1 Thursday 25 July 2024 2 (9.45 am) 3 MR BEER: Good morning, sir. Can you see and hear us? 4 SIR BRIAN LANGSTAFF: Yes, thank you very much. 5 MR BEER: May I call Sir Vince Cable, please. 6 THE RIGHT HONOURABLE SIR JOHN VINCENT CABLE (sworn) 7 Questioned by MR BEER 8 MR BEER: Good morning, Sir Vince. My name is Jason Beer 9 and I ask questions on behalf of the Inquiry. Can you 10 give us your full name, please? 11 A. John Vincent Cable. 12 Q. Thank you. For those listening and watching, if I'm 13 speaking in more than usually loud voice today and if 14 I'm getting closer to the microphones than is usual, 15 there is a good reason for that, which Sir Vince 16 understands? 17 A. Thank you very much. I appreciate it. 18 Q. Can you look at a witness statement that you've kindly 19 prepared for the Inquiry, please, it's in front of you. 20 So it should be 53 pages long and dated 27 June 2024. 21 If you look at the last page, page 53, do you see your 22 signature? 23 A. Yes, I do. 24 Q. Are the contents of that witness statement true to the 25 best of your knowledge and belief? 1 1 A. Yes, they are true to the best of my knowledge and 2 belief. 3 Q. Thank you very much. You can put that to one side now. 4 All of the other documents I will show you will come up 5 on the screen. 6 I think by training and background you are 7 an economist; is that right? 8 A. Yes, that's right, yes. 9 Q. After university and the like, you entered the Civil 10 Service; is that correct? 11 A. For a couple of years, yes, and then I was later 12 a Special Adviser within the Department of Trade and 13 Industry but mostly not in the Civil Service, but I had 14 a stretch there. 15 Q. Then you worked in business before being elected to 16 Parliament in 1997; is that right? 17 A. Correct, yes. 18 Q. So far as concerns this Inquiry, the most important 19 office you held was as Secretary of State for Business, 20 Innovation and Skills, and was that between 12 May 2010 21 and the 12 May 2015? 22 A. Yes, that was the full length of the Coalition 23 Government. 24 Q. So five years? 25 A. Five years, yes. 2 1 Q. During that period, is it right that there was a junior 2 minister responsible for postal affairs? 3 A. Yes, I think there were six or seven junior ministers 4 and one was responsible for postal affairs, amongst 5 other things, most notably, I think, labour relations, 6 consumer protection. 7 Q. You list them in paragraph 21 of your witness 8 statement -- no need for it to be turned up -- but there 9 were a succession of junior ministers with 10 responsibility for postal affairs in that five-year 11 period; is that right? 12 A. Yes, there were four. 13 Q. Was that a regular or normal number of junior ministers 14 holding down a post over that kind of period? 15 A. Well, I think there was quite a high turnover generally. 16 The four ministers we've referred to were people from my 17 party, the other junior ministers were Conservatives, 18 but they had a turnover which was really directed by the 19 Prime Minister. My group of ministers were essentially 20 appointed by Nick Clegg and worked with me. 21 Q. Did you get any sense that there was churn, as it's 22 sometimes referred to, in that ministerial post that may 23 have made it difficult for the person occupying it to 24 grasp/fully understand/get to grips with post Office 25 issues? 3 1 A. I wouldn't say abnormally so. I mean, I was unusual in 2 having five years in my office. I think under the 3 government that has just passed, we had Cabinet 4 Ministers who held jobs for a few months but I was 5 unusual. I think, in Jo Swinson's case, there was 6 an interruption because of the maternity leave. That 7 was, I think, very understandable, that wasn't really 8 churn. But the others were changed because of 9 an overall mix in our ministerial portfolio: Ed Davey 10 became a Secretary of State, for example. 11 Q. Did you get any sense in your period of office that the 12 brief held by the person responsible for postal affairs, 13 the minister responsible for postal affairs, was too 14 broad, ie there was too much to do? 15 A. Well, there was a vast amount within the Department, 16 I think we may come to this in more detail later, but in 17 the briefing pack, the topical briefing pack, I noticed 18 there was a list of 100 items which came within my 19 portfolio, roughly, and Post Office was one of them, and 20 the portfolio had to be divided up between ministers and 21 civil servants. The Post Office was part of a junior 22 minister's portfolio and I think that was proportionate, 23 given the wide range of things that we had to do. 24 Q. Did any of the Junior Ministers in your time ever raise 25 with you a problem as to capacity, such that they 4 1 couldn't give postal affairs sufficient attention? 2 A. No, I don't think so. I mean, in my judgement they were 3 highly conscientious and very intelligent ministers and 4 very capable and perfectly capable of handling the 5 responsibility. I met them regularly as party 6 colleagues and ministers, we talked formally and 7 informally and they kept me abreast of issues which they 8 found particularly important. 9 Q. In paragraph 2 of your witness statement -- again, no 10 need to turn it up -- you say: 11 "I am informed that a large number of documents 12 which should have been retained cannot be located, such 13 as my official diary and minutes of meetings." 14 Sir Ed Davey and Jo Swinson have said similar things 15 to the Inquiry. Do you know why such papers, including 16 your official diary, which is presumably an important 17 record of your activities, was not retained? 18 A. I have no idea why they weren't retained but there 19 were -- in my case, there were some what I call seminal 20 meetings which were never recorded. I had a first 21 courtesy call meeting with Paula Vennells and Alice 22 Perkins, for example. There doesn't seem to be any 23 record of that, though I registered with them some of my 24 concerns about the Post Office at that point. There was 25 a meeting where a Member of Parliament, Mr Bridgen, 5 1 brought the Federation to tell me about some of the 2 distressing cases of subpostmasters. There appears to 3 be no record of that either. 4 Q. Have you asked why there is no record? 5 A. Yes, I was told that people had searched and couldn't 6 find it. I think probably it has to do with the 7 transition which was taking place from paper to digital. 8 When I first started the job, almost everything was done 9 on paper, letters came into the Department. I think, by 10 the end of it, it was email based and, for a variety of 11 reasons, complete records were not kept. 12 Q. You tell us also in paragraph 2 of your witness 13 statement that, in your five years in office, problems 14 with Horizon barely came across your desk; is that 15 right? 16 A. That is correct and, when they did, it was usually in 17 a very uncontroversial way and it was not drawn to my 18 attention as an issue I should focus on. 19 Q. That five-year period was a significant one in relation 20 to the unfolding events concerning Horizon, including, 21 within that five-year period, because campaigning work 22 was being undertaken by the Justice for Subpostmasters 23 Alliance; there was the threat of a class action being 24 brought against the Post Office in the courts; there had 25 been the discovery of evidence in that five-year period 6 1 which cast doubt on the safety of criminal convictions 2 obtained by the Post Office when acting as a private 3 prosecutor; the CCRC, the Criminal Cases Review 4 Commission, had commenced an investigation into the 5 safety of some convictions; second Sight, the forensic 6 accountants, had been instructed and had produced four 7 reports in that five-year period; it marked the 8 beginning, middle and end of the initial Complaint and 9 Mediation Scheme run by the Post Office; Deloitte, 10 forensic accountants, had completed reports on the 11 Horizon system. 12 I've given you a smattering of things that happened 13 in that five-year period where you say Horizon barely 14 came across your desk. Looking at it in the round, how 15 do you think it is that Horizon barely came across your 16 desk in that five-year period? 17 A. Well, I think the general reason is that the officials 18 who were briefing me and the ministers on the subject 19 hadn't seen it as a particular problem. I think, with 20 hindsight, I should have been told at the outset about 21 Horizon, what it was. It was just a word. I should 22 have been told that people were querying it -- you know, 23 good, competent people. Computer Weekly, for example, 24 I knew nothing of their work. We should have been told 25 that people were suggesting there was a risk factor and 7 1 I should have been told about Mr Bates and the Justice 2 group. I never heard his name until I'd been in the job 3 five years at the end, when the whole issue came to 4 a head. But, certainly, I wasn't briefed on them and 5 I think probably this came down to civil servants making 6 a judgement that, because I had a vast area of 7 responsibility and because it was being well handled at 8 a minister level, that I didn't need to be told about 9 them. 10 Q. Thank you. You tell us in paragraph 4 of your witness 11 statement that governments across the political spectrum 12 share some responsibility for the fact that the scandal 13 happened on their watches and that you accept your share 14 of responsibility. 15 A. Yes, I -- to be frank, I found it very difficult to 16 pinpoint particular events or decisions that I could 17 have done differently but, simply as a matter of formal 18 responsibility, this was a state enterprise that came 19 within the remit of my Department and I accept the fact 20 that it happened on our watch. I know that's a cliché 21 but it's something that ministers have to recognise. 22 Q. I was about to ask you, when you say that you accept 23 your share of responsibility, what are you accepting 24 responsibility for? 25 A. Well, general oversight of the Department, and this was 8 1 an area of the Department where clearly there was 2 a policy failure. 3 As far as I recall, there weren't any specific 4 interventions that I made or was asked to make that 5 would have changed any of those long list of things that 6 you described. 7 Q. Can we get down to some specifics then and start with 8 the issue of your knowledge of key issues relating to 9 subpostmaster challenges concerning Horizon. If we just 10 turn up paragraph 33 of your witness statement, it'll 11 come up on the screen, please. It's on page 12, 12 page 33. You're here dealing with, as part of your 13 chronological account, the period of time when you took 14 up office, and you say in 33: 15 "I was not briefed by officials on, or otherwise 16 aware of, any issues to do with the Post Office's IT 17 system at this time." 18 If we go back to paragraph 13 of your witness 19 statement, which is on page 5, thank you. This is years 20 before you took up office. 21 A. Yes. 22 Q. In this part of your witness statement, you're telling 23 us more generally about your knowledge of the Post 24 Office. 25 A. Yes. 9 1 Q. You say: 2 "I became aware of allegations of fraud when 3 a constituent was charged and lost his post office. 4 [You] cannot recall exactly when this was -- probably 5 around 2001-2002. [You] approached the family and 6 offered help. They told me that the charges were 7 unjustified but they wanted to rely on 'justice' and not 8 involve me as MP. The family never mentioned IT." 9 Then, thirdly, in paragraph 92 of your witness 10 statement, which is on page 37, you say: 11 "Before I came into government, I think I had 8 12 closures in my constituency ... I organised and 13 collected numerous petitions against branch closures ... 14 Usually postmasters did not want to become involved, 15 because they were afraid of the consequences." 16 Then this: 17 "When we came into Government, Ed Davey and I agreed 18 based on our experience as constituency MPs that [Post 19 Office Limited] middle management were, as I described 20 [and you refer to a debate in Parliament in 1999] 21 'authoritarian'. Mr Bates has, I believe, described 22 them as 'thugs in suits' and I recognise this 23 description. [Post Office] dealt with us in an arrogant 24 way when we campaigned against closures." 25 Drawing the threads together there, you had been 10 1 involved in a separate issue, a closure issue, and that 2 had given you some insight into the way that POL middle 3 management the behaved; is that right? 4 A. That's correct. Just to elaborate a little bit, I had 5 raised a debate in Parliament, I think probably I was 6 one of the first, about the way postmasters were treated 7 by the Post Office, and there was a particular case, 8 which you haven't referred to, but there's a particular 9 case of a woman in my constituency who had invested, 10 I think, £75,000 in her post office. It was taken away 11 from her for reasons that were never clearly explained, 12 she lost all the money. Another post office opened up 13 nearby for reasons that were never explained. 14 I never got good answers for why this was happening, 15 so I called the debate and it basically chimed in with 16 other experiences I had of the Post Office. For 17 example, I'd been campaigning for months on Post Office 18 closures in my own constituency and others and I took 19 them to the Post Office and it was all sort of brushed 20 aside, I was an interfering politician, it was nothing 21 to do with me, operational matters were matters for the 22 Post Office and not for ministers or politicians. And 23 so I'd formed a very negative impression, in the case, 24 and it was reinforced in Government because, as I think 25 I mentioned a few minutes ago, that I think the one 11 1 occasion when I was a minister where these distressing 2 cases were brought to me was by a deputation -- not 3 a deputation -- a single man, a man from the Federation, 4 I think, about 50 to 100 cases, he brought a scrapbook 5 of photographs to illustrate it. So I knew that these 6 expulsions, fraud cases, and so on, were taking place 7 but, throughout the whole of that, in none of these 8 cases did anybody, as far as I remember, ever say 9 anything about the computers. 10 It was seen as -- as I saw it -- I had a theory 11 which may have been proved to be wrong but, essentially, 12 the Post Office had what I would call a 'one strike and 13 you're out' policy, that if a postmaster made a mistake 14 they would be punished severely -- not necessarily 15 anything to do with computing mistakes, that emerged 16 subsequently. And if I can just add one final point, 17 that when I was campaigning on behalf of postmasters at 18 that stage, and it was 10 years before I went into the 19 Government, I did get a lot of help from the Federation, 20 Mr Baker, who was in charge at that point, and they 21 helped me to obtain compensation for the postmistress 22 who had been evicted in my constituency. She was fully 23 compensated and it was with the help of the Federation. 24 So I, thereafter, tended to have a very positive 25 view about them and trusted their judgement. 12 1 Q. You say here that POL middle management was 2 authoritarian and you recognised the description of them 3 applied by Sir Alan as "thugs in suits"; what about your 4 dealings with them led you to those views? 5 A. Well, it was the description of what happened when -- 6 well, in the particular cases I brought to Parliament, 7 but I'd heard of others -- about what happened when 8 a postmaster made a mistake. I mean, in the case of my 9 constituent, the only thing that we had identified was 10 that Twickenham residents had gone into the post office 11 and found that the person behind the counter didn't know 12 that Santiago was the capital of Chile, and a complaint 13 had been made and, on the basis of this complaint, she 14 had been -- had her franchise taken away from her. 15 Certainly, when I raised that issue and closures 16 with the Post Office officials who I met around 17 closures, the attitude came across to me very much as it 18 was described here. 19 Q. It was as a result of meeting them face-to-face? 20 A. It was indeed and through the attitude that was revealed 21 in correspondence at the time. 22 Q. If we turn to the period when you took up office -- that 23 can come down from the screen, thank you -- when were 24 you first aware of individual subpostmasters challenging 25 the Post Office's enforcement action against them? 13 1 A. I wasn't aware of that at all. I knew that there were 2 these fraud cases because, as I've mentioned, I had this 3 delegation brought to me by Mr Bridgen, and I had asked 4 the Post Minister what action we were taking, and it was 5 at that point that I was told about Second Sight, the 6 forensic accountant, and I think reasonably assumed that 7 there was now a process to deal with it. That was the 8 only occasion on which this came to my attention. 9 Q. When did you first become aware that Post Office both 10 investigated and privately prosecuted its own 11 subpostmasters and mistresses? 12 A. Well, I wasn't aware specifically about that 13 differentiation. I think the kind of common way of 14 looking at it was if somebody was charged with fraud it 15 was all a matter to do with the police and the courts. 16 The distinction that you draw and subsequently emerged 17 was not something I was aware of. 18 Q. Not aware of at any time in your period of office? 19 A. Well, I think right at the end, when we had this coming 20 together of Mr Arbuthnot's question in Parliament and 21 the report of the Select Committee, I started to ask 22 a lot of questions about what was going on and I think 23 that was one of the issues which emerged but, until 24 then, the question had never arisen. 25 Q. When did you first become aware of concerns that 14 1 subpostmasters had been prosecuted on the basis of 2 Horizon data, which may not be reliable? 3 A. Well, I think it was then, very much at the end of the 4 Parliament when we had that coincidence of events, and 5 I was brought in to the picture. 6 Q. If we turn up your witness statement, please, at page 14 7 and paragraph 40, you say: 8 "In the course of preparing this statement, my 9 attention has been drawn to an unsigned letter dated 10 'August 2012' to David Miliband MP, apparently a draft 11 prepared by officials on my behalf ... I understand this 12 letter to have been held by UKGI, and it is therefore 13 reasonable to assume that it was drafted by officials in 14 the Shareholder Executive. The draft letter indicates 15 it is a response to a letter from Mr Miliband dated 16 23 July 2012, which apparently enclosed a letter from 17 his constituent, Kevin Carter. I have seen neither 18 David Miliband's nor Kevin Carter's letter." 19 You then quote from the letter, which I'll skip 20 over. If we go over the page, please, and look at 21 paragraph 41, you say: 22 "I have no recollection of this correspondence at 23 all. I've not seen a signed and dated version of this 24 letter, though it is fair to assume that someone in the 25 Department responded, and did so along the lines of this 15 1 draft referred to above. As David Miliband was a Privy 2 Counsellor, normally I would have been asked to sign the 3 response as a matter of courtesy -- though ... this was 4 in the summer recess and [you] may not have been 5 available ..." 6 Can we look at the letter, please. UKGI00013690. 7 This was the draft letter to which you were referring in 8 those paragraphs and it begins, you'll see, by thanking 9 Mr Miliband for his letter of the 23rd, enclosing 10 a letter from Mr Carter, and continues: 11 "I have noted Mr Carter's experiences and concerns 12 as subpostmaster [but] note that Post Office remains 13 fully confident about the robustness and integrity of 14 its Horizon and related accounting processes." 15 Next paragraph: 16 "... in the light of discussions with James 17 Arbuthnot and a number of other MPs with 18 ex-subpostmaster constituents [Post Office] recently 19 agreed to an external independent review of a small 20 number of individual cases that had been raised with 21 them by several MPs." 22 If we go down, please, we'll see it's got your name 23 at the bottom but, as you say, you've not seen a signed 24 version of this letter. For letters like this, would 25 you read the letters before signing them? 16 1 A. Yes, I would, but let me just explain a little bit of 2 the background. I think the clue to this particular 3 letter is in the date. It was August. I was rarely, if 4 ever, in the Department in August because that was the 5 month I was sent on overseas visits to China, India, 6 whatever, to negotiate trade and investment agreements. 7 It was also the month I took short holidays with my 8 wife. So I almost certainly never saw the letter or the 9 incoming letter but maybe it will help answer your 10 question, I think, if I describe the process by which 11 correspondence was dealt with in my office and 12 I personally related to. The situation -- 13 Q. Just before you do, we've got a very detailed account 14 from you in your witness statement as to how 15 correspondence was dealt with. I just wanted to ask you 16 a few questions about how the correspondence was managed 17 within the Department and your private office. 18 A. Yes, maybe I can help with that. The problem was that 19 I think there were about several hundred letters a day 20 and emails, would come addressed to me personally. 21 I never saw them they would be directed by the 22 Correspondence Unit to the relevant civil servants who 23 would prepare replies, either by other civil servants or 24 by the Post Minister and very, very occasionally to me, 25 if there was a special reason -- as I say, Mr Miliband 17 1 was a Privy Counsellor -- and a letter of this kind 2 would come to me probably in a folder and it would be 3 explained by the civil servants, and my private office, 4 that this was a standard letter, that it had been agreed 5 with the Post Minister's office, it was the Departmental 6 line, and all I needed to do was sign it because there 7 was nothing controversial or difficult in it. 8 Q. Just stopping there, Sir Vince, when you say it would 9 have been explained by officials in your private office 10 to you -- 11 A. Yes. 12 Q. -- in a covering submission, covering document, or 13 explained orally to you? 14 A. Well, I think in a case like this there may not even 15 have been a covering document because it was seen as 16 a routine bit of correspondence, and I would sometimes 17 have put in front of me a pile of letters for signing on 18 totally different subjects, and I would be told "These 19 are standard letters, you don't need to study them in 20 the way that, you know, other controversial issues 21 needed to be studied". 22 I mean, if I'd had time and opportunity I would 23 almost certainly have spent as much time as I could 24 reading them and absorbing them but, as I say, in this 25 particular case, I almost certainly never saw the letter 18 1 and it would have been sent out by my office PP'd on my 2 behalf. 3 Q. You see in the second paragraph it refers to Post Office 4 remaining fully confident about the robustness and 5 integrity of the Horizon system and related accounting 6 processes. What enquiries would you expect to have been 7 undertaken and by whom, whether in private office, ShEx, 8 or otherwise, in order to confirm or stand up what is 9 said there? 10 A. Well, I would have expected -- and I think I said this 11 to you earlier, that when I first came into office 12 I would have expected to have been told that there were 13 questions being raised about this system, both by 14 Computer Weekly and by the Justice group, but I wasn't 15 and all I was ever told was -- and it appeared in 16 letters and in annexes to briefs that I was given -- 17 that this was an issue that wasn't controversial. 18 I mean, bear in mind, I think, that, like, I think, 19 most politicians and most officials, I wasn't computer 20 literate. If somebody had said to me there was 21 a problem of integrity in a computer system, I wouldn't 22 have understood what on earth they meant. So I was very 23 reliant, as we all were, on the competence and integrity 24 of the people who were giving advice. 25 Q. My question was more what enquiries would you expect, if 19 1 any, officials to have carried out before recommending 2 the inclusion of a line like this in a letter to be 3 signed by you? 4 A. Well, I think the civil servants who dealt with it -- 5 I find it difficult to put myself in their minds, these 6 were people who were working full time on computer 7 related issues, I would certainly have expected them to 8 consult somebody independent, to have validated this 9 claim and probably to have taken time to interrogate the 10 people who were offering criticisms, and it appears 11 there were, at that time. But, no, I wasn't in their 12 mind. It wasn't a subject I was remotely familiar with 13 and I had to accept and trust the advice I was given 14 because, I mean, that is ultimately how Government 15 works. 16 Q. Yes. 17 A. You have to trust advice. 18 Q. Would you have regarded it as sufficient if officials 19 had lines provided for them by Post Office and simply 20 incorporated those into letters that were to be sent out 21 in your name or junior ministers' names, without the 22 kind of testing or challenge that you've just mentioned? 23 A. Well, there should have been a testing or challenge at 24 some point but, having established, as they seemed to 25 have done, that there wasn't a problem, it would have 20 1 been reasonable then to have accepted the Post Office 2 wording. 3 Q. So you would have expected at some point a moment of 4 challenge or deep investigation to -- 5 A. Yes -- 6 Q. -- have occurred -- 7 A. -- I think that's reasonable. 8 Q. -- in order to start up the use of the lines provided by 9 Post Office about Horizon, even if, thereafter, the line 10 was perpetuated without further investigation? 11 A. Yes, I would have expected an interrogation of the 12 issue, of course. 13 Q. In paragraph 31 of your witness statement, if we turn 14 that up, please -- it's on page 11 -- you say: 15 "Upon my appointment I set three objectives for the 16 Department and Ministers ..." 17 Then if we go over the page, please, and the third 18 of them -- it hasn't got a (c) next to it but I think it 19 is the third of them -- is: 20 "To address the imbalance in the relationship 21 between the Post Office and subpostmasters, giving 22 postmasters a greater say in the running of the network, 23 and to advance, in partnership with the Federation, the 24 idea of mutualisation." 25 What lay behind your understanding that there was 21 1 an imbalance in the relationship between the Post Office 2 and subpostmasters? 3 A. Well, it was based on -- largely on my own personal 4 experience, which I've already described to you that 5 I had called a debate in Parliament 10 years earlier, 6 expressing my unhappiness with the way that postmasters 7 were dealt with. And there was actually a broader 8 policy issue which engaged me, in the sense that I was 9 responsible, overall, for competition policy and there 10 are, in the country, a whole set of cases where you have 11 a what you might call a monopoly -- the technical word 12 is monopsony but, sorry, I don't want to get into 13 complex economics here -- but where you had a powerful 14 organisation with large numbers of suppliers, and we had 15 that situation with, say, farmers and supermarkets, we 16 brought in legislation to protect the farmers. 17 We did the same with publicans and pub-goers, which 18 took a great deal of time and Jo Swinson's time, and 19 I was aware there was a similar problem with the Post 20 Office, and I had thought, at the outset, we needed to 21 change this situation. 22 And the idea came up, I think it was Ed Davey in his 23 discussions with the Federation, that the best way to 24 deal with this problem was to create a mutual structure 25 which would effectively put the postmasters in charge of 22 1 the post office. 2 It was an ambitious idea and, unlike the other two 3 objectives, this didn't come to fruition unfortunately 4 but that was where the idea came from. 5 Q. Can we look, please, at POL00059303, and look at page 2, 6 please, and scroll down a little further. You'll see 7 this is a letter from Yasmin Qureshi, the then MP for 8 Bolton South East. Then if we go back to page 1, 9 please, you'll see it's dated 25 October 2012, and it's 10 addressed directly to you. It concerns Chirag Patel. 11 If we scroll down, please, if you just read to yourself 12 what is said in the first six paragraphs. 13 A. Yes. 14 Q. You'll see in the seventh paragraph it says: 15 "The person who did the audit even said there was 16 a problem with the computer because all the money in the 17 post office was accounted for and it was not Mr Patel." 18 Scrolling on, he had to pay £12,500 and then, over 19 the page, if you just read what's on that page. 20 Yes. If we just go back to page 1, looking at the 21 letter, is this the kind of letter that you would have 22 seen yourself? 23 A. No. As I've explained -- 24 Q. In this instance, why would you not have seen this type 25 of letter? 23 1 A. Well, I never saw any of this kind of letter for the 2 reasons I described. Because of the way the 3 Correspondence Unit operated, there would be very large 4 numbers of incoming letters, they were immediately sent 5 to the relevant part of the Department to prepare 6 an answer and the answer would come back through either 7 a civil servant or through the Post Minister. In this 8 case, it was judged that I didn't need to be involved 9 and, certainly, I never saw the letter. But the content 10 of it is familiar, because of the case I was familiar 11 with in Twickenham, it sounded very similar to this, 12 except that the IT dimension wasn't in evidence there, 13 and it was the same kind of issue which was presented to 14 me by the Federation when the representative met me with 15 Mr Bridgen. 16 Q. One of your objectives was addressing the imbalance in 17 the relationship between Post Office and its 18 subpostmasters and this kind of complaint speaks to that 19 very issue, doesn't it? 20 A. Yes, I thought a lot about how you dealt with this 21 question of imbalance but the proposal I had made to 22 Parliament 10 years earlier was that we did need to set 23 up an arbitration mediation mechanism. You may say it 24 was just serendipity but this is ultimately what 25 happened and, certainly, in my first meeting with Paula 24 1 Vennells, I had suggested that this is what the Post 2 Office should do. But when I came into Government and 3 discussed this matter with Ed Davey, and I think 4 separately the Federation, we thought a more radical 5 solution was required and that's how the idea of 6 mutualisation came up. 7 In retrospect, probably we should have been more 8 modest and perhaps insisted that postmasters should be 9 on the Board of the Post Office. I believe this has now 10 happened but, at the time, they weren't directly 11 represented. But that would have achieved some of the 12 objectives of mutualisation, without the full process 13 which took an inordinately long time. 14 Q. Given that one of your three key objectives for Post 15 Office was to address the imbalance in the relationship 16 between Post Office and subpostmasters, do you know why 17 correspondence of this kind, which speaks to that very 18 issue, was not flagged to you? 19 A. Well, I think the reason it wasn't flagged to me was the 20 reason I gave in my earlier answers: that I had a vast 21 portfolio, the civil servants in my private office and 22 in the Department knew that this was -- I don't know, 23 1 or 2 per cent of my workload, and clearly judged that 24 they didn't need to deal with me, if necessary, there 25 was a Post Minister who would deal with it on my behalf. 25 1 So, you know, it was a judgement on their part, it was 2 perfectly fair, that I simply would not have been able 3 to cope with the volume of correspondence. 4 Q. Can we look at some of the responses that junior 5 ministers sent out. UKGI00013863, please. 6 Thank you. If we go to the bottom of the second 7 page and the top of the third page. In fact, we can see 8 it from that first page. We can see this is a letter 9 sent out by Ed Davey MP. You can see it's to Norman 10 Lamb who, ironically enough, was subsequently to be 11 a Postal Affairs Minister but here he is being written 12 to in his capacity as a backbench MP. Here, Ed Davey is 13 replying to a letter that had been sent to you by Norman 14 Lamb on behalf of his constituent, Allison Henderson, 15 setting out her concerns about Post Office audit 16 procedures and accusations levelled against 17 subpostmasters: 18 "I am replying as Minister for Postal Affairs." 19 So there are number of these. Just looking at what 20 we have seen this so far, is this what you would have 21 expected to have happened, namely a letter coming in to 22 you from a backbench MP, being passed to the Postal 23 Affairs Minister to respond to? 24 A. Yes, I would have expected that that was the process. 25 I have to say when I first came into Government, I got 26 1 a lot of complaints that MPs weren't getting answers, so 2 I asked for more resources to beef up the Correspondence 3 Unit. So the fact that proper letters were going out 4 was, in itself, an advance on where we'd been before. 5 But, yes, I recognised the letter, and there are several 6 messages in it, which were, I think, fairly consistent 7 and consistent with what I'd heard. 8 For example when I'd held my debate in Parliament in 9 1999, the first thing that the Labour minister told me 10 was, "I can't deal with this because this is 11 an operational matter, and operational matters are the 12 responsibility of the Post Office"; and the second issue 13 which was pointed out to me is that, you know, there are 14 legal issues involved, there are court cases, ministers 15 cannot get involved in matters relating to the criminal 16 law. So, ministers replying to letters were probably, 17 at each stage, having to explain that. 18 Q. You'll see that, as you say, in the second paragraph, it 19 says: 20 "The issues raised in your [Norman Lamb's] letter 21 are operational and contractual matters between Post 22 Office and [the postmistress] Mrs Henderson ... neither 23 I nor the Department can intervene in cases which are 24 sub judice or where court action had been determined." 25 The constituent was charged to appear at Norwich 27 1 Crown Court. She pleaded guilty to false accounting. 2 Then it is said: 3 "... I understand, at no time during the case were 4 any problems with ... Horizon IT system raised by 5 Mrs Henderson or separately identified." 6 That line there, that no problems with the IT system 7 were raised by Mrs Henderson at any time, we know to be 8 false. She had raised in the course of the court 9 proceedings, on two occasions, including in formal 10 documents, her suggestion that the losses were caused by 11 the IT system. 12 For this kind of correspondence, what kind of 13 inquiry would you expect officials to make before 14 including in a letter information such as that? 15 A. Well, in a way this is your earlier question in 16 a different form -- 17 Q. It is. 18 A. -- which is basically, at the outset, there did need to 19 have been an interrogation of the claim by the Post 20 Office that there wasn't a problem but that, having been 21 satisfied, as apparently the civil servants were, it was 22 perfectly reasonable to incorporate that kind of comment 23 in an outgoing letter. 24 Q. This goes slightly further. It has a bit of a dig at 25 Mrs Henderson, saying it's all very well complaining 28 1 now, she didn't complain when she had the opportunity to 2 do so, namely in the court proceedings. 3 A. Yes. 4 Q. What would you expect officials to do, if anything, 5 before including that kind of line in a letter? 6 A. Well, this is a level of detail I'd never got involved 7 in, drafting and preparing letters of this kind. So how 8 much detail -- I think there is a serious point, though, 9 which is that this issue about commenting on court 10 cases. Throughout -- 11 Q. Put that to one side for the moment. I am asking you, 12 as the Secretary of State, what you would expect 13 officials to do before including this kind of content in 14 a letter? If you say you don't know, and are not in 15 a position to judge -- 16 A. Well, this is in a level of detail that I really can't 17 make any useful comment on. As I said, I think it was 18 incumbent on the officials in the Department to have 19 established, in general terms, that the Post Office were 20 acting correctly but, having established that, it was 21 not unreasonable for them to reproduce versions of 22 events that they were given. 23 Q. Ie given by Post Office? 24 A. Yes. 25 Q. So you wouldn't see anything objectionable in, if they 29 1 were given that line by the Post Office, simply to cut 2 it into a letter? 3 A. Well, it is a little odd, now you mention it but I don't 4 really have anything add. I mean, this is a very high 5 level of detail and I wasn't involved in drafting 6 letters of this kind, so I can't really make any 7 intelligent comment on it. 8 Q. No, I know you weren't involved; I'm just trying to 9 explore with you whether, before you or your ministers 10 put their names to letters, you had an understanding of 11 what had gone on in the back office. If somebody had 12 asked me to sign something, I'd either want to know if 13 what's in it is true from my own personal knowledge or 14 a little bit about the process which has gone into 15 finding out the information and testing it? 16 A. Yes, well, I'd imagine that what happened was that the 17 civil servants in BIS spoke to their opposite number 18 on -- in the Post Office, and said, you know, "Can you 19 give me the background to this case because I need to be 20 able to give a full reply, and will you please tell me 21 what happened in the case of Mrs Henderson?", and would, 22 I think, simply on matters of fact, have had to trust 23 the reply they were given. 24 Q. Thank you. Can we look, please, at UKGI00014038, March 25 2011, a letter out from Ed Davey to Glenda Jackson. The 30 1 first paragraph thanking her for her letter of 2 22 February 2011 to you on behalf of her constituent, 3 Bhavisha Parekh, whose father was prosecuted for cash 4 losses. It records that the constituent suggests that 5 the Horizon computer system caused these losses? 6 So, again, similar to what we see before in the 7 terms of the architecture of the thing: letter in to you 8 but letter out from Ed Davey. 9 A. Yes. 10 Q. That would be the system operating as it should? 11 A. Yes. That was how it worked. 12 Q. There are quite number of these letters but just to see 13 this is a repetition, in the second paragraph: 14 "The issues raised in your letter are ... 15 operational and contractual matters between Post 16 Office", et cetera. 17 Was that a line that you were familiar with, a line 18 to take? 19 A. Yes, I was very familiar with that because that was 20 exactly what I was told when I had raised cases in 21 Parliament on behalf of the postmaster, that they had -- 22 I think I had a 15-minute reply from the then Labour 23 Minister and the first five minutes were explaining the 24 legislation under which the Post Office operated, '69 25 Act, which made it very clear that they had 31 1 responsibility for operational matters. 2 And certainly when I, I think, first met Paula 3 Vennells, the first courtesy meeting, I'd explained my 4 history and I think she reminded me that this is exactly 5 the way in which the relationship between me as 6 a minister and her as a Chief Executive, must operate. 7 Q. You mentioned the '69 Act there, are you referring to 8 the Post Office Act 1969? 9 A. Yes, yes. 10 Q. What did you understand that to say, by the time of the 11 years 2010 to 2015, as to operational independence? 12 A. Well, my understanding, which framed the way I dealt 13 with issues, was that I had responsibility for the 14 general kind of strategic direction of the Post Office 15 and its financing, and that the Post Office were 16 responsible for their relationships with individual 17 postmasters and operational decisions about the opening 18 and closing of post offices. That was how I saw the 19 distinction. 20 Q. We've got in our pack a series of letters -- I'm just 21 going to list them -- from MPs or constituents. I'll 22 list them, one in October 2013, POL00195964 at page 3; 23 one, December 2014, POL00218852, pages 1 to 4; and one 24 where the date isn't clear, POL003454283. So letters in 25 to you raising matters concerning the operation of the 32 1 Horizon system and action taken against subpostmasters. 2 Would you expect anyone, in your office or 3 otherwise, to draw together correspondence which was of 4 the same or substantially the same nature, ie was 5 complaining about the same thing? 6 A. Well, I would have expected the operational civil 7 servants, not necessarily my private office, to have 8 been alert to a systemic problem if there was one. But 9 perhaps if I can just add another note, because the 10 letters you're drawing to my attention are letters from 11 MPs. I was very conscious from the outset that I didn't 12 want to be caught in what you might call a Sir Humphrey 13 situation, of being blindsided by officials who had, 14 say, a biased view. So I set up in Parliament, through 15 my so-called PPS, a system of surgeries so that MPs 16 could come and talk to me on a Monday evening with or 17 without officials present, if there were any problems 18 they had. 19 Q. Just stopping you there, you explained some of this in 20 your witness statement. 21 A. Yes. 22 Q. Can you explain to those watching and listening what you 23 mean by a "Sir Humphrey situation"? 24 A. Well, the fact that civil servants may have had a view 25 of the world which was different to mine and I needed to 33 1 be aware of that, and that's why I set up this system 2 and people came to see me every week, MPs, on Post 3 Office issues, not related to postmasters, but on Post 4 Office issues. And I'm very surprised that, in the 5 whole of the five-year period, with the single exception 6 of Mr Bridgen, who brought the Federation, who didn't 7 raise the IT issue, why none of the MPs who were 8 concerned about this ever came to talk to me about it. 9 That was the way in which I could have challenged 10 the officials but I was never given the ammunition to do 11 so. 12 Q. Did you know that groups of MPs, quite a large number of 13 MPs, were seeking to progress, during your period of 14 office, the complaints of their constituents, led 15 essentially by James Arbuthnot? 16 A. Well, I discovered this in March 2015. Before that, 17 I wasn't aware of it, no. 18 Q. This may sound an awkward question: do you know why you 19 weren't aware of it? 20 A. Well, I -- optimistically, I would say it was because 21 they had complete trust that the Post Minister was 22 dealing with it properly. But the way Parliament worked 23 was that I walked past Mr Arbuthnot and the other MPs 24 several times a day and, if they were concerned, they 25 would surely have stopped and said something to me. 34 1 I mean, they did on other issues. 2 Q. Sorry, Sir Vince, are you saying it there that James 3 Arbuthnot was not concerned because he didn't raise the 4 matter with you? 5 A. No, I have read about his work and it was monumental, 6 and he did enormous amount of good work. But, for 7 whatever reason, the MPs who were concerned about this 8 issue never raised it with me in Parliament. They had 9 abundant opportunities to do so. 10 Q. You're not being critical of them for failing to do so? 11 A. No, not at all -- 12 Q. You're simply saying they took a different route? 13 A. No, they took a different route and different MPs 14 operate in different ways. No, I'm not remotely 15 critical, particularly Lord Arbuthnot, as he is now, did 16 a heroic job. I wouldn't dare to criticise him. 17 Q. Were you aware that, essentially, a boilerplate reply 18 was being sent out in response to each and every one of 19 these letters in from MPs that were being sent to you? 20 A. Well, I wasn't aware of the letters as coming in or 21 going out but, yeah, it clearly was a boilerplate 22 response. But that was actually how Government dealt 23 with most issues. Department/Government had to have 24 a line on issues and, having established it, reproduced 25 it and it would have caused chaos if there'd been 35 1 a different response to every individual. 2 Q. The alternative view might be that having a boilerplate 3 response and sticking to it means that there's never any 4 real investigation of the issues? 5 A. Well, as I said several times already, I think, you 6 know, there should have been at some point a careful 7 interrogation of the issues but, having established 8 a clear line of argument, it was entirely appropriate to 9 be consistent in dealing with everybody who wrote in 10 about it. 11 Q. Can I turn to the second issue, then: the Second Sight 12 investigations and the Mediation Scheme. Can we turn to 13 paragraph 46 of your witness statement, which is on 14 page 17. You say: 15 "I am told that on 8 July 2013 the Second Sight 16 Interim Report was published; I was not aware of this 17 report or its contents at the time ..." 18 When did you first hear about the Second Sight 19 investigation and its Interim Report? 20 A. Well, I don't think I did, except I did meet, you know, 21 the ministers on a very regular basis. They may well 22 have said in the course of reporting to me on what they 23 were doing that this forensic investigation was taking 24 place and was proceeding normally. But I certainly was 25 never given a formal, detailed report on the work of 36 1 Second Sight. I only heard about it when I had this 2 visit from Mr Bridgen and the Federation, and I wanted 3 to follow it up and ask the postmaster -- the Post 4 Minister what was going on, and they told me that the 5 Second Sight investigation was taking place. 6 I didn't realise, incidentally, that it was an IT 7 investigation. I thought it was just a general 8 investigation into why so many postmasters were being 9 charged with fraud and losing their post offices. 10 Q. When were you first aware that Second Sight were 11 undertaking an investigation? 12 A. Well, when I told the Post Minister that I'd had this 13 delegation and I was very worried about it and the 14 numbers of people and the distress of some of the cases, 15 and I said, "What are we doing about this?" And she 16 said -- I think it was Jo Swinson at that time -- "We 17 have just launched this forensic audit and investigation 18 and I'm sure that all your cases will have been dealt 19 with properly". 20 Q. Would that be in the course of her first period of 21 office, 6 September 2012 onwards? 22 A. Yes, I'm sure it was. It may not even have been Jo; it 23 may have been, I think, Norman Lamb, briefly. But no, 24 from memory, I think it was Jo's time. 25 Q. If we look, please, at UKGI00013690, we can see the 37 1 letter from you to David Miliband and, if we just look 2 in the third paragraph: 3 "Nevertheless, in the light of discussions with 4 James Arbuthnot and number of ... MPs [Post Office] 5 recently agreed to an external independent review of 6 a small number of individual cases that had been raised 7 by them ..." 8 That's, I think, a reference, would you agree, to 9 the Second Sight investigation. 10 A. Yes. 11 Q. So you signing this letter off in August 20 -- 12 A. '12. As I said, I didn't sign it off. 13 Q. No, so you simply would never have seen this? 14 A. Almost certainly. 15 Q. Didn't see the letter in; didn't see the letter out? 16 A. Almost certainly not. 17 Q. So we can't take this as knowledge by you of Second 18 Sight at this time? 19 A. No, absolutely not. 20 Q. Can we look, please, then, at UKGI00019389, and look at 21 the bottom of the page, please, and over to the second 22 page. Can you see an email dated 22 July 2013 from 23 "Cable MPST"; is that your private office's email 24 address? 25 A. Yes, it is, yes. 38 1 Q. To the private office of Jo Swinson and others within 2 ShEx. The subject is "Subpostmasters News Story", can 3 you see that? 4 A. Yes. 5 Q. It says: 6 "Hi all 7 "Vince has seen this news article and thought it was 8 a good news story for the Post Office and good link to 9 the Trust and Transparency work. Any suggestions on 10 what we can do to take this forward? 11 "Thanks 12 "Anna." 13 Was she one of your private secretaries? 14 A. I don't remember -- there were a lot of private 15 secretaries. I don't remember an Anna but I'm sure it 16 was, yes. 17 Q. We can see the second highlight is the attachment, 18 "Subpostmasters news story.pdf". Can we look at that, 19 please. UKGI00019390. 20 You may recognise the style and font and text. It's 21 an extract from Private Eye. 22 A. Yes. 23 Q. It reads: 24 "At last some encouraging news for subpostmasters 25 who have been sacked, sued and even jailed over 39 1 shortfalls that hoe up on the Post Office's [Horizon 2 system]. 3 "The Interim Report of a review of the IT system, 4 following a campaign by Tory MP James Arbuthnot, sets 5 out a raft of failings. These include the brutal way 6 the Post Office investigated financial errors; 7 unreliable hardware; the absence of training or support 8 for subpostmasters on a system said to be more complex 9 than that at a high street bank; and an unfair business 10 model which automatically makes subpostmasters 11 responsible for any discrepancy. 12 "These failings have led to false accounting 13 prosecutions as inexperienced individuals with 14 unexplained discrepancies have been faced with either 15 reporting false figures or losing their business, with 16 nowhere else to turn. 17 "Arbuthnot has applauded the Post Office on the open 18 way in which, through the review, it has allowed the 19 flaws to be exposed. But the next big test is whether 20 scores of people who have lost their livelihoods and 21 sometimes liberty will win any redress." 22 Q. Now, it seems from the covering email that you had read 23 the article? 24 A. Well, I had seen it, yes. 25 Q. What's the difference between seeing and reading? 40 1 A. Well, the difference is I was given every morning a pack 2 of 30 or 40 press cuttings, everything relating to the 3 Department, and I would normally judge from the gist of 4 it, the headlines, whether this was something we in the 5 Department needed to react to in some way. Part of my 6 was job to be conscious of the public impact of what we 7 were doing, and I just glanced and this one and it did 8 refer to the brutal way the Post Office investigate, and 9 I thought you know, "Well, this chimes with what 10 I know", and I -- 11 Q. Do you recall now only glancing at it? 12 A. Yes, I'm sure I only glanced at it. I only glanced at 13 almost all of the press cuttings. It wasn't 14 an important part of the day's routine; it was just 15 picking up important issues. I just noticed that -- I'd 16 been lecturing businesses on how they needed to be much 17 more transparent about how they dealt with consumers and 18 workers, and so on, and here was somebody who had been 19 a critic of the Government saying that, actually, 20 a Government agency under our remit was doing a good 21 job. So I thought "Oh, yeah, why don't we make more of 22 this?" 23 And, as you see from the private office response, 24 they were at pains to dampen my enthusiasm because they 25 realised that this was a complex issue, so I think we 41 1 simply moved on and I didn't take it any further. 2 Q. We'll come to all of those steps in a moment. You'll 3 see the article says that the Interim Report, which is 4 a reference to the 8 July 2013 Second Sight Report, sets 5 out a raft of failings: the brutal way Post Office 6 investigated errors; unreliable hardware; the absence of 7 training or support; an unfair business model leading to 8 false accounting prosecutions, leading to people losing 9 their business with nowhere else to turn. Why did you 10 think this was a good news story? 11 A. Well, I thought it was a good news story because I'd 12 simply picked up the fact that, I think it says 13 Mr Arbuthnot applauded the Post Office on the open way 14 in which it allows these flaws to be exposed. I mean, 15 as I say, I didn't read it carefully. It wasn't 16 a policy document; it was just one of 30 press cuttings 17 that I'd glanced at, but I'd picked up that somebody was 18 saying something positive about the Department and the 19 agencies we're responsible for. 20 Most of the press coverage was negative. I mean, 21 that's the way -- you know, the way of Government and 22 here, at a quick glance, was something positive. So 23 I suggested to the Press Office maybe they should take 24 this a bit further. 25 Q. Looking back at the email, please, UKGI00019389, see the 42 1 reply. So again, it's from Anna Bartholomew, a private 2 secretary in your office, so she's essentially replying 3 to her own email with the same distribution list. She 4 says: 5 "I have spoken to officials working on [Post Office] 6 and compiled the following advice for [you] -- this will 7 go in the box tonight with the article. 8 "Officials recommend not following up on the 9 article -- it presents a very skewed picture and does 10 not cover all the facts. 11 "The Interim Report clearly said that there was no 12 evidence of systemic failures or flaws, whereas the 13 report suggests [Post Office] has admitted to system 14 errors. There were 2 minor discrepancies which [Post 15 Office] identified and rectified independently of the 16 report. This affected a very small [proportion] of the 17 network ... no subpostmasters lost money ... 18 "Arbuthnot is closely involved in the investigation, 19 and provided a chance for the submission of individual 20 cases ... Although the article correctly refers to [him] 21 applauding the Post Office on the open way it responded 22 to allegations, there remain significant differences in 23 opinion. Following publication on the Interim Report 24 [he's] tabled an Urgent Question requiring a Government 25 statement ... despite conversations with Jo Swinson to 43 1 explain the operational nature of the issue. 2 "With regards to the possibility of redress, it must 3 be remembered that prosecutions were subject to the 4 judicial process. There is no automatic redress and 5 nothing the Government should or could intervene on. 6 Additionally, number of the subpostmasters pleaded 7 guilty. 8 "... this is only an interim report." 9 So, essentially, pouring cold water of a different 10 kind or a different variety in a number of ways on your 11 idea to take forwards what you had read? 12 A. Yes, it was. Obviously. 13 Q. Are you able to recall whether that's what happened? 14 A. No, I don't recall this episode at all but it -- we'd 15 had this kind of discussion constantly about the kind of 16 public relations/communications issue, about how to deal 17 with them, and I had got the point fairly quickly that 18 this was something the Press Office and the officials 19 didn't want to make something of. So I'd deferred to 20 their judgement on public relations grounds. 21 I certainly didn't study the content of this minute in 22 any detail. 23 Q. What about studying the reports, "Can I see the report, 24 there's obviously a difference of view here"? 25 A. Well, I could have done but I think it didn't ring 44 1 a bell at the time that this was an issue. As I say, it 2 was just -- I was focusing on a different question, 3 which is the fact that the Government and Government 4 agencies were being more transparent, and I thought that 5 was the theme of the issue, rather than getting into 6 a debate about what the Government was actually doing in 7 relation to Second Sight. So I saw it entirely as 8 a rather simple one-line PR issue, and I was warned off 9 it and -- as I often was, and took no further action on 10 it. 11 Q. Would you expect to have been provided with a copy of 12 the report by your officials? 13 A. Not necessarily. Independently of this press issue, it 14 was proceeding under the overall oversight of the Post 15 Minister. I'd no reason to believe that it wasn't being 16 well handled by her and, indeed, it was being well 17 handled. So I didn't need to see the report and nobody 18 suggested that I read it. 19 Q. Would you expect to be provided with an impartial and 20 objective summary of the report? 21 A. Not necessarily, depending on whether it was potentially 22 controversial and might lead to difficult decisions but 23 this was -- I think it goes back to the earlier part of 24 our exchange, that this was a very small part of my 25 portfolio, I left it to the discretion of my private 45 1 office and my ministerial colleagues to decide what was 2 sufficiently important to bring to me, and they clearly 3 judged that this wasn't necessary. 4 Q. You had, it seems, seen or read the Private Eye article 5 and realised that it raised an issue of substance? 6 A. Well, I'd seen the Private Eye article. I didn't 7 realise that it had raised an issue of substance, no. 8 Q. Why did you not realise that it raised an issue of 9 substance? 10 A. Well, because I'd probably glanced at it in two or three 11 seconds. That was the way we -- you know, I had to deal 12 with press cuttings. As I say, it was a very rapid 13 exercise, took ten minutes in the morning and I would 14 just pick up, usually from headlines, what were the 15 issues in the news that I needed to be abreast of. 16 Q. Is that why you focused on it being a good news story, 17 rather than all of the parts of the article -- 18 A. Yes, exactly right. 19 Q. -- which point in the other direction? 20 A. Yes, exactly. 21 MR BEER: Sir, it's 11.00 now. I wonder if we might take 22 the first morning break until 11.10. 23 SIR WYN WILLIAMS: Yes, of course. 24 MR BEER: Thank you very much. 25 (11.00 am) 46 1 (A short break) 2 (11.11 am) 3 MR BEER: Good morning, sir, can you continue to see and 4 hear us? 5 SIR WYN WILLIAMS: Yes, thank you. 6 MR BEER: Thank you. 7 Sir Vince in your witness statement you tell us in 8 paragraphs 61, 68, 69, 76 and 77 about some letters that 9 you received from James Arbuthnot MP and Adrian Bailey 10 MP -- 11 A. Mm. 12 Q. -- on 11 and 17 March 2015. I'd like to just look at 13 those, please, and see what happened in relation to 14 them? 15 A. Sure, yeah. 16 Q. These are about the Second Sight investigations and the 17 Mediation Scheme and a report that they were publishing 18 or providing. Can we look, please, at the first letter 19 in, UKGI00003781. Can we see this is from James 20 Arbuthnot, it is dated 11 March 2015, to you. Scroll 21 down, please, he says: 22 "In [PMQs] today the Prime Minister told me that he 23 would ask you to write to me about the Post Office 24 Mediation Scheme. While there are many things that are 25 very worrying about it, what particularly concerns me is 47 1 that the Post Office has recently been refusing to give 2 to Second Sight the documents and information that 3 Second Sight feel they need in order to determine 4 whether a miscarriage of justice has occurred. 5 I believe that the only legal folder, for example, that 6 Second Sight has seen is that relating to my constituent 7 Jo Hamilton -- but that folder did show that there was 8 no evidence (as the Post Office knew at the time) of 9 theft. Yet the Post Office charged her with theft. And 10 as a result she then pleaded guilty to false accounting, 11 having untruthfully been told that she was the only 12 person going through these difficulties. 13 "That suggests to me that there is more disclosure 14 of documents that needs to take place and that our 15 constituents will never believe that the truth has been 16 reached without that disclosure. Equally, that 17 disclosure needs to be made to Second Sight, who have 18 now built up the expertise to deal with it." 19 If we look at the letter in from Mr Bailey, 20 POL00176637, page 3 and 4, please. If we just pan out, 21 17 March 2015, to you. 22 "Dear Secretary of State, 23 "As you will be aware, on 3 February the [BIS] 24 Committee heard evidence on the Post Office Mediation 25 Scheme. During this session, we were concerned to hear 48 1 that the Mediation Scheme was not operating in the 2 matter envisaged when it was established. 3 "I was pleased to hear that since our evidence 4 session Post Office has agreed to take most cases 5 forward to mediation. However, I have a number of 6 specific concerns regarding Post Office's approach to 7 the mediation process, which I expect the Government to 8 be actively involved in addressing in order to ensure 9 they do not cause further issues in the future." 10 Then Mr Bailey lists them. I'm not going to go 11 through them. 12 You tell us in your witness statement that you 13 replied to both letters, indicating that you had read 14 both letters, and that your response is in detail, and 15 that you did not accept your private office's advice 16 that you should approve the revised draft of the letters 17 out without reading them. Correct? 18 A. Yes, that's correct. I only became aware of these when 19 I was asked to sign an outgoing letter and, of course, 20 they are different sources -- one is Mr Arbuthnot and 21 the other is the Select Committee -- but, in my mind, 22 they were dealing essentially with the same set of 23 issues. And I got a draft letter from officials, and 24 I wasn't happy with it. It was partly, I think, 25 stylistic. I thought we should be a little bit more 49 1 deferential, respectful, to the senior gentleman, but 2 I think more a substance that I'd read the letter and 3 I realised that it entirely hinged on accepting the view 4 of the Post Office. 5 And I said "Well, are the postmasters happy with 6 this? I mean, that whole Mediation Scheme was for their 7 benefit, so do they accept it?" And so I said "I want 8 you to go" -- I asked the officials, who clearly wanted 9 me to sign this in a hurry, because we were almost at 10 the end of the Parliament, I said, "Look, I want to be 11 satisfied that the postmasters share the view of the 12 Post Office about this question". 13 So I declined to sign the letter until I had been 14 given evidence on that point. 15 Q. Just on that point, you said that the reason for you not 16 following your advice was that the draft that had been 17 supplied to you depended on the accuracy entirely of 18 that which the Post Office was saying. 19 A. Yes, and I -- 20 Q. A number of the earlier letters that had gone out also 21 depended entirely upon the accuracy of what the Post 22 Office was saying. What differentiated this occasion 23 for you to say, "Hold on, I'm not signing that draft"? 24 A. Well, the difference -- I'm not sure that I did commit 25 myself in quite the same way earlier but, anyway, what's 50 1 happened here was that I realised that there's something 2 really rather important and bad going on because it 3 isn't just a campaigning MP, this is the Select 4 Committee, who were there to have oversight of what 5 I did, being very critical of the Department. 6 So I needed to really concentrate on the issue and 7 think about it, and I think it was only in March 2015 8 I realised there was some really -- something really 9 seriously bad going on. It was actually quite 10 difficult. I mean, I remember this period quite clearly 11 because I was in the middle of a crisis, the last big 12 crisis of my period in office, when I was having to 13 decide about the export of weapons to Saudi Arabia that 14 were being used to bomb civilians, and I was keeping 15 awake at night because either I'd have blood on my hands 16 or I'd make a decision that would put large numbers of 17 British workers out of work, so I was totally 18 preoccupied with that problem. 19 And in the middle of it, I was being asked to sign 20 letters about this Mediation Scheme. So I needed time 21 to think about it and I refused to sign the first draft, 22 for the reasons I've just given you. 23 Q. Can we look at the draft you did sign, UKGI00003910. 24 This the letter back to James Arbuthnot, dated 17 March: 25 "I am writing to you further to your question to the 51 1 Prime Minister regarding the Post Office Mediation 2 Scheme on Wednesday last week, and your subsequent 3 letter. 4 "I appreciate you raising your concerns about the 5 Mediation Scheme in general, but particularly regarding 6 your constituent Mrs Jo Hamilton, who I understand has 7 a case in the scheme. I must first of all reiterate 8 that the Mediation Scheme is independent of Government, 9 and decisions relating to the scheme or its operation 10 are matters for the parties involved and not for the 11 Government." 12 Then if we go over the page, please, if you look at 13 the penultimate paragraph at the foot of the page, you 14 conclude by saying: 15 "... I note, through Second Sight's Report and the 16 subsequent investigations, there is no evidence of 17 system-wide problems with Horizon and that conclusion 18 has stood firm through nearly two years of 19 investigation. As such, the priority must be to ensure 20 that those applicants remaining in the scheme can have 21 their cases considered swiftly and fairly, and I am 22 hopeful that all parties will continue to work 23 constructively to ensure this can happen." 24 That sentence, "there is no evidence of system-wide 25 problems with Horizon and that conclusion has stood term 52 1 through nearly two years of investigation", was that 2 a suggestion put to you by officials? 3 A. Well, it was but because I was confronting the issue 4 really for the first time, I wanted reassurance from the 5 postmasters that that was indeed the case, and I had 6 asked the officials to check with the Federation whether 7 this was indeed their understanding, and I was told that 8 it was and that the General Secretary or the head of the 9 union had appeared before the Select Committee and has 10 said he was satisfied that there was no problem. 11 So I was now being told by the officials, the Post 12 Office and the union that there wasn't a problem, so it 13 seemed to me perfectly reasonable for me to accept that 14 collective view. 15 Q. Was that, in your mind, the critical turning point: the 16 views expressed by, I think, the General Secretary of 17 the NFSP? 18 A. Yes, it was. I had dealt with them before -- 19 Q. Had you dealt with him? 20 A. Not with him. Well, he'd met me, I think, on a couple 21 of courtesy calls -- 22 Q. Sorry, just to make clear, who are you referring to? 23 A. Sorry, my first dealings with the Federation, 15 years 24 earlier, had been with Mr Baker. 25 Q. Colin Baker, yes. 53 1 A. My second interaction had been when a representative -- 2 I'm not sure who it was, whether it was Mr Thomson or 3 a regional head -- had come to see me about individual 4 cases, and I had met Mr Thomson. I think on couple of 5 occasions he had come to talk about the progress of the 6 Transformation Programme and the progress we were making 7 on mutualisation. So that was my extent of my dealings 8 with the union -- 9 Q. That he, in your dealings with him, ever struck you as 10 a tool -- meaning a tool of the Post Office? 11 A. Absolutely not. All my dealings with the Federation and 12 him personally, they'd struck me as people of high 13 integrity, who believed in what they were doing, as 14 trade union officials do. I had no reason to doubt 15 their integrity whatever. 16 Q. Do you not need to see Second Sight's Report in order to 17 include a sentence or sentences such as these in the 18 letter? 19 A. Well, I think, given time, I probably would have done 20 and should have done but I think the context was that 21 we, within a day or so of the end of Parliament, I was 22 being pressed by the officials to get this letter out, 23 I think even when I was given the reassurance about the 24 Federation's view, I declined still to sign it, because 25 I had the -- I was beginning to smell a rat. I mean, 54 1 there was something going on here and had I -- had 2 Parliament continued or had I been returned to office, 3 I would have got all these people around the table -- 4 the Select Committee, Mr Arbuthnot, the Post Office 5 people and, for the first time, Mr Bates, I'd not heard 6 of him until this point -- and I'd have got them all 7 around a table and asked "What the hell is going on 8 here?" But I didn't have time to do that and I had to 9 make a snap judgement about whether to send out this 10 letter. 11 Q. Can we look at the reply to Mr Bailey please, 12 POL00039281. Can you see 26 March and, if we just go 13 over the page to page 2, signed by you. Then if we go 14 back, please, to page 1: 15 "Thank you for your letter ... I am grateful to the 16 Committee for considering this matter and am pleased to 17 provide a response ... attached to the letter. 18 "It is important to reiterate that the Mediation 19 Scheme is independent of Government. Given that the 20 cases in the scheme are disputes between independent 21 business people and the Post Office, and are of course 22 sensitive and confidential, it would not be appropriate 23 for Government to intervene or seek to influence the 24 outcome." 25 Is that what you understood you were being asked to 55 1 do, to influence outcomes? 2 A. No, I think that wasn't the part of the letter that 3 I was focusing on. It was the implication that the 4 Horizon scheme was or wasn't functioning properly. 5 I wasn't -- as explained to you before the break, 6 I hadn't been given any briefing about the Second Sight 7 and the mediation process. I was, I suppose, privately 8 pleased that the suggestion I'd made 15 years earlier, 9 about setting up a mediation process, was actually 10 happening. The fact that it had not gone in an ideal 11 way was not something I was aware of until that point. 12 Q. Then there's the line: 13 "Since the issues were first raised over two years 14 ago, [the system] has been under considerable scrutiny, 15 and ... it remains the case there is no evidence of 16 systemic problems with Horizon. That conclusion has 17 stood firm through independent investigation by Second 18 Sight." 19 Then: 20 "The vast majority of subpostmasters continue to use 21 Horizon successfully every day in operating their 22 branches ... There are fewer than 150 cases in the 23 Mediation Scheme, while there have been around 500,000 24 users who have worked with Horizon since it was 25 introduced, [it] processes over 6 million transactions 56 1 every working day." 2 Is that a line, a comparison, of the said to be 3 small number of cases where individuals were raising 4 a problem versus the number of users and the number of 5 transactions that was put to you by officials as 6 an important point? 7 A. Yes, it almost certainly was. I mean, I -- it's 8 an issue that troubles me, and I'm sure the Inquiry to 9 this day, about -- those of us who don't really 10 understand computers and computer system, is why it 11 works almost all the time, but in some cases not, with 12 disastrous consequences. I mean, it needed somebody, 13 I think, to explain why -- 14 Q. Did anyone ever explore that with you or -- 15 A. No, I wish they had. I wish they had -- 16 Q. -- and suggest that it doesn't really matter if there's 17 a large number of okay transactions because if -- 18 A. No, clearly -- 19 Q. Hold on. If you let me finish, Sir Vince. 20 A. Sorry. 21 Q. If you're the person that has been sent to prison whilst 22 pregnant, if you're the person who has committed 23 suicide, if you're the person who has been made 24 bankrupt, it doesn't matter that quite a few other 25 people have been getting on fine with the computer? 57 1 A. Of course it matters, it matters immensely, and enormous 2 harm was done. I think the problem, as I was just 3 trying to explain, for policymakers, is who -- who don't 4 understand anything about computers and computer 5 systems, is how it is that they seem to work almost all 6 the time but not all the time. 7 It's a concept here that I still struggle to get my 8 head around, why this was the case. 9 Q. We've received a lot of evidence on precisely that issue 10 and the Inquiry understand how that occurs, concerning 11 code regression and the combination of a set or a series 12 of circumstances which, when they interact with each 13 other, can lead to undesirable outcomes? 14 A. Well, indeed, and I've read about that. But it would 15 have been helpful, when I was in Government, for 16 somebody to have explained how that was possible. 17 I believe the Computer Weekly people had some insight 18 into it but I went aware of their existence. And 19 Mr Bates too, it was only then, March 2015, I was aware 20 of his existence and he may have been able to explain 21 that. 22 Q. Can we turn, please, to POL00153177, and page 15, 23 please. It's the top two paragraphs. We don't actually 24 have the Computer Weekly article that's here quoted and 25 so I'm using this as a source of the information. This 58 1 briefing note says, in the top paragraph, that: 2 "James Arbuthnot ... has been the most vocal of 3 a group of 140 MPs campaigning for redress ... 4 "Speaking to Computer Weekly this week, [he] 5 expressed disappointment that a written answer to his 6 question during Prime Minister's Questions on 11 March, 7 which subsequently came from [you], followed the Post 8 Office's line closely. 9 "In response to the written answer to his question, 10 written by [you], Arbuthnot told Computer Weekly: 'The 11 Secretary of State has chosen to listen carefully to his 12 advisers and the Post Office on this matter rather than 13 seeking to understand why over 140 of his fellow MPs 14 have outstanding cases and unresolved concerns about the 15 matter. This is a shame. I remain quietly confident 16 that the truth will be revealed in due course and 17 I intend to pursue this matter until that happens." 18 Do you agree that 140 outstanding cases or 140 MPs 19 having outstanding cases represented a significant 20 number? 21 A. Yes, it is. It's appalling. 22 Q. Was Mr Arbuthnot's statement that you had listened to 23 the Post Office and had not sought to understand why 140 24 of fellow MPs have outstanding cases accurate? 25 A. No, I hadn't just listened to the Post Office. That's 59 1 the whole point of what I was telling you: I only agreed 2 to support the official line on this when I was 3 reassured that the people who represented the 4 postmasters were content. It wasn't based on 5 an acceptance of the Post Office view at all. I would 6 never have signed it if that was all I was asked to do. 7 And I would just add a point, which I think we did 8 discuss briefly before, that what is strange about this 9 whole episode is that none of these 140 MPs ever came to 10 talk to me about it. I had some of them coming to talk 11 to me in my -- the privacy of my House of Commons office 12 about Post Office issues, like the last bank in town, 13 where the Post Office were not being very proactive. 14 Nobody came to talk to me about the Post Office and, for 15 example, the Chairman of the Select Committee, who 16 I knew very well and respected, he was a very good 17 Parliamentarian, had actually come to see me a few weeks 18 before this episode and all he wanted to talk to me 19 about was about the pub legislation, and never raised 20 the issue about postmasters. So I think I could be 21 forgiven for not understanding the weight of this 140 MP 22 campaign because none of them ever talked to me about 23 it. 24 Q. He wrote you a detailed letter setting out his and the 25 committee's concerns -- 60 1 A. Yes, but I think -- 2 Q. Was that not enough? 3 A. It certainly wasn't, no. I think all MPs realised that 4 writing polite letters to departments isn't necessarily 5 the way to get through to people at the top of 6 Government. You have to talk to them face-to-face. 7 Q. So you do blame them for failing to come and see you? 8 A. No, I'm not blaming them. As I say, different people 9 have different styles. Some people operated through the 10 formal processes of Parliament, others didn't. No, it's 11 not a question of blame. As I say I had a great -- 12 having seen the mountain of work that they did, have 13 enormous respect for them but it was -- let's just say 14 it was unfortunate that I never had any personal contact 15 with the MPs about this matter. 16 Q. Would the outcome have been different; is that what 17 you're saying, Sir Vince? 18 A. Yes, I think it probably would have been. 19 Q. In what way? 20 A. Well, because I would have realised much earlier than 21 March 2015 that there were serious problems that were 22 not being properly addressed by the Post Office and the 23 Department, and I would have started to interrogate it 24 much more aggressively, as I did long quite a lot of 25 other issues where MPs came to see me. 61 1 Q. Don't you think you would have been provided with 2 exactly the same Post Office lines by officials, and 3 they would have been sent out in the same way as we've 4 seen? 5 A. I might well have been and it might well have led to the 6 same conclusion but I would have been more alert to the 7 challenge that was being made in Parliament. 8 Q. Can we go towards the end of this episode and look at 9 paragraph 79 of your witness statement on page 33. 10 Page 33, paragraph 79: 11 "On 15 April 2015, my Private Office was copied into 12 an email from Laura Thompson [a ShEx official] to the 13 BIS Communications Team concerning the imminent 14 publication of the Second Sight second report ... It 15 essentially said that the report was about to be 16 published, [Post Office] considered it to be of poor 17 quality and had prepared a response, that the report 18 would be provided to BIS in line with my response to the 19 BIS Select Committee and that there may be some media 20 interest. My Private Office responded to say that [you] 21 had noted the [concerns] of the email and was grateful 22 for the update. By this time, Parliament had dissolved 23 and preparations were under way for the general 24 election. [You] were unable to take non-urgent 25 decisions." 62 1 Can we look at that exchange, please, UKGI00004225, 2 and go to page 4, please. Email, 15 April, Laura 3 Thompson to, amongst others, your private office. Can 4 you see that? 5 A. Yes. Yes, I can. 6 Q. "Hannah, Ashley 7 "... we expect the next development in the Post 8 Office Horizon issue to happen tomorrow ... or possibly 9 Friday. 10 "Second Sight ... have completed their final report 11 into the matter. This report will be issued to all 12 remaining applicants ... later today ... 13 "Post Office advise that the report is poor, 14 containing unsubstantiated allegations and 15 misrepresentations ... they are issuing their own 16 response to the report alongside it. 17 "The report is designed to inform those applicants 18 in the scheme awaiting mediation. It is not designed to 19 be published ... once it is received by applicants ... 20 it will be leaked. Post Office anticipate this will 21 happen and are prepared to release the report in full, 22 alongside [its] response, to journalists on request ... 23 "[Post Office] will send a copy of the report and 24 their response to BIS later today ... This is in line 25 with the commitment that [you] made in [your] letter to 63 1 the BIS Select Committee last month. 2 "I understand from [Post Office] that, while the 3 report does not make any particularly new accusations, 4 it still contains criticism of [Post Office] and these 5 could be picked up by interested parties (probably Nick 6 Wallis from the One Show). However, it is important to 7 note that the report maintains the conclusion that there 8 are no systemic flaws in Horizon capable of causing the 9 issues that have been claimed." 10 Your office, I think, was told to direct all calls 11 to Post Office and seek Post Office lines; is that 12 right? 13 A. It appears so, yes. 14 Q. Would you have seen this email chain? 15 A. I doubt it. It's possible. There was a great flurry of 16 activity, in the last few days of Parliament. I think 17 the judgement would have been that my sending those 18 letters to Mr Arbuthnot and the Select Committee was the 19 end of my involvement but it's possible I was shown. 20 Q. So this being the last days of Parliament, or 21 a Parliament, it affected the extent of your 22 involvement? 23 A. Yes, and, indeed, the issue I referred to earlier around 24 Saudi Arabia was absorbing more and more of my time and 25 I think my officials understood I had to focus on that. 64 1 Q. Would anything be done in those circumstances to alert 2 the new Secretary of State, if there was going to be 3 a new Secretary of State, as to the issues that weren't 4 being addressed because of the ending of this 5 Parliament? 6 A. Well, I guess I was hoping I would be the new Secretary 7 of State and I would have an opportunity to deal with 8 this issue properly. I mean, I'd realised, as I'd just 9 said to you, that there was something bad happening. 10 I tried to respond to it as best I could. I think the 11 rational approach of an incoming Secretary of State who 12 I hoped would be me would be to get the various parties 13 together, including Mr Bates, who I'd heard of for the 14 first time, the critics of the Post Office in 15 Parliament, in order to thrash out why these 16 discrepancies in interpreting the work of the computer 17 and the mediation system had arisen. 18 I mean, it would -- part of my role as Secretary was 19 convening, and I think what I should have done and would 20 have done, had there been time, would have been to have 21 dealt with the matter in that way. 22 Q. Thank you, that can come down. 23 You tell us in your witness statement, it's 24 paragraph 140, that the Post Office Board was, in 25 retrospect, clearly a failure: 65 1 "I wish I had spent more time thinking about the 2 role and constitution of the Board and whether it was 3 doing its job properly." 4 Can you tell us in greater detail, please, what you 5 think you should have spent more time doing, concerning 6 the role and constitution of the Post Office Board? 7 A. Well, in retrospect we know that bad things were 8 happening in the Post Office and that the Board were the 9 people who would have surfaced any disquiet and reported 10 it back to ministers and, if necessary, me, and so there 11 was a failure at that level. As to what I could have 12 done about it, I think, as I said earlier, I was wanting 13 to change the institutional arrangement so that the 14 postmasters had a bigger voice and an easy way of doing 15 it would have been to have insisted that postmasters and 16 their representatives were put on the Board. 17 At the time, it hadn't occurred to me to do that but 18 I know it's now been done. 19 Q. You tell us in paragraphs 141 and 142 of your witness 20 statement that: 21 "I should have also noticed that there was something 22 wrong about Paula Vennells and Alice Perkins attending 23 meetings together, where Alice Perkins was supposed to 24 be supervising and independently scrutinising the Post 25 Office's Executive Team's performance. On these issues, 66 1 though it's fair to ask whether it's really for 2 a Secretary of State to be surfacing these issues or for 3 the officials in ShEx, whose focus was the Post Office." 4 Firstly, can you tell us what the something wrong 5 might be about two individuals, one the Chairman and the 6 second a CEO, attending a meeting at the same time? 7 A. Well, I suppose it's observations that have come from 8 later years and now, since I've left politics, I'm 9 involved in a Non-Executive Director role in companies 10 and I'm directly confronted with this whole issue of 11 Cadbury principles in business and the separation of 12 roles of Chairs and Chief Executives. I probably hadn't 13 appreciated at the time why that was important. 14 The Chair and the Chief Executive, when they came to 15 see me -- and I think it was only on two or three 16 occasions on courtesy calls -- were a double act and, 17 you know, in one sense, it's, you know, understandable 18 that the Chair would want to give encouragement to the 19 Chief Executive in delivering our big programme of 20 transformation. That's understandable, but I think 21 I now appreciated, having had personal responsibility 22 for corporate governance, that there is a separation of 23 roles and it might have been better in hindsight if they 24 had separated the roles themselves. 25 Q. Did you ever have concerns about the competency of the 67 1 Post Office's senior management? 2 A. No, I didn't. I -- as I think I mentioned earlier, 3 I think at my first ever meeting with Paula Vennells, 4 I'd told her I didn't think much about Post Office 5 Management. I'd had very negative views about them and 6 I'd recommended, I think, that she should read my 7 Hansard report and think about it. But she had nothing 8 to do with that, she came much later and I certainly had 9 no reason to believe that she and her senior colleagues 10 were a problem. 11 Q. Was it ever escalated to you that members of the Board, 12 individuals within ShEx, and some ministers, had 13 concerns about her competence and abilities? 14 A. No, it was never communicated to me. 15 Q. Did the consistent complaints from subpostmasters that 16 were addressed to your Department not cause you to have 17 concerns about Post Office's management? 18 A. Well, I didn't know about the volume of them. As I say, 19 the one occasion I -- when an MP brought the Federation 20 to me, concerned, I think, 100 postmasters, which was 21 1 per cent of the total, I think, something of that 22 order of magnitude. Indeed, I asked the question at the 23 time, of my officials would they do some research, as to 24 into whether a 1 per cent prosecution rate was abnormal 25 in franchise networks. I said go to Londis and Spa, and 68 1 so on, and ask if this is normal. And the message came 2 back to me that it was normal and there was nothing 3 worrisome about it. 4 So the fact is that my limited knowledge of 5 complaints didn't suggest to me that at that point, that 6 there was a failing at the top management. 7 Q. Can we turn, lastly, to some reflections you make at the 8 ending of your witness statement it's page 51 and 9 paragraph 144. You say: 10 "[You] have naturally reflected on what lessons can 11 be learnt from the Post Office scandal. A few 12 thoughts", and you set out five of them: 13 "[First] The relationship between the Post Office 14 and postmasters was, and is, highly unequal. In 15 comparable situations [you] promoted legislation 16 establishing independent regulators to protect the 17 weaker [parties]." 18 You've mentioned that already: 19 "In the case of the Post Office, a different 20 approach was tried ... but for a variety of reasons it 21 did not work. In future an independent 22 regulator/arbitrator should be appointed." 23 Can you expand, please, on what you mean by 24 an independent regulator and arbitrator? 25 A. Well, I can't expand a great deal because it was a sort 69 1 of concept and we actually, as we now know, the Second 2 Sight project led to a form of arbitration or dispute 3 settlement, which didn't work, once -- because the 4 details were wrong. So the concept was tried and didn't 5 work brilliantly well. But I think in the other cases 6 I had taken action, in respect of pubs and supermarkets, 7 a set-up had worked. The difference being that we were 8 dealing here with a state agency, and to have introduced 9 that kind of arrangement, I would have been asking to 10 set up an arrangement where the Government would have to 11 investigate complaints into Government, which would have 12 been a rather circular process. But I think the concept 13 of having an entirely independent arbitration process is 14 right, though, of course, the details also need to be 15 right. 16 Q. You say, secondly: 17 "A related point is that UK competition law is 18 forced on distortion of competition resulting in 19 detrimental impacts on consumers. It does not address 20 market imbalances between large corporations and smaller 21 subcontractors or [franchises]. Consideration should be 22 given to addressing this." 23 Can you expand, please, on what you have in mind 24 there? 25 A. Well, I think the answer is the one I've just given to 70 1 you: that I'd -- one of the things I'd done as 2 a minister was to set up these regulatory bodies for 3 industries where this was a common problem, which was 4 agriculture and supermarkets, and pubs and pubcos. In 5 introducing the legislation, it proved to be a lot more 6 complicated than I'd realised when I was putting the 7 idea out in general terms. But I think we should be 8 looking at those models and applying -- drawing on those 9 lessons to apply it in the case of the Post Office. 10 Q. Over the page, please. 11 SIR WYN WILLIAMS: Before we go on, Mr Beer, can I just ask 12 one question about the first subparagraph, just to clear 13 my mind. 14 Sir Vince, as you probably are aware, the Mediation 15 Scheme in 2013 to 2015 was just that, in the sense that 16 the parties, in effect, were free to choose whether to 17 accept what the mediator was trying to achieve. Does 18 your phrase "independent regulator/arbitrator" convey to 19 me that you think that there should be some kind of 20 scheme which, in effect, imposes a solution on the 21 postmasters and the Post Office, whether they like it or 22 not? 23 A. No, that's exactly what I envisaged. 24 SIR WYN WILLIAMS: Fine. All right. Thank you. Yes. 25 MR BEER: Thank you, sir. 71 1 Over the page to 3, please. You say: 2 "The experience of Horizon has been that Post Office 3 Management, government officials and ministers did not 4 understand the workings and limitations of complex, 5 advanced computer systems. There have been many other 6 failures (as in the NHS). There is a case for 7 Government Departments and entities like the Post Office 8 to have a Board-level Technology Officer who is legally 9 responsible for validating the integrity of technology 10 systems in the same way that the Permanent Secretary is 11 Accounting Officer and company Chief Finance Officers 12 are responsible for accounts." 13 "Legally responsible", do you mean through 14 legislation? 15 A. Yes. Not that the individual would be subject to 16 prosecution, no; indeed, through legislation. I mean, 17 I was just attracted to this idea because of the 18 experience I had with the Permanent Secretary, who was 19 the Accounting Officer for BIS, and, if there was 20 something wrong in the accounts of the Department, he 21 would be hauled up before the Parliamentary Public 22 Accounts Committee. So there was a real accountability 23 here. There is analogous behaviour in the private 24 sector, obviously, with due diligence, and I thought, 25 since very few people in public life have any 72 1 understanding of computers and systems, there needed to 2 be somebody who was properly qualified/knowledgeable, 3 who would take that level of responsibility, because, 4 I mean, some companies and Government departments, stand 5 or fall by whether their technology is working, and so 6 having a specific line of accountability would, in my 7 view, be useful. 8 Q. Thank you. Fourthly: 9 "There appears to have been a failure of governance 10 in as much as the Board failed to identify a serious 11 failure and alert ministers to it ... When government 12 appoints members of supervisory boards of this kind it 13 is important that members are aware that their primary 14 duty is to protect the wider public interest. This may 15 involve creating a bespoke corporate structure with 16 specific legislative underpinning." 17 A couple of questions on that: you say that when the 18 government appoints members to a board it is important 19 that that member is aware that their primary duty is to 20 protect the wider public interest? 21 A. Yes. 22 Q. Do you say that that is established already, that that 23 was the members' duty? 24 A. I think it is implicit. But I think it was obvious -- 25 Q. Implicit how? I'm so sorry. 73 1 A. In this case, of course, the -- there was a Government 2 representative on the Board -- 3 Q. Yes. 4 A. -- but he or she was, I think, probably looking in terms 5 of the public interest, in terms of spending £2 billion 6 of taxpayer's money and making sure it was properly and 7 effectively spent, but there were other public 8 obligations, the welfare of postmasters being one of 9 them, and it was quite difficult for, you know, one 10 shareholder representative to carry out different, 11 possibly on occasions conflicting, aspects of public 12 interest. 13 So I think we probably hadn't thought through how 14 these different aspects of public interest were best 15 captured in the composition of the Board. 16 Q. So the first question, your answer to the first question 17 is you think it was established that Mr Callard's 18 primary duty was to protect the wider public interest? 19 A. Yes, I think so. We can debate, you know, academically 20 about what public interest was but, yes, I think that 21 was clearly the case. 22 Q. Why do you think that was clearly established, that his 23 duty was to protect the wider public interest, rather 24 than to be -- to hold and discharge the duties that any 25 other Board member held? 74 1 A. Well, because he was there to represent the Government 2 and the Government represents the public interest. As 3 I say, we can debate the different components of public 4 interest but he was the Government -- the Government was 5 the shareholder, he was there to represent the 6 Government and the Government, if it -- in a democracy, 7 is there to represent the wider public interest. 8 Q. Do you think that was obvious at the time? 9 A. No, it wasn't, probably obvious and maybe, as I've said 10 in this note, we should have been, and should be 11 thinking a little bit more about the composition of the 12 board. 13 Q. You say, secondly, that this would: 14 "... involve creating a bespoke corporate structure, 15 with specific legislative underpinning." 16 Do you have this idea in mind in relation to the 17 whole range of public corporations in which the 18 Government is a shareholder? 19 A. Well, I don't want to redesign Government but we know 20 from the private sector, sometimes you have two-tier 21 boards, which is necessary to capture the variety of 22 stakeholder interest. I mean, when we talk about public 23 corporations, we're talking about some very 24 controversial bodies, like the BBC, and so the word 25 "bespoke" is to take account of the fact that these are 75 1 very different animals and require different treatment. 2 Q. Fifth, lastly: 3 "There will need to be a review of the precise role 4 of Government in relation to [ALBs] as in the status of 5 Public Corporation under the 1969 Act. There is no 6 appetite at any level for politicians to be micro 7 managing organisations, like the Post Office (or 8 hospitals, colleges and government laboratories). But 9 an explicit mandate to deal with failing organisations 10 (as with schools, NHS Trusts and police forces) might be 11 helpful." 12 Can you explain what you mean by an "explicit 13 mandate"? 14 A. Well, the question I'm addressing here is one that runs, 15 I think, through the heart of this Inquiry: which is 16 this whole question of the distinction between 17 operational questions and strategic questions and where 18 you draw the line. And I think, in general, it is 19 sensible policy that agencies of Government should not 20 be micromanaged from the centre, whether they're schools 21 or public corporations. 22 But that does require some mechanism to ensure that, 23 when they go very badly wrong, there is an opportunity 24 for Government, the Minister sitting behind them, to 25 interfere, and I think this has been thought through in 76 1 the case of schools and hospitals. It is clear that in 2 this case there wasn't a kind of emergency mechanism, 3 where probably my successors would have been able to 4 move in very quickly and take over the organisation, 5 appoint new management and start from scratch. 6 Q. In colloquial language, special measures -- 7 A. Special measures. 8 Q. -- type enterprises? 9 A. Yes. 10 MR BEER: Sir Vince, those are my questions. Thank you for 11 answering them. 12 A. Thank you. 13 MR BEER: There will be some questions from Core 14 Participants. May I suggest we have our second break 15 now until 12.10. There are about 45 minutes' of 16 questions, sir, which will take us to the lunch break. 17 SIR WYN WILLIAMS: All right. Thank you very much. 12.10. 18 MR BEER: Thank you very much. 19 THE WITNESS: Thank you. 20 (11.57 am) 21 (A short break) 22 (12.10 pm) 23 MR BEER: Sir, before the Core Participants ask their 24 questions, there's one matter that I'd omitted to ask on 25 behalf of a Core Participant, so I ought to do that 77 1 first. It'll only take a couple of minutes. 2 SIR WYN WILLIAMS: Certainly. 3 MR BEER: Thank you, sir. Can we turn up paragraph 90 of 4 your witness statement, please. It's on page 36. About 5 five lines from the bottom, you say: 6 "It was clear that in my period in office the 7 operational failures were sufficiently widespread and 8 serious as to justify Government intervention. But 9 these were not identified or recognised within the 10 Government. The reason, so far as I can tell, was that 11 officials in ShEx were misinformed or lied to by their 12 counterparts in the Post Office." 13 Then similarly page 41, at the foot of the page, 14 paragraph 110, two lines from the bottom: 15 "It is clear that in my period in office the 16 operational failures were not identified or recognised 17 as systemic, or engaging strategy. The reason, so far 18 as I can tell, was that officials in ShEx were 19 misinformed or lied to by their counterparts in the Post 20 Office." 21 Firstly, would you agree that there is a distinction 22 between ShEx misinforming, on the one hand, or lying to, 23 on the other, their counterparts in the Post Office? 24 A. Yes, indeed. There is an important distinction, yes. 25 Q. Are you able to assist the Inquiry as to the basis for 78 1 the assertion that any officials in ShEx were lied to by 2 their counterparts in the Post Office? 3 A. No, nothing specific. I've been trying to follow the 4 Inquiry at some distance and that is the kind of 5 language and interpretation that I've heard, and you've 6 given -- you've taken evidence from Ed Davey, who 7 certainly felt very strongly that he had been very 8 seriously misinformed or lied to, he wasn't clear which, 9 and that matters might have been addressed if that 10 information had been given to him. 11 Q. Are you able to assist the Inquiry from your own 12 knowledge, rather than having watched the Inquiry 13 proceedings, as to the identity of any individual within 14 ShEx who was lied to by their counterpart -- 15 A. No, I certainly can't do that. ShEx were one of many 16 departments within the BIS. As far as I was concerned, 17 they were just part of the BIS Civil Service. We had, 18 I think, 3,000 to 4,000 civil servants and I had no 19 particular reason to reflect on who ShEx were in this 20 context and who the individual civil servants were or, 21 indeed, their relationships with the Post Office. 22 MR BEER: Thank you very much. 23 Sir, those are the supplemental questions. I think 24 it's Ms Patrick first and then Ms Page and then 25 Mr Jacobs. 79 1 Questioned by MS PATRICK 2 MS PATRICK: Sir Vince, good afternoon. My name is Angela 3 Patrick and I represent, together with Mr Moloney KC and 4 Hudgells Solicitors, a number of subpostmasters who were 5 convicted and have since had their convictions quashed, 6 including Mrs Hamilton, who I'm sure you can see sitting 7 to my right. 8 A. Yes. 9 Q. You'll be glad to hear I've got one issue I want to 10 cover with you in questions and it's looking back at 11 your witness statement. At paragraphs 117 to 118 you 12 deal with your knowledge and experience on the 13 backbenches before you came to Government, and you've 14 dealt win that a little with Mr Beer this morning. 15 I just want to look again at paragraph 118, if we could, 16 and if that could be brought up for you, I'd be 17 grateful. It's WITN10830100, and it's page 44 at the 18 top. 19 Can you see that, Sir Vince? 20 A. (No audible answer) 21 Q. It says: 22 "From 1999 until 2003, I was the Liberal Democrat 23 Trade and Industry spokesman ..." 24 You make clear you've never been the Shadow 25 Secretary of State and you say you are extensively 80 1 involved in issues related to Post Office closures and 2 you remembered Alan Johnson introducing Horizon as 3 a system. You've dealt with that a little this morning 4 with Mr Beer. 5 It's the second part I want to look at particularly 6 and if you see that there: 7 "When I was a backbencher, there were continuing 8 debates about government IT systems (the NHS and Inland 9 Revenue systems were complete disasters) so there was 10 a certain amount of scepticism about this new IT system 11 [Horizon], but we had no information indicating that 12 this one didn't or wouldn't work." 13 I just want to ask you a few questions about that. 14 So before you took up your ministerial role, you were 15 aware of continuing debates about Government IT systems 16 being problematic? 17 A. Mm. 18 Q. Those debates were about IT failures in multiple public 19 IT projects? 20 A. Mm. 21 Q. You're nodding, Sir Vince. For the transcript, 22 unfortunately, you have to either say "yes" or "no"? 23 A. Sorry, I was -- I didn't quite hear your question. 24 Q. Sorry. You were aware, looking at your evidence, that 25 there had been IT failures in multiple different -- 81 1 A. Yes. 2 Q. -- public projects? 3 A. The answer is, yes, yes. 4 Q. You give examples of the NHS and the Inland Revenue but 5 there had been others, hadn't there? 6 A. Yes, indeed. 7 Q. This had informed the public narrative that Government 8 and other public bodies, when it came to IT, came with 9 a particular known susceptibility to a degree of risk; 10 is that fair? 11 A. I'm not sure this was necessarily just public bodies. 12 I think probably private companies had the same problem. 13 Q. Okay. But there had been disasters which had been 14 particularly costly to the public purse, hadn't there? 15 A. Yes, there had. In fact, I -- shortly before I went 16 into Government, I remember taking Gordon Brown to task 17 because of the problems with the Inland Revenue and 18 large amounts of loss of money. 19 Q. Yes, and there had been projects that were just, as you 20 put it, simply complete disasters in the sense that they 21 just simply didn't do what they were intended to do; is 22 that fair? 23 A. Yes, I think it is fair, yes. 24 Q. You refer there in your witness statement to a certain 25 amount of scepticism about Horizon. Would you have 82 1 expected that kind of scepticism that you held about 2 public IT systems, and Horizon itself, to have been 3 adopted by others, including in the Post Office, in the 4 Civil Service and in other public agencies, contracting 5 for IT or managing IT systems? 6 A. Yes, I would have expected people to be in inherently 7 sceptical. I think, in the case of the Post Office, 8 I remember this was this flurry of concern when Alan 9 Johnson was the Minister, and quite a lot questions were 10 asked, including by me, but, by the time I had been in 11 Government, that was 10 years later and they'd had 12 10 years to get their system organised and iron out any 13 problems and as I -- I had no reason to assume that it 14 wasn't the working properly. 15 Q. Putting Horizon to one side just for a minute, you were 16 aware of continuing reporting of problems in these kind 17 of IT projects, including in the public sector, at the 18 time you became Secretary of State? 19 A. Yes, that's fair. 20 Q. I mean, just to be really obvious, from 2010 on, the 21 historic risk about IT, public or private, didn't go 22 away with the forming of the Coalition, did it? 23 A. No, I'm sure. 24 Q. No. So if I take just one example, to see if I can 25 spark your memory a little. If I mention Libra, 83 1 a system that was running in the Magistrates Court and 2 another system that had been developed by ICL Fujitsu 3 and it having been criticised in the mainstream media, 4 following what if it is work by the NAO in 2011, would 5 that have been something you'd have been aware of? 6 A. Not that specific case, I don't think so. 7 Q. Again, stepping away from Horizon for a second, if there 8 were allegations and concerns about a third-party 9 contractor who was contracting across Government and 10 different public IT platforms, were there systems in 11 place for information sharing across Government 12 departments or public agencies where there were 13 different commercial contracts with different 14 departments or different public bodies? 15 A. I certainly knew nothing about that. The only -- trying 16 to help answer your question, that I think in the middle 17 of my period of Secretary of State, the computer systems 18 actually broke down in my Department and I tried to find 19 out why that was, and it was being blamed on me because 20 I had given instructions that contracts should be 21 awarded to small companies, rather than big 22 multinationals, where there was a choice. And it turned 23 out that the small guys hadn't been able to operate the 24 system properly. And unfortunately, the decision had to 25 be reversed. So I was aware that there had been systems 84 1 failures, yes. 2 Q. I think we are at slight cross purposes, Sir Vince. I'm 3 suggesting -- I'm just asking if you can help the 4 Inquiry understand, where you have different commercial 5 contracts with a third-party contractor, in different 6 Government departments or different public agencies, is 7 there a system across Government for sharing 8 intelligence about concerns that might arise in respect 9 of one contractor, albeit that there are different 10 contracts with different bodies or different public 11 departments? 12 A. Well, the answer is I don't know but I think that the 13 Cabinet Office were the people in Government whose job 14 it was to ensure that that kind of coordination took 15 place. 16 Q. Okay. I think you've told Mr Beer this morning that 17 Horizon wasn't on your radar until fairly late in your 18 ministerial appointment. Whether in 2013, at the time 19 of the Private Eye article being circulated to you, or 20 later in March 2015, when you were dealing with the 21 correspondence around the Select Committee and James 22 Arbuthnot, if you had been aware either of difficulties 23 in the early development of Horizon and, separately, if 24 there were other difficulties arising in projects 25 developed or managed by ICL Fujitsu, would either of 85 1 those matters have increased or decreased your 2 scepticism? 3 A. Well, as I explained to Mr Beer, I think the 2013 case, 4 I just saw as a public relations issue. I didn't 5 realise it was anything to do with policy. Perhaps 6 I should have read it more carefully but I didn't 7 realise at the time. And the 2015 case, yes indeed, all 8 of these issues came together, and I did realise there 9 was a systemic problem here because a lot of serious 10 people were questioning it. I don't remember the name 11 of the contractor to ever have been mentioned in this 12 context, but I'm -- as your question suggests, there was 13 an issue with them. 14 Q. Separately, would you have expected, if anyone in the 15 Post Office or in ShEx, or in any role responsible for 16 representing the interests of the shareholder, if they'd 17 had information about difficulties in the early 18 development of Horizon or difficulties arising in other 19 projects run by the contractor, would you have expected 20 them to have similarly increased scepticism? 21 A. Yes, I would but I think your phrase about the early 22 stages -- I mean, I think it was introduced in, was it 23 1999? So I think 10 years later, I would have expected 24 that, if there were any problems, they'd been dealt 25 with. 86 1 Q. Indeed, and the Inquiry has heard evidence about the 2 development and the management of Horizon throughout the 3 years and I'm not asking you questions about that 4 evidence. 5 But one final question: we've talked about issues 6 arising, can you recall whether there was any discussion 7 about the performance of Fujitsu as a repeat Government 8 contractor across departmental lines at any time when 9 you were Secretary of State? 10 A. No, I can't recall them. My dealings with Fujitsu were 11 in a totally different context because we had 12 an industrial strategy designed to develop manufacturing 13 industry and I think they were partners or part of the 14 ICT arm of the industrial strategy, and they contributed 15 to thinking about Government training, and so on. But 16 I certainly was never involved, to my recollection, in 17 any discussions about Fujitsu as a contractor. 18 Q. Just to raise you having said that, and their role in 19 the wider industrial strategy, we know that the campaign 20 run by subpostmasters, including Mrs Hamilton, was 21 running well before you became Secretary of State in 22 2010. At any time when you were talking to civil 23 servants or other officials around the strategy and any 24 role played by Fujitsu, did anyone mention that they 25 were involved in these concerns around Horizon issues? 87 1 A. Not that I recall, no. 2 Q. Would you have expected that ought to have been 3 something that was raised with you? 4 A. Well, as I said, and in response to Mr Beer's question, 5 I did expect to have been briefed at the beginning of my 6 term of office, that questions were being raised about 7 the computer system by serious people, which they were. 8 But I was not briefed about it, no. 9 MS PATRICK: Thank you very much, Sir Vince. Those are all 10 the questions that we have. 11 THE WITNESS: Thank you. 12 Questioned by MS PAGE 13 MS PAGE: Over to me now, I think, Sir Vince. 14 I'd like to ask you about your strategic objectives. 15 A. Yes. 16 Q. No need to bring it up but in paragraph 31 of your 17 witness statement you set out three strategic 18 objectives. The first was to secure funding for the 19 network and Network Transformation specifically, with 20 a view to stopping closures, yes? 21 A. Yes. 22 Q. Then your second was to separate the Post Office from 23 Royal Mail Group with a view to then privatising Royal 24 Mail Group? 25 A. Correct. 88 1 Q. Then, finally, you hoped to mutualised the Post Office? 2 A. Correct. 3 Q. How did you come up with those three strategic 4 objectives? 5 A. Well, it was -- I was responsible for the Department, 6 I'd had a background in Post Office issues, to a limited 7 extent. I think the overriding one of those three was 8 getting of funding for Network Transformation. It was 9 difficult because this was a time of austerity, most 10 Government services were being cut. I could see from my 11 having dealt with the Post Office Network that it was in 12 a state of collapse, it had fallen from, I think, 17,000 13 to 11,000 branches in the decade since I first raised it 14 and, unless something dramatic was done, there wasn't 15 going to be a network, although it mattered enormously 16 to millions of people. 17 So it needed an injection of cash and commitment to 18 turn it round and, certainly, whenever I met Post Office 19 officials -- I didn't very often but, when I did, the 20 issue that was at the top of my mind was were they doing 21 this effectively, was it working? And it was, actually, 22 because I think, to my recollection, there haven't been 23 any more post office closures net since that time. 24 Q. So that objective was your pre-eminent one. Your second 25 strategic objective, was that interlinked to it? 89 1 A. I don't think they were necessarily linked. The issues 2 around the separation of the Post Office and the Royal 3 Mail were essentially sort of technical and legal, and 4 I think they were handled very effectively by Ed Davey, 5 who did a lot of the preparations for that and the 6 legislation around it. I didn't get involved in that. 7 The third one, which I did care about, goes back to 8 when I was campaigning for the postmasters. You know, 9 we felt as a matter of principle that this was a very 10 unequal and unfair relationship, it needed to be 11 addressed and it needed radical change and we had 12 support for that idea from the Federation. So that was 13 how that originated. It wasn't -- it was quite 14 disconnected from the others. 15 Q. Well, the second one, of course, was pre-existing in the 16 sense that the previous Labour administration had made 17 moves in the direction of separation and privatisation; 18 that's right, isn't it? 19 A. Yes, that's correct, yes. 20 Q. Obviously, your first objective of securing the 21 £2 billion funding for the network, that did happen and 22 there was then a period of time over which that funding 23 was released. 24 A. Yes. 25 Q. Your second objective was also a success though, wasn't 90 1 it, in at least this sense: that when all shares were 2 sold in Royal Mail Group, that brought in 3.3 billion 3 for the Treasury, didn't it? 4 A. Yes, there was a big dispute as to whether we could have 5 got more but, in retrospect, actually, the Royal Mail is 6 worth less now than when we sold it. So yes, I think 7 that was considered a success. I mean, the issue was 8 not actually simply a question of raising money; the 9 main reason we did it was to enable the Royal Mail to 10 survive. Its business was dying because -- 11 Q. To bring in private injections? 12 A. Yes, so the Treasury would not allow the Post Office to 13 raise -- would not allow it to borrow when it was under 14 public ownership. So if it was to finance its -- you 15 know, modernise, it could only happen in the private 16 sector. 17 Q. But I asked you whether the two were interlinked and you 18 have suggested not. Are you saying that George 19 Osborne's Treasury would have given out £2 billion for 20 the network if there hadn't have been the promise of 21 £3.3 billion coming in from the sale of -- 22 A. No, I think they were completely separate issues. We 23 had no idea at the time that the sale was launched how 24 much would be realised, and there was no connection. 25 Q. Even though, as you said yourself, this was a time of 91 1 cutting back, a time of the launch of austerity, and the 2 Treasury was very reluctant to give out money? 3 A. Yes. No, actually, the big cost to the Treasury was the 4 cost of the pension fund. It swamped all the other 5 financial consideration. 6 Q. That's certainly another factor, isn't it, because there 7 was some -- 8 A. If I could just finish my answer. The reason we pressed 9 for it was for political reasons. It was -- certainly 10 I believed and my party colleagues believed, that the 11 Post Office Network was a major national priority and it 12 needed funding, and we, in the negotiations with the 13 Treasury, identified certain key issues -- and that was 14 one, and Catapult Network was another, I could list half 15 a dozen -- where we wanted more money, even at a time 16 frame when cuts were having to be made. 17 Q. But you couldn't sell Royal Mail Group with the problems 18 that it had with the pension pot, could you? There was 19 a £28 billion pension pot there that needed to cover 20 £37.5 million of liabilities, didn't it? 21 A. Yes. It had to be dealt with before a sale could take 22 place. No shareholders would have taken it on 23 otherwise. 24 Q. Although that was a problem in the sense that the 25 liabilities were greater than the sum of money there, in 92 1 the short-term, for the Treasury, that was £28 billion 2 straight in the door, wasn't it? 3 A. Yes, indeed. 4 Q. Albeit that there was then, for future administrations, 5 a long-term problem of £37.5 billion that needed to be 6 paid out in the future? 7 A. Yes, well, as you know, there has been a big argument 8 about the measurement of the liabilities of pension 9 funds, depending on the interest rate and the discount 10 rate. So, I mean, we could have a long debate about the 11 privatisation of Royal Mail but I'm trying to see the 12 connection with the Post Office -- 13 Q. Well, the simple point is this: those issues were 14 interrelated, weren't they? There was no way there was 15 going to be funding for the Post Office unless the 16 Treasury was going to get in both the £28 billion 17 pension pot and what was ultimately, although not known 18 at the time, £3.3 billion in shares? 19 A. I didn't see them as interlinked. I saw them as 20 separate problems. 21 Q. How did the people within Post Office and Royal Mail 22 Group know about your three strategic objectives? 23 A. Almost certainly because I told them. I had a courtesy 24 meeting with the Chief Executive and the Chair, shortly 25 after the Post Office was separated and I spelt out what 93 1 I wanted them to do and the Post Ministers were aware 2 that those were our priorities and very aware of them 3 and carried them out. 4 Q. Can I just then turn to some of the specifics about how 5 they may have related to what happened within Post 6 Office. In July 2013, you were making an announcement 7 in Parliament about privatisation and, shortly before 8 that, Jo Swinson had to give a short reaction in 9 Parliament to the Second Sight Interim Report. What I'd 10 like to be brought up, first of all, is her statement. 11 It's POL00141558. If we just zoom in to the middle of 12 the second paragraph, there is just a one-liner and it 13 says this -- sorry, this is the second paragraph as we 14 see it on the page: 15 "It is important to note that the issues in the 16 report [that's the Second Sight Interim Report] have no 17 impact on Royal Mail, which is an entirely separate 18 business." 19 If we also go to a Whip's briefing that lies behind 20 that statement from Ms Swinson, if we could go, please, 21 to UKGI00001679, and we go to page 2, please, and under 22 a heading of "Wider impacts". As I say, this is the 23 Whip's briefing that sits behind the statement that Jo 24 Swinson made on 9 July: 25 "The timing of Arbuthnot's intended statement 94 1 [that's his intended statement about the Second Sight 2 Interim Report] should be considered in the context of 3 the Royal Mail privatisation ... 4 "Vince Cable and Michael Fallon are making 5 a statement to Parliament on Wednesday, 10 July [that's 6 one day after Ms Swinson's statement], setting out the 7 steps towards a Royal Mail transaction. In the eyes of 8 many MPs, the media and the public at large, Royal Mail 9 and the Post Office are the same entity. Although not 10 related, the adverse coverage that Arbuthnot is seeking 11 to attract is likely to have a significant and 12 diversionary impact on the messaging of the Royal Mail 13 statement." 14 So those can come down. So here's the point, isn't 15 it, Sir Vince: that it was seen as essential not to let 16 problems with the Second Sight Interim Report get in the 17 way of a statement that you were about to make that 18 related to privatisation? 19 A. Well, that's your assertion, but I -- I don't think 20 that's correct, actually. I mean, I became involved in 21 the Royal Mail privatisation because it was highly 22 controversial and I had to lead from the front. It was 23 being led by a Minister of State but I got sufficiently 24 involved to be aware of some of the risk factors, 25 I don't recall this ever being mentioned. The big risk 95 1 factor was around the trade union, the CWU, who were 2 threatening to go on strike. That was a big risk factor 3 for the investors, and that was the one -- the only one 4 that I recall being discussed with any seriousness. 5 Q. So this going on in the background, we can take it that 6 it wasn't something that was coming directly from you 7 but, nevertheless, this was, because you had 8 communicated your three strategic objectives, something 9 which people knew you needed to have happen. Right? 10 A. Yes, that's correct. 11 Q. So whilst you may not have become involved in what 12 people at Post Office and, indeed, in Government 13 supporting Ms Swinson were getting up to, they were 14 helping, because they thought it was necessary, to get 15 the privatisation over the line? 16 A. Yes, well getting the privatisation over the line 17 depended on managing a group of risk factors. I don't 18 recall this being one of them. As I say, the risk 19 factors overwhelmingly centred on industrial relations 20 issues. It may be, as you say, that there were people 21 in the -- who were involved in the Post Office who were 22 worried that they might be creating a problem. The 23 people who had identified risk factors were the brokers 24 and the investment managers, and they would have said, 25 "This is worrying us". I don't recall they ever did. 96 1 Q. You may not have seen some of the evidence in the 2 Inquiry about Ms Vennells' work on the prospectus? 3 A. Okay. 4 Q. She, in fact, managed to get a section in the prospectus 5 taken out that was going to be about the Horizon 6 problems. 7 A. Mm. 8 Q. She told her Chair, Ms Perkins, that she had earned her 9 keep on that one. So that may have been an example, may 10 it not, Sir Vince, where you didn't know but the people 11 acting within the Post Office knew that there was a risk 12 factor that they wanted to take out of the picture in 13 order to help your strategic direction? 14 A. Yes, what you say seems to be perfectly fair. All I can 15 say is that I didn't -- I wasn't aware of it as a risk 16 factor, and I was involved in the privatisation, so 17 I would have, I think, known. 18 Q. Yes. Well, let me just give you another example, 19 perhaps, of what may have been going on behind the 20 scenes. If I could bring up POL00296944, please. This 21 is an email between the Chief Executive and the Chair, 22 and it's about finessing the Second Sight Interim 23 Report. In that second paragraph, she's referring to 24 conversations that she had with her General Counsel, 25 Susan Crichton. She said: 97 1 "I caught up with Susan this evening after we 2 finished. She had finished her meeting with [Second 3 Sight] ..." 4 She says "wade" but I think we can take it that she 5 "was": 6 "... of the view that they do now understand the 7 risk of being caught up in something bigger and more 8 sensitive. She is hoping their report should be more 9 balanced, should say they have found no evidence of 10 systemic Horizon (computer) issues but will confirm 11 shortcomings in support processes and systems, and that 12 Post Office has already identified and corrected 13 a number of these." 14 Then she talks about James Arbuthnot: 15 "I hope when they speak to James tomorrow that they 16 will confirm all this. They will also want to say their 17 work is not finished and therefore still not 18 conclusive." 19 Now, something bigger and more sensitive, this email 20 is on 1 July 2013. Ms Swinson was to make the statement 21 about the Interim Report in Parliament on 9 July, and 22 your statement about privatisation was on 10 July. This 23 again, rather looks as if this is people within the Post 24 Office worrying about Second Sight tying into something 25 bigger and more sensitive, ie the privatisation; does 98 1 that make sense to you? 2 A. Yes, it does make sense. 3 Q. Yes. So this appears to be an attempt to have the 4 Interim Report's findings managed in a way so as not to 5 disrupt your strategic plans. Are you confident that 6 there was no one in Government putting any pressure on 7 Post Office to do that sort of thing? 8 A. Well, I simply I don't know. The ShEx, who were the 9 unit responsible for Post Office, were also the people 10 who were managing the privatisation from the BIS point 11 of view, so it was the same group of people. Whether 12 they acted the way you describe, I have absolutely no 13 way of knowing but I can see that, if you're looking 14 for -- no, conspiracy is too hard a word but, if you're 15 looking for attempts to manage the issue then what you 16 say makes sense. 17 MS PAGE: Thank you. Those are my questions. 18 Questioned by MR STEIN 19 MR STEIN: Sir Vince, my name is Sam Stein, I appear on 20 behalf of a very large group of subpostmasters and staff 21 that worked in branches. 22 I work with Mr Jacobs, who appears on my left, and 23 we are instructed by a firm of solicitors who have long 24 been a thorn in the side of the Post Office, called 25 Howe+Co. 99 1 Now, you've been asked a number of questions by 2 Mr Beer about the correspondence that either was or 3 wasn't sent through to your office, when you were 4 Secretary of State for BIS, and what happened to that. 5 I am just going to quote from paragraph 37 of your 6 statement. We don't need it on the screen. Sir Vince, 7 you say there this: 8 "Whilst Horizon was on a few occasions raised in 9 correspondence addressed to me, with very few 10 exceptions, my correspondence were dealt with by 11 officials at the level of the responsible junior 12 minister, none of whom flagged these issues to me as 13 needing my engagement." 14 That's what you've been said in your statement. 15 You've been asked a large number of questions about that 16 by Mr Beer. Okay. 17 A. Mm. 18 Q. I'm not going to repeat those questions. I'm going to 19 go to a different type of information that BIS was aware 20 of. 21 A. Mm. 22 Q. Can we go, please, to a document which is POL00141382. 23 The date of this document is May 2012. If you'll take 24 that from me, I'll be very grateful. Helpfully, for me, 25 you started as Secretary of State for BIS in May 2010, 100 1 so this is pretty much two years into your time as 2 Secretary of State dealing with these matters. 3 You've just been asked a few questions that touched 4 upon Post Office Network Transformation. You're 5 familiar with the discussions about that and you'll 6 recall, I hope, that there was a BIS Select Committee 7 that was set up to consider issues that related to 8 Network Transformation at around the same time in 2012? 9 A. No, I don't actually recall that but I appeared before 10 the Select Committee every year and they interrogated me 11 about the things that they thought I should know. 12 Q. Right. Now, this is the written evidence, as you'll 13 see, submitted by Shoosmiths solicitors, and you can see 14 there that, if we go to just a few of these paragraphs, 15 paragraph 2: 16 "Access Legal from Shoosmiths, a national law firm, 17 have been contacted by almost 100 SPMs [subpostmasters] 18 who have suffered losses they cannot explain and have 19 been subject to disciplinary measures by POL. All are 20 adamant that they or their staff have not stolen any 21 money. They claim that the Horizon system ... 22 an Electronic Point of Sale and accounting system POL 23 require them to use, has caused the errors or not 24 enabled them to work out why the errors have appeared in 25 the first place." 101 1 They go on to say there: 2 "They claim there has been no real investigation by 3 POL as to the cause of the losses that have appeared -- 4 SPMs are expected to pay it back regardless of how it 5 was caused." 6 Go to paragraph 3: 7 "POL are adamant that the Horizon system has no 8 faults." 9 Go down to paragraph 7, please. What is being said 10 here is about: 11 "If the SPM ever faced with a loss when balancing, 12 the SPM is presented with two options on the Horizon 13 system: 'Settle Centrally' or 'Make Good Loss'. Settle 14 centrally means that, according to POL, the loss can be 15 investigated. However the description of this from SPMs 16 means that it just means the loss will be taken from the 17 SPM's remuneration either as a lump payment or in 18 stages. If 'make good loss' is selected the SPM must 19 make good the loss there and then out of their own 20 pocket. One of these options must be selected otherwise 21 an SPM will not be able to trade the following day." 22 I'm just then going to touch on paragraph -- I think 23 it is 8. Yes: 24 "Some of the SPMs have told Horizon that they have 25 made good the losses when in actual fact they haven't. 102 1 The reasons they do this vary, but are typically related 2 to an inability to pay (often due to have made various 3 repayments previously) and a desire to keep the post 4 office open for their community. When doing the above 5 an SPM is committing false accounting, albeit not to 6 enrich themselves, or to deny POL what is rightfully 7 theirs." 8 So by the time we get to paragraph 8 we've got 9 a description, by a national law firm, representing 100 10 subpostmasters in May 2012, setting out real fundamental 11 difficulties with the Horizon system, people being made 12 to do things within their branches that they shouldn't 13 have to. So these are complicated, cogent submissions 14 being made by this law firm, Shoosmiths; do you agree? 15 A. Absolutely. Yes. 16 Q. Now, did this information, this submission, get through 17 to you? 18 A. No. 19 Q. Right. Help the rest of us understand why not. This is 20 a public consultation by a Select Committee in 21 Parliament, where these issues, which are serious, are 22 being raised in relation to Network Transformation, 23 which is meant to be informative for the Post Office, 24 "Get this thing up and running, get it back on its 25 feet", but the Shoosmiths solicitors are saying, "Hang 103 1 on, there's a real problem here"; how come that didn't 2 get through to you as the Secretary of State for BIS? 3 A. I don't know why it didn't get through to me. My own 4 perceptions, as I tried to describe earlier, were based 5 on the contacts I had with individual postmasters, and 6 I was aware, as I've described, that there were some 7 terrible things happening, and the one that I cared most 8 about was in my constituency, and I'd contacted the 9 family and I said, you know, "What's happened? We've 10 lost our post office, you're being charged with fraud. 11 What happened?" And the explanation from the family -- 12 I didn't speak directly to the postmaster -- was "We 13 think that we made a mistake, and we're being punished 14 in a ridiculously excessive way". 15 So that's how I started thinking about this problem 16 and, as I also said, I think around about 2012/13, I was 17 visited by the Federation -- a regional head or 18 a national figure, I don't know -- but I was visited by 19 the Federation, who had this scrap book full of 20 photographs of some of these postmasters who were in 21 terrible situations -- I mean, you know all about them, 22 they've been in the Inquiry -- and clearly very 23 emotional about it, and we sat in a meeting trying to 24 understand why this had happened. 25 And the theory they had, and I agreed with, was that 104 1 what was happening was that mistakes were being made, 2 you know, obvious mistakes but, you know, postmasters 3 are handling vast sums of money and large numbers of 4 transactions, you know, perfectly honest, understandable 5 mistakes we all make in every aspect of live, and they 6 were being brutally punished for it. And that was my 7 understanding, it was this kind of 'one strike and 8 you're out' policy which -- the way I interpreted it, 9 and the Federation, when they came to see me, confirmed 10 that view. 11 I don't ever recall this being discussed in terms of 12 Horizon problems. I mean, it may have been mentioned, 13 but it didn't register with me because other people were 14 giving a very clear explanation about why this was 15 happening. It reflected very badly on the Post Office 16 but it wasn't about computers. 17 Q. Well, let's have a look at what is being said in a very 18 clear explanation a little bit further. Paragraph 8, 19 the description there of what is happening by SPMs that 20 are having to make good the losses, when they haven't, 21 and related to an inability to pay, desire to keep the 22 Post Office open for their community. When doing that, 23 the Shoosmiths submissions say this: 24 "When doing the above an SPM is committing false 25 accounting, albeit not to enrich themselves or deny POL 105 1 what is rightfully theirs." 2 Paragraph 9, last sentence, losses that have been 3 discussed by Shoosmiths Solicitors, losses between 4 £6,000 and £150,000. 5 Paragraph 10: 6 "The SPM then has, according to POL, an opportunity 7 to explain the losses [and so on]. Typically the SPM's 8 contract will be terminated and POL will request any 9 losses that are repaid under the contract." 10 Paragraph 12 we'll touch on and then I'll move on to 11 something that may assist in relation to the NFSP: 12 "If the loss is not repaid POL will prosecute the 13 SPM for false accounting. SPMs are typically advised by 14 their legal advisers to plead guilty to false 15 accounting, as in the above circumstances they will have 16 committed it. Many will be charged with theft or fraud 17 but these charges are typically dropped in these 18 circumstances. SPMs have been imprisoned as a result of 19 convictions for false accounting." 20 So, Sir Vince, my point, on behalf of the group of 21 people I represent, the subpostmasters, people working 22 in branches, is that these were all matters that could 23 have been investigated, that could have been looked into 24 by BIS, essentially the Department in control over the 25 Post Office, but this was never taken to your level; is 106 1 that right? 2 A. That's correct. 3 Q. Well, let's deal with the NFSP, paragraph 17: 4 "National Federation of SubPostmasters -- the NFSP 5 are the trade association for SPMs. They negotiate with 6 POL on behalf of SPMs and provide representation at 7 disciplinary meetings. They state publicly that there 8 are no issues with Horizon. Many SPMs report that they 9 receive no useful assistance from the NFSP when they 10 have accounting difficulties." 11 Then it goes on to reference to the Communications 12 Workers Union, the CWU: 13 "... the relevant union for POL employees, have 14 recently set up a branch to assist and represent SPMs." 15 So there the Government, BIS, is being told that 16 there is a problem with the NFSP and, if that had been 17 looked into, it would have been discovered that the NFSP 18 was being paid off by the Post Office. To so all of 19 these issues were being set out lucidly, cogently, in 20 simple submissions, that 14 years later, we've been 21 examining through the Post Office Inquiry; all of these 22 points now we know to be true. But BIS did what, as far 23 as you know, with these submissions? 24 A. I have no idea what they did with them. On this 25 particular point about the Federation, I think I've 107 1 explained, in answers to Mr Beer, my dealings with them 2 were very limited but positive. I first brought to 3 Parliament the case of a postmistress who had lost her 4 post office, lost upwards of £100,000, and I asked for 5 help from the Federation to advise me, and they 6 succeeded in getting full compensation. So why would 7 I not think of this as an effective trade union? 8 And, similarly, in the other cases that were brought 9 to me, which I've already described, it was clear that 10 they cared passionately about the hardship that 11 postmasters were experiencing. I had no reason whatever 12 to doubt their integrity or their competence. 13 Q. Let's move on through the chronology. This is 2012, two 14 years into your time as Secretary of State for BIS, 15 okay? Now, you've said this in your evidence: that by 16 the time we get to 2015, you'd realised something bad 17 was happening -- 18 A. Mm. 19 Q. -- and you say, and you've said to this Inquiry that 20 what happened at that stage was that that was the end of 21 your term as Secretary of State and you wish, 22 essentially, that you'd been able to stay on so that you 23 could do something about this. So your words were you 24 realised something bad was happening. Well, you're 25 right. Jacqueline Falcon was prosecuted in 2015 by the 108 1 CPS for fraud. She was prosecuted for her work at the 2 Hadston post office, she'd worked there for eight and 3 a half years, in total she had worked in branches for 4 15 years, from the year 2000, Hadston branch for eight 5 and a half years, and losses below £1,000, a shortfall, 6 was discovered in that particular branch. The end of 7 2014, that was discovered. In 2015, early 2015, she by 8 that point, based upon advice, pleaded guilty to fraud, 9 into a suspended sentence for three months. 10 In 2015, Jacqueline Falcon was pregnant, going 11 through all of that, she was prescribed antidepressants. 12 So you're right, Sir Vince: something bad was happening. 13 Now when we try and understand what happened at that 14 point, when you hand over to the next person to take on 15 the job of ignoring the problems with the Post Office, 16 at that particular point, what did you do to say to the 17 next person, "Hang on, there's a real problem here. 18 Something bad is happening"? 19 A. Well, the answer is I was unemployed after the election 20 for two years, until I got my job back. But it appears 21 to be the case, and I was frankly shocked by this, 22 nothing to do with the Post Office but that when a new 23 Government comes in, they start with a completely blank 24 sheet of paper. I was never -- when I became Secretary 25 of State, the Civil Service would not tell me what my 109 1 predecessors had been advised on a whole range of 2 issues. It was thought to be improper, that we start 3 again with a new Parliament and we have to reinvent the 4 wheel. That unfortunately is the way government 5 operates. 6 But, certainly, if I'd met Sajid Javid, who was my 7 successor, and this issue had come up, I would have 8 certainly passed on that advice. But the way Government 9 works, there isn't a transition, there is no carryover. 10 It's entirely reliant on the Civil Service to maintain 11 continuity. 12 Q. Sir Vince, we understand that that happens certainly 13 between the transition of one government from one party 14 to another, so recently, as we understand it, the 15 position is that the Labour Government will not have 16 access to Conservative Government papers. Does that 17 also happen, to your knowledge, in relation to the next 18 administration, even though it may be the same 19 individuals involved? 20 A. Well, it wasn't the same individuals. 21 Q. No. It could be, though? 22 A. It could be. 23 Q. Yes. Does that happen in the same way? 24 A. I don't know but I -- it's common sense to suggest that 25 it should. 110 1 SIR WYN WILLIAMS: Didn't we have evidence from the 2 Conservative minister who succeeded the Conservative 3 minister, I forget the precise dates, that that's 4 exactly what happened? 5 MR STEIN: Yes, well, I think we're establishing that, sir. 6 The question is whether it relates to -- 7 SIR WYN WILLIAMS: I think Ms James said she didn't have 8 a briefing from Baroness Neville-Rolfe. 9 MR STEIN: My question related to whether, even if it's the 10 same minister, whether, essentially, they're not allowed 11 background to their own papers, if they carry on. 12 SIR WYN WILLIAMS: Sorry, that's a variation on it. Sorry, 13 Mr Stein. 14 MR STEIN: Now, we're going through time. As you say, you 15 spent two years outside of Parliament, then you come 16 back into Parliament. Yes? 17 A. Yes. 18 Q. So the timing we're now getting to, 2017/2018, you're 19 aware by that point that there are then, in 2019, the 20 judgments in the High Court. 21 A. No, I wasn't aware. No. 22 Q. Well, when were you first aware of the judgments by 23 Mr Justice Fraser, now Lord Justice Fraser, in the High 24 Court? 25 A. Well, I wasn't aware, I think, until this whole Inquiry 111 1 process started and journalists started asking me about 2 it and what I knew, and following the evidence. 3 I certainly had lost all contact with this issue after 4 2015. 5 Q. Okay. So when you came back into Parliament, and we 6 know that there were issues that were in relation to the 7 Post Office going through the High Court, you're saying 8 you were aware of that later, and you know that there 9 are issues being raised in relation to the criminal 10 appeals, did you look into any aspect of those matters? 11 A. No, I would have looked into aspects of those matters if 12 any of my constituents had become involved. I'd 13 reverted to being a backbencher -- I happened to be 14 leader of the party but that was a separate matter -- 15 but in relation to Parliamentary business, I would only 16 have encountered them if postmasters in Twickenham had 17 been in this situation. I don't think there were any. 18 Q. You see that represented an opportunity for you to do 19 what you've criticised other MPs for. So if you had 20 engaged with these issues, if you had read the judgments 21 from the High Court, had paid attention to what was 22 going on, you would have been able to say to the 23 Government at that time, in 2019, "Hang on, there's been 24 a problem here. When I was looking at matters such as 25 this, nobody brought this to my attention". 112 1 A. Well, had I known about it, I could possibly have 2 intervened in the way you describe but, when I came back 3 into Parliament in 2017, Government and opposition were 4 completely overwhelmed by the big new issue, which is 5 called Brexit and, as the leader of my party at the 6 time, I was having to devote 100 per cent of my time to 7 focusing on that, apart from the time I spent on the 8 constituency issues, and I raised issues for 9 constituents in Parliament in debate and questions. 10 I didn't range outside that -- well, there were many 11 outstanding issues. One of the things which followed me 12 was this Saudi arms deal, for example, and there were 13 half a dozen issues like that, that I dealt with in 14 Parliament, and I realised were still hanging around two 15 years later and I was being asked about them, and -- but 16 for the reasons I have given, I wasn't then in the 17 business of dealing with Post Office issues. 18 Q. Last question. Let's turn it round the other way. Did 19 anyone in Government go to you and say, "Sir Vince I've 20 got these issues at the High Court. You may not or may 21 not know about them but let me tell you about them. 22 They've raised serious, deep rooted problem within the 23 Post Office about the Horizon system. It's a mess. 24 Total debacle. People being sent to prison under 25 horrendous circumstances, lives being ruined". 113 1 Did anybody come to you and say, "Sir Vince, what 2 were you told about this during your time at BIS"? 3 A. Nobody came to me and asked that question. I wish they 4 had -- 5 MR STEIN: Yes, thank you Sir Vince. 6 A. -- but they didn't. 7 SIR WYN WILLIAMS: Thanks, Mr Stein. 8 Is that it, Mr Beer? 9 MR BEER: Yes, it is, sir. 10 SIR WYN WILLIAMS: Well, thank you very much, Sir Vince, for 11 making your witness statement and for coming to the 12 Inquiry this morning and answering questions from number 13 of people. I'm very grateful to you. 14 THE WITNESS: Thank you very much, Sir Wyn. 15 MR BEER: Sir, could we reconvene at 2.00 pm, please? 16 SIR WYN WILLIAMS: Yes. 17 MR BEER: Thank you very much. 18 (1.03 pm) 19 (The Short Adjournment) 20 (2.00 pm) 21 MR BLAKE: Good afternoon, sir. Can you see and hear me? 22 SIR WYN WILLIAMS: I can, thank you. 23 MR BLAKE: Thank you, sir. This afternoon we're going to 24 hear from Mr Clark. 25 THE RIGHT HONOURABLE GREGORY DAVID CLARK (sworn) 114 1 Questioned by MR BLAKE 2 MR BLAKE: Thank you very much. Can you give your full 3 name, please? 4 A. My name is Gregory David Clark. 5 Q. Thank you. You should have in front of you a witness 6 statement. 7 A. Indeed. 8 Q. Is that dated 28 June this year? 9 A. It is. 10 Q. Could I can you to turn to the final substantive page, 11 that's page 47. 12 A. Yes. 13 Q. Can you confirm that that is your signature? 14 A. It is. 15 Q. Is that statement true to the best of your knowledge and 16 belief? 17 A. It is. 18 Q. Thank you very much, that has a Unique Reference Number 19 of WITN10900100 and that will be uploaded onto the 20 Inquiry's website. 21 Mr Clark, you were a Member of Parliament between 22 2005 and this year; is that correct? 23 A. That's correct. 24 Q. You've held a number of different ministerial posts, you 25 served as Minister of State in the Department for 115 1 Communities and Local Government; is that right? 2 A. That's right. 3 Q. You were Financial Secretary to the Treasury? 4 A. I was. 5 Q. Minister in the Cabinet Office? 6 A. Yes. 7 Q. Minister for Universities and Science? 8 A. Correct. 9 Q. Secretary of State for Communities and Local Government? 10 A. That's right. 11 Q. And, relevant to today, you were Secretary of State for 12 Business, Energy and Industrial Strategy, and that was 13 between 14 July 2016 and 24 July 2019. 14 A. That's correct. 15 Q. That was during the premiership of Theresa May? 16 A. That's right. 17 Q. I'm just going to begin with a little bit of background 18 before your time as Secretary of State and if I can ask 19 to be brought up on screen POL00097393, please. I'm 20 going to take you to some correspondence relating to 21 a constituent of yours, and this is a letter from 22 yourself to the Right Honourable James Arbuthnot, and 23 you're in conduct with him regarding your constituent, 24 Mrs Pauline Thomson, who the Inquiry has heard from in 25 an earlier phase, who wished you to refer her case 116 1 against the Post Office on to Second Sight. 2 "Mrs Thomson has now stated that she is happy for 3 Second Sight to proceed with an investigation of her 4 case and she has confirmed that she understand her 5 details will be seen by the Post Office." 6 Did you have a number of different cases around this 7 period from subpostmasters, as a constituency MP? 8 A. This was the only one in my constituency that I was 9 aware of at the time. 10 Q. Thank you very much. You were corresponding with Lord 11 Arbuthnot in relation to -- 12 A. Correct. 13 Q. -- the Second Sight investigation into her case? 14 A. That's right. 15 Q. Could we please turn to POL00232847. We're now moving 16 on from January 2013 to March 2015, so quite 17 a considerable time has elapsed and it relates again to 18 the same constituent, Mrs Thomson. In this letter, 19 you're corresponding with Paula Vennells about a letter 20 that Mrs Thomson received only a couple of days after 21 being told that her case would proceed to mediation? 22 A. Correct. 23 Q. If we turn over the page, we can see the letter that you 24 have enclosed. The letter is marked as "Confidential -- 25 Not to be disclosed outside of the Scheme and 117 1 mediation", dated 5 February 2015, so it's during 2 a period where we know that the Working Group is being 3 shut down. 4 A. Yes. 5 Q. I'll just read to you a couple of passages from the 6 letter that was sent to Mrs Thomson. It says: 7 "You will be aware that your case has been looked at 8 afresh and thoroughly reinvestigated by Post Office. 9 Your case has also has been considered by the Scheme's 10 independent forensic accountants, Second Sight Support 11 Services Limited. The reports of both of these 12 investigations have been shared with you. 13 "As you will know, Second Sight recommended that the 14 question of responsibility for losses incurred in your 15 branch should be mediated. In the event, the Scheme's 16 Working Group considered that the issue was suitable for 17 mediation on a deferred basis." 18 So it seems as though Second Sight and the Working 19 Group both considered that Mrs Thomson's case was 20 suitable for mediation. 21 A. Indeed. 22 Q. Then the letter continues: 23 "I regret to inform you that, after careful 24 consideration, Post Office takes a different view and 25 has decided against proceeding to mediation in your 118 1 particular case for the reasons I set out below. 2 "Responsibility for Losses 3 "Post Office considers that the question of 4 responsibility for the losses suffered in your branch 5 was appropriately addressed at the time of the 6 suspension of your contract with Post Office on 7 12 September 2008 and your subsequent prosecution and 8 conviction. It remains Post Office's view that the 9 conclusions drawn at the time were correct and nothing 10 in our own reinvestigation, nor in the review of your 11 case by Second Sight, represents a challenge to that 12 position." 13 So a refusal to mediate the case on behalf of the 14 Post Office. 15 A. That's right. 16 Q. Did you meet with this particular constituent at the 17 time? 18 A. I can't remember. I certainly met with her on several 19 occasions during the long period in which I've been 20 trying to help her resolve the case. 21 Q. We'll come on to talk about the particular case in 22 a moment but, before I do, I will just take you to 23 a response that was received to your correspondence, 24 that can be found at POL00117339. Thank you very much. 25 So this is a response from Ms Angela van den Bogerd to 119 1 you and, if we scroll down, she says: 2 "There is, in fact, no inconsistency in the two 3 communications she received. 4 "The first communication she received enclosed 5 Second Sight's final independent review of her case, 6 including Post Office's investigation into the matters 7 it raised. In these reviews, Second Sight offer their 8 view as to whether a case might be suitable for 9 mediation. However, while this is their view, all 10 mediations are entirely voluntary. The final decision 11 on whether or not to mediate a case ultimately rests 12 with the parties involved. It follows that either party 13 can decline to take part. 14 "Mrs Thomson's case has been thoroughly 15 reinvestigated through the Scheme and, after careful 16 consideration of all relevant facts (including Second 17 Sight's final report), the Post Office has concluded 18 that mediation does not offer any realistic prospect of 19 resolving your constituent's complaint for the reasons 20 set out in our letter to her." 21 Prior to becoming Secretary of State, so in this 22 period, what was your understanding of the issues 23 relating to Horizon and Second Sight? 24 A. My principal understanding, I think, in fact all of my 25 understanding, came from dealing with Mrs Thomson, and 120 1 it conditioned my view of certainly the management of 2 Post Office Limited. I mean, on the documents that 3 you've just put up -- I don't know whether we can have 4 that second one again -- that reply from Angela van den 5 Bogerd, I think she was called, I thought was 6 an impudent reply. She didn't answer the question as to 7 why Mrs Thomson was being refused the ability to 8 arbitrate. 9 Indeed, if we look at it, I think they even get her 10 name wrong. I've just noticed that -- 11 Q. That's going to be brought up on to the screen. 12 A. -- now. "Mrs Paula Thomson"; she's called Pauline 13 Thomson. It doesn't say why, it merely asserts that, 14 despite the fact that Second Sight and this panel had 15 recommended it, they say that "We simply decided that we 16 don't want to"; either party can decline to take part 17 and so they've done so. I thought it was an impudent 18 letter to receive in reply to mine to the Chief 19 Executive and it conditioned, as I say, my view of the 20 management of Post Office Limited. 21 Q. Thank you very much. That can come down now. You took 22 office in July 2016. 23 A. Yeah. 24 Q. I'd like to take you to the introductory brief that was 25 provided to you. That can be found at WITN10900103. At 121 1 paragraph 33 of your witness statement, you have said 2 that you received introductory briefs from each of the 3 40 or so directorates in your Department; is that right? 4 A. Correct, as a standard, yes. 5 Q. So is this kind of a brief that we're going to see, is 6 this typical of the kinds of briefs you would receive in 7 relation to the areas for which you had responsibility? 8 A. Fairly typical. I mean, some were more substantial than 9 others, for example at the time that I took office, one 10 of the first decisions I had to make was whether to 11 approve the -- Hinkley Point, the nuclear power station, 12 which was and is the biggest construction project in 13 Europe, I think, at the time. So, obviously, the 14 briefing for that was necessarily more substantial but 15 this was not untypical of many briefs that I received. 16 Q. Are you able to assist us with who might have been 17 responsible for drafting this? 18 A. I infer from knowing, I think, with the benefit of 19 hindsight, the structure of things now, that this would 20 have been from UKGI -- someone in UKGI, perhaps Mark 21 Russell, who was the CEO, who we may come on to discuss, 22 regularly briefed me, because I think I'm right in 23 saying that there was not a Post Office team within the 24 Department at that point, and so I assume that came from 25 them. 122 1 Q. Thank you. If we scroll down, we can see it begins by 2 outlining some key facts about the Post Office. It then 3 addresses the Department's role, and I'd just like to 4 read to you the first paragraph from the next page. It 5 says: 6 "The BEIS Secretary of State is the sole shareholder 7 of [Post Office], and UKGI manage that shareholding for 8 BEIS, representing Government as [the Post Office's] 9 shareholder and with a position on the Board. UKGI also 10 acts as a voice/guide for [the Post Office] within 11 Government and it maintains relationships with key 12 Department's such as HMT, Cabinet Office and DWP." 13 So it seems as though UKGI represent Government as 14 POL's shareholder but, at the same time, act as 15 a voice/guide for the Post Office within Government. 16 How does that work? 17 A. Well, how it worked then, before there was a team in 18 BEIS, was that regular meetings and briefings and 19 communications to do with the Post Office would come 20 from UKGI, principally, actually, to the Post Office 21 Minister at the time, rather than me directly as 22 Secretary of State. But, as I say in my witness 23 statement, one of the things that I instituted right at 24 the beginning of my tenure was to require each of the 25 Directors General, which is to say the layer below the 123 1 Permanent Secretary, to give me a weekly report, just to 2 me, of anything on their mind, and one of them came from 3 Mark Russell, who was the Chief Executive and, 4 therefore, the equivalent of the DG of UKGI. 5 And so, each week, I would get what was on his mind 6 through that directly, but most of the detailed 7 submissions and contact would have been with the Post 8 Office Minister. 9 Q. Irrespective of individual personalities, is there 10 a tension between representing Government at the Post 11 Office and also acting as a voice/guide for the Post 12 Office within Government? 13 A. I think there is a tension in many respects that we may 14 come on to talk about in more detail. I actually think 15 there is a structural tension and, arguably, at least in 16 the view of the Department, something of a legal 17 tension, in that, in a fiduciary board, the 18 responsibility of a director, and the UKGI director was, 19 as it were, a fully fledged the director of the 20 organisation, there is a kind of unitary responsibility 21 to the company and, in particular, my understanding, and 22 certainly it's consistent with advice during this 23 period, was that, in terms of the Department, and indeed 24 the Government, directing or influencing the Board 25 through that director, that that was a perilous thing to 124 1 do, that it was something known as the shadow director 2 risk, in which if you -- if, from the outside, whether 3 collectively or through an individual, you directed the 4 Board's decision, then you could be counted as 5 a director yourself. 6 In my view -- I'm sure we'll come on to talk about 7 this -- rather than seek to dance around that I think it 8 would have been better for it to be perfectly legitimate 9 for ministers and officials in the Department to input 10 directly without any of these -- this kind of tiptoeing 11 around, to the decision making of the Board. But no, it 12 was constituted that way, and that's how it was at the 13 time. 14 Q. Moving down to policy areas, it says: 15 "Government's policy on the Post Office is to set 16 the parameters within which we expect it to operate 17 (reach of network, types of services it should seek to 18 offer) and then allow the business to operate 19 commercially, at arm's length from Government. [Post 20 Office] is a public corporation with a fiduciary Board 21 ... Operational decisions are made by the CEO, Paula 22 Vennells, and her ... team, supported by the Board. CFO 23 Al Cameron, who are meeting, is the other Executive on 24 the Board." 25 That's another thing that we've heard quite a bit 125 1 about: operational decisions. 2 A. Yes. 3 Q. Was that something that could be easily separated out, 4 when it came to, for example, matters relating to 5 subpostmasters? 6 A. Well, I think -- as other witnesses have said, I think 7 there is no bright line, certainly there is no 8 definition that sets this out. The view of the 9 Department -- the inherited view across different 10 administrations of different parties -- was that 11 certainly what counted as operational included matters 12 like IT systems and the relationship with the 13 subpostmasters and, therefore, that was definitely in 14 that category. Things that were strategic, or obviously 15 was Government requirement on how many post offices were 16 to be there. But, clearly, and no doubt we'll come on 17 to talk about this, within the middle, there are 18 questions as to when operational matters become 19 strategic or certainly kind of proper for ministers, and 20 my view, as set out in my witness statement, is that 21 I think in certain government-owned organisations, of 22 which Post Office Limited is one, I think there is 23 a greater likelihood of that to happen than in some 24 others, for example Lloyds Bank, when it was owned by -- 25 at least in part by the taxpayer. 126 1 Q. Thank you. It seems there that you were going to be 2 meeting with the CFO, Al Cameron; do you recall 3 a meeting with Mr Cameron? 4 A. I do recall meeting with Mr Cameron and, indeed, other 5 executives throughout my period in office. What has 6 been a bit frustrating, and I think other witnesses -- 7 including Sir Vince this morning -- have said, is that, 8 for reasons I don't understand, the Department don't 9 have access to -- whether they don't have at all -- 10 ministerial diaries and minutes of meetings. That is -- 11 that surprises me and disappoints me. So, in 12 a three-year tenure, meeting literally thousands of 13 people a year, I'm unable to say how often and when, but 14 certainly I met Mr Cameron and I probably, from this, 15 I met him shortly after this note was sent. 16 Q. If we scroll down, we can see various headings, we have 17 "Ownership", "Services and Long-Term strategy", 18 "Network" -- if we keep on scrolling -- at the bottom of 19 the next page, "Pensions", "Cash supply chain", 20 "Industrial relations", then we come to "Other issues". 21 A. Yes. 22 Q. Under "Other issues", it says as follows: 23 "Following complaints from a small number of 24 subpostmasters regarding the [Post Office's] Horizon IT 25 (point of sale) system, an investigation was undertaken 127 1 by an independent firm, Second Sight, over two years. 2 Whilst this received relatively high profile press 3 attention no systemic issue with Horizon has been found. 4 However, affected subpostmasters continue to put 5 pressure on [the Post Office], the Criminal Cases Review 6 Commission are considering some cases where individuals 7 have received criminal convictions, and group civil 8 litigation is being launched against [the Post Office] 9 in the High Court." 10 It seems as though that is the only mention of 11 Horizon related issues within this brief; is that right? 12 A. It is, yes. 13 Q. Do you consider that brief to be sufficient? 14 A. Well, it contains, in my view, the crucial information 15 which is in that last sentence, I think it is, that the 16 Criminal Cases Review Commission are considering some 17 cases, by implication the safety of the convictions, and 18 that litigation is about to begin in the High Court. 19 That was -- that communicated what I thought was the 20 essential information on that. 21 Q. Did it give you, for example, an idea of the scale of 22 the Group Litigation? 23 A. No, it didn't, clearly. 24 Q. It begins by saying that there were complaints from 25 a small number of subpostmasters -- 128 1 A. Yes. 2 Q. -- regarding Horizon IT systems. Now, looking at it, do 3 you consider this summary to be an accurate and fair 4 summary? 5 A. Well, certainly it wasn't a small number. I think, if 6 I were to be fair to the authors, I think the number of 7 subpostmasters that were part of the group civil 8 litigation increased. I think it started off not small 9 but, you know, smaller than it ended up and that grew 10 over time. But, in some ways, the number was not the 11 most important point. It is an important point, 12 certainly, but I didn't think it was the most important 13 point because the most important point is that people 14 are talking about criminal convictions that are in front 15 of the CCRC. 16 My view is, and bearing in mind that I was working 17 with a constituent who was absolutely sort of an example 18 of this, if she'd been the only one, that would be 19 enough. 20 Q. It refers there to Second Sight investigation and no 21 systemic issue with Horizon has been found. Were you 22 aware, for example, that Second Sight had produced 23 a report which identified two bugs that they went into 24 detail on, and a further bug? 25 A. I wasn't aware of that. 129 1 Q. Were you aware at this stage of any concerns about 2 an expert witness who had appeared in a criminal case or 3 criminal cases? 4 A. I certainly was not. 5 Q. You, in your witness statement -- it's paragraph 36, you 6 say that you've re-read all 150 or so weekly updates -- 7 A. Yes. 8 Q. -- that were provided to you while you were Secretary of 9 State and there's minimal reference in there to issues 10 relating to Horizon. 11 A. Referring to the lit -- to Horizon, yes, and it was 12 through the lens of the litigation, essentially, it was 13 an update on that. 14 Q. We'll come to examples and to detail but do you think 15 you were sufficiently briefed in relation to matters 16 relating to Horizon? 17 A. Well, were it not for the fact that these cases were 18 before the courts, what I say in my witness statement is 19 that view of the Department, and you may ask me about, 20 as it were, my own view of this, the view of the deposit 21 were that these matters were, essentially, sub judice 22 and were perhaps not technically so, but they were being 23 tested in two judicial forums, if I can put it that way: 24 one with the Criminal Cases Review Commission and the 25 other in the High Court and, therefore, the 130 1 determination, the discovery of the truth about this, 2 was taking place through that process. 3 So, in that sense, I think it was proper that the 4 court was, you know, sitting, in some cases daily, to 5 examine that, and so the updates, when it came to 6 Horizon, were on the progress of the litigation. 7 Q. So the courts had charge of the matter? 8 A. Yes -- 9 Q. You were being updated about -- 10 A. -- and the CCRC. 11 Q. -- and you were being updated about their progress. 12 A. Yes. 13 Q. But looking at this, this one paragraph, plus the weekly 14 briefings you've looked at, do you think that was 15 sufficient in relation to the overall picture of 16 problems with the Horizon system? 17 A. Well, I describe in my witness statement as "this 18 period" being a period, I think as I described it, 19 between two times and what I mean by that is that up 20 until, I think, 2015 prosecutions were being made of 21 subpostmasters. They had come to an end. The legal 22 processes had commenced -- both the CCRC, I think, had 23 commenced the year before, and the Group Litigation had 24 started -- I think I was appointed in July, in the 25 April. But they clearly neither had been resolved. 131 1 So this was a time of limbo, in some sense, between 2 the entered of the Post Office making -- taking forward 3 prosecutions but before the opinion of the courts, High 4 Court, and the Court of Appeal had been issued. 5 So the role of the Government, I would say, in 6 resolving those problems, was -- and certainly sort of 7 mounting prosecutions -- was not the same as it was 8 before or after. 9 Q. Could we please turn to POL00117715, please. On 10 becoming Secretary of State you received a letter from 11 Paula Vennells. That's 25 July 2016. If we scroll 12 down, she congratulates you on your appointment. If we 13 scroll down, we can see the significant strides in 14 modernising the network that she refers to and, if we go 15 over the page, please, it says: 16 "We are therefore developing a new strategy to 17 2020/21 designed to strengthen our market position, 18 improve our digital capabilities and radically reduce 19 our operating costs. While this will require investment 20 to execute, it provides an historic opportunity to 21 complete the commercial turnaround of the Post Office 22 and put the network on a self-sustaining footing." 23 Do you recall receiving this letter? 24 A. I don't recall it but I'm sure I did. 25 Q. There's no mention in this letter of Horizon issues? 132 1 A. Indeed. 2 Q. Do you recall, in your early time as Secretary of State, 3 or even thereafter, discussing Horizon issues with Paula 4 Vennells? 5 A. I don't have any recollection of that. 6 Q. How about Al Cameron, who you met perhaps more 7 regularly? 8 A. I can't remember that but, again, I would say that the 9 litigation and the Court of Appeal, the CCRC, they were 10 the most important parts of that. And as I say, the 11 view was that these were effectively being determined in 12 court, rather than between ministers and the Post Office 13 at that stage. 14 Q. You say the view, that was of those who advised you; was 15 that your view as well? 16 A. Well, so, going back to your first questions to me, 17 Mr Blake, I had an insight into this through one 18 particular constituent and it led me, I think, that 19 correspondence -- and there's others we might have 20 looked at -- that I didn't trust the management of the 21 Post Office, to be frank. So take that unilateral 22 refusal of -- to Mrs Thomson to have her case 23 arbitrated, despite the fact that the panel, whatever it 24 was, recommended it -- that led me to suspect that the 25 current management of the Post Office were not to be 133 1 trusted to resolve some of these questions. 2 So the view of the Department, as I say, the 3 inherited view that Horizon IT systems, contracts with 4 subpostmasters, et cetera, were kind of operational, and 5 therefore, litigation around it was for the Post Office 6 itself. My view was to welcome the fact that court was 7 going to look at this, the High Court in particular. 8 I thought the authority of a High Court judge, and the 9 requirements of disclosure and all the rest of the 10 things, was a better way of resolving this than, as it 11 were, a process that involved the Post Office -- any 12 kind of arbitration with the management of the Post 13 Office. 14 Q. So pausing there at, say, 2016, who, if anybody, did you 15 think should have been providing you with more 16 information about the Horizon system, or is it your 17 evidence that, in fact, you are satisfied with the level 18 of information you were being given at that time? 19 A. I would say that what I was -- I was relieved that the 20 High Court and the CCRC were, with the powers available 21 to them, going to determine the truth about what went 22 on. I had no evidence to think that the -- or to know 23 that the Post Office were behaving improperly but, 24 certainly, the experience of a constituent, who I should 25 say was a well-respected person in the community, was 134 1 a person of sort of blameless character, had been 2 treated in this way, not just charged and convicted, but 3 subsequently been treated in this predatory way by the 4 Post Office. There are letters about demanding 5 repayment of funds even after she was sentenced. 6 I was very keen that the courts would determine the 7 truth here, rather than relying on the Post Office. 8 Q. Moving on in time now to 2018, can we please turn to 9 UKGI00007712. There seems to have been a letter to you 10 from Ms Eleanor Shaikh in respect of a subpostmaster. 11 This is a response from your minister, Margot James. 12 This particular version is unsigned, we have two 13 different versions, one from Margot James and we also 14 have a later one from UKGI as well. I don't think 15 whether we can say this particular one was sent or 16 wasn't sent. I think the assumption is that this did 17 go. 18 She writes as follows, you had been written to in 19 relation to the suspension of Farncombe village's 20 subpostmaster, following a sub post office audit in 21 2017. She sets out there that the Government recognises 22 the importance the Post Office plays, and then this 23 paragraph, she says: 24 "I should explain that the Government sets the 25 parameters in which the Post Office operates -- 135 1 including its geographic reach and the key services it 2 offers -- and then allows the Post Office to operate as 3 an independent commercial organisation within those 4 parameters. As such, we do not play a direct role in 5 the day-to-day responsibilities of the company, and this 6 will include matters concerning the investigation and 7 suspension of subpostmasters." 8 Just pausing there, is there a difficulty with this 9 clear distinction when it comes to, for example, 10 prosecutions of subpostmasters? Do you consider 11 prosecutions of subpostmasters to be purely operational 12 matters or might there be more to it? 13 A. First of all, I didn't know that the Post Office itself 14 prosecuted at that stage subpostmasters. In the case of 15 my constituent, I'd known that the police arrested her 16 and so I kind of inferred from that that it was a normal 17 process. So I was not aware of that. 18 Q. Irrespective of what happened in that particular case, 19 as a principle, do you see the prosecution of 20 subpostmasters to be a purely operational matter for the 21 Post Office or are they something else? 22 A. Well, I think that would -- I think it depends. Every 23 organisation will, from time to time, have instances in 24 which they have to take disciplinary action against 25 either an employee or, in this case, someone that it has 136 1 a contractual relationship with, whether that's, you 2 know, a retail group, whether it's a corporation. So 3 leaving aside whether they should have the power to 4 prosecute themselves, the fact of people being 5 prosecuted, I don't think is necessarily a strategic 6 thing. 7 Whether -- I mean, what clearly does make it 8 strategic is whether those prosecutions were mounted in 9 a way that was, I'm afraid, corrupt and we now know, 10 from what has been disclosed, that the Post Office was 11 in receipt of information that at least one of its 12 witnesses, during those trials, was unreliable and, 13 certainly, I'm not sure of the timing, whether people, 14 once they knew it, were continuing to be prosecuted, 15 despite the knowledge of that. But, certainly, the case 16 that people that had been prosecuted had to live their 17 lives as convicted people because of it. 18 Now, that not only raises it to the level of 19 strategic, it raises it to the level of being totally 20 unconscionable. So from the spectrum of, you know, one 21 or two people in a large organisation being prosecuted 22 for misdemeanours from time to time, to what seems to be 23 the case, that at least in some parts of the management 24 of the Post Office, people were prosecuted, in some 25 cases jailed, in some cases people lost their lives, on 137 1 the basis of information that we now know, and was known 2 to them, to be wrong, is of a whole different order. 3 Q. If we look at the final paragraph there, it says: 4 "The Post Office have also assured me that they are 5 confident that their Horizon system is robust and 6 reliable. It is used by over 11,600 branches for 7 numerous services every day and has been for a number of 8 years. It is right that the Post Office should 9 investigate these sorts of instances thoroughly given it 10 is charged with overseeing substantial amounts of public 11 and third party funds." 12 Were you aware of these kinds of stock lines being 13 sent out to people who wrote to either yourself or to 14 your ministers? 15 A. I can't remember but it wouldn't surprise me. They 16 were, as you say, standard lines that had, I think, 17 prevailed for many years under different 18 administrations. 19 I -- if I saw this, I would have regard it as, in 20 effect, a holding line. It says, "The Post Office have 21 also assured me". It comes from Margot James but it 22 says "The Post Office have assured me". I wanted to see 23 the Post Office's assurances tested rigorously in court, 24 and that's what was going on during this time. 25 Q. Can we turn, please, to UKGI00007733. This another 138 1 response to Ms Shaikh, this time February 2018. It 2 says: 3 "Thank you for your email of 13 January 2018 to Greg 4 Clark MP about Farncombe Post Office." 5 If we scroll down, very similar terms towards the 6 bottom." 7 A. Yes. 8 Q. Again, same number referred to there, it's used over 9 11,600 branches, et cetera, and this one was sent by 10 Stephen Clarke of UKGI. Was he somebody that you worked 11 with? 12 A. I can't remember, I mostly dealt with Mark Russell who 13 was the head of the organisation but he may well have 14 been in meetings accompanying Mr Russell. 15 Q. I want to turn now to the Common Issues judgment. 16 A. Can I just make a comment on that -- 17 Q. Absolutely. 18 A. -- since you put it up? I think, looking back -- does 19 it say what date of the letter -- 20 Q. If we scroll up, 13 January was the letter to you? 21 A. 2018. Beginning of 2018. I think, if I look back, what 22 it would have been better to have said is what I've just 23 said to you: that actually these matters are being 24 tested by the High Court and we -- and will be 25 determined shortly. 139 1 Q. Thank you. I'm going to move to the Common Issues 2 judgment, the judgment itself was 5 March 2019. 3 It seems, certainly from the paperwork that we have, 4 that Horizon didn't really feature very much in your 5 briefings between 2016 and March 2019; is that a fair 6 summary? 7 A. Well, only to the extent that it was before the High 8 Court, it was obviously until the judgment was issued. 9 That was where, as it were, the action was, and there 10 were updates on that. The Post Office Minister at the 11 time, I think, got a regular update. I say in my 12 witness statement that there was some reluctance even to 13 give those factual updates of what was going on, but 14 that's not to say that I didn't regard that court 15 process, as I hope is evident, as being very important, 16 and the respective judgment as being important, because, 17 before we get to that judgment, you will see from my 18 witness statement that I took steps to, as it were, to 19 prepare for the receipt of that judgment, even to the 20 point of asking whether the Government Business 21 Department could have early sight of that judgment. 22 I was advised that this was not possible because we 23 weren't a party to the litigation. 24 I asked the Permanent Secretary, outside the UKGI 25 process, to advise me and the then Post Office Minister 140 1 in anticipation of the judgment as to what his 2 assessment of how we should handle it was. So this -- 3 throughout it I'd regarded this court process as being 4 extremely important and, therefore, the judgment I had 5 no idea what it was going to say, but I was looking 6 forward to it, shall we say. 7 Q. Can we turn to the advice in relation to the draft 8 judgment. That can be found at UKGI00009076. This is 9 a ministerial submission to you of 1 March 2019, and we 10 see there you are noted there "To Note". 11 A. Yes. 12 Q. Do you know who drafted this? There are a number of 13 names there? 14 A. I assume from deciphering the norms on these things, 15 that Tom Aldred, who was marked as the Lead Official, 16 I assume that he would have drafted it, but that it 17 would have been approved by Mark Russell. In fact 18 I required that Directors General approve statements 19 like this. 20 Q. Thank you. It is headed "Judgment in Post Office Common 21 Issues Trial", and it says: 22 "A judgment in the Common Issues trial will be sent 23 to the parties next week ..." 24 If we scroll down, there's some advice. It says on 25 paragraph 5: 141 1 "You have asked for advice on whether we should seek 2 permission from the judge for ministers to have advanced 3 sight of the judgment." 4 A. Yeah. 5 Q. If we scroll down and over the page to page 2, please. 6 We can see at paragraph 10, it says: 7 "Regardless of the legal findings, Post Office 8 expect the judge to continue to be critical of some 9 aspects of Post Office's handling of the case and its 10 treatment of claimants. We expect these largely to 11 relate to historic behaviour and do not believe that 12 [the Post Office] currently has problems with its 13 operational culture." 14 Did you have at this stage any views as to the 15 current operational culture at the Post Office? 16 A. Yes, I -- my views of the -- well, whether it's current, 17 I don't know. Drawing from my experience with my 18 constituent, I am minded to think, inclined to think 19 that the management of the Post Office was insensitive 20 to and dismissive to the point of abject rudeness to 21 subpostmasters. 22 Q. Paragraph 11: 23 "While [Post Office Limited] is 100 per cent owned 24 by [Her Majesty's Government], it operates as 25 an independent, commercial business. As such, the 142 1 relationship with its subpostmasters and the management 2 of its IT systems are operational matters for Post 3 Office Limited." 4 So again, reference to operational matters: 5 "The legal defence and the costs involved are being 6 handled by them." 7 If we scroll down and over to page 3, please. 8 Paragraph 14 says: 9 "[Your Department's] Legal and UKGI legal advisers 10 have consulted relevant [Government Legal Department] 11 litigation advisers and advise that such an application 12 is highly unlikely to be successful." 13 So it's unlikely to be successful if you did apply 14 to see the judgment in advance. 15 Then at paragraph 15: 16 "As well as being unlikely to receive permission, 17 the application for permission and the judge's response 18 will be made public. An application would run counter 19 to the position the Department has taken thus far 20 regarding this litigation (including in Parliamentary 21 Questions), namely that it is an operational matter for 22 [the Post Office]." 23 Reference here to a position that the Department has 24 taken. Can the distinction between operational matters 25 and other matters, can that sometimes be used to advance 143 1 a particular position? 2 A. Well, it was the longstanding position of the Department 3 over many years, over different administrations, that it 4 was the case that the contract between the Post Office 5 and subpostmasters and IT systems were operational and, 6 therefore, litigation around it was also operational. 7 My view was that that was entirely dependent on the 8 judgment of the court and, were the court to find, as it 9 did, that the Post Office had behaved as disreputably as 10 it had, then that marked it very firmly as strategic. 11 So he is reporting -- or repeating the inherited line. 12 In my own mind, I was very clear that the -- this 13 judgment was going to determine whether this was 14 operational or strategic. 15 Q. Then at paragraph 16: 16 "Therefore, we advise that the Minister does not 17 seek permission to have early sight of the judgment. 18 UKGI will work with BEIS communications and with POL to 19 ensure that appropriate responses are made as soon as 20 the judgment is out." 21 Can we please turn to UKGI00009137, please. And 22 this is a further submission a few days later, 5 March, 23 now. This is a submission from Alex Chisholm, the 24 Permanent Secretary, to you. 25 A. Yeah. 144 1 Q. He says: 2 "You asked me yesterday to look into some issues 3 relating to the Post Office and to advise both you and 4 Kelly on the way ahead." 5 Do you recall the conversation that you had with 6 Mr Chisholm at -- 7 A. Not in detail but I recall enough about it to be able to 8 make some observations, if I may? 9 Q. Yes, please. 10 A. So the timings you say, I think it was shortly after 11 that submission that we've just looked at. My view was 12 that the result of this court case, which I regard as 13 important, was about to come out. I had a notion that 14 this would be significant, and I didn't entirely -- 15 trust is the wrong word. I wanted a different view to 16 the UKGI view, which we saw in the last submission. So 17 in the weekly meeting -- I had a meeting one to one with 18 the Permanent Secretary every week, normally every 19 Monday morning, and I said, "You give me, Alex, your own 20 view of this, write to me separately", and it's why 21 I think he describes it as a kind of personal minute or 22 something like that. 23 It's not a submission, which tend to be kind of 24 agreed across the Department by sort of multiple people. 25 This was direct from the Permanent Secretary to me and 145 1 Kelly Tolhurst, who was then the Post Office Minister. 2 Q. It says: 3 "The two most pressing issues relate to the court 4 case and the appointment of an interim Chief Executive 5 ..." 6 Then in relation to litigation, he says: 7 "I agree with the legal and policy advice that we 8 should not seek permission to see the judgment in 9 advance of it being made public, and not comment when it 10 is published. To obtain an advance copy we would need 11 to satisfy the judge that there was a clear public 12 interest in such. This is difficult in any case but 13 especially in one such as this where there are no 14 immediate consequences, and we have presented the trial 15 as being an operational matter for the Post Office." 16 That comes up back to the same point I was making 17 before as to the use of the word "operational" to 18 perhaps distance the Department from it. 19 A. Yeah. 20 Q. Is that something you would agree with, that it was, to 21 some extent used, for purposes? 22 A. Well, it's hard to know what was in the Permanent 23 Secretary's mind when he wrote that. My own view was 24 that the court case and the judgment would determine 25 whether this was an arm's-length matter or something 146 1 that was directly for the Department. It may be that he 2 took that view, it may not be. So I think it would be 3 unfair for me to read into his mind on that. 4 Q. Thank you. It then says: 5 "This is only the first of four trials scheduled to 6 continue until at least March 2020, and the final 7 outcome will not be clear until they have all completed. 8 Ministers will want to keep an appropriate distance from 9 the trial and not comment directly while it is sub 10 judice", which is the point that you made. 11 A. Indeed. 12 Q. "([The Post Office] may wish to appeal if the judgment 13 goes against them). Personally I would not be surprised 14 if the proceedings uncovered some faults on both sides 15 of the litigation. Hence it would be especially 16 advisable to stay above the fray for now, leaving you 17 free to speak and act as necessary and in the public 18 interest once the matter is decided." 19 He then addresses the position of the interim CEO, 20 and is satisfied that Al Cameron is the right person for 21 that particular job. 22 A. Yeah. 23 Q. Moving now to the judgment, so the judgment was 24 15 March -- 25 A. So perhaps to just kind of comment on that. Certainly, 147 1 paragraph 1 about the early sight of the judgment and 2 suchlike, that was a kind of second opinion that I'd 3 sought on the UKGI advice. That's just in summary. 4 Q. That was broadly consistent -- 5 A. He was effectively supporting the advice of UKGI on 6 that. 7 Q. Where he says, "I would not be surprised if the 8 proceedings uncovered some faults on both sides" -- 9 A. Well, I had more in mind -- I think it did echo that but 10 also that we shouldn't seek -- the key issue to hand was 11 whether the Department, rather than UKGI, who were 12 getting it anyway, should try to obtain the judgment in 13 advance, and UKGI said you shouldn't because there's no 14 precedent for this ever happening for a shareholder, and 15 the Permanent Secretary agreed. So, on that basis, 16 I think we didn't apply. 17 Q. At this point, was there a difference in view that you 18 could sense between the Permanent Secretary and UKGI in 19 relation to where the fault may lie? 20 A. I don't -- I'm not aware of -- I can't recall any 21 difference at that stage, not to say that there wasn't 22 any, but I don't recall it. Although I think the fact 23 that I went to the Permanent Secretary and asked him to 24 give advice, as it were, on UKGI's advice, I'm sure, in 25 my mind, was that the Permanent Secretary was not, as it 148 1 were, wholly on the same page in general as UKGI. 2 If I'd known him to have the identical view, there'd 3 have been no point going to him in the first place but 4 I didn't, and it was direct and personal to him. 5 Q. Thank you. That can come down. 6 The judgment was 15 March, paragraph 51 of your 7 witness statement, you described it as seminal. 8 A. Yes. 9 Q. Can you briefly assist us with why you considered it to 10 be seminal? 11 A. Well, it was seminal, as I set out in my witness 12 statement for -- in a number of respects. I mean, first 13 is that this was a long-awaited verdict, after a long 14 period of litigation, perhaps too long, and the parties 15 to it, the subpostmasters and mistresses, wanted to see 16 it. So -- but that's probably the most trivial sense in 17 which it was seminal. 18 It was seminal in another sense, in which it is the 19 first time, in my recollection or in my view, that 20 a court, a court of the land, had opined on this 21 question of justice for subpostmasters and mistresses 22 since the individual court that had handed down criminal 23 convictions. There'd been, you know, arbitrations that 24 had gone nowhere, there'd been, by now discovered but 25 didn't know at the time, a review by the Post Office 149 1 Chairman, commissioned by a silk and his assistant on 2 that. There'd been all sorts of things done internally 3 but this was the first time, since those convictions 4 were made, that a court had opined on it. 5 It was -- so that was, as it were, it was seminal in 6 anticipation. It was seminal in terms of its content, 7 because the judge was very clear the subpostmasters and 8 mistresses were right, and that the Post Office had 9 behaved disreputably, as I think I describe it, and to 10 the considerable detriment of the claimants. 11 Q. Can we please turn to UKGI00009213. There was a meeting 12 on 16 March. If we could scroll down on this page, 13 please, at the bottom of the page we can see -- is this 14 is an email from your private office? 15 A. Yes, "Clark MPST" is my private office. 16 Q. "All, 17 "Thanks for joining the call this morning. A quick 18 readout below with actions." 19 So it seems as though there was a call with a number 20 of participants, if we scroll down we can see who 21 attended. 22 A. Can I just describe the context of that? 23 Q. Absolutely, please do. 24 A. So the judgment was handed down on a Friday afternoon at 25 a time when I was in my constituency with engagements, 150 1 and, that evening I had an important commitment, 2 an irrevocable commitment in my constituency, but 3 I wanted to have a meeting to discuss the judgment, so 4 we did, at the first opportunity, which in this minutes, 5 this readout, is 9.45 in the morning, so I assume it 6 would have been 8.30 or something like that on the 7 Saturday morning. 8 Q. Thank you. If we scroll down, can you assist us to with 9 who these participants are? 10 A. Yes, SoS, obviously me, Secretary of State; Kelly 11 Tolhurst was Post Office Minister at the time; Will 12 Holloway and Jacob Willmer were my inter-department 13 Special Advisers; Gavin Lambert was, by then, the 14 Director General, that's to say one below the Permanent 15 Secretary with responsibility for this area of policy; 16 Tom Cooper was the UKGI representative on the Board of 17 the Post Office; Tom Cartlidge was one of my private 18 secretaries, the duty private secretary -- it wasn't, as 19 I recall, his specialism but it was Saturday morning, 20 and he obviously had drawn the short straw to be on duty 21 that weekend; and Hibaq Said, I assume -- it says "PS" 22 on there, it must be Kelly Tolhurst's private secretary. 23 Q. If we scroll down to the detail, it says as follows: 24 "Kelly brought [the Secretary of State] up to date 25 on the judgment against [the Post Office], indicating 151 1 that the judgment was close to the worst-case scenario." 2 There's some detail there from Tom Cooper. 3 It then says: 4 "[Secretary of State] asked about the prospect of 5 an appeal by [the Post Office]. Tom Cooper discussed 6 the legal advice received by the Post Office. This 7 advice will require careful consideration. Tom 8 indicated that there are both legal and tactical reasons 9 for the Post Office to appeal and that it is most likely 10 they will do so. Appealing may be [unhelpful] in 11 reaching a settlement." 12 A. "May be helpful". 13 Q. I was going to say, just pausing there, can you assist 14 us with the discussion regarding legal and tactical 15 reasons? 16 A. So I was incensed by that remark. It seemed to me that 17 this was a very important judgment that was strongly 18 critical of the postmaster -- of the post office, and 19 supportive of the subpostmasters, and it was instantly 20 evident that that needed to be accepted and acted upon. 21 And what really stung me was the use of the word 22 "tactical" in this: 23 "... there are ... tactical reasons ... to appeal 24 and that it is most likely that they will do so." 25 That suggested to me that this wasn't because there 152 1 was something unclear in the judgment. It wasn't that 2 there was some kind of area of law that needed to be 3 clarified or some material fact that was wrong. But 4 that it was, I could -- well, at least I inferred that 5 this was, in effect, to disadvantage to the 6 subpostmasters and their litigation, which should not 7 have been in anyone's mind. 8 Q. There aren't speech marks around the word "tactical", is 9 that something you actually remember from this meeting 10 being mentioned? 11 A. Well, tactical, I assume, was mentioned because it's 12 a very specific word, and it's -- I mean, the fact that 13 it says -- I mean the private secretary is -- was a very 14 experienced private secretary. He captures two aspects, 15 both legal and tactical. So it was clearly pointing to 16 something other than the legal. And -- I mean, I say in 17 my witness statement that my reaction may have been 18 unfair, it might have done an injustice and perhaps it 19 wasn't intended in the way that I interpreted it. 20 But all I can tell you, and what I recall, is that 21 I took that as meaning that they -- there was 22 an intention to play -- it was a pretty appalling 23 thought -- a kind of legal game with this rather than to 24 respect the judgment. 25 Q. It then says: 153 1 "[The Secretary of State] made clear his primary 2 objective is to see justice done." 3 I think in your witness statement you've said that 4 that is a diplomatic way of putting it. 5 A. So, for those that are not -- have the good fortune not 6 to be connoisseurs of kind of ministerial minutes and 7 readouts, there is a general understatement to what is 8 kind of recorded in this. But there is a kind of code 9 that I think people understand if they read it, and 10 whenever it says something like "Secretary of State made 11 clear", that means that I intervened with some force on 12 the issue. It's not "Secretary of State said" or 13 "Secretary of State observed" or "Secretary of State 14 suggested". "SOS made clear" is, if you take evidence 15 from other civil servants, I'm sure they will confirm, 16 that means something. That means that this was a pretty 17 emphatic. 18 Q. Is that one level below "full and frank"? 19 A. I think it's probably a level above. I think it 20 probably implies that I was pretty direct about it. 21 Q. It then continues: 22 "Where postmasters" -- 23 A. Before you go on, can I have a quibble with this? 24 Q. Yes. 25 A. I think I recall my demeanour on that call. I was quite 154 1 angry about it and, in terms of making clear, I don't 2 think I would have said, you know, "Let me tell you my 3 primary objective is to see justice done". I think 4 I would have said -- did say, "my only objective" and 5 that's how it should be read. 6 Q. It then continues: 7 "Where postmasters and mistresses have been treated 8 improperly they should be treated justly. It will be 9 necessary to consider the legal advice carefully to 10 ensure no activity by [your Department] will prejudice 11 any appeal. 12 "[The Secretary of State] and Kelly discussed the 13 possibility of making a statement. [Secretary of State] 14 resolved not to make a proactive statement. He asked 15 that an [Urgent Question] rebuttal be prepared for 16 Monday morning. He also asked that the Department put 17 at a statement making the point that we are aligned with 18 the interests of the postmasters but that we are still 19 going through the legal process." 20 Do you recall if that statement went out or not? 21 A. Yes, it was a -- I think in the evidence that was 22 disclosed, there was a written ministerial statement 23 that I think was issued on the Monday morning. 24 Q. So that's a written ministerial statement -- 25 A. Yes. 155 1 Q. -- when it refers to a statement? 2 A. Correct. 3 Q. Yes. "We should also" -- 4 A. It was probably a press statement as well. Actually 5 I think -- I suspect it was both. 6 Q. "We should also do a Dear Colleague letter promising to 7 revert to the House when the legal matters are 8 completed. It should be robust in tone and making clear 9 that the litigation is ongoing and that [Her Majesty's 10 Government] will keep the House updated. 11 "[The Secretary of State] made clear that where [the 12 Post Office] can fix problems internally before the 13 conclusion of the legal process, it should do so." 14 It then says: 15 "He agreed with Tom Cooper's assertion that caution 16 would be required to ensure that justice is done for 17 legitimate claimants, but that restitution may not be 18 appropriate in all circumstances." 19 Now, I think you've said in your witness statement 20 that the reference to "your agreement" is, again, the 21 Civil Service speak of -- 22 A. So I think both of these are a little opaque. The first 23 sentence of that paragraph, "[Secretary of State] made 24 clear that where POL can fix problems internally before 25 the conclusion of the legal process", my recollection is 156 1 I told them to get on with giving restitution to 2 postmasters and mistresses. There was enough in the 3 Common Issues judgment to -- for that to be any 4 initiated. 5 They'd waited long enough and they shouldn't, as it 6 were, wait for the conclusion of the process. They 7 should get on with it. 8 To this last point, so Tom Cooper -- so -- and 9 I think -- I infer from the last sentence that, in the 10 sentence before, that they should give restitution to 11 the postmasters and mistresses, I think I said 12 comprehensive restitution. They should all be put in -- 13 financially, at least, in the kind of position that they 14 should have been in, had this not taken place, to which 15 Tom Cooper clearly made an observation that I think has 16 been familiar from other evidence that the Inquiry has 17 taken, that, well, you know, there may be some people 18 that actually were convicted and were genuinely guilty 19 of criminal deeds, and it would be an abuse of public 20 money if they were compensated when they shouldn't be. 21 To be frank, I didn't have much patience with that. 22 I didn't think that was the import of the judgment. 23 I don't recall Mr Justice Fraser as having made a kind 24 of great play of that. But, you know, it's hard to 25 dissent from noting that, yes, of course, if someone 157 1 clearly isn't entitled to it, they shouldn't get it. 2 But I -- there's not much emphasis I would have placed 3 on that aspect. 4 Q. Thank you. I'm going to turn to two related documents. 5 Can we please turn to UKGI00009296, please. This is 6 internal UKGI correspondence. If we scroll down, we can 7 see an email there from Richard Watson to Tom Cooper, 8 and he says: 9 "Tom, I spoke again to BEIS Legal. While they agree 10 it is a Board decision we think that if [the Post 11 Office] decides to make the application it should leave 12 open the possibility that the Minister, after her 13 discussion with Tim tomorrow, would want to say the 14 shareholder disagrees." 15 This is talking now about the recusal application. 16 A. It is. 17 Q. "Legally the shareholder cannot force the Board not to 18 make the application and our advice to the Minister is 19 not to get involved but if she is adamant she does not 20 want it made that may be a matter the Board will want to 21 consider." 22 So this is 19 March and it's a discussion about 23 whether or not the Minister should have a say in the 24 decision to recuse. 25 A. That's right. 158 1 Q. If we scroll up, Mr Cooper responds: 2 "Really?" 3 Then Mr Watson said: 4 "Are you free to speak?" 5 There is a further correspondence on the same point, 6 if we turn -- the last document before the break -- to 7 UKGI00009308. Perhaps if we could start with the bottom 8 of page 3. We have, if we scroll up, Mr Chisholm's 9 view, as expressed to Mr Cooper, regarding recusal. He 10 says: 11 "I have now read all this legal advice. 12 "Personally I find Justice Fraser in this case (as 13 in the Magnox case) to be opinionated, exacting, and 14 rather inclined to personalise matters. But not (to my 15 layman's mind) obviously wrong or biased. 16 "I also share the concern that a recusal attempt 17 risks further antagonising him (if unsuccessful) and 18 also positioning [the Post Office] in public as 19 aggressive and in denial about its shortcomings (which 20 impression would be consistent with the judge's findings 21 to date). 22 "However my personal view of the case -- formed from 23 a rapid perusal of the judgment and all the legal 24 commentary you've kindly provided -- does not matter as 25 (a) I am not a lawyer and, anyway (b) the Department is 159 1 not controlling the case -- that is properly a matter 2 for the Post Office and their advisers." 3 If we just scroll down, I will just read a few 4 passages from the bottom of that email, it goes on to 5 say: 6 "Proceeding with the appeal and recusal attempt, 7 risks identifying the organisation's leadership today 8 with the negative historic behaviours of which [the Post 9 Office] stands accused. But it is not obviously 10 mistaken or otherwise inappropriate. 11 "The Board will want to reflect carefully on all 12 these matters. For my part I am satisfied that [the 13 Post Office] Board is the right body to do this; and 14 that it has been properly advised. 15 "The Department should maintain its clearly distinct 16 and detached position, so that it is free and credible 17 for dealing with the consequences as they unfold. 18 Ministers may want to show appropriate concern about the 19 criticisms and may express a desire for [the Post 20 Office] to act appropriately but should not comment 21 substantively in ongoing litigation in which the 22 department has a clear interest but no direct 23 involvement." 24 If we scroll up, we can see that Mr Watson, Richard 25 Watson, says: 160 1 "Thanks. Alex sums up my view perfectly." 2 If we scroll up, we have a further email, from 3 Mr Watson, that says: 4 "All 5 "Are we agreed that we should not try to engineer 6 a position today whereby if the Board decides to proceed 7 with recusal the Minister is given a chance to object, 8 ie some sort of conditional Board approval. As 9 shareholder, I don't consider she has the legal power to 10 prevent this even if it was an appropriate thing for her 11 to express a view on, which I think we agree it isn't 12 but instead is properly a matter for the Board. 13 "It is of course proper for the Minister to 14 understand [the Post Office's] decision and why their 15 position might have changed since her call with the 16 chair on the weekend. I understand that might be 17 subject of a call with the Minister later today." 18 Then Tom Cooper responds and he says: 19 "I have no intention of engineering such an outcome 20 of the Board meeting." 21 Finally, if we scroll on to the first page, 22 Mr Evans, who was Deputy Director, in BEIS Legal 23 Advisers, he says: 24 "Clearly the Minister should be given an opportunity 25 to understand [the Post Office's] decision but it is for 161 1 the Board to decide whether to apply for a recusal (or 2 the variant described by Tom) guided by their officials 3 and counsel and there should not be a situation where 4 the Board takes a decision subject to endorsement or 5 otherwise by the Minister. This should be a decision 6 that is taken by the Board, on the merits of the 7 litigation advice." 8 Can you assist us with what your view was on the 9 recusal application at that point in time? 10 A. Yes. I think it's a very important episode because it 11 indicates that, notwithstanding the strength, and 12 I would say unambiguous nature of the view that I and 13 Kelly Tolhurst -- I should say, throughout this, the 14 Post Office Minister's view, from whom you heard earlier 15 this week, was identical to mine in this -- in every 16 conceivable respect, that the Post Office needed now to 17 accept the judgment, give restitution to subpostmasters, 18 and change their whole approach. 19 And yet, we discovered -- I only discovered, I think 20 it was on the Tuesday evening -- so that call was on the 21 Saturday morning on the Tuesday evening, I got a message 22 from Kelly Tolhurst asking to speak to me to say, 23 "You'll never guess what, they're now tying to recuse 24 the judge and I'm completely against it, as being 25 incompatible with what we said". My view, again, was 162 1 the same as that. They were going to do it I think the 2 next morning. 3 From memory, I think I was either out of Parliament 4 or the Department, I suspect it was an evening, I was 5 probably speaking at some industry dinner somewhere. So 6 I don't have access to these things, unfortunately, from 7 my private office but I think that I called the 8 Permanent Secretary and asked him to get to the bottom 9 of this and to advise Kelly and the Board as to what we 10 could do about it, and I think that is why his advice -- 11 I note this email is 9.23 on the Tuesday evening, so it 12 to suggests that it's late at night. 13 If I may make a couple of observations on the 14 handling of this. 15 So the first is to say that I thought it was 16 outrageous that UKGI contrived to keep the unambiguous 17 view of ministers from the Post Office Board in making 18 the consideration of this. It was my view, it was Kelly 19 Tolhurst's view, even to the point -- and you had it in 20 the email that was up -- about looking for 21 an opportunity even for the Minister, once they'd made 22 their decision, and the strong legal advice from two 23 sets of legal advisers was that it had to be made by the 24 Board but, even after they'd made it, should it be for 25 recusal, we were minded to want to disassociate 163 1 ourselves from it at the time. And that exchange about, 2 you know, I'm not going to -- I can't remember what the 3 words were -- "I'm not going to engineer a situation 4 that was possible" -- 5 Q. "I have no intention of engineering such an outcome at 6 the Board meeting." 7 A. I thought that was wrong and appalling. 8 In terms of the discussion at the Board, I haven't 9 seen -- perhaps the Inquiry has seen -- any kind of 10 verbatim account of what was discussed at the Board, but 11 the advice that Alex Chisholm as Permanent Secretary 12 gave on my request, it went to Tom Cooper, as to what he 13 could do and what he could say. Even though it was, to 14 my taste, a bit to on the one hand and on the other, 15 I would have preferred a more robust piece of advice, 16 saying ministers are strongly opposed. 17 Actually what he does say -- and you highlighted it 18 when you called up the document: 19 "Proceeding with the appeal and recusal attempt, 20 risks identifying the organisation's leadership today 21 with the negative historic behaviours of which POL 22 stands accused." 23 Then he says: 24 "The Board will want to reflect carefully on these 25 matters." 164 1 Now, in my view, that aspect of the Permanent 2 Secretary's advice should have been put to the Board so 3 that they could consider that not only were ministers 4 strongly opposed to this, even accepting that it was 5 a decision for the Board but that the Permanent 6 Secretary had some apposite things to say on what they 7 should have in mind. 8 I'm not certain but it was -- the impression that 9 I've formed, is that there was a discussion in which -- 10 forgive me, it's not clear to me whether Tom Cooper said 11 anything. He recused himself from the vote but whether 12 he did what was advised by the Permanent Secretary and 13 set these concerns out, in my view, he should have done. 14 MR BLAKE: Thank you. 15 Sir, that might be an appropriate moment to take our 16 mid-afternoon break. 17 SIR WYN WILLIAMS: Yes, certainly. 18 MS PRICE: Can we come back at 3.30, please? 19 SIR WYN WILLIAMS: By all means, fine. 20 (3.17 pm) 21 (A short break) 22 (3.30 pm) 23 MR BLAKE: Thank you, sir. Can you see and hear me? 24 SIR WYN WILLIAMS: Yes, thank you. 25 MR BLAKE: Can we turn to BEIS0000070. Sticking with the 165 1 recusal application, this is a submission of 21 March 2 2019. The summary is that: 3 "Following independent legal advice, [the Post 4 Office] Board has approved an application to recuse the 5 judge. We expect this to be tabled today." 6 If we scroll down, please, it says: 7 "[Over] the weekend you spoke to the Secretary of 8 State and separately with the [Post Office Limited's] 9 Chair Tim Parker", so this isn't a ministerial 10 submission to yourself, although you are -- 11 A. It was to the Post Office Minister, I assume, is it? 12 Q. Yes. 13 "... and interim CEO-designate Al Cameron. [The 14 Post Office] informed you that they were taking 15 independent advice on whether to seek an application for 16 the judge to recuse himself from hearing the rest of the 17 litigation. At that stage, Tim thought if it unlikely 18 that an application would be taken forward. Following 19 these calls, on Monday, 18 March, you sent a Dear 20 Colleague letter to update MPs on events." 21 Were you aware that it was originally Tim Parker's 22 understanding that it was unlikely that there was going 23 to be an application for recusal? 24 A. Only from this, I didn't know that there was any thought 25 given whatsoever to a recusal application until Kelly 166 1 Tolhurst called me on the Tuesday evening, I think it 2 was. But I note -- I think, this thing into which I was 3 copied would be the first I knew. 4 Q. We -- 5 A. The confirmation of it. That wasn't the first I knew 6 but this was the first kind of official submission. 7 Q. Thank you. If we scroll down, we can see it says: 8 "On 20 March, [the Post Office's] Board met to hear 9 legal opinion on the recusal application, and to take 10 a decision on whether to proceed. Tom Cooper attended 11 as the shareholder's representative to the Board, but 12 following advice from UKGI Legal, he took no part in the 13 decision making." 14 Your Department ultimately would have been funding 15 this application; is that fair? 16 A. No, I don't think that's strictly right. So the Post 17 Office were funding the application. Now, of course, 18 the Government stood behind the Post Office and there's 19 a perfectly legitimate question you might go on to, is 20 again, how arm's length can that be? But, certainly, 21 throughout it, the Post Office, were -- and I think 22 the -- there's some evidence that the Permanent 23 Secretary reiterated that this had to come from the Post 24 Office's own resources. 25 So this wasn't, as it were, sort of coming to the 167 1 Department to fund that, not that it makes it any more 2 acceptable, in my view. 3 Q. Is it right for the UKGI member of the Board not to 4 vote, not to be part of that decision-making process, in 5 light of the reasons you've already set out about the 6 relationship between Government and the Post Office? 7 A. Well, I've discovered quite a bit about this through 8 this Inquiry and its disclosures. At the time, it was 9 an evening call from the Post Office Minister and then 10 a later night call to the Permanent Secretary. But what 11 I understood and I recollect -- I'm sure accurately from 12 my conversation with Kelly -- was that she was being 13 essentially told, given strong legal advice, which is to 14 say that, you know, you can't intervene in this, you 15 can't make this decision yourself, and I discovered ex 16 post that it applied to Tom Cooper as well. 17 Now, there is a very interesting thing here in the 18 evidence that's been disclosed. Some of that advice, it 19 seems to me from reading the to and fro, was advice from 20 UKGI Legal, that's to say from lawyers, but it was 21 essentially presentational advice, not a requirement of 22 the law, shall we say, and, since that was summarised, 23 I think possibly -- well, certainly in other 24 correspondence, that legal advice was that the Minister 25 shouldn't intervene and Tom Cooper shouldn't intervene. 168 1 You know, I'm not sure that it's the right thing for 2 presentational advice -- which, in any case, frankly, 3 should be a matter for others and the ministers -- for 4 that to be passed off as legal advice. And if there 5 were no legal bar on Mr Cooper taking part in that 6 decision, I was clearly -- I was certainly of the view 7 that he should have participated and should have spoken 8 against it. 9 As it happens, I could understand a genuine sort of 10 legal objection to, as it were, the Executive being 11 involved in a criticism of the judiciary, but that would 12 more apply, it seemed to me, if the Department, UKGI and 13 Mr Cooper were wanting the judge to be recused, which -- 14 whereas certainly the ministerial view, and I think 15 consistent with the reading between the lines of the 16 Permanent Secretary's view is: we didn't want that. We 17 wanted the opposite. 18 Q. Thank you. Could we please turn to UKGI00009464. 19 So the submission I just took you to was 21 March. 20 A few days later now, 25 March, and you have received 21 correspondence from another member of the Department, 22 Anne-Marie Trevelyan, writing on behalf of 23 a constituent, Peter Holloway, and she discloses, if we 24 scroll over to page 3, please, an email from her 25 constituent. He says: 169 1 "I am sure you're aware that judgment in the first 2 part of the trial came down very strongly for the 3 subpostmasters, with strong criticism of the management 4 of Post Office. We are currently in the second phase of 5 the trial looking at the Horizon system operated by the 6 Post Office. We are confident often a similar outcome. 7 "The Post Office are fighting the case vigorously 8 and are already considering appealing the first 9 judgment. However, two of their Senior Managers have 10 been found lying understanding oath in the court whilst 11 giving their evidence with the severe adverse comments 12 by the judge. 13 "I respectively request that you raise questions 14 with the Minister responsible for Post Office, as to 15 whether they have seen the judgment of the court and 16 what is the Minister proposing to do about it. The 17 Government is the single shareholder of the Post Office 18 and that Government, in its own words 'has an arm's 19 length' approach to managing the Post Office, and it is 20 this very 'arm's length' approach that has created this 21 position whereby Post Office is in the middle of a train 22 crash and refuses to see it. Meanwhile people like me 23 have been fighting for 'justice' for over ten years 24 having lost many hundreds of thousands of pounds at the 25 hands of the Post Office. There are 550 of us in this 170 1 Joint Action and many have been forced into bankruptcy, 2 some sent to prison, all severely ... disadvantaged. 3 AND the Post Office has been, and is still, spending 4 millions of pounds of public money to defend its 5 entrenched position and the reputations of 6 an incompetent Executive and a Board that either doesn't 7 care or doesn't understand what is going on. 8 "Over the last ten years there have been three 9 enquiries all of which the Post Office refused to accept 10 their findings, an attempt at mediation, at which the 11 Post Office refused to mediate. It's time for the Post 12 Office to accept the true position and agree to settle 13 with us who have been so badly treated." 14 Is this correspondence you recall receiving; was it 15 sent directly to you? 16 A. It isn't and I don't expect I would have seen it for 17 reasons that Vince Cable, I think, set out today. 18 I think it would have been directed by the Department 19 straight to the Post Office Minister. 20 Q. Were they sentiments that you were aware of more 21 broadly? 22 A. Well, I'm not sure I was aware of them more broadly but 23 I couldn't have written it better myself. It basically 24 reflects my views on the judgment. 25 Q. Were they your views at the time? 171 1 A. Certainly. From might Saturday -- from the Friday night 2 when I first saw the judgment in my box to the 3 conversation on the Saturday morning when I, in effect, 4 directed that it needed to be respected and, to the 5 point here about the financial detriment that had been 6 longstanding, my clear instruction was that needed to 7 end and there needed to be a restitution. 8 Q. Could we turn, please, to BEIS0000071. This is 9 a ministerial submission of 12 April. If we could 10 scroll down, it updates you on developments, since the 11 submission of the recusal application. It says in the 12 first paragraph: 13 "The judge dismissed the application on 9 April and 14 refused permission to appeal, but [Post Office] will now 15 seek the Court of Appeal's permission directly. In 16 parallel, [the Post Office] is preparing an appeal of 17 the Common Issues judgment." 18 The "Recommendation" is: 19 "To note the contents of this advice and indicate if 20 you wish [the Post Office] to give you an oral briefing 21 to supplement this, as well as to outline its appeal 22 strategy once the Board has decided." 23 If we scroll down, please, over the page to 24 paragraph 8, we can see a section entitled "Legal Team", 25 and it says as follows: 172 1 "[The Post Office] has decided to boost the Legal 2 Team and has provisionally appointed Herbert Smith 3 Freehills to oversee the litigation with a direct 4 mandate from the Board rather than ... through the 5 company legal counsel. Their mandate will be to revisit 6 the approach to the litigation (both substance and 7 tone), which in the short-term means looking at the 8 appeal relating to the Common Issues trial, the 9 currently adjourned Horizon Issues trial, and the 10 strategy for reaching resolution." 11 What did you understand by the reference to 12 substance and tone? 13 A. Well, I think the Common Issues judgment -- I described 14 it as seminal and it was. It was finding, it was in 15 effect directing that the Post Office needed to accept 16 the unfairness of its treatment of subpostmasters and 17 mistresses, and that it needed to -- the tone thing is 18 to conduct itself in a more respectful way. 19 Q. It continues: 20 "[The Post Office] is open to making other changes 21 depending on the advice received from the new firm. 22 Given the unexpected outcome of the Common Issues trial 23 we have been pressing [the Post Office] to ensure that 24 their litigation strategy is considered with a fresh set 25 of eyes, so this is a good outcome and we expect it to 173 1 have a significant bearing on the way the litigation is 2 conducted." 3 We then have a further ministerial submission in 4 May. That's at BEIS0000073, 10 May. By this stage, 5 Herbert Smith Freehills has reviewed the legal strategy. 6 If we scroll down we can see paragraph 5: 7 "Following the appointment of [Herbert Smith 8 Freehills] to oversee the litigation with a direct 9 mandate from the Board, [they have] reviewed [the Post 10 Office's] legal strategy. [They] presented their advice 11 on the proposed approach to the Common Issues [trial]. 12 This approach was endorsed by the Board's Group 13 Litigation Subcommittee ... In broad summary [they] will 14 be appealing ..." 15 Then it sets out (a), (b), (c) and (d), the points 16 they will be appealing. Then it says below, in relation 17 to recusal application: 18 "[The Post Office] applied on 11 April directly to 19 the Court of Appeal for permission to appeal the judge's 20 decision and for the second 'Horizon Issues' trial to be 21 stayed in the meantime." 22 It doesn't seem at this stage as though the 23 litigation strategy has actually changed very much, does 24 it? 25 A. No, to coin a phase, nothing has changed. 174 1 Q. Were you aware by this stage of any changes to the 2 substance and tone as proposed at earlier submissions -- 3 A. That first submission that you put up did indicate that 4 they were taking the direction that had been given by me 5 and Kelly Tolhurst immediately after the Common Issues 6 judgment. I don't know whether you can put it back up, 7 the end of that first -- of the two that you have just 8 shown. They were appointing this new team to review the 9 strategy, to report direct to the Board and to change 10 the substance and the tone. So that was encouraging. 11 What was very disappointing in this, I should just 12 say for completeness, I've seen this in what was 13 disclosed to me but I don't think this submission was 14 sent to me, it was to the Permanent Secretary and to the 15 Post Office Minister. 16 Q. That's correct. 17 A. But through conversations, I would be aware -- would 18 have become aware of it, you know, I was, I suppose, 19 looking forward, you know, with some anticipation to 20 seeing the outcome of this review by a fresh pair of 21 eyes, and then to find that it, in effect, is taking the 22 same approach, was bitterly disappointing. 23 Q. Could we please turn to BEIS0000075. This is the final 24 significant ministerial submission that I'm going to 25 take you to today, and it's from 11 June. So this is 175 1 a ministerial submission to you, to approve and it says, 2 as follows: 3 "At the industry meeting on 4 June, you [Secretary 4 of State] asked for advice on how the ongoing Post 5 Office Limited litigation could be brought to a swift 6 and satisfactory conclusion, ensuring subpostmasters who 7 had been treated unfairly were appropriately 8 compensated." 9 So starting at the beginning there, what was the 10 industry meeting of 4 June, do you recall? 11 A. So I describe in my witness statement that my pattern, 12 as well as having every Director General give to me 13 their thoughts every week, direct to me, I had a series 14 of what I regard as important internal meetings in which 15 we would discuss with the relevant minister present, in 16 this case the Post Office Minister, usually the 17 Permanent Secretary and senior officials, things that 18 were on my mind, or a decision that one of the junior 19 ministers was going to take, that they wanted or I felt 20 that they should have some collective discussion. So 21 this was a weekly meeting of these things, and senior 22 officials were present. 23 I would observe that it says at the industry meeting 24 on 4 June, and we will certainly have had a discussion 25 resulting in this commission. 176 1 My recollection is that there were discussions 2 before that as well, from around the time of the two 3 submissions that you put up, in other words the weeks 4 ahead. They quite probably were or quite possibly were 5 at one of the other industry meetings. Unfortunately, 6 the Department doesn't have minutes of those meetings 7 and, certainly, I would have, in my weekly discussions 8 with the Permanent Secretary and with the Post Office 9 Minister, have been, essentially, kind of preparing the 10 ground for a major intervention in the Post Office to 11 cause them to do what manifestly I'd hope that they 12 would do, from that Saturday after the Common Issues 13 judgment, in other words to settle, to set up 14 a restitution scheme, to change their whole legal 15 approach. I hoped that they would do that, as it were 16 voluntarily. 17 By this stage, I had essentially given up on them 18 and concluded that they needed to be forced to do it. 19 Q. There's reference there to appropriate compensation. At 20 that point in time, what did you have in mind? 21 A. Oh, the full detriment. I mean, the detriment can never 22 be overcome. I mean, the -- the loss of reputation, you 23 know, the disruption of people's lives can never be 24 properly compensated. But certainly financial 25 compensation, and something that was, you know, 177 1 an attempt to deal with that. 2 There are various references, you'll probably see 3 later in this submission, to, you know, kind of worrying 4 about the costs of this. If there's one thing I would 5 communicate very clearly, is that there was no way that 6 I was going to see the compensation, the entitlement to 7 the subpostmasters, see them sort of bilked to protect 8 the -- for the convenience of the Post Office or even 9 the Treasury and the Government. They needed to get 10 what were their desserts. 11 Q. There are a number of recommendations. The 12 "Recommendations" are: 13 "That you note the advice and our recommendation 14 that you choose from the following options (which are 15 not mutually exclusive): 16 "1. Challenge [the Post Office] Chair and Board to 17 review their litigation strategy ... 18 "2. Commission [the Post Office] to carry out 19 a project on how to structure and operate a settlement 20 ... 21 "3. BEIS Ministers to state publicly that they want 22 to see justice resulting from litigation for claimants 23 with valid claims. 24 "4. Challenge Post Office to announce that it is 25 taking on board some of the legitimate criticisms of the 178 1 judgments and is taking action ... 2 "5. Put UKGI lead legal counsel (or other legal 3 adviser) on [the Post Office] Litigation Subcommittee as 4 director or observer 5 "6. Invite Nigel Boardman, Chair of the BEIS Audit 6 and Risk Committee, to carry out some independent due 7 diligence on [their] litigation strategy 8 "7. Put in place clear information-sharing 9 arrangements via the proposed Framework Agreement for 10 [the Post Office]." 11 Then it says: 12 "More radical steps are presented in options 8-10; 13 we recommend these are not pursued at this stage." 14 I think, did you ask for -- 15 A. I did. 16 Q. -- what was called "nuclear options"? 17 A. I did. 18 Q. -- or what you called "nuclear options"? 19 A. My purpose in requesting and requiring this package of 20 advice, which I think took some time to put together, so 21 that -- the interval between the industry meeting and 22 this submission, I think, is slightly misleading, 23 I think this was in train before that -- was essentially 24 that I wanted the direction that I'd in effect given on 25 that Saturday morning to be put into effect, up to and 179 1 including dismissing the Board, taking over the 2 litigation by the Department. 3 Q. Thank you. If we scroll down over the page on to 4 paragraph 6, it says there: 5 "The current status of the litigation is that at 6 a hearing on 23 May the judge denied [the Post Office] 7 permission to appeal his judgment in the first 'Common 8 Issues' trial and awarded the claimants their costs of 9 the Common Issues trial rather than reserving this 10 judgment until later in the litigation. Setting out his 11 reasons in a written judgment of 4 June, the judge 12 criticised [the Post Office's] conduct again, namely 13 [the Post Office's] 'veiled or implied threat that 14 mirrors the approach adopted by Post Office on the 15 recusal application, namely that in adopting a course of 16 action in the face of opposition by the Post Office ... 17 runs the risk that the Post Office will say that the 18 overall outcome of the litigation ... has already been 19 decided'. The Judge also expressed concern about the 20 escalating costs of the litigation ..." 21 In your witness statement at paragraph 96, you have 22 said that the Post Office had not accepted the 23 significance of the previous judgment -- 24 A. Well, it's to my remark that nothing can change. 25 Clearly, you know, even at this stage on 4 June, so 180 1 I had commissioned this advice, probably better more 2 accurately described as a kind of set of actions to 3 force them into line. I'd commissioned it before this 4 judgment, suspecting that they were not doing what I had 5 directed them to do and, lo and behold, the judgment of 6 Mr Justice Fraser, who seems to have been very alert to 7 the Post Office's conduct, says that, even now, they're 8 engaged in the kind of behaviour that he deprecated in 9 the first Common Issues judgment -- almost unbelievable. 10 Q. If we scroll down, please, to paragraph 14 there's 11 a section there regarding the role of Government as sole 12 shareholder. It says at the bottom: 13 "This does not include explicit powers to direct the 14 Board to take a specific course of action ..." 15 Although, over the page, it says: 16 "... though ultimately ministers have the right to 17 appoint or remove any member of the Board ..." 18 We will get to it but I think those were one of the 19 nuclear options that were proposed? 20 A. Indeed. There is throughout this a continuing anxiety 21 on the part of the Department that, you know, it's 22 an arm's-length Limited company, in which the power of 23 ministers is confined to approving the strategy and to 24 appointing or firing individuals, not to direct them, 25 and there was -- I think it's here, there's a kind of -- 181 1 in fact, there it is in paragraph 16 -- there's 2 a warning that, you know: 3 "... care needs to be taken that Ministers do not 4 risk being regarded as shadow directors. A shadow 5 director is someone in accordance with whose directions 6 or Customs the board are accustomed to act." 7 Now, it was very much my intention that the Board 8 should act in accordance with my instructions, they were 9 alive to that, they were drawing my attention to it, so 10 we were skating on somewhat sort of thin legal ice, as 11 it was described to me, which is one of the reasons in 12 my recommendations that I don't think we needed to 13 tiptoe around it in quite that way for -- God forbid 14 that there should ever be a future case but, in future, 15 that sort of advice should not need to be given. 16 Q. Was there a point at which you actually considered, in 17 effect, becoming a shadow director? 18 A. Well, it was in my mind from the Saturday morning that 19 I had a clear view as to what the Post Office Board 20 should do and that I was going to do everything I could 21 to make sure they implemented it, within the law, hence 22 the -- this discussion. But I was -- I was prepared to 23 push the envelope, shall we say. 24 Q. If we scroll down, at 19 the recommendation was you 25 choose from options 1 to 7, either individually or 182 1 collectively. 2 If we briefly turn to BEIS0000076. We can see the 3 annexe to the submission, which sets out the options and 4 the advantages and the risks. If we scroll down, we can 5 see at page 4 the additional options that were 6 potentially available: 7 "Go public with a stronger [Secretary of State] 8 statement ... 9 "Change Chair/[change the] Board." 10 Scrolling down: 11 "Change management team." 12 Further down: 13 "BEIS to take shared responsibility for the 14 litigation ..." 15 So those were options 8 to 11. 16 A. Correct. 17 Q. Very briefly, why did you discount those options? 18 A. Well, so, as you said Mr Blake, these were options that 19 I'd asked to be included and I didn't so much discount 20 them as start with the -- so I think what I said is 21 I want all of the above in terms of the top seven, and 22 to keep on the table these to see whether they could 23 be -- obviously whether they would act in the 24 appropriate way. 25 I think the top one of these additional ones, to 183 1 make a strong statement, actually I don't think that 2 very different from what I did direct, which was to say 3 we were on the side of the subpostmasters and the 4 litigation had to change. 5 But, in terms of -- so the others essentially amount 6 to, one way or another, dismissing the Board, either 7 explicitly, in terms or through perhaps the option 11, 8 taking responsibility for it. They, I think, might be 9 likely, probably would have been likely, to quit on the 10 basis that, you know, it's a lack of faith in our 11 competence. 12 So, essentially, they boiled down to a question of, 13 at that point, should you -- should I fire the Board? 14 Now, that's something that I certainly wouldn't shy 15 about doing. I have used my powers in other 16 organisations to remove people that I thought were not 17 competent or performing or had certain problems 18 associated with them. 19 But it's a step that one has to take advisedly, it 20 seems to me, as a kind of Secretary of State. This was 21 an organisation without a Chief Executive, at this point 22 in time. The interviews, I think, were being conducted 23 that week for the new Chief Executive. Nick Read was 24 someone that was appointed a few weeks after that. 25 So it's an organisation, you know -- running the 184 1 Post Office is, it's a complex organisation, it's 2 absolutely essential for national infrastructure of 3 paying benefits and applying for passports, and all the 4 rest of the things. So to -- I would have had in my 5 mind that, in order to instantly summarily, as it were, 6 dismiss the Board, you'd have to have an alternative 7 arrangement in place. To have an organisation as 8 important without any leadership would be quite a big 9 step. In addition to that, I would certainly have had 10 to consult the Prime Minister and others, were I to do 11 that. 12 So my view -- it was certainly not taken off the 13 table. Quite the opposite, I just -- 14 Q. Shall we turn to your confirmation of the options that 15 you did choose? 16 A. Yes. 17 Q. That can be found at UKGI00010205. 18 So this is 18th June 2019, I think you were only in 19 post for about a month after this. 20 A. Yes. 21 Q. It says: 22 "[Secretary of State] has reviewed this advice and 23 has expressed a preference for the first 7 options to 24 pursue. Content for you to proceed on this basis and we 25 can discuss further at industry meeting when next 185 1 scheduled." 2 Can we turn back to the submission, so that is 3 BEIS0000075. Thank you. If we could scroll down and 4 look at the recommendations. How many of those 5 recommendations are you aware were actually fulfilled? 6 A. I can't say. There were various actions that were 7 implementing the recommendations, much of which was 8 about the Minister appearing at a POL Board meeting, 9 which I think was in a few weeks' time. 10 Q. In respect of public statements, for example, were they 11 carried out during your period in office? 12 A. I can't remember. I think we did, in terms of -- well, 13 for -- I mean, some of these we've already done. For 14 example (3), I think in the communication after the 15 Common Issues judgment, we said that we were aligned 16 with the postmasters and mistresses and we wanted to see 17 restitution. So, actually, I think that was already in 18 train. 19 Q. Could we please turn to POL00285354. The suggestion 20 might be made that you should have done more of those 21 more quickly. 22 A. Mm-hm. 23 Q. What do you say about that? 24 A. Well, I -- when one takes a decision like that, it -- 25 there are different ways of implementing it. One was -- 186 1 and I don't know whether we got the date. There was 2 an important appearance that Kelly Tolhurst was going to 3 make at the Post Office Board to tell them what to do. 4 One of the other aspects was that the new Chief 5 Executive was about to be appointed and, no doubt, he 6 would be -- he or she, turned out to be a he -- would be 7 the conduit of that. 8 But, in general terms, I think it would be fair to 9 reflect that, given how dilatory the Post Office were, 10 that actually to have been more directive a few weeks 11 earlier might have saved a few weeks in this. I think 12 that would be a reasonable reflection to make. 13 SIR WYN WILLIAMS: Can I just get one thing straight in my 14 head though. Unless I've got this fact wrong, there 15 would seem to me to be quite some difficulty in actually 16 doing very much at all in June 2019 because was it not 17 in June 2019 that the Horizon issues trial started? So 18 it's very difficult to imagine doing anything while 19 you're actually conducting that litigation. 20 A. Thank you, Sir Wyn. I was aware that the Horizon Issues 21 trial was going on, but I, for example, in the drawing 22 up of a scheme of compensation -- 23 SIR WYN WILLIAMS: Sorry, perhaps I put it too broadly, so 24 I'll stop you. In terms of generally the litigation 25 strategy, as opposed to the broader issues -- 187 1 A. Yes. 2 SIR WYN WILLIAMS: -- of compensating the postmasters, I've 3 just been musing to myself about how anything meaningful 4 could be done while the Post Office lawyers are on their 5 feet busily fighting the postmasters' lawyers before 6 Mr Justice Fraser again. 7 A. Sir Wyn, I would say that my hope and intention was that 8 the approach that was taken to that Horizon trial would 9 be different from the approach that had been taken 10 throughout the common issues period, that they would be 11 looking to acknowledge the -- 12 SIR WYN WILLIAMS: I might be trespassing well beyond my 13 terms of reference but it seems to me that, once the 14 Horizon Issues trial started, of course there could be 15 a difference in tone and the way you approached 16 people -- I don't mean you personally, I mean the Post 17 Office and the Government -- but, effectively, the 18 choice was either to fight the case properly and 19 legitimately, or to give up. That's what it boils down 20 to. 21 What I mean by "give up", start making real 22 overtures about settlement. I mean, those were the only 23 two practical options in those days, weren't they? 24 A. Well, I would agree with you that, in terms of 25 settlement, that was going back to the readout of that 188 1 Saturday morning conversation. I can't remember the 2 exact words, but it was something to the effect of that 3 we shouldn't wait for the end of the legal processes to 4 settle, in effect. 5 So that was part of it. Part of these points that 6 we've just been talking about were to begin setting up 7 the structure of a compensation scheme but I am not 8 a legal -- not a lawyer, let alone a legal expert, so to 9 what extent the -- my hopes that the conduct of the -- 10 of that -- of the Post Office's participation in that 11 trial could have been changed, I had hoped and intended 12 that it -- that was possible, that it should happen. 13 SIR WYN WILLIAMS: All right. Thank you. Okay. 14 MR BLAKE: Can we please turn to POL00285354. This is the 15 final document I'll take you to before we move on to 16 recommendations. 17 This is an email of 30 September 2019, so it's after 18 your time in office. It's an email from Alisdair 19 Cameron to Nick Read and it relates to potential 20 changes, structural changes. It says: 21 "In the conversation there are multiple stakeholders 22 with varying needs which I have tried to set down in the 23 attached (which should not be forwarded please). 24 I don't think a [I think that's some sort of 25 responsibility assignment matrix] is the answer because 189 1 they won't abide by it." 2 It seems to be relating to UKGI -- 3 A. Yes. 4 Q. -- and how to manage that relationship. 5 The document that's attached to that can be found at 6 POL00285355, and there are various comments from 7 Mr Cameron. I'd just like to get your view on these 8 because I think you did meet Mr Cameron on a number of 9 occasions. 10 A. I did. 11 Q. So BEIS Secretary of State -- that may be a reference at 12 that stage to Andrea Leadsom rather than yourself, or to 13 the post, it's not entirely clear. But it says: 14 "Usually the [Secretary of State] has no strong 15 feelings except not being embarrassed by us. The [Group 16 Litigation Order] is important because we are being sued 17 by Postmasters -- politicians have mixed feelings about 18 us but LOVE constituency postmasters and will always 19 side with them versus us if they can. When we make that 20 difficult it is stressful." 21 Were you aware of those views, as expressed there? 22 A. Well, when I first saw this document I assumed, wrongly, 23 that it was referring to me, and I don't believe anyone 24 can think I didn't have strong feelings on the matter, 25 but I think it's my successor. 190 1 I thought this whole document was pretty cynical. 2 It's looking, as we go on, to -- looking at ways in 3 which the stakeholders can be, as it were, sort of 4 managed, it seems to me. I was -- 5 Q. There's a section there on Alex Chisholm -- 6 A. (Unclear) 7 Q. -- and it says: 8 "Alex doesn't want us to do anything that might 9 damage his career prospects. 10 "Alex meets us very rarely to date. His views have 11 been developed, starting with the last funding round, 12 when he and Greg Clark concluded that UKGI had gone 13 native and they were anxious about Government investing, 14 via us, commercially (not their skillset) and how did 15 they stop us throwing 'good money after bad'?" 16 It's that, in particular, I want to ask you about, 17 where it says that you "concluded that UKGI had gone 18 native"; is that a fair reflection of your view at the 19 time and, if so, why? 20 A. I don't think I would have put it in necessarily those 21 terms but certainly, during the funding round, as it's 22 referred to, it was my responsibility, as Secretary of 23 State, along with the Permanent Secretary, to ensure 24 that public funds were not wasted and I felt, and 25 I think the Permanent Secretary felt, that there were 191 1 proposals that were being made to invest in quite large 2 sums of money in different ventures that seemed to be 3 dubious, in terms of their likely value for money. 4 And I think there's a structural problem here, in 5 that UKGI -- we may come on to talk about this a bit 6 more -- UKGI is a sort of deal-making -- it's a kind of, 7 you know, it's a private equity-type organisation who 8 I think the people in it, structurally, are kind of keen 9 to do deals and to do the things that you do in 10 corporate finance. And so, in our scrutiny of UKGI, 11 I think we were pretty wary about their views and they 12 were more aligned with encouraging the Post Office to do 13 things that we didn't necessarily think were judicious. 14 Q. It says: 15 "[Mr Chisholm] has been infuriated by the GLO which 16 he thinks we should have settled ages ago -- and said so 17 last year." 18 Do you recall Mr Chisholm having said that the GLO 19 should have been settled considerably earlier? 20 A. I don't. I don't recall him having said that. For the 21 reasons that I gave, I think, earlier in our discussion 22 this afternoon, I thought it was important that that 23 litigation concluded, that it were not -- I can see from 24 a sort of Department -- from a Permanent Secretary's 25 point of view, to have it sort of dealt with might have 192 1 had its attractions, but I think a lot of what was in 2 the very comprehensive judgment would not have been in 3 the public domain. And if you take the view that I do, 4 and did, that the criminal convictions, the unsafety of 5 the -- the lack of safety of the criminal convictions 6 was, as it were, the keystone of the edifice, I think 7 pursuing that litigation, I think, was important for 8 that. 9 My concern, having seen partly what happened, going 10 right back to the beginning of my evidence of the 11 supposed settlement mediation through Second Sight, that 12 was not satisfactory, and so I think it needed that 13 resolution. But that's a long digression. I did not 14 know that Alex Chisholm took that view. 15 Q. If we scroll down, finally, on this document, there's 16 a reference to UKGI, and it says: 17 "UKGI has the role of overseeing Government's 18 commercial interests. They're generally ineffective and 19 pleasant." 20 Very briefly, what was your view of UKGI? 21 A. Well, I've got great respect for the people who, often 22 after distinguished commercial careers, give up their 23 time to be on the Board of UKGI and to serve in the 24 public interest, and I don't want to say anything 25 critical about them. But I think there is -- I have 193 1 reflected on this over the weeks and months ahead -- 2 I think there's something of a kind of Emperor's New 3 Clothes quality to UKGI, as an organisation, that, with 4 hindsight, I think I and perhaps others should have 5 pointed out. 6 I mean, let me give you some examples, some of them 7 perhaps trivial. It talks about its "assets", the whole 8 time, "We are managing the asset", "We are dealing with" 9 -- "These are our assets". It's a peculiar way of 10 talking. These are, you know, the Post Office, the 11 Nuclear Decommissioning Authority, Ordnance Survey. 12 They're not assets. It denotes -- no one in Government 13 would talk about the "assets". They are organisations, 14 they are public bodies; why not call them public bodies? 15 I think the fact that it's a limited company is 16 a bit peculiar. You know, why do you have a limited 17 company with all of the downsides, in terms of being 18 able to direct, and that we've discussed, when it 19 doesn't charge for its advice? I don't see why it 20 should be a limited company. 21 And to have a limited company giving advice on 22 another limited company, I think, is a bit peculiar. 23 And this whole thing of having memorandums of 24 understanding with departments, you know, the Business 25 Department didn't have a memorandum of understanding 194 1 with the Treasury, or with the Communities Department, 2 they wanted to work together. So I think there was 3 a kind of cod corporate finance arrangement to this 4 that, actually, I don't think was appropriate and 5 necessary. 6 Q. If I could bring on to screen the memorandum of 7 understanding that was in place during your period in 8 office. That's UKGI00017461. It explains, under 9 "Background": 10 "UKGI is a limited company wholly owned by HM 11 Treasury ..." 12 Then it says, at 2.2: 13 "To facilitate UKGI in managing its work and 14 resources, and to enable the constructive engagement of 15 UKGI with the department it advises, memorandums of 16 understanding are expected to be put in place for the 17 benefit of UKGI and the departments it works with." 18 "UKGI Service 19 "UKGI will provide independent advice to BIS and its 20 ministers to deliver BIS objectives. Any direct 21 engagement with Assets or Projects will formally be as 22 an agent of BIS. 23 "UKGI will provide its advice in a manner consistent 24 with the Civil Service's core values of integrity, 25 honesty, objectivity and impartiality." 195 1 It then has a section on accountabilities and 2 responsibilities, and it says: 3 "The accountability to Parliament for the Activities 4 UKGI is involved in will be ..." 5 Then it says: 6 "Ministerial level: BIS Ministers." 7 Then, if we scroll over to the fourth page, it sets 8 out there what it defines as the activities as at 9 1 April 2016, and one of the assets, as you say, defined 10 under "Assets" is the Post Office. 11 If we scroll back to the first page, it says on the 12 first page, paragraph 4: 13 "The accountability to Parliament for the Activities 14 [ie the Post Office]: 15 "[At] Ministerial level: BIS Ministers." 16 Irrespective of the legal interpretation of this 17 memorandum of understanding, do you understand there to 18 be a clear link of accountability of UKGI? 19 A. No, and I think it's obscured somewhat by its 20 organisation as a limited company. I mean, in other -- 21 I think I say in my witness statement that it describes 22 itself as being, you know, owned by the Treasury, and 23 accountability is to Treasury Ministers. 24 I think it obscures. It seems to me that sort of 25 simplicity is the best way to proceed. I never had any 196 1 difficulty in understanding the role of civil servants. 2 Again, they're not part of the Civil Service, I don't 3 know why not. There are norms in the Civil Service as 4 to how to proceed. I don't think it needs that. 5 I understand that one reason -- I suspect, I don't 6 know, but I suspect one reason for creating this limited 7 company, arm's-length body is to be able to pay people 8 more than the Civil Service pay scales allow. 9 But that's a good example, it seems to me, of, you 10 know, setting up something to get round a problem rather 11 than to address it. If you need, you know, senior 12 corporate finance people in Government to advise 13 Ministers and Permanent Secretaries, then, rather than 14 sort of set up a limited company to employ them, why not 15 have an exception and be direct about it, it seems to 16 me? 17 Q. How would you improve, very briefly, the line of 18 accountability? 19 A. Well, I would certainly have UKGI reporting -- well, 20 I would prefer the advice to be within the Department, 21 in essence to be from officials within the Department. 22 There's another example of this, and I -- in 23 preparing for this hearing, a number of the other public 24 bodies, the Nuclear Decommissioning Authority, an asset 25 in the terms of UKGI, had obviously not a similar but 197 1 a kind of related problem in which it got into 2 a contractual tangle. UKGI were not very effective in 3 spotting it and bringing it to the attention of the 4 Department and ministers. 5 As Secretary of State, I commissioned a review by 6 a man called Steve Holliday into that and it reported, 7 I think a couple of years ago. And, interestingly, one 8 of its recommendations is that the complexity of this 9 sort of governance is excessive and it should be -- 10 there should be BEIS civil servants directly on the 11 Board, and that's, it seems to me, a preferable way of 12 operating. 13 Q. One of the things that you've referred to in your 14 proposed recommendations is something called a public 15 interest company. Very briefly, how do you envisage 16 that would work? 17 A. Well, it's a thought, rather than a blueprint, but the 18 thought is this: that some of what we've been talking 19 about has been, you know, advice about, you know, 20 whether you're going to be a shadow director; is this 21 the responsibility of the Board; do you have standing, 22 as a minister, to direct it or not? And a lot of this 23 comes from using the kind of vehicle of an ordinary 24 Companies Act company to contain 25 businesses/organisations like the Post Office, and it 198 1 seems evident, I think from our conversation this 2 afternoon, that there is a combination of public 3 interest and commercial interest. 4 In other spheres -- in charities, for example -- we 5 have a corporate form. The Charity Law states -- I'm 6 the trustee of a charity -- how that should be because 7 it's a particular way of organising things. There are 8 things like community interest companies that have their 9 separate governance. So, just for simplicity, to 10 recognise that there are some organisations in which 11 there is, pretty much sort of jointly and severally, 12 a public interest, as well as a commercial interest, and 13 to make it very clear that ministers and officials are 14 absolutely at liberty to have information to direct, as 15 it were, proceedings there, it seems to me, would make 16 life a whole lot easier. 17 Q. Some people have blamed individual actions as well as 18 structures. How would you guard against that? 19 A. Well, there will always be individuals who don't 20 discharge their duties as well as they should. When 21 we're talking about UKGI, I have been very struck -- and 22 I'm the latest in a series of witnesses who have been 23 members of the Government -- that many of my 24 predecessors have been critical about individuals who 25 have been employed by UKGI: I think Jo Swinson was, 199 1 Baroness Neville-Rolfe, Margot James, Kelly Tolhurst and 2 others. 3 I think that actually points to a kind of structural 4 problem that they are in a dilemma, or at least are -- 5 perhaps because of the requirement to be a member of 6 a unitary board, are drawn into a certain way of 7 proceeding at the expense of another, and this is not 8 a kind of trivial observation. 9 I mean, you know, one of the purposes of UKGI is to 10 be good at governance, to improve the Government's 11 capacity at governance. But I have to say, on the 12 evidence of this, and I think on the NDA, the evidence 13 is that they have not been very good at that, in 14 important instances. 15 For example, the failure of UKGI to bring to the 16 attention of the Post Office Board, let alone ministers, 17 the Parker Review/the Swift Review, which was highly 18 consequential, that seems to me to be a failure of 19 corporate governance, in which UKGI was part. I might 20 also add -- which was news to me until the evidence of 21 this Inquiry was disclosed and reported -- I had no 22 information given to me that the Board had a lack of 23 confidence in Paula Vennells, for example. UKGI did. 24 You've had conversations, I know, about, you know, 25 ministers from successive administrations being aware of 200 1 what happened in the previous one. I think that would 2 have been very material, to know that the Board had 3 expressed, in the past at least, a lack of confidence 4 there. 5 So even as corporate governance specialists, I don't 6 think the record of UKGI is all that robust, shall we 7 say. 8 Q. Thank you. Very finally, you've clearly watched a lot 9 or heard a lot of the evidence from this Inquiry. Are 10 there any recommendations that didn't make its way into 11 your statement that you can think of now, briefly? 12 A. I tried to reflect on all of these. I do say something 13 about the pattern of evidence. I mean, it seems to me 14 kind of standing back, and I think it -- you know, in 15 public policy and public life generally, one of the 16 things that I've become -- been interested in, in recent 17 years -- I was chairing the Science and Technology 18 Committee at the House of Commons -- is the development 19 of artificial intelligence. 20 Artificial intelligence -- I'll explain the 21 relevance in a second -- spots patterns that, actually, 22 as it were, the naked eye may not spot. I think if the 23 pattern of prosecutions/convictions had been spotted 24 better and earlier then certainly a lot of the time to 25 resolve these matters might have been shortened and, in 201 1 many cases, by getting to a recognition of injustice 2 earlier, some people might have been saved the appalling 3 effects that they had. And so some of the 4 recommendations I make in my witness statement is to 5 give responsibility, whether it's to the CPS or other 6 bodies, to actively monitor unusual patterns, so that 7 they can be brought forward earlier. 8 But here am I, as it were, sort of freelancing into 9 an area that is judicial, in which I am not really 10 qualified. So I mention that because you asked me 11 whether there was anything else I included in my witness 12 statement, and that was a reflection that I made. 13 MR BLAKE: Thank you very much. 14 Sir, I don't think there are any questions from Core 15 Participants, unless you sir, have any questions? 16 SIR WYN WILLIAMS: No, I asked the few that I needed to as 17 we went along. 18 So thank you very much, Mr Clark, for your witness 19 statement, for your oral evidence and also for your 20 reflections. A number of your fellow current or past 21 politicians have addressed their minds to reflections, 22 so I think I'm right in saying that, currently at least, 23 you are the last politician who is going to give 24 evidence in this phase and so I would thank all of you, 25 and you've used the vehicle for providing me with plenty 202 1 to think about in terms of how I make recommendations 2 for the future. 3 THE WITNESS: Thank you, Sir Wyn, and if I'm put in the 4 position of my colleagues, to thank you and the Inquiry 5 for the meticulous approach that you're taking to it. 6 Thank you. 7 SIR WYN WILLIAMS: Right, Mr Blake, tomorrow we resume at 8 9.45? 9 MR BLAKE: That's correct, sir, yes. 10 SIR WYN WILLIAMS: We have a part-heard witness, do we not, 11 and then Mr Edwards, is it? Yes, it is. 12 MR BLAKE: That's correct, yes. 13 SIR WYN WILLIAMS: Fine. All right, then. 9.45 tomorrow. 14 MR BLAKE: Thank you very much. 15 (4.28 pm) 16 (The hearing adjourned until 9.45 am the following day) 17 18 19 20 21 22 23 24 25 203 I N D E X THE RIGHT HONOURABLE SIR JOHN VINCENT ............1 CABLE (sworn) Questioned by MR BEER ............................1 Questioned by MS PATRICK ........................80 Questioned by MS PAGE ...........................88 Questioned by MR STEIN ..........................99 THE RIGHT HONOURABLE GREGORY DAVID .............114 CLARK (sworn) Questioned by MR BLAKE .........................115 204