By Tony Collins
After 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.”
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.”
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.”
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?”
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.
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: “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.”
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…”
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.
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.”
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.”
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