Department for Science, Innovation and Technology permanent secretrary Sarah Munby has denied suggesting to the chairman of Post Office Ltd that compensation payments to Horizon Scandal victims should be stalled in the run-up to the general election.
Henry Staunton was sacked from his role at POL by business secretary Kemi Badenoch last month. At the weekend, he told the Sunday Times he had been "told by a fairly senior person to stall on spending on compensation and on the replacement of Horizon".
Staunton said that he had also been told that POL, which is wholly owned by the government, needed to "limp, in quotation marks – I did a file note on it – limp into the election”.
Munby was permanent secretary at the then-Department for Business, Energy and Industrial Strategy and is the official Staunton was referring to. BEIS was scrapped in February 2023's machinery of government changes, which saw the creation of the Department for Business and Trade and DSIT. Munby was appointed to take the helm of the latter.
In a letter to Badenoch, published yesterday, Munby rebuts Staunton's recollection of the 5 January 2023 meeting – which took place shortly after he was appointed as POL chair.
"It is not true that I made any instruction, either explicitly or implicitly, to Mr Staunton to in any way delay compensation payments. I did not," she wrote. "We discussed Post Office operational funding, not compensation funding. These two areas of spend were separately ringfenced, and it is factually wrong to suggest that cuts to compensation would have improved the Post Office’s financial position."
In her letter, Munby said that although Staunton had produced a personal note of the 2023 meeting after his Sunday Times interview was published, it did not substantiate his allegation that there had been a demand from government for compensation payments to be stalled.
"I note that Mr Staunton originally said that there had been a direct instruction," she wrote. "Since he located the file note this seems to have moved to a suggestion of some sort of implied instruction. Such a claim is also not in any way supported by the notes and did not take place."
Munby provided a departmental note of the meeting for comparison with the note published by Staunton.
"The two notes do not indicate I made an implied suggestion that delays should be made, or that Mr Staunton understood me to be making one," she said.
Munby told Badenoch: "I am able to give you the very strongest reassurance that I did not at any point suggest to Mr Staunton, or imply to him in any way whatsoever, that there should be delay to compensation payments for postmasters. I did not believe they should be delayed and no minister ever asked me to seek delays."
An annex to Munby's letter gives her recollection of the topics covered and advice given in the meeting. It says compensation payments related to the Horizon Scandal did not feature among the financial pressures being faced by the organisation that were discussed.
Munby said that Staunton, who also is a former chairman of retailler WH Smith, had raised the possibility of large-scale branch closures and the need for a significant increase in the taxpayer subsidy for POL.
She said she had wanted to help him to understand that the Post Office was "not a purely commercial enterprise like those he was used to working with" and that branch closures or large hikes in taxpayer subsidies were "likely to be politically very difficult".
"Branch closures were completely against ministerial steers," she said. "If he wanted to make real progress and drive strategic change, much more work was needed to present ministers with something better than a choice between two very unattractive outcomes."
Munby said that she and Staunton had agreed that short-term financial fixes were likely to be required to address the Post Office's immediate problems, while more work would need to be done to develop a "more fundamental" multi-year reset programme.
"It was in this context that my statements about the likely impact of the election on decision making were made," she said. "None of this discussion about short-term and long-term issues related to compensation payments."
The note that Staunton produced earlier this week said Munby had been "sympathetic" to all of the challenges facing the Post Office that he had set out, but had cautioned that "politicians do not necessarily like to confront reality".
He wrote: "She said we needed to know that in the run up to the election there was no appetite to 'rip off the Band Aid'. 'Now was not the time for dealing with long term issues'. We needed a plan to 'hobble' up to the election."
More than 700 subpostmasters were convicted of theft, false accounting and fraud in the 15 years following the introduction of the Horizon IT system, produced by Fujitsu subsidiary ICL Pathway, in 1999. Hundreds more have faced accusations of wrongdoing.