Ex-Post Office chair was told financial plan had to ‘hobble’ up to election, says memo

The former chair of the Post Office has released a memo that alleged he was told by a senior civil servant to stall requests for financial support and develop a plan for the state-owned business to “hobble” into the general election.

Henry Staunton’s memo from January 2023 detailed his account of a meeting where he raised concerns over the Post Office’s finances, including the costs associated with the inquiry into the Horizon IT scandal.

He wrote that Sarah Munby, then permanent secretary at the Department for Business, Energy and Industrial Strategy, told him that there was no appetite in government to “rip off the band aid”.

Munby said “now was not the time for dealing with long-term issues” and the Post Office needed a strategy to “hobble” up to the election without taking drastic financial action, according to the memo.

The note, which Staunton wrote after assuming his role as chair in December 2022, has fuelled an explosive spat between the senior business figure and business secretary Kemi Badenoch.

Staunton claimed in an interview with The Sunday Times last weekend that he had been asked by a senior civil servant in 2023 to “stall on spending on compensation and on the replacement of Horizon”. He had been abruptly dismissed by Badenoch late last month.

Badenoch subsequently accused Staunton in parliament on Monday of making “wild, baseless allegations” that were a “blatant attempt to seek revenge after a dismissal”. She added that he had no evidence for his allegations.

Munby, now permanent secretary at the Department for Science, Innovation and Technology, said on Wednesday that Staunton’s claims around compensation were “not true . . . either explicitly or implicitly”, with compensation ring fenced.

“It is factually wrong to suggest that cuts to compensation would have improved the Post Office’s financial position,” she said in correspondence published by the Department for Business and Trade.

In the memo, Staunton expressed concerns over the business’s finances. “I said I had been on over a dozen public company boards and not seen one with so many challenges,” he wrote.

He said a £160mn shortfall had been identified, including £90mn in extra costs associated with the Horizon inquiry, and noted the possibility of a “significant reduction in post offices” if more government support was not provided.

A spokesperson for Staunton said the two biggest items of expenditure the business faced at the time were replacing the Horizon IT system and compensating victims of the scandal.

Munby added subsequent to her conversation with Staunton additional operational funding of around £356mn was provided to the Post Office.

She acknowledged tasking Staunton with recognising that “political and electoral pressures” were layered on top of the bottom line at the Post Office, but argued that mention of an election only took place in the context of long-term decision making.

More than 900 sub-postmasters were convicted in cases involving data from Fujitsu’s faulty Horizon IT system following its introduction in 1999, including more than 700 brought by the Post Office itself.

Asked at Prime Minister’s Questions if he would be investigating Staunton’s claims, Rishi Sunak replied that Badenoch had instructed the former Post Office chair to step down after “serious concerns were raised” about his conduct.

The Liberal Democrats said they had written to Sir Laurie Magnus, the prime minister’s ethics adviser, calling for him to investigate whether Badenoch had misled parliament and breached the ministerial code.

One ally of Badenoch said: “The long-standing issues around the Post Office’s finances are a matter of public record and do not include postmaster compensation, which is being fully funded by the government. Henry Staunton is either confused or deliberately mixing up the two issues.”

At the time of the conversation, the Post Office had a provision of about £800mn for sub-postmasters’ redress across three different schemes. In its 2022-23 accounts, the state-owned business wrote down the provision for one scheme from £487mn to £244mn.

Ministers have earmarked £1bn in compensation for Post Office victims. However, under the terms of the government’s guarantee, payments can only be released once a settlement has been reached with a sub-postmaster.