MPs question Post Office's financial viability as subpostmasters compensation payouts loom

The Public Accounts Committee has written to the Department of Business, Energy and Industrial Strategy (BEIS) asking for an explanation of the strategy for keeping the Government-owned company running.

A compensation programme called the Historical Shortfall Scheme (HSS) has been designed to repay subpostmasters who lost money and their jobs as a result of accounting errors with the Post Office’s Horizon IT system in a scandal which saw many of them wrongfully prosecuted and in some cases sent to jail for fraud and theft.

The scheme was set up in May 2020 but the Post Office wrote to the Government in December 2020 to warn that there had been a higher than expected number of applications which risked being “unaffordable” for the company.

The estimated cost of HSS payments is now expected to be £153m, of which £89m will come from the Post Office, with a “current best estimate” of £65m from BEIS that may be increased. Further compensation for overturned criminal convictions, which the Government has committed to covering, is expected to cost the taxpayer up to £780m.

The Public Accounts Committee said that, in addition to explaining the financial plan for the Post Office, it also wants the BEIS to notify it should the Government provide any further assurances to the Post Office over the funding of its liabilities.

The committee’s report said: “The Post Office’s mismanagement of its Horizon programme has had devastating consequences for individuals wrongly accused of fraud.

“The financial cost of compensating these individuals will largely fall to the public purse.

“The Horizon accounting system erroneously recorded shortfalls of cash in local branches over its more than 20-year lifetime.

“The Post Office considered some of these shortfalls to be caused by subpostmasters and subpostmistresses, resulting in those staff being dismissed and the Post Office taking action to attempt to recover the ‘losses’ and in some cases leading to prosecutions and people being wrongly convicted.

“The department estimates that the Historical Shortfall Scheme, set up by the Post Office to compensate those who may have experienced and repaid shortfalls (for example, from their own funds), is likely to cost £153m, of which it has set aside £65m.

“The Secretary of State for the department is the sole shareholder of the Post Office, and the department will provide sufficient financial support to Post Office to cover the scheme.

“The Government has also committed to paying compensation for overturned criminal convictions and estimates that this may cost the taxpayer up to £780m.

“The Government has also committed to covering the cost of this compensation.”

Post Office working through compensation claims

The Post Office has said it wants to resolve the vast majority of applications to the Historical Shortfall Scheme by the end of this year.

A spokesperson said: “Although many claims are being resolved much sooner, our aim is to provide outcomes to 95 per cent of all eligible applicants to the Historical Shortfall Scheme by the end of 2022.”

To date, the Post Office has paid £9.4m, covering 993 claims made under the scheme. Settlement offers have been made to 1,303 people, 55 per cent of those eligible to make a claim.

The BEIS was contacted for comment in regard to MPs’ recommendations.

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