The National Audit Office (NAO) has said there is not enough data in the department of business and trade’s (DBT’s) financial statement to put a figure on Post Office Horizon scandal compensation costs.
The department’s spending also breached its limit by £208m, for the latest 12-month financial period, as it prepares to settle with Post Office Horizon scandal victims, said the NAO.
Victims of the scandal were wrongly blamed and punished for account shortfalls, which were actually caused by errors in the computer system, from Fujitsu, that they were made to use in their branches. About 900 were prosecuted but thousands more were forced to pay the Post Office to cover phantom shortfalls.
The NAO warned that due to a lack of data, estimates made about the take-up of the Horizon Shortfalls Scheme (HSS) could be inaccurate, and that there is a risk that “small and reasonable” inaccuracies in departmental assumptions could see “highly material changes to the value of the provision”.
Gareth Davies, the head of the NAO, said he has been “unable to obtain sufficient appropriate evidence” that the provisions made by government for the cost of the HSS (£672m) and for the Horizon Conviction Redress Scheme (£699m) are “free from material misstatement”.
“I consider the effect of these issues to be potentially material in terms of the valuation of these liabilities, and the accuracy of related expenditure,” he added.
The HSS was established after the conclusion of a 2018/19 High Court trial that proved unexplained accounting shortfalls, which subpostmasters were blamed for and had to repay, were caused by errors in the Horizon computer system used in branches. HSS was designed for former subpostmasters who were not convicted of crimes but suffered losses as a result of repaying to the Post Office the shortfalls for which they were wrongly blamed. The overturned conviction scheme introduced last year after the government pushed through legislation to exonerate about 900 former subpostmasters and branch staff who were wrongly prosecuted and convicted of financial crimes such as theft and false accounting.
Audit evidence
Davies said that because the Post Office has only recently started a mass mail-out to potential scandal victims, he has been unable to obtain “sufficient appropriate audit evidence” in relation to the estimate additional claims under the HSS and their value. “Small and reasonable” changes to the assumptions made could lead to highly material changes to the value of the provision.
The NAO also revealed that the department has increased the authorised departmental spending limit by £208m, in anticipation of settling its HSS obligations. “In this instance, the amount needed to settle the department’s obligations did not become clear until after the supplementary estimates were submitted,” it said.
A government spokesperson said: “This issue took place as a direct result of the decision to rightfully offer further redress to Horizon scandal victims, at a time when the high volume and complexity of claims meant there was significant uncertainty on the cost estimates.
“We have acknowledged this to the NAO and remain determined to ensure that all affected postmasters receive the financial redress they deserve to right these historic wrongs,” they added.
The Horizon system was proved to be error-prone during a High Court legal battle that began in 2018. Led by former subpostmaster Alan Bates, a group of 555 members of the Justice for Subpostmasters Alliance sued the Post Office to prove that errors in the Horizon system were causing unexplained accounting discrepancies. It is often referred to as the biggest miscarriage of justice in UK history.
The government also faces increased costs in relation to claims to be made by former subpostmasters affected by problems with a system, known as Capture, used before Horizon in the 1990s. The system, which has been proven by a government-commissioned report to have been the cause of unexplained accounting shortfalls, also saw subpostmasters prosecuted and convicted of crimes. Many more lost their businesses after being blamed for shortfalls. The Criminal Cases Review Commission is currently examining Capture-based convictions, and the DBT is currently working with people affected by Capture errors to set up a compensation scheme.
The Post Office Horizon scandal was first exposed by Computer Weekly in 2009, revealing the stories of seven subpostmasters and the problems they suffered due to accounting software (see below timeline of all Computer Weekly articles about the Horizon scandal, since 2009).
