To ask His Majesty’s Government what responsibility ministers have for the appointment of the Board and Chief Executive Officer of the Post Office.

My Lords, I thank the noble Lord for his Question. As set out in the Post Office’s articles of association and shareholder relationship framework document, the Secretary of State for Business and Trade appoints the chair and directors of the Post Office and approves the appointment of the chief executive officer. Strong and effective leadership of the Post Office is a necessity and the Government therefore take their role in making the right appointments very seriously.

My Lords, I believe that the shortcomings of the Post Office board and senior executives were responsible for this unparalleled injustice. Last week, the Minister said that the Government were looking at tightening the governance of the Post Office. Can I suggest that one way of doing this would be for the Ministers making the appointments to also ensure regular appraisals of those they have appointed? After all, who among us in this Chamber has not gone through an appraisal at some time? If such an appraisal scheme already existed, perhaps sub-postmasters across Britain would not be in despair, feeling that they were—I think of the words of Toby Jones, who played Mr Bates in the TV drama—the “skint little people” who are

“fighting a war against an enemy owned by the British Government”.

I thank the noble Lord for that. The whole House shares the noble Lord’s sentiments that this is a deeply shameful episode, which went on for over 20 years. It is quite incredible to think back on the scale of the failure here, both of governance and of corporate life. Since the Horizon scandal came to light, the Government have taken quite a lot of steps to strengthen the governance of the Post Office. However, there are a number of ongoing reviews, including one by Simmons & Simmons, to look at exactly how the appraisal system works. Once the Wyn Williams review—a statutory inquiry—has concluded, we will be able to take steps around corporate governance going forward.

My Lords, in an arm’s-length organisation, to whom in practice is the chief executive accountable? Is it the department’s permanent Secretary?

I thank my noble friend for his question and for all his efforts on behalf of the postmasters. We have to realise that this is a limited company owned entirely by the Government, with one share owned by the Secretary of State. It separated from Royal Mail Group when that went private, but the Post Office is actually classified as a public non-financial corporation. Public corporations include, for example, Ordnance Survey, Royal Mint and British International Investment. They are typically owned by the appropriate Secretary of State in that department, the reason being that they are hybrid: the Post Office has commercial activity, it makes revenue through the post offices, but it also receives public money to support the network. As a result, the governance is such that the chief executive reports to the chair, the chair reports to the Secretary of State, and the chief executive also reports to the permanent Secretary when it comes to public money.

My Lords, I am not sure that the Minister answered the question from the noble Lord, Lord Arbuthnot. We agreed that the Post Office needs leadership, and last week the Minister said:

“We will appoint an interim chair as soon as possible”.—[Official Report, 30/1/24; col. 1122.]

Perhaps with another week, the Minister can dwell a little more on the process. When will the details of the process be published? How will the job description of this appointment differ from the job description that was used by Business Secretary Kwasi Kwarteng when he appointed Henry Staunton as recently as September 2022? What will change in the job description of the chairman from the last appointment?

I thank the noble Lord for that question. The corporate answer is that the chief executive reports to the chairman; the job of the chairman is to fire the chief executive on behalf of the shareholder; the shareholder is the Government and, since these matters came to light in 2020, we have had the new shareholder relationship document that outlines all the governance on this. Indeed, the Minister for the Post Office has had monthly meetings, starting with Minister Scully through to the current Minister, Minister Hollinrake, with the chief executive. When the new chair is appointed, that chair will step into the position and continue to run the board on behalf of the Government.

My Lords—

I am sorry, but the Minister has not answered the question from the noble Lord, Lord Arbuthnot.

Order. It is the turn of the Cross Benches.

My Lords, as a member of one of the departments is a member of the board of the Post Office, at the relevant time—and the board knew quite early on that Horizon was not working properly—why did that representative not tell the Government, or did he do so?

I thank the noble and learned Baroness: this is the whole purpose of the inquiry. I cannot answer the specific questions, not having been there myself. The inquiry will look into this. What is clear is that there has been a failure of governance. On the face of it, Post Office Ltd is set up with the right checks and balances in place. There have been non-executive directors, there is the government representative on the board, there is a chairman: on the face of it, it should be subject to the governance that we see in private companies. For some reason, there has been a lack of inquiry and of challenge and we need to understand why and find out who is accountable for that.

My Lords, is this not a systemic failure of the whole state? The answer to the question from the noble Lord, Lord Arbuthnot, is that the permanent Secretary is the accounting officer for the Post Office, and the department puts a director on the board of a public corporation. This is not just about the failings of Post Office managers; it is about the failings of the whole state, which sacrificed pillars of the community to suffer one of the gravest injustices committed in recent times.

I thank the noble Lord for that: no one can disagree with his sentiments. As I said, the machinery was put in place, but there was a lack of scrutiny, inquiry and challenge from the non-executive directors, from, perhaps, the chair, and from, perhaps, the Ministers. The permanent Secretary role is a key one because, using the public accounting model, they meet with the DBT on a quarterly basis to have that line of communication as well. There was no shortage of lines of communication here.

My Lords, my noble friend has vast experience in private equity and elsewhere in business. Does he not agree that, faced with this kind of disaster, the first thing any private business would do is clear out the entire board, without necessarily attributing any blame, and put in a new team of people who did not have any baggage in order to sort it out. Why do the Government not get on and do that?

Three new non-executive appointments were made in 2023 and there will be a new senior independent director appointed and a new chair. Two postmaster directors have also been appointed to the board. The current chief executive, who came in in 2019 at the point of the judgment, remains in place. We continue to have faith in him to move this thing forward quickly, with the right amount of oversight. We have confidence in the board as it is reconstituted. But, as has been said, the question is: why did the original failure happen? We need to find that out.

My Lords, the financial cost of the Horizon scandal is going to be in excess of £1 billion, and that does not take into account the personal cost to the postmasters and postmistresses, some of whom are here with us. Fujitsu has offered to pay a voluntary contribution but, more importantly, should the Post Office wish to sue Fujitsu, is it still in time to do that and when did the Post Office agree a standstill?

I thank the noble Lord for that question. On the specifics, I will write to him on the actual timeline, but the reality is that Fujitsu knows it has a major part to play here. It knows that it is under serious investigation. It has pre-empted that by coming out and saying that it feels a moral responsibility. My colleague, the Minister in the other place, has made it very clear that the cost of this debacle cannot land purely on taxpayers and I am sure there will be a very full investigation and compensation required from Fujitsu.

My Lords, further to the question from the noble Lord, Lord Forsyth, when in an earlier Question Time I asked the Minister whether the Post Office brand was not now too toxic for it to continue as currently constituted, the Minister replied that, in his view, the brand image of the Post Office had improved as a consequence of what had happened. Now, while the reputation of the people who run sub- post offices has no doubt been greatly enhanced, to suggest that of the reputation of the organisation which so cruelly and illegally persecuted them cannot possibly be true. So I repeat what I asked then: is it not now time for a wholly new organisation, with new leadership and a new business model incorporating the appropriate ethical principles?

I thank the noble and gallant Lord for his question. To clarify my remarks, last time I said that the reputation of the postmasters had been enhanced and most people in the community think of the Post Office as being the postmasters. In the last 12 months, the churn of postmasters—those leaving and those coming in—has gone up. We have a record number of post offices—11,700—in the country; 5,000 of those are in rural areas and one-quarter are the last shop in the village. They form a vital role in the community and, as I said before, the reputation of the postmasters has only been enhanced by this sorry tale.