1 Monday, 11 November 2024 2 (10.00 am) 3 MR BLAKE: Good morning, sir. 4 SIR WYN WILLIAMS: Good morning, Mr Blake. 5 MR BLAKE: We will shortly be hearing from Mr Reynolds. 6 He's not yet in the room. 7 SIR WYN WILLIAMS: That's fine. 8 MR BLAKE: As you, sir, mentioned on Friday, at 11.00 we 9 will be taking a one-minute's silence irrespective of 10 where we are. 11 SIR WYN WILLIAMS: Yes, fine. (Pause) 12 MR BLAKE: Sir, I anticipate we won't be starting for at 13 least two or three more minutes. 14 SIR WYN WILLIAMS: All right. Do you want me to remove 15 myself from the screen or can we just sit here quietly? 16 MR BLAKE: Entirely a matter for you, sir. 17 SIR WYN WILLIAMS: All right. Well, I'll sit here quietly. 18 (Pause) 19 JONATHAN NEIL REYNOLDS MP (sworn) 20 Questioned by MR BLAKE 21 MR BLAKE: Thank you very much. Can you give your full 22 name, please? 23 A. I'm Jonathan Neil Reynolds. 24 Q. Thank you very much. Secretary of State, you should 25 have in front of you a witness statement dated 1 1 26 September this year; is that correct? 2 A. Well -- 3 Q. At least in the bundle -- 4 A. In the bundle I've seen it, yes. 5 Q. -- behind tab A two, it should be. Thank you. 6 A. Yes. 7 Q. Can I ask you please to turn to the final substantive 8 page, that's page 8. Thank you. Can you confirm that 9 that is your signature -- 10 A. I can confirm that's my signature. 11 Q. -- and that the statement is true to the best of your 12 knowledge and belief? 13 A. That is correct yes. 14 Q. Thank you very much. That witness statement has 15 a unique reference number of WITN11470100, and will be 16 uploaded on to the Inquiry's website. 17 As is well known, you are Secretary of State for 18 Business and Trade; is that correct? 19 A. That's correct, yes. 20 Q. Your predecessor is our next witness, Kemi Badenoch. 21 You have a background as a solicitor; is that correct? 22 A. That's right, yes. 23 Q. Are you able to assist us in what area of law you 24 practised. 25 A. I worked for Addleshaw Goddard LLP, I did my training 2 1 contact with them, I left before I completed my training 2 contract, when I was elected in the 2010 general 3 election, and the seats that I did my training contract 4 in were corporate and real estate. 5 Q. Thank you. I'm going to bring up onto screen a printout 6 of your responsibilities as Secretary of State. Can we 7 please bring onto screen RLIT0000349, please. It's 8 simply a printout from the gov.uk website, outlining the 9 responsibilities of the Secretary of State. We see 10 there, if we scroll down, it says: 11 "The Secretary of State has overall responsibility 12 for the Department for Business and Trade. 13 "Responsibilities include: 14 "Overall responsibility for delivery and strategy 15 "Cross-government business engagement 16 "Public appointments 17 "[Free trade agreement] negotiations, mandates and 18 decisions 19 "WTO [World Trade Organisation], G7 and G20 20 ministerial meetings 21 "Overseas network." 22 Is that correct? 23 A. That is correct, Mr Blake. 24 Q. We also know there is an Under-Secretary of State for 25 postal affairs and we heard from him on Friday. What do 3 1 you see as your responsibility in respect of overseeing 2 matters relating to the Post Office? 3 A. First of all, Mr Blake, let me say I'm very grateful for 4 the chance to be here. I've been following this 5 Inquiry, as you would expect, and perhaps didn't 6 anticipate a general election meaning I'd have the 7 chance to participate in it, so I'm extremely grateful 8 for the chance to be in this given how important the 9 work is. 10 I would say, first of all, I see it as being my 11 responsibility for everything the Department for 12 Business and Trade is responsible for, that ultimately 13 I'm accountable for everything so the Post Office is 14 a significant part of that. I also see my role within 15 the whole of Government when there are matters affecting 16 the Post Office that perhaps touch on other Government 17 departments, that I am a key member of the Government in 18 terms of making sure the rest of the Government is doing 19 what we need in regard to the Post Office and, whilst 20 I work very closely with my junior minister, Minister 21 Thomas, who you've heard from, as part of the Inquiry, 22 the significance of this particular issue, which 23 pertains not just to the need for redress for the 24 survivors of this egregious scandal, but actually for 25 what lessons we take from that for the future of the 4 1 Post Office, whether it's business model for how it's 2 run, for its governance structure, that's a very 3 significant personal priority for me as the Secretary of 4 State. 5 Q. We've talked a lot about redress in the past few weeks. 6 If there is not full, fair and prompt redress for 7 subpostmasters, do you take ultimate responsibility at 8 a governmental level? 9 A. Yes, I think this is an example of where, in the past, 10 there has been insufficient accountability and 11 ultimately, as the Secretary of State, I take 12 accountability for everything that is within the 13 portfolio of the Department of Business and Trade. 14 Q. How do you propose that full, fair and prompt redress is 15 going to be achieved? 16 A. The first thing I would say is I understand there has 17 been, quite rightly, a lot of analysis in this Inquiry 18 about whether there is a tension between fair redress 19 and the speed at which it is delivered and I understand 20 why that is of such importance to the work that is going 21 on here. Since the general election, there has been 22 a significant increase in the pace at which compensation 23 has been paid, the overall quantum of compensation is up 24 in the last four months by roughly a third, and the 25 number of claims to which there has been an initial 5 1 offer being made in response to that claim has roughly 2 doubled in the last four months to what it has been in 3 the four months preceding the generation. 4 But I would very much want to say that I do not 5 believe that increase in pace has been at the cost of 6 fair or accurate compensation being made. 7 I think if you look at the key decisions that we've 8 been able to make since the general election -- so 9 obviously the compensation scheme for the overturned 10 convictions, legislation that was passed in the wash-up 11 period between the two governments, the appeal scheme 12 being announced for the Horizon Shortfall Scheme, the 13 publication of the Capture report, the publication of 14 redress data and the fixed-sum awards being offered 15 under the HSS scheme, I think you could put that 16 together into a package and see that we are trying to, 17 wherever possible, offer a reasonable sum of 18 compensation by fixed award, if that is what a claimant 19 themselves wants, a detailed breakdown, if that is the 20 appropriate way forward, greater capacity to process 21 claims, greater deadlines in terms of when the 40-day 22 period we put in place under some of the schemes by 23 which an initial claim is made. 24 These are all ways in which -- and the position is 25 still not, you know, to everyone's satisfaction but 6 1 I think you can see we've tried to speed up compensation 2 and redress without that being at the cost of any 3 claimant feeling that's not an accurate or fair level of 4 redress for them to receive. 5 Q. Thank you. We'll get into the specifics of that in due 6 course. There are two matters that you say that are 7 particularly important issues of concern, the first you 8 have described as driving cultural change and the second 9 is redress. We'll get to redress shortly but, in terms 10 of cultural change, what do you see as the most 11 important way in which the culture at the Post Office 12 can be changed? 13 A. I think the scale of this scandal, as I say, cannot be 14 separated out from the business model and the governance 15 structure of the Post Office. So we need, from the work 16 that I lead as Secretary of State and what this Inquiry 17 is seeking to do, to not just respond to the obvious 18 injustice and the need for redress to follow that, but 19 to understand why, as an institution, the Post Office 20 has gone so wrong, and what needs to change in future. 21 So, for instance, I believe that is everything from, 22 you know, the internal governance structure of the Post 23 Office, right down to the level of remuneration that 24 postmasters receive. I mean, I think, despite the scale 25 of this scandal, Post Office is still an incredibly 7 1 important institution in national life. I think it 2 still has an incredible role to play in communities. 3 I look at the business model of the Post Office and 4 I think, even accounting for the changes in the Core 5 Services that are provided, I mean, people are familiar 6 with the decline of letter volumes, there's still 7 a whole range of services that are really important but 8 I don't think postmasters make sufficient remuneration 9 from what the public want from the Post Office. 10 And I think that's going to require some very 11 significant changes to the overall business model of the 12 Post Office, as well as looking at what the future is in 13 terms of the governance arrangements, that will, 14 I think, to be frank, have a greater level of trust and 15 responsiveness to the people providing the services on 16 the frontline. 17 Q. Okay well, once again, we'll get to the detail of that 18 shortly. If we now focus then on redress and 19 compensation. 20 We've seen in this Inquiry at certain stages there 21 has been disagreement between your Department and the 22 Treasury on matters of redress. In your current 23 experience, have there been any disagreements during 24 your term in office? 25 A. No, I can genuinely say, Mr Blake, that there haven't 8 1 been, and I know there are a whole range of issues, 2 perhaps perception of historic tensions between the 3 Business Department and the Treasury, specifically on 4 this issue, which is obviously a personal priority for 5 me but also for many members of the Cabinet. I can say 6 the support I've received from the Chancellor and the 7 Chief Secretary to the Treasury, who, of course, 8 formerly was the Chair of the Business and Trade Select 9 Committee and the previous incarnation of the Business 10 Department before that, I have exactly what I needed. 11 So if you look at, for instance, the announcements 12 in the budget, first of all you see a greater amount of 13 compensation now appearing in the national accounts, 14 from the previous figure. 15 Of course, whilst that's an increase, it's actually 16 even more significant than that because you will know 17 the compensation previously for this -- for the four 18 redress schemes was accounted for in the Treasury 19 Reserve, which was heavily overspent, so essentially not 20 only does the budget put a greater sum towards redress, 21 it confirms that is real money in place. 22 But you may also have seen in the budget that the 23 allocation of money for redress has moved from being 24 DEL -- departmental expenditure limits -- to annually 25 managed expenditure, in other words, it is demand led. 9 1 So whatever the level of redress is required, I can 2 guarantee that this Government, that the British State, 3 will be able to pay for that, and that has already been 4 agreed with the Treasury and has appeared in the budget. 5 So, in terms of the support from Treasury 6 colleagues, I could not have asked for more. 7 Q. Can you assist us, then the £1.8 billion figure that was 8 announced in the budget, we've heard some evidence 9 suggesting that's not new money. Is it new money or, if 10 it isn't, to what extent has that situation changed? 11 A. Well, it is new money because the allocations in the 12 past came from an overall position, and I appreciate 13 we're getting into some of the politics of the budget 14 here, where there were frankly too many claims on that 15 Treasury Reserve for that to be genuinely ever expected 16 to be paid. Now, governments do sometimes, I think, 17 historically, you know, ascribe different policy costs 18 to the Treasury Reserve but, you know, there were more 19 demands on that money than money existed. 20 So the confirmation that not only is there a greater 21 sum of money being allocated to redress but that can be 22 absolutely guaranteed by myself, by the Treasury and the 23 Government, is, I think, a significant development. 24 Q. If, ultimately, the claims fall under that level, is the 25 rest of that amount of money going to be spent on 10 1 something relating to postal matters? 2 A. Well, if, because of the designation, as annually 3 managed expenditure, to be frank, my assumption behind 4 that has always been to make sure, if the sum of money 5 for redress was greater than that, that I could 6 guarantee it would be paid. I haven't considered 7 an underspend in any way, if I'm being honest about 8 that. If it was, that would be a conversation that 9 I could have with Treasury colleagues but, to be frank, 10 my efforts have been to make sure that we could 11 absolutely stand behind any sum of redress that the 12 process came to. 13 Q. We've hearing discussions of widening redress to, for 14 example, assistance and managers, or possibly to family 15 members. Does that figure cater for that expansion and, 16 if not, then what is the plan for funding that 17 expansion? 18 A. So you will understand we have, as well as the number of 19 announcements that we've made, been looking at a whole 20 range of issues, Mr Blake, exactly as you describe. 21 A particularly significant one of those is around family 22 members, where we have been looking at, for instance, if 23 there was agreement to extend to family members, would 24 the existing schemes be the right mechanisms through 25 which people would do that; would it require something 11 1 else? Obviously a whole range of fairly legal 2 definitions as to who -- how the scope would cover 3 everyone who that needed to do. 4 If there were significant extensions to the eligible 5 claimants at present, I would seek Treasury agreement 6 for additional funding for those. It's possible that 7 sum of money might be sufficient but, if there was to be 8 an extension in any way, I think the appropriate cause 9 of action would be to ensure that there are agreements 10 in place with the Treasury that due funding is available 11 for those. 12 Q. Are you personally aware of any cost projections in 13 respect of how much that might cost? 14 A. I haven't seen in any of the official advice I've 15 received a specific sum of money. I think the costs -- 16 the work being undertaken covers the potential scope but 17 that could be quite wide or quite narrow, depending on 18 the definition of harms you were seeking to provide 19 redress for and, to be frank, you will understand that 20 part of our work will be guided by the findings of this 21 Inquiry as well, and the recommendations that might come 22 from it. 23 Q. Thank you. Could we please bring up onto screen 24 BEIS0000888. This is an email exchange that we took the 25 Minister to on Friday. We now have the underlying 12 1 submissions, so we'll go to the submission as well, but 2 if we could perhaps start on page 5 and into page 6. At 3 the bottom of page 5, we have the summary of the 4 submission. It says: 5 "Timing: We would be grateful for a swift readout. 6 Post Office has received regular correspondence from 7 postmasters awaiting payment of the £75k fixed sum 8 following the March announcement and we expect it to be 9 raised during next week's redress announcement." 10 It makes number of recommendations to the Minister. 11 The first is: 12 "Implementing your predecessors' announcement to 13 introduce a fixed-sum award of £75k to [Horizon 14 Shortfall Scheme] claimants, to bring the scheme in line 15 with the GLO scheme. 16 "b) Capping awards at £50k where postmasters reject 17 the fixed sum and are offered a lower amount with no 18 option to return to the fixed sum. 19 "c) Not providing legal advice to claimants to 20 consider the offer of a fixed sum. 21 "d) Consider whether to delay the introduction of 22 a fixed-sum award until we have clarity from [the 23 Treasury] on funding for HSS appeals, noting that this 24 could take several weeks or months." 25 Finally: 13 1 "e) Note the revised application process ..." 2 We'll come on to most of those but, in terms of (d), 3 we were just speaking about issues with the Treasury. 4 Was there an issue here with the Treasury and was it 5 overcome? 6 A. Mr Blake, no, I'm not aware of there being any Treasury 7 element to the conversation around this. As you say, 8 the principles behind the key policy features of this 9 submission had already, I think, broadly been 10 established in Parliament as desirable, that the way the 11 election had fallen meant, essentially, previous 12 announcements were being implemented by ourselves as 13 a new Government, and the key aspect of this is, 14 obviously, the presentation of a fixed-sum for those 15 cases where claimants would feel that that was the best 16 course of action for them, effectively offering 17 an expedited fixed sum, so it as to be able to get 18 compensation and redress to people as quickly as 19 possible and, of course, alongside that, if they 20 believed that would not be an appropriate level of 21 redress, the existing ability to have the individual 22 assessment go forward. 23 Q. The fixed sum seems to be in relation to the HSS appeals 24 mechanism. We can come on to look at that shortly. If 25 we scroll up, please, we see on page 2 confirmation from 14 1 the Minister. In the middle of page 2, thank you very 2 much, it says: 3 "Thank you for attending the meeting today -- for 4 the benefit of the chain, the Minister was content with 5 the recommendations a), b), c) and e) in the 6 [submission] but has asked not to delay the introduction 7 of the fixed sums award outline in recommendation d)." 8 So the potential delay that might be caused in 9 respect of the appeals mechanism was put to one side, 10 and the announcement made in any event. 11 If we please scroll to page 1 we can see that you 12 had reviewed the submission as well and agreed with 13 Minister Thomas' steers. Is that something you recall? 14 A. That's right, that's right, Mr Blake. 15 Q. Perhaps if we're able to, it's only been recently 16 received but the submission of 22 July should have 17 a unique reference number of BEIS0001228. Thank you. 18 It's going to come onto screen. I think it's 19 a submission that we didn't have as at Friday's hearing 20 so I'd like to take you to it, just to clear up a few 21 matters that were addressed on Friday. 22 So this is the underlying submission of 22 July. We 23 see there a summary of the issue: 24 "This note seeks your agreement on delivering 25 a fixed-sum award to provide redress to postmasters 15 1 participating in the Horizon Shortfall Scheme." 2 The "Recommendation" is exactly as we've seen in 3 that covering email. 4 Can we please turn over the page to page 2. 5 Paragraph 6 addresses the £50,000 cap. I'm just going 6 to read to you that paragraph. It says: 7 "From a public money perspective, the £75k will be 8 more efficient to administer than the full claims 9 process. If the £75k remains available to those who 10 pursue the full claims process, there is a high risk 11 that many more will choose this option leading to 12 greater costs and delays. We therefore recommend that 13 claimants who reject the £75k should not be able to 14 return to it if, upon full assessment of their claim, 15 they are awarded a lower amount. Instead, we recommend 16 that the award is capped at £50k (or the value of the 17 offer if it exceeds £50k) to ensure fairness and help 18 provide value for money for the taxpayers. This is 19 consistent with the approach on the GLO scheme, although 20 there haven't been any instances of a claimant receiving 21 lower than £75k in practice." 22 This is a proposal that has been described as 23 a jeopardy issue. It's been criticised by some in 24 respect of the pressure that it places on claimants who 25 may be elderly, may simply be wanting money as quickly 16 1 as possible, and are put in a position where, if they 2 don't accept the £75,000, they are at serious risk of 3 losing a considerable amount of money. What is your 4 view on that? 5 A. So, Mr Blake, the public policy perspective on 6 paragraph 6 is obviously that, in order to give people 7 a route to redress as soon as possible, that's what the 8 fixed sum process is there to do, and my view was always 9 that that should be set at a level where, for most 10 people who would consider that, that would be, you know, 11 a decent level of redress that they would feel was 12 appropriate to the situation that they were in. 13 Obviously you're right to say, when you have 14 a choice between a fixed sum and an individual 15 assessment, you wouldn't want there to be a sense of 16 risk or jeopardy that pushed people to a course of 17 action that they ideally didn't want to go under. So 18 the £50,000 reference in paragraph 6 is effectively 19 a security cap. It's a floor by which you will be aware 20 if you're going through that process that you don't 21 risk, for instance, getting a sum of redress which is 22 considerably below the £75k. 23 So you will see, I hope, in each of the decisions 24 made, an attempt to provide people with a genuine choice 25 as to what is the fair course of redress for them, 17 1 bearing in mind quantum of redress and the timescale at 2 which they will receive it, but always trying through, 3 whether there's the £50k floor in this proposal or, for 4 instance, through the HSS appeals scheme that we've 5 announced, a set of checks and balances that hopefully 6 give people assurance that it's not an attempt to force 7 people down a route they wouldn't necessarily want to go 8 down, but to give them some assurance. 9 Q. How about the consideration of value for money for 10 taxpayers in setting the £50,000 level where it is? 11 A. Well, I think in every decision that you make as 12 a government minister you always have to have regard for 13 the fact that this is taxpayers money, ultimately, 14 you're making decisions and you want it spent fairly, 15 but the key determinant, I would say, of the sums of 16 money in this submission, is what are the appropriate 17 levels from the perspective of fairness for redress that 18 are put in place. You will see, obviously, I think 19 people understand, if you didn't have the distinction 20 between the two schemes, you wouldn't be creating 21 essentially the capacity to consider the more complex 22 claims in a way that you would want to make sure there's 23 fair and speedy redress for people in that cohort. 24 Equally, I think you wouldn't want a situation where 25 it was a choice between a fixed sum and no kind of 18 1 security, if you went down the other route. 2 Q. Thank you. If we could scroll down because the 3 submission may be new for a number of the Core 4 Participants. I'll just read to you paragraph 9, which 5 addresses value for money. It says: 6 "There will be overpayment duty to this 7 intervention. There is a risk that very small claims 8 could make up a significant proportion of expected late 9 applications, and all would be entitled to £75k. As of 10 June 2024, the Post Office have paid [approximately] 600 11 claimants £5k or less (and have paid over 100 of these 12 claimants less than £1k). However, officials believe 13 the measure provides [value for money] overall as there 14 are no lower cost alternatives that ensure equal 15 treatment of [the Horizon Shortfall Scheme] and GLO 16 claimants. Offering a lower or no fixed payment is 17 unlikely to reduce the overpayment risk and may increase 18 the total costs to [the Government]. The £75k fixed 19 payment also reduces the administrative costs of 20 resolving potential appeals due to under-settlements. 21 As set out above it also mitigates some of the 22 criticisms that the [Horizon Shortfall Scheme] 23 applicants have under-claimed due to the lack of upfront 24 legal advice and problems with the consequential loss 25 guidance." 19 1 Does that summarise for you the position in respect 2 of the value for money? 3 A. Yes, Mr Blake, I have always accepted there will be, in 4 some cases, effectively an overpayment, relative to the 5 actual financial loss but I think we would all accept, 6 when you consider what the Post Office, what the UK 7 State has put some of these people through, there's 8 a wider set of factors to consider, and that the kind of 9 approach articulated in paragraph 9, whilst, yes, on the 10 one hand there would be some people who could nominally 11 be said to receive a considerable sum in relation to the 12 shortfalls that they had been held accountable for, when 13 considered in aggregate, this is a fair and reasonable 14 approach. 15 Q. Thank you if we please turn over the page and scroll 16 down to paragraph 16, about halfway through that 17 paragraph, it says: 18 "Officials have discussed a potential closure date 19 of 31 March with Post Office, but this timing may need 20 to be reviewed. You will receive separate advice on 21 scheme closure date in the next few weeks." 22 We're going to come on shortly to the closure dates 23 of both the Horizon Shortfall Scheme and also the GLO. 24 Are you able to confirm whether you did receive 25 subsequent advice on this issue? 20 1 A. Yes, I have received, Mr Blake, a further advice note on 2 the potential closing dates for some of the compensation 3 schemes. 4 Q. Thank you. If we scroll over the page, please, there's 5 a section on legal costs, that's in respect of the 6 advice that's provided to applicants to the scheme: 7 "The current policy on the [Horizon Shortfall 8 Scheme] legal costs is that Post Office will reimburse 9 reasonable fees for postmasters to seek advice on their 10 offer of compensation. For those who wish to accept the 11 £75k fixed sum, either as a top-up where they have 12 already settled their claim below this amount or those 13 who have not yet settled, we do not think that the costs 14 of legal advice should be reimbursed. This is because: 15 the value for money is diminished by incurring 16 significant expenditure on claimant's legal fees; legal 17 involvement will slow delivery down; and postmasters who 18 settled below £75k have already had the opportunity to 19 seek legal advice and are now being offered a higher 20 amount." 21 Can you assist us, then why is it that applicants 22 who accept the fixed-sum award should not be provided 23 with legal advice? 24 A. So, Mr Blake, the intention of this point, of the 25 policy, from my point of view, was always that 21 1 I believed people who were able to make a very clear 2 personal choice that they would be in a satisfactory 3 position to accept the fixed-sum award would be able to 4 do so, and the point in relation to legal advice was 5 really to continue with the aspirations that that could 6 be delivered at a significantly faster pace than 7 previous compensation had to date. 8 It was always my belief, and is my belief, that 9 anybody who has a more complicated case, who believed 10 they were borderline in terms of whether the £75,000 11 fixed sum would be adequate redress or not, would go 12 down the route of individual assessment, and this was 13 simply a way of getting appropriate redress to 14 a significant group of people as possible who would be 15 able to make that decision without regard to their own 16 legal advice. 17 Q. Do you recognise the risks that have been articulated in 18 the Inquiry about certain individuals who might fall 19 slightly above the £75,000, say £85,000 or £95,000, and 20 don't take legal advice and end up in a worse position? 21 A. Yes, absolutely. I think whenever there's any kind of 22 threshold in public policy it's always people close to, 23 above or near on that threshold that some of these 24 particular issues will emerge from. You referenced in 25 your previous question the fact that a number of the 22 1 claims would technically result in overpayment if they 2 went down the fixed-sum route to redress. So my 3 assumption here has always been that there will be 4 a significant and is a significant group of claimants 5 for whom this decision is relatively straightforward and 6 anyone in that more complex position would go down the 7 route of individual assessment, and, in fact, we'd have 8 greater capacity to give those people appropriate 9 redress at the pace they needed it at, if we were able 10 to free up capacity to do so because of being able to 11 offer a significant fixed-sum award to people who were 12 in a position to make that decision quite clearly. 13 I will, just say in relation to that, I'm aware that 14 there has been, you know, at various times, particularly 15 in the public domain, criticisms about, you know, how 16 many different stages this process involves, you know, 17 different sets of lawyers and the cost of those. That 18 has never been a factor, you know, in a decision like 19 this. When you look again at the scale of this 20 injustice, you wouldn't want to, in any way, limit 21 access to legal advice as part of that. This was simply 22 about how to appropriately run the compensation schemes. 23 Q. Thank you. Paragraph 19 says: 24 "There is a risk that not offering legal advice will 25 be criticised as unfair on postmasters given previous 23 1 commentary about low levels of legal representation for 2 claimants in the [Horizon Shortfall Scheme]. However, 3 as this intervention will benefit postmasters and is 4 intended to be delivered swiftly, it is a defensible 5 approach that ensures the benefits of the policy are 6 fully realised and we recommend that approach. 7 A separate decision to introduce an appeals mechanism 8 would also help here." 9 Can you assist us, what is the current position on 10 the appeals mechanism, so far as you're aware? 11 A. Yes. So we have made the announcement that we will 12 accept the Advisory Board's request for an appeals 13 mechanism. That work is proceeding at pace. 14 I believe -- and I hope you will understand I have to 15 formally announce any new initiatives to Parliament 16 itself -- but I hope to be able to have some of the 17 details able to be presented to the House of Commons in 18 a very short period of time, certainly looking towards 19 the very beginning of next year. 20 Q. Thank you. In terms of the fixed sum, we've heard some 21 evidence about concerns for those who sign up to that 22 fixed sum, that they are waiving any right to an appeals 23 mechanism that they're not yet aware of how it will 24 work. What's your view on that? 25 A. Well, you will have seen in the bundle that the 24 1 reference to this that I made in an oral statement 2 I made to Parliament, shortly after becoming the 3 Secretary of State. In that statement, I talk about how 4 the appeals mechanism is, in design, there to make sure 5 people who feel that there hasn't been appropriate 6 consideration of all the evidence, they've got new 7 evidence, can then have that considered through that 8 appeal process. 9 In practice, I believe that appeals scheme will be 10 open to anyone who is dissatisfied with the result of 11 their claim. Given the appropriate safeguards, caps and 12 a process that's in place already, I'm not sure that 13 will be too large a group of people but I think it's 14 an important safeguard in the system to have. But, 15 effectively, just to repeat that, to be clear, I see 16 that as being available to anyone under the HSS scheme 17 who is dissatisfied with the result of their claim. 18 Q. Might that include those who accepted the fixed sum? 19 A. Not those who have accepted the fixed sum, or I believe 20 that would result in insufficient capacity in that 21 scheme to deal with the kinds of cases we're most 22 interested in making sure have again had that full, 23 speedy and effective redress. 24 Q. Can we please turn to RLIT0000413, please. 25 SIR WYN WILLIAMS: Before we do, Mr Blake, could I just ask 25 1 one or two questions about this myself? 2 MR BLAKE: Absolutely. 3 SIR WYN WILLIAMS: First of all, in relation to 4 paragraph 19, since it's still -- well, it was on the 5 screen -- this is one of the things that's going around 6 in my head, Mr Reynolds, so I would like your help with 7 it. 8 My understanding is that, under the HSS scheme that 9 operated before fixed offers were introduced, once the 10 scheme got to the point where an offer was made to 11 a claimant, he or she, that is the claimant, at that 12 point could take legal advice and be recompensed for the 13 cost of it, subject to a limit, about whether or not the 14 offer should be accepted or not, all right? 15 Now, in a sense, all that's happening with a fixed 16 sum is that an offer is being made at a much earlier 17 stage because many of the steps leading to an offer have 18 been left out. So I'm still struggling to see why 19 there's a blanket refusal to allow legal advice about 20 the offer of £75,000. I take your point, Mr Reynolds, 21 that for many people the answer will be obvious and, in 22 those circumstances, I think you can reasonably assume 23 that they wouldn't bother with legal advice. 24 But there are going to be some cases where there are 25 difficult decisions to be made, and it's quite tough, 26 1 I think, and I'm expressing a very provisional opinion, 2 to think that the claimant in those borderline cases 3 either has to make a decision without legal advice or 4 pay for it themselves. 5 So my question to you is, why is it a blanket no 6 recompense for legal advice, as opposed to a more 7 nuanced policy, which would allow for, shall we say, the 8 obtaining of legal advice when it's obviously 9 a borderline case? 10 A. Yes, thank you, Sir Wyn. I know you've taken 11 a particular interest in this matter, quite rightly. 12 I would say the view in terms of the submissions that we 13 received, that became the policy, was that to involve 14 legal advice in such a way in the fixed sum would go 15 against the objective of having a route to redress that 16 was speedy, straightforward, easy to deliver at pace. 17 I have always been of the view, as I said to Mr Blake 18 earlier that anyone with any, perhaps, complexity or 19 grey area in whether that would be the appropriate route 20 for them would anyway go down the individual assessment 21 route and take the offer of the funded legal advice. 22 That was part of that. I appreciate what you're 23 asking specifically is why not have an area -- a bit of 24 discretion in that, in terms of those particular cases? 25 I think that is a very reasonable point and I can assure 27 1 you that we are looking very much to the work of this 2 Inquiry, in terms of lessons for the future and whether 3 there would be the need, when, you know, dealing with 4 schemes like this, or indeed this one, to take account 5 of that. So I take on board your feedback on that point 6 very much. 7 SIR WYN WILLIAMS: Well, I am not making a recommendation in 8 advance, Mr Reynolds, I assure you, but I did want to 9 clear my thought process at the very least about that, 10 so thank you very much. Could we go back to 11 paragraph 6, please. 12 MR BLAKE: That's page 2. 13 SIR WYN WILLIAMS: It's the sentence four lines down: 14 "We therefore recommend that claimants who reject 15 the £75k should not be able to return to it if, upon 16 full assessment of their claim, they are awarded a lower 17 amount." 18 Fine, all right. I'll park that and think about it. 19 But there's an intermediate position, isn't there, which 20 I want to canvas with you again because I'm sort of 21 having these ideas floating in my head. The £75,000 is 22 rejected, and the claimant goes down the route of full 23 assessment but, long before he or she gets to full 24 assessment, he or she realises (a) that their claim may 25 not be as valuable as they thought or (b) just out of 28 1 frustration, they are fed up with the process. 2 There is no getting off point, as I understand it, 3 once you reject the £75k, you've rejected it once and 4 for all. You can't change your mind, shall we say, 5 three or six months later but long before any offer is 6 made to you; is that reasonable, do you think? 7 A. Well, Sir Wyn, I believe that is the position. 8 SIR WYN WILLIAMS: Yes. 9 A. I have to be frank, I've never considered a situation 10 properly where someone is in that place where they may 11 wish, before the final determination is made, to change 12 their route to redress. So I think that is 13 an interesting proposition. I think you'd have to, in 14 order to maintain the objectives here of the two routes 15 to redress, decide when and how that would be 16 appropriate to do so. It would also be my aspiration, 17 to be frank, that compensation redress is delivered at 18 such a pace that there aren't significant periods 19 between the claim coming in and the money going out the 20 door to pay for that redress, but that is unfortunately 21 the situation we have with a number of the claims. 22 So I think there would have to be some appropriate 23 safeguards in place as to when that were possible. But 24 it is something that could happen, if that would be 25 where we believed we needed to make an alteration, again 29 1 to provide the right redress to people at a pace that 2 they deserve it. 3 SIR WYN WILLIAMS: Thank you. 4 Thanks, Mr Blake. Back to you. 5 MR BLAKE: Thank you very much. 6 If we could return, then, to that Guardian article 7 at RLIT0000413. It addresses the potential deadline, 8 and this time it addresses the GLO scheme, rather than 9 the Horizon Shortfall Scheme. But I'll just read to you 10 a few passages: 11 "Post Office operators affected by the Horizon IT 12 scandal will not all receive payouts by the March 2025 13 deadline called for by the campaigner Sir Alan Bates, 14 the postal minister has admitted. 15 "Gareth Thomas said it would be difficult to achieve 16 the deadline but promised that there would be 17 'substantial progress' towards clearing the compensation 18 claim backlog by next summer." 19 It says a little further down: 20 "'I wish I could commit to Sir Alan's timeframe', 21 said Thomas, speaking to BBC Breakfast on Wednesday. 22 'I think we will have made substantial progress by next 23 summer'." 24 Are you in the same position: are you not able to 25 commit to a timeframe and, if so, when, do you 30 1 participate? 2 A. Mr Blake, I've thought about this a great deal and, 3 obviously, anything put forward by Sir Alan in 4 particular I'll consider to a significant degree. The 5 position I'm in is I'm trying to make sure people get 6 redress for a horrendous scandal, and that's 7 an important job of work. At a minimum, I don't want to 8 do anything that makes that injustice even worse, and 9 the worry about a deadline, can you imagine a situation 10 where, for whatever reason, a claim has not come in, 11 I think it would be unconscionable to say that is not 12 going to be considered. 13 Now, where I really do share Sir Alan's frustration 14 is in the fact that the real significant delay in the 15 GLO scheme is in the claims arriving in because of the 16 preparation for them. So I share all of Minister 17 Thomas' concerns but the last note I sent to my own 18 officials was to say that, if there was a situation 19 where we were still, going into next year, frustrated at 20 the lack of claims coming in, even though I've got those 21 concerns I've just articulated, I may wish to go forward 22 with something like that, that would make clear I've got 23 to have those claims in, in order to get people the 24 redress and the justice that they deserve. 25 Now, I'd obviously want to make sure I was putting 31 1 myself in a position where I wasn't committing any 2 further injustice in the future but, if my frustration 3 in those claims not arriving at the Department meant 4 that I felt that was the only way to speed this up, and 5 I felt that wasn't going to prejudice any individual 6 claim, based on the information that I had, it will be 7 something that I will consider because obviously I want 8 to get redress to these people that they deserve, as 9 soon as possible. 10 Q. Have you done any blue-sky thinking, either in respect 11 of the Horizon Shortfall Scheme or the GLO or in respect 12 of any of the other schemes, as to whether matters can 13 be sped up, whether it's by lowering the evidential 14 burden or in some way making it easier and quicker? 15 A. We think about the pace at which redress has been 16 delivered a great deal, and I said to you in my 17 introductory answers that obviously we have seen 18 an increase since the election, but that has always 19 been, for my personal view, not in such a way that has 20 reduced the accuracy of the redress payments being made 21 or in a way which has meant that claims today are being 22 dealt with to a different evidential threshold to ones 23 in the past. I think there probably would be some 24 judicial review, you know, risk if that were seen to be 25 the case. 32 1 Where we've seen increases in the pace at which 2 redress has been delivered, some of those are just 3 old-fashioned issues of capacity and focus. As I say, 4 it has been clearly an objective of the new ministers, 5 of the new Government, to make sure this is being done 6 at pace but, again, I'd just like to reassure people 7 that there is no sense of that being done at the cost of 8 accuracy or a change to how cases are being considered 9 relative to the past. 10 Q. Thank you. I'd like to move on to a new topic which is 11 the Post Office Horizon System Offences Act. It came in 12 just before the election. I think you've said in your 13 statement that you that some involvement. Can you 14 assist us with what that involvement was? 15 A. That's right. I mean, people will be familiar with the 16 challenge that the then government had and we, as the 17 opposition, were sensitive to, which was you have 18 a large cohort of people for whom they were clearly 19 wrongly convicted. There are two major problems with 20 the traditional route to overturning those convictions: 21 the Criminal Cases Review Process and Commission. 22 Firstly that a lot of those people had lost all faith in 23 the justice system and I think we can understand why 24 that would be the case and, second of all, the time 25 frames for where we had got to and extrapolating that to 33 1 where we would get to were, for years and years -- 2 I mean, it was absolutely conceivable that if we had 3 relied on the traditional constitutional route to doing 4 that, many of those people would never have had the 5 justice they deserved and obviously would never have got 6 then the redress that they deserved because they would 7 have been, at that point, in the process. 8 So when -- I felt I'd had a good working 9 relationship with the then Conservative Government's 10 Postal Affairs Minister, Minister Hollinrake, when the 11 potential -- he approached me and told me that there was 12 potential for, you know, an Act of Parliament, very 13 significant constitutional terms, of course, to overturn 14 these convictions, I was immediately aware of just how 15 significant that would be and the reasonable concerns 16 a lot of people would have about constitutional 17 protections and oversight of that, but just, looking at 18 the problem, it was clear to me that was really the only 19 vehicle that we had to deliver justice. 20 And so you will I think, Mr Blake, appreciate, you 21 know, in any political context, you've got to consider 22 not just the here and now but what are the precedents 23 people might take from that? 24 You know, I think we'd all say we wouldn't want 25 a system where there were -- you know, where it was 34 1 a common occurrence for Acts of Parliament to overturn 2 the courts. That is not an easy or attractive 3 proposition to have. So I really led conversations on 4 our side of the aisle within the Labour Party about why 5 I believe this was the best and only vehicle to doing 6 that and, between ourselves, I believe we secured the 7 cross-party agreement that was necessary -- I should 8 say, at this point -- we had no idea the general 9 election was coming, so we had no idea it would be part 10 of the expedited process that happens when an election 11 is called to pass, the so-called wash-up procedure, when 12 legislation goes through much quicker than it usually 13 does. 14 And I think if you looked at some of the Hansard 15 exchanges around that, we very much tried to indicate 16 the unique circumstances that had led to this position 17 being reached, and the cross-party agreement that lay 18 behind that, and some of those protections we thought 19 were necessary around that. But I will say, Mr Blake, 20 I'm very much aware, in a year, 10 years, 50 years, 21 whatever, there will be people who will say, you know, 22 that was not the right decision because of the 23 constitutional precedent, which I don't believe it did 24 set by the way a precedent because of the unique 25 circumstances of this, but I know people will maybe cite 35 1 that in future. 2 But I absolutely believe, without that cross-party 3 agreement and breakthrough, we'd be in a position here 4 today where this cohort of people would not have had 5 their convictions overturned and they would not be 6 receiving redress. 7 Q. Are you able to provide us with any update as to how 8 many people have been contacted in respect of that 9 legislation? 10 A. Yes, Mr Blake. So you will be aware of something, to be 11 frank, at the time when we were having these discussions 12 and it wasn't until I'd become the Secretary of State, 13 and was several weeks into the job, that I became aware 14 of, which is the Ministry of Justice, which obviously -- 15 the judicial system held the records for this group of 16 cases -- was not in a position to speedily inform this 17 cohort of people of their eligibility -- that their 18 convictions had been overturned and their eligibility 19 for redress. 20 I'm really aware of the fact that this is -- this 21 whole issue is an example where there's a sense to 22 different bits of Government, different bits of the 23 State not accepting accountability, so when I talk about 24 my frustrations with the records, it's not me in any way 25 passing blame or the buck for that, but I simply wasn't 36 1 aware that it wouldn't be relatively straightforward 2 having had this breakthrough to contact these people. 3 For the people in the Horizon Convictions Redress 4 Scheme, there are 172 claims that have been received. 5 That is up considerably obviously because it's 6 a relatively new scheme. Full and final settlements 7 under that scheme are now at 36 but there's still 8 a significant number of people therefore who haven't had 9 those interim claims. Because of the problems with the 10 records we made a direct appeal for people to contact us 11 directly and go into the system, though I again 12 appreciate they will say, "Why don't you have the 13 records to contact us?", and we are regularly in touch 14 with the Ministry of Justice about their efforts to 15 identify specifically claims; the nightmare scenario 16 frankly would be someone receiving a letter who wasn't 17 eligible to receive it. 18 But it is a frustration and, again, I would repeat 19 the point that people who are in this position can 20 contact the Government directly in order to go into the 21 system and that the Ministry of Justice is working at 22 pace on their side of this to make sure they're 23 identifying the right people. 24 Q. You spoke about those who aren't eligible. We have 25 heard some evidence in relation to a category of people 37 1 who aren't covered by the legislation, that's, for 2 example, those who appealed but who were refused leave 3 to appeal or whose appeals were rejected and, as 4 a result of them having previously appealed, they are 5 then cut out of a scheme that overturns the convictions 6 of those who didn't even go to the appeals stage. 7 What is your view on that position? 8 A. So the specific criteria for eligibility under the Act 9 of Parliament, obviously that was decided by the 10 previous Government but we were aware through the 11 Parliamentary exchanges of the decisions that were 12 taken. I think the two most significant ones were this 13 cohort of people, so people who had already been able to 14 go through the justice system but had not had their 15 convictions overturned, the view being that they had 16 already had the details of their case assessed in that 17 way. 18 And the other cohort were people who were not 19 prosecuted by the Post Office, they were, for instance, 20 by the Department of Work and Pensions, where there 21 would be a different set of factors, different position 22 in terms of obviously the well known failure of 23 disclosure process by the Post Office, wouldn't apply to 24 them, and they'd been a different position. I should 25 say as well, of course, that the devolved governments 38 1 pass their own legislation because of the devolved 2 nature of justice across the United Kingdom. 3 But specific to the cohort you referenced, Mr Blake, 4 I believe the previous Government system assessment was 5 they would already have had their individual 6 circumstances assessed and therefore in a different 7 position to the majority of the cohort who were -- then 8 needed this legislation in order to have their 9 convictions overturned. 10 Q. How about that other group that you identified: those 11 who were prosecuted by other agencies? 12 A. So again, I believe -- if I recall the conversations 13 that were had and exchanges in Parliament, that was 14 based on a genuine sense that the circumstances of those 15 cases were different, so there wasn't the same failure 16 of disclosure that we were aware of in the Post Office 17 prosecutions. And that frankly there would be, within 18 that cohort, a greater number of cases where there were 19 legitimate issues that had been pursued, and the blanket 20 exoneration of the Act of Parliament wouldn't be the 21 appropriate vehicle to include for those cases. 22 Q. Thank you. My final topic today relates to the future 23 of the Post Office. If we put aside what external 24 consultants may be planning, so Boston Consulting Group, 25 I think, have been involved in planning. We've heard 39 1 about a strategic review from a company called Teneo. 2 If we put those all aside, do you have any ideas as to 3 how the Post Office might be changed to avoid 4 a repetition of what we've seen in the past? 5 A. Yes, Mr Blake. So as I said this in my earlier answers, 6 I believe you cannot separate out the issues of justice 7 and redress that this Inquiry is rightly dealing with 8 from those wider conversations about the future of the 9 Post Office. I think the governance has to change. 10 I think one of the most legitimate, you know, questions 11 that I get, you know, from members of the public and 12 constituents is the question of how did the Post Office 13 not believe something must have gone wrong when all of 14 a sudden after Horizon was introduced, there was a huge 15 spike in convictions; what did they think was going on? 16 And I think you have to assume that what they 17 thought was that Horizon was catching people, rather 18 than something could have gone wrong with the system and 19 it's just inconceivable that that number of people were 20 all of a sudden committing, you know, criminal offences 21 and needed to be prosecuted. 22 And so the governance model has to change. There 23 has to be connected to the change in the business model 24 where postmasters have to earn more money from the 25 services the public want. I want to say specifically, 40 1 because I know it's come up in the media, that any 2 question about the future structure/governance of the 3 Post Office would not be this Government just, you 4 know -- for instance, on the point of potential 5 mutualisation, it wouldn't be just passing it over and 6 saying "Look, there that you go, you're going to run 7 yourselves in a different way". We're very much aware 8 that the structure and the business model has to change 9 in order to be sustainable. There are obviously some 10 particular issues like the funding of a replacement for 11 Horizon, which couldn't be funded at the minute from the 12 Post Office itself. 13 So those issues have to be addressed before we then 14 look to what the future relationship is, but I am 15 absolutely certain that the future has to be one that 16 addresses the lack of trust, the lack of reciprocity 17 and, you know, genuine regard for people who are 18 providing the front-door services of the Post Office. 19 And frankly I believe anything should be on the 20 table as to the right way forward around that. But, as 21 I say again, it has to come after we make sure that the 22 position of the Post Office is a long-term sustainable 23 one. 24 Q. Thank you, Secretary of State. I have one or two more 25 questions, we are very close to 11.00, perhaps we can 41 1 take a pause? 2 SIR WYN WILLIAMS: Mr Blake, I make it 10.59 and I'm sure no 3 one would regard it as disrespectful if we take 4 a natural pause, which is now. So I propose to start 5 the minute's silence now, and people in the hall may 6 stand if they wish or sit as they prefer. I am in 7 a room on my own, so I will continue to sit down. But 8 the minute begins now. 9 (Pause for one-minute's silence) 10 MR BLAKE: Thank you very much. 11 Secretary of State, have you given any consideration 12 to some fundamental issues, such as whether 13 a self-sustainability, self-sufficiency model is ever 14 a realistic ambition? We heard from one of your 15 predecessors, Greg Clark, some novel ideas about 16 a fundamental change to the type of company that the 17 Post Office is, some sort of public organisation that is 18 not a private company; are you able to assist us with 19 your thinking on that? 20 A. Yes, Mr Blake. 21 I mean, as I say, I don't think anything should be 22 off the table for the future. I think alternative 23 governance models, mutualisation is one, I think, that's 24 been in some of the media coverage. You know, it would 25 have some particular advantages in terms of dealing with 42 1 the specific breakdown of trust between different parts 2 of the organisation and provide a route going forward. 3 Some of the work that you mention, I mean, the 4 distinction I'd have between, say, the Post Office's 5 work with Teneo is that that's really about the kind of 6 nuts and bolts of the business model, where is money 7 coming in; where does it go; how can that change; what's 8 the course of action required for the future? 9 Whereas the Boston Consulting Group work with my 10 Department is really more about the kind of fundamental 11 purpose as, you know, technology has impacted on some of 12 the traditional services the Post Office operates, the 13 future of cash, we're very keen as Government on Banking 14 Hubs, which is -- don't necessarily have to be run by 15 the Post Office but usually are. They are in my 16 hometown of Stalybridge, so there's a set of factors 17 both for the Post Office as a business, if you like, and 18 then its fundamental purpose, both being looked at by 19 the appropriate levels of Government. 20 The future, in terms of what that structure might 21 look like, and it could be something different -- 22 I mean, I give that some thought. You will understand, 23 to address some of the problems I'm talking about, that 24 can't just be a top-down decision from the Secretary of 25 State. The aspirations around the Green Paper, which 43 1 I think Minister Thomas mentioned, which we intend to 2 publish next year, is a chance for that wider 3 conversation, a national conversation, to be frank about 4 that. 5 I believe as an institution, as a brand, there's 6 still tremendous public affection for and desire for the 7 Post Office to have a strong future but we've got to 8 consider all of these issues as to its future business 9 and how it is run as part of that process. 10 Q. Can you see a time prior to the Green Paper on which the 11 Inquiry could be updated as to your thinking? 12 A. I think we certainly are progressing conversations with 13 the Post Office as to how they wish to make sure the 14 business model side of change is progressing. I think 15 there will be the opportunity to update the Inquiry 16 about some of that. I believe the questions about 17 governance are probably best suited to the Green Paper 18 because, again, fundamentally, we want to be getting the 19 input of postmasters themselves at the frontline as to 20 what they would like to see, what would give them 21 reassurance that the culture and effectiveness of the 22 organisation was changing as part of that. 23 But, if there were any developments at Departmental 24 level, I think it would be, you know, straightforward to 25 be able to provide the Inquiry with an update to that 44 1 regard. 2 MR BLAKE: Thank you very much, Secretary of State. There 3 are a small number of questions from Core Participants. 4 Sir, unless you have any questions, I will turn 5 to -- 6 SIR WYN WILLIAMS: Please do. If I have any at the end, 7 I'll ask them at the end, all right, Mr Blake? 8 MR BLAKE: It's Mr Stein. 9 Questioned by MR STEIN 10 MR STEIN: Mr Reynolds, my name is Sam Stein. I represent 11 a large number of subpostmasters affected by the 12 scandal. Many of them engaged in the High Court case, 13 the GLO litigation, as we call it, in 2019, and the 14 spread of people I represent include people that were 15 not subpostmasters but also managers, people working in 16 branches, and importantly, at least for today's 17 discussion, as regards what's going on, strategy-wise 18 for the Post Office, people that are still serving as 19 subpostmasters. 20 In answer to Mr Blake's question just a second ago, 21 which was about the timing or timeline for the delivery 22 of a Green Paper, and your answer, which was that you 23 felt it was best put within a Green Paper, you're a very 24 experienced, long-term serving politician. Also, 25 currently, you're in place as the Minister in charge of 45 1 DBT. Can you give us the actual timeline, likely 2 timeline for such a Green Paper? 3 A. So the aspiration for the Green Paper that Minister 4 Thomas referenced in his evidence is for next year. I'm 5 afraid I can't give you any more specific guidelines 6 than that, but I, if it would be appropriate, can check 7 with the Department and maybe write, if we've got 8 an indicative part of, how we believe that would be 9 ready. I should say that that's simply because, you'll 10 be aware, some of the very earliest, most significant 11 priorities of the new Government have been delivered by 12 the Department for Business and Trade, the Employment 13 Bill, for instance, or the Investment Summit. So please 14 don't take any sort of sense that it's not an urgent 15 priority; it's just that the number of things the 16 Department has had to do in the first three to four 17 months of the Government have been extensive. 18 But the conversations we're having about the future 19 of the Post Office, which are almost on a weekly basis 20 in the Department, should be an indication of just how 21 significant we see this work, and it would be my 22 aspiration, given I think the level of national interest 23 in the future of the Post Office, to have that available 24 and start that conversation as soon as possible. 25 Q. We've had a number of witnesses recently that have said 46 1 things in the way you've just said them, in a way, which 2 is, "We aim to do things really quite soon, we're 3 getting on with it", and so on. Can you give us even 4 a time bracket for the delivery of a Green Paper: as 5 an example, next year? 6 A. Yes, next year. That's the -- 7 Q. Right. First half of next year; second half of next 8 year? 9 A. It would be my personal aspiration for the first half of 10 next year. 11 Q. Now, you understand that this Inquiry was set up with 12 terms of reference which included obviously learning 13 lessons from the criticisms made by Mr Justice Fraser in 14 the High Court, and also assessing whether the processes 15 and information provided by Post Office to postmasters 16 are sufficient. So I'm reading from the terms of 17 reference. 18 So the processes and information provided by Post 19 Office are sufficient to enable both parties to meet 20 their contractual obligations, to enable postmasters to 21 run their businesses. This includes assessing whether 22 Post Office Limited's related processes, such as 23 recording/resolving postmaster queries, dispute 24 handling, suspension, termination, are fit for purpose. 25 In addition, determine whether the quality of the 47 1 service offer for postmasters and their relationship 2 with Post Office Limited has materially improved since 3 the conclusions reached by Mr Justice Fraser. 4 So the terms of reference of this Inquiry are not 5 just historic. 6 A. Mm. 7 Q. The word "are" means currently. At the moment, we're in 8 this rather odd position, which is this Inquiry has been 9 now running for a number of years. There have been 10 grave difficulties with disclosure, obtaining of 11 material, that have contributed to the length of this 12 Inquiry. The judgment at the High Court in 2019, which 13 was a seminal judgment -- two judgements, sorry, in 14 2019 -- heavily criticising the Post Office is the 15 starting point for this Inquiry. 16 Yet we hear from you that the changes to take place 17 within the Post Office, the ones that you spoke about at 18 10.11 this morning, which are about a new business 19 model, about the new direction of the Post Office, we 20 hear from you and other witnesses that these are still 21 yet to take place. So that means that the terms of 22 reference of this Inquiry are simply, we are going to 23 submit to the Inquiry chair, not going to be complete 24 until we know, until we can see and examine what is 25 happening to the Post Office. 48 1 How is this Inquiry going to be able to examine 2 whether the new model that you've discussed -- 3 Mr Railton has called it change in polarity of the Post 4 Office -- how are we going to examine that, Mr Reynolds, 5 considering all of these discussions are ongoing at the 6 moment and that we may get a Green Paper somehow in the 7 first part of the next year? 8 A. Well, I can understand the frustration that underlines 9 a question like that. In fact, I can't speak for the 10 previous Government, although, you know, I would say on 11 all of this we've played this completely straight 12 without any politics trying to be cooperative in 13 opposition and then continue some of that work into 14 government. So I can't speak for how significant the 15 conversations were, you know, before 4 July. I can only 16 say, for our part, if you look at the first, you know, 17 three to four months, there was an urgent need, first of 18 all, to make some of the decisions we've been through 19 this morning, on the redress scheme for the overturned 20 convictions following legislation, the appeal scheme, 21 the fixed-sum awards, the work around the Capture system 22 as well. 23 There was an immediate need around issues of redress 24 to respond to that. I believe, potentially, the 25 previous government may have been looking for some sort 49 1 of steer or guide from this Inquiry, and you quite 2 rightly make the point that you see that as part of the 3 process itself. 4 But I do know, in terms of the speed at which we've 5 been looking, not just at the issues of redress but the 6 future, and some of the decisions that are going to be 7 in the public domain fairly soon, that sense of, you 8 know, transformation is happening now, and I respect 9 very much your point that you'd like to be able to 10 assess that for a plan now. I don't think, to be frank, 11 in opposition that plan could have been drawn up in any 12 adequate level of detail but, if you are telling me 13 specifically that you feel that needs to be expedited in 14 order to be a part of the kind of consideration that you 15 are having in this Inquiry, I understand that very much, 16 and can tell you, that will inform my decisions going 17 back to the Department. 18 But I don't think, given where we are sat here 19 today, we could have increased the speed any further 20 than we have, either for redress or the future business 21 model of the Post Office. 22 Q. Mr Reynolds, are you prepared to return to this Inquiry? 23 It's a matter for Sir Wyn to decide but, if Sir Wyn, as 24 an example, would wish to hear from you again and 25 possibly Mr Thomas, the Post Office Minister, and hear 50 1 as to progress and changes being made, are you prepared 2 to return? 3 A. Of course, if Sir Wyn wanted me to return I would be 4 more than happy to. 5 Q. Now, compensation issues, at one point, in dealing with 6 a question from Sir Wyn, you thanked him for his 7 feedback. Again, we're left in this odd position: the 8 length of time it's taken to get to where we are 9 regarding compensation means that we're about to close 10 the evidence of this Inquiry as of this moment, unless 11 Sir Wyn directs otherwise, this week. We get to closing 12 submissions through the remainder of the year and we 13 have oral submissions on, I think, 16 and 17 December. 14 I'll be corrected if I have that date wrong. 15 That means, in effect, that the oversight of 16 compensation issues directly from this Inquiry, 17 essentially, is going to go, unless Sir Wyn directs 18 otherwise, to return to these matters in another hearing 19 date. It also means that the questions of the appeal 20 mechanism, the question of whether the thresholds are 21 correctly placed, the question of whether lawyers should 22 be allowed to advise people that have justifiable claims 23 but perhaps don't realise the extent of them, those 24 won't that have the Inquiry's oversight. 25 How are we to determine whether, in fact, you and 51 1 your colleagues are going to be doing the right thing 2 about these issues? Can we have a commitment from you 3 to report back as to the changes that you are going to 4 make on those very self-same issues: that is the 5 threshold question, the access to lawyers, the date of 6 the appeal mechanisms. Can we have that commitment from 7 you, Mr Reynolds? 8 A. Well, I can give you a commitment that we keep the 9 performance of all of the compensation schemes under 10 review. I'm very sensitive to the fact that Sir Wyn was 11 clear he's not making a specific recommendation under 12 any of those schemes. Of course, it has always been my 13 view that the work we do as ministers, both in relation 14 to the compensation schemes and the future of the Post 15 Office, will of course have a considerable and indeed 16 total regard to the findings of this Inquiry. So you 17 ask a slightly different question, which is about 18 keeping the review and potential changes to those 19 schemes available while the Inquiry is going on. So I'd 20 have to be guided by Sir Wyn in relation to that. 21 Q. You see there's a bit of a trap here, Mr Reynolds. What 22 has happened is there have been delays to those schemes. 23 We've had witness after witness saying there have been 24 problems with getting these schemes worked out, problems 25 in setting them set up, difficulties in assessing their 52 1 breadth, and so on, a litany of problems that have 2 delayed the activities of those schemes. But that delay 3 itself has now led to a lack of potential oversight from 4 Sir Wyn, so there's a trap that's been set up by 5 a failure to grasp the issues. So what we need is, 6 rather than you saying, "Well, you've heard Sir Wyn", we 7 need a commitment to change on those very self same 8 issues? 9 We can ask, of course, Sir Wyn to frankly give 10 an interim report or set out his own view on these 11 matters. That will be a matter for him. What we need 12 is for you to say, "There are problems here, we need to 13 resolve them and they need to be resolved in favour of 14 subpostmasters". I've called this before, with other 15 witnesses, a spirit of generosity -- 16 Forgive my voice, it seems to be going today, which 17 is an unfortunate problem for an advocate. 18 But I've called it the spirit of generosity that 19 decisions such as this should be made in favour of the 20 subpostmaster, and they need to be made in favour of the 21 subpostmasters frankly sooner rather than later; don't 22 you agree? 23 A. Yes, I would agree with that and I would say, if you 24 look at the actions we've taken to date, I think we can 25 demonstrate that through each of the decisions that 53 1 we've made, whether that's the approach to the 2 publication of data under the different redress schemes, 3 whether that's the openness around the Capture report 4 that we published, whether it's the changes with the 5 route to fixed-sum compensation or the appeals scheme or 6 indeed the redress scheme for Overturned Convictions. 7 So where there is a need, where I receive direct 8 feedback that this part of the scheme, perhaps through 9 the evidence of this Inquiry or a direct approach to me, 10 where I believe there are changes that need to be made, 11 I think we've demonstrated that we will make them and we 12 will remain open to doing so in respect of any part of 13 the system of redress, if we feel or see evidence that 14 it's not working as it should. 15 Q. Sitting just two across from me is Mr Enright, he's 16 partner at Howe+Co solicitors. He has been involved in 17 this matter and his firm has been involved in this 18 matter for many, many years. Are you prepared to meet 19 with him to continue to keep an eye on these very 20 self-same issues directly, so that he can discuss with 21 you the progress and report back, as far as he can, the 22 information that you'll you give him as to these issues? 23 A. Yes, more than happy to give that commitment. 24 Q. Can I turn then to Fujitsu and its role in this matter. 25 Fujitsu has Mr Patterson, who is the European Director 54 1 of Fujitsu, he has come to the Inquiry, he has given 2 evidence to the Select Committee. There's been 3 an apology from Fujitsu for its role within this 4 scandal. 5 We've asked questions of Mr Patterson, which is to 6 what extent is Fujitsu prepared to put its financial 7 muscle behind redress. Now, redress comes in two 8 different ways. Fujitsu have said that they would 9 consider contributions towards compensation. But they 10 will not do so until the close of this Inquiry, okay? 11 That appears to be their current position. Mr Patterson 12 is giving evidence about such matters later on today. 13 Have there been any approaches from Fujitsu to 14 Government to actually set out the structure of what it 15 is proposing by way of contributions to compensation? 16 A. So no, I've not received any specific information in 17 relation to that. My understanding is the same as 18 yours: that there's been an acceptance of, I believe, 19 the phrase used was a moral responsible to make 20 a contribution, but that they were waiting for the 21 findings of the Inquiry before taking that forward. 22 I would welcome to see what the evidence will be in the 23 remaining sessions but I have always envisaged, at some 24 point, those kind of conversations being necessary. 25 Q. Well, can we try it another way round. Has the 55 1 Government, to your knowledge, that's in the last four 2 months, under your own leadership with the DBT, or to 3 your knowledge prior to a Labour Government, has the 4 Government reached out to Fujitsu and said, "Well, hang 5 on, we are spending an awful lot of money on 6 compensation, you've made a promise, it seems, to 7 contribute. Why are you waiting for the close of this 8 Inquiry? That seems to be running out the Inquiry so 9 you're not under observation". 10 A. That's -- 11 Q. Has the Government done that; has the Government 12 approached Fujitsu? 13 A. I have not had that direct conversation. I am not aware 14 if officials have had it at that level. It was 15 genuinely always my understanding that the Inquiry would 16 conclude before that element would be addressed. 17 Q. Would you consider approaching Fujitsu? It's quite 18 convenient Mr Patterson is here today. Maybe there's 19 an opportunity, given time restraints in the busy 20 timetable for a minister, just to have a word to set up 21 a meeting? 22 A. Yes, I believe that will be a necessary meeting to have. 23 I should say I've also been confronted with some rather 24 unwelcome decisions I will have to make about the 25 replacement for Horizon, the budget that I have walked 56 1 in to find that being allocated, which is very, very 2 large and I think there are questions as to whether that 3 is the right way forward that we're talking to the Post 4 Office about, and frankly the need to have further 5 involvement with Fujitsu to make sure there is 6 a transition between the existing system and what the 7 future will be, which I believe neither Fujitsu 8 themselves would ideally want to be involved in and, 9 frankly, I wouldn't ideally want to be in the position 10 I'm in where I might have to make a decision to extend 11 that involvement in order to make sure that system is 12 properly accounted for before a new system is in place. 13 So there are some issues already of engagement 14 between the DBT and Fujitsu that will have to be there 15 and, as I say, some of that is frankly less welcome than 16 it would be, but that's simply the situation I've walked 17 through the door to find. 18 Q. Lastly, and only this: this scandal affected families. 19 It affected people in small branches up and down the 20 country. It affected the classic Post Office that we 21 see in the high streets and the villages and towns. It 22 affected a lot of people living in these premises, their 23 partners, their children, their education, their ability 24 to consider their children's needs, and we know that 25 there is a voice for children that needs to be expressed 57 1 properly before this Inquiry, which is that they're 2 damaged as well. They feel affected by what's happened. 3 They've been hurt. Their aspirations have been limited. 4 Questions about their education need to be addressed. 5 In other words, there is a need for a restorative 6 justice that considers the wider implications of this 7 scandal and what has happened. 8 Now, we heard, I think, from Mr Recaldin that the 9 discussions have already taken place within Government 10 on this very issue. It is an issue that we, on behalf 11 of the client group we represent, we have suggested that 12 Fujitsu could contribute to but, actually, this might be 13 something to be grasped by both Government and Fujitsu 14 and really good work could be done here, and it needn't 15 cost that much. It'll cost a bit but it's about ideas, 16 and about making it possible for those families that 17 have had such great difficulties. What's happening in 18 that regard, Mr Reynolds? 19 A. That's absolutely right. So the issue of wider family 20 impact was very much on our minds when we came to 21 office. We have commissioned some preliminary work 22 around that, you'll understand a whole range of 23 questions as to the kind of harms you're looking at, the 24 kind of impact, making sure the definition of family 25 members is a modern one that understand families come in 58 1 all shapes and sizes -- you wouldn't want to commit 2 further injustice by getting some of that wrong. 3 You mentioned whether specifically Fujitsu could be 4 a part of the answer to that. I think that is 5 an interesting proposal. I wouldn't necessarily want to 6 limit the involvement of Fujitsu just to that element of 7 redress but the impact on wider family members is 8 something that is being looked at within Government, 9 yes. 10 MR STEIN: I said I'd finished and I really will, but we 11 made that suggestion to Mr Patterson on the last 12 occasion when he gave evidence. It's not a new 13 proposal. So again, could that form part and parcel of 14 the wider discussions? 15 Frankly, there's a need to restore the families back 16 to what they hoped to be when they started their journey 17 through the Post Office. At the moment that doesn't 18 seem to have been grasped. Thank you, Mr Reynolds. 19 THE WITNESS: Thank you. 20 MR BLAKE: Sir, we have questions from Ms Shah as well. 21 Questioned by MS SHAH 22 MS SHAH: There we go, can you hear me now; is that working 23 now? 24 A. Yes, I can, thank you. 25 Q. Good morning, Mr Reynolds. I ask questions on behalf of 59 1 the National Federation of SubPostmasters. So Mr Read 2 in his evidence to the Inquiry said that he thought the 3 culture at the Post Office had changed and improved 4 under his five-year tenure as CEO, although that does 5 not align with the key findings of Grant Thornton's 6 report of the Post Office. There's no need to turn it 7 up, but for the transcript that report is POL00448771. 8 That reported earlier this year and the key findings 9 on page 13 includes that there's an inability to unlock 10 a unified purpose and shared ambition around a longer 11 term vision and strategy between POL and its 12 shareholder; there's an unconscious bias around the lack 13 of accountability; there's a lack of clear understanding 14 of objective roles, responsibilities and purpose; and 15 that, in relation to culture, there's a misalignment on 16 accountabilities between POL and DBT/UKGI, which is 17 culminating in a failing working relationship. 18 Would you agree that these findings show that there 19 continues to be significant issues in relation to 20 culture and governance at the Post Office? 21 A. Well, thank you for that question. I would say, having 22 been the Secretary of State for four months, I can't 23 comment on claims from, you know, the progress over the 24 last five years. But I would say that we start from the 25 position that things need to change extensively, as I've 60 1 said in some of the previous answers, with regard to the 2 business model, the accountability, the governance 3 structure. I think the job at the Post Office that's 4 required is one of transformation, not accepting that 5 things are in a position now that is to anyone's 6 satisfaction and, broadly, I think that is something 7 which is held by people involved at every level of the 8 Post Office. 9 Q. Just to pick up on something that Mr Stein has raised, 10 whilst the Grant Thornton review shows that there are 11 continuing issues with the culture of the Post Office, 12 five years after the GLO judgments, what confidence can 13 this Inquiry and the UK's postmasters have that, once 14 the scrutiny of the Inquiry is removed, that the Post 15 Office and Government will ensure that culture and 16 governance is improved? In other words, when the 17 spotlight of this Inquiry is turned off, is there not 18 a danger that things will just revert to business as 19 usual and this will remain a problem just too big, just 20 too hard and just too expensive for government to solve? 21 A. No, I think that is absolutely the right question and 22 when I talked about the nature of the job, as I see it 23 at the Government level, being not just sorting out the 24 routes to redress and the pace at which redress is 25 received, but they can't be divorced from those wider 61 1 questions about the future of the Post Office, that is 2 what I mean by that. I think there is a danger, there 3 is a perception that we could simply, even if we do 4 a good job on redress, maybe not link it to the wider 5 future and questions of transformation, and that's 6 an absolutely reasonable question. 7 So the commitment we have as a Government is to deal 8 with these things together and hope there is some 9 assurance of that, making sure that is held to because 10 I know Government ministers change, they come and go and 11 different people take over these departments. I think 12 that is a job that will have to be held, not just by the 13 Government but by the Parliament, I think the Select 14 Committee in particular will play a role in ensuring 15 that but I think we should all acknowledge that that is 16 what success looks like here. It's not just about 17 resolving issues of redress and justice. It's about the 18 future of the Post Office, playing the role I believe it 19 can and should play in national life, but in a way which 20 recognises just how wrongs thing have gone in the past. 21 Q. Okay, well, this Inquiry has shown the prolonged and 22 consistent history of Post Office with Government 23 oversight treating postmasters as subservient and 24 unworthy, making choices that benefit Post Office as 25 a company and that are detrimental to postmasters, and 62 1 not valuing or listening to postmaster input. Would you 2 agree that there may need to be a number of different 3 cultural change initiatives run by or implemented by 4 Post Office and Government, or your Department, in order 5 to restore the confidence of a group of people that have 6 been consistently failed? 7 A. Yes, I would agree with that statement entirely and 8 I would say that there absolutely has to be a position 9 where people delivering -- postmasters delivering 10 services on the frontline for the organisation feel that 11 the overall organisation itself is there to support 12 them, rather than to have what's clearly been 13 an adversarial relationship, one that has been lacking 14 in trust, one that has been lacking in respect, to be 15 frank, and that is at the heart of what we talked about 16 with Mr Blake. You know, some of the potential 17 governance changes have to be a part of that. 18 I think there's -- you know, the people I speak to, 19 who have been affected by this fairly widespread 20 recognition about the nature of a business model needing 21 to change to provide greater remuneration to people, 22 delivering services to postmasters themselves, and that 23 will necessitate some quite considerable changes to the 24 organisation centrally in order to do that. I think 25 there's an open-mindedness to different governance 63 1 models as to the right way to do that, I don't think 2 anyone needs to be prescriptive at this stage about it. 3 But you should always have oversight of what's your 4 objective in those changes, not governance changes for 5 the sake of it. It's about what would produce that much 6 stronger, healthier relationship going forward. 7 Q. Thank you. We have heard from other witness to this 8 Inquiry that it might not be practical for Government 9 alone to play a more active role in the oversight of the 10 Post Office due to the nature of the arm's-length 11 relationship but would you agree that it could only be 12 a good thing for there to be an increased oversight and 13 transparency and that this would be key in detecting and 14 resolving any potential issues in the Post Office going 15 forward? 16 A. So I'd say this issue of how arm's-length bodies and how 17 Government and UKGI functions is one that's got to be 18 central to the conversation and the answers that we're 19 having. Now I honestly cannot tell you, having been 20 a Secretary of State for no more than four months, 21 whether I am confident that the arrangements of the UK 22 state in this way will always work effectively or 23 whether this was just the wrong questions being asked of 24 the wrong people, you know, the wrong mechanism or 25 whether there's something more fundamental at stake in 64 1 that. 2 I would say that I look at a whole range of things 3 that I have seen from the perspective of being a Member 4 of Parliament for over a decade and, obviously, this is 5 a significant one but I think about Hillsborough, 6 I think about Bloody Sunday, and I think about what 7 we've recently seen around Grenfell, and I think there 8 are some quite profound questions that we as a country 9 have to ask ourselves, that go beyond individual 10 mechanisms for oversight as to how we establish and run 11 these kinds of organisations. 12 There are things that have been going, you know, 13 fundamentally wrong with how power is wielded in the UK, 14 how accountability is provided for. So I think, yes, 15 there are some specific questions around the future 16 governance structure and oversight, but I think there 17 are some wider changes we've got to think about as 18 a country, whether that is -- you know, there's been, 19 I know, as part of this Inquiry some conversation about 20 how we would address in future historic miscarriages of 21 justice and abuses of power and whether there's a sort 22 of different mechanism, standing mechanism we can have 23 to do that. 24 You'll know the Government has committed to 25 something called the Hillsborough Law, the duty of 65 1 candour. I think all of these things are connected to 2 each other and, whilst we've got to address the specific 3 problems of this Inquiry, there are some wider lessons 4 that we've got to consider because there have been too 5 many cases in modern British history of fundamental 6 abuses of power and that is just how it is. And we've 7 got to recognise that -- we've got to have the humility 8 to recognise lessons have to be learnt from all of these 9 things going forward. 10 Q. Just to focus on the question of oversight, you might 11 have heard the evidence of Sir Alex Chisholm on 12 7 November. In his evidence he proposed an independent 13 oversight committee, with reporting obligations to the 14 Post Office Board, the authority to write to the 15 Secretary of State with concerns, and obligations to 16 report periodically to Parliament. In support of that, 17 he states that, whilst this would add an extra layer, 18 the particular circumstances here, where the Post Office 19 Board has failed in its oversight responsibilities which 20 clearly lie with the Post Office Board and the 21 management executive being a part of that, their 22 internal legal teams over many years have failed to 23 provide effective service, then that has caused 24 a terrific breakdown of trust, not only with the 25 subpostmasters but with the wider public. 66 1 He suggested that special measures are required, 2 because of the failings that the organisation have gone 3 through. Just for the transcript, that's pages 167 to 4 168 of that transcript. 5 Now, the NFSP has drafted a proposal for 6 an oversight committee, which it has discussed with 7 various key individuals within Post Office, Government 8 and others. Again, no need to turn it up but, for the 9 transcript, that is WITN00370110. I'm not sure if 10 you've seen this proposal but it says that the aim is to 11 expand on the existing shareholder relationship 12 framework that currently exists between the Government 13 and Post Office, whilst retaining its social purpose, to 14 ensure a situation similar to the Horizon scandal is 15 never able to occur again, whilst securing the future of 16 the network. It says that lack of expertise, scrutiny 17 and accountability were key elements of how this scandal 18 continued for so many years. It is therefore the aim of 19 this proposal to bring together a committee of people 20 with specific Post Office knowledge, alongside those 21 from a wider social perspective to ensure that the 22 social purpose of the Post Office remains key. 23 Then at page 5 of the proposal, it outlines the 24 proposed membership of the committee, and that includes 25 postmaster representative bodies, such as the NFSP, 67 1 unions such as the CWU and Unite, representatives from 2 the Government, consumer champions, and representative 3 bodies for groups who rely upon the social purpose of 4 the Post Office, such as older people and people from 5 economically deprived areas, as well as a temporary role 6 for individuals who could offer advice on specific 7 issues, pertinent to the agenda, among others. 8 So in light of this scandal, would you agree that it 9 could only be a good thing for stakeholders to work 10 together for the betterment of the Post Office in 11 an open and transparent forum such as the one proposed 12 here? 13 A. Look, I'll certainly look at that. It's clearly 14 a thoughtful proposal responding to what we have seen. 15 I would want to make sure that any governance change 16 was, first of all, one that was going to be effective. 17 I mean, on paper, the existing structure could have been 18 effective but clearly wasn't. I also wouldn't want 19 anything which is seen to sort of be outsourcing 20 responsibility for fixing these problems to a committee 21 of people or whatever. I think that might be perceived 22 as the opposite of what we're trying to do in terms of 23 facing up to and providing redress in relation to this 24 and providing a future which is one where we've got 25 confidence we've put these problems right. 68 1 But the kind of thoughtful proposal you're putting 2 forward, I can see where that has come from and what 3 that would mean. So I promise we would absolutely 4 consider anything of this kind in this way it would also 5 have to be consistent of course with any future 6 governance or business model changes but I appreciate 7 the good faith nature of what you're putting forward and 8 it's something we'll look at. 9 Q. So would you be willing to make a commitment, then, to 10 discuss this proposal with NFSP and others to explore 11 this option and give the public and postmasters 12 confidence in the future, because you'd agree it's 13 important to help and ensure that the Post Office meets 14 its social purpose as a Government-owned company, rather 15 than acting as a company with only profit as its goal? 16 A. I would be absolutely willing to meet with anyone to 17 discuss the future of the organisation. I would as well 18 that, whilst I can see the very good spirit and good 19 faith nature of that proposal, fundamentally that -- 20 I think, if postmasters felt that was something that 21 they still didn't have the power, they still didn't have 22 a structure that gave them authority, and they would 23 just be, you know -- the perception of that being 24 a talking shop for grievances or not getting to the 25 source of what had gone wrong here. 69 1 I'd be cautious about that but, again, I can see, 2 you know, the positive nature of that proposal and where 3 it's come from and it's obviously worthy of further 4 discussion. 5 MS SHAH: Okay, thank you very much. 6 MR BLAKE: Thank you, sir. There are a small number of 7 questions from Ms Patrick. If I'm not going to get in 8 trouble with the stenographer, can I propose that we 9 take those -- 10 SIR WYN WILLIAMS: No, I'm sorry. It's over an hour and 11 a half now and I think small numbers of questions seem 12 to become longer, not shorter, this morning. So I think 13 we need to take a break. 14 MR BLAKE: Okay, sir. That's absolutely fine. After that 15 break, we'll need to take at least a 15-minute break 16 before Ms Badenoch attends. 17 SIR WYN WILLIAMS: Fine. So what time shall we resume? 18 MR BLAKE: Perhaps if we take a short break now, say five 19 minutes? 20 SIR WYN WILLIAMS: Well, let's make it 11.45. 21 MR BLAKE: Thank you very much. 22 (11.37 am) 23 (A short break) 24 (11.45 am) 25 MR BLAKE: Thank you, sir. Ms Patrick. 70 1 Questioned by MS PATRICK 2 MS PATRICK: Good morning, Minister. 3 A. Hi. 4 Q. Good morning my name is Angela Patrick. I act for 5 a number of subpostmasters who were wrongfully convicted 6 and have since had their convictions quashed. I'm 7 instructed by Hudgells Solicitors. I only have two 8 topics to cover with you. 9 The first is a question about mechanics, almost. In 10 Phase 2, we heard evidence about handover from one 11 administration to another, and back again, and one topic 12 that came up was the issue of a new administration not 13 being able to access the papers of the previous 14 administration. I just want to ask you, Minister, has 15 that practice changed? 16 A. Yeah, absolutely, really interesting question. So bear 17 in mind, this is all still relatively new for the new 18 ministers. That is my understanding, that we can't 19 access papers and decisions from previous 20 administrations. It comes up in a number of occasions, 21 to be honest, particularly, actually, around the 22 Department consideration of things like the trade talks, 23 and so forth. We have to refresh all of that as a new 24 Government. I would say specifically, in relation to 25 the Post Office, I've never felt that there's, you know, 71 1 something I needed that I haven't had access to. Some 2 of the broad policy decisions, for instance, you're 3 saying the appeal scheme for HSS, had already sort of 4 been -- they were in the public domain through the 5 Advisory Board's recommendation, so it wasn't like there 6 was something I felt we didn't know where it had come 7 from or where it had originated, or a piece of 8 information, and I think as far -- or certainly from my 9 point of view, I would say had a fairly good 10 relationship with particularly Kevin Hollinrake, who had 11 been the Postal Affairs Minister before the election 12 and, frankly, the ability to talk or raise issues 13 between us quite readily. 14 So that is my understanding of our constitution but 15 I don't feel or haven't felt that it's been a barrier 16 for me in this case. 17 Q. In practical terms, just to think about what that might 18 mean, thinking about one or two of the topics that are 19 still very much live, the Strategic Review and NBIT, if 20 there had been, for example, some work done under the 21 previous administration, a report produced or piece of 22 research or a piece of thinking, that was set down on 23 paper and in a drawer somewhere in the Department, that 24 couldn't be fished out and given to you as a minister 25 but civil servants would have access to it; is that 72 1 a reflection of the rule? 2 A. I believe what you're saying is right and I just want to 3 say that I don't consider myself an expert on this 4 having just been through it recently through it fairly 5 recently. I also don't quite know the situation in 6 relation to an arm's-length body that is sponsored by 7 the Department that would essentially be doing its own 8 work and then referring that back to the Department for 9 oversight or for decision making. But again, I would 10 say I don't feel that there's sort of anything that I am 11 aware of that has happened or would be beneficial to 12 know about that I haven't had access to, and when I have 13 said in exchanges in Parliament, either in responses to 14 questions from the oral statement or in departmental 15 questions, some of the things I've shared with you this 16 morning about the direction of travel I want to see the 17 Post Office in, I've felt there's broadly a degree of 18 consensus between the benches on that future direction, 19 though I haven't had a sort of specific conversation 20 with the former government about what they were thinking 21 in terms of the future of the Post Office. 22 Q. Thank you, Minister. The second topic I want to talk 23 about is Mr Stein raised the issue of families and 24 compensation. 25 Now, are you aware of an organisation called Lost 73 1 Chances? 2 A. I don't think I am aware of that, no, sorry. 3 Q. So there is an organisation called Lost Chances for 4 Subpostmaster Children who represent the children of 5 subpostmasters who have suffered as a result of the 6 scandal. Were you aware that they had met with Paul 7 Patterson of Fujitsu, on 9 August this year? 8 A. No, I'm not aware of that meeting, sorry. 9 Q. Since that date, Hudgells Solicitors have been chasing 10 for Lost Chances, chasing Fujitsu for follow-up on that 11 action. Have you had any conversation or contact with 12 Fujitsu since that date in early August to discuss 13 precisely that issue? 14 A. No, I haven't had that but I'm pleased, first of all, 15 that that conversation has happened, though I'm 16 frustrated to hear that it obviously hasn't resulted in 17 the follow-up that people would have wanted from that. 18 And I'd be very happy to be, as a Government, as 19 a Department, a sort of party to those conversations, if 20 that is deemed to be helpful, going forward into the 21 future, and I think, similar to the exchange we had 22 earlier about possible options for redress in future, 23 this is obviously an element of those, though I wouldn't 24 necessarily limit the conversations with Fujitsu just to 25 that. But I can see why this would be an area of 74 1 particular and appropriate interest. 2 MS PATRICK: Thank you. We have no further questions. 3 Questioned by SIR WYN WILLIAMS 4 SIR WYN WILLIAMS: Mr Reynolds, before you finish, can 5 I just ask you this: I have heard evidence from some 6 witnesses which suggest that, in effect, the Post Office 7 cannot be rescued. Those are my words, not their words, 8 but that's what it amounts to at the extreme end, all 9 right? 10 You have expressed quite firmly to me this morning, 11 at the beginning of your evidence, that despite all the 12 things that have happened, the Post Office should be 13 preserved. So what I'd like, if it's possible for you 14 to do, is to just give me the two, three, four, whatever 15 they are, bullet points which lead, I take it, your 16 Government and you personally to think that it's worth 17 preserving the Post Office? 18 A. Sir Wyn, that's an incredibly thoughtful question. 19 I would say, despite the scale of what went wrong here, 20 and it was very, very large indeed -- I mean, people if 21 they recognise me as a Cabinet Minister in the street, 22 this will be one of the things that they bring up, you 23 know, that's on their minds: wanting to know what the 24 progress is, what the pace of redress is, and so forth. 25 Despite that registering with the public in this way, 75 1 I do genuinely feel the public still want a Post Office. 2 They still want the service it provides. When I go 3 into, you know, the post offices in my local community, 4 they're actually always pretty busy. I think, as I say, 5 the regret is that I don't think postmasters are earning 6 appropriate remuneration from that level of business 7 taking place and, frankly, when it comes to new 8 initiatives like Banking Hubs, I think the Post Office 9 has been -- and in every case actually -- has been the 10 natural partner picked to run that in a local community. 11 I think there is, Sir Wyn, fundamentally, a need for 12 something, whatever you call it, whatever the future is, 13 that is the Post Office on the high street, providing 14 the kind of services that it currently does, and 15 potentially some new things in the future. I think the 16 big public policy questions like the future of cash in 17 our society, and the closure of high street banking in 18 many communities, I think the Post Office is part of the 19 answer to those other wider public policy concerns, and 20 I do foresee, potentially, in future, services that 21 aren't currently delivered by the Post Office, either 22 Post Office being a potential vehicle for delivering 23 them, in that way. 24 But I think the future is definitely one that has, 25 to be frank, a significantly smaller centre and, you 76 1 know, is based much more around power authority and 2 governance being provided to postmasters on the 3 frontline, really a central organisation serving those 4 people. In a way, I don't think that's been the 5 relationship leading into this scandal in particular. 6 I would also say, to be frank, even when there 7 are -- I've had circumstances in my constituency, Sir 8 Wyn, where someone success providing postal services 9 wishes to move on, retire, whatever, and you ask for -- 10 is there another business in the local community willing 11 to provide these things? If that can't be found, there 12 is still genuine regret amongst the public at the loss 13 of those services. So I feel both the public demand and 14 policy rationale is still there and that underpins these 15 conversations and work that we're doing and what the 16 future might look like. 17 SIR WYN WILLIAMS: Thank you very much, Mr Reynolds. I'm 18 very grateful to you for taking the time to come to give 19 evidence at the Inquiry. All I need do is to thank you 20 for doing that. 21 THE WITNESS: Thank you for the opportunity to be here, 22 Sir Wyn. 23 SIR WYN WILLIAMS: Right, Mr Blake. A 15-minute break, yes? 24 MR BLAKE: Well, we'll need 15 minutes in which everybody 25 clears the room, I'm afraid. 77 1 SIR WYN WILLIAMS: Right, okay. 2 MR BLAKE: Thank you very much. Thank you. 3 (11.59 am) 4 (A short break) 5 (12.14 pm) 6 MR BEER: Good afternoon, sir. Can you see and hear us? 7 SIR WYN WILLIAMS: Yes, thank you very much. 8 MR BEER: May I call Kemi Badenoch, please. 9 KEMI BADENOCH MP (sworn) 10 Questioned by MR BEER 11 MR BEER: Good afternoon, Ms Badenoch. My name is Jason 12 Beer and I ask questions on behalf of the Inquiry. Can 13 you give your full name, please? 14 A. My full name is Kemi Badenoch. 15 Q. Thank you. You've provided kindly two witness 16 statements to the Inquiry. The first of them is dated 17 26 September 2024. Could you please open it? I think 18 it's tab A2 in your bundle there. For the transcript, 19 the URN is WITN11480100. I think it's nine pages in 20 length, excluding the appendix. Is that your signature 21 on page 9? 22 A. Yes, that is an electronic signature but, yes, I did 23 sign electronically. 24 Q. Thank you very much. Are the contents of that statement 25 true to the best of your knowledge and belief? 78 1 A. Yes, they are. 2 Q. Thank you very much. If you turn on a tab to your 3 second witness statement, which is dated 7 October 2024, 4 that's 14 pages in length, excluding the appendix. 5 I think there's one correction to make, paragraph 2 on 6 page 1. 7 A. That's right. 8 Q. Second line. Should the date be 26 September 2024? 9 A. Yes, that's correct. That's the correction required. 10 Q. Thank you very much. Is that your signature on page 14? 11 A. Yes, that is another electronic signature but this is 12 mine. 13 Q. Is that witness statement, with that correction brought 14 into account, true to the best of your knowledge and 15 belief? 16 A. Yes, it is. 17 Q. Thank you very much. By way of background, I think it's 18 right that, before coming to Parliament in 2017, you 19 worked firstly as a software engineer in the CGI group; 20 is that right? 21 A. For a company called Logica CMG, which then became the 22 CGI Group. 23 Q. Which is, I think, a Canadian IT consulting firm; is 24 that right? 25 A. Not when I was there but, yes, I believe that is what it 79 1 is now. 2 Q. You then worked as a systems analyst I think at RBS -- 3 A. Yes. 4 Q. -- is that right? The retail and commercial bank. Then 5 I think you moved to be an Associate Director at Coutts, 6 the private bank and wealth management firm; is that 7 right? 8 A. Yes, that's correct. 9 Q. Then, finally, before Parliament, you worked as the 10 Digital Director at The Spectator magazine; is that 11 right? 12 A. Yes, that is correct. 13 Q. Thank you. You became an MP, the member for Saffron 14 Waldon, as that constituency was then described, in 15 2017, and I think you remained on the backbenches until 16 July 2019; is that right? 17 A. Yes, that is correct. 18 Q. In July 2019 you took up the position of Parliamentary 19 Under-Secretary of State for Education? 20 A. Yes. 21 Q. Then from February 2020, until 15 September 2021 you 22 were the Exchequer Secretary to the Treasury? 23 A. Yes, I was. 24 Q. That was when Mr Johnson was Prime Minister and Mr Sunak 25 was Chancellor. 80 1 A. Yes, that's right. 2 Q. From 16 September 2021 until 6 September 2022, I think 3 you were a Minister of State at the Department for 4 Levelling Up, Housing and Communities? 5 A. Yes. 6 Q. You were the Secretary of State for International Trade 7 and, indeed, the President of the Board of Trade between 8 6 September 2022 and 7 February 2023? 9 A. Yes, I was. 10 Q. Then most relevantly for us, from 7 February 2023 until 11 5 July 2024, you were Secretary of State for Business 12 and Trade? 13 A. That is correct, yes. 14 Q. So it's that 17-month period, February '23 until July 15 '24 that we're most interested in, you understand? 16 A. Yes, thank you. 17 Q. Then I ought to record in the evidence that after 5 July 18 2024 you've been a member of His Majesty's Opposition, 19 more recently Leader of the Conservative Party and 20 therefore Leader of the Opposition? 21 A. That's right. 22 Q. Can I turn right back to the beginning, then, of the 23 relevant period, February 2023. I think you tell us in 24 your witness statement that you received an introductory 25 briefing concerning the Post Office on 21 February 2023; 81 1 is that right? 2 A. Yes. 3 Q. So that was about two weeks into your time as Secretary 4 of State? 5 A. Yes. 6 Q. What was your state of understanding about the issues 7 concerning the Post Office and, in particular, the 8 Horizon scandal, before you took up your role as 9 Secretary of State in February 2023? 10 A. No more than a lay MP. So I was aware that there had 11 been an issue with the Horizon system and I was also 12 vaguely aware about the outcome of the court case, which 13 was that an injustice had occurred and a lot of 14 postmasters required redress. But the full detail of 15 what had gone wrong with Horizon and what the 16 postmasters had endured I was not familiar with. 17 Q. So the previous ministerial and similar appointments you 18 had held hadn't brought you into contact with the Post 19 Office or the scandal in any substantial way? 20 A. Not that that I recall, no. 21 Q. So the Common Issues Judgment, the Horizon Issues 22 Judgment, the settlement of the Group Litigation, the 23 overturning of convictions by the Court of Appeal in 24 April 2021, the Overturned Convictions Scheme, the 25 Horizon Shortfall Scheme, and the GLO Compensation 82 1 Scheme, all of the things you were told about in that 2 briefing of February 2023, they were essentially news to 3 you; is that right? 4 A. In the sense that the detail of what they were was 5 provided. I am sure that, as of that time, I would have 6 heard about schemes and references to them but, in terms 7 of the detail, that was news to me. I was fully 8 engrossed in my other ministerial roles. In fact, the 9 only thing that's missing from the -- 10 Q. Minister for Equalities -- 11 A. Yes, I was Minister for Equalities from 2019 right up 12 until July 2024, so I also had another ministerial job, 13 so most of what I was doing was focused on my 14 ministerial role and my work as a constituency MP. 15 Q. Understood. Can we look at the briefing, please. It 16 will come up on the screen. BEIS0001061. You'll see 17 this is headed "Post Office introductory brief for the 18 Secretary of State". You'll see it's dated February 19 2022. I think that must be a typo because this was 20 February 2023. 21 A. It could have been a typo but it may also have been 22 a lightly updated version of the standard briefing which 23 they would provide to Secretaries of State. 24 Q. So still a typo because the date to have been updated as 25 well? 83 1 A. Yes, that's right, yes. 2 Q. Can we please look at page 2. If we just pan out 3 a little bit, please, an overview is given of the Post 4 Office. You'll see, for example, on the last bullet 5 point, it gives some dates or a date of January 2023. 6 So it is updated, perhaps even lightly. These kind of 7 facts and figures, these would have been new to you? 8 A. Yes, definitely. 9 Q. If we go over, please, to page 3. There's a diagram 10 setting out the Government's relationship with Post 11 Office Limited. It records in the rubric that the 12 Secretary of State became the sole shareholder in the 13 Post Office Limited in 2012, by virtue of the Postal 14 Services Act 2011. 15 A. Mm. 16 Q. Then you'll see the boxes set out, two boxes on the 17 left, two in the middle and then two on the right. On 18 the left-hand side, two boxes, one within the other, one 19 referring to you, the Secretary of State, and one 20 referring to the Minister, Mr Hollinrake. 21 A. Mm. 22 Q. Did that position, as is set out in those boxes, reflect 23 the state of affairs on 21 February 2023, ie the date of 24 the briefing? 25 A. Yes, because if I can describe the nature of the 84 1 Machinery of Government Change, Kevin Hollinrake had 2 already been in the Department for Business before it 3 was joined up with Trade, so he was already carrying out 4 that work. So, effectively, the delegation existed even 5 before he had come to the Department, but what the main 6 change was that I was becoming the Secretary of State 7 for Business as well as Trade, and I was taking on the 8 sole shareholder responsibilities. 9 Q. I see. So as at the date of this meeting, 21 February 10 2023, five functions were retained by you, the five 11 bullet points under "Sole Shareholder", namely Board 12 appointments, remuneration, Post Office's strategic 13 plan, the funding envelope and the size of the network? 14 A. Mm. 15 Q. But delegated to Mr Hollinrake ministerial oversight and 16 the Parliamentary spokesman? 17 A. Yes, but I'm not sure that fully describes how it would 18 have worked. The five items which are listed as my 19 responsibilities, Kevin would have also been working on 20 them as well. So the delegation works in the sense that 21 both ministers are aware of everything that's happening. 22 He tends to -- the junior minister looks at the detail, 23 and I serve as an escalation point, usually given 24 updates and decision-making capacity after he has 25 provided advice to me, based on what he thinks should 85 1 happen. That was the main nature of the role, 2 delegation and responsibilities. 3 Q. In your witness statement, let's look at it, please, 4 it's the second witness statement, it will come up on 5 the screen. So WITN11480200, page 3, paragraph 10. You 6 say: 7 "Two days later (on 23 February [so after the 8 meeting we've just looked at] 2023) I had another 9 meeting with David Bickerton at which it was suggested 10 that Post Office business should be delegated to the 11 Minister, Kevin Hollinrake. It was entirely normal as 12 Secretary of State to delegate aspects of my large 13 portfolio to ministers ..." 14 Then you referenced a list of your ministerial 15 responsibilities, which was indeed large: 16 "... it seemed entirely sensible to delegate Post 17 Office issues to Kevin Hollinrake, given his interest in 18 and grip of the issues and the fact that he was already 19 doing this work as Minister within BEIS, prior to the 20 creation of DBT and my arrival as Secretary of State", 21 which you've just essentially said. 22 A. Mm. 23 Q. Do we take it correctly from that that there was 24 essentially a further delegation beyond that which was 25 described in the two boxes, which overlapped with five 86 1 bullet points in the first box and two bullet points in 2 the second box? 3 A. I think it would be more accurately described as a way 4 of working. So a more comprehensive restating of what 5 sort of delegation I wanted to see. It was effectively 6 the same sort of relationship that you would have had in 7 any other ministerial Department, where the Junior 8 Ministers look after the detail. But this conversation, 9 if I recall correctly, it was just me restating my ways 10 of working to David Bickerton, and looking at just the 11 sheer scale of what needed to be done, ensuring that we 12 weren't dropping the ball on anything because, as of 13 this point, I was still carrying out all of my duties as 14 Trade Secretary. 15 So I was effectively taking on the work of two 16 departments and I was quite concerned about how much 17 needed to be done on the Post Office and I wanted to 18 make it clear that Kevin had authority and they 19 shouldn't wait for everything to come to the Secretary 20 of State. That's one of the things that does tend to 21 happen, where, even when a junior minister has opined on 22 things, people wait for the Secretary of State and that 23 ends up slowing things down. So it was a restating of 24 how I saw of the delegation working. 25 Q. This paragraph here refers to the delegation of Post 87 1 Office business or the delegation of Post Office 2 issues -- 3 A. Mm. 4 Q. -- to Kevin Hollinrake, in the second and about the 5 sixth line/seventh line. Was that delineated in any 6 way, ie which things you were formally delegating to 7 him? 8 A. I don't believe so because I was still the official 9 decision maker. So delegating from my perspective, 10 apart from the Parliamentary work carrying out oral 11 statements, and so on, was the day-to-day work on the 12 Post Office: meeting people, so the meetings, going to 13 the Board meetings, for example, talking to the staff 14 within the Department for Business and Trade. So the 15 day-to-day ministerial work of the Post Office was for 16 him to look after and then the decision points would 17 come to me. 18 Q. So you retained formal responsibility for decision 19 making, that wasn't delegated, but day-to-day business 20 was? 21 A. I would -- well, yes, that is correct. So I retained 22 formal responsibility for decision making, but I also 23 allowed him to make decisions and then let me know what 24 he had wanted to do, and I would decide whether I needed 25 to take a different option, which rarely happened. But 88 1 all -- I believe that all ministers should have the 2 capacity to take decisions without constantly being 3 micromanaged by the Secretary of State. 4 So when decisions would come to me, it would often 5 because there might have been a difference between what 6 Kevin wanted to do and official advice, and I would need 7 to decide which way to go, or if he just wanted me to be 8 aware of conversations that had occurred before he ended 9 up making a particular decision. 10 Q. Thank you. Can we go back to the diagram, please, which 11 was BEIS0001061, and look back again at page 3, please. 12 Do you see, after the Hollinrake box, I'm going to call 13 it, there is a line up to Post Office Policy Team and 14 a line down to UKGI Shareholder Representative? 15 A. Mm. Yes, I do. 16 Q. Within the Post Office Policy Team box, the first bullet 17 point is setting overall policy direction for Post 18 Office. Did the DBT Post Office Policy Team have the 19 responsibility for setting the overall policy direction 20 for Post Office? 21 A. Well, it depends on what you mean by policy versus what 22 the officials mean when they've put that on the slide. 23 Can you elaborate exactly: when you say "policy", how do 24 you mean? 25 Q. I can only go on the words on the page, Ms Badenoch, 89 1 which suggest that the Post Office Policy Team had 2 responsibility for setting the overall policy direction 3 for Post Office. 4 A. So I don't think that that is what they are referring 5 to. Ministers decide -- ministers decide policy but the 6 Post Office policy was decided long before Kevin and 7 I had become ministers. I suspect what they were trying 8 to say there was ensuring that they passed on what we 9 were talking about in terms of policy direction on to 10 the Post Office. But, in terms of setting overall 11 policy direction, that would happen at ministerial 12 level. 13 Q. So that's one issue, responsibility for setting, and you 14 say that that rested with the politicians rather than 15 the civil servants? 16 A. Well, yes. I mean, the funding comes from the 17 politicians. The nature of what the Post Office should 18 or shouldn't be doing comes from politicians. But this 19 is one of the things that's quite interesting about the 20 Post Office itself as an entity. It's one of those 21 organisations that's neither fish nor fowl. It's not 22 fully public service, it's also commercial, as the 23 solicitor shareholder, as ministers, we can't get 24 involved in commercial decisions. We don't often have 25 the detail and the expertise. This was just one of 90 1 about 30 other arm's-length management organisations 2 which we're looking at. 3 However, the policy teams do have the time to carry 4 out that bit of work. And, remember, policy teams also 5 carry out the research which advises ministers on what 6 the options are and then we decide which direction to 7 take. So I suspect this bullet point is trying to 8 explain to me what the Policy Team does, rather than 9 trying to define to outside observers how the Post 10 Office is being managed. 11 Q. In the answer before last that you gave, you said that 12 the Policy Team was -- and I'm summarising here -- more 13 responsible for taking the decisions made by the 14 politicians and passing them on, or carrying them into 15 effect. 16 A. Yes. 17 Q. You'll see that there isn't arrow coming out of the Post 18 Office Policy Team box. This isn't just me picking 19 apart a diagram, I'm trying to actual understand, on 20 behalf of the Inquiry, what role the Policy Team had in 21 setting the policy direction for the Post Office. If it 22 was responsible for carrying into effect the will of 23 ministers, how did it do that? 24 A. Well, this was one of the things which UKGI, for 25 example, was doing. As the shareholders -- 91 1 Q. Sorry to speak over you, I can understand that, but 2 that's not what this diagram shows, is it? Here, the 3 narrow goes down to UKGI, and it suggests under the 4 first bullet point that its responsibility was to 5 challenge the Post Office's strategy, rather than 6 setting it. 7 A. Mm. So I think that this diagram needs to be looked at 8 in context. It is not a definitive diagram of exactly 9 how everything works. It is really a short briefing 10 document, so that we can see how all of the teams are 11 interacting and give a high-level overview of what it is 12 they do. This PowerPoint is not a bible for exactly how 13 things should work. We as ministers will have multiple 14 teachings, which teams are rushing through in half-hour, 15 one-hour meetings, how an organisation is put together 16 and how it all -- and how it all works. 17 But the real learning goes on over a longer period 18 of time, not the half hour meeting. So I wouldn't read 19 too much into this diagram as the definitive sort of 20 explanation of how things worked. You know, even as 21 I described the delegation, this is simply what they're 22 showing me on day one, "This is officially what you do, 23 here's our team, this what we do", and so on and so 24 forth. 25 I would not use this diagram as a full description 92 1 of how every single thing happened. It's a useful 2 illustration. 3 Q. You said that in fact UKGI had responsibility for 4 carrying into effect the politicians' decisions as to 5 Post Office's strategy? 6 A. No, that's not quite what I said. I said UKGI also 7 carried out that sort of representation of what 8 ministers wanted, as a shareholder's representative but 9 they were not a Policy Team. 10 Q. Who did have responsibility for carrying into effect 11 minister's decision as to the policy direction of Post 12 Office? 13 A. Well, it depends specifically on the issue. We have 14 a team that has a director, there's a Director General 15 who covers the Post Office, as well as many other 16 departments' business areas, as well as arm's-length 17 bodies -- British Business Bank being a classic 18 example -- and there will be quite a few people within 19 the Policy Team who have an interaction with the Post 20 Office, sometimes at Board level, but it's split amongst 21 various individuals. 22 Q. As between the Post Office Policy Team and UKGI, who had 23 principal responsibility for carrying into effect 24 ministers' policy directions for Post Office? 25 A. Well, again, it depends on what specifically it is we 93 1 are talking about. So -- 2 Q. I'm essentially asking, did the Government use, its 3 representative on the Board as the primary means by 4 which it sought to influence the policy direction for 5 the Post Office? 6 A. Well, quite often, the policy teams would also speak to 7 the UKGI shareholder representative. So most of this 8 day-to-day interaction was carried out by Minister 9 Hollinrake, and I know that he was meeting our UKGI rep 10 Lorna, as well as our policy teams. So I saw them as 11 being more integrated than perhaps the diagram would 12 show, and I think that's a natural expectation for the 13 size of the organisation but, in terms of setting 14 policy, there were really just two things we were doing 15 one was trying to make sure that the Post Office did not 16 fall over, looking to the future, you know, the Board 17 representation, the future of the Post Office, and so 18 on, and managing the issues that had come out of 19 Horizon. 20 And beyond that, there was very little new policy 21 being created. So when we talk about policy, we're 22 really talking about the day-to-day management of policy 23 that has been set over a longer period of time, and this 24 was something that worked together really well broadly 25 as a team with Kevin leading. 94 1 Q. Thank you. That can come down. Can I turn to my second 2 topic, which is compensation and redress. 3 You tell us in your second witness statement, let's 4 turn it up, it's page 11, paragraph 39, you say: 5 "Right from my first briefing, I was concerned with 6 the pace at which the compensation was being delivered. 7 Kevin Hollinrake also told me that we should be going 8 faster, and he needed some help from his Secretary of 9 State to accelerate things. We had briefings on the 10 issue with officials, and it was quite clear to me that 11 we were allowing bureaucracy to get in the way of 12 redress too much of the time. Kevin and I wanted to get 13 the money out there, and we were always given a reason 14 why we couldn't. For example, officials suggested we 15 wait until the end of the Inquiry so we knew precisely 16 what to do. I was adamant that we could not wait that 17 long and we had to get the money out. I was 18 particularly concerned that postmasters would die 19 waiting for compensation. I remember saying in one 20 meeting that I don't want any of that happening on my 21 watch, and that we wanted to get the redress out to 22 people before it is too late. I wanted to know what we 23 could do to get the payments out the door, and said we 24 needed to do whatever we could to make it happen." 25 Can I ask, firstly, as Exchequer Secretary for 95 1 18 months from February 2020 until September 2021, were 2 you aware of any blockers in the Treasury to the payment 3 of full and fair compensation? 4 A. No. 5 Q. Was that something that crossed your desk, the payment 6 of compensation and the provision of redress arising 7 from the Horizon scandal when you were Exchequer 8 Secretary? 9 A. It may have done but I don't recall, I don't recall 10 looking at that. I'm not sure that that sort of thing 11 would have been the Exchequer Secretary's remit, so I'd 12 be surprised if it did. The Exchequer Secretary didn't 13 look at spending. It looked -- the Exchequer 14 Secretary's role is around economic growth and where 15 money is coming from, rather than where money needs to 16 go to. So I would be surprised if that crossed my desk. 17 Q. So that would be more responsibility for the Chief 18 Secretary to the Treasury? 19 A. Very likely, yes. 20 Q. Thank you. At this time, once you became Secretary of 21 State, why were you concerned with "the pace at which 22 the compensation was being delivered"? 23 A. Well, because after the briefing, and maybe during the 24 briefing as well, Kevin had told me how he had been 25 looking at this issue from the time when he was 96 1 a backbench MP, and I was aware of the injustice, you 2 know, just from reading newspapers rather than any 3 Parliamentary briefing, and I had seen this sort of 4 thing happen before, where justice delayed is 5 effectively justice denied, and I am more interested in 6 making sure that we get things done, rather than every 7 single box is ticked. 8 I feel that there is often too much bureaucracy in 9 the way of getting things done because people are 10 worried about process, they are worried about, if things 11 go wrong, them being on the hook for that, and so they 12 carry out lots of checks and balances, well beyond what 13 I think is required in order to deliver the right 14 outcome. 15 Q. You say something along those lines in this paragraph 16 here, the sentence about five lines in: 17 "... we were allowing bureaucracy to get in the way 18 of redress too much of the time." 19 Who was allowing bureaucracy to get in the way of 20 redress too much of the time? 21 A. Well, the Government machine. So I think I remember 22 asking a question like, "Why can't we just give them the 23 money now, if we know this" -- I can't remember 24 specifically what we were talking about, but I just like 25 to ask the simple questions, why can't we just do this? 97 1 And then I'd be told, "Well, there could be judicial 2 review and the Treasury has these value for money 3 requirements and, if we don't meet them, then we might 4 end up having to go to court". So I just kept trying to 5 find a way through, how do we -- you know, I put myself 6 in the shoes of the subpostmasters, that if I was this 7 person or if I was a member of their family, what would 8 I want? 9 And in my view, what they would want is for the 10 matter to be dealt with as quickly as possible and to be 11 able to move on with their lives and, when I would have 12 conversations with officials, I would be told, "Well, 13 there's still an inquiry going on and if you make 14 a decision like this without going through all the 15 checks and balances or without waiting for the Inquiry 16 to conclude, then you might have a problem later". 17 But I thought that it was better to err on the side 18 of ensuring the people got their compensation quickly, 19 rather than making sure that we didn't get into any 20 trouble for not doing it in the perfect way. 21 Q. Thank you. I think in August 2023 you wrote a letter to 22 the then Chancellor of the Exchequer, Jeremy Hunt MP? 23 A. Yes. 24 Q. Can we look at that, please. BEIS0000808. You will see 25 it's not fully dated, it's dated "XX August 2023", but 98 1 I think we know from other evidence that the letter that 2 issued was dated 9 August 2023. 3 A. Okay. 4 Q. The cross-heading is "Accelerating Post Office Horizon 5 compensation" and, broadly, Ms Badenoch, was this letter 6 in pursuance of your strategy to try and get 7 compensation paid quickly? 8 A. Yes, it was and, bearing in mind that this is now 9 five/six months after the initial briefing, this letter 10 is an expression of my frustration that things are still 11 not happening. And when I ask officials shortly before 12 I send this out, "What do we need to do?", they tell me 13 that I need to write to the Chancellor, there's no other 14 way of getting what I want in terms of delivering the 15 compensation swiftly. 16 So that's the reason why the letter is being written 17 at this point. 18 Q. You say: 19 "Kevin Hollinrake and I are both determined that 20 postmasters affected by the Post Office Horizon scandal 21 should get proper compensation -- and that they should 22 get it as rapidly as possible." 23 You then describe in the second paragraph the three 24 sets of compensation schemes or arrangements that were 25 then afoot. In the third paragraph, you say: 99 1 "This scandal ruined many postmasters' lives. The 2 longer compensation goes unpaid, the more criticism we 3 shall face -- including from the Williams Inquiry. If 4 we were to fail to compensate all the GLO members in 5 time we would face severe criticism from all sides." 6 A. Mm. 7 Q. "Kevin and I have therefore been looking at ways in 8 which we could radically speed up the processes. We 9 have already made interim payments of £163k to almost 10 all postmasters whose convictions are overturned, and we 11 undertake only limited scrutiny of GLO claims for 12 certain hearing loss under £10k and HSS ones under £8k. 13 We are looking to extend these measures substantially in 14 relation to the GLO, which has started to receive 15 claims. 16 "Some of the options we are considering would 17 actually save money on the cost of lawyers or other 18 advisers than they would cost in extra compensation. 19 Others do have additional costs -- but in my view these 20 would be well worthwhile in light of the non-financial 21 benefits of accelerating the schemes. In particular, 22 I would like us to be able to offer a £100k fixed 23 payment to every claimant who applies to the GLO scheme. 24 I recognise that announcing this will create significant 25 pressure to offer the same for HSS claimants, which we 100 1 should consider separately, but I believe that is the 2 right route forward for the GLO scheme. Such radical 3 action would offer great advantages in terms of the 4 speed of the process. The DBT Accounting Officer has 5 expressed some concerns about the value for money given 6 the repercussive risk and raised the potential need for 7 a direction for this idea. I would welcome your views 8 on the best approach, being mindful of value for money 9 considerations, and whether you agree that we should 10 pursue this." 11 Then there's a passage I needn't read. 12 So it appears from this letter that, by this time, 13 you and Mr Hollinrake were fully engaged into the need 14 for urgent compensation to be paid to GLO members? 15 A. Yes. 16 Q. This is essentially a joint letter, is that right, from 17 you and Mr Hollinrake? 18 A. Well, it's my letter but we both agreed that this was 19 the best way forward. He had come to me on one or two 20 occasions saying that he was having trouble getting 21 through to the Treasury and also separately getting 22 officials to agree. So the reference to the DBT 23 Accounting Officer is our Permanent Secretary, and he 24 asked for my help, and I said I will go to the 25 Chancellor myself and ask for this money and try and cut 101 1 through the bureaucracy. 2 Q. So this is an escalation from him to you, essentially -- 3 A. Yes, and this was my response to the escalation. 4 Q. -- and a similar escalation in the sense that you're 5 writing directly to the Chancellor of the Exchequer? 6 A. That's right. 7 Q. Do you think you should have assumed this level of 8 engagement immediately after your appointment in 9 February 2023, or shortly thereafter? 10 A. No, I would not have known enough to have carried out 11 this level of escalation. This is coming after multiple 12 attempts, which I can't recall the full detail of, of 13 trying to get compensation out, move quickly. So this 14 letter is happening after a period of frustration that 15 things still aren't happening, and I also remember 16 a conversation, where I was, you know, advised to wait 17 until the Inquiry. This is the point I was referencing 18 in the witness statement, and I am not one of life's 19 natural bureaucrats. My view is that we just need to 20 get things done because, if you don't, more problems 21 will arise. 22 And what I was seeing, as I observed the way the 23 Department and the Post Office were carrying on, was 24 that we would just never get to the end of it, and 25 I wanted to start seeing things happening. I had my own 102 1 personal objective of making sure that we did right by 2 the postmasters and we showed that we were delivering on 3 the scheme as promised after the court case and that we 4 were just being seen to do the right thing. 5 Being seen to do the right thing, in my view, is 6 just as important as doing the right things. Making 7 explanations and excuses for why things take so long 8 shouldn't go on beyond a few weeks or months, and that 9 was my attempt to short-circuit the process and create 10 options. So this was not a solution that we had got 11 advice from; it was something that Kevin himself had 12 recommended and said, "Why don't we try this and see how 13 far we get?" 14 Q. Presumably doing the right thing is actually more 15 important than being seen to do the right thing? 16 A. Both of them are important. Doing the right thing when 17 no one knows that you're doing it often creates 18 different problems elsewhere. So as a politician, it is 19 not enough to be doing the right thing; it is important 20 to be seen to be doing the right thing. Perception 21 matters too, otherwise you lose trust. 22 Q. In paragraph 47 of your witness statement, you say: 23 "Kevin and I agreed that we should prioritise money 24 out of the door, even if this risked paying more than 25 was due." 103 1 Is that the approach that you were advocating: that 2 speed should triumph accuracy? 3 A. Yes. 4 Q. Can we look at the Chancellor's reply the same month, 5 BEIS0000705. You'll see his reply. If we look at the 6 second page and scroll down, you'll see it's a letter 7 from Mr Hunt. Go back to the first page, please. It's 8 dated August 2023. He says, in reply to you: 9 "Thank you for your letter of 9 August ..." 10 That's one of the pieces of evidence that we can 11 establish that your letter was dated 9 August from: 12 "... regarding the acceleration of Post Office 13 Horizon Compensation. 14 "I am wholly committed to ensuring the postmasters 15 achieve the full and fair compensation that they rightly 16 deserve." 17 Then moving on to paragraph 5, where he addresses 18 the substance of your request: 19 "In relation to the specific proposal for fixed-sum 20 awards on the GLO scheme, while successful delivery is 21 paramount, we must also have regard to our 22 responsibility for the public finances and to ensuring 23 that the treatment of claimants on each Horizon 24 compensation scheme is fair to that of their peers." 25 Then paragraph 6: 104 1 "As you note, making fixed-sum awards on the GLO 2 would incur significant repercussive risk and cost, 3 including to the [HSS]. Given the extent of this risk 4 and its high likelihood of crystallisation, I would 5 encourage you to explore the full breadth of other 6 options to advance the ultimate objective of timely and 7 successful delivery of full and fair compensation." 8 Then, over the page, he says he's grateful to you 9 and Mr Hollinrake. 10 So paragraph 6 was essentially a rejection of the 11 proposal by the Chancellor? 12 A. Yes. 13 Q. You tell us in your witness statement, it's at 14 paragraph 44, this is your second witness statement, if 15 we turn that up. It's page 13. Having cited the letter 16 that I read from you to the Chancellor, you say: 17 "Despite some initial resistance from the Treasury 18 ..." 19 Then you crossrefer to the letter we've just read, 20 Mr Hunt's reply. 21 A. Mm yes. 22 Q. "... I was prepared to issue a Ministerial Direction to 23 get this over the line." 24 You describe this as "initial resistance". Wasn't 25 it just a refusal? 105 1 A. Well, the witness statement is written at a point when 2 we did get some money over the line, so that's what I'm 3 referring to. 4 Q. I see. So, in the context of the payment of 5 compensation as a whole -- 6 A. Yes. 7 Q. -- this rejection is to be seen as "initial resistance"? 8 A. Yes. 9 Q. Got it. You say you were prepared to issue 10 a ministerial direction to get it over the line. 11 Can we look, please, at the reference to 12 a ministerial direction. BEIS0000716. It's page 23. 13 You'll see here an email of 21 August 2021, if we scroll 14 down, and a bit more, just to see the signature block. 15 I think Rose was one of your Private Secretaries -- 16 A. That's right. 17 Q. -- or in fact the Private Secretary; is that right? If 18 you scroll up, please -- 19 A. Do you have the reference in the pack for the hard copy 20 that I could look at? 21 Q. Yes, B28. 22 A. Thank you. 23 Q. It would be in the page in the bottom right-hand corner, 24 23. 25 A. Thank you. 106 1 Q. You'll see that this is the first email in the chain. 2 It's the originating email. Your Private Secretary says 3 that she had: 4 "... a meeting this morning with [you], which 5 touched on [amongst other things]: (1) Horizon -- in 6 particular the ongoing work to speed up compensation for 7 the GLO postmasters ... The Secretary of State was 8 particularly concerned about the pace at which 9 compensation schemes are being delivered and is keen to 10 ensure we're doing all we can to speed things up. 11 "Conscious that Minister Hollinrake and [the 12 Permanent Secretary] have very much been gripping this, 13 so my sense is we need a couple of paragraphs to bring 14 [the Secretary of State] up to speed on the following 15 ..." 16 If we just look to the first bullet point but the 17 sub-bullet point: 18 "It is worth noting that [the Secretary of State] is 19 supportive of the £100k flat offer to GLO postmasters 20 and is content to provide a Ministerial Direction to see 21 this get over the line. As such, it would be good if 22 the update focuses on how we can deliver this proposal." 23 I think that's the crossreference you make in your 24 witness statement to a willingness to provide 25 a ministerial direction to get it over the line -- 107 1 A. Yes. 2 Q. -- is that right? Can you explain the circumstances in 3 which a ministerial direction may be given? 4 A. I think this is best seen in the context of the question 5 you asked me earlier, about speed versus accuracy. So 6 in Government we have to make sure we're delivering 7 value for money for the taxpayer and there are some 8 times when an amount that's being paid is not really 9 value for money, but there are other considerations, 10 which a minister might think make that worthwhile. In 11 this case, the ministerial direction, which I had 12 wanted, was to overrule the value for money, because 13 I was looking at a scenario where, if you're 14 a subpostmaster, would you rather have compensation that 15 might be £10,000 more or £10,000 less than what you 16 would have done, versus passing away and your family not 17 getting the money or you not getting the money? 18 And, in my view, the worst risk was someone not 19 getting money at all, rather than them not getting the 20 exact amount of money right down to the penny. 21 That does not meet value for money considerations 22 because the Government will be worried about overpaying 23 and I felt that, given the context, given how long this 24 had been taken, it was better that we overpay, if that's 25 the worst-case scenario, but make sure people get their 108 1 money quickly, than wait until we derive the perfect 2 amount and they are not there to receive the money at 3 all. 4 Q. Would such a direction overrule or resolve all of the 5 objections from the Treasury? 6 A. So this is where ministerial directions can be funny. 7 So if the Treasury doesn't give you the money at all, 8 you can't direct anything. They need to give you the 9 money first and then you can decide how it is best used. 10 So, yes, it can overrule certain requirements which they 11 might place on things but, quite often, a ministerial 12 direction comes in long after money has been given. But 13 this was also not just me trying to solve the problem, 14 but showing willing to my officials, so that they didn't 15 feel that they had to bear the responsibility. 16 A ministerial direction is often a short way of 17 saying, "Don't worry about it, it'll be my problem not 18 yours". 19 Q. I was going to ask, was this exercising soft power, 20 essentially, an unkind way of describing it would be 21 sort of posturing, but in order to get a result? 22 A. It could be seen that way but I was very happy to make 23 the direction. So it wasn't just posturing but it was 24 signalling the direction which I wanted the Department 25 to take, and to make it very clear -- and I am happy 109 1 that we did this because now I can talk about it at the 2 Inquiry -- to make it very clear that we need to change 3 the way we do things in Government. There is far too 4 much going around and around in circles and avoiding 5 taking serious real decisions because everybody is 6 worried about getting into trouble later. 7 This is something which I tend not to worry about, 8 maybe I should do, but I do trust my judgement, and 9 I think that you look at the way this case has panned 10 out that we should have just done it in August 2023. 11 I am glad we got there in the end but I think the 12 worries were -- that people were overly worried, that's 13 the best way to put it. 14 Q. Why was no ministerial direction simply issued by you? 15 A. Because there was no money to haggle over what the right 16 value should be. So, in order to issue a ministerial 17 direction around value for money, you need to have the 18 money in the first place and, at this point, no money 19 had been outlined specifically for this proposal. At 20 least, that's what I recall. 21 Q. So threatening or raising the possibility of 22 a ministerial direction would be ineffective? 23 A. Well, I don't think so because, if you look at the 24 letter, which the Chancellor had written, if we can just 25 go back to it because you said refusal, and I said 110 1 resistance, and I do tend to choose my words carefully. 2 I did not see that as the end of the line. I saw it 3 very much as the first -- this is -- I've been in the 4 Treasury, I know how Treasury works. The Treasury often 5 starts with "No", and eventually you haggle your way 6 through. 7 I was not expecting the documentary in January, 8 which helped speed things along but, knowing how the 9 Department worked, I knew that that was an opening move, 10 you'd get a response, and eventually, you would get 11 something and then we could use a ministerial direction 12 to try to move the process along for that specific 13 proposal. 14 Q. You wanted to look at the letter again, BEIS0000705? 15 A. Yes. There might be something there which I can point 16 to, there might not, but I can't remember off the top of 17 my head. 18 Q. It'll just come up on the screen. If there is, it will 19 be in paragraphs 5 and 6? 20 A. Yes, the line, "I am receptive to measures which will 21 increase the likelihood of successful delivery", in my 22 view was not a flatout, "No" but maybe "Try something 23 else, we don't think this is value for money", and 24 that's where I could see room for manoeuvre. So the 25 Treasury was supportive of us of making sure that 111 1 compensation was paid in theory but, in practice, it was 2 very hard for them to move away from their usual 3 day-to-day behaviours, a lot of which, I think, was just 4 them acting by rote. 5 I had seen this myself as a minister in the Treasury 6 you get briefings and the briefing is often to say, 7 "Well, nothing can be done unless the Treasury says so, 8 it's got to be value for money". It just happens in 9 a way that's almost robotic, rather than looking 10 specifically at individual circumstances and seeing 11 whether you can -- you know, whether you can be 12 flexible. Inflexibility, I think, is one of the 13 Treasury's flaws, and that would have been the advice 14 that I am certain was given to the Chancellor before he 15 wrote the letter which he wrote to me. 16 Q. So were you disappointed or encouraged? 17 A. Neither. It's just how things work. I'd seen -- I saw 18 enough there to know that it wasn't over but there 19 wasn't very much that I could do with that letter, and 20 we would need to try something else, try a different 21 angle, make a different case, or something. 22 Q. You referenced earlier the documentary or the drama on 23 ITV. Was it essentially that which made the difference? 24 A. I think it suddenly turned it from a value for money 25 question to a public perception question, and this is 112 1 the point, you know, that we were talking about: it's 2 not enough to do the right thing; you also have to be 3 seen to be doing the right thing. And many people had 4 not known the arguments that were taking place behind 5 the scenes in Whitehall. There was an assumption that 6 nothing was being done, and it was the documentary that 7 made things happen. 8 But actually work was being done, it was too slow, 9 it wasn't happening quickly enough. No one could see 10 what was taking place. So what the documentary did in 11 my view was change the priority of this issue from 12 something which was behind the NHS and security, and so 13 on, you know, defence to, "We need to solve this now". 14 So it brought the urgency, which I had wanted us to have 15 right from the get-go, it brought the urgency to it and 16 raised the prioritisation. 17 Q. It's a bit disappointing, isn't it, if you step back, 18 that it takes three or four nights on ITV whilst we were 19 all at home in the New Year -- 20 A. It's extremely disappointing. 21 Q. -- watching a programme to give something sufficient 22 attention that the Government thinks that perception has 23 changed and therefore takes action? 24 A. Well, I think that, if you look at it in the context of 25 what is happening in Government, there are 1,000 things 113 1 that are being asked -- that money is being requested 2 for. And I think, after a while, the decision makers or 3 the analysts become very dispassionate. They're not 4 looking at it the way a politician might be looking at 5 it or the way a member of the public might be looking at 6 it, which is what is the human story here, who is being 7 impacted? 8 After a while, it just becomes another line in 9 a ledger and, well, if we take money away from 10 schools -- you know, if we give money to this, that's 11 money that's going to go away from schools. 12 It is not irrational but it has to change: it is not 13 helpful either. And I think that the way we go about 14 doing things, making sure that every single box is 15 ticked and there's value for money and following all of 16 the rules and regulations which we've put in place, we 17 actually make things more expensive in the long run, 18 that we end up paying out more than we would do if we 19 just brought in common sense. 20 There is an absence of common sense in a lot of 21 Whitehall because people are afraid to trust themselves 22 and trust their judgement, follow principles and do the 23 right thing. People want legal cover. They want to do 24 things in a way that they can show a court or, you know, 25 a lawyer that, "Well, I followed the rules, and I didn't 114 1 do anything wrong". And that might work in a very 2 simple system but Government is now too complex. The 3 problems we're trying to resolve are far too complex and 4 I don't think that works any more. We need to simplify 5 quite a few things. 6 MR BEER: Sir, on the absence of common sense in Whitehall, 7 might we take our lunch break? 8 SIR WYN WILLIAMS: Certainly, Mr Beer, yes. When shall we 9 resume? 10 MR BEER: 2.00 pm, please. 11 SIR WYN WILLIAMS: Right. 12 MR BEER: Thank you very much. 13 THE WITNESS: Thank you. 14 (1.09 pm) 15 (The Short Adjournment) 16 (2.00 pm) 17 MR BEER: Good afternoon, sir. Can you see and hear us? 18 SIR WYN WILLIAMS: Yes, thank you. 19 MR BEER: I'll just wait for the room to quieten down before 20 we start the questions. 21 Thank you, everyone. Ms Badenoch can we turn to the 22 issue of Henry Staunton, please. In your first witness 23 statement, you deal with the dismissal of Henry Staunton 24 as we had asked you to do. Just by way of background, 25 is it right that he was appointed as the Chair of Post 115 1 Office back on 2 September 2022, and so pre-dated your 2 appointment as Secretary of State by about five months? 3 A. Yes. I'm not exactly sure of his appointment date but 4 it certainly pre-dated me. 5 Q. He wasn't, in any event, one of your appointments? 6 A. No, he was not. 7 Q. When you started your position as Secretary of State in 8 February 2023 and were briefed, was anything said to you 9 about Mr Staunton being problematic or an unsuitable 10 person to be the Chair of the Post Office? 11 A. Not when I first started. There were issues around 12 general -- there were general issues around the Board 13 finding the right people, and so on, and that it was not 14 a happy place, being at the Post Office. But nothing 15 specific or personal, no. 16 Q. So nothing specific or personal about him? 17 A. No. 18 Q. Nothing of the order of magnitude that was suggested to 19 you the following year in January 2024? 20 A. No, nothing at all. 21 Q. Okay. Can we go back to the briefing you received, 22 BEIS0001061. Can we go to page 9, please. This 23 briefing to you sets out the key stakeholders. The 24 first bullet point refers to Mr Staunton, Post Office 25 Chair, Henry Staunton, and it says that it's recommended 116 1 that you meet him. 2 Did you meet Mr Staunton? 3 A. No. No, I did not. 4 Q. Why not? 5 A. I don't know. There was a recommendation that I met him 6 and I didn't say no to that, but nothing was ever 7 organised. It may be that something was and it fell 8 through, but I remember at this point I'm still trying 9 to carry out a lot of my Trade Secretary work, I'm 10 travelling a lot. So if people weren't sort of banging 11 on the door to meet, the meetings didn't necessarily 12 happen. And, remember, the Post Office is one of very 13 many arm's-length bodies. I didn't meet the people 14 running a lot of them unless there was often an issue. 15 I would get updated. They tended to meet with the 16 Department Director General or with the junior minister. 17 So a Secretary of State meeting was not necessarily 18 prerequisite to doing the job. But those that wanted to 19 meet me did meet me. There was never any requests from 20 Mr Staunton, either. 21 Q. When you subsequently came to inform Mr Staunton on 22 27 January the following year, 2024, in the course of 23 a phone call that he was being dismissed from his 24 position as Chair of the Post Office, you made a number 25 of comments about the fact that the pair of you had 117 1 never met -- 2 A. Yes. 3 Q. -- over the course of that year, didn't you? 4 A. Yes, yes, I did. 5 Q. Can we look, please, at a transcript of a recording of 6 that call, BEIS0001059. You can see this is 7 a transcription of the phone call that you had with 8 Mr Staunton on 27 January 2024. Now, I think you didn't 9 have this transcript when you first made your first 10 witness statement? 11 A. No, no, I didn't. 12 Q. You said you very much wanted to have it and you'd asked 13 Departmental officials to track down a copy of the tape? 14 A. Yes. 15 Q. I think you worked in your first witness statement from 16 a note -- a near verbatim note -- taken by 17 an official -- 18 A. Yes. 19 Q. -- and then a summary to that note which was published 20 to the media? 21 A. Yes. 22 Q. Now, we've now got the tape and, therefore, this 23 transcript of it. You'll see that it starts up sort of 24 mid-sentence and doesn't include the introductions at 25 the beginning, nor the part where you actually informed 118 1 him that he was being dismissed? 2 A. No. 3 Q. But we've got a verbatim note of that and I needn't go 4 back to that. Can you help us, why was the call 5 recorded? 6 A. To help the notetaker carry out a good summary of 7 minutes. 8 Q. Is that usual? 9 A. I don't know. I don't know; I don't take the notes. It 10 may be, it may not be. 11 Q. Did you know that it was recorded? 12 A. Not at the time. 13 Q. Okay, so this was something that was going on by -- 14 A. This was something I discovered after Mr Staunton had 15 made the false allegations to The Sunday Times, and when 16 I asked for the transcripts and the notes, I didn't -- 17 you know -- explaining that I know I had not said the 18 things which he said, I was then made aware there was 19 a recording which would prove that as well. 20 Q. Do you know whether Mr Staunton was informed that it was 21 recorded at the time of the -- 22 A. If I wasn't, I suspect he wasn't as well. The purpose 23 of the recording was to get minutes written accurately 24 and probably they would have been disposed of 25 immediately and maybe retrieved from deleted place, 119 1 I don't know. 2 Q. Is it normal, then, for all your calls to be recorded? 3 A. I don't know because I've never had -- I've never 4 needed -- never had this situation before, so it 5 probably isn't, but I suspect, on this occasion, it was 6 just to make sure that the minutes were very accurate, 7 given the severity and the media interest, that the 8 minutes were very accurate. That's certainly what I was 9 made to understand at the time, that it wouldn't 10 necessarily be usual to have a recording. 11 Q. Let's read through this. Mr Staunton, in mid-sentence, 12 says: 13 "... change anything that requires the government 14 civil servant where we get whistleblowed and whatever, 15 whatever. You can -- it is a massive, massive problem 16 here in terms of trying -- at least you've got training 17 going much better now, things are moving in certain 18 direction. But it's a handful and, I've got to say, 19 I've chaired some companies, a lot of companies, very 20 successfully but this one's -- this one's a bit of 21 a nightmare. But we could have got through it but it 22 needed UKGI to be onside and I didn't feel they were 23 onside for a moment. And I'm sure that UKGI was talking 24 to the journalist. That's what they did before, not 25 actually sorting out the business." 120 1 The context of that is, by the time you're speaking, 2 the fact that you were to dismiss him had already been 3 leaked. 4 A. Yes, which was extremely frustrating because I had 5 wanted to do it in a particular sequence and spare him 6 embarrassment where I could. 7 Q. You say: 8 "I know. I'm sorry to hear that but why didn't you 9 get in touch with me?" 10 Him: "Because I had an inkling only last week with 11 the Chairman and Chief Executive UKGI and was I was 12 going to tell them all this. I know it's UKGI but 13 I never met you, you see, and it's just -- but it's ... 14 "I've chaired so many companies you would not 15 believe. I'm working on this business 60 hours a week, 16 whereas I can take Swiss, despite -- I chose Swiss as 17 an international company where the share price more than 18 quadrupled and I could do that on 15 hours a week. This 19 is four times the time. You just wouldn't know the half 20 of it, Secretary of State." 21 You: "I do know, I do know. This is what, this is 22 what the world is like today within the public sector. 23 What I did find out of the ordinary was that of all the 24 arm's-length bodies that I'm responsible for, the Post 25 Office was the one where I never heard from you 121 1 directly. You know the CMA, UCES" -- 2 A. That would have been "UKEF", UK Export Finance. 3 Q. "... the British Business Banks, the chairs of all these 4 organisations would reach out to my office fairly 5 frequently. And Kevin Hollinrake did manage the 6 relationship very well, but there didn't seem to be much 7 interest in doing much more." 8 Just stopping there, what did you mean by that, 9 "Kevin Hollinrake did manage the relationship very well, 10 but there didn't seem to be any interest in doing much 11 more"? 12 A. In that Kevin did have meetings with him and he fed back 13 to me how that relationship was going, and so, in terms 14 of making sure that he was staying in touch with the 15 Post Office, that was going well. But what I was trying 16 to signal to Mr Staunton, and which I do believe now, is 17 that he didn't seem to want to meet me. And, you know, 18 one can speculate on the reasons from a hindsight 19 perspective but, at the time, I simply assumed that he 20 was perfectly happy having meetings with Kevin 21 Hollinrake. In hindsight, I think that he did not want 22 to meet me. 23 Q. So "there didn't seem to be any interest in doing much 24 more", you're saying interest by you, Mr Staunton? 25 A. Yeah, interest in Mr Staunton doing much more with, you 122 1 know, in terms of relationships with ministers. 2 Q. So, by that, you mean "but you didn't seem to have any 3 interest in doing much more"? 4 A. Yes. That's what that -- 5 Q. So that's directed towards Mr Staunton not 6 Mr Hollinrake? 7 A. No, no, no, no. I think Mr Hollinrake did an excellent 8 job. 9 Q. You continue: 10 "I've been given a very, very high level overview of 11 the government's issue that has led to the advice given 12 to me about the decisions which I have now taken, but 13 I want to make sure that you have had a chance to make 14 your views known as well. But, given where we are and 15 what I've just said, what would you like to see happen 16 now?" 17 Him: "Right. So what we need to do is actually 18 I think -- it's a very difficult one with regard to the 19 CEO, who's very unstable and actual I said to Lorna ..." 20 That's Lorna Gratton, yes, UKGI? 21 A. Mm-hm. 22 Q. "... we need to have an adult conversation with him to 23 say, look, stay through the Inquiry and we'll treat you 24 as a good leaver -- nail him down for 12 months. Well, 25 of course she says, oh, well, in this government it's 123 1 very difficult to offer could leaver status. If we have 2 a crisis, it's not a big deal; he might get an extra 3 100,000 that he wouldn't get if he wasn't a good leaver 4 but at least we nail him down for a year and the money 5 he would get for good leaver status actually seems to be 6 more important to him than actually the sums involved. 7 So I think we need to nail the Chief Exec down." 8 That's the first things. The second thing he goes 9 on to address: 10 "We must do something about -- we must make this 11 organisation more postmaster centric. I said we need to 12 have an oversight committee chaired jointly by the two 13 Postmaster Directors, we need to introduce a third 14 Postmaster Director, so the message will get out to the 15 network that the Post Office is changing. And, trust 16 me, at the moment it is terrible the view of the Post 17 Office out in the network. So have a third postmaster. 18 "We're really then, Secretary of State, starting 19 this journey towards demutualisation. We're not to say 20 that, but that's what you need to do. The SID process, 21 it's six for two. Never mind what Lorna thinks and the 22 fact that we've gone outside. The fact is when the 23 facts change, you change your decision. We need to have 24 an internal policy -- if you met Darfoor you'd recognise 25 this is a class act which ought to be asked so we can -- 124 1 I can quite see why everyone's got there. And the fact 2 that we started out on a public journey -- it was 3 a different world two months ago. I mean, we were just 4 -- you know, it's just been horrific the last four 5 weeks. We need to get on the front foot and I think 6 that postmaster centric does that for you." 7 Then moving on: 8 "There's a feeling within the business -- Richard 9 Taylor said all the postmasters are on the take and 10 they're all guilty as charged, we wrote to the Lord 11 Chancellor stating that was our view, and that would be 12 Peters & Peters. That's not my view and I don't think 13 it's the view of the majority of the Board but I think 14 that UKGI and people sending that letter with (unclear) 15 it was very -- it was actually contrary to what the 16 Government ministers were trying to do and in fact you'd 17 be surprised [at] the sort of things your civil servants 18 say about ministers. 19 "So it's a mess. But the fact is 'you are guilty as 20 charged, postmasters are on the take' it's got to change 21 and we need a massive cultural shift in this 22 organisation to do that. And most of the directors are 23 on side and the UKGI director is not. She couldn't -- 24 she couldn't run a bath, let alone run a company. We've 25 got a big problem there. We need to take some very 125 1 tough business-like decisions in terms of culture to 2 change it. And when we talk about culture, as Nick 3 said, Lorna thinks it would just be a crusade for female 4 diversity. It's not that. It goes to the heart of how 5 we operate Post Office, this cultural shift. It's 6 enormous what we need to do but I think it's possible. 7 "But I don't think it's -- you know, we need to have 8 Andrew as the SID. The Chairman would put it through. 9 I think you need to change the UKGI Directors and just 10 get to the core. And it's a battle that's winnable but, 11 by God, it's going to be a battle." 12 You say: "It certainly is ..." 13 What in that previous passage were you agreeing 14 with? 15 A. That it's going to be -- that sorting things out is 16 going to be a battle. 17 Q. Specifically, what did you think was going to be 18 a battle? 19 A. I think that the conversation here was about the general 20 Board. So he says, "We need to change the UKGI 21 Directors and just get to the core", but he is giving 22 personal view about Lorna Gratton, and he thinks that 23 the issue is between the Post Office and UKGI. I am, 24 you know, being amicable and saying "Yes, it is going to 25 be a battle". The Board, in my view, was the issue and 126 1 there's a lot that needed to be done. That's what I'm 2 alluding to there: it's not just about UKGI. 3 But what I wasn't trying to do was give an opening 4 for him to pick apart particular individuals on the 5 Board. I didn't think that that was a helpful road to 6 go down. I did want to get his view about what had 7 happened and I didn't want to have an argument with him. 8 So I'm agreeing where we thought we could find some kind 9 of agreement and then moving the conversation on to the 10 things that I was trying to elicit from him. 11 Q. Can we move much further into the call and turn to 12 page 9, please. This is you speaking at the top of the 13 page and this is about whether he should turn up to the 14 Board meeting that was going to happen on Monday or 15 Tuesday of that week, and you were saying, "No, you 16 should not". 17 You say: "I'm sorry but that would need to be the 18 case given the conversation we've had and what I suspect 19 the media after going to be doing." 20 A. Sorry, could you let me know where in the hard copy 21 I could find that? 22 Q. B19. 23 A. B19? 24 Q. Yes. 25 A. Bear with me. Ah, thank you. 127 1 Q. We're at the top of page 9. 2 A. Yes. 3 Q. So we dealt at the bottom of page 8 with not turning up 4 at the next Board meeting and you say, "I'm sorry but 5 that will need to be the case". 6 A. I think I'm talking about his leaving and about not 7 giving reasons. Am I looking at the wrong -- 8 Q. Yes, you are. Bottom of page 8. 9 A. Bottom of page 8. So I'm saying, "I'm sorry but that 10 will need to be the case". 11 Q. If we just go back on the screen to the bottom of 12 page 8, please. 13 A. Sorry, yes, I've found it. It's page 9 on mine. I've 14 found it. Thank you. 15 Q. We can see that on this passage here -- 16 A. Yes, that's right this is about -- 17 Q. Immediately beforehand, you were trying to arrange some 18 contact details -- 19 A. Yes, that's right -- 20 Q. -- and you couldn't get anyone on the call that was 21 listening in to acknowledge that they were listening in, 22 so you had to write down his mobile phone -- 23 A. Yes. 24 Q. -- or his email address? 25 A. I think that when the -- the way that the Government 128 1 does these calls it was a switch call that they were 2 muted and so they were unable to join the conversation. 3 Q. So looking at the bottom of page 8, he says: 4 "-- therefore, I won't turn up to the Board meeting 5 on Monday or Tuesday." 6 You say: "Yes, that is correct." 7 He says: "Fine." 8 Then we go to the top of page 9, you say: 9 "I'm sorry but that will need to be the case ..." 10 A. Yes. 11 Q. Which is why I said the context of you saying that -- 12 A. Thank you. 13 Q. -- was not turning up. Anyway, you carry on, third 14 line: 15 "... if it's any consolation at all, I doubt it will 16 be, but I'm very angry about the fact that this has been 17 leaked without us doing this properly." 18 He says: "Appalling. Appalling." 19 You say: "It is appalling and I have noted what you 20 have said about UKGI. I do think that they have been 21 part of the problem and that is the next step." 22 What problem were UKGI a part of? 23 A. I think that the communication channels between myself 24 and UKGI should have been -- there should have been more 25 information passing direct to me, not just through 129 1 Kevin. And Kevin would, of course, give me a summary, 2 but there were some times that we actually ended up 3 coming to different views on things. So we had 4 different views, for example, on Nick Read, the CEO, not 5 problematically but we just had a different -- we just 6 came to different conclusions. 7 And I felt that my own interactions with UKGI were 8 very limited and I didn't actually meet Lorna herself 9 until it was -- the issues with Henry Staunton had come 10 to light and we were in the process of sacking him. 11 And also, I was giving him the benefit of the doubt 12 with what he had said earlier on in the conversation 13 about issues with UKGI. If you remember, the views 14 I have about Henry Staunton now are different from where 15 I was at the time of this conversation, where this is -- 16 where I was thinking this is someone who's made too many 17 mistakes, the position is untenable, but he was probably 18 in his own way doing his best, to where I am now, where 19 there's just been repeated uses of misinformation, and 20 so on. 21 I took it in good faith that his complaints about 22 UKGI were well meant and true from his perspective. 23 Given everything that has happened since then, I don't 24 think that his complaints about UKGI are well founded. 25 Q. So were you just saying I think UKGI are part of the 130 1 problem as a sop to him? 2 A. No not so much as a sop but, if a chair feels that way, 3 then UKGI should have been aware and should have been 4 made me aware as the sole shareholder, not just told 5 Minister Hollinrake. There was no note, for example. 6 Just because I wasn't meeting them on a day-to-day basis 7 doesn't mean they couldn't have sent a note to me for me 8 to review, and that didn't happen either. So these are 9 the sort of processes which I would recommend to the new 10 Secretary of State to ensure that UKGI are giving a full 11 and frank view, rather than just the vanilla view of 12 what's going on. 13 There's too much vanilla in terms of reporting and, 14 actually, it's very hard to know early when problems are 15 occurring. 16 Q. What do you mean, "there is too much vanilla"? 17 A. That the way notes are written in the Civil Service is 18 often too -- in a way that too much isn't said. For 19 me -- and I'm speaking for myself now -- other ministers 20 may not necessarily want this -- I prefer to just have 21 the detail unvarnished, "We think this person a problem. 22 We don't think they're doing a good job. We think they 23 are dishonest", and so on. People tend not to like 24 writing things down, maybe because of inquiries like 25 this or an FOI request or who knows. 131 1 So, instead, you get what I call a vanilla version 2 of "There are concerns", and that could mean anything. 3 It could mean that there are minor concerns which you 4 don't need to worry about or there are very significant 5 concerns which we don't want to put on paper. And as 6 a minister who is getting 100 pieces of information 7 a day where you have to prioritise, you might not 8 recognise that there's a big red flag because of how 9 a note has been written. 10 This is standard across the Civil Service. It's 11 just the way things are written, probably to not alarm 12 people, to not create panic, and to keep the discretion 13 there because it's very hard to keep all notes secret, 14 even when they are marked "Official Sensitive". And 15 maybe UKGI didn't have this view, I don't know, but I do 16 find that the unvarnished truth is more helpful than the 17 vanilla version. 18 Q. Can we take that down and go back to the process that 19 led to the dismissal of Mr Staunton, by looking at your 20 first witness statement, please. That will come up on 21 the screen for you. It's page 2, paragraph 10. If we 22 just go down, under the heading, "Concerns regarding 23 Mr Staunton's conduct", you say, "On 24 January", so 24 that's three days before this call we're speaking about. 25 A. Yes. 132 1 Q. "... I received a written submission date 23 January 2 prepared by UKGI and Departmental officials, in which 3 I was advised of specific concerns in relation to 4 Mr Staunton's conduct and his suitability for office. 5 [They] were", then you list them 1 to 5. It goes over 6 the page. 7 That fairly reflects the documents. I am going to 8 read them out. 9 A. Okay. 10 Q. "(1) That he had repeatedly attempt to shut down 11 a whistleblowing investigation into his conduct. 12 "(2) That he had engaged in aggressive, intimidating 13 and disrespectful behaviour to other Board members and 14 members of the POL Executive Team. 15 "(3) That he showed poor understanding of the public 16 sector aspect of POL's work and poor judgement. 17 "(4) That he had disregarded proper governance 18 processes as [the] Chair, most recently by announcing 19 the appointment of a new Senior Independent Director for 20 [Post Office] without following formal consultation with 21 the Board, following Board processes or sharing 22 shareholder approval as required. 23 "(5) That he had failed to provide constructive 24 support to [the Post Office's] CEO." 25 I think it follows that, so far as you were aware, 133 1 none of the issues that were set out for you included 2 the speed at which compensation was to be paid by the 3 Government or the Post Office to subpostmasters arising 4 from the scandal, nor a dispute between Mr Staunton and 5 the Government and or Post Office about that speed. 6 A. No. 7 Q. In particular, the go-slow suggestion that he was 8 subsequently to make did not feature in the list of five 9 issues that were brought to your attention? 10 A. No. They had nothing to do with that submission. And, 11 you know, from our earlier session, the letter that 12 I wrote to Treasury showed that we were not -- that's 13 certainly not what my Department was doing. 14 Q. "11. The submission recommended that I should decide 15 that Mr Staunton could not continue in his role as Chair 16 and that if [you] agreed [you] should offer him the 17 opportunity to resign rather than excise [your] power 18 under [the] Articles of Association to remove him." 19 You record, and this is backed up by the documents 20 you refer to, that submission was referred, in 21 paragraph 13, to your Private Office by email, with 22 a covering text that said that the submission reflects 23 the Permanent Secretary's view as well as that of 24 Government Legal Department and UKGI lawyers. 25 The submission was placed in an overnight box, 134 1 together with a box note, and the box note -- and you 2 give us the reference there -- stated that the 3 recommendation to remove Mr Staunton came from the 4 Senior Independent Director and then Remuneration 5 Committee Chair. The concerns included allegations of 6 misogyny and racism against Mr Staunton and that 7 officials agreed that his conduct and judgement made him 8 unsuitable to continue as Chair. 9 Was it on that basis that you decided to dismiss 10 him? 11 A. It was on the basis of everything that had come to 12 light: a conversation with Kevin, with Kevin Hollinrake, 13 but also, going back to the point that I made earlier 14 about doing it the right thing and being seen to do the 15 right thing, I think that we should always be clear 16 about what we are doing and, if you are sacking someone, 17 then giving them the opportunity to resign can mean that 18 a different story is communicated to the public. And 19 I wanted people to be clear about what was happening. 20 I didn't want him to have a huge amount of 21 embarrassment. I wanted us to have a controlled story 22 about why we'd asked him to leave, which we lost because 23 of the leak. 24 But the initial recommendation, which I was 25 considering, about giving him the opportunity to resign, 135 1 I did not think was the right one, given the detail of 2 the allegations, the seriousness of them, and the sheer 3 number of issues that we were having with him as Chair. 4 Q. Thank you. You refer in that series of documents to the 5 initial note, the submission that came up to you in the 6 box. 7 A. Mm. 8 Q. Can we look at that, please, BEIS0000868. This is the 9 submission that came up to you, as you've said, on the 10 24th; it's date the 23rd. It's addressed to Kevin 11 Hollinrake and you, addressed to you by Lorna Gratton, 12 and Carl Creswell from UKGI and the Department 13 respectively. Then in the first line, it says: 14 "We have previously expressed concerns to you about 15 Henry Staunton's suitability to be Chair of the Post 16 Office Board." 17 Firstly, is that accurate: that they, either Lorna 18 Gratton or Carl Creswell, or both, or their 19 Department's, had expressed previously concerns to you 20 about Henry Staunton? 21 A. Yes. It isn't just accurate, it's also illustrating the 22 point I made earlier about the vanilla -- you know, the 23 vanilla update. Concerns had been expressed but not 24 detail. So it was statements like, "We don't think it's 25 going to work out with the Post Office, we have some 136 1 concerns" and I would ask what's happening? "Well, 2 there's an investigation, we can't really talk about it. 3 We're not supposed to know, we don't want to prejudice 4 but we'll let -- you know, eventually we'll let you 5 know", by which time it's time to sack. 6 So it is true that they had previously expressed 7 concerns but the strength of the concerns was not clear 8 until the submission, which we just referred to in 9 January. 10 Q. Can you recall anything in more detail about the 11 substance of the calls? 12 A. No, no. If what came out in the submission had been 13 said previously, I would have taken much more of 14 an interest but the way that the information had been 15 conveyed was that there was a problem and the processes 16 were in place to handle them, and I didn't need to worry 17 about it Minister Hollinrake would look more but, at the 18 right escalation point, I would be informed. So, from 19 my perspective, the system was -- the system was 20 working. There was a problem, it wasn't yet Secretary 21 of State level issue, they were trying to resolve it, 22 and because we had had other issues -- there was the 23 problem with the Inquiry metric and the bonuses which 24 had been paid -- it felt at that point like one of those 25 things, where they just weren't getting a handle of the 137 1 job. 2 Q. Do you think the Department should have acted sooner in 3 dealing with and/or removing Mr Staunton? 4 A. I don't know. I think it's hard to carry out 5 a significant action like that in terms of removing 6 someone when the processes haven't been followed, 7 because of the unfair dismissal, you know, Employment 8 Tribunal type repercussions, which could come from not 9 doing things properly. So when it comes to acting 10 quickly, I always start from the perspective of who is 11 impacted. So with the acting quickly in terms of 12 getting postmasters compensation, yes, because we want 13 to make sure that they're treated properly and fairly. 14 But acting quickly, in terms of sacking a chair, creates 15 the opposite issue, where someone may not necessarily be 16 treated properly and fairly because we're trying to move 17 in haste, so it's always about what is the impact on the 18 person; what is the outcome we're trying to achieve? 19 I would rather make some mistakes and get 20 compensation out to postmasters quickly but I would 21 rather take some time and act slowly in order to make 22 sure that we don't sack someone unfairly or give them 23 a right of appeal or right to a fair hearing where 24 a process demands that. 25 And I also believe very much in the concept that 138 1 people are innocent until proven guilty. I think if 2 we'd acted much faster than that, that would have been 3 against that principle. 4 Q. Were you aware before you accepted the advice to dismiss 5 Mr Staunton, that he was a strong advocate and supporter 6 of the Subpostmaster Non-Executive Directors? 7 A. No, I was not aware but I am not sure that is 8 necessarily true given what I remember people saying 9 when I did visit the Post Office. There were a lot of 10 subpostmasters who did not like Mr Staunton, so that's 11 his word, and, you know, there's no reason for us not to 12 believe him, but the evidence of that I didn't think was 13 much. 14 Q. I'm referring specifically to being a strong supporter 15 of the Subpostmaster NEDs on the Board? 16 A. Again, that's actually what I did mean, both the 17 subpostmasters and the ones on the Board. He always 18 said that, he certainly said that in his call to me but 19 of course that's a call we're having after he's just 20 been relieved of his position. 21 Q. Thank you. That can come down. 22 You, I think, were party to the appointment of Nigel 23 Railton as POL's Chair, at least Interim Chair; is that 24 right? 25 A. Yes. 139 1 Q. Can we look, please, at BEIS0001070. This is a letter 2 from you to him in May 2024, in which, in the opening 3 paragraph, you extend your congratulations to him on his 4 appointment as Interim Chair of the Post Office and 5 welcome him in your role as the sole shareholder. Yes? 6 A. Yes. 7 Q. I just want to look at the strategic priorities. You'll 8 see that's the heading of the letter. "Strategic 9 Priorities for 2024/25". 10 Can you help us, what's the purpose and status of 11 a letter like this? 12 A. So it is to formally let someone know what you're 13 expecting them to do in the job. 14 Q. Is it what you're expecting them to do in the job or 15 what you're expecting Post Office to do as 16 an organisation? 17 A. Well, specifically in this case it was what I wanted him 18 to look at as Chair of Post Office. I can't remember 19 whether this had been done for the Post Office. It 20 wouldn't be an annual -- it's written in an annual way 21 now but it wouldn't necessarily be an annual -- a set of 22 priorities. We'd normally do those sorts of things over 23 several years. So if strategic priorities had been done 24 the previous Secretary of State would have done them. 25 We tend to have policy statements for regulators and 140 1 arm's-length bodies about what we expect them to do, but 2 2024/25 was very much a focus on conversations which I'd 3 had with him about urgently turning things around for 4 the Post Office. 5 Q. I should have said that this is a draft, hence the date 6 and the passage in grey. You tell us in your second 7 witness statement -- no need to turn it up -- in 8 paragraph 36 that this is a draft version but that you 9 understand that the final version cannot be located by 10 the Department, although you believe it would have been 11 in very similar terms? 12 A. Mm. Yes. 13 Q. If we scroll down, please. You say: 14 "... I would like you to focus on the following 15 priorities for the" -- 16 A. Sorry, can you tell me where in the hard copy I can see 17 this? 18 Q. Yes, BB25. 19 A. BB25. Thank you. 20 Q. So the main paragraph from the bottom, highlighted: 21 "In this capacity, I would like you to focus on the 22 following priorities for the Financial Year 2024/25 ..." 23 Then there are three priorities set out in bold, 24 number 1: 25 "Intensifying existing workstreams to address [Post 141 1 Office's] historic failures and setting the business up 2 for future success." 3 Then over the page: 4 "2. Supporting the cultural transformation of the 5 Company and focusing on improving on [Post Office's] 6 capacity, capability and resilience at all levels." 7 Then: 8 "3. Enabling the future success of [the Post 9 Office], including effective financial management and 10 performance to ensure medium-term viability." 11 Then particulars are give in bullet points under 12 each of those three strategic objectives. 13 A. Yes. 14 Q. One of the points that you mention under 3, and it's the 15 fourth sub-bullet point under 3, is: 16 "Maintain stringent cost control and a focus on 17 value for money and efficient, delivery across the cost 18 base including on the New Branch IT (NBIT) and IT 19 projects, legal costs, acceleration of the network 20 strategy, of the approach to directly-managed branches 21 and measures aimed at reducing central costs." 22 Now, I don't think NBIT, the New Branch IT 23 Programme, is mentioned in your witness statements. Can 24 you recall when you first became aware of NBIT? 25 A. No, I can't recall when I first became aware of NBIT. 142 1 It might have been in that initial briefing or in 2 subsequent meetings about the Post Office. But the most 3 substantive conversation I had about NBIT was when 4 I visited the Aldwych branch of the Post Office, and 5 spoke to them about how that project was going and what 6 they needed from me. 7 Q. Were you consulted or provided with updates regarding 8 the development of NBIT? 9 A. No, not directly. I imagine Kevin was but I was not. 10 Q. Did you have any oversight of the Post Office's approach 11 to and the rolling out of NBIT? 12 A. No, and I wouldn't expect to. That's the sort of thing 13 which I think the Post Office has to do itself. Having 14 political direction is very different from the sort of 15 operational day-to-day decisions which would have been 16 taken but this is -- this was put in as a strategic 17 property, because I'd had that meeting and I was quite 18 concerned, just from my own background in technology, 19 about the direction the project was going. 20 Q. Does it follow that, so far as you're concerned, Post 21 Office's engagements regarding NBIT were limited to 22 essentially funding requests? 23 A. Yes, certainly -- well, that was my experience. It 24 might not have been Minister Hollinrake's experience or 25 previous Secretary of State's experience but that was my 143 1 experience. But I also would not expect to be getting 2 into the detail of the IT projects of the Post Office. 3 I would have been expecting a high level overview of 4 what they were trying to achieve and how much money they 5 needed. 6 Q. Government ministers said the same to us when they gave 7 evidence to the Inquiry about the development and 8 rollout of Horizon: "I wouldn't expect to be getting 9 involved in that kind of thing". 10 A. Mm. 11 Q. Does it follow that you have not been made aware of any 12 issues with the development of NBIT? 13 A. Well, the project is overrunning and it's requiring 14 a lot more than was budgeted for it. That, in my view, 15 is an issue. But, in terms of how it is working, no, 16 and I would not expect to see that. I did have some 17 conversations about how to extend the new Horizon 18 system, which Fujitsu had been supporting, because that 19 would have -- we needed something in place. That ending 20 would cause a serious problem for postmasters. So 21 managing the day-to-day contract, and ensuring that that 22 continued until a replacement was ready was very 23 important to me because, otherwise, everything would 24 fall over. 25 Q. Thank you. That can come down, that document. 144 1 Just lastly, then, from me, you tell us in your 2 witness statement -- I'll read it out without turning it 3 up: 4 "If it [the Post Office] was a private organisation 5 it would have disappeared in its current form long ago. 6 We are keeping it alive. The result is that it is in 7 a permanent state of stress. We will need to make sure 8 that we're recruiting with that in mind." 9 Would you agree that it's imperative not merely to 10 keep Post Office alive but to transform it? 11 A. Yes, yes, I would. 12 Q. What, in your view, is essential, in terms of what needs 13 to be done in order to change or to transform the Post 14 Office? 15 A. Well, this is a very difficult question. Because the 16 fundamentals which underpin the Post Office are very 17 difficult to manage in the age that we live in. When -- 18 pre-Internet, the Post Office would have been 19 a commercial entity that any organisation would bite its 20 hand off to run. You know, the universal service it 21 effectively provided just meant that it had a very easy 22 stream of cash. Now, that is not the case. But we 23 believe, certainly when the Conservatives were in 24 Government, we did believe that this is an entity that 25 has not just operational significance but also 145 1 a cultural significance that should not be lost. 2 How we maintain that going forwards, given how much 3 it costs, is very difficult. The sort of transformation 4 that you might have in a commercial organisation just 5 doesn't work in Government. The sort of decisions which 6 you would take which are around profit and profit for 7 the shareholder just don't come into -- they don't come 8 into play. And that, I think, is what I was alluding to 9 in my witness statement when I say it's just in 10 a permanent state of stress. 11 I am -- well, I was the sole shareholder. The 12 Business Secretary is the solicitor shareholder but even 13 they aren't the ones who provide the money. It's 14 a totally different department. So it just doesn't make 15 sense the way a commercially structured organisation in 16 the private sector would be run. And any sort of 17 transformation, in my view, needs to start from the 18 objectives which we have in mind for what the Post 19 Office needs to deliver, how it works within that 20 universal service obligation, which goes with Royal 21 Mail, making sure that everybody has access to post, 22 given that there's, you know, just a lot of competition. 23 That's quite difficult to do within the restricted 24 funding environment which is expected for every single 25 public sector organisation. It is not the customer's 146 1 money; it's taxpayers' money as well. We subsidise this 2 organisation. How do we do so in a way that can keep it 3 going, that can refresh it for the 21st century? It is 4 a labour of love. That's one of the reasons why I had 5 to make a direct appointment for Nigel Railton, rather 6 than an open one. 7 People are simply not interested now in going to 8 work for the Post Office at that level because of the 9 intense levels of public scrutiny, because of the 10 difficulties in making decisions which you would be able 11 to do very easily in a private sector organisation. You 12 need people who are prepared to do a difficult job, as 13 if they were public servants, even though that's not 14 quite the case, and I think that's a huge challenge in 15 terms of transformation for the Post Office. I don't 16 know how we do it. It requires its own piece of work. 17 I know that there have been reviews. I don't think 18 anyone has come up with the correct answers yet. 19 Q. Thank you. Then in terms of Government's role in this, 20 I just want -- the very last thing -- to ask you about 21 a sentence or two in your witness statement. If we look 22 at it, please, I think it's your second witness 23 statement. It's page 12, paragraph 41. At the top of 24 paragraph 41, you're dealing here with decision making 25 within Government and you say something that you said to 147 1 us more than once today: 2 "There is a cautious, risk-averse culture within the 3 Civil Service, which is ... baked in." 4 But then, do you see about three lines from the 5 bottom there, it says: 6 "If we want our Government to make decisions faster, 7 we need to reduce some of the public law burden ..." 8 Can you see that? 9 A. Yes, I do. 10 Q. "... and if we choose not to do so, we must accept this 11 has consequences for speed and efficiency of Government. 12 Every time we create more public law to hold [the] 13 Government to account, it is slower to deliver for 14 people." 15 I just want to make sure we've understood what you 16 mean by those sentences. Is it your evidence that the 17 Government's accountability to the courts is that which 18 prevents it from acting with speed? 19 A. It does slow things down. If, as a minister, you make 20 a decision and every decision is open to challenge on 21 the basis of judicial review, it is quite rational the 22 civil servants will do every single thing they can to 23 make sure that you don't end up getting taken to court. 24 All of those things which they do end up slowing down 25 the process. It is just part and parcel of, you know, 148 1 of creating more accountability, that you add extra 2 processes. Those will take time. Those will need to be 3 followed. 4 It is a trade-off that is baked in; it is a part of 5 creating accountability. The thing is you can't just 6 have someone making a decision and saying, "Do this" and 7 the thing happens instantly. It means that things never 8 happen instantly because you have to create an audit 9 trail, you have to go through the checks and balances, 10 you have to have more meetings, you need to consult, 11 consultations can take months. All of those things slow 12 down the pace of delivery. And it's not about 13 criticising accountability: it is about understanding 14 where the opportunity costs are and making sure that we 15 can see where it is that perhaps these things might need 16 to change in order to stop the sort of injustice which 17 we saw take place around Horizon or, in fact, with 18 delays to paying compensation. 19 And it's also the same thing, even within the case 20 of Henry Staunton, you know, you asked the question why 21 didn't we remove him earlier? If we had done that, then 22 we could have created more problems in the future by not 23 providing the evidence and the audit trail. It's just 24 part and parcel of accountability but the more 25 Government does, the bigger Government gets, the more it 149 1 has to do these things, the more requirements there are 2 on the Treasury, the more likely it is that the Treasury 3 is going to be saying no or creating value for money 4 arguments that mean that it's salami slicing everything, 5 and everybody is just getting a little bit of what it 6 needs rather than a big chunk to deliver and perhaps 7 provide transformation. 8 Q. Can I summarise that: it's your view that the rule of 9 law stands in the way of delivery of services by the 10 Government to people? 11 A. No, that's not what I'm saying. This not about the rule 12 of law; this is about the burden of regulation. The 13 Burton of regulation is not the rule of law. You can 14 have the rule of law without an excessive burden of 15 regulation. But if you keep adding more and more rules, 16 that will slow things down. It doesn't mean that you 17 don't want the rule of law but the rule of law has 18 a purpose and that is to create a fair system which 19 everybody is treated equally and where everyone can 20 receive justice. If you keep creating more regulations 21 and people aren't getting justice then something has 22 gone wrong. 23 And we should be able to look at that without 24 assuming that this is a criticism of the entire system 25 of the rule of law. It means that we should be able to 150 1 look at how we can reform public law. The law is not 2 above criticism. We should be able to say that, 3 actually, this isn't working well, what can we do to 4 improve it? Rather than what is happening now where 5 people say, "Oh, it's the rule of law, we can't too 6 much. Let's not do anything", and then there's more and 7 more injustice. 8 We shouldn't be afraid to challenge ourselves. We 9 shouldn't be afraid to challenge the system, we 10 shouldn't be afraid to challenge Government and we 11 shouldn't be afraid to challenge the law, if we think 12 the law is not delivering for the people. 13 MR BEER: Ms Badenoch, those are my questions. Thank you 14 very much for answering some of them. 15 THE WITNESS: Thank you. 16 MR BEER: Can I hand over to Core Participants and I'd ask 17 them to be mindful, please, of the time limits we're 18 operating under, thank you. 19 Questioned by MR STEIN 20 MR STEIN: Ms Badenoch, with the (unclear) of time in mind, 21 can I take you to a document, please. BEIS0001061. It 22 will come up on your screen in a moment. 23 A. Okay. Is there a hard copy reference for that? 24 Q. There'd probably is but I'm going to look to Mr Beer to 25 provide the hard copy reference, as I don't have it. It 151 1 was a document you were shown earlier on in your 2 evidence, which if we go to the first of the two-page 5s 3 within the document -- 4 MR BEER: BB3. 5 A. BB3, thank you. 6 MR STEIN: Thank you. Do you have the document -- 7 A. I do. 8 Q. The page I'm looking at is Post Office strategy. There 9 are two page 5s within this document, which I think you 10 commented on with Mr Beer, that it's probably a document 11 that's been reworked for your purposes. 12 A. Yes. 13 Q. If we look there under "Post Office Strategy", 14 Ms Badenoch, it then says this, final bullet point: 15 "Recent ministers have been more cautious about 16 going public on this work than their predecessors. As 17 a result we are taking this strategy/policy work forward 18 only internally within HMG and together with POL. We 19 will then advise ministers of findings and ministers, 20 (including with HMT ministers) will then decide whether 21 they want to make any changes to the current policy 22 framework and if so, when to proceed with the necessary 23 public consultation." 24 Just help us unpack that. Recent ministers. Now, 25 since let me see, 2019, which is when the High Court 152 1 litigation, what we call the GLO litigation, took place, 2 and essentially the Post Office was found in two seminal 3 judgments to have failed subpostmasters, all right? 4 A. Mm. 5 Q. So since that time, we had Ms Andrea Leadsom in 2019 to 6 2020; and then from 2020 to 2021 Lord Alok Sharma; after 7 that, in 2021 to 2022, we had Mr Kwarteng; and then in 8 mid-2022, so 2022 to the middle of 2022, we had 9 Mr Rees-Mogg; and then your immediate predecessor was 10 Mr Shapps. 11 So we had a revolving door of ministers, really, 12 going through, I'm afraid, the role that you then took 13 up as Secretary of State. So the ministers that we seem 14 to be being referred to here in the final bullet point, 15 "Recent ministers have been more cautious about going 16 public on this work than their predecessors", the title 17 of the work being Post Office strategy. When you came 18 into post, did you find that any work had taken place 19 regarding Post Office strategy? 20 A. I believe that there had been some work being done. 21 Q. What was it? 22 A. I mean, I don't have the documents in front of me. But 23 I remember us looking at what the Post Office was doing 24 in three buckets: dealing with compensation claims under 25 the fallout of Horizon; managing the day-to-day running 153 1 of the Post Office; and the future transformation, the 2 NBIT IT programme and also thinking about how and where 3 this might interact with Royal Mail, which of course we 4 also had some responsibilities for in terms of 5 delivering its universal service obligation. 6 So the issue here around revolving ministers, 7 I think, can often be overstated. Primarily because 8 people often don't understand the difference between 9 setting political policy direction and company policy 10 direction, and it was one of the questions which counsel 11 asked right at the beginning, in terms of who is 12 carrying out the policy work. 13 There is policy, in terms of internal company policy 14 which officials might have some view on, but general 15 overview that comes from ministers is often political in 16 nature. So I'm not surprised, for example, that it says 17 that recent ministers had been cautious about going 18 public because there's a lot of deliberation which takes 19 place, which in a commercial company, just wouldn't 20 happen, but because it's a public company, people are 21 more interested in, but it's not necessarily helpful 22 when you have not come to a final conclusion or 23 a decision. 24 Listening to ministers and officials and the Post 25 Office Executives deliberate is not helpful until you 154 1 actually have a clear sense of direction of where the 2 Post Office wants to go, and the strategy work, which 3 had come back, was often very, very speculative in 4 nature: demutualisation, do we even need a Post Office? 5 Having those sorts of conversations in public is very 6 alarming for people who are hearing the conversation 7 happen before you've actually settled on a direction. 8 So that's not surprising to me at all. 9 Q. The judgments, which were the starting point for this 10 Inquiry, on which this Inquiry is based, were in 2019. 11 Now, we finally hear this year from Mr Railton who comes 12 to this Inquiry to give evidence, and he says, "Well, 13 there's been a submission up to Government this year", 14 after your time in office -- 15 A. Mm. 16 Q. -- setting out a proposal for the forward looking 17 strategy to govern the Post Office into the future. It 18 doesn't seem as though, frankly, anything has been done, 19 Ms Badenoch, from 2019 until after your appointment of 20 Mr Railton, when he decides that, well, something ought 21 to be done about this, really and maybe we ought to 22 nudge Government's arm? 23 A. No, that wouldn't have been the case. Nothing had been 24 decided but, if you recall looking at the strategy -- 25 strategic priorities that I set out for Nigel Railton, 155 1 I also asked him to have a look again because I did not 2 think that we were getting anywhere with the previous 3 strategy discussions. And I seem to remember that some 4 consultants had been brought in -- I can't remember 5 whether that was Grant Thornton -- and what their remit 6 had been, but this was something that had been worked on 7 but never concluding, and I wanted something that was 8 specific with the proper outcome, which was viable to 9 deliver because, at the end of the day, we would have to 10 go to the Treasury rather than the public for the money. 11 But this is, in my view, not as a result of changing 12 ministers. This is actually more as a result of other 13 things that are happening in the background: spending 14 review settlements, changes in Government more 15 generally, it wouldn't have mattered if the same person 16 had stayed in if you had a Prime Minister who's dealing 17 with the fallout of perhaps Covid, when these 18 conversations starts its before a pandemic, priorities 19 change. So you have to have all of those things in 20 mind. We as ministers aren't just dealing with one 21 organisation. 22 Even I, as Secretary of State, was dealing with 23 about to be 30 or 40 different bodies and that's 24 something that would have an impact in terms of the 25 priorities of the Post Office, and this also alludes to 156 1 the final point which I was making: that the nature of 2 this organisation sitting in the public sector throws up 3 all sorts of issues which you just wouldn't have in the 4 private sector. And that's what -- you know, the 5 questions you're asking are in that vein, they're 6 showing up what some of these tensions are. 7 Q. In fact, the strategic direction that you asked 8 Mr Railton to take in the document that you'll find 9 within your pack at BB25, I note from Mr Beer's 10 direction to that earlier, that says at bullet point 11 three, the first bullet point at 3, and I'll read out 12 what it says, that says to Mr Railton: 13 "Oversee a strategic review of Post Office and 14 provide ministers with your conclusions." 15 So by the time we've gone from 2019 to your time as 16 Secretary of State, to your time as Secretary of State 17 to May 2024, we get within your letter to Mr Railton, 18 who you've appointed, your general request of him that 19 he is to oversee a strategic review of POL, the Post 20 Office, and "provide ministers with your conclusions". 21 Now, hang on, that's 2019-24, okay, let's be 22 generous, just under five years where you're having to 23 go to the new chair that you've appointed and say, 24 "Look, honestly, give this some thought", and that's 25 a bit more than just problems with a revolving door. 157 1 That seems to be that nothing has happened since 2019. 2 A. I disagree. Just because there is not a strategy that's 3 being implemented doesn't mean that no work on strategy 4 is taking place. But clearly there are unsatisfactory 5 conclusions and also, which is part of the reason why 6 we're having this Inquiry, the organisation itself is 7 bogged down in dealing with historic and current issues. 8 It is very hard to create a strategy for the future when 9 the Board itself and the organisation is dysfunctional. 10 It doesn't make sense to demand a strategy when the 11 entire financial world in which we live in has changed. 12 So whatever strategy was worked on would not have 13 been something which would have been viable for the 14 future, which is why I, as Secretary of State, ask the 15 Chair, "Can you start again and look at what we can do, 16 given what we know now". 17 Q. Five years after, or just under five years after, the 18 GLO litigation was concluded. 19 Let's move on to Fujitsu. Now, we know that the 20 European Director of Fujitsu, Mr Patterson, gave 21 evidence before the Select Committee. I can't really 22 ask questions about that, they're subject to 23 Parliamentary privilege. He came along to this Inquiry 24 to give evidence and he expressed his concerns about 25 Fujitsu's operation within the scandal. Secondly, 158 1 essentially, we know that Fujitsu have committed to 2 providing something by way of a contribution towards 3 compensation. Lastly, with Mr Patterson, he answered my 4 questions, which was about restorative justice, making 5 sure that the wider range of people that have been 6 affecting by this scandal, in other words family 7 members, he said in the positive -- he answered my 8 questions positively and said that that's something that 9 ought to be looked into, and seemed to be approving of 10 the suggestion. 11 So we know that Fujitsu are saying, essentially, 12 "We'll put hand in pocket"; did they ever come to you 13 and say, "Secretary of State, we really mean that, what 14 can we do to, you know, to help and provide money?" Did 15 they have a meeting with you or arrange a meeting with 16 you. 17 A. Well, we did have meetings, I can't remember the names 18 of the executives who I did meet but that included the 19 global CEO or global Chairman, but it was -- they had 20 expressed that sentiment but it was I who was asking for 21 specifics, dates, times. I recall a meeting where 22 I asked if they could do something early to show 23 goodwill, being mindful that, if they didn't and not 24 knowing when the Inquiry would end, that there could be 25 a change of Government, the revolving door of ministers, 159 1 you know, moves again, and conversations could start 2 from scratch. 3 But, in terms of them proactively offering, which 4 I think is what you're asking, then the answer is no. 5 Q. You see the commitment they've made, and we know from 6 Mr Patterson -- I anticipate his evidence will be that 7 essentially they're prepared to do something after the 8 close of this Inquiry: they await the report of this 9 Inquiry. 10 A. That's certainly the impression that I was given. 11 Q. Did they provide any reasons as to why they need to wait 12 until the close of this Inquiry? 13 A. Well, this is now recall, which may not be 100 per cent 14 accurate, but I think it was about making sure that it 15 was done properly. They seemed reluctant to start off 16 with making payments before the Inquiry was concluded, 17 not dissimilar to the reasons that officials made or 18 advised when we asking for some of the compensation 19 payments, about just wanting to make sure they do it 20 properly and do it at the right time, and that, they 21 felt, was when the Inquiry had given them an appropriate 22 figure of something or that they could judge what 23 an appropriate figure would be. 24 Q. There seems to be a certain irony about Fujitsu's 25 operation because they continued to operate the Horizon 160 1 system and they continued to operate other contracts of 2 Government, and they continued to take the Government 3 pound, and yet they don't appear to want to contribute 4 within the lifetime of this Inquiry to compensation or 5 indeed restorative justice in real terms, ie financial 6 terms? 7 A. Well, certainly that was the conversation that I had. 8 I look at what the Government is doing with Fujitsu in 9 other areas completely differently because they are 10 different arms of Fujitsu and not everybody can deliver 11 on what they are doing, and simply yanking away 12 contracts would not necessarily be what's right for the 13 taxpayer or the consumer at the end. So I think we need 14 to look at those things quite separately. What is the 15 right thing to do here and does provide need to provide 16 compensation? I believe that's absolutely right. 17 Should they have done so in some form earlier? I would 18 have liked to have seen that but that does not preclude 19 them doing so in the future. 20 I imagine that they definitely will. I know that 21 they've had an impact on their share price, for example, 22 just from that documentary being aired at the beginning 23 of this year. But I think we should also look at that 24 very separately from Fujitsu's other operations, many of 25 which have nothing to do with the branch that caused the 161 1 Horizon issue and, of course, Fujitsu is still providing 2 the software which the postmasters are using, and which 3 they depend on. 4 Q. Lastly, you've only just started in your most recent 5 post as Leader of the Opposition. From that 6 perspective, do you have the opportunity to reach out to 7 Fujitsu and put your weight and the Conservative Party's 8 weight with behind engagement with Fujitsu, to encourage 9 them to perhaps do something perhaps sooner rather than 10 later? 11 A. Not in the way that a Secretary of State would. It has 12 to be the Secretary of State who does that. This is 13 a Government issue, not a Parliament issue. 14 MR STEIN: Thank you, Ms Badenoch. 15 THE WITNESS: Thank you. 16 Questioned by MS PATRICK 17 MS PATRICK: Good afternoon, Ms Badenoch. My name is Angela 18 Patrick and I act for a number of subpostmasters who 19 were wrongly convicted and have since had their 20 convictions quashed and you'll be glad to hear I only 21 want to cover two topics with you. 22 The first is one you've covered with Mr Stein about 23 compensation and families. Did you hear the questions 24 we asked the Secretary of State this morning? 25 A. No, no, I did not. 162 1 Q. We asked some very specific questions about one 2 organisation. Are you aware of the organisation Lost 3 Chances for Subpostmaster Children? They're 4 an organisation focused on securing financial support 5 from Fujitsu to address the lost opportunities and 6 trauma they experienced as children due to the impact of 7 the scandal on their families? 8 A. No, I'm not aware. I know that there are many 9 organisations but not specifically this one. 10 Q. Okay. Well, Katie Downey, Rebekah Foot and Katie 11 Burrows from Lost Chances are sitting with me here 12 today. You've given evidence, just now and before 13 lunch, about your own personal objective to ensure you 14 did right by the subpostmasters, and being seen to be 15 right and to be doing the right thing. 16 Now, Mr Stein has asked some questions about the 17 contact you might have had with Fujitsu. Did those 18 conversations with Fujitsu at any time cover the trauma 19 and the lost opportunities experienced by the children 20 of subpostmasters? 21 A. No, I did not specifically speak about the children of 22 the subpostmasters. I simply talked about compensation 23 for postmasters and their families. 24 Q. While in post as Secretary of State, had there been, as 25 far as you're aware, any discussion within Government 163 1 about the question of redress or restorative justice for 2 the families of subpostmasters? 3 A. The conversations were always about financial 4 compensation for subpostmasters and their families. 5 Q. And their families? 6 A. I believe so because, specifically in the context 7 I remember having these discussions, where 8 a subpostmaster had passed away, and what could be done 9 for the families. 10 Q. When you were in Government, can you recall if there was 11 any discussion at all about creating any specific route 12 or scheme to ensure redress specifically for the lost 13 chances and trauma experienced by children of 14 subpostmasters? 15 A. There was a conversation I recall us having about these 16 requests being made but I wouldn't be able to give you 17 anything more specific than that, I'm afraid. 18 Q. Thank you. Would you accept, looking back and knowing 19 the experiences that you had, and your objective as 20 Secretary of State, if the concern was really to do the 21 right thing and to be seen to do the right thing, can 22 the whole question of compensation, redress, restorative 23 justice, really truly be answered if those lost chances 24 are overlooked entirely? 25 A. Well, I don't think that they should be overlooked. 164 1 I think they certainly should be considered because 2 compensation isn't just about financial -- it's not just 3 about financial loss. Reputational loss also took 4 place, as well as other things. But what I was not able 5 to do was look into specific cases of postmasters or 6 their families. It was about the principle of what we 7 were trying to do, which was to make sure that we were 8 being seen to be fair, being fair, and ensuring that 9 justice was delivered. 10 How justice -- what justice looks like and how it is 11 delivered is not always the case for ministers. It's 12 something that we may have a view on, but this is what 13 I believe the purpose of the Inquiry is, so that 14 everyone can see and hear and a fair conclusion is made. 15 Q. Okay, and moving on, the second thing I wanted to ask 16 you about was to return very briefly to something you 17 said this morning, and you have had covered decision 18 making in Government on value for money, and your 19 correspondence with the Treasury, and the rule of law, 20 most latterly, with Mr Beer. 21 A. Mm. 22 Q. I just want to ask you about something you said, when 23 you were asked this morning about what caused delay in 24 compensation, you referred to the Government machine. 25 Very briefly, what is the Government machine? 165 1 A. It is all of those processes, procedures, decisions, 2 consultations, reviews, submissions, all of those things 3 which need to be done to evidence decisions and all of 4 the people who are involved in that. It's not any 5 specific individual. There is, in my view, nobody who 6 wanted to slow down compensation. That was not the 7 objective of anyone. There, of course, were people who 8 quite rightly wanted to make sure that there was value 9 for money, that is something that is part of, you know, 10 the principles which we, as ministers and Government 11 officials need to make sure, we can't just do what we 12 like because it is not our money, the money belongs to 13 people. 14 But as more and more checks and balances are 15 created, more and more accountability, more and more 16 rules and regulations, these things do have an impact 17 and those things do tend to slow down processes where 18 you just want to get people money out the door as 19 quickly as possible. 20 Q. Now, Mr Stein has also given you a rundown of the 21 individual ministers who came before you. If it is 22 believed the Government machine is broken or if it isn't 23 working very well, whose responsibility is it to take 24 the steps needed to fix it? 25 A. Well, there needs to be an acknowledgement that the 166 1 Government machine and the system is broken, and I think 2 you well find that I am actually in a minority of 3 opinion when I say that. And I think you'll find that 4 the Government does not necessarily -- we have a new 5 Government -- does not necessarily believe so. That is 6 an argument that I've been making for a long time but, 7 as you can see, given that I'm Leader of the Opposition, 8 not Prime Minister and not Secretary of State, that is 9 not an argument that I am winning. 10 I think this is something that we need to examine in 11 and of itself. The way that we can have some reforms to 12 improve the system need looking at, and I hope that 13 that's one of the outcomes from this Inquiry. 14 Q. I can just pause you there. We're here, in the whole of 15 this Inquiry, dealing with what's been described as one 16 of the biggest miscarriages of justice in modern legal 17 history. From your last responses to Mr Beer, I suspect 18 you'll accept whatever change is made to that machine, 19 the machine must respect the rule of law? 20 A. Absolutely. The machine must respect the rule of law 21 but we must also make sure that the laws are good. If 22 you have bad laws then the rule of law will not work out 23 the way people want it to. We need to make sure the 24 laws themselves are good and that is to the job of 25 legislators. 167 1 MS PATRICK: Thank you, Ms Badenoch, nothing else from me. 2 THE WITNESS: Thank you. 3 SIR WYN WILLIAMS: Where are we now, Mr Blake? 4 MR BEER: In fact it is me, sir. Just Mr Henry to go. 5 SIR WYN WILLIAMS: What about an afternoon break? 6 MR BEER: Could I just urge upon you to just let Mr Henry 7 ask his questions and then take a break, so we can then 8 switch the witnesses. 9 SIR WYN WILLIAMS: All right but I'm becoming very concerned 10 about the time left this afternoon, Mr Beer. 11 Over to you, Mr Henry. 12 Questioned by MR HENRY 13 MR HENRY: Thank you, very much, sir. 14 I just want to go to a little bit of your [draft] 15 evidence where you stated: 16 "I think the communication channels between myself 17 and UKGI should have been [and then you paused] there 18 should have been more information passing direct to me, 19 not just through Kevin, and Kevin would, of course, give 20 me a summary, but there were some times that we actually 21 ended up coming to different views on things. So we had 22 different views, for example, on Nick Read the CEO ..." 23 Then it reads "but problematically, but we just" -- 24 A. "Not problematically". That's "not". 25 Q. Exactly, I was going to -- "not problematically". What 168 1 were the different views that you held to Mr Hollinrake 2 on Mr Read? 3 A. It was, in terms of whether Nick Read was doing the best 4 that he could as CEO and I felt of the issue was less 5 Nick Read but more about the difficulties of running 6 that sort of organisation in the first place and, of 7 course, yes, mistakes had been made but I did not think 8 that Nick Read was a bad CEO. He may not have been the 9 right CEO, given what we know now. I don't think that 10 when he was appointed, that that was certainly an issue, 11 but I saw someone who was trying to do his best. Kevin 12 had a different view but we're all entitled to our 13 different opinions. 14 Q. He had a different view but, of course, you were very 15 clear in the course of your evidence -- and there's no 16 criticism at all because you had a huge portfolio -- 17 that you delegated considerable responsibility to him, 18 although you were the ultimate decision maker? 19 A. Yes, that's right. 20 Q. So therefore he had a direct and far more firsthand 21 grasp of the issues, would you agree, than you? 22 A. Not necessarily, because he gave me his full and frank 23 view, but I also was able to observe CEOs across a whole 24 number of arm's-length bodies, which Kevin was not. So 25 I was also able to make a comparison, and I was also 169 1 making a comparison to CEOs who I'd seen in the private 2 sector. But also, Kevin was looking at this very much 3 from the perspective of what was going on at the Post 4 Office at that particular time. 5 As a Secretary of State attending Cabinet and 6 looking at what other Cabinet ministers were doing, 7 talking about and dealing with, I was taking a much 8 broader view, and it is very often the case that people 9 will look at the same facts and come to very different 10 conclusions. People often witness the same events and 11 give completely different witness statements. 12 So I do not think that it is the case that just 13 because I had delegated to Kevin, that his view must 14 have been the correct one and mine not. 15 Q. But you definitely differed on this? 16 A. On that point, yes. Not -- and, as I said, not 17 problematically because, in terms of conclusions, I did 18 not think that we were going to change very much in 19 terms of how we needed to manage the organisation. My 20 view was what Nick needed was a Chair who was a little 21 bit more hands on, and that was why we made the direct 22 appointment of Nigel Railton, so that he could provide 23 support during Nick Read's tenure. 24 MR HENRY: Right. Well, there's no need to I go any further 25 than we have done, so I shall pause there. 170 1 THE WITNESS: Thank you. 2 MR BEER: Sir, that is it. 3 Questioned by SIR WYN WILLIAMS 4 SIR WYN WILLIAMS: Right, there's one question I want to ask 5 you, Ms Badenoch, and it arises from a sentence in your 6 second witness statement, and it's at paragraph 38. 7 A. Okay. 8 SIR WYN WILLIAMS: I don't think we need to have it on 9 screen because I'm just going to read the one sentence: 10 "The Post Office, on the other hand, is caught in 11 this awkward halfway house where it is given only enough 12 to exist in a state of permanent starvation." 13 All right? Those are, if I may say so, very 14 powerful words. 15 A. Mm. 16 SIR WYN WILLIAMS: If it is to continue to exist in a state 17 of permanent starvation, can it exist at all? 18 A. Yes, it can exist in that state. I don't think that 19 that is what is best for the Post Office but, in order 20 for this to change, I think what we ask the Post Office 21 to do and how we ask it to do it will need to change. 22 It may be the case that, in order to save money in the 23 future, a lot more needs to be given right now. But it 24 is also the case, as I saw when I looked at NBIT, I did 25 not think that what the Post Office was doing with that 171 1 IT programme was value for money. 2 So there are things going wrong on both sides. I am 3 not sure that the way that the Post Office commissioned 4 and carried out the delivery of that IT programme was 5 done properly, which would justify the Treasury 6 believing that it shouldn't just be given more money, if 7 it is not spending it judiciously. 8 However, I do know that the way that Government 9 works in terms of providing money, those one-year 10 spending review settlements, where we decide what we're 11 giving to education and what we're giving to the NHS 12 making a decision about what the Post Office gets, when 13 you're deciding how much we're going to fund health, the 14 Post Office will always lose that battle. If you are 15 deciding what's going to happen to children, what's 16 going to happen to sick people, oh, and here's the Post 17 Office, the Post Office will always lose. We need to 18 find a different way of making those decisions. 19 SIR WYN WILLIAMS: Right. So can I take it that you agree 20 with that which Mr Reynolds told me this morning: that, 21 despite all its problems, it's still worth saving the 22 Post Office? 23 A. Yes, I absolutely do agree with that. The challenge is 24 where we find the money -- 25 SIR WYN WILLIAMS: Yes, sure. 172 1 A. -- and making sure the Government has the money to do so 2 is absolutely key. It's a different question entirely 3 but should we have a Post Office? Yes, I think it 4 a cultural institution that's absolutely essential for 5 us to keep, and I support it wholeheartedly. 6 SIR WYN WILLIAMS: Thank you very much. 7 Well, thank you, Ms Badenoch, for giving evidence to 8 me -- well, I think it's all been this afternoon, albeit 9 it started before lunch. So thank you for taking the 10 time to come to the Inquiry and thank you for making two 11 witness statements. 12 THE WITNESS: Thank you, Sir Wyn. 13 SIR WYN WILLIAMS: Right. So we'll now have our break, and 14 can I tell everyone that my cut-off point this afternoon 15 has to be 5.00, so I urge counsel to agree between them 16 how we manage that time. 17 MR BEER: Thank you, sir. Mr Blake will have heard that. 18 3.35, please. 19 SIR WYN WILLIAMS: Yes, fine. 20 (3.23 pm) 21 (A short break) 22 (3.35 pm) 23 MR BLAKE: Good afternoon, sir. Can you see and hear me? 24 SIR WYN WILLIAMS: Yes, I than, thank you. 25 MR BLAKE: Thank you very much. This afternoon we're going 173 1 to hear from Mr Patterson. 2 SIR WYN WILLIAMS: Yes. 3 WILLIAM PAUL PATTERSON (sworn) 4 Questioned by MR BLAKE 5 MR BLAKE: Thank you very much. Can you give your full 6 name, please? 7 A. William Paul Patterson. 8 Q. Mr Patterson, you have previously appeared at this 9 Inquiry. You have produced five witness statements, the 10 second and third witness statement you have already 11 confirmed the truth of their content but I'll just like 12 to address all of them at once, please. The first 13 witness statement, it doesn't need to be brought up on 14 screen, WITN06650100, dated 28 September 2014, related 15 to Phase 2; the second witness statement, FUJ00126035, 16 dated 29 December 2022, related to Phase 3; the third 17 witness statement, WITN06650300, dated 14 September 18 2023, relates to Phase 4; the fourth witness statement, 19 WITN06650400, dated 8 August 2024, relates to Phases 5 20 and 6; and finally, the fifth witness statement, 21 WITN06650500, dated 23 September 2024, relates to 22 Phase 7. 23 Can you confirm that you have copies of those in 24 front of you and, in respect of those which you haven't 25 already addressed, so that's the first, the fourth and 174 1 the fifth statements, that you can see your signature on 2 those statements? 3 A. Yes, I can, Mr Blake. 4 Q. Can you confirm that all of those statements are true to 5 the best of your knowledge and belief? 6 A. Yes, they are. 7 Q. Thank you very much. All of those statements, or the 8 ones that haven't yet been published, will be published 9 on the Inquiry's website. 10 As I've said, you have previously given evidence to 11 this Inquiry, and you have been called back today 12 principally address two issues. The first is the 13 current state of Horizon and the use of Horizon in 14 respect of actions against subpostmasters, and the 15 second is the issue of redress or compensation. As we 16 established last time, you are the Director of Fujitsu 17 Services Limited -- is that correct -- 18 A. Yes. 19 Q. -- and the Executive Vice President and Chief Executive 20 Officer of the Europe region? 21 A. Yes. 22 Q. You joined Fujitsu, I think, in 2010; is that correct? 23 A. Yes. 24 Q. Thank you very much. If we could then bring on screen 25 your fifth statement, that's WITN06650500. Thank you 175 1 very much. Could we please look at page 6 of that 2 statement. It's paragraph 14 I'd like to ask you about. 3 You say at 14: 4 "... Fujitsu accepts that there have been failures 5 to meet the standards expected." 6 Can you assist us with what specifically those 7 failures are, so far as Fujitsu is concerned? 8 A. So I think I cover a number of the topics inside the 9 statement but, as I reflect on my previous evidence as 10 well, the prosecutory support clauses in the contract 11 meant that we put too much focus on the clauses in the 12 contract, rather than on the impacts on the 13 subpostmasters. I think there was a second topic for 14 me, which is about the support of our employees when 15 they flagged up concerns, and my third issue was around 16 the whole industrialisation of witness statements, which 17 I thought was and we think is completely inappropriate. 18 Q. Page 27, paragraph 72, you've said that there is still 19 substantial work to be done. Is it your view that the 20 failings insofar as Fujitsu are concerned were 21 substantial? 22 A. Well, the three examples I've just given you, I think 23 they are substantial and they resulted, and they 24 contributed to, a miscarriage of justice on an enormous 25 scale. So, yes, I think they were substantive. 176 1 Q. I won't be going into the detailed evidence, we won't be 2 looking at the who, what, where, when, how, but it's 3 important to understand Fujitsu's corporate position on 4 what it accepts. I just want to see, in respect of 5 three propositions: the first is, does Fujitsu accept 6 that it provided a witness or witnesses in criminal 7 proceedings who provided evidence that was, at 8 a minimum, incomplete or otherwise should not have been 9 relied upon? 10 A. So I'm not a lawyer, Mr Blake. So my reading of the 11 evidence and what was submitted, I think, they were 12 exactly as you just described. 13 Q. Thank you. Second of all, does Fujitsu accept that it 14 provided audit data, ARQ data, that was at certain 15 points also unreliable? 16 A. Yes. 17 Q. Third, does Fujitsu accept that there have been 18 occasions in the context of enforcement action against 19 subpostmasters, where information that was provided by 20 Fujitsu was unreliable, inaccurate or otherwise 21 incomplete? 22 A. So I don't know about all the cases. I'm not familiar 23 with all the cases and where witness statements were 24 given. But I think there is a general theme which is 25 that they were -- and I seem to recall in evidence, 177 1 witness statements being edited and being adjusted by 2 Post Office lawyers. So I think there was a number of 3 those areas where they were inaccurate, incomplete, yes. 4 Q. Thank you. Moving on then to the current position and 5 operation of Horizon, can we bring up the expert report 6 from YouGov EXPG0000007, can we please turn to page 17. 7 As you're aware, this YouGov report is based on 8 responses from approaching 1,000 current subpostmasters. 9 Have you read this report? 10 A. Yes, I have. 11 Q. Looking at page 17, we saw there that the net 12 dissatisfaction in respect of how Horizon currently 13 operates is a clear majority as between those 14 dissatisfied and those satisfied. We have 49 per cent 15 net dissatisfied. If we could turn over the page, 16 please. It says there the vast majority, that's 92 per 17 cent of subpostmasters surveyed, reported experiencing 18 some form of issues with the Horizon IT system in the 19 last 12 months. It gives an example, if we scroll down, 20 of an open-ended comment: 21 "In my opinion Horizon is still flawed. I regularly 22 have unexplained discrepancies often altering daily or 23 manifesting at balance." 24 If we scroll over the page, we have the list there 25 at figure 8 of issues experienced within the last 178 1 12 months. Unexplained discrepancies, 57 per cent of 2 those who responded said that they had experienced 3 unexplained discrepancies with Horizon in the past 4 12 months; we have there unexplained transactions, 5 19 per cent; missing transactions, 14 per cent; double 6 entry of transactions, 10 per cent. 7 Do you have any reason to doubt those figures or 8 experiences of the subpostmasters? 9 A. So when I look at this report and I had my team try and 10 decode it, my concern is the term "Horizon" is being 11 used to cover everything inside the Post Office's 12 complete supply chain. So if you are a subpostmaster, 13 this is exactly the view you would get because you would 14 look on your screen and these are some of the problems 15 or discrepancies or issues that they are experiencing. 16 So it is absolutely correct from their experience. But 17 screen freezes could be caused by multiple things. 18 The Post Office has its network provided by a third 19 party. Issues with PIN Pads have nothing to do with the 20 Horizon system, they are provided for and maintained by 21 another organisation. And when I listened to Melanie 22 Park's, I think, evidence around discrepancies and 23 innocence, actually, in some cases, innocent double 24 keying, or whatever, all of that told me that these 25 things need to be properly investigated, not to rely on 179 1 a very narrow definition of Horizon or very narrow 2 definition of where a problem would be. 3 Q. Do you think that the system that is provided by Fujitsu 4 could be, at least in some part, to explain for those 5 unexplained discrepancies, unexplained transactions, 6 missing transactions? 7 A. So Fujitsu has been clear all the way along: there 8 continues to be bugs, errors and defects; there 9 continues to be end of life. This application, the 10 Horizon application, as I think was covered in the 11 witness statement earlier today is end of life. It was 12 meant to be end of life some years ago and a new system 13 was meant to be in play. So all of those things are 14 correct and could be or could not be causing those 15 problems, which again is why I made point a moment ago, 16 any accusation to a subpostmaster needs to be properly 17 investigated and not rely on one data point. 18 Q. Perhaps we can see your reflections in respect of the 19 end of life situation. Could we please turn to 20 FUJ00243299, please. It's correspondence that the 21 Inquiry has seen from 15 December 2023, to Mr Brocklesby 22 and it relates to the extension of the contract. I'll 23 just read to you a few passages. At paragraph 1 there 24 if we scroll down, it says: 25 "The risks associated with the continued provision 180 1 of the Horizon system (including the audit archive) on 2 end-of-life IT infrastructure. Understandably, Post 3 Office has historically been strategically focused on 4 alternative solutions to Horizon rather than investing 5 in the existing infrastructure. Due to the age and 6 consequent end of service life status of the 7 underpinning Horizon infrastructure there is 8 an increasing risk of failure of the infrastructure that 9 could result in adverse impact in the delivery of 10 services to the public." 11 Is that one of the points that you were just making, 12 that, as time goes on, the end of life status means that 13 there is an increasing risk of failure? 14 A. There is an enormous increase in risk. The Post Office 15 have rightly been focused on their other suppliers and 16 building their new system and the Horizon application 17 was meant to be retired so they put their efforts and 18 focus, understandably, into the new world and not into 19 the old world. To give this some context, we have not 20 turned off some of this equipment because it is so old. 21 Q. Another challenge to the feasibility and continued 22 delivery of the Horizon system, number 2, is: 23 "The technical complexity and risk associated with 24 (i) updating infrastructure at various states of 25 obsolescence and compatibility, and (ii) delivering new 181 1 system requirements, including because of lessons 2 learned and commitments to end users. These activities 3 are increasingly risky and technically challenging given 4 the End of Service Life Horizon system noted in 5 paragraph 1 ..." 6 So those are the challenges in respect of making 7 changes to the Horizon system going forward? 8 A. Yes, and, as I mentioned a moment ago, the Horizon 9 application is one of many applications which are all 10 interconnected inside the Post Office's supply chain. 11 When you change one part, you need to make sure that it 12 connects with Credence, with POLSAP, with all the other 13 systems that the Post Office uses directly, and with 14 other third parties. When something is this old, and 15 you make that change, it has consequential impacts on 16 all of those other systems, which you need to be super 17 careful about. 18 Q. We're going to look at some of the correspondence 19 between yourself and the Post Office, Mr Read (sic), in 20 due course, but could we just quickly go through a few 21 of those letters, a few lines in a few of those letters. 22 If we start with FUJ00243204, it's a letter that we've 23 already seen in great depth of 8 July 2024 between 24 yourself and Nick Read. As I said, we'll come to the 25 context of these letters but, if you scroll down, 182 1 there's only one passage that I'd like to draw your 2 attention to. It says there: 3 "As the Post Office is well aware, there have been 4 and there continued to be bugs, errors and defects in 5 the Horizon system. Further, [Fujitsu] currently has, 6 and previously had, access to branch transaction 7 records." 8 Two points you're highlighting there: one is bugs, 9 errors and defects and the other is what has come to be 10 known as remote access; is that correct? 11 A. Yes. 12 Q. Thank you. Could we please then turn to FUJ00243303. 13 A further letter of 23 August. This one is to 14 an investigator at the City of London Police. If we 15 could scroll down the first page, please. Under (a), it 16 says: 17 "As discussed, the Horizon system has had and 18 continues to have bugs, errors and defects, some of 19 which may not have been detected at this time." 20 So not only an acceptance that the current system 21 has bugs, errors and defects but also there are 22 effectively unknown unknowns? 23 A. Yes, but I think the second sentence is also important, 24 which is the Horizon application is fed from other 25 third-party systems and business processes. So as well 183 1 as Horizon may well have unknown, I cannot attest to the 2 validity or performance of those other systems. 3 Q. Thank you very much. That letter can come down, and 4 we'll return to it shortly. Are we to understand from 5 that correspondence and from your evidence that there 6 are currently reliability issues with the Horizon 7 system? 8 A. So the Horizon system, as far as I understand today, is 9 performing to its contractual performance levels in 10 terms of its SLAs. If I -- last week, I got an update 11 on where we are with bugs, errors and defects. There 12 are currently 16, and we have patches, which is the 13 technical term for the fixes cited to go in in February, 14 after the Christmas peak. So I think there is good 15 understanding of where there are bugs, errors and 16 defects, and a process, which is well communicated with 17 the Post Office. There is a weekly session with the 18 Post Office, and we're told they communicate that to the 19 subpostmasters. 20 But there will continue to be, Mr Blake, with 21 changes and with age, bugs, errors and defects that may 22 well arise. 23 Q. Does the system that Fujitsu provides operate in 24 a way -- and I'm going to use the language of a letter 25 from Ernst & Young that we saw in Phase 2 of this 184 1 Inquiry, it's a 1999 letter -- does it operate in a way 2 that would allow subpostmasters to produce their 3 accounts to a suitable degree of integrity? 4 A. I couldn't answer that question. 5 Q. Do you consider it to be sufficiently reliable for 6 subpostmasters to produce their accounts? 7 A. So Mr Blake you're asking me to comment on audit and 8 accounting processes, which I don't have any 9 professional understanding of. What I can say is that 10 the system today performs to the SLAs that the Post 11 Office require us to do -- to perform to. I can't 12 comment on whether that document that's produced at the 13 back and what its contents or whether it's appropriate 14 for them to legally sign off. That would be massively 15 overstepping my capability. 16 SIR WYN WILLIAMS: Sorry, Mr Patterson, I've forgotten what 17 "SLA" stands for. 18 A. Forgive me, service level agreements. 19 SIR WYN WILLIAMS: Sorry, yes. Fine. 20 MR BLAKE: Subpostmasters up and down the country use 21 a system where the fundamentals are provided by Fujitsu. 22 That system, as far as you are aware, is it sufficient 23 to produce reliable accounts? 24 A. So I think in all the evidence we've seen and all the 25 Inquiry have seen, the reporting that comes out of 185 1 Horizon, whether it's appropriate or not, may have bugs, 2 errors and defects, may have been fed bugs, errors and 3 defects, may not be reflecting the accuracy of what's 4 gone on in the Post Office -- in the subpostmaster's 5 branch. Whether the -- what is the document that's 6 required by the Post Office signed off by the 7 subpostmaster, I have no idea. 8 Q. Not the Post Office; I mean the taxman, for example. 9 A. I have no idea, Mr Blake. I've never seen one of those 10 documents about what would be presented to an accountant 11 or to the HMRC. Is it -- I don't believe it's in my 12 evidence. 13 Q. Are you confident, for example, that somebody could come 14 to the Inquiry from Fujitsu, and say, where you're 15 sitting, that, as somebody who operates Horizon -- and 16 of course individual cases have to be taken on their own 17 basis and their own facts -- but as somebody who 18 operates Horizon, the system, so far as they are 19 concerned, is reliable for accounting purposes? 20 A. Mr Blake, again, I'm going to answer it, I don't know. 21 If that question was being posed, I would expect the 22 Post Office to be sitting here, as well, as well as the 23 engineers on our side, to determine whether the 24 information required is appropriate to be able to sign 25 those things off. 186 1 Q. Mr Patterson -- 2 A. It's very clear -- forgive me, it's very clear, in all 3 the evidence in this Inquiry, that there is level of 4 unreliability, an unreliability, I've said at the start 5 of this particular evidence, around bugs, errors and 6 defects, and the whole end-to-end. Horizon in some 7 respects represents the end-to-end of what goes on 8 inside a subpostmaster's branch and what happens in the 9 Post Office, Head Office. So for me to sit here and say 10 I think there's enough in that documentation to allow 11 HMRC or an accountant to sign off, I'm not qualified to 12 answer that and neither are my colleagues. 13 Q. Mr Patterson, you are presumably somebody who goes up 14 and down the country bidding for contracts. If you are 15 selling Horizon as a new system, would you be able to 16 tell the person who you are selling that system to that, 17 at the end of the day, the accounts that it produces are 18 reliable? 19 A. So we do not sell this system. This system is end of 20 life. At the Public Accounts Committee, when I gave 21 evidence, this is not a product that we've ever sold to 22 another customer. It is bespoke to the Post Office and 23 it is bespoke to the Post Office's requirements. So 24 again, I would ask -- that would be a question I would 25 be asking the Post Office: is the documentation and the 187 1 material that comes out of it reflecting what is 2 required? 3 Q. Can you see how that is an issue if you're -- 4 A. I do. 5 Q. -- a current subpostmaster who operates that system, who 6 produces accounts, who relies on the system day in, day 7 out, that the head of the company in Europe who produces 8 that system can't say that what's coming out of it is 9 reliable? 10 A. So I'll give you a slightly different example. If in 11 a cash pouch a subpostmaster inadvertently puts in two 12 extra zeros and that cash pouch gets to the other end of 13 the line and doesn't have those two extra zeros of 14 money, that's a discrepancy. Horizon has just reported 15 what was keyed in on one end and what was counted on the 16 other end. Forgive me, do I then say that the Horizon 17 system its accurate? Well, in that example, I can't say 18 that because I don't know what's gone on. 19 Q. Are we again repeating the words "user error"? 20 A. No, far from it. I use that as an example. Please 21 forgive me, Mr Blake, please forgive me, I am very 22 respectful for the subpostmasters and what they've gone 23 through, but you're -- 24 Q. What I'm asking about is not the individual user making 25 an error. I'm purely asking about the system that you 188 1 provide? 2 A. Well, I'll take it away from being the user. Does the 3 POLSAP system feed into the Horizon system correctly? 4 I don't know the answer to that. 5 Q. That's a third-party system? 6 A. But Horizon reflects all of that, and that's the 7 transactions, in fairness to the subpostmaster, that he 8 or she are representing, which is why we've been 9 consistent, since the very start of the Inquiry that 10 there have been bugs, errors and defects, there will 11 continue to be unreliability in the front end, and in 12 the rest of the supply chain, I do not know the answer 13 to that, which is why, when we get to the next set of 14 questions, we've been so keen to make sure that 15 investigations take in the entire system and don't rely 16 on a very narrow point of view. 17 Q. Let's move to that correspondence's. If we start with 18 FUJ00243157. If we start, please, on page 4. Thank 19 you. This is an email exchange that you'll be familiar 20 with, the Inquiry is familiar with it. It relates to 21 a City of London Police investigation in April this 22 year. Simon Oldnall of the Post Office says: 23 "Can I ask that you help with any conversations that 24 City of London Police need to have with Fujitsu Services 25 Limited." 189 1 If we scroll over the page, please, to page 3, the 2 response from Mr Walton of Fujitsu, is: 3 "As this is a legal matter, [Fujitsu Legal] are 4 communicating with the City of London Police. I am not 5 involved in those communications, and in any event, 6 [Fujitsu] considers it to be inappropriate for Post 7 Office and [Fujitsu] to be discussing a police 8 investigation." 9 If we go to page 2, please. If we scroll down, we 10 can see, this is an email we saw with Mr Bartlett, he 11 says: 12 "[City of London Police] has informed us that they 13 have not had any, in information or contact with Fujitsu 14 after the single exploratory and inconclusive 15 conversation. They left that conversation with the 16 feeling that they were indirectly being told that the 17 Horizon system was unreliable and so the case could not 18 progress. We really need to explore this as this is not 19 the nuanced impression Simon Oldnall has given me. 20 "As the potential victim in this case, the Post 21 Office would be grateful if you could provide me with 22 contact details for either the equivalent person in 23 Fujitsu to my role or an appropriate person in your 24 Legal Team. I will then pass those details on to the 25 City of London Police who are looking to have 190 1 a trilateral conversation with Fujitsu, Post Office and 2 City of London Police. 3 "It is impossible to overstate how important this 4 is. I need to advise both the police and the Post 5 Office as to evidentially established reliability or not 6 of data that is being used every day in establishing 7 outcomes with postmasters and potentially to be 8 presented to the criminal justice system by the police 9 and the three public prosecuting agencies. The 10 non-provision of relevant witness statements from the 11 Post Office and Fujitsu will rightly be interpreted by 12 the police and prosecutors as Post Office and Fujitsu 13 not having faith in the reliability of the data with the 14 obvious outcome resulting." 15 If we go on to page 1, please. We see there the 16 response from the solicitor at Fujitsu's Legal Team 17 saying: 18 "Please refer any correspondence to me rather than 19 Mr Walton. 20 "I note your comments, which aren't accepted. 21 "It is not appropriate for Fujitsu to discuss with 22 Post Office the nature and substance of its cooperation 23 with an ongoing police investigation." 24 If we scroll up to the top, we have there 25 Mr Bartlett's response. 191 1 "We have had a call with City of London Police 2 following your email below and they will be in touch 3 with you again to arrange the taking of a witness 4 statement or statements. We would be grateful for 5 Fujitsu to extend any and all assistance to [City of 6 London Police City] to aid their objective understanding 7 and assessment as to the reliability of the Horizon 8 system and the admissibility of evidence produced from 9 it relating to the investigation they are conducting 10 following [Post Office] making a crime report to them as 11 a potential victim." 12 As we have seen, that then sparks a number of 13 letters between yourself and Mr Read. I will take them 14 as quickly as we can. If we start, please, at 15 FUJ00243199. We have there the letter of 17 May, where 16 in the first paragraph, you explain the serious 17 concerns. You say: 18 "To be clear, Fujitsu will not support the Post 19 Office to act against postmasters. We will not provide 20 the support for any enforcement actions, taken by the 21 Post Office against postmasters, whether civil or 22 criminal, for alleged shortfalls, fraud or false 23 accounting." 24 Then you address each one of them. "Criminal 25 investigations", you refer to that City of London Police 192 1 investigation, and you say: 2 "The approach of Fujitsu is to cooperate with the 3 police and any other third party, exercising independent 4 investigative, prosecutorial, regulatory or judicial 5 powers. However, we are concerned by the behaviour of 6 the Post Office Investigation Team on this matter." 7 You address the concern there relating to, for 8 example, reference to the Post Office being a victim -- 9 A. Mm. 10 Q. -- and that's something we have already addressed. 11 The second in relation to the "Pursuit of shortfalls 12 from subpostmasters", you say: 13 "It seems that the Post Office may be continuing to 14 pursue postmasters for shortfalls in their accounts. We 15 would have expected that the Post Office has changed its 16 behaviour. It should not essentially be relying on 17 Horizon data as the basis for that enforcement." 18 You then address the issue of redress and say that 19 you will continue to provide data in relation to 20 redress. 21 Sorry, before I get to a question, I'll just quickly 22 take you through two more letters, the first is 23 FUJ00243201. This is the response from Mr Read -- thank 24 you very much. At the bottom of the page, he reassures 25 you that the Post Office won't be undertaking their own 193 1 prosecutions. He explains, over the page, please, that: 2 "Post Office requests the use of Horizon data for 3 a number of day-to-day business reasons, including 4 supporting postmasters with their branches. In terms of 5 enforcement, the Post Office's requests only relate to 6 cases where our teams are supporting criminal 7 investigations or prosecutions pursued by independent 8 third parties." 9 He says: 10 "In response to the specific case you raised, 11 potential criminal activities were identified in the 12 branch and Post Office therefore reported the matter to 13 the police. We have assisted with the police's 14 investigation, including providing supporting data ..." 15 He says: 16 "Naturally, it is vital for the police's 17 investigation that it can rely on the Horizon data it 18 has received." 19 In respect of shortfalls, he says that: 20 "Horizon data isn't currently being used but the 21 Post Office data for a range of key day-to-day business 22 activities, including supporting its postmasters with 23 resolving discrepancies on their accounts", is necessary 24 to have your assistance. 25 If we go over the page, please. He says there: 194 1 "Post Office sees reliance on Horizon data as 2 essential to supporting postmasters with understanding 3 and remediating discrepancies. 4 "Post Office relies on Fujitsu and the services it 5 provides to ensure that it can continue to support 6 postmasters in that way." 7 Then, finally, he addresses the same topic: redress. 8 The final document before I ask the question is at 9 FUJ00243204. This is your response of 8 July. I'll 10 take that slightly more slowly. If we scroll down, 11 please, you say there: 12 "In simple terms, the Post Office is requesting that 13 Fujitsu give expert opinion evidence to be used in 14 criminal proceedings against postmasters and post office 15 workers." 16 You say: 17 "In your letter, you rightly note that the content 18 of any witness statement is a matter between the police 19 and [Fujitsu]. However, I consider it necessary to 20 address this issue with you because the request was made 21 by Post Office and because I consider the request to be 22 entirely inappropriate, particularly in the light of the 23 evidence being uncovered at the Inquiry. 24 "I enclose with this letter an email chain", and you 25 refer to that email chain that we saw. 195 1 Then you say: 2 "A witness statement from [Fujitsu] attesting to the 3 reliability of the Horizon system, and of data from it 4 in criminal proceedings would amount to expert opinion 5 evidence. [Fujitsu] is incapable of providing expert 6 opinion evidence, as it is neither independent nor has 7 it sufficient information to provide such an opinion." 8 Now, you're not a lawyer and I'm not asking you for 9 a legal answer to this question but why do you 10 understand Fujitsu couldn't provide a witness statement, 11 not purporting to be an independent witness statement, 12 not purporting to be an independent expert, but just 13 simply evidence of the personal experience of the author 14 in respect of the reliability, with whatever caveats it 15 may require? 16 A. So first of all, we are actively supporting the police 17 in their enquiries. There's evidence, I think, in the 18 pack, in the bundle, of the comprehensive set of 19 correspondence with the police, drawing their attention 20 to a number of areas directly from this Inquiry. 21 A witness statement from us on what comes out of the 22 Horizon application is still a problem to us, for 23 exactly the reasons I said earlier, because the Horizon 24 system is one lens on the entire supply chain in the 25 Post Office, and we can't attest to everything that goes 196 1 on in that, from left to right. 2 My other concern about the email from Mr Bartlett 3 was just trying to narrow things down. So what I've -- 4 as I've tried to pay close attention to this Inquiry, 5 one of the topics that came up was people flagging 6 things, did executives flag things; were we being 7 transparent; were we being curious? This is Fujitsu 8 trying to be very transparent, very curious, around what 9 has gone on and what is going on day-to-day. So that 10 was why we didn't feel like we could give a witness 11 statement, but the material that we have given to the 12 police at the moment -- and I don't know the state of 13 those cases -- may still require us to give that in due 14 course, Mr Blake, but at this point in time, we felt we 15 couldn't. 16 Q. In the email chain, it explained from the Post Office's 17 perspective that they considered that the police had 18 been given the impression that the system was 19 unreliable. 20 A. Mm-hm. 21 Q. That may, in fact, be consistent with the evidence that 22 you've given to the Inquiry today. But is there not 23 some way in which Fujitsu could provide a statement that 24 at least speaks about its own system that it operates, 25 subject to the caveats of the third parties, that goes 197 1 to, in some way, reassure the police in respect of the 2 current reliability of the system? 3 A. So again, what I've learnt -- what I've learnt and what 4 our company has learnt from the Inquiry in its earlier 5 stages is, it just is very narrow, containing questions, 6 "was this correct at this point in time from 9.00 to 7 4.00?" We feel that is completely inappropriate and 8 I think the evidence during this Inquiry suggests that 9 is also inappropriate. You need to take a holistic view 10 and, in fairness to the subpostmasters, that's what they 11 need as well: they need to see the whole system that 12 they're engaging with, not just a window which is 13 Horizon, but all the other parts of the components. 14 It is impossible for Fujitsu, even with all those 15 caveats. The other thing I've learnt about caveats is 16 nobody reads them and people only then pick out the 17 paragraph that they want to pick out, and that was one 18 of your first questions to me. So that is why we felt 19 we couldn't. 20 Now, evidence may well transpire, you know, there's 21 a number of other cases going through. I think there's 22 33 prosecutions which the police are looking into at the 23 moment. We are only aware of four. So, again, this 24 point of transparency -- and we were aware of none 25 before January/February, when we got that email. So 198 1 everything was silent to us, and then suddenly we get 2 these two requests, which made us very suspicious, very 3 curious, hence why I wrote to Mr Read. 4 Q. The next paragraph, I think I may have referred you to 5 this already, it says: 6 "As the Post Office is well aware, there have been 7 and there continue to be bugs, errors and defects in the 8 Horizon system. Further, [Fujitsu] currently has and 9 previously had, access to branch transaction records." 10 You also say: 11 "In addition to [Fujitsu] the Horizon system is 12 reliant on services by Post Office and third parties 13 retained by the Post Office." 14 That's the point you've also made today. 15 A. Mm. 16 Q. If we scroll over the page, please. It says: 17 "Based on the evidence which has been seen and heard 18 in the Post Office Horizon IT Inquiry, Fujitsu considers 19 that all of the matters management above would need to 20 be investigated carefully by the Post Office and the 21 police, with the assistance of an independent technical 22 IT expert, and possibly also a forensic accounting 23 expert, to ascertain proper explanations for branch 24 account discrepancies. Fujitsu considers that only 25 after such an investigation has been undertaken could 199 1 a meaningful expert witness statement be made in 2 subsequent criminal proceedings, which addresses the 3 reliability of the Horizon system and the relevant data 4 produced. For the reasons I have mentioned above, 5 [Fujitsu] cannot provide such a statement." 6 Putting a statement to one side, what about 7 an independent investigation into the reliability of the 8 system? We've heard evidence that the Post Office are 9 looking for some sort of independent statement from 10 an IT expert. In respect of their investigation, do you 11 commit to fully cooperating, opening up your books, your 12 warehouses, your data, to an expert for that purpose? 13 A. I think anything that helps the subpostmasters in the 14 entire end-to-end be confident about the systems that 15 they are using, I welcome, Fujitsu would welcome, yeah. 16 I have no problem with that at all. 17 Q. In respect of opening up your books to that expert, so 18 they can work out for themselves the reliability of the 19 system? 20 A. Indeed. And I think, you know, back to the earlier 21 comment: this is a complex environment, which is, in 22 parts, 25 years old, and we are applying today's, you 23 know, computing standards to some of those things. So 24 I think it would be difficult, hence why the system is 25 end of life, hence why it should not be being extended, 200 1 hence why it should have been replaced. 2 So I have no problem at all in opening up to any 3 analysis that a third party would wish to do. 4 Q. Has Fujitsu had an independent company report on the 5 current reliability of the Horizon system? 6 A. Now, I don't know the answer to that. I don't know the 7 answer to that, Mr Blake. 8 Q. We've seen some evidence, for example, back in 2012, 9 that Fujitsu were going to obtain a KPMG report. 10 I think it was stopped in light of the Second Sight 11 Report. Is that your understanding or do you have 12 a different understanding? 13 A. I don't have much understanding. I saw that document in 14 my bundle and I don't have an opinion why it was stopped 15 or didn't go ahead. I read the email traffic, and -- 16 Q. Focusing on the present, though, people may be 17 interested in why the burden is being placed on the Post 18 Office to obtain that independent report, why it is that 19 Fujitsu themselves, in the time that's been available, 20 haven't commissioned an external investigation into the 21 reliability of a system that they produce? 22 A. So I think again it's about we're expanding what the 23 system is, and our definition of what the Horizon 24 application is. There are multiple things in this 25 supply chain which Horizon touches or is fed with. 201 1 I think it's right and proper that the whole system 2 end-to-end is examined, not just the Horizon 3 application, which is -- and whether we should be partly 4 funding that or doing it, I think that's perfectly 5 sensible for us to have that conversation with the Post 6 Office. Why we haven't done that in the past, well, 7 frankly, it's been end of life. We're not meant to be 8 maintaining this system and, in fact, we have not been 9 doing any material investment in it, or the Post Office 10 haven't, for several years. And I'm sure we'll come on 11 to that question in a moment. 12 Q. I'll take you to how this correspondence with the Post 13 Office ends, and we can start with FUJ00243209. 14 A 23 July 2024 response from Owen Woodley, I won't go 15 into the detail. If we scroll down he says he shares 16 your commitment, the Post Office has unquestionably 17 changed its mindset. Post Office will never again take 18 a prosecutorial role. He addresses the question of 19 expert evidence, he says: 20 "As you rightly say, Fujitsu is not able to provide 21 expert opinion evidence and it is not sufficiently 22 independent for any statements that it may provide to be 23 deemed expert evidence by the Crown Prosecution Service. 24 Post Office is aware that it has not and would not 25 request that [Fujitsu] provides expert opinion 202 1 evidence." 2 If we scroll over, he then says in that top 3 paragraph, about halfway through, he says: 4 "The police have raised questions regarding the data 5 and the Horizon system, and the AC&I [I think it's A&CI] 6 team referred the police to [Fujitsu] -- as Post 7 Office's provider of the system -- to obtain answers to 8 those questions. The feedback they received in April 9 2024 was that police had only been able to have one 10 conversation with [Fujitsu] at that time and the 11 investigation officer's impression from the conversation 12 was that they were indirectly being told by [Fujitsu] 13 that the Horizon system was unreliable. As a result, 14 the police told the team that the investigation could 15 not progress. 16 "In light of that feedback from the police, 17 Mr Bartlett sent the email ..." 18 He's explaining the background to the email and why 19 it was sent: 20 "[He's] not asking Fujitsu to act as an independent 21 expert witness in this case. He asks that [Fujitsu] 22 engage with the police and provide a statement when 23 requested to do so by the police, regarding the 24 reliability of the data, which was informing the 25 police's investigation. I understand from your previous 203 1 correspondence that Fujitsu has confirmed it will engage 2 further with the police in this matter." 3 He then goes on to address criminal investigations 4 and prosecutions. If we go over the page, please, he 5 says: 6 "To get the right checks and balances in any of 7 these investigations processes, data will be required 8 from the Horizon system, along with analysis of any 9 known bugs, errors or defects." 10 He then addresses the victim point. He moves on to 11 postmaster shortfalls: 12 "Thank you for confirming [Fujitsu] will continue to 13 deliver its contractual obligations, including reporting 14 promptly and transparently on branch impacting 15 incidents. 16 "While the Post Office does not currently take civil 17 recovery action to recover established losses from 18 postmasters, this may be necessary in future to 19 establish a fair, transparent and consistent approach to 20 recoveries." 21 So he's referring there to potential actions to 22 recover apparent shortfalls. 23 A. Mm-hm. 24 Q. He says: 25 "I welcome your commitment that [Fujitsu] will work 204 1 collaboratively with Post Office over the coming months 2 so that together we can achieve the best outcome for the 3 postmasters and your offer to work collaboratively on 4 the future of the Horizon system is much appreciated." 5 We then turn to your response. It's FUJ00243211. 6 It's a response dated 26 July this year, and you 7 say: 8 "It is unfortunate that Nick [Nick Read] was not 9 able to attend the meeting as discussed. The original 10 purpose of writing to Nick was to escalate, CEO to CEO, 11 the concerns relating to certain behaviours within the 12 Post Office. It seems clear that the Post Office 13 continues to have significant cultural issues, sees 14 itself as the 'victim', with the enforcement and 15 prosecution of postmasters considered as business as 16 usual activity of a commercial retail company. As 17 I stated in my correspondence to Nick and during our 18 discussion, Fujitsu finds the language and the suggested 19 behaviour unacceptable from Post Office Investigators. 20 "I do not intend to engage further with the Post 21 Office on the matters I raised. We completely trust in 22 Sir Wyn and the Inquiry process, which will examine the 23 extent of the Post Office's change in Phase 7." 24 It might be suggested that that is a rather petulant 25 response to a serious letter from the Post Office. What 205 1 is your view on that? 2 A. It's not petulant at all, and I also heard the term 3 being used, it was schoolboy playground things. I take 4 all of this matter personally really, really seriously. 5 So seriously, which is why I wrote to Nick Read because, 6 as I said earlier, I've learnt in the evidence in this 7 Inquiry too much -- or lack of transparency, lack of 8 clarity, lack of curiosity, on a very, very complex set 9 of material and environments. So it's not petulant at 10 all. 11 I felt it was really serious, particularly when I'm 12 contacted as a company by the police, accusing 13 subpostmasters of very serious offences and, given what 14 I have heard in this Inquiry, I felt it was really 15 important that I lay out clearly that we will not be 16 supporting the Post Office. 17 However, Mr Blake, we are actively supporting the 18 police in those inquiries, and I know it has also come 19 up in this Inquiry whether we are or not. I think 20 you've seen some of the material. They are very 21 comprehensive. I saw some material this morning also on 22 this very matter with the police. So we are actively 23 supporting the police, and sharing with them all the 24 material that we've got, as well as the material 25 obviously from this Inquiry. 206 1 Q. What about that second paragraph there: 2 "I do not intend to engage further with the Post 3 Office on the matters I raised." 4 I mean, why was it this summer you couldn't say to 5 the Post Office, "Of course we'll supply to the police 6 whatever witness statements they ask for"? 7 A. So in our statement to the Select Committee in 2020, we 8 made it clear in that we will continue to support the 9 police in their investigations. It's in my corporate 10 statement here, I think on the back paragraphs, we will 11 continue to support the police in any investigations. 12 I felt, having -- there's been a number of changes in 13 the Executive Team in the Post Office. I met Nick early 14 on when we were both appointed. I've now met 15 Mr Woodley, I've now met their new Acting CEOs as well. 16 And one of my other concerns, as you will have seen in 17 my notes, was just about the continuity of that 18 understanding about how serious Fujitsu takes for his 19 matter. And, therefore, I wasn't going to engage any 20 further with the Post Office but would with the police. 21 Q. Does that, in some way, signify a quite serious 22 breakdown in the relationship between Fujitsu and the 23 Post Office? 24 A. So operationally, we are very well engaged, and 25 delivering against our contract to the Post Office. 207 1 I -- on Friday evening, I spoke to two executives from 2 the Post Office about their request on an extension. So 3 we continue to focus on the day to day and what needs to 4 be done. But on this particular matter about 5 prosecutions, I will not engage with the Post Office -- 6 we will not engage with the Post Office on it. 7 SIR WYN WILLIAMS: Right. I understand that, Mr Patterson. 8 Let me just ask you this: as we are talking to each 9 other now, how many, if not exactly, approximately, 10 cases are you -- and I'm using these words completely 11 neutrally -- having correspondence or discussions with 12 the police? 13 A. Four. 14 SIR WYN WILLIAMS: Four, right. In those four cases, to the 15 best of your knowledge and belief, has Fujitsu answered 16 the questions or tried to answer the questions that the 17 police have posed to them? 18 A. Yes, Sir Wyn. In fact, one of the documents was 19 33 pages laying out the answers to those questions. 20 SIR WYN WILLIAMS: Hang on. That's fine. In those four 21 cases, if the police has asked for documentary material, 22 has it been provided? 23 A. Yes. 24 SIR WYN WILLIAMS: If the police have asked for data from 25 Horizon, has that been provided? 208 1 A. No, I don't know whether they have asked for that yet, 2 Sir Wyn. 3 SIR WYN WILLIAMS: If they haven't, that's fine. But -- 4 A. But if they do, absolutely. 5 SIR WYN WILLIAMS: Right. In any of the cases to date, has 6 the police asked Fujitsu to nominate a person to make 7 a witness statement? 8 A. I don't believe so. 9 SIR WYN WILLIAMS: Right. So far as you are aware, if the 10 police made such a request of Fujitsu, would you at 11 least try to find a person who could make a witness 12 statement? 13 A. Absolutely, Sir Wyn. Absolutely. 14 SIR WYN WILLIAMS: Right. Fine. Okay. So that's the 15 current position. 16 Right, back to you, Mr Blake. 17 MR BLAKE: Thank you very much, sir. 18 We'll move on, then, to the extension of the 19 contract. Could we bring back onto screen your fifth 20 witness statement at page 30, please. It's 21 paragraph 77. Page 30, paragraph 77. You say there: 22 "As noted above, the Horizon contract is due to end 23 on 31 March 2025. However, in the event that it is not 24 possible, Fujitsu is currently discussing with [the Post 25 Office] (at its request) the potential for a short-term 209 1 extension) which [Post Office] envisages to be 2 approximately two years) to facilitate an orderly exit 3 and transition to occur. In light of the evidence that 4 has emerged in the Inquiry in relation to [the Post 5 Office's] conduct and culture, and the challenges that 6 Fujitsu has faced with regard to visibility over [the 7 Post Office's] use of Horizon data and/or records, 8 Fujitsu's position will be that any extension to the 9 Horizon Contract should necessarily see the removal of 10 the Court Case Support Services provisions." 11 Can you assist us with what you mean by the Court 12 Case Services provisions? 13 A. So I don't have all the clauses in my head but there is 14 a set of responsibilities placed on Fujitsu, back when 15 this contract was agreed in 1999, which had a number of 16 activities and responsibilities. Fujitsu will not sign 17 any extension if those conditions are still in the 18 contract. 19 Q. Are you able to assist us with whether Fujitsu will be 20 able to assist the Post Office in respect of the 21 investigations of shortfalls, putting aside historic 22 criminal matters, in respect of current shortfalls 23 experienced by postmasters? 24 A. So I think I also say in here somewhere about the ARQ 25 data is moving, so that all the historical data will be 210 1 under the Post Office's control and, in fact, when I was 2 talking to Mr Railton a few weeks ago, it was very 3 important to him. So I think, actually, that Post 4 Office, by early February, will have all of the data 5 inside their own control to support any investigations 6 that they wish to do. 7 Q. In respect of matters after February, so let's say in 8 a year's time, there needs to be an investigation into 9 a shortfall, is that something that you will be 10 assisting the Post Office on or not? 11 A. Yes, I would expect those types of operational 12 engagements to continue, and I think they are quite 13 different in tone to Court Case Support Services and my 14 very earlier comment around the industrialisation of 15 witness statements. 16 Q. Thank you. We've seen in other documents discussion of 17 potentially a five-year extension, five more years of 18 Horizon. Would it be possible, in light of what you've 19 said, to improve the reliability of Horizon data over 20 that time or do you anticipate that in fact it may get 21 worse over that time? 22 A. So the first correspondence, I think, was December, with 23 the request for five years. In my meeting with the 24 acting CEO at the time, Owen Woodley, I think the 25 request was two years. We've had the request for three 211 1 years, and this morning, as I walked into this building, 2 I had another request, which was for four years. 3 So this continues to move around in terms of what 4 the requirements are from the Post Office. I am 5 encouraged by the new leaders who seem to be getting 6 more understanding and clarity around what the actual 7 business requirements from -- from the Horizon system 8 will be but, to your question, I am very worried about 9 it. And, in fact, my correspondence and my commentary 10 to them as well is it needs to be the shortest possible 11 time entirely, because this system is not meant to be 12 continuing and it's not had any material investment in 13 the last four years, while the attention has been on 14 NBIT or versions of NBIT. 15 My earlier comment also around Horizon is one 16 part -- this application is one part of an incomplete 17 supply chain and, in fairness to the Post Office, that 18 means it's got to have multiple tests of all their other 19 systems as well. So if you change one part, you have to 20 test everything else. So I think it's very, very 21 difficult to know whether three years, four years or 22 five years will be required -- will be possible, to your 23 question. 24 Q. Thank you. I want to look at current use of Horizon 25 data. If we could bring back onto screen your witness 212 1 statement, WITN06650500, page 25, paragraph 66. 2 Thank you, it's the bottom of page 25. 3 You say there: 4 "Fujitsu continues to provide the Post Office with 5 Horizon data, including ARQ data, when requested as part 6 of its provision of services related to the Horizon 7 system." 8 Over the page, please. 9 "While Fujitsu has informed the Post Office that it 10 will not provide support for enforcement actions taken 11 against postmasters, whether civil or criminal, Fujitsu, 12 has as a result to verify the purpose to which the Post 13 Office intends to put this data, or what the data is in 14 fact used for." 15 Can you assist us with what you mean by "struggled 16 to verify the purpose"? 17 A. So I think it came up in some of the Post Office 18 Executive's evidence as well. So one of the things that 19 we are very concerned about, again, this narrow use of 20 information, is information being requested and used 21 for -- in the concern here, for prosecutions. And what 22 we are asking for and what we did on a very simple form, 23 which is an ARQ form, is could you tick a box to say is 24 it used for redress or management information, or for 25 prosecution? And the Post Office felt that was 213 1 inappropriate and didn't accept that change, but that 2 was the reason for the change. 3 If I go back to what Fujitsu has learnt through this 4 Inquiry, it's that curiosity topic again, you know, what 5 is the data being used for, rather than just handing 6 over the data without any context to it? 7 Q. Perhaps we could bring onto screen the forms, the new 8 form and the old form, FUJ00243213, and, if it's 9 possible to bring that on screen alongside FUJ00243227. 10 Is this the ARQ form you were referring to? 11 A. Yes, I think it is. I think it is, yes. 12 Q. If we have a look at the one now on the left-hand side 13 there are two additional questions there that are said 14 to be mandatory. First asks: 15 "Is this request related to either the investigation 16 of or action being taken or intended to be taken by the 17 Post Office against a postmaster or Post Office worker 18 in connection with potential fraud, theft, breach of 19 contract or any other potential impropriety which is 20 suspected to have occurred at the relevant Post Office 21 branches?" 22 The second is. 23 "Will this information be used to support either 24 a postmaster or a Post Office worker to achieve 25 financial redress?" 214 1 So they are provided with two options: one 2 presumably is one that you have absolutely no issue 3 with: the second one, providing information in relation 4 to redress? 5 A. Correct. 6 Q. In respect of the first, what is the position, if I were 7 to tick "Yes"? 8 A. So the Post Office have not accepted the change in the 9 form, is my understanding. So we are still reverting to 10 the old ways. 11 Q. There is another option, at least one more option, isn't 12 there, that the Post Office might need the data to 13 assist a subpostmaster in understanding and discussing 14 their current shortfalls; is that something that is 15 missing in this mandatory section? 16 A. So that would be, wouldn't it? Yes, I'd agree with you 17 on that. 18 Q. There has been, we've seen in an email chain, a dispute 19 between the Post Office and Fujitsu in respect of this 20 new form. Can we please turn to FUJ00243233. If we 21 start on page 4, please, the bottom of page 3 and into 22 page 4., you have somebody from the Remediation Team. 23 If we scroll down, we can see their name. It says as 24 follows: 25 "Please find attached an updated ARQ request tracker 215 1 with a brief summary of all previous and new request(s) 2 since our last ARQ Requests." 3 If we scroll up we can see a response, at the bottom 4 of page 3. Thank you. The response there from Fujitsu 5 is: 6 "Thank you for your recent request. Unfortunately, 7 as it is not on the latest template, we are unable to 8 process it. Please resubmit your request using the 9 attached template." 10 If we scroll up, we can see the response from the 11 Remediation Team: 12 "As you can see below, we again sent our ARQ 13 requests through to Fujitsu using the older process of 14 master tracker and summary table. It was returned 15 refusing to complete the request without us completing 16 the updated form. 17 "Could you please advise next steps as we have ten 18 ARQ requests outstanding." 19 If we scroll up, please. The response: 20 "Further to my earlier emails on this topic, we are 21 now accumulating a backlog of requests, potentially 22 delaying postmaster redress. 23 "Can you confirm that [Fujitsu] will process these 24 requests without further delay?" 25 If we turn to page 1, it says as follows: 216 1 "We introduce the updated ARQ form to clarify the 2 intended use of ARQs requested by Post Office. Fujitsu 3 does not accept that the introduction of this amended 4 form has caused delay to redress activities. Since it 5 was introduced, the Post Office has requested over 60 6 ARQs to support redress activities and these have been 7 processed in the usual way. As you have now clarified 8 that the ARQs referred to in your email below are 9 intended to be used to support postmaster redress, 10 I will instruct the team to process those received on 11 the previous version of the form and they will not be 12 subject to additional charges." 13 If we please look again at page 4, I said that the 14 request came from an email address called the 15 Remediation Team. We see that the requester has the job 16 title or team of Remediation Admin Support Team, 17 Remediation Unit. 18 Has distrust between Fujitsu and the Post Office 19 reached such a level that, where somebody from the 20 Remediation Admin Support Team in the Remediation Unit 21 requests ARQ data, they are not trusted to be requesting 22 data for that purpose? 23 A. The date of this request is 18 June? Am I reading it -- 24 Q. If we scroll up, yes, 18 June? 25 A. I think the response from Dan Walton was when? 217 1 Q. 19 June. 2 A. So one day later? 3 Q. Yes. 4 A. So -- 5 Q. Sorry, the Daniel Walton email on page 1 is 21 June. 6 A. So about four days later, three or four days later. So 7 I don't agree with the premise of the question. I think 8 we're dealing with these matters as speedily as we can 9 do. I think everybody inside Fujitsu is very, very 10 nervous about any documentation, any data that relates 11 to prosecutions or redress. So this is just a natural 12 nervousness. The management team, I think, in this 13 example got to it very quickly, so Simon very quickly 14 flagged it with Dan and it was dealt with very quickly, 15 I would say in three/four days. 16 Q. That can come down and I'll move to my very final topic 17 of today, which is compensation and redress. Could we 18 please bring up on to screen RLIT0000276, please. 19 This is an article on the BBC website, addressing 20 pay that was received by Fujitsu bosses during the 21 Horizon contract. There is a section on you from 22 page 7, if we go down and look at page 8, and into 23 page 9. I'll just read to you a few passages from that 24 report. It refers to you, and if we scroll down, it 25 says that you: 218 1 "... gave evidence last month, and is due to do so 2 again later this year. 3 "He admitted to the MPs on the Business Select 4 Committee this year that there had been 'bugs, errors 5 and defects' with Horizon from the start, and apologised 6 for [your] firm's role in the scandal. 7 "[You now face] the prospect that Fujitsu may be 8 asked to contribute to the compensation fund for the 9 victims, something he has said the firm has a 'moral 10 obligation' to do." 11 Can you assist us, what do you understand by "moral 12 obligation" or for what purpose did you use that form of 13 words? 14 A. Because the legal process, I think, allows lawyers to 15 spend a lot of time litigating. I think, from my 16 standpoint and from my company's standpoint, and in 17 Tokyo, we felt it was a moral obligation. Now, when 18 I said that back in January, you know, we've learnt 19 an awful lot in the last several months of this Inquiry 20 around what other people and organisations did or didn't 21 do. So I stand by, and the company does stand by, we 22 see ourselves contributing morally to redress to the 23 subpostmasters. 24 Q. If we scroll down and over the page, please, it quotes 25 a spokesperson from Fujitsu to say: 219 1 "Based on the findings of the Inquiry, we will also 2 be working with the UK Government on the appropriate 3 actions, including contribution to compensation. The 4 Fujitsu Group hopes for a swift resolution that ensures 5 a just outcome for the victims." 6 The Inquiry's evidence has now effectively come to 7 an end, we have our expert witnesses tomorrow but that 8 is the end of the final phase of the Inquiry. You have 9 had an opportunity, Fujitsu have had an opportunity, to 10 hear all of the evidence that has been heard in this 11 Inquiry. Having heard that evidence, how are you going 12 to compensate those affected by Fujitsu's failures? 13 A. So what we've said all the way through is we expect to 14 contribute to redress. We see that as going through the 15 Government, who are the shareholder, and I heard the 16 evidence earlier today. So we see that as being 17 a conversation with Government about what our 18 contribution would or would not look like. 19 Q. What have you suggested to Government that your 20 contribution be? 21 A. I have not suggested any particular number. I heard the 22 questions earlier previous Secretary of State, and 23 I think she's used the term "gesture". We don't feel 24 that this is a gesture conversation. This is too 25 serious. But we do want to sit down with the Government 220 1 and talk about that frankly, and very openly. I thought 2 what Mr Reynolds said this morning as well would be very 3 helpful to that. I have been in constant contact with 4 the Department for Business and Trade, so the Department 5 for Business and Trade and me, and with the Post Office, 6 have been in constant communication around one extension 7 and also about evidence or not providing evidence. So 8 I welcome the opportunity to talk to the new Secretary 9 of State in due course. 10 Q. You outlined at the beginning of your evidence today 11 a number of things that you accepted, insofar as 12 Fujitsu's role was concerned. The Inquiry, is, as 13 I say, coming to the end of its evidence taking what are 14 you able to say to the Inquiry about what you are 15 proposing by way of compensation? 16 A. I can't put a number on it, and I think, if I reflect on 17 what I've heard from subpostmasters and the families, 18 there are a number of areas that they need help in, and 19 we would like to sit down with Government and figure out 20 how we contribute to that. 21 Q. Which in particular? 22 A. Well -- 23 Q. What would you like -- let's assume there is a pot of 24 money from Fujitsu. What, in particular, do you 25 consider Fujitsu should be contributing to? 221 1 A. So I'm not going to put number on it, Mr Blake. I think 2 that's -- 3 Q. I didn't ask for a number but just in terms of how it 4 is. There are existing schemes. Is your plan to give 5 the Government money towards the redress that has 6 already occurred or operate a separate fund? 7 A. Sorry, we are not an organisation that can set up new 8 funds or charities, or what have you. We see ourselves 9 contributing to whichever scheme the Government and the 10 subpostmasters agree is the most appropriate one. 11 Q. Can I please take you to RLIT0000433. It's the final 12 document I'll take you to today. This is a recent 13 article in The Financial Times. The headline is "Post 14 Office IT provider Fujitsu won £1.4 million public 15 sector contracts since promise to stop bidding". I'll 16 just read a passage from that, if we scroll down, 17 please. It says: 18 "After a public outcry, Fujitsu said in January that 19 it would 'voluntarily pause bidding for future public 20 sector contracts' while a public inquiry into the 21 scandal was ongoing. 22 "However, it did not rule out continuing to bit for 23 work with existing public sector customers, or when the 24 Government needed its 'skills and capability'." 25 If we go over the page, please, it says: 222 1 "According to government procurement data provider 2 Tussell, the Japanese group has won six public sector 3 contracts worth an estimated total of 1.4 million since 4 making this commitment. Two of these contracts have 5 been awarded as recently as September." 6 We can see there it sets out below in the tables the 7 various contracts. Can you assist us, to what extent 8 were these existing bids, to what extent is that new 9 work that falls under that caveat that has been 10 provided? 11 A. So I believe the MoD is where we have a contractual 12 obligation to provide hardware. So I think that's what 13 that one is about. We have -- I think, this article 14 talks about 33 -- there it is at the bottom of the page, 15 33 public sector contracts. So these are existing 16 contracts that we have obligations within. I think the 17 Nuclear Laboratory one, they have stated that this is 18 the last -- this is a software contract and they are 19 moving off that software platform, and that was the 20 licence for the final year, I think it was. 21 So these were existing contracts where we have 22 contractual obligations to provide those -- either the 23 hardware or, in this case, software. 24 Q. It says in the article that the pause is a voluntary one 25 while the Public Inquiry was ongoing. How do you see 223 1 that in the future? 2 A. I think in due course we'll sit down with Government and 3 discuss it. 4 Q. Do you intend to resume bids once the Inquiry has 5 finished? 6 A. No, I don't intend to resume bidding. I think this is 7 a very emotive topic and we would want to sit down with 8 Government and discuss that. We do some things in 9 Government, particularly in quite a dangerous area, 10 which we would like to talk to the Government about in 11 due course, but I'm not going to say here today that we 12 are going to start bidding for new contracts. We have 13 not done that for the last several months and my current 14 intention is not to start that tomorrow or the day 15 after. 16 MR BLAKE: Thank you. 17 Sir, that brings us to questions from Core 18 Participants. I think we only have two sets of 19 questions, one from Ms Patrick and one from Mr Stein. 20 I'm in your hands, sir, as to whether we can complete 21 those today or whether we return tomorrow morning. 22 They've been allocated one topic each. 23 SIR WYN WILLIAMS: Right. Can I please have, as best you 24 can, Mr Stein and Ms Patrick, what are you talking about 25 in terms of time? 224 1 MS PATRICK: Sir, I think -- 2 MR STEIN: On behalf of Howe+Co we'll be 10 to 15 minutes. 3 MS PATRICK: Sir -- 4 I apologise, Mr Stein. 5 Sir, I think we'd be around five to six minutes. 6 SIR WYN WILLIAMS: Right. So it's now 4.50 and, as you 7 know, my powers of concentration are limited to a normal 8 court day but I think we are all in agreement that it's 9 better for Mr Patterson to finish if he possibly can; is 10 that right, do you both agree? 11 MS PATRICK: Yes, sir. 12 MR STEIN: Sir, yes. There's one difficulty. I'll need to 13 have two minutes to speak to Mr Blake about one 14 particular question. 15 SIR WYN WILLIAMS: All right. 16 MR STEIN: So that will take me two minutes. 17 SIR WYN WILLIAMS: So we'll have a five-minute break and 18 resume at 4.55 and finish by 5.20. 19 MR STEIN: Thank you, sir. 20 SIR WYN WILLIAMS: Fair? 21 MR STEIN: Yes, sir. 22 SIR WYN WILLIAMS: Fine. 23 (4.49 pm) 24 (A short break) 25 (4.54 am) 225 1 MR BLAKE: Thank you, sir, we're going to hear from 2 Ms Patrick and then Mr Stein. 3 SIR WYN WILLIAMS: Fine. 4 Questioned by MS PATRICK 5 MS PATRICK: Mr Patterson, good afternoon. 6 A. Sorry. 7 Q. Are you okay? 8 A. Yes, indeed, yes. Thank you. 9 Q. My name is Ms Patrick and I ask questions on behalf of 10 a number of subpostmasters who were wrongfully convicted 11 and have since had their convictions quashed. I only 12 want to raise one topic. When you gave evidence in 13 January, at the end of your evidence you committed to 14 meeting subpostmasters and their families; is that 15 right? 16 A. I committed to meeting subpostmasters and the families 17 contacted me. 18 Q. Yes. In August, early August, seven months on, you met 19 then with representatives of the children who suffered 20 as a result of their parents being prosecuted and 21 convicted. 22 You're nodding, Mr Patterson. You have to say "yes" 23 or "no". 24 A. Oh, sorry, yes, yes. 25 Q. In that meeting, there were nine children of former 226 1 subpostmasters, including Katie Downey, Rebekah Foot, 2 and Katie Burrows, who sit next to me today. Again, 3 you're nodding. You have to say "yes" or "no" for the 4 transcript. 5 A. Yes, I recognise them now, yes. 6 Q. I think you might be aware that their group is called 7 Lost Chances for Subpostmaster Children? 8 A. Yes, I am. 9 Q. Lost Chances for Subpostmaster Children, affected by the 10 Horizon scandal, they're campaigning for financial 11 support to address chances and opportunities lost or, as 12 they would say, taken from them, during their childhood 13 as a result of the experiences of their families. 14 Now, today, perhaps coincidentally, or fortuitously, 15 while we raised your contact that you'd had with their 16 group with the Secretary of State during his evidence, 17 they've had a response from the Post Office to their 18 request for a meeting with them. But you have met their 19 group, haven't you? 20 A. Yes, I have. 21 Q. During that meeting, they did something that was quite 22 painful for them: they'd written down their stories and 23 they shared each of them with you, everything that they 24 had gone through, didn't they? 25 A. Yes, they did. 227 1 Q. It was in very moving terms, to be frank, wasn't it? 2 A. It was. 3 Q. They explained that their lost opportunities and their 4 trauma, it just isn't caught by any existing 5 compensation redress or restorative justice scheme; is 6 that fair? 7 A. That's my understanding, yes. 8 Q. You listened to what they had to say and you said you 9 would take it away and you would come back to them? 10 A. Yes. 11 Q. That's over three months ago now, August, isn't it? 12 A. Yes. 13 Q. Yes. Now, Hudgells Solicitors has regularly sought 14 updates on their behalf from Fujitsu as to what would 15 happen and when; is that fair? 16 A. I believe so. 17 Q. Just very briefly, we don't have to go through the 18 detail, in September, on the 13th, your solicitors for 19 Fujitsu replied and said that your team were continuing 20 to study what you had learned during your meeting in 21 August. Can I just ask briefly, very briefly, what had 22 you learned in your August meeting? 23 A. So the -- I think the two or three colleagues -- sorry, 24 the three members of the group sitting beside you, it 25 was a very difficult day for them and it was a very 228 1 difficult day to listen. They had a number of ideas, 2 some of which I had no -- I've got no experience of 3 personally. I don't know even how we would execute 4 those things and I think I said in the meetings we are 5 not the right people to -- the right organisation to do 6 some of those things. But let us think about could we 7 find organisations. But, equally, I think the group 8 were also structuring themselves differently to allow us 9 to potentially engage with them in a more structured way 10 than the way that it was previously. 11 So we do want to engage in that way. I'm still 12 unclear about what things we can do other than sums of 13 money, the list of -- I think, the education topic that 14 we talked about, the mental health topic that we talked 15 about, how we can, as a company help, help in that way, 16 and I think there was also a conversation around legacy 17 on education. I didn't bring my notes with me on that 18 particular meeting. 19 So we still want to do that. Frankly, we've 20 struggled, though, to figure out how. 21 Q. Can I ask you to pause there for one moment because 22 I know we're very short of time. The last reply they 23 received, I believe, suggests you would revert with the 24 timetable around engagement towards the end of this year 25 but that you had no further updates at this time, and 229 1 that came through Fujitsu's solicitors. Does that mean 2 that it will be the end of the year before you can take 3 a position on whether you can engage further with the 4 Lost Chances organisation and with the people sitting 5 here; is that what that means? 6 A. So I think there was something else that happened today 7 with the Secretary of State, where he also said he 8 thought there was a theme in here or topic in here that 9 we could be involved in. 10 I don't know what format that engagement with two of 11 you, three of you, the nine of you, could be before the 12 end of the calendar year but I won't stay silent. So 13 I won't stay silent. 14 Q. So you won't stay silent. Can I just ask, you said 15 before the end of the year. Now, given everything that 16 you've said today, and we know what you've said about 17 waiting until the end of the Inquiry, given everything 18 you've said today about that meeting and Fujitsu's role 19 in the scandal, is there really any need for this work, 20 this engagement, to wait until the end of the Inquiry to 21 decide where Fujitsu might fit? 22 A. So for us as a company, it's very difficult to 23 understand, when we had the first conversation, very 24 difficult to understand where that engagement could be, 25 what could we do. You had a list of several topics that 230 1 we think we could help with. I think that we'd want to 2 explore those again, not to -- I think, in fact, 3 Rebekah, you made a point about kicking the ball down 4 the road -- not to do that, but we struggled, frankly, 5 to find a way to engage it. 6 Now, I think, if my memory is right, you've also 7 structured yourself slightly different now, I believe. 8 I owe it to you to have a look at what that new 9 structure looks like and is there a way we could engage 10 with before the end of the calendar year. 11 Q. Thank you, Mr -- 12 A. And I don't know off the top of my head what your new 13 structure looks like. Okay. 14 MS PATRICK: Thank you, Mr Patterson. There have been 15 updates provided to Fujitsu and I'm very grateful for 16 your indication that there would be further engagement. 17 SIR WYN WILLIAMS: Before Mr Stein asks you any questions, 18 Mr Patterson, can I just get clarity about one point. 19 So far as Fujitsu is concerned, does the end of the 20 Inquiry for taking steps mean at the close of play on 21 17 December, when the last final oral submissions are 22 made, or does it mean when I report? 23 A. I haven't given it, Sir Wyn, any practical thoughts, 24 actually. I am hoping, once you finish taking all the 25 evidence, we can sit down with Government, given that 231 1 we'll know a number of themes and a number of 2 conclusions, shall we say, given everybody has listened 3 to it. But I hadn't given it a definitive date, sir. 4 SIR WYN WILLIAMS: Well, that's all right but I would like 5 you to ponder that because I think everybody will 6 realise that there is bound to be a period of time, 7 I won't commit myself to any particular period of time, 8 between 17 December and when I produce a report, and 9 I think it would help both clarity and transparency if 10 Fujitsu did clarify that. 11 A. I will take that up with the Department as well. Thank 12 you, sir. 13 SIR WYN WILLIAMS: Yes, all right. Mr Stein. 14 Questioned by MR STEIN 15 MR STEIN: Thank you, Mr Patterson. We've met before. 16 Can we go to straight to a document which is 17 FUJ00243199. That's the letter dated 17 May that you're 18 familiar with. On that first page, can we scroll down, 19 please, to (ii), "pursuit of shortfalls from 20 postmasters". Let's just read through that together. 21 So this is a letter from you to Mr Read and the relevant 22 part that I'm going to take you to therefore says: 23 "It seems that the Post Office may be continuing to 24 pursue postmasters for shortfalls in their accounts 25 using Horizon data. We would have expected that the 232 1 Post Office has changed its behaviour in light of the 2 criticisms and is appropriately circumspect with respect 3 to any enforcement actions. It should not be relying on 4 Horizon data as the basis for such shortfall 5 enforcement." 6 Now, this appears to be a fairly serious letter. 7 Did you mean what this says? 8 A. I know what I wrote. 9 Q. Did you mean it? 10 A. Well, it's what I wrote, Mr Stein. 11 Q. Well, you either mean something or you don't, 12 Mr Patterson. Is that correct in what it seems to say, 13 which is that the Post Office should not be using 14 Horizon data to go after subpostmasters for shortfalls? 15 A. I think, as I've said during the last hour or so, there 16 is multiple data points that the Post Office should be 17 using before they conclude whether a shortfall or 18 a theft has taken place. 19 Q. Let's try it one more time. Well, let's try it again. 20 "It should not be relying on Horizon data as the 21 basis for shortfall enforcement." 22 When you wrote that, was that what you felt? 23 A. Yes, Mr Stein. 24 Q. Do you still stand by that? 25 A. I think, as I've given in evidence today several times, 233 1 you cannot rely on just one data source. 2 Q. Well, that's not quite the same thing, is it? 3 A. No, it is exactly the same thing. It's Horizon data, 4 and I've said you can't rely on one source of data. 5 Q. Right. So Horizon data should not be used by the Post 6 Office to go after subpostmasters for what the Post 7 Office reckons may be money owed by the subpostmaster? 8 Is that right? 9 A. So Mr Stein, there's four investigations at the moment 10 with the police. We have given material to the police 11 which talks about all the data that they could -- 12 should, frankly -- be looking at to determine whether 13 a theft has taken place, or whatever the crime is. 14 SIR WYN WILLIAMS: Does it amount to this, Mr Patterson: 15 that perhaps with, to use that phrase much loved of in 16 this Inquiry, "with the benefit of hindsight", this 17 sentence should read: "It should not be relying solely 18 on Horizon data", et cetera? 19 A. Yes, Sir Wyn, yes. 20 SIR WYN WILLIAMS: Fine. Thank you. 21 A. I have the words "basis" and "solely" as 22 interchangeable. 23 SIR WYN WILLIAMS: Right. 24 MR STEIN: The point you made earlier in your evidence, 25 Mr Patterson, was one whereby you referred to it as one 234 1 data point, in other words that there should be 2 something else outside of Horizon data. Is that what 3 you're trying to say here in your evidence? 4 A. Yes, and that was my point earlier about the complete 5 supply chain that provides information to Horizon, or 6 actually to subpostmasters themselves. You cannot rely 7 solely -- forgive me -- solely on one data source. 8 Q. Right. So on its own, Horizon data its insufficient to 9 mount a case against a subpostmaster for a shortfall? 10 Is that what you're trying to say? 11 A. So I am not a legal person. I'm not a legal -- in my 12 view and in our company's view, you cannot rely on that 13 solely for the data. 14 Q. To pursue people for shortfalls? 15 A. Yes. 16 Q. Right. Fujitsu's position on this: will you support the 17 Post Office in pursuing subpostmasters for shortfalls? 18 A. We've said we won't do that. 19 Q. Right, okay. So let's add this all together. Fujitsu 20 will not support the Post Office if the Post Office is 21 going after a postmaster for a shortfall either in, I 22 suppose, correspondence with that subpostmaster, or in 23 court? Is that correct? 24 A. I thought you were going to add another sentence: "based 25 solely on Horizon data." 235 1 Q. Well, that's the one you've added today, prompted by 2 Sir Wyn. 3 A. Well, I'll go the other way. Based on shortfall data. 4 Q. Right. 5 A. So whether you want to use "basis" or "solely", the same 6 thing applies. 7 Q. So what's going to have to happen: you're going to have 8 to be persuaded that there's something else other than 9 Horizon data before you provide support to the Post 10 Office? How's it going to work, Mr Patterson? 11 A. So, as I've said in my evidence today, there are 12 multiple data sources, and if you look at the YouGov 13 data, look at the YouGov data about different places 14 where errors or omissions or issues can occur, all of 15 that needs to be in play and the investigation needs to 16 be not taking a narrow view, but a holistic view. 17 Q. So are you going to get the Post Office to come to you, 18 provide the data, and then see what else comes up, or do 19 you need the support, in other words something other 20 than Horizon data, before you hand over the Horizon 21 data? Which is it? 22 A. So Horizon data, as I said earlier, will be inside the 23 Post Office's house by February, all historical data. 24 So they'll have all the data that is required. And 25 I think in evidence from several members of the Post 236 1 Office Executive, they've got that data already. So 2 they've got the data that they need. My evidence point 3 is I would like to be satisfied that they are using more 4 than just one data source. And I've not seen anything, 5 anything, which tells me that they're using more than 6 one data source. 7 Q. I see. So in that sense, if we put this all together, 8 frankly, you don't trust the Post Office in order to get 9 this right? 10 A. On this particular topic, I absolutely don't trust the 11 Post Office. 12 Q. You mentioned one further point in your evidence to 13 Mr Blake. This is about the age of the system, okay? 14 You said this: 15 "To give this some context, we have not turned off 16 some of this equipment because it's so old." 17 A. Mm-hm. 18 Q. Help us understand what would happen if you did turn it 19 off? 20 A. I've got no idea. So in my experience of 35 years in 21 this industry, you know, if you do not do disaster 22 recovery, if you do not turn things off, if you don't 23 keep them upgraded, I cannot determine what will or will 24 not happen, which is part of our nervousness about any 25 extension. 237 1 Q. Let's turn back to the questions that I asked you now so 2 many months ago in January of this year. Now, I asked 3 you these questions, which was: 4 "You're aware of the effect of this scandal upon 5 subpostmasters. It's felt by their families, by their 6 loved ones, by their partners, by their children. This 7 devastated not only the subpostmasters' individual lives 8 but everyone around them. Subpostmasters, because they 9 could not see what was going on, would sometimes blame 10 their own partners or their employees, and the effect, 11 therefore, of this scandal is much more widespread than 12 on the subpostmasters themselves, whose lives sometimes 13 have been terminated by this scandal." 14 Then I asked you this: 15 "Will Fujitsu commit to providing funds in 16 recompense for all those hurts to others outside of 17 subpostmasters and the contribution scheme? In other 18 words, financial redress to support others that have 19 been affected?" 20 I asked this: 21 "You may want to think that what could be done by 22 Fujitsu is supporting people in the future, 23 subpostmasters in future entrepreneurial endeavours, 24 their families in such, or in education; will Fujitsu 25 consider that type of support?" 238 1 You said this: 2 "Mr Stein, the Inquiry and the explanation of the 3 history of all of this is getting a great deal of 4 attention and support from us. Our company here in the 5 UK has many things in society, around the country, 6 around the UK. I think the suggestion you've just made, 7 and clearly [the transcript says 'clearly in 8 a conversation', I think it means 'is a conversation'] 9 if I were able to come to and engage with subpostmasters 10 and their representation, their representatives, we 11 would -- would be absolutely something we would like to 12 consider." 13 So you appeared to be giving a positive answer to 14 the general suggestion, which is providing some way to 15 provide support. 16 Today, in answer to the questions on such matters, 17 you've said that Fujitsu wishes to engage in 18 a discussion with Government -- you mentioned also 19 subpostmasters -- as to providing the financial support 20 that would go to Government. 21 Now, has Fujitsu written off doing something more 22 creative than that? In other words, setting up a fund, 23 bursaries for the children, for the families, for the 24 people with lost opportunities? Have they written that 25 off, or is it just going to be money to Government? 239 1 A. So when I met the subpostmasters there were many, many 2 suggestions, and in fact one subpostmaster made it clear 3 to me the company should not be giving any money to 4 Government at all. We are not a -- we've got no 5 experience of setting up these things or doing these 6 things. Or, as I just said to the Lost Families, we 7 were hoping that through Government channels we'd be 8 able to provide funds to contribute to some of those 9 areas. To be more creative, we're struggling to find 10 out how we can be more creative, frankly, because that's 11 not something that we've got any experience in. 12 I was hoping, equally, from this morning's 13 conversation, that there would be more activity in and 14 around the law in changing the law or lobbying for the 15 law to change, because I was personally, as a normal 16 citizen, surprised that the families did not have 17 recourse to some of those other areas of compensation. 18 But I haven't written it off, Mr Stein. I'm just not 19 quite sure where to go. 20 Q. Well, where to go, Mr Patterson, is to go back to the 21 representatives representing people that have been in 22 this situation, and say, "Can you help? We are" -- if 23 this is right -- "Fujitsu is trying to see what can be 24 done. Do you have experience with compensation, 25 frameworks, redress schemes, restorative justice 240 1 schemes?" 2 You will find that Howe+Co, Mr Enright, who sits to 3 my left, who sits to Mr Kelly's right -- you may recall 4 Mr Kelly from meeting him -- 5 A. Yes, I do. 6 Q. -- he does have that expertise. The people are out 7 there, Mr Patterson. Why haven't you reached out since 8 January of this year to those people that can provide 9 such assistance for you on these important queries? 10 A. Sir, there's no reason why I haven't reached out. I've 11 had the meetings, Mr Stein. Thank you for the 12 suggestion. We'll have the conversation in due course 13 with the colleagues. 14 As an IT company, we are unsure where to go and what 15 to do about this. We were hoping that the compensation 16 schemes and contributing to the Government compensation 17 schemes would be a suitable vehicle for redress. 18 Q. But you know that those compensation schemes are not 19 providing this type of support to the wider family. So 20 all that appears to be happening is Fujitsu is 21 contemplating a contribution, subbing the Government for 22 the compensation schemes that are currently in place. 23 That's what you seem to be saying. 24 A. Sir, that is what I was saying earlier. And what you're 25 suggesting to me is that your organisational colleagues 241 1 may have some expertise in these other areas, and we'll 2 have that conversation. 3 Q. Is there a standstill agreement between the civil action 4 from the Post Office and Fujitsu as to whether the one, 5 Post Office, will sue the other, Fujitsu? 6 A. Yes, there is. 7 Q. So in essence, what may be happening here, do you agree, 8 Mr Patterson, is Fujitsu is considering paying some 9 compensation towards the compensation funds in order to 10 stave off, as a way of settling the action from the Post 11 Office against Fujitsu? That's what it appears to be, 12 Mr Patterson. 13 A. Well, it's not, Mr Stein. 14 Q. So any funds committed by Fujitsu towards compensation 15 will not be in settlement to the claim between Post 16 Office and Fujitsu is that what you're saying? 17 A. So, Mr Stein, I have had no conversation with the Post 18 Office about the standstill agreement. That's our legal 19 teams and our legal teams. As far as I'm concerned, if 20 there's any contribution to compensation, it will always 21 be outside that conversation. 22 Q. Lastly, where in all of this is the situation that's 23 been described: which is that Fujitsu awaits the close 24 of the Inquiry? Now, Sir Wyn has asked you some 25 questions: "What do you mean by the end of the Inquiry? 242 1 Is that this year, or is that at some point next year 2 when the Inquiry reports?" 3 Okay, fine. 4 Why is it that Fujitsu wants to wait until the end 5 of the Inquiry before dealing with such matters? What's 6 the rationale? 7 A. So when I sat in this room in January, there were some 8 things I knew, and I didn't know. I've now spent the 9 last seven months, as you have, listening to evidence 10 about what other people in other organisations did or 11 didn't do. The notion that this is all down to 12 a software bug and has contributed to the largest 13 miscarriage of justice in the United Kingdom is 14 incorrect. These are complex matters, as you well know, 15 based over many, many decades, and we have learnt, as an 16 organisation, a great deal about the causes of this 17 miscarriage of justice. 18 Q. Yes, well, let's go back to my question: why is it that 19 Fujitsu needs to await the close of this Inquiry before 20 it deals with matters such as compensation or 21 contributions towards compensation? 22 A. For the reasons I've just given: these are complex 23 matters which we need to understand all those 24 components. Now, what we do know, and as I said to 25 Sir Wyn just a moment ago, by the time we get to the end 243 1 of this week we'll have a better idea on a number of 2 those topics about how we can contribute. You have 3 given me a suggestion here, and I've already committed 4 to meeting with the Lost Families. 5 Q. But Mr Patterson, you already accept that there is 6 a need for Fujitsu to put its money where its mouth is. 7 You would accept that there is at least a discussion to 8 be had about supporting people that have been affected 9 by the scandal. Why wait? Is this legal advice: wait 10 until the end of the Inquiry when it's all gone quiet? 11 A. Far from it, gone quiet. I don't expect this to go 12 quiet at all. Why should it go quiet? These are 13 serious matters. 14 Q. But is this your decision to wait until the end of the 15 Inquiry, or is it legal advice? What is it, Mr Fujitsu 16 (sic)? Who is telling you to wait until the end of the 17 Inquiry? 18 SIR WYN WILLIAMS: I'm not sure about answering that 19 question fully. He can say, "I'm not going to tell you 20 about our legal advice", can't he? 21 MR STEIN: That's true, but it is his choice. 22 SIR WYN WILLIAMS: Yes, well I'm just reminding him he has 23 a choice. 24 MR STEIN: Yes. 25 Mr Patterson? 244 1 SIR WYN WILLIAMS: I mean it is the reality, Mr Patterson, 2 isn't it, that by listening to all the evidence first, 3 you will have a much better idea about the culpability 4 of Fujitsu, if any; isn't that the reality of it? 5 A. Yes, it is, Sir Wyn. 6 SIR WYN WILLIAMS: Fine. Thank you. 7 MR STEIN: So the end result of this is that we know the 8 Post Office has indicated that they wish to bring 9 forward restorative justice proposals. Will Fujitsu 10 commit to supporting that? 11 A. So you asked me a question a moment ago: do I trust the 12 Post Office? 13 Q. Well, you've got a choice, Mr Patterson. You can reject 14 working with the Post Office as you like. Will Fujitsu 15 commit to supporting restorative justice proposals? 16 A. So the new management team inside the Post Office, 17 I would welcome that opportunity to sit down and talk to 18 them about those topics, yes, Mr Stein. 19 Q. Sooner rather than later, Mr Patterson? 20 A. I spoke to the Post Office Executives on Friday, and I'm 21 speaking to them again on Thursday. So sooner rather 22 than later, yes. 23 Q. Avoiding any other problems, will you commit also to 24 meeting with Mr Enright and his team from Howe+Co sooner 25 rather than later -- 245 1 A. Mr Stein, you've asked me that question before as well, 2 and the answer is I won't commit to that. 3 Q. You won't commit to that? 4 A. No, not sooner rather than later. You've just given me 5 a whole bunch of caveats to that meeting. You've just 6 offered to me that you've got some experience in those 7 areas. I will talk to my team about how do we get the 8 value from that conversation. But I'm not going to sit 9 down and commit to meeting Mr Enright tomorrow or today 10 or whenever. I need to have that conversation first. 11 Q. All right, well that's avoiding tomorrow -- 12 A. Well, you said the words "tomorrow" and "today" and you 13 gave me a number of caveats. 14 Q. How about before Christmas, Mr -- 15 SIR WYN WILLIAMS: That's enough, gentlemen. That's enough. 16 I think I've got the picture. 17 Thank you very much, and it's finishing dead on 18 time, Mr Stein, so well done. 19 MR STEIN: Thank you, sir. 20 SIR WYN WILLIAMS: Right. Good. 21 We'll resume again at 10.00 tomorrow, but first -- 22 or lastly, today -- I should thank you, Mr Patterson, 23 for appearing again at the Inquiry, for producing 24 witness statements on behalf of Fujitsu, and making the 25 commitments to the extent that you have. Thank you. 246 1 THE WITNESS: Thank you, Sir Wyn. 2 (5.21 pm) 3 (The hearing adjourned until 10.00 am the following day) 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 247 I N D E X JONATHAN NEIL REYNOLDS MP (sworn) .............1 Questioned by MR BLAKE ........................1 Questioned by MR STEIN .......................45 Questioned by MS SHAH ........................59 Questioned by MS PATRICK .....................71 Questioned by SIR WYN WILLIAMS ...............75 KEMI BADENOCH MP (sworn) .....................78 Questioned by MR BEER ........................78 Questioned by MR STEIN ......................151 Questioned by MS PATRICK ....................162 Questioned by MR HENRY ......................168 Questioned by SIR WYN WILLIAMS ..............171 248 WILLIAM PAUL PATTERSON (sworn) ..............174 Questioned by MR BLAKE ......................174 Questioned by MS PATRICK ....................226 Questioned by MR STEIN ......................232 249