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

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

In the note from January 2023, released by Henry Staunton, 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, responded that there was no appetite 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 seen by the Financial Times.

The memo, 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 had claimed in an interview with The Sunday Times last weekend that he was asked by a senior civil servant in 2023 to “stall on spending on compensation and on the replacement of Horizon”.

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.

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 had 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.

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

At the time of the conversation, the Post Office had a provision of about £800mn for sub-postmaster’s 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.

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.”

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.

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

The Department for Business and Trade and Munby were contacted for comment.

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