Sacked Post Office boss stands by his allegations as civil servant rejects claims

The increasingly bitter 'who said what' row about stalling compensation for sub-postmasters took a new turn today, as Deputy Political Editor Anushka Asthana reports

ITV News has seen the full memo made by former Post Office chairman Henry Staunton in which he claims he was told by a top civil servant not to "rip off the band aid" on its finances, following an ongoing row over Horizon scandal compensation payments.

According to a note written by Staunton after a January 2023 meeting with Sarah Munby - now the permanent secretary at the Department for Science, Innovation and Technology (DSIT) - he claims she warned him that “politicians do not necessarily like to confront reality”.

He also alleges she said “now was not the time for dealing with long-term issues”.

While there is no direct reference to the Post Office compensation pay out in the note, Mr Staunton claims it was understood this was one of the major financial issues the Post Office was facing at the time.

In response to the memo from Mr Staunton, the government released a letter from Ms Munby to Business and Trade Secretary Kemi Badenoch, in which she says the funding discussed in the memo was not to do with compensation.

"It is not true that I made any instruction, either explicitly or implicitly, to Mr Staunton to in any way delay compensation payments.

"Neither Mr Staunton’s note, nor the contemporaneous note that my office made, suggest otherwise."

She goes on to say: "As the notes record, 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."

Rishi Sunak has sidestepped calls to repeat Ms Badenoch’s claims that Mr Staunton was lying when he claimed the government had been seeking to delay payments to sub-postmasters affected by the scandal.

Mr Staunton will be quizzed about this next week when he gives evidence to MPs on the Business and Trade Select Committee.

He will answer questions on Tuesday February 27 alongside current Post Office boss Nick Read and subpostmasters including Alan Bates.

In response to the release of Mr Staunton's memo, a government spokesperson said: "Sarah Munby’s letter sets the record straight on her exchange with Mr Staunton.

"Neither of the records taken at the time suggest the government – either at official or ministerial level – wanted to slow down or delay compensation payments to postmasters, as the Secretary of State said on Monday.

"This is a distraction from the important work to continue to deliver for postmasters, which the Business Secretary is focused on."

Ms Badenoch accused Mr Staunton of choosing to “spread a series of falsehoods” and “provide made-up anecdotes to journalists” while also claiming he was being investigated over bullying allegations before his dismissal.

Mr Staunton countered by accusing Ms Badenoch of making “an astonishing series of claims”, with his spokesperson saying Mr Staunton was “not aware of any aspect of his conduct which could give rise to such allegations”.

The row emerged after Mr Staunton claimed he had been told by Ms Munby, the then permanent secretary at the Department for Business, Energy and Industrial Strategy (BEIS), to “stall” spending on compensation to sub-postmasters ahead of the next general election.

The note reads:

Sarah asked for first impressions, I said I had been on over a dozen public company Boards and not seen one with so many challenges.

I focused on the financing and Network challenges:

- On Financing we had identified in Sept a deficit of £210m. After much effort we had identified savings of £170m (mainly out of the change budget , cap exp and exceptionals).

However since then extra costs of £120m have arisen: from Horizon £60m (training needs esp with Inquiry); Inquiry £30m (taking longer); and telephony/Internet £30m.

In total we have a shortfall therefore of £160m…..and this before the deficit arising from the material downturn in the parcels business, and to a lesser extent from the implications for our cash business of the FCA Money Laundering regs on deposits.

- There was a likelihood of a significant reduction in post offices if more funding was not required.

Last year half of all Post Offices were either loss making or earning less than £5,000 profit.

The position would have deteriorated substantially because of increase in Minimum Wage and fuel /electricity prices .A recent survey indicated that one third of PMs would hand back their keys over the next 5 years and that figure would now be higher because of extra costs. The reputational consequences for PO and for Government were fraught.

- Sarah was sympathetic to all of the above. She understood the "huge commercial challenge" and the “seriousness“ of the financial position.

She described “all the options as unattractive“ . However, “politicians do not necessarily like to confront reality“.

This particularly applied when there was no obvious “route to profitability“.

- 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.

- Having said that we and BEIS needed to do the long term thinking for a new Government of whichever colour.

This would include what is politically acceptable wrt the size of the network.. She also referred to “operational “ issues colouring HMT’s thinking. (“Trust” in the PO Board and management has not been high.)

They could see this as another “begging bowl“ request from the PO. I said the funding issues revolved around poor decisions made many years ago wrt Horizon and related legal issues.

- With regard to the forthcoming meeting with the SoS she gave some advice. He is nice and easy but not interested in meetings. He prefers the written form.

We should expect him to be “pushy and demanding“ as he was with the train operators whilst SoS for Transport. He would “hold us to account“.

He will take a hard line on pay. So far Sarah’s efforts on pay have fallen on deaf ears.

Speaking at Prime Minister’s Questions on Wednesday, Labour leader Sir Keir Starmer said: “Would the prime minister be prepared personally to repeat the allegation made by his Business Secretary that the former chair of the Post Office is lying when he says he was told to go slow on compensation for sub-postmasters and limp to the next election?”

Mr Sunak replied: “As the Business Secretary said on Monday, she asked Henry Staunton to step down after serious concerns were raised.

"She set out the reasons for this and the full background in the House earlier this week, but importantly we have also taken unprecedented steps to ensure that victims of the Horizon scandal do receive compensation as swiftly as possible and in full.”

Sir Keir Starmer pressed the PM at PMQs on Wednesday. Credit: PA

To which Sir Keir responded: “On Monday the Business Secretary also confirmed categorically that the Post Office was, and I’ll quote this in fairness to the prime minister, ‘at no point told to delay compensation payments by either an official or a minister from any government department, and at no point was it suggested that a delay would be of benefit to the Treasury’, so that’s Monday.

“A note released by the former Post Office chair this morning appears to directly contradict that… I appreciate the Business Secretary has put the prime minister in a tricky position, but will he commit to investigating this matter properly?

"Including whether that categorical statement was correct, and why rather than taking those accusation seriously she accused a whistleblower of lying?”

Have you heard our new podcast Talking Politics? Every week Tom, Robert and Anushka dig into the biggest issues dominating the political agenda…

Mr Sunak, in his reply, said: “It is worth bearing in mind as the Business Secretary said on Monday, she asked Henry Staunton to step down after serious concerns were raised.”

Sir Keir said he hoped Mr Sunak would “instigate that investigation into what was said on Monday because one of the features of this miscarriage is that where concerns have been raised they have been pushed to one side”.

Mr Sunak also said he did not ask ministers who held senior and relevant government positions at the time about an investigation reportedly carried out but not completed in 2016 that could have revealed issues with the Post Office’s Horizon IT system.

Sir Keir asked: “Considering the prime minister’s Foreign Secretary (Lord Cameron) was running the government in 2016, and one of the prime minister’s current Cabinet Office ministers was the Post Office minister, has he thought to ask either of them what they knew in 2016?”

Sarah Munby, Permanent Secretary at the Department for Science, Innovation and Technology (DSIT). Credit:

Rishi Sunak responded: “No… we did the right thing which was to set up an independent statutory inquiry. That is the right way to resolve this issue.

"It’s the right way to get victims the truth and the answers they demand, but this government is getting on getting them the compensation that they rightly deserve.”

The government said in response to Staunton’s original claim: “We utterly refute these allegations. The government has sped up compensation to victims, and consistently encouraged postmasters to come forward with their claims. To suggest any actions or conversations happened to the contrary is incorrect.”

The Horizon IT scandal saw more than 700 sub-postmasters and sub-postmistresses handed criminal convictions between 1999 and 2015 as Fujitsu’s faulty Horizon system made it appear as though money was missing at their branches.

Hundreds of victims are still awaiting compensation despite the Government announcing that those who have had convictions quashed are eligible for £600,000 payouts.

Want a quick and expert briefing on the biggest news stories? Listen to our latest podcasts to find out What You Need To Know…