Post Office boosted its ‘coffers’ as Horizon system threw up unexplained shortfalls, inquiry told

The Post Office was ‘keen’ to make subpostmasters cover unexplained accounting shortfall as its business struggled, public inquiry hears

The Post Office made financial gains while subpostmasters were financially ruined after the government-owned business forced them to pay for losses in their branches that were caused by computer errors, the public inquiry has been told.

In the latest Post Office scandal public hearing, former National Federation of Subpostmasters (NFSP) president John Peberdy said that with pressure on its business, the Post Office had been keen to get subpostmasters to cover accounting shortfalls with their own money, rather than get to the bottom of what had caused them.

This money, which in reality was not missing, would then be added to Post Office accounts, inflating them as a result.

When the Horizon computer system, from ICL/Fujitsu, was introduced in 1999 to replace manual accounting practices, subpostmasters began to suffer unexplained losses. A High Court trial, which ended in December 2019, found that the Horizon accounting system’s errors had caused unexplained losses for subpostmasters, for which they were blamed and punished, with many forced to pay back shortfalls, were made bankrupt – and 736 were prosecuted for financial crimes.

When a loss was in dispute, it would be placed in a suspense account until the Post Office had got to the bottom of it. The inquiry was told that during an eight-month period from when Horizon was introduced, the amount of money in dispute in the suspense account had jumped from £2m, from when accounts had been handled manually, to £10m. This was an amount it had never been near under the paper-based accounting model, said Peberdy.

He said the financial plight of the Post Office business and resulting pressure led it to demand that subpostmasters pay the shortfalls out of their own money, before trying to get to the bottom of what had happened. The Post Office was “very keen to stick everything on the subpostmasters”, said Peberdy.

“With the Post Office’s financial year end and the state of its accounts, with a lot of money sitting in suspense accounts was, in my view, not looking good for it,” he said. “It therefore wanted to get this money in and was definitely taking a much stronger view on getting this money back into its coffers, with the subpostmasters having to pay.”

Peberdy added: “The Post Office was rapidly attempting to make these [alleged] losses good, to stop them being in the suspense account for so long, and they wanted to reduce the money that they saw as owed to them.”

He said the Post Office had “nothing to lose” when it came to Horizon causing unexplained losses, because it was subpostmasters who were contractually obliged to make accounts good.

“I often wondered whether the Post Office went far enough in dealing with [unexplained losses] in so much as trying to find out what was wrong, more than getting the money back, because in truth the Post Office had got nothing to lose, because [contractually] subpostmasters were left to put their hand in their pocket,” said Peberdy.

The public inquiry also heard this week how the NFSP deliberately kept details of problems with Horizon from going public, for fear of derailing the project. At the time, its subpostmaster members were being forced to pay the Post Office to cover unexplained losses and many were being prosecuted for financial crimes.

Computer Weekly first reported on problems with the Horizon system in 2009, when it made public the stories of a group of subpostmasters (see timeline of articles below).

Read all Computer Weekly’s articles about the scandal since 2009

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