The Great Post Office Scandal

The Fight to Expose A Multimillion Pound Scandal Which Put Innocent People in Jail

Nick Wallis

• Publisher: Bath Publishing
• Year: 2021
• ISBN:
  9781838439057
• Topic: Business
• Subtopic: Business Ethics
• Index: Business

The Great Post Office Scandal is the extraordinary story behind the recent ITV drama series Mr Bates vs The Post Office.

This gripping page-turner recounts how thousands of subpostmasters were accused of theft and false accounting on the back of evidence from Horizon, the flawed computer system designed by Fujitsu, and how a group of them, led by Alan Bates, took their fight to the High Court. Their eventual victory in court vindicated their claims about the defects of the software and exposed the heavy handed attempts by the Post Office to suppress them.

The book also chronicles how successive senior managers, business leaders, lawyers, civil servants and Government ministers, at best failed to expose the injustice or, even worse, sought to cover it up, resulting in one of the largest miscarriages of justice in UK history.

The author, Nick Wallis, is a journalist and broadcaster who has been reporting on the scandal for over ten years and who acted as script consultant on Mr Bates vs The Post Office, the ITV drama that brought the affair into the national consciousness.

As the public inquiry reaches its climax, and senior figures such as Paula Vennells come to be questioned, The Great Post Office Scandal reveals the full scale of what happened and will leave you enraged at how so many of our trusted institutions allowed the saga to go on for nearly a quarter of a century, shattering the lives of thousands of innocent people.

PART 1

BUILDING AN EMPIRE

Clint parked up outside the lo-rise glass and concrete office block situated on the edge of Hanworth Park in Hounslow. He announced himself at reception and collected an ID pass. As he waited to be accompanied into the building, he reflected on what he’d been told about the project he would soon be getting a direct handle on.

He knew it was in trouble – that’s why he was there. How much trouble, he could not begin to imagine.

The late nineties were a good time to be in IT. The globally-connected future, foretold by wide-eyed seers and digital visionaries, was no longer the stuff of fantasy. The dot.com boom was, well, booming, and the information super-highway, or World Wide Web, was becoming part of everyday life. Smartphones, Google and Facebook were still a while off, but dial-up modems, Netscape and email had worked their way into Britain’s businesses and homes.

Empires need construction workers, and jobs were easy to come by. The IT world was full of brilliant minds, but there were plenty of chancers talking themselves into jobs they weren’t qualified to do. Coders, testers, and systems and network engineers were all in demand, alongside the usual project managers, sales and marketing people. There were also plenty of middle-ranking execs with little understanding of what the young turks in their charge were up to, but had learned just about enough to bluff their way through.

Clint was no chancer. Clint was the real deal. He’d been working in IT development his entire career. He knew how to code a system and he knew how to manage a team.

After spending most of the nineties in Brussels developing complex financial systems for the European Parliament and European Commission, Clint had been called by a former colleague who was working on a project to automate the Post Office network. The project’s name was Horizon.

TRACY FELSTEAD

In November 1999, 17-year-old Tracy Felstead nervously stepped through the door of her local Crown Post Office¹ in Camberwell Green, South London. She was young, keen, just out of school and had been invited to an interview for the post of counter assistant. Luckily, Tracy had been recommended to the branch manager by a family friend, and the interview went well. She was offered and accepted the job.

Tracy was sent on a two day training course to learn her way round Horizon, the new computerised till system which hadn’t long been installed in the branch. Soon, Tracy was using it to serve customers.

There were 12 counter positions at Camberwell Green. Tracy was the youngest assistant, so she was taken under the wing of the experienced staff.

‘To be fair, everybody seemed lovely,’ she remembers. ‘Everybody seemed pretty much on the ball. If you needed any help, you could just ask.’

Each member of staff had their own login, allowing them to switch between counters, but the regime was lax. No one minded if you used somebody else’s login. If someone needed a break during a busy period, another member of staff would ‘jump on’ their Horizon terminal without going through the process of logging off and logging back in again. This ensured minimum disruption for customers, but it had obvious security implications.

Every day, after each shift, Tracy would cash up, checking the money in her till tray against the figures on the Horizon screen. She would then print off and sign a receipt displaying the till tray balance. One day, she found herself with a small deficit. Tracy said her manager was not in the least bit concerned.

‘I think because I was the baby, all of them mothered me. She said, “Oh, it’s fine, it will rectify itself.” I suppose I was a bit naïve, being 17, but I trusted her.’

Tracy was a happy girl and a popular employee. She flew through the hectic pre-Christmas period without any serious mishaps. Her understanding of her responsibilities – handling cash, handling Horizon and handling customers – was coming on in leaps and bounds. Outside work, Tracy was getting serious with her partner Jon, who worked as a reprographics manager in the City. They bought a house in Penge and were planning to get married. Life was all set.

Half way through 2000 Tracy suffered another spate of discrepancies. ‘I did a cash up at the end of the week and I had a £1,300 loss,’ she says. Again, her boss seemed relaxed. Tracy said the manager took over at the terminal, ‘did something’ and the loss went up to £1,800. ‘And then she said, “Oh, leave it, I’ll sort it out.”’

Tracy did leave it, but she was concerned.

In February 2001 Tracy locked her till tray in the office safe and went on a family holiday. It was her parents’ 15^th wedding anniversary, so they chose somewhere special – the Dominican Republic. While Tracy was away her cash tray could be used by someone else, so long as all the stock and cash was checked before and after each session, and the counter assistant entered the figures under their own login into Horizon.

The day before Tracy got back from holiday, a loss of £11,503.28 was found on her stock unit.² On her return to work, Tracy was questioned about the loss. Her manager’s demeanour was not motherly any more.

‘I’m looking at this woman like, “What on earth is going on?,” and she said, “Oh, another member of staff used the till while you were away and found a discrepancy.”’

Tracy was asked if she knew how the discrepancy had come about. She remembers shaking her head and firmly telling her manager she had ‘no idea.’

The next day, Tracy cashed up and signed off her stock unit with the £11,503.28 discrepancy still outstanding.

There appeared to be a serious amount of money missing from Tracy’s till position, but as nothing more was said about it, she put it to the back of her mind. Tracy continued serving customers, but the atmosphere had changed. Two weeks later she walked into work and was given a shock.

‘I’ve got two strapping, great big guys sitting there waiting for me, and they want to interview me. And I said, “Okay, that’s absolutely fine.” They asked whether I wanted legal representation and I told them, “No, I haven’t done anything wrong, so I don’t need anybody. Happy to be interviewed. Not a problem.”’

The two strapping guys were from the Post Office’s internal security unit. Tracy’s interview turned into an interrogation. ‘They were constantly asking, “What did you spend the money on?” And I remember looking at them and saying, “Seriously, I haven’t taken any money. You can have access to anything you want. Bank accounts … whatever. I haven’t taken any money.”’

Tracy was suspended. ‘They said they needed to do some more investigation. I was distraught, absolutely distraught. But part of me actually thought – well, they’ll get me sorted because I haven’t stolen any money. So they’ll fix this.’

Three weeks later, at 8am, the same Post Office investigators knocked on the door of Jon’s parents’ home in Peckham, where Tracy was staying. The investigators were accompanied by two police officers.

‘The police told me they were there to keep the peace. What they thought I was going to do, I’m not quite sure. I’m only 5′3″ and small, you know, a size 10. And I’m not gonna … these men are massive, intimidating, huge men. And they said, “Could you escort us down to the police station for interviewing?” And I said, “Yeah, fine.”’

On this occasion Tracy did ask for a solicitor.

____________________

¹ Crown Post Offices – usually shortened to Crown Offices – are directly owned and managed by the Post Office.

² Stock units are usually related to, and the responsibility of, individual Horizon users. A counter assistant or Subpostmaster will log in to a Horizon terminal and assign themselves, or be assigned to, a stock unit (usually lettered AA, AB etc). The stock unit will relate to a physical till tray containing cash and stamps. Horizon registers electronic transactions and transfers in, out and through stock units over the course of the day. So, if I take a book of stamps out of my till tray and you pay for it by card, my till tray and my stock unit is down one book of stamps, and the amount of electronic money in my stock unit is up by the cost of a book of stamps (even though there is nothing physical in my till tray). If you give me a £50 note and I change it for 5 x £10 notes from my till tray I would also have to manually register that physical transfer electronically on Horizon, so that the physical cash denominations in my stock unit match those in my till tray.

THE MAGIC BULLET

The full automation of Post Office systems was set in motion in 1992, initially as part of a solution to rampant fraud.

In those days benefits were paid at the Post Office by exchanging vouchers from social security order books for cash. Between 1991 and 1992, £230m worth of order books were lost, of which £85m had been found to be fraudulently cashed. A further £16m was lost through fraudulent encashment of girocheques. The paper system was vulnerable, and needed upgrading.

After a few experiments with barcoded order books, the Department of Social Security decided it wanted to use a magnetic-strip swipe-card as a vehicle for dispensing benefits payments. The cards would be given to claimants, who would have their use of the card electronically registered at a central database each time they were swiped at a Post Office. This ensured each card could only be used once a week, and deactivated if lost. Swipe-cards were an established technology. The problem was, the Post Office had nowhere to swipe them.

For decades the Post Office had been the place where British citizens did their admin with the state. Each day millions of people would visit their local branch to buy stamps, tax discs, traveller’s cheques, premium bonds or TV licences. They would cash benefits and pensions, or make utility bill payments, National Savings Bank account withdrawals or deposits, or apply for passports or driving, fishing or game licences or any number of other permits and services.¹

Important documents were stamped, signed, shown or submitted, and cash would be paid or received accordingly. These transactions, made in their millions every day, gave the Post Office a multi-billion pound annual turnover. It was an established system and it worked, but it was costly. Although attempts had been made to automate various parts of the network, by the mid-nineties most village and suburban branches were still handing over paper forms, stamping dockets, transferring physical cash and generally operating more or less along the same lines they had in Queen Victoria’s day. Especially when it came to filing branch accounts.

At the end of each trading week, every Subpostmaster would fill out a giant paper spreadsheet, recording their transactions in the relevant, designated column. The sheet would be signed, folded and posted back to the Post Office’s financial HQ in Chesterfield.

By the 1990s this antiquated system was in need of an overhaul. With the race for digitisation happening everywhere, the Post Office, government and many Subpostmasters felt that automating the Post Office network was a nettle which needed to be grasped. The DSS swipe-card idea provided the impetus for starting to wrestle with the eye-watering cost and logistics of doing so. The eventual solution was a £1bn PFI contract. This was tendered in 1994 by both the DSS-owned Benefits Agency and the Post Office. It would deliver the swipe-card scheme and automate the front and back end of Britain’s twenty thousand Post Offices – a transformative project.

The candidates were whittled down to a shortlist of three. In May 1996, the winner was announced. Pathway, a consortium owned almost entirely by a company called International Computers Ltd – better known as ICL – got the gig. ICL once saw itself as Britain’s answer to the American computing giant IBM, but its glory days were long gone. In 1990, the Japanese tech corp Fujitsu had taken an 80% stake in ICL with a view to outright ownership. Whilst Pathway was being tendered, Fujitsu was in the process of swallowing ICL whole.

Pathway managed to come bottom in eight of the 11 scoring criteria drawn up to quantify the strengths of each bid, but it was the cheapest in terms of its cost to the government. Fujitsu’s business model for Pathway saw it shouldering almost all the project’s commercial risk by paying for its development and rollout. In return Pathway would get a transaction fee every time a shiny new Benefits Agency card was swiped through a shiny new Post Office card-swiper, for a guaranteed period of eight years. If all went according to plan, Project Pathway would deliver automation of the Post Office and vast sums of cash to Fujitsu, without any risk to the public purse. As an incentive to get things operational as soon as possible, the eight year guaranteed transaction fee period would start the moment the PFI deal was signed.

Almost as soon as the ink on the contract was dry, Pathway ran into difficulties. Serious, big-picture difficulties. It seemed everyone had badly underestimated the complexity of automating 20,000 geographically isolated and disparate Post Offices carrying out multiple (and sometimes region-specific²) transactions which were many times more complicated than the average bank.

The logistics of building, testing and installing a bespoke IT system of this size was uncharted territory for the government, and Fujitsu. 20,000 Post Offices would need 40,000 terminals. 67,000 people with variable technical skills would have to be trained to successfully keep handing out £56 billion in benefits alone to their 28 million annual customers.

The hardware would have to be robust. The software would have to process millions of transactions a year. Training and support would have to be first rate. Fujitsu had bid for IT’s Operation Moonshot by undercutting the competition. Having won the contract, they were realising how complex and expensive moonshots can be.

Conceptually, Horizon was relatively straightforward. The front-end terminals would be custom-specced PCs running Microsoft’s Windows NT operating system. These would sit in a box under each Post Office counter window. Each PC would be connected to a custom keyboard, a barcode scanner, a 3.5 inch receipts printer and a touchscreen, which would sit on top of the counter. Running bespoke Horizon software, each counter PC would write both manually- and barcode-inputted transactions into the branch accounts. Every night all the information collected from the branch would be uploaded via ISDN or (in some cases) satellite to a centrally-located Post Office mainframe.

That was the theory. Writing the code to make this system work reliably appeared to be completely beyond Fujitsu. Despite burning through £10m a month, by the middle of 1997, Fujitsu was not able to deliver an (already renegotiated) contractual obligation to demonstrate Horizon’s ‘satisfactory, sustained’ operation. Even in a controlled environment, they simply could not get it to work.

Fujitsu was not helped by its clients, two state-owned ent...