Postmasters with Overturned Convictions: Settlement Funds

Statement

My Lords, with the leave of the House, I shall now repeat a Statement made in another place by my honourable friend the Parliamentary Under-Secretary of State for Small Business, Consumers and Labour Markets. The Statement is as follows:

“Mr Speaker, with permission, I will make a Statement on the latest steps that the Government are taking to ensure that swift and fair compensation is made available to postmasters whose Horizon-related convictions are quashed.

The House is very well aware of the terrible impact felt by the many postmasters affected by issues with the Post Office’s Horizon IT system. These distressing consequences have been widely documented in the courts, in the 2019 GLO judgments and the more recent Court of Appeal judgments, as well as in the media. I have met postmasters personally to hear how their lives and the lives of their families have been affected by these events. No one who has heard these stories could fail to be moved by the impact that these events have had on individual postmasters’ lives and their fight for justice over a number of years. I also pay tribute to colleagues on both sides of the House who have supported postmasters in their efforts to expose the truth and see justice done.

I would today like to take the opportunity to update the House on the latest steps the Government are taking to ensure that fair compensation is paid to postmasters with convictions that have been quashed due to Horizon evidence being essential to their prosecution. In the first instance, we worked with the Post Office to deliver interim payments of up to £100,000 for each eligible postmaster. I informed the House of the Government’s decision to provide funding for these interim payments last July. Government funding was necessary because the Post Office does not have the necessary funds to deliver the appropriate compensation. That is why it turned to BEIS, as its 100% shareholder, for funding for these interim payments.

I am pleased to report to the House that the interim payments are progressing well. The Post Office has received 66 applications for interim payments. Of these, 62 offers have been made, and of those, 50 have been accepted and payments made. Payments made to date have all been for the maximum interim amount of £100,000. I am pleased that these interim payments have helped to deliver an early down payment on the compensation due to affected postmasters in advance of full and final compensation packages being agreed. But that is only the first step. It is right that the focus now shifts to the agreement of full and final settlements. That is why the Government have been working with the Post Office to agree funding to facilitate the Post Office making final compensation payments to postmasters. As I announced in a Written Ministerial Statement to the House yesterday, the Government have now agreed to provide funding for that purpose. We are working with the Post Office to enable the final settlement negotiations to begin as soon as possible.

To be clear, the Post Office is not proposing a new compensation scheme to deliver full and final settlements. The Post Office is instead proposing to follow a process of alternative dispute resolution in which it will aim to agree an appropriate level of compensation with each postmaster, recognising the individual circumstances of each case. The Government support the Post Office in its aim of reaching fair settlements with postmasters via alternative dispute resolution, as we believe that this will lead to speedier delivery of compensation to postmasters.

I am not in a position to give significant detail today about this process, as the final detailed approach to these negotiations will need to be discussed and agreed between Post Office Ltd and individual postmasters and their representatives. I am sure that colleagues will agree with me that it is important that the Post Office listens to postmasters’ views and that these are taken into account in how these negotiations proceed. While it will be for the Post Office to negotiate settlements directly with claimants and their representatives, the Government will work closely with the Post Office to ensure that fair compensation is delivered. Given the impacts on so many individual lives, it is right that the Government stand behind the Post Office and provide this funding to ensure that fair compensation can be made to individuals who were wrongly prosecuted and convicted on the basis of unreliable Horizon evidence. While compensation cannot change what is past, it can provide a degree of recompense for past wrongs.

In addition to providing compensation, it is important that we learn lessons so that something similar can never happen again. That is why the Government have set up the Post Office Horizon IT Inquiry and put it on a statutory footing to ensure that it has all the powers it needs to investigate what happened, establish the facts and make recommendations for the future. The inquiry has recently set out the full list of issues that it is investigating, and core participants have started to share key documents with the chair, Sir Wyn Williams, and his team. We will co-operate fully with the inquiry to ensure that the facts of what happened are established and lessons learned. I commend this Statement to the House.”

My Lords, that concludes the Statement.

My Lords, I thank the Minister for the advance sight of today’s Statement delivered earlier in the Commons. I know from previous questions and debate in your Lordships’ House—and he has said it again tonight—that he agrees in no uncertain terms that the sub-postmasters’ and postmistresses’ scandal is an absolute disgrace. It is an absolute disgrace on so many levels: financially, judicially, on a human level, on a systems failures level and, most worryingly, on a government oversight level.

We all know the details, but it is worth repeating a few of them. Hundreds of sub-postmasters were sacked or prosecuted in the space of 16 years and wrongfully labelled as thieves and fraudsters by the Post Office and our judicial system. Their lives were made hell, and all because of an IT glitch in the Post Office system that was known about.

What makes this even more shameful is the lengths the Post Office went to to hide it. The fact that the Post Office spent £32 million denying these claims and bullying those wrongly accused into false guilty pleas is bad enough, but what makes the story even worse is that we finally got to the truth of the case only when it made it to one of the highest courts of this land. Tens of millions of pounds of public money were spent trying to stop the case going forward. This meant, in effect, that nearly £100 million of taxpayers’ money was spent defending the indefensible and covering it up.

But even though all postmasters’ and postmistresses’ convictions—or, the question is: is it all of them?—have now been quashed, or are in the process of being quashed, and we are working through compensation, this has come too late for many: many postmasters and mistresses who were wrongly convicted and imprisoned, and some who have, sadly, passed away. So far, many postmasters and postmistresses have received only a fraction of their costs and expenses, as we have heard. This simply is not good enough, especially as there are cases of postmasters who have had to remortgage their houses and borrow money from family and friends to cover their legal costs.

My Lords, until 2011, I was an elected Member of the Welsh Assembly. I dealt at that time with the cases of a number of sub-postmasters from Cardiff and the surrounding area. It struck me immediately when they got in touch with me as a group, that it was highly unlikely that so many sub-postmasters were crooks. Here were a group of people who were upright, respected citizens at the hub of their communities. It seemed ludicrous from the start, and it is a scandal that this has been allowed to go on so long in the face of mounting evidence of a problem with the whole thing.

Some 736 sub-postmasters and postmistresses—an average of one a week—were prosecuted. There was really bad faith on the part of the Post Office, in that it pretended to the individuals that they were alone. It hid from them the fact that there were hundreds of others. It took a long time for many of them to discover that they were in the company of a very large number of colleagues. Some of them went to prison, following convictions for false accounting and theft. Many were financially ruined and were shunned by their communities. Some went bankrupt as they tried to make up the shortfall in order to avoid prosecution. Some committed suicide, and many have died since, some of them worn out by the fight that they had to undertake.

It is quite clear that the original process for postmasters to gain recompense was flawed. Some 555 of them who joined in a group action were forced to settle because they ran out of money to continue with their action. They were paid far less in compensation than they had paid to the Post Office to balance their accounts. Does this Statement here today mean that those people will now have their cases reviewed and receive proper fairness in their compensation?

Can the Minister give us a timeframe for when those affected by the scandal will have their cases dealt with? Will it be 2022 when we see the end of this terrible process, or is it, in his estimation, going to take longer? Will the Government undertake to compensate victims for consequential loss as well as financial loss as part of the commitment today? Many of them suffered emotionally so badly, and their families suffered too.

I thank the noble Lord, Lord McNicol, and the noble Baroness, Lady Randerson, for their points. Almost uniquely in my time on the Front Bench, I agree with virtually everything that both noble Lords have said. The noble Lord, Lord McNicol, said the situation was an absolute disgrace; the noble Baroness, Lady Randerson, referred to it as a scandal. If anything, these are almost understatements when one considers the extent of the total travesty that has occurred. There is no party-political difference in these matters. This is not a recent scandal: it has gone on for decades under previous Labour Governments, the coalition Government and this Government. Obviously, we cannot go back and right the wrong of the clear, manifest injustice of the past, but we can provide adequate levels of compensation, and we are doing that.

I also want to join the noble Lord, Lord McNicol, in paying tribute to the parliamentarians on all sides who drew attention to this scandal. Hopefully, my noble friend Lord Arbuthnot will intervene shortly; he played a crucial role both in the other place and in here, as did a number of MPs on both sides, along with—to be fair—some campaigning journalists. Nick Wallis from the BBC played a major role in bringing it to account. Of course, there is a full inquiry going on now with statutory powers, which will hopefully get to the bottom of exactly what went wrong and who is responsible. My friend in the other place, Paul Scully, said that if there are any allegations against Ministers—either serving or previous—we will hold our hands up and acknowledge that mistakes have been made, which is only correct.

On the question of compensation, the funding we announced yesterday is for compensation for postmasters with convictions that have been quashed due to Horizon evidence being essential to their prosecution. There is a separate scheme—the historical shortfall scheme—that more than 2,500 people applied to for compensation, and the Post Office is working through those applications. The Government are ensuring that it is being pushed forward as quickly as possible. On the 555 who took the first court cases about Horizon against the Post Office, the settlement reached in 2019 was full and final. However, as the Minister for Postal Affairs said this afternoon in another place, it is important to acknowledge the work they have done in bringing the facts to light. The Minister for Postal Affairs has committed to continue to work with them to see what we can do.

My Lords, I acknowledge that this is very good news and I am grateful to my noble friend for the work that he is doing and has done behind the scenes on it. Can I press him on the question asked by the noble Baroness, Lady Randerson, about why this Statement is limited to sub-postmasters who have had convictions overturned? Surely the same moral principles apply not just to those who have been wrongly convicted but to those who were acquitted, to those who were wrongly sued, and to those, such as Lee Castleton, who were bankrupted and have not come out of that, including the 555 in the group litigation. In another place this afternoon the Minister hinted that he was softening the Government’s line on full and final settlement. Can my noble friend confirm that this is the case?

Before I answer the noble Lord’s question, I again pay tribute to the work that he has done over many years on this scandal to make sure that the world knows the truth about what took place. He makes a valid comment about the similarity of moral principles between the various cases. I can go no further than to confirm what the Minister said in another place. I will quote it to him in full:

“the 555 sub-postmasters who were part of the High Court case performed a massive public service by exposing the wrongdoings within the Post Office, and I recognise the deep frustration at the fact that because they agreed that the settlement with the Post Office would be a full and final one, they do not qualify for these compensation schemes. I have met some of those people and, as I said, I will continue to work on what more we can do.”

I, like everyone else, pay tribute to the noble Lord, Lord Arbuthnot, for the work he has done. I also acknowledge, as he has done, that this is significant, because it means that central government will fund all the compensation.

I welcome what the noble Lord, Lord Callanan, said in answer to one of the questions from the Front Benches. To paraphrase, he said, “We know there was a terrible scandal. What we’ve got to do now is provide adequate compensation for those who were affected.” We all understand what the scandal was; Mr Justice Fraser in the High Court has laid it out. It involved the Post Office, despite senior management knowing that there were problems with the IT, which was probably identifying wrong shortfalls, nevertheless allowing sub-postmasters to be charged in millions of pounds for those shortfalls, in some cases allowing them to be prosecuted and in others allowing those who were prosecuted to be sent to jail. With all the people who suffered in this way, the Post Office, knowing that the IT system was unreliable—that is what Mr Justice Fraser said—nevertheless allowed them to be prosecuted or sued and in some cases bankrupted. They are all entitled to compensation.

There are three categories. First, there are those who went to prison or were convicted; some of them may not have gone to prison. They must be compensated —there is no doubt about that. Secondly, there are those not covered by the settlement—that is, people other than the 555. Can the noble Lord, Lord Callanan, confirm that they will be compensated? There is no other basis—no possible distinction that can be drawn with them—and there is no full and final settlement argument in respect of them. Thirdly, there is the group of people who were party to the settlement. Because he is well informed on this, the noble Lord will know that £56 million was recovered in the settlement and £46 million of that went on costs—he is nodding because he is clever and knows everything. That left £11 million for 550 sub-postmasters, whose average loss was £700,000. They were given £20,000—that is all they got. Surely, if we are keen that they be fairly compensated, that third category should also be compensated. Can the noble Lord deal with each of the three categories I have identified?

I agree substantively with many of the points that the noble and learned Lord made. He is tempting me to comment on the lawyers of his profession who took part in funding the case of the 555 members and the amount that went on legal fees, which perhaps I should not do in this House. I sympathise greatly with many of the points he made. Perhaps I would go even further and say that even when the Post Office knew about many of these problems, it appears it then attempted to cover it up. However, these facts will emerge in the inquiry that is taking place. The judge who is leading it is doing extremely well and is progressing with exposing that injustice.

Those outside of the 555 settlement are able to secure compensation through the historical shortfall scheme, which is the other one I mentioned in my response to the noble Lord, Lord McNicol. On the third category, Paul Scully in the other place—I quoted his words earlier—certainly went further than the Government have gone before on those points, and he has promised to work with those who were affected.

My Lords, I absolutely join with others in welcoming this Statement and join in the tributes paid by the noble Lord, Lord McNicol, to the noble Lord, Lord Arbuthnot. I also welcome the Minister’s praise for the journalist Nick Wallis, which is the main route by which I heard about this.

My noble friend Lady Randerson talked about the way that individuals were picked off and given to understand that they were the only ones in trouble. There is a certain uncomfortable echo of that in the way that all these different categories are being treated differently and put in silos. We have these 66 people covered by this new scheme—those who have been acquitted. Then we have the 555 civil litigants who settled, and then I think the noble Lord said that there are around 2,500 applicants to the historical shortfall scheme, and there may be others. So there are thousands of other people who are all being treated differently. It seems that we need some kind of holistic approach, because they are all in the same moral boat. They are all the victims of the most appalling scandal. It is not a political scandal but a public scandal.

My honourable friend Alistair Carmichael in the other House had a debate in Westminster Hall in which he referred to the ongoing problems in the attitude of the Post Office—the arrogance. Can we cut through that arrogance? Will the Government cut through it and treat all these thousands of victims of the Post Office in a similar way and not divide and rule, which is unfortunately the echo that is coming to me?

That is not an entirely fair comment. We as a ministerial team and a Government inherited this scandal. We are making endeavours within the powers and legal procedures that we have. We cannot ignore the fact that a civil court case has taken place and there was a full and final settlement. We have to negotiate within government for additional funding to be made available. I can assure the noble Baroness that the Minister for Postal Affairs is attempting to do so and is trying to work with the parties to bring this to a resolution. There is clearly moral equivalence between the different categories, even if there is not necessarily a legal equivalent at this stage. I am not a lawyer but, to be fair, there are differences in the cases. It would be right for the Government to try to compensate them all to the greatest degree possible within existing legal procedures, and my honourable friend is attempting to do that.

The noble Baroness referred to the culture of the Post Office. Again, her comment was a little unfair. The Post Office is under new leadership and it has committed to changing its ways. I can assure her that Ministers regularly discuss this matter with the Post Office. It has a programme of change, including the appointment of two recent postmaster non-executive directors to try to get some say in the senior leadership team from those working on the ground. I know that the new chief executive is committed to doing his best to overcome this scandal, right the wrongs and put the business on a sound footing in the future.

My Lords, having had previous responsibility for the Post Office, I am very well aware that Ministers are advised to stand firm on seemingly solid grounds, only for it to become clear in the long term that that is not defensible. This issue was probably the most disturbing thing that I had to deal with. Will the Minister take a deep breath and accept that the litigation involving 555 former postmasters who, as he said, performed a massive public service, was not conducted on a fair basis, and act accordingly?

I can certainly confirm what my noble friend has said in terms of briefings that I have given to Ministers. Indeed, similar briefings were given to me when I first started in the department. I went back and started to ask more questions. Paul Scully was new in his job at the time and I discussed the issue with him. We both agreed that we needed to do more. Since then, although it was not purely due to our actions, lots more information has come about, there have been various court cases and so on. It is certainly true that the culture of government is always to put up a firewall and try to stand firm. However, there are occasions when we just need to accept that things have gone terribly wrong and do what one can to put them right, which is what we are doing. I cannot go any further than the answers that I have already given in terms of compensation to the 555, but I have great faith in the Minister for Postal Affairs, who is responsible for this matter, and he will do whatever he can within the system.

My Lords, I know that the Minister has said that there is an inquiry, but are the Government confident, given what they already know, that such a scandal can never happen again?

I hesitate to give the noble Viscount an unequivocal assurance because no one can do that. I can certainly say from the current ministerial team that we are absolutely determined to learn whatever lessons we are told to learn by the inquiry, take on board its recommendations and put in place whatever measures are required to make sure that it never happens again.

My Lords, we are clearly united in agreeing that this is a scandal, and in our regard and respect for my noble friend Lord Arbuthnot. I refer to the 555 sub-postmasters who settled without knowing that more evidence was to emerge. As we understand it, the Post Office knew at the time that it was still in the wrong and had not disclosed information that later came to light.

It seems to me that the 555 have been let down by people in authority every step of the way and, if we are not careful, we are going to let them down again when they are clearly being dealt an injustice at this time. I am grateful for what my noble friend the Minister has said already, but I hope he can agree and acknowledge just how strong the feeling is that this matter is dealt with. Furthermore, is Fujitsu going to be liable for any of the funding that will be necessary to pay this compensation?

I think the answer to my noble friend is that these matters will be considered by the inquiry. I may even be right in saying that court proceedings are ongoing involving Fujitsu, so I had better be careful what I say. Again, I cannot go any further than what I have already been said about the 555. It goes back to the answer that I gave to the noble and learned Lord, Lord Falconer, earlier. One reason why the legal fees incurred in that case were so high is because the Post Office fought every step of the way and put in place the maximum legal barriers to those poor individuals receiving the compensation that they deserved. That is one of the matters that I hope will be inquired into properly and that appropriate conclusions will be drawn.