Government to bail out Post Office which can’t afford to pay compensation to subpostmasters

The government is stepping in to use more taxpayers’ money to compensate subpostmasters who were ruined by the Post Office Horizon scandal.

A government statement has revealed that if the Post Office – which it 100% owns – was forced to pay the compensation it owes to subpostmasters whose lives it destroyed, it would fail as a business.

Department of Business, Energy and Industrial Strategy (BEIS) minister Paul Scully said: “The cost of the scheme is beyond what the Post Office can afford.”

He added: “The government will provide sufficient financial support to the Post Office to ensure that the scheme can proceed, based on current expectations of the likely cost. The BEIS secretary of state is providing this support in his capacity as sole shareholder in the Post Office.”

Thousands of subpostmasters were blamed for unexplained accounting shortfalls, which were caused by errors in the Horizon computer system they use in branches. They were forced to pay the money back and many suffered criminal prosecution for financial crimes.

A Computer Weekly investigation in 2009 first revealed the plight of the subpostmasters in interviews with seven of those affected (see timeline below for more).

Subpostmasters did not have the luxury of an owner ready to step in and pay for the unexplained losses they had wrongly been blamed for. Some were sent to prison, many were made bankrupt and hundreds had their lives destroyed.

Following a High Court trial in 2019, which proved that the Post Office had wrongly blamed subpostmasters for financial losses caused by computer errors, the Post Office set up a scheme to compensate other subpostmasters affected.

Scully said that without financial 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 555 subpostmasters who took the Post Office to court and won a multimillion-pound case are not included in the Historic Shortfall Scheme, despite the fact that the £57.75m damages they received was reduced to £11m after costs were taken out. This left the victims with compensation payments that didn’t even scratch the surface of their losses, never mind their suffering. One subpostmistress who was wrongly convicted of theft was sent to prison and lost her livelihood, but received only £8,000.

Those included in the Historic Shortfall Scheme, which exists only because of the subpostmasters taking the Post Office to court, receive much higher and more appropriate levels of compensation.

The Post Office spent vast sums of money defending itself in the court battle. During the trial, it ramped up costs that it saw as an “existential threat” to its business, spending what is believed to be in the region of £100m.

There are loud calls for the government to pay the legal costs of the subpostmasters to leave them with more compensation, but the government has refused.

In January last year, Alan Bates, the former subpostmaster who spearheaded a campaign for justice and then the legal battle, wrote to Kelly Tolhurst MP, minister for small business, consumers and corporate responsibility – part of BEIS – calling for the government to pay costs so that the damages would be more appropriate.

Tolhurst replied in a letter: “I note that the settlement agreed with the Post Office included all legal and other costs. In those circumstances, I must respectfully refuse your request for payment.”

The government said the Historic Shortfall 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”.

After Scully’s announcement that the government would step in to fund the Historic Shortfall Scheme, Bates said: “If the government is so keen to right the wrongs of the past, they have to provide financial redress to the 555 subpostmasters who spent £46m just to have a few of the wrongs subjected to them disclosed and tested in court.”

Peer James Arbuthnot, who has campaigned for subpostmasters for many years, said: “Even now the government, the Post Office and Fujitsu are holding out against doing the right thing themselves – which is to pay full compensation for all the damage the subpostmasters and their staff have suffered.”

Next week, the Court of Appeal will hear the appeals of 42 subpostmasters who were convicted of financial crimes based on evidence from the Horizon system. Six subpostmasters have already had their names cleared. Some 900 subpostmasters were prosecuted between 2000 and 2015 by the Post Office using Horizon data, so there could be many more appeals.