Post Office: Executive Remuneration - Question

– in the House of Lords at 2:58 pm on 27 February 2024.

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Photo of Lord Sikka Lord Sikka Labour 2:58, 27 February 2024

To ask His Majesty’s Government on which dates since 1999 they exercised their right as the sole share- holder of the Post Office to (1) approve, or (2) disapprove, the executive remuneration policies and amounts.

Photo of Lord Johnson of Lainston Lord Johnson of Lainston Minister of State (Department for Business and Trade)

Under current arrangements, the Government, as shareholder, approve the targets underpinning executive performance pay. Targets are typically approved on an annual basis as these schemes are usually revised each year to ensure that targets are up to date. The Government also approve CEO and CFO remuneration, in principle before their formal appointment. For the CEO, this was provided in June 2019 and, for the CFO, in January 2015. Such approvals have historically been made in line with the Government’s guidance on senior pay in the public sector at the appropriate juncture.

Photo of Lord Sikka Lord Sikka Labour

My Lords, it is shameful that year after year, the Government approved remuneration of Post Office directors boosted by a higher bottom line number and inflated by theft from sub-postmasters. Why has none of that so far been clawed back, and why have the Government approved bonuses for Post Office directors for appearing at the Horizon inquiry?

Photo of Lord Johnson of Lainston Lord Johnson of Lainston Minister of State (Department for Business and Trade)

I am very grateful to the noble Lord for raising this point. I think we all agree that this is an extremely distressing situation for the postmasters involved. A committee hearing is going on in the other place, which I believe we will discuss later this afternoon. I reassure all Members of this House that the Government never approved the bonuses for the section relating to co-operation with the Horizon inquiry. Frankly, the idea that you should reward executives for performing their duty is surprising, and we certainly did not confirm those bonuses. That is a very important point. The second important point to make is that the executives, as I understand it, have paid back the portion of the bonus relating to that, but that does not change the fact that we need to review how Post Office executive remuneration functions. There has been a number of different reviews of the governance of that, and the Government are taking significant note of them.

Photo of Baroness Brinton Baroness Brinton Liberal Democrat

My Lords, the Minister’s Answer just now was very interesting, given that the Post Office Limited: Shareholder Relationship Framework Document says at paragraph 7.6 that

“the remuneration of all Board members will require approval by the Shareholder”,

and remuneration that exceeds the threshold must also be approved by the Chief Secretary to the Treasury. Can the Minister say what bonuses were approved after 2015? Have any additional approvals been required by the Chief Secretary to the Treasury since 2015? If the Minister does not have this information, I would be grateful if he wrote to me with it.

Photo of Lord Johnson of Lainston Lord Johnson of Lainston Minister of State (Department for Business and Trade)

Again, I am very grateful for this challenge; it is a very important discussion to have. The Government are responsible for setting remuneration for the board, while the bonuses that I think the noble Lord, Lord Sikka, was referring to relate to the Post Office executives, so we should separate the two. Both still need to be investigated—absolutely. I do not have the specific answer to the question relating to the Chief Secretary to the Treasury, but I will be delighted to write to the noble Baroness.

Photo of Lord Arbuthnot of Edrom Lord Arbuthnot of Edrom Conservative

My Lords, either the Post Office is an independent arm’s-length organisation, or it is one for which the Government are fully responsible. Does my noble friend agree that the Post Office Horizon scandal shows that never again should Ministers refuse to answer questions relating to a body in which they own all the shares?

Photo of Lord Johnson of Lainston Lord Johnson of Lainston Minister of State (Department for Business and Trade)

I pay tribute to my noble friend for the astonishing work he has done on this great travesty. I am very grateful to him personally for driving this agenda, and I agree in principle with some of the comments he has just made. There seem to be an air gap between arm’s-length bodies, the Government and Ministers. It is very important that this situation allows us to review exactly how the principle of arm’s-length bodies functions, in the sense that it does not mean they are entirely out of Ministers’ or the Government’s remit and our lines of inquiry. Noble Lords would expect that of us. They remain within reach, and the inquiry will allow us to have a significant investigation into how culture and practices can be improved in the governance of such institutions.

Photo of Lord Reid of Cardowan Lord Reid of Cardowan Labour

My Lords, as the Minister said—well, as he implied—it is an absolute disgrace that people should be paid a bonus to turn up at a public inquiry. I am afraid it is not good enough for him to say that the Government did not approve it, because if they acquiesce in it, in practical terms they are giving their approval. So, will he take measures to disapprove of that payment? If he is not prepared to do that, I can tell him that, since retiring as a Minister, I have been at 16 public and other inquiries—so can he tell me who I write to for payment?

Photo of Lord Johnson of Lainston Lord Johnson of Lainston Minister of State (Department for Business and Trade)

I am grateful to the noble Lord for submitting his claim for attendance at public inquiries. He is absolutely right. I have to be careful with my language for many good reasons, but the idea that we should reward staff for attending an inquiry of such seriousness did seem clearly out of kilter with how the governance should have functioned at the time. Two reports have been written, the Burton report and the Simmons & Simmons report, both of which are very clear on the governance of paying Post Office staff; that the remuneration committee should have clearer direction and more resourcing; and on how the department’s policy team should interact with the Post Office. The fact that there were not necessarily enough personnel in the department overseeing some of these arrangements is now going to be reviewed very clearly.

When the Horizon inquiry moved on to a statutory footing, the idea that you should reward people for attending what was effectively a quasi-judicial environment was of course a bit bizarre. It certainly would not happen in any other environment going forward. There are huge lessons to be learned, not just for one party or one Government but for the body politic and the institution of our bureaucracy, so that we do not have bureaucratic indifference. Ministers have the opportunity to take responsibility for doing the right things and to take an active part in organisations that perhaps we felt should be completely ring-fenced and separate. I do not believe that that is the right thing to do.

Photo of Lord Forsyth of Drumlean Lord Forsyth of Drumlean Chair, Financial Services Regulation Committee, Chair, Financial Services Regulation Committee

My Lords, I should declare an interest as chairman of a public company. The Government and the regulators insist that public companies have proper arrangements for malus and clawback, so that bonuses which have been paid to people who did not deserve them can be clawed back. Does the Post Office have such a system in place? If not, why not, because the Government insist that everybody else should have outside the public sector?

Photo of Lord Johnson of Lainston Lord Johnson of Lainston Minister of State (Department for Business and Trade)

My noble friend raises a very good point. I am aware of people’s frustration over the longevity of the processes, but Sir Wyn Williams’s review will be extremely important in informing us about what has happened. I agree with my noble friend’s point: long-term incentive plans should be as common in public sector bodies as they are in the private sector. I encourage that when looking at how we review governance in these sorts of organisations.

Photo of Lord McNicol of West Kilbride Lord McNicol of West Kilbride Shadow Spokesperson (Business and Trade), Shadow Spokesperson (Scotland)

My Lords, a recent Post Office board meeting refers to a “toxic culture of disbelief” persisting at the top, including a continuing view that some postmasters and postmistresses were guilty as charged. Until the Post Office is taken out of the compensation process altogether, nothing will change. The Minister knows that one of the advisory board’s recommendations is to do exactly that. Have the Government made any recent assessment of the impact of the Post Office’s involvement on the delivery of the compensation scheme? Also, regarding the last question put by the noble Lord, Lord Forsyth, the answer is yes—the Government do have a clawback mechanism.

Photo of Lord Johnson of Lainston Lord Johnson of Lainston Minister of State (Department for Business and Trade)

I am grateful to the noble Lord for that point. On the reference point at the end, I assume that we are awaiting the outcome of the inquiry, which is only right, so that we can ensure that the right things are done at the right time in the right way. I am also grateful for the prompt regarding the Government taking over the entire management of the compensation system. There is a great deal of demand for that—half the compensation processes are managed by the Government, and they have been effectively delivered. It is not for me to make such commitments, but it is clear that these discussions are going on within government to give people confidence that we are trying to do the right thing for those who have suffered so much.

Photo of Baroness Butler-Sloss Baroness Butler-Sloss Chair, Ecclesiastical Committee (Joint Committee), Chair, Ecclesiastical Committee (Joint Committee)

My Lords, the person who was appointed to the board by the Government—what was his or her job?

Photo of Lord Johnson of Lainston Lord Johnson of Lainston Minister of State (Department for Business and Trade)

I am not sure I fully understand the noble and learned Baroness’s question.

Noble Lords:

Oh!

Photo of Lord Johnson of Lainston Lord Johnson of Lainston Minister of State (Department for Business and Trade)

Do forgive me, my Lords. Perhaps it relates to the chairman or the independent director, and it is a good point in terms of the governance of these arms-length bodies and non-commercial government companies. It is right that we review how governance functions. We all want to hear the results of the review and then work out ways to ensure that these organisations can operate with the independence they need, but with the right level of ministerial scrutiny and oversight. Ultimately, we are accountable to everyone in this House and the other place. Noble Lords and all parliamentarians need to know that we are doing our job without a high degree of interference but are accountable. That is very important, and more will be said in the future.

Photo of Lord Foulkes of Cumnock Lord Foulkes of Cumnock Labour

My Lords, is it not encouraging that my noble friend Lord McNicol has already started answering questions from the Dispatch Box? Does that not bode well for the future?

Photo of Lord Johnson of Lainston Lord Johnson of Lainston Minister of State (Department for Business and Trade)

In this instance, I would be delighted if the noble Lord, Lord McNicol, and I swapped places. He would be welcome to take on answering the rest of this Question, but I am afraid it has now concluded.