megaflopp - stock.adobe.com

News

Post Office and Fujitsu malevolence and incompetence means huge final taxpayers’ bill

The human tragedy caused by the Post Office scandal cannot be measured, but the total financial cost will be well beyond the £1bn set aside by the government

Karl Flinders
By
Published: 04 Sep 2024 14:05

The £1.15bn put aside to cover the costs of the Post Office Horizon scandal won’t go near meeting the bill, raising questions over how much Fujitsu should contribute.

Taxpayers are on the hook for at least £1.15bn to cover the costs of the scandal which saw subpostmasters and their staff blamed and punished for unexplained losses caused by computer errors. But beyond the three financial redress schemes for affected subpostmasters, the cost of lawyers, the public inquiry and the replacement of Horizon will make this figure just an instalment.

In January 2022, Computer Weekly broke news that the government had set aside £1bn to settle financial claims with affected subpostmasters. In October 2023, the government added another £150m.

But this was before ITV’s dramatisation of the scandal created a groundswell of support among the public and gave affected subpostmasters the confidence to come out of the shadows with their stories and financial claims. The government has also introduced legislation to exonerate 900 wrongly convicted subpostmasters en masse.

The Horizon software supplier Fujitsu has emerged from its unresponsiveness and admitted it is “morally obligated” to contribute to the costs related to the Post Office Horizon scandal. But so far it looks like the only money flowing between the government and Fujitsu will be ending up in the Japanese IT giant’s bank account.

During a Post Office scandal public inquiry hearing Fujitsu’s UK boss, Paul Patterson admitted that the IT company missed an opportunity to take action to prevent subpostmasters from being convicted for financial crimes after its software showed unexplained shortfalls in branch accounts.

Taking into account financial redress alone, it is clear that £1.15bn won’t go far. For example, one of the schemes designed to redress the financial losses of subpostmasters that have had wrongful convictions overturned sees an estimated 900 people eligible for a minimum of £600,000, which if all accepted would be £540,000,000.

The average settlement for the wrongly convicted victims so far has been over £600,000, but only a small potion has been settled. According to Post Office figures, 55 claims by wrongfully convicted subpostmasters have been fully settled at a cost of £35.43m, an average of £644,000. Many of those wrongly convicted are entitled to much higher payments, with those taking longer to settle more likely to be in this category.

Already the pot is dwindling and this is just one of the financial redress schemes. The Horizon Shortfalls Scheme (HSS), which was set up in 2019 after subpostmasters defeated the Post Office in the High Court Group Litigation Order (GLO), has so far accepted 3,930 applications. A total of 2,262 (57%) have accepted full and final payments worth more than £90m in total.

Then there is the separate financial redress scheme for subpostmasters that took part in the GLO. Taking out the 63 wrongfully convicted in the group who fall within the Overturned Convictions financial redress scheme, there are 492 eligible claimants. Only 238 have submitted claims so far, with 195 accepting offers and 190 of these receiving full and final payments. A total of 32 have refused offers, including Sir Alan Bates, who received an offer that was a sixth of the value of what he is owed, according to independent expert analysis.

Former subpostmaster Michael Rudkin said that he has not even been made an offer yet and is being asked to write a business plan to show what his business could have been worth 16 years after he and his wife’s lives were turned upside down.

Auditors turned up at Rudkin’s house and said there was a £44,000 shortfall at his branch in Ibstock, Leicestershire, and he was suspended. Rudkin was reinstated three months later, but he said that there were problems balancing the accounts. In 2009, after experiencing unexplained account shortfalls, his wife Susan – who worked at the branch – was prosecuted for theft.

She was convicted, received a 12-month suspended sentence, was ordered to carry out 300 hours of unpaid work and was placed on an electronically monitored curfew for six months. She has since had this wrongful conviction overturned.

Rudkin told Computer Weekly that by just adding up his yearly salary in 2008 when his contracted was terminated to now would result in well over a million pounds.

“The negotiations are a shambles and that’s putting it politely,” added Rudkin.

There are other costs beyond financial redress, including the lawyers advising the government in its dealings with financial redress and court cases, the public inquiry, and the sudden need to replace the Horizon system.

The Post Office has used lawyers for over a decade in an attempt to evade justice. A freedom of information request made by The Lawyer to the Post Office revealed that £256.9m has been paid to 15 law firms and two barristers’ chambers between September 2014 and March 2024.

The statutory public inquiry into the scandal is another cost that taxpayers will cover. According to the public inquiry’s financial reports, between 01 April 2020 and 31 March 2024, it has cost over £44m, with the final phase (seven) due to begin in September and end in November. There will then be a report from chair Wynn Williams.

Another huge cost to taxpayers is the system to replace Horizon. The Post Office is currently working on a project, known as New Branch IT (NBIT), which is planned to replace Fujitsu and Horizon.

As revealed by Computer Weekly in May, the project has hit major problems, and the Post Office has requested £1bn of extra public funding from HM Treasury to get the programme back on track. The budget has spiralled from £180m to £1.1bn, and the implementation has slipped from 2025 to 2030.

The Post Office is also negotiating an extension to its contract with Fujitsu, which could cost another £180m.

But the costs won’t end there. Since the Horizon scandal hit the headlines, subpostmaster have come forward with stories of their lives being ruined when using the Horizon predecessor, known as the Capture system.

The government has already commissioned an examination of the Capture system and costly lawyers are involved. There are likely to be significant claims from subpostmasters, with almost 50 users prosecuted after experiencing unexplained shortfalls. Capture was used from the early 1990s until Horizon’s introduction in 1999, with thousands of users.

Furthermore, the huge cost to taxpayers of the group litigation order in the High Court in 2018/19, over £100m, must be factored into the final bill for taxpayers.

The £1.15bn will be a down payment by taxpayers, but how much will Fujitsu pay?

The Post Office scandal was first exposed by Computer Weekly in 2009, revealing the stories of seven subpostmasters, including Alan Bates, and the problems they suffered due to accounting software. It’s one of the biggest miscarriages of justice in British history (see below timeline of Computer Weekly articles about the scandal, since 2009).

• Also read: What you need to know about the Horizon scandal •

• Also watch: ITV’s documentary – Mr Bates vs The Post Office: The real story •

Timeline: Computer Weekly articles about the scandal since 2009

Read more on IT for retail and logistics