Fujitsu put pressure on UK government to sign off troubled Horizon project, public inquiry hears

Pressure was put on the UK government by IT supplier Fujitsu to sign off the contract to roll out error-ridden software to automate accounting at 18,000 Post Office branches, the public inquiry has heard.

In 1998, following a meeting between the British ambassador to Japan and Fujitsu executives, the British embassy in Tokyo wrote to the UK government warning it of serious economic repercussions, including UK job losses and reductions in trade, if Fujitsu/ICL’s software contract with the Post Office was cancelled.

At this time, in the lead-up to its planned roll-out, the Horizon accounting and retail system from Fujitsu-owned ICL was beset with technical problems.

In what has become known as the Post Office Horizon scandal, these technical problems continued after the system was rolled out, and subpostmasters were blamed for unexplained losses that were caused by its errors.

More than 700 were prosecuted for financial crimes as a result, and many were sent to jail. Thousands more experienced life-changing suffering after the unexplained losses, including bankruptcy, and many were forced to use savings, sell possessions and borrow to cover the unexplained shortfalls. More than 80 former subpostmasters have so far had criminal convictions, based on evidence from the Horizon system, overturned.

During the Post Office Horizon scandal inquiry this week (23 November), evidence has emerged of the pressure the UK government was under to get the software project completed.

While questioning former department of trade and industry civil servant David Sibbick, inquiry barrister Julian Blake referred to a telegram to the government from the British embassy in Tokyo, sent in December 1998.

Implications on jobs

The telegram from the embassy in Tokyo followed a meeting between David Wright, British ambassador in Japan at the time, and senior Fujitsu/ICL executives, including vice-chairman of Fujitsu and chairman of ICL UK, Naruto. It warned there would be “profound implications on jobs and bilateral ties” if Fujitsu/ICL were to lose the Post Office contract. “Mr Naruto stressed the difficult and serious crisis Project Horizon faced,” the telegram said.

It revealed the cost of the project had already increased from £185m to £600m. “To date, ICL, supported by Fujitsu, had spent over £200m on the project,” it said. “ICL and Fujitsu would have to raise the remaining funds through bank loans. Due to delays setting up the project, ICL risks losing £500m by the year 2000. Loss of this scale against an outlay of £600m was unsustainable.” 

The telegram stated that Naruto and Fujitsu were worried the British government did not understand the seriousness of the situation.

“Naruto repeatedly stressed that the failure of the project will have serious repercussions for Fujitsu’s international standing ... [leading] to major internal difficulties within Fujitsu and the collapse of ICL,” it added.

“The tone of Mr Naruto's approach makes it quite clear that we have a major and potentially damaging problem on our hands. I do not think he was simply trying to make our flesh creep, by warning of the threat to ICL’s future viability. Fujitsu and Naruto in particular have worked for 18 years to prop up and then put ICL on a healthy footing. Naruto certainly meant what he said when he warned this now being under threat.”

At the time, there were major doubts in the government, Post Office and subpostmaster community over the Horizon project. The government was considering various options for the troubled project, including ending the contract with Fujitsu/ICL.

“We have to expect that ICL and Fujitsu would publicise their criticism of the project’s management,” the telegram said. “That would be damaging to the hitherto benign and mutually supportive style of relationship between the British government and Japanese companies invested in Britain.”

During the public inquiry hearing, former civil servant Sibbick was asked about time pressure coming from Fujitsu to get the contract done.

“Quite a lot,” he said. “As we understood it, there was a lot of pressure on [Fujitsu] to get this sorted out so that they could sign off their accounts, as I understand it, for that year, and a lot hinged on this as to whether Fujitsu would have no alternative but to kind of cut ICL loose, disband it, whatever they were going to do with it.” 

“I think it was, from the very beginning, seen within the Department of Trade and Industry as very important indeed, that it would have been a major blow, as I think I’ve already described, to the whole public finance initiative concept if a project of this importance and this stature, if you like, failed,” Sibbick told the inquiry.

“The other was the damage to the network of post offices up and down the country if the thing failed, so we had these twin objectives, as it were, to keep on trying to press ministers into a solution that dealt with these two issues, and I think it was the combination of them, the industrial one and the purely political one, the subpostmasters and the network, and so on, that, in the end, the force of those arguments were what prevailed.”   

Nobody at Fujitsu has been held to account for the suffering endured by subpostmasters wrongly blamed for losses caused by errors in its system. The company has also escaped financial penalty and has continued to win large IT services contracts with the UK government. 

Computer Weekly first reported on problems with the Horizon system in 2009, when it made public the stories of a group of subpostmasters (see timeline of articles below).