How Fujitsu became a central part of the Post Office scandal

As a TV drama brings the Post Office scandal to a wider audience, many are wondering how and why a Japanese IT company became embroiled in the story – we examine the troubled history behind Fujitsu’s role

This article can also be found in the Premium Editorial Download: Computer Weekly: All eyes are on the Post Office scandal – at last

In the short few weeks since the Post Office public inquiry adjourned for Christmas, the national mood around the scandal has changed dramatically. When Sir Wyn Williams convenes phase four of the statutory inquiry on 11 January, the focus on the hearings will be greater than ever, thanks to the incredible impact of the ITV drama, Mr Bates vs the Post Office, broadcast in the first week of the new year.

For the first time since hearings started in early 2022, the eyes of national media will be all over proceedings. The questions that the process seeks to answer – who was responsible for the scandal, how did it happen, and who knew? – have become topics of national debate like never before.

Also for the first time, especially intense attention will be paid to Fujitsu, the supplier of the controversial Horizon IT system responsible for flaws that caused accounting errors that were blamed on subpostmasters. On 16 January, witnesses from Fujitsu will take the stand, to face forensic questioning from the inquiry’s barristers.

The UK government is now talking about forcing Fujitsu to contribute to the likely £1bn compensation bill for victims of the scandal. Up to now, the Japanese giant has been largely silent on its role in the scandal that began with the roll-out of Horizon to about 19,000 Post Office branches from 1999.

Since Computer Weekly first revealed the scandal in 2009, Fujitsu has mostly declined to comment. More recently, as national outrage has grown, it sends out a standard statement to the media, apologising for its role in the scandal, promising to support the inquiry, but adding it will say nothing further until the inquiry is complete. MPs are hoping to change that by inviting executives to answer questions in Parliament this month.

Two Fujitsu employees have been under investigation by the Metropolitan Police since 2020 over possible perjury during court cases that convicted innocent Post Office managers – based on evidence that arose during the 2018/19 High Court case that proved Horizon was responsible for the errors that led to thousands being wrongly accused. No charges have yet been brought.

Much has been revealed about the culture of the Post Office when Horizon was rolled out – how its auditors presumed subpostmasters experiencing problems were “on the fiddle” or “in a muddle”, and that accounting errors simply served to confirm the bias and assumptions in the organisation that branch managers had been cooking the books for years before their paper-based methods were automated.

But what about Fujitsu? If it was a perfect storm of conditions that led to the Post Office scandal, what was the cultural weather like in the supplier at the time Horizon was being developed and implemented?

The Pathway to a scandal

Fujitsu’s involvement began in 1996 when ICL, then 80% owned by the Japanese firm, won a £1bn contract to automate the benefits system. The project, called Pathway, was awarded jointly by the Department for Social Security (DSS) – a predecessor to today’s Department for Work and Pensions – and the Post Office.

Pathway almost immediately hit problems. In 1996, ICL proposed a smartcard system, but the Post Office and DSS insisted the system should be designed to use older, more established magnetic strip technology as a stepping stone to a full smartcard system. The result was a series of missed deadlines, with suppliers and customers blaming each other for delays.

In December 1997, ICL said that if the project were to continue it would either have to increase prices by 30% or extend the contract by five years and raise prices by 5%, according to a National Audit Office report in 2000. A House of Commons committee report into Pathway later said the project was "blighted from the outset" and labelled it "the largest IT disaster ever for the government".

In 1999, the government scrapped the benefits element of the project, but instead awarded ICL a £900m fixed-price contract to computerise the Post Office branch network – which became known as Horizon.

In 2000, the Post Office also revealed a £571m charge on its books caused by scrapping Pathway. Unions representing subpostmasters feared that the cancellation of the project would lead to the closure of rural branches.

The Horizon contract was announced the day before ICL declared its annual results, which included a £180m write-off caused by its losses on Pathway, and was widely perceived to have been awarded to help ICL – a significant government IT supplier – to mitigate those Pathway losses.

By that time, ICL had become a wholly owned subsidiary of Fujitsu, but was working towards a very public flotation of the company, due to take place by the end of 2000, that was expected to value ICL at £5bn.

We have since learned, thanks to evidence during the Post Office inquiry, that Fujitsu executives in Japan pressured the UK government, under prime minister Tony Blair, to agree the Horizon deal to replace Pathway, following rumours the new UK administration was considering ending the contract.

In 1998, following a meeting between the British ambassador to Japan and Fujitsu executives, the British embassy in Tokyo wrote to the government warning of serious economic repercussions, including UK job losses and reductions in trade, if Fujitsu/ICL’s software contract with the Post Office was cancelled.

The Fujitsu executive in charge of ICL told the ambassador that “failure of the project will have serious repercussions for Fujitsu’s international standing ... [leading] to major internal difficulties within Fujitsu and the collapse of ICL.”

In the mood

Imagine, then, the mood within ICL in the period before, during and after the roll-out of Horizon began in 1999.

ICL’s owners had threatened the UK government with closure of the supplier – whose technology was then running the entire country’s tax and benefits systems.

ICL’s board was hugely focused on getting the company ready for a stock market float that would, inevitably, have been lucrative for many senior executives, as well as parent Fujitsu.

And right in the middle of all that, the supplier was forced to write off £180m for its role in the biggest government IT disaster the UK had seen – with all the high-profile adverse publicity that goes with it.

When it was rolled out, Horizon was described by Fujitsu as the “largest non-military IT system in Europe”. All eyes were on the project. Its customer, the Post Office, was in no mood to be told that its most important IT system was not fit for purpose.

The culture all of that helped to create within the Horizon development team was revealed by a former Fujitsu insider, who spoke to Computer Weekly in 2021. The senior developer, who worked on the project between 1998 and 2000, said, “Everybody in the building by the time I got there knew [Horizon] was a bag of shit. It had gone through the test labs God knows how many times, and the testers were raising bugs by the thousand.”

He said Horizon should “never have seen the light of day” and that bosses at supplier Fujitsu allowed it to be rolled out into the Post Office network despite being told it did not function correctly and could not be fixed.

Cash account problems

The developer specifically highlighted failures in a feature known as the cash account - the ledger where all cash transactions are recorded. He made his superiors at Fujitsu aware of the extent of the problems, telling them explicitly that the cash account needed to be scrapped.

“You’ve got to throw the cash account away and you’ve got to rewrite it,” he said.

As we now know, incorrectly recorded cash transactions lay at the heart of the accounting shortfalls that led to subpostmasters being wrongly prosecuted by the Post Office.

However, nobody at or near the top of Fujitsu/ICL wanted to hear bad news about its biggest, highest-profile project – one that had already nearly broken the company – and especially not while it was briefing the City in preparation for making £5bn from a stock market listing.

The ICL flotation was eventually scrapped in August 2000 as tech stocks plummeted in the dot com crash.

In November 2000, the author of this article, writing then for Computing magazine, revealed that ICL’s losses had trebled in the first half of the year. New CEO Richard Christou – who took over after the failed flotation led to the resignation of his predecessor, Keith Todd – told employees that the company would not be able to survive without Fujitsu.

Amid warnings of job cuts, Christou said at the time, “If we were not supported by Fujitsu at this moment, the company would not be able to carry on its business, and none of our employees would have any jobs at all.” This may have been news to employees, but the boardroom would have known it was coming for many months.

In April 2002, the now-toxic ICL brand was scrapped. The company was renamed initially as Fujitsu Services, and later just Fujitsu. In 2014, the ICL trademark and brand was acquired by an IT and electrical device repair firm in Kidsgrove, Stoke-on-Trent.

Questions to answer

When Fujitsu representatives face the Post Office inquiry in the coming weeks, there will no doubt be questions asked as to why nobody in Fujitsu spoke up once subpostmasters started being accused of theft and fraud. Why nobody spoke up when Computer Weekly revealed the first victims in 2009 - the inquiry has heard that Fujitsu staff read the article in what was then a print magazine, widely circulated among IT development teams.

And why nobody in Fujitsu spoke up as the scandal slowly came to the attention of national media in subsequent years – with the honourable exception of Richard Roll, the whistleblower who revealed that remote access to branch accounts was common practice, despite the Post Office’s insistence that it was not possible.

According to figures from public procurement analyst Tussell, Fujitsu has won nearly 200 contracts from the UK public sector with a combined value of £6.78bn – the Post Office Horizon contract remains its biggest, valued at nearly £2.4bn including a £36m extension to keep the IT system going until 2025.

Of course, none of this explains why the Post Office conducted a 20-year campaign of prosecuting people for crimes that never took place, and then lying and covering up the truth.

Nonetheless, when examining Fujitsu’s role in the Post Office scandal, it’s possible to identify its roots in a multimillion-pound loss arising from an earlier IT project disaster. Some campaigners may, therefore, enjoy a welcome irony in the prospect of Fujitsu having to make a multimillion-pound contribution to the compensation fund for the victims.

• Also read: What you need to know about the Horizon scandal

• Watch: ITV’s Post Office scandal documentary, Mr Bates vs The Post Office: The real story

Timeline: Computer Weekly articles about the scandal since 2009

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