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Post Office received £1bn taxpayer subsidy last year as part of IT scandal compensation

The Post Office has received over £1bn in taxpayer subsidies for its Horizon scandal compensation scheme

Karl Flinders
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Published: 14 Jan 2022 8:00

The Post Office received subsidies worth over £1bn last year, including a £685m payment just last month, in a scheme labelled Post Office Historical Matters Compensation.

The government-owned Post Office is currently being bailed out by taxpayers as the costs associated with compensating victims of its wrongdoing, in the Horizon scandal, mount. It faces a massive bill to compensate former subpostmasters whose lives were ruined after being wrongly blamed and punished for unexplained losses in their branches. The eye-watering sums are a sign of the huge damage the Post Office has caused to thousands of people who ran Post Offices.

According to a government spreadsheet, at least three payments were paid by the Department for Business, Energy and Industrial Strategy (BEIS) to the Post Office last year. A payment worth over £94m was made in July and another of £685m on 20 December, both labelled “rescue aid” as their purpose, as part of a subsidy scheme known as Post Office Historical Matters Compensation. In March, £233m was paid with the purpose label “employment”, within a subsidy scheme known as Post Office Historical Shortfalls Scheme.

A BEIS spokesperson said the subsidy figures are a top estimate of what could be needed, and has been set aside for potential use. "It has not been spent and will only be given to the Post Office in arrears if and when required."

In 2009, a Computer Weekly investigation first revealed that subpostmasters were being blamed for unexplained accounting shortfalls. Many were prosecuted, with some sent to prison, and hundreds and potentially thousands were financially ruined (see timeline of Computer Weekly articles below).

Ten years later, a group of 555 subpostmasters won a High Court group litigation, proving that errors in the Horizon system could cause unexplained losses and that the Post Office was aware of the bugs in the system.

The Horizon system was introduced in 1999 to automate manual accounting practices. Soon after, subpostmasters began experiencing unexplained losses. 

The Post Office needs huge government financial support to pay subpostmasters what they are owed. As part of a settlement in the High Court with the group of 555 subpostmasters in 2019, after they proved that Horizon was to blame for unexplained losses, the Post Office was forced to pay £57.75m in damages and set up a compensation scheme for subpostmasters affected by unexplained losses. 

About 2,500 subpostmasters have joined the scheme, with hundreds of millions of pounds expected to be needed to pay them.

Furthermore, the court case also paved the way for subpostmasters who were prosecuted after being blamed for unexplained losses, 736 in total, to have their criminal convictions quashed.

A total of 72 have already had convictions overturned and they will now seek compensation. The government agreed to pay them an interim sum of up to £100,000 while full compensation is calculated.

There will also be huge costs associated with compensating the 555 claimants in the High Court case. Their court action was paid for by a litigation funder, which had to be repaid. After legal costs were taken out of the £57.7m, they were left with about £11m, just £20,000 on average. These victims lost homes, businesses, suffered ill health and stress, and there are suicides linked to the scandal.

The government agreed to cover the costs, but maintained that the court settlement with the 555 claimants was full and final, but after pressure from campaigners, MPs and the public, it has admitted this stance cannot be maintained. In a recent BEIS select committee hearing, minister Paul Scully said all that stands between the 555 and fair compensation is workout a mechanism do so.

Labour MP Kevan Jones, who has campaigned for justice for subpostmasters for over a decade, recently said: “Without the 555 subpostmasters successfully taking civil action, we would not have discovered the lies, deceit and subsequent cover-up by the Post Office, nor would we have had unsafe convictions overturned or the current judge-led statutory inquiry. It is time for the government to look again at why this group is currently carved out of existing compensation schemes and recognise that appropriate compensation must be put forward.”

Former subpostmaster Alan Bates, who lost his business in 2003 after being held responsible for unexplained losses caused by computer errors, led the 555 subpostmasters in court in 2019.

Following the recent BEIS select committee hearing and the comments by Scully on compensating the 555, he told Computer Weekly: “I have had years of fighting this, with lots of promises, but they mean nothing until the money is on the table.”

Timeline of the Post Office Horizon case since Computer Weekly first reported on it in 2009

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