The Post Office misused millions of taxpayers’ pounds to back its legal fight against subpostmasters over devastating mistakes made by its Horizon system. They broke the rules by taking funding meant for branch maintenance and organizational changes and redirected it towards this legal battle during a critical group litigation order in 2018/19.
In the latest public inquiry into the scandal, Alex Chisholm, former chief operating officer and the permanent secretary for the Cabinet Office, testified. He pointed out, “At one point, we found evidence that the funds we gave for maintaining the network and investing in transformation appeared to have been used for litigation.” He called this a “categorical mistake.”
The inquiry revealed the Post Office incorrectly spent at least £2.3 million in public funds for this purpose and sought another £2.4 million before civil servants noticed and halted it. In the group litigation order, former subpostmasters, led by Sir Alan Bates, successfully challenged the Post Office’s claim that the software could not have caused unexplained shortfalls, for which the branch operators had been blamed and punished. This followed the Post Office’s expenditure of around £100 million on legal support. Earlier inquiry hearings indicated that the Post Office ran its legal battle like a war of attrition, intent on outspending the claimants.
The subpostmasters’ action was first announced in 2015, prompting the Post Office to start financing its defense. As principal accounting officer, Chisholm held the responsibility for how the department spent its money, including that spent by bodies like the Post Office.
In January 2018, before the first High Court trial, Chisholm addressed Post Office CEO Paula Vennells regarding a funding request. He noted, “That request indicated that the Post Office intended to use BEIS funds for non-transformation program purposes, specifically to help fund the Horizon litigation.” He challenged this, firmly believing public funds should not be misallocated. To keep tabs on proper usage of BEIS funds, he asked Vennells for quarterly confirmations.
Vennells responded that she would ensure the Post Office clarified the source of its funds for litigation, stating that they would avoid including legal expenses in future funding requests. She also committed to returning the £2.3 million that had already been improperly requested for GLO work.
Chisholm expressed disappointment over this budgeting error but felt reassured by Vennells’ swift response. In stark contrast, the subpostmasters had to rely on litigation funders for financial support, meaning any eventual settlement would carry interest due to payback obligations.
The Post Office Horizon IT Inquiry is now in its seventh and final phase, looking into current practices and future recommendations. The scandal first surfaced in 2009, thanks to Computer Weekly, which highlighted the struggles of seven subpostmasters whose lives were shattered by the Horizon software, marking one of the biggest miscarriages of justice in British history.