In line with our emergency response for nuclear incidents obligations, my Department has been developing a new software application to support the management of nuclear emergencies. The new system will replace two ageing legacy systems managed by BEIS and MOD.
My Department is procuring application management and support (AMS) services presently. We intend to indemnify the selected supplier in respect of liabilities that they may incur if employees of the former supplier of these services bring employment law claims against them in relation to the application of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).
In relation to this, I have today laid before Parliament a departmental minute giving notice of the Department incurring this contingent liability in the form of indemnity protection provided to the selected supplier.
We believe it is appropriate to incur this contingent liability, to ensure that the new software system can go live without any delay. We consider the provision of this liability as the best value for money option to ensure the new service is available.
Problems with the Post Office’s Horizon IT system have affected the lives and livelihoods of many postmasters.
Over the years, the Horizon accounting system recorded shortfalls in cash in branches. The Post Office at the time thought that some of these were caused by postmasters, and this led to dismissals, recovery of losses by Post Office Ltd and, in some instances, criminal prosecutions.
A group of 555 of these postmasters, led by former postmaster Alan Bates, brought a group litigation claim against the Post Office in 2016. It is clear from the findings of Mr Justice Fraser, just how wrong the Post Office was in its relationship with postmasters and that there were clear failings with the Horizon system.
The Government pay tribute to those postmasters and colleagues across the House who continue to shine a spotlight on such an important issue.
The Post Office reached a full and final settlement with claimants in the group litigation in December 2019 and apologised for its past failings. That settlement was an important step towards addressing the wrongs of the past, but it was only the start of a long journey for the Post Office to repair and strengthen the relationship with postmasters.
As part of the settlement the Post Office agreed to set up the historical shortfall scheme. The scheme was open to current and former postmasters who did not participate in the group litigation claim against the Post Office and did not have a criminal conviction, but who may have experienced and repaid Horizon shortfalls. It is therefore an important step in making sure that all those who were affected have the opportunity to seek resolution.
Today the Government are publishing their ambitious plans to strengthen the UK’s audit, company reporting and corporate governance framework, “Restoring trust in audit and corporate governance”, which I will lay in the House. These proposals will ensure the UK’s markets are at the cutting edge of global best practice.
British business is built on trust, so it is vital that our leading companies can command the confidence of the financial markets, investment community and wider public as the UK recovers from the effects of covid-19. Our comprehensive package of reforms will strengthen reporting, audit and governance in the UK’s largest companies. The proposals will help cement the UK’s position as a world-leading destination for investment by helping to ensure that our leading companies are governed responsibly and that investors, creditors, workers and others have access to the information they need.
Our proposals respond to the independent reviews led by Sir John Kingman, Sir Donald Brydon and the Competition and Markets Authority, and I would like to thank each of them for their valuable contributions. Today’s publication sets out a balanced and wide-ranging package of reforms which will lay the foundations for British companies to build back stronger as the UK recovers from the effects of covid-19 and in the wake of recent corporate failures. Restoring business confidence, but also people’s confidence in business, is crucial to repairing our economy and building back better from the pandemic.
In particular, the Government’s proposals include:
supporting directors of large companies in planning for long-term success through annual resilience statements: setting out how they are mitigating short and long-term risks, for the benefit not only of shareholders but also of local communities, suppliers, customers and the wider UK economy;
The scheme closed in August 2020 and received over 2,400 applications. This number was higher than the Post Office had anticipated when the scheme was established. All of these applications of course need to be properly assessed.
The Post Office is committed to the successful delivery and timely completion of the historical shortfall scheme. However, the cost of the scheme is beyond what the business can afford.
The Government will therefore provide sufficient financial support to the Post Office to ensure that the scheme can proceed, based on current expectations of the likely cost. The Secretary of State for Business, Energy and Industrial Strategy is providing this support in his capacity as sole shareholder in the Post Office.
There are two reasons this is being done.
First, we must ensure that those postmasters who have applied to this scheme are able to seek redress. By supporting the scheme, we will make it possible for these postmasters to be fairly compensated.
Secondly, we must protect the post office network. As we have seen through the pandemic, it provides essential services to citizens across the country.
Without this support the Post Office would be unable to deliver fully the historical shortfall scheme and it would be unable to continue to operate its network as we know it today. This is a critical intervention that benefits current and former postmasters and the millions of customers that rely on their local post office branch.
The final cost of delivering the historical shortfall scheme will be determined over the coming months, including through the work of an independent panel. This support will ensure that postmasters are appropriately compensated, however we will not spend more of taxpayers’ money than is necessary to ensure the scheme meets its objectives.
The Post Office is rightly contributing what it can from its own resources to the delivery of the scheme.
While it is important that the scheme remains independent of Government it is also important that this shareholder support delivers value for money. The Government are confident that the controls in place in the design of the historical shortfall scheme will make sure this is the case.
The Post Office will make the first offers to applicants shortly. However, given the number of applications it will take time to work through all the claims that the Post Office has received. The Government would therefore like to thank postmasters in advance for their patience and reassure them that their claims will be properly handled.
The Horizon dispute has affected the lives of too many people and supporting the scheme operated by the Post Office will help them right the wrongs of the past.
We must also ensure that a situation like this can never be allowed to occur again. That is why this Government have asked Sir Wyn Williams to lead the Post Office Horizon IT inquiry.
Sir Wyn’s inquiry will work to fully understand what happened, gather available evidence and ensure lessons have been learnt so that this cannot occur again. It will also look specifically at whether the historical shortfall scheme is being properly delivered. The Government look forward to receiving Sir Wyn’s report in the summer.
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making directors of the country’s biggest companies more accountable when they breach their duties, with the prospect of fines or bans only when there are serious failings, such as misleading accounts or hiding information from auditors. This measure is targeted at the very largest companies in the UK, not start-ups and small businesses, and would not affect the vast majority of directors. Instead, it reflects the level of responsibility that comes with a board position in the largest companies;
addressing “rewards for failure” through mechanisms to claw bonuses back following misconduct or management failures;
measures to unleash competition and strengthen governance in the audit market, overseen by a new regulator, to increase choice and drive up resilience;
recognising the economic importance of the largest privately-owned companies by ensuring they meet the highest governance and reporting standards;
making company reporting more transparent and informative: so that they pay out dividends only when they have sufficient reserves, and enabling companies to have a wider range of metrics audited, for example climate disclosures.
These proposals will all be backed by the creation of a strong and independent statutory authority for audit, corporate reporting and governance. Replacing the Financial Reporting Council, the new regulator will be given much stronger powers to enforce standards. We also propose that it will have the power to impose an operational split between the audit and non-audit functions of accountancy firms, to reduce the risk of any conflicts of interest that may affect the standard of audit they provide.
The UK is consistently placed as one of the leading destinations for foreign investment in Europe and around the world. These reforms will sustain and build on the UK’s position, and reinforce the Government’s wider work to ensure the UK remains a world-class destination for investment.
The reforms cover the whole of the UK since, although company law is devolved in Northern Ireland, to date the Northern Ireland Executive has preferred to align with Great Britain in this area. The Government will also continue to work closely with the devolved Administrations in Wales and Scotland in developing the final provisions.
In light of the challenging circumstances for companies, the Government’s consultation period will run for 16 weeks. The Government then intend to bring forward legislation when parliamentary time allows. We will implement reforms in a proportionate way that does not prove burdensome to business, for example considering a limited exemption for newly listed firms from the new requirements.
I will place a copy of the three supplementary publications, including an impact assessment of the proposed measures, in the Libraries of both Houses.