the same time, we have a list of things that we will deal with as we go along.”

Clark:  “What do you think needs to be done as a result of everything you have learned from that process so that these kinds of problems do not happen again?”

Vennells:  “We have outlined some of those things already, such as the way that we listen to sub-postmasters through the branch user forum, and the training. It seems to me that one of the big issues to come out of this is that in some cases – not the majority, but I accept Mr Blomfield’s point that this is about the small number of cases here today – we could have done things better.

What should happen now?

Alan Bates: “First, Post Office has to be investigated – it has to become part of the investigation. It is trying to act as an agent and as everything – it is trying to control the information coming out, what is released and all the rest of it.

“It has to be investigated and taken out of the scheme, which Government have to take over. They really do. While Post Office is still sat there controlling all the information, we will never really find out the truth.”

George Thomson:  “For a tiny percentage of complaints over a 15-year history, it would be nonsense for the Government to take over. Let’s bring it to conclusion as quickly as we can.

“The cases that are in mediation, let’s deal with them. Let’s get out the way, let’s move forward and let’s try to make sure that Post Office has a decent future as a stand-alone company outside the Royal Mail group. Let’s get on with that.”

Andy Furey: I would suggest that the mediation scheme needs to be opened up for some of the contemporary cases that are ongoing today.

“I would ask the Post Office to withdraw any obstacles in the way of CWU [Communication Workers Union]  representing postmasters. Mark gets lots of obstacles, such as lack of recognition for representing postmasters.

“The filtering through the walk-in group to stop cases getting to mediation needs to be removed and they need somebody to bring some independence in the mediation scheme beyond the current people involved.”

“Kay Linnell:  “The initial complaint review and mediation scheme, with 150 cases in it, needs to be drawn to a conclusion by making the Post Office go back to the original brief and stop doing this legal defence thing.

“But I also think that a permanent, Government-based solution for new complainants to a third-party individual such as an ombudsman for future fault reporting, without any recrimination or redress from the Post Office on the person raising the complaint, is an essential way to go forward.

“We need something for future complainants to do, albeit that the MPs have been fabulous. It should not be necessary for somebody with a current problem to fall back on their MP and raise it in that way.”

Mark Baker:  “We [the Communication Workers Union] are an organisation that is excellent at advocacy and being able to sort the weaker claims out from the stronger claims; and we know how to work with Post Office.

“We know how to challenge it—we are not in awe of it, as some people are. We would make a valuable contribution to improving and moving the mediation scheme on.

“If that cannot be achieved, I would support what Alan said: perhaps the Government should take it over and get it sorted out.”

Business, Innovation and Skills Committee hearing on Post Office Horizon system and mediation scheme – 3 February 2015