1 Thursday 20 October 2022 2 (10.15 am) 3 SIR WYN WILLIAMS: There are less people here than when 4 I last attended. 5 MR BLAKE: I won't take it personally. 6 Sir, we're going to begin this morning with 7 Mr Roberts. 8 ANTHONY JOHN ROBERTS (affirmed) 9 Questioned by MR BLAKE 10 MR BLAKE: Can you give your full name, please? 11 A. Anthony John Roberts. 12 Q. Mr Roberts, you should have in front of you a witness 13 statement -- 14 A. Indeed. 15 Q. -- that is dated 7 September of this year. 16 A. Yes. 17 Q. On page 18 is that your signature at the end? 18 A. Yes, it is. 19 Q. Is that statement true to the best of your knowledge and 20 belief? 21 A. Yes, it is. 22 Q. Mr Roberts, that witness statement and the exhibits all 23 will go into evidence today, so I'm not going to take 24 you through line by line of that witness statement. I'm 25 going to ask you some questions that the Chair would 1 1 like us to consider and that Core Participants would 2 also like us to consider. 3 I'm going to start with your background. You 4 joined the Post Office in 1967 via the Civil Service 5 fast track scheme; is that right? 6 A. That's correct. 7 Q. You worked for the Post Office for the whole of your 8 professional career -- 9 A. I did. 10 Q. -- retiring in 2002? 11 A. Yes. 12 Q. Between 1985 and 1993, you were managing director of 13 counter services? 14 A. Yes. 15 Q. Towards the end of your time in that position, there was 16 a development towards the automation of post office 17 counters; is that right? 18 A. Yes, indeed. 19 Q. You say in your statement that you didn't have an IT 20 background and your role at that stage was on monitoring 21 and deciding on issues such as resource provision; is 22 that right? 23 A. That's correct. 24 Q. In 1993 and to 1995 you were managing director of group 25 services? 2 1 A. Yes. 2 Q. In 1995 you became Chief Executive of the Post Office 3 Group? 4 A. Yes. 5 Q. That is Royal Mail, Parcelforce and Post Office Counters 6 Limited? 7 A. Yes. 8 Q. Pausing there, as you are the first witness from the 9 Post Office, can you tell us what Post Office Counters 10 Limited was and how that fell into the overall structure 11 of the group? 12 A. The structure of the group, starting with the board, 13 Post Office corporation was a public sector body owned 14 by the government; the government was a shareholder. 15 The government appointed members of the Post Office 16 Board who were the Chairman, group strategy director, 17 chief finance director, chief executive and a number of 18 non-executives. 19 Below us, there were three main businesses as 20 you've said: Royal Mail, which was letters; Parcelforce, 21 which was parcels; and Post Office Counters, which dealt 22 with the 20,000-odd retail post offices up and down the 23 country, including Northern Ireland. 24 Each of those businesses was headed by a managing 25 director, who was not on the board but attended the 3 1 board and those roles were appointed by the board. So, 2 in other words, I would be involved in the appointment 3 of the managing director. The managing directors were 4 basically the heads of those businesses reporting 5 through me to the board. 6 They were, as I'd been, as you said in the '80s to 7 the early '90s, really in charge of those businesses. 8 The board would be in charge of strategy for the whole 9 of the corporation, including those businesses, but 10 then, having set the strategy with the managing director 11 (let's say POCL involved) they, as managing directors, 12 would be tasked with the idea of delivering that 13 strategy through the various directors and then the 14 members of that particular business. 15 Q. You have said that the board were appointed by 16 government. How were they appointed? 17 A. I think that's a very good question. It would normally 18 be a decision taken by the Secretary of State, in that 19 case for the Department of Trade and Industry, having, 20 if necessary, gone out to headhunters, having produced 21 a series of names. Those names would normally have been 22 run across the chairman of the corporation at that time, 23 if they were members of the board, and then, in that 24 discussion and, in the case of the Chairman, 25 a discussion with the Prime Minister or Number 10, the 4 1 Secretary of State would then decide that person X was 2 to be appointed to the board -- very much done by 3 government. 4 Q. Did any members, so far as you are aware, of the board 5 have IT expertise at the time? 6 A. None of them, I would say, were trained in IT. A number 7 of them, particularly one of them who'd been involved in 8 running parts of the rail system would doubtless have 9 come across IT or had IT in their business but I think, 10 at that level, in the late or the mid-1990s, finding 11 people -- apart from the banking industry and one or two 12 others -- who they could say were IT experts at that 13 kind of board level was very, very unusual. 14 Q. Was it common for board members to have followed the 15 path like you and have spent their life within the 16 organisation, their professional life within the 17 organisation? 18 A. In those days it was. Our non-executive board members, 19 of whom there were between four and five during my time 20 as CEO, were people who, in one case, had come up 21 through the accounting industry. Two, I would say, were 22 general managers from the retail area, and you could see 23 that they would have moved around. But, certainly, the 24 person from the accounting industry, I think, probably 25 stayed with the same company for a lot of her career. 5 1 Q. In your case, having risen up throughout the Post Office 2 Group. Managing directors would all report to you and 3 you would report to the board. 4 A. Yes. 5 Q. Would you say significant matters at Post Office 6 Counters Limited were raised to the board through you? 7 A. Yes, very much so. I would have a fair amount of 8 contact with the managing director. There would be 9 a formal -- well, informal, more likely, one to one 10 meeting with me every month. There would be 11 conversations on the phone. Particularly in a big issue 12 such as Horizon, there would have been a lot of 13 information flowing backwards and forwards but 14 information that we tried to keep at the right kind of 15 level, depending where it was going. 16 Q. Where did Stuart Sweetman fit into that? 17 A. Stuart Sweetman was the managing director for Post 18 Office Counters and, therefore, he was the direct report 19 to me for that business. 20 Q. Many of the minutes that we'll be looking at are minutes 21 of the board. Were there separate meetings of the Post 22 Office Counters Limited? 23 A. Yes. There would be -- the Post Office Counters Limited 24 internally would have what we call a Counters Executive 25 Committee. That would be chaired by Stuart Sweetman and 6 1 it would include the various directors of different 2 parts of the counters business. 3 Q. I'm going to bring up a document on the screen. That's 4 POL00090836. 5 A. Yes. 6 Q. These are minutes of the Post Office Counters Limited 7 board. Did that board meet regularly? 8 A. No. What had happened was that, in the 1980s, the 9 chairman of the day had thought there would be value in 10 trying to create a separate counters business, as 11 opposed to the two mails businesses, and, for a brief 12 time, we had a board with a couple of non-executives 13 purely for Counters. It became clear, after a little 14 while, and probably with a change of chairman, that he 15 didn't think that this was helping. It was becoming 16 a bit of an intrusion in the day-to-day activities of 17 the counters business; he wanted a much clearer setup in 18 the way that I've described to one of your earlier 19 questions. 20 We decided at the time that we would keep this, 21 having set up the company, and every year we sent to 22 Companies House a very brief, less than two-page 23 statement of the company's performance in that year. It 24 was not run, other than probably a one-hour meeting once 25 a year, other than to keep that company clear with 7 1 Companies House. 2 It did, around about 2002, just as I was leaving, 3 become changed to Post Office Limited because, by then, 4 we had known that governments of different persuasions 5 were very keen to try and privatise Royal Mail -- it 6 took rather a long time but they were keen to privatise 7 Royal Mail -- and it had always been clear that, if that 8 happened, Post Office Counters would not be part of the 9 privatisation, mainly because of the way it was 10 structured and because of the role of subpostmasters. 11 So that was a company that didn't -- this one on 12 the screen, didn't really take place or didn't become 13 part of the management structure but it was moving in 14 that direction from about 2002 onwards. 15 Q. So a typical meeting of Post Office Counters Limited of 16 the board, would that be John Roberts, Jonathan Evans -- 17 so yourself, Jonathan Evans and Stuart Sweetman? 18 A. It would have been but it would probably have been for 19 no more than about an hour and really to sign off the 20 two documents to go to Companies House. The rest of the 21 time, Post Office Counters would have been run by the 22 managing director and his executive committee. 23 Q. How independent was Post Office Counters Limited to the 24 Post Office Board, sitting as a board? 25 A. Post Office Counters Limited, as an entity, was really, 8 1 if I can put it this way, a non-event. The issue was 2 the accountability line was from the group board through 3 to the managing director, through to his executive 4 committee and the people who sat on it, and that was the 5 way the business was managed from really about 1989/90, 6 right the way through until I finished in 2002. 7 Q. I am going to bring up another document, that's 8 POL00028611. Can we go to the second page. The second 9 page should be a letter to the Secretary of State, 10 talking about signing off heads of agreement. 11 If we look at the first paragraph there, it says: 12 "In the light of your letter today expressing the 13 Government's with for the Post Office to sign the Heads 14 of Agreement with ICL, The Post Office Board met 15 tonight. With the exception of one non-executive, all 16 members were involved. 17 "We considered your proposal", et cetera. 18 Later down it says: 19 "... we would be prepared to sign the heads of 20 agreement ..." 21 I'm going to look at one more document. So that's 22 a letter saying that the board have considered the 23 matter. If we look at POL00028690. This is the 24 ultimate heads of agreement that were signed. 25 A. Yes. 9 1 Q. That's the first page. Can we look at page -- well, at 2 the top is the agreement itself is between Post Office 3 Counters Limited. If we look at page 9, the signatures 4 have been redacted but, at the bottom, I think you can 5 take it from me that it's Stuart Sweetman, on behalf of 6 Post Office Counters Limited that actually, ultimately 7 signed that. 8 A. Yes. 9 Q. So is that the way that it operated, that essentially 10 Post Office Counters Limited followed the direction of 11 the board? 12 A. Very much so. On the two letters you just put up, the 13 first letter to the Secretary of State would have been 14 the board, along with Stuart Sweetman attending as part 15 of -- as the head of the business. The board would have 16 agreed, given the state of the issue, the size of the 17 issue, importance of the issue, what should be done. 18 Stuart Sweetman would be part of that discussion. 19 At the end of the discussion, when something had 20 been decided, he would be tasked to take that away, with 21 my help if that's necessary, to take the thing further 22 and to take things the further with ICL and develop, in 23 that case, a new set of heads of agreement. 24 Q. I'm going to move on to the commercial context of 25 Horizon. Why was Horizon important for the Post 10 1 Office's business? 2 A. In the 1980s, we'd gone through a Monopoly and Mergers 3 Inquiry, which had come up with the beautiful term that 4 end that Post Office Counters should be "managed for 5 decline". It was something that we rejected. But we 6 also knew that you couldn't go on with a paper-based 7 system forever and ever because that would lead to 8 decline. The discussion had always been, as you looked 9 that banks and you looked at other organisations, that 10 with the kind of network we had, it needed to be 11 automated. 12 We couldn't see a long-term commercial solution 13 without automation. It was particularly important to 14 the Department of Social Security because they accounted 15 for, probably, 25 per cent, if not more, of the turnover 16 for Post Office Counters. This was all the pensions 17 work that was done at post offices. 18 We also knew, even then, two things: one, they 19 felt we were very expensive, which I always rejected, 20 but that's what they said; and, secondly, that they 21 wanted to move towards Automated Credit Transfer where 22 you didn't have to use the network at all and, if they 23 had been left to their own devices, that's where they 24 would have gone and they would have gone quickly to it. 25 For all those reasons, automating what we did at 11 1 post offices became vital to us and it became the main 2 strategy for the business as you went through the '90s 3 and then into the 2000s. 4 Q. I'm going to take you to another document. It's 5 POL00031128. Now, these are some minutes that I'm going 6 to go back to shortly but can we just look at page 2 and 7 it's point 6 on page 2. 8 Would it be possible just to scroll down to (vi) 9 and highlight that. Thank you very much. 10 About three-quarters of the way down that 11 paragraph it says: 12 "The commercial aspect which 'united' POCL and 13 Pathway was not an issue for the BA [that's the Benefits 14 Agency] who actually had the means to pursue different 15 options, without infringing contract obligations." 16 Can you tell us what was the commercial aspect 17 that you considered united POCL and Pathway? 18 A. The contract that we eventually had with ICL opened the 19 door, we thought, to look at new products. The initial 20 ones, after the Horizon project had been fully 21 implemented, was to look at government issues, like 22 Government Gateway, which now provides the link into 23 most of the government services, many of which we were 24 handling individually at Post Office Counters. 25 It was also a move into banking because, if we had 12 1 the IT system which could well have been provided beyond 2 Horizon by ICL, then that would give us a greater 3 opportunity to get into more sensible banking and one of 4 the things that had always concerned us was what was, in 5 those days, called (probably still is) the "unbanked". 6 That meant that if they, as we thought, would over time 7 become the "banked", we'd rather they retained a link 8 with Post Office Counters, which had some kind of bank, 9 than go anywhere else. 10 I think it led, in the end, to a very close 11 relationship, after my time, with the Bank of Ireland 12 who were providing services via the counter. ICL's 13 interest in that was being able to provide further 14 IT services beyond Horizon, which would enable us to do 15 those things. 16 Q. I'm going to take you to a presentation. It's at 17 POL00028570. It's a presentation from February 1998. 18 It has your name on the front. Would you have given 19 that presentation? 20 A. I would have been part of it with Stuart Sweetman. 21 I would probably have introduced it, left him to do the 22 fair amount of the detail and would have probably closed 23 it before any discussion. 24 Q. Do you recall who the presentation was to? 25 A. I've got a feeling it was to ministers trying to set 13 1 out, partly as a communication exercise, exactly what we 2 had in mind what we were trying to get out of the 3 automation programme. 4 Q. Can we turn to page 7, please. I'm going to read those 5 two paragraphs for the purpose of the record. It talks 6 Horizon benefits. It says: 7 "Once rolled out, Horizon provides a new, powerful 8 national electronic network, sited in a nationwide 9 network of post offices that gives local and person 10 service. This is also backed by powerful new card 11 management and payment authorisation systems on a scale 12 greater than, for example, Visa. This capability will 13 meet the current range of government services, but is 14 also flexible enough to accommodate new services 15 emerging in the future. That is what we mean by 16 a 'future proofed platform' being established as part of 17 the national infrastructure. 18 "Examples of services that could arise from new 19 ideas or policies are 'social banking' or 'learning 20 accounts' as part of Government's drive to reform 21 welfare and education respectively." 22 Moving on to page 9 of that document, for POCL it 23 says it's: 24 "central to commercial future/viability." 25 Is that your recollection, that it was really 14 1 a central plank of your future viability? 2 A. Absolutely. 3 Q. Do you recall a term "golden cloud" that appears in some 4 documents? 5 A. No. I don't think so and, if I do, I wouldn't be able 6 to explain to you what it was. 7 Q. I don't think it's actually as complicated as it sounds. 8 I'll take you to a document very quickly just to have 9 a look and see if it jogs any memory. That's 10 BEIS0000366. This isn't a document you would have seen, 11 this is a ministerial submission but I'm going to look 12 at paragraph 2 of that, please. It's the fourth line 13 down. 14 A. Yes. 15 Q. So: 16 "... a revised version of 'golden cloud' (the 17 ICL/POCL partnership for exploiting the commercial 18 potential of the Horizon infrastructure)." 19 It may not have been a term that you used -- 20 A. I was just about to say I'm rather more boring than 21 that. I would have probably called it a partnership for 22 exploiting the commercial potential of the Horizon 23 infrastructure; I'm not sure I would have gone around 24 saying it was a "golden cloud". 25 Q. I'm going to take you chronologically from 1996, so the 15 1 year of your appointment as chief executive. Starting 2 in April 1996, I'm going to look at the Major Projects 3 Expenditure Committee. Can you tell us what was the 4 Major Projects Expenditure Committee? 5 A. It was a committee that covered the whole of the Post 6 Office, whole of Post Office Group, and the aim was that 7 any of the managing directors who had a major project, 8 major project normally defined in financial terms, would 9 have to put that project to the committee, which 10 normally consisted, I thought -- I may well be wrong -- 11 I thought of the group director finance in the chair, 12 but I think for the one you're talking about I was in 13 the chair but that could have been -- 14 Q. Shall I bring it up on screen so we can have a look at 15 it? It's POL00028451. 16 A. That's right. That one is one where I would have 17 thought that was the standard setup with the finance -- 18 group finance director, Mr Close, as chair, group 19 strategy director and myself there, the project sponsors 20 for the various projects listed underneath and at least 21 two of those, one was managing director Royal Mail and 22 Mr Sweetman was manager director Counters. 23 They would have been putting forward a paper on 24 the project that they had in mind. It would have been 25 developed to a reasonable stage by then and, normally, 16 1 if it was an internal project only, we would have been 2 looking at the net present value of that project, we 3 would be looking at the way their numbers would have 4 been put together and we would have been looking at how 5 they intended to run it. 6 So it was a hurdle that they had to go through 7 before that project was signed off. 8 Q. Can we look at the first substantive paragraph that 9 begins "the submission". There were three suppliers 10 shortlisted at that stage for the automation project. 11 They were described as "Tom", "Dick" and "Harry". Do 12 you remember that? 13 A. Yes. 14 Q. If we look at paragraph (xx) -- that's on page 3 -- it's 15 about halfway down. It says: 16 "'Harry' was ... the most expensive and least 17 compliant ..." 18 I think that was Cardlink? 19 A. Yes. 20 Q. So once "Harry" was eliminated that left IBM and 21 Pathway; is that right? 22 A. Yes. 23 Q. Looking at, on page 3, (xxiii) so talking about "Dick" 24 there, which is Pathway, they provided the best overall 25 money solution? 17 1 A. Yes. 2 Q. Then, over the page to (xxvi) -- can we highlight that 3 paragraph which is an important paragraph -- it says: 4 "... as a technical solution, 'Dick' was the least 5 preferred bidder providing a higher risk to delivering 6 the programme." 7 Is that your recollection? 8 A. Yes, it is. 9 Q. Paragraph (xxx) identifies risks: 10 "the risks associated with 'Dick' were both 11 short-term: liable to be late; pressure to accept 12 incomplete functionality; premature roll-out could prove 13 unreliable; and long-term: fragile software system; 14 difficult to enhance; if 'Dick' lost money it would be 15 difficult to do future changes ..." 16 If we go to the paragraph down, it says that the 17 risks were manageable and could be mitigated and the 18 reasons why it could be mitigated are set out there: 19 "stronger technical assurance that this had 20 previously been envisaged, resourced by POCL or outside 21 contractors; 22 "[developers] must not go in a direction counter 23 to POCL requirements; 24 "rigorous user and system testing prior to 25 roll-out to be built into the contract; 18 1 "evidence of a supplier contingency plan in the 2 event of delays; 3 "careful review of supplier contingency plans as 4 to how they would resource to resolve problems ..." 5 Can we go down to the paragraph below that, that's 6 (xxxii): 7 "[The] Committee considered that the additional 8 risks associated with 'Dick's' technical solution needed 9 to be fully understood and documented, but that the risk 10 was only relative, if it was capable of delivery without 11 'falling over' ..." 12 Now, that term "falling over", is that a technical 13 term or was that a joke? 14 A. I think it was vaguely a technical term; in other words, 15 it meant falling over in the sense of not working. 16 Q. Can we go to the top of the next page: 17 "Committee supported the selection of 'Dick' 18 subject to having the backup material which demonstrated 19 that all conditions had been met for the selection 20 process ..." 21 Now, as a core member of that committee, those 22 were the kinds of things that you would have been aware 23 of, as early as 1996, that there were at least some 24 technical concerns about Pathway's -- 25 A. Yes, indeed, but, if I may, Mr Blake, just to make it 19 1 clear that this wasn't the first time that somebody had 2 been going through this project. The committee -- this 3 is outside my direct knowledge but I remember it -- the 4 committee that selected Pathway had been made up of 5 people who had been working, I think, since about '94 on 6 the bids, reducing the bidders to the three that you 7 have mentioned (IBM and ICL amongst them), deciding -- 8 and this was a group that included Her Majesty's 9 Treasury, the DSS and a number of people -- deciding 10 that this was the one they wanted to put forward, both 11 in government and to the Post Office. 12 So we were then getting, at this committee, 13 something that had been trawled over, from memory 14 I believe Coopers & Lybrand had been involved in going 15 through everything. So this had been done before we got 16 to that stage. 17 Q. Did you think, at that stage, that the risks that were 18 presented were manageable? 19 A. I think we thought, at that stage, that the risks that 20 they'd outlined you could have applied to almost any 21 bidder who had been through the process and had been 22 accepted. The issue for me, certainly in the mid-'90s, 23 was that I think -- this is almost difficult 25 years 24 later to think about it. I mean, we were all pretty 25 basic in terms of IT and, having gone through this with 20 1 government involvement, government sponsorship, we all 2 felt that these were capable of being handled, assuming 3 that you picked the right partner who was then going to 4 deliver, because they were the experts in IT, not us, in 5 general, who were the general managers, who were saying 6 "Should we spend the money on this, which is central to 7 the strategy that we want to follow". 8 Q. Who within your organisation would you have relied on at 9 that time to provide reassurance in terms of the 10 technical abilities? 11 A. There was an IT department within the Post Office, which 12 looked across all three businesses. We would also have 13 been fairly dependent on consultancy help from people in 14 the IT industry who were consultants and they would have 15 been brought in to try and look at -- I think a lot of 16 that had been done before the proposal came forward both 17 to us and, I assume, up the government chain as well. 18 Q. Was there any particular individual within Post Office 19 who stood out for you as somebody who you trusted to 20 give you that kind of information? 21 A. We had a head of the IT department in those days, 22 I think, called Dr Duncan Hine who had spent most of his 23 life in IT and was seen as a sort of internal guru on 24 IT and would definitely have been consulted, or one of 25 his senior people would have been, in looking at this 21 1 and putting this paper together. 2 Q. You sat at quite a high level. Was there somebody below 3 you that you would rely on or would you have 4 conversations with Dr Hine directly? 5 A. I would have left it, in general, to the managing 6 directors and I would have been asking if they had done 7 that, talked to people got additional reassurance and, 8 given that the next stage, if I remember it right, was 9 that this would have been gone to the Post Office Board, 10 I would, by the time we got to that, have been looking 11 at the board paper with the managing director to make 12 sure that, when it went to the board, he and I were not 13 going to be caught out by, you know, very difficult 14 questions about "Well, why are you putting this 15 forward?" 16 We had to convince the board then at that stage 17 that this was the best way forward. 18 Q. We can, I think, look at the board minutes that you have 19 mentioned. If we go to RMG00000011, is this the board 20 meeting that you had in mind? 21 A. I'm sure it is, yes. 22 Q. That's 7 May. 23 A. Sorry, may I just go back. Having seen that list of 24 people who were there, you asked whether people would 25 have had IT experience. Seeing Sir Christopher 22 1 Harding's name there, I think Sir Christopher, at the 2 time, was chairman of the nuclear power industry and I'm 3 pretty sure that he would have had rather more 4 IT experience than we had. So there is a little bit 5 more than perhaps I gave you the impression of earlier 6 on. 7 Q. The names mentioned there from POCL, so the names that 8 are down there for "Also Present", you're not aware of 9 any particular IT expertise amongst those names? 10 A. No. 11 Q. Can we look at page 6 of that document. It's the final 12 page. This is where the board granted the authority to 13 Post Office Counters Limited to enter contracts with the 14 Benefits Agency and Pathway, subject to the resolution 15 of a funding issue affecting the Social Security Agency 16 in Northern Ireland. 17 Can we go back to page 2 of that document, which 18 is where the discussions begin. If you look on the 19 left-hand side, a little bit further down, it mentions 20 Benefits Agency, POCL, automation, and it refers to 21 a paper from yourself. Would you have been the 22 principal person who addressed the board on the 23 automation project on that occasion? 24 A. Yes, it would have been a combination of me starting and 25 then with the managing director filling in probably more 23 1 detail than I did. 2 Q. Do you recall on that occasion bringing those kinds of 3 technical concerns to the board's attention at all? 4 A. I think we would have brought to the board's attention 5 exactly what had been brought to our attention at the 6 earlier MaPEC meeting. What then would have happened is 7 that the board would have been told that there had been 8 that discussion at MaPEC and what the conclusion of that 9 discussion was. 10 What we wouldn't have done was to try and fudge 11 the fact that there were risks to do with this. One of 12 the things that I always tried to do with the board was 13 to set out what the risks were, why we thought, in any 14 context, you could then handle those risks and, after 15 that, make a recommendation for what should happen. 16 Q. Moving on to 1997, we know the Go Live project started 17 in September 1996 but the timetable shifted after that 18 and there was a no-fault replan. Do you remember that 19 at all? 20 A. I remember the timetable shifting because ICL had not 21 met one of the original dates. I think there had been 22 an aim to try and start roll-out in 1997, which was 23 clear that that wasn't going to happen or it was going 24 to be delayed. So I remember that happening, yes. 25 Q. Let's move to June 1997, and we'll look at a document. 24 1 It's POL00028593. Can we start at the last page and 2 that's page 11. On 16 June 1997, you wrote to Stuart 3 Sweetman saying that you would like to further your 4 understanding of the lessons learnt during the live 5 trials and page 2 of that document is the response that 6 was actually provided from Paul Rich on 15 July. Can we 7 have a look at page 2? 8 This is the response from Paul Rich and, actually, 9 if we go to the page before that, page 1 -- these are in 10 reverse order in this particular bundle of documents -- 11 he then circulates the document to the wider group on 12 24 July emphasising that you wanted to ensure that 13 lessons were learnt (that's paragraph 2) and he also 14 annotated it with his suggestions it seems for who was 15 accountable for taking forward certain things. Do you 16 remember that? 17 A. Yes, I do. 18 Q. Can we look at page 3, please. At the top of each page 19 it says "Horizon -- PO Board Follow Up". What do you 20 understand that to mean? 21 A. That would have been questions that had come out of, 22 probably, the board discussion. They would then have 23 led me probably to write the kind of note that you've 24 just shown, asking for a report on where we were. 25 I can't remember a particular Post Office Board meeting 25 1 but that process would have been the one that would 2 normally have been followed. 3 Q. So is this an example of you staying on top of matters 4 that were raised at board level? 5 A. I think it's probably a result of me trying to stay on 6 top of matters that were raised at board level. 7 Q. On this particular page, page 3, we see some positives 8 on the left hand. So: 9 "Original 10 post offices in Stroud area work 10 well. 11 "Three new ICL releases tested and accepted. 12 "Barcoding of order books now available in over 13 150 post offices ..." 14 Can we move to page 7, please. On the left-hand 15 side, it says: 16 "'we needed a better idea of connections to our 17 other new systems' 18 "there was no adequate programme management in 19 place in POCL to understand the integration and 20 migration issues of [Post Office's] other automation 21 projects with Horizon 22 "there was a risk because end-to-end operational 23 procedure mapping had not been undertaken to test 24 whether Horizon's new processes were replacing them 25 adequately 26 1 "end-to-end programme technical assurance and 2 impact analysis/change control processes within POCL 3 were not in place systematically 4 "a process for accepting releases and that within 5 POCL is not systematically in place." 6 Did you understand the term "end-to-end"? 7 A. Yes, I did. 8 Q. Did that mean looking at all of the systems and looking 9 at the Post Office's systems and knowing that they all 10 definitely worked together; is that a fair description? 11 A. Yes, that's a very fair description. I think it was 12 very easy to get hooked purely into the Horizon project 13 and one of the things that we were starting to learn, 14 maybe belatedly, was that it wasn't just having the 15 Horizon project, there were going to be connections with 16 other parts of IT in the Post Office corporation and 17 that's what had to be looked at. 18 Q. The concern being raised there is that there weren't 19 proper systems in place, at least at that particular 20 time? 21 A. Yes, and I think that the point of this document and 22 asking for it was -- I think we were all, both on the 23 ICL side and on our side, starting to learn that perhaps 24 we'd been naive in expecting this to be as simple as 25 maybe it seemed a year or so before that. The other 27 1 point too, which I think starts to come out maybe later, 2 Mr Blake, is that there was a thing called the Project 3 Development Agency, PDA, which was basically the joint 4 organisation, government, ICL and POCL, which, at that 5 stage, was probably the most overlapping organisation 6 for making sure that the project was working. That's 7 where everybody got together and I think it became clear 8 soon after this that that wasn't working. 9 Both the government, government departments, us 10 and ICL were learning a heck of a lot in a short time 11 about why this was going to be a more complicated 12 project than perhaps we thought when people were 13 appointed. 14 Q. If we look on the right-hand side of that page, those 15 are actions to be taken. Can we look at the final two 16 of those. It says: 17 "end-to-end testing procedures will need to be 18 transferred from the PDA, and supplemented as release 19 planning migrates back to [Post Office Counters Limited] 20 after the system is accepted 21 "a process for live trial acceptance is being 22 devised to ensure collective ownership across POCL 23 functions." 24 Does this mean that, once the PDA was wound up 25 and, even after the Post Office had accepted the Horizon 28 1 System, POCL itself would need good systems in place to 2 address things like end-to-end testing? 3 A. I think it meant it before that. There would have been 4 end-to-end testing on Horizon and then, as you say, 5 there would have to be links with any other systems that 6 were being developed within the business. It was a lot 7 simpler once it became a project which was effectively 8 between ICL and POCL. That then meant that you could 9 deal directly with the people responsible for the 10 technology, whereas this is also about the management 11 side of the technology and making sure that the whole 12 thing was joined up. 13 Q. Is the impression given there that at least some of it 14 will come back to the Post Office to take responsibility 15 for? 16 A. Yes. 17 Q. The last bullet point there is that live trial testing 18 of the system was being devised at that stage? 19 A. Yes. 20 Q. I can deal with this with other witnesses but it says 21 Paul on the right-hand side. Do you think that was Paul 22 Rich? 23 A. Yes. 24 Q. It says lead CEC member. What's the CEC? 25 A. The CEC was the Counters Executive Committee. This was 29 1 the group of directors who, with the managing director, 2 effectively ran the Counters business. 3 Q. Those are specific issues that I've highlighted to take 4 forward within Post Office Counters Limited but there 5 were also issues with ICL that were addressed in this 6 particular document. Can we go to page 8, please. Can 7 we look at the left-hand side of that page, halfway 8 down. It says: 9 "ICL Pathway's own organisation appeared stretched 10 managerially and technically." 11 It says: 12 "the end-to-end overall programme processes and 13 outputs sometimes lack clarity in responsibility and 14 prioritisation." 15 Over to page 9, "Key Issues Outstanding", the very 16 first issue we see "Robustness of ICL Pathway 17 Programme", and it says there, on the right-hand side, 18 the final bullet point under that heading: 19 "Collective nerve needed to ensure no compromised 20 on quality for sake of speed and to retain the programme 21 focus." 22 Then it says "All!" so that means everybody is 23 responsible for ensuring that quality is not 24 compromised. 25 A. Yes. 30 1 Q. So that's the summer of 1997. Concerns have been raised 2 at board level and this is the report back to you 3 chasing that up and it tells us, amongst other things, 4 that you, POCL, need to take some ownership of 5 end-to-end testing, that ICL is managerially and 6 technically stretched, that a key issue is the 7 robustness of the ICL Pathway programme, and we all need 8 to make sure that quality isn't compromised for the sake 9 of speed. That's a fair summary of the things that 10 we've just seen. 11 A. Yes, it is and the last point was one that we kept 12 emphasising at the board. This wasn't about a race: it 13 was about getting it right because it was absolutely 14 central to the strategy we wanted to follow for POCL. 15 Q. I know that you've said at the beginning of your 16 evidence that you weren't involved in the technical 17 detail and the technical problems but this is at least 18 you getting involved in some degree of the technical 19 issues because you've requested quite a detailed paper 20 addressing the technical problems at that stage. 21 A. I think that it was partly technical. A lot of it was 22 managerial. The issues on the ICL side were as much 23 about the numbers of staff and experts that they were 24 putting into the project. If you go back to where you 25 were on page 1 -- not necessarily -- don't need to turn 31 1 it up, from my point of view -- what we were seeing 2 there was, in spite of this, the offices in Stroud, or 3 wherever it was, were working well, there were three 4 releases of software that had worked well. So it's not 5 as though nothing was happening. 6 I think this kind of review, which was what 7 I wanted, was a warts and all review and there were some 8 really fundamental points in it, both on POCL's side, 9 Post Office side and on the ICL side and what pleased 10 me, I think, as we went further beyond that -- which you 11 may want to go -- was that this kind of report, which 12 would have been discussed too with ICL, was starting to 13 make changes, both on our side and theirs, to try and 14 sort out the issues there. 15 All the manuscript sidelinings were effectively 16 allocating work to the members of the Counters Executive 17 Committee to make sure that those things were solved or 18 dealt with. 19 Q. You described it as warts and all. Some of those warts 20 were quite technical warts that they were bringing to 21 your attention such as end-to-end issues? 22 A. Yes. 23 Q. Can we go over the page to page 10, please. DSS 24 political issues. That's the Department for Social 25 Security. Somebody has highlighted there on the 32 1 right-hand side: 2 "We understand other policy options ([for example] 3 termination) may be being considered in DSS as 4 contingency options. We need to confront this early 5 politically." 6 It's got there "Stuart (with AJR?)". Are you the 7 "AJR"? 8 A. I'm afraid so. 9 Q. Meanwhile, as early as the summer of 1997, there were 10 political movements, which are beginning to appear, 11 which are of some concern; is that fair to say? 12 A. Yes, and they go back a long way. Even in my time as 13 managing director, Counters, the most difficult 14 relationship was always with the DSS, mainly because 15 there was an enormous negotiation every so often about 16 a rather huge sum of money. 17 We felt, right the way through this, that there 18 was a fairly large proportion of people in DSS, not 19 necessarily at the top, who really felt that they 20 shouldn't be going down this route, they should be going 21 to Automated Credit Transfer straightaway. 22 Just going back a little bit, in the early 1990s 23 ministers had tried to go down that sort of route and it 24 had led to a fairly large explosion from the National 25 Federation of SubPostmasters. There may even have been 33 1 marching down Whitehall. There was one famous occasion 2 when they did, which rather took the wind out of 3 ministers' sails, but that had always been something in 4 the background and, although, at this stage, I think, 5 all the people that my people were dealing with with DSS 6 were working sensibly to try and do this. 7 This theme of "We don't really want to be here, 8 we'd rather be doing Automated Credit Transfer as soon 9 as possible", is one that you'll see as it goes through 10 the years, until we reach a point where there was 11 a formal statement of what's going to happen about ACT. 12 But for a long time there wasn't. 13 Q. The very final bullet point right-hand side at the 14 bottom, it says: 15 "Commercial freedom exploitation critically 16 depends on automation for [Post Office Counters 17 Limited]." 18 That's really a repetition of what we saw in your 19 earlier slide deck? 20 A. Yes, very much so. 21 Q. So, presumably, termination by DSS was a significant 22 threat to automation? 23 A. It was a significant threat to automation and it was 24 a significant threat to the size of the Post Office 25 network; in other words, if that had happened and we had 34 1 lost, over time, a fairly short time, the revenue that 2 we had from DSS, there weren't many options that you had 3 open to you, other than to say "Well, we're going to 4 reduce the size of the network", which would have meant 5 closing a number of both Crown offices and sub post 6 offices. 7 Q. That would presumably dramatically affect the financial 8 benefits as well that you had envisaged being provided 9 by the Horizon project? 10 A. Yes, it would. I mean, the commercial exploitation 11 would have been almost impossible, I think, because we 12 would have still been using a paper-based system at Post 13 Office Counters while the world was moving on to 14 automation. 15 Q. At that particular stage, preventing that from 16 happening, the impression that's given on the papers -- 17 and we'll come to them -- seems to be a very important 18 issue for you personally? 19 A. Very much so. 20 Q. Still in July 1997, we're going to look at the Counter 21 Automation Steering Group. That might be the final 22 issue I deal with before we take a short morning break. 23 Can we go to POL00031128, please. These are the minutes 24 I touched on earlier, I took you to one particular 25 passage, but now we can just spend bit of time on this 35 1 first page. 2 Can you tell us about the Counter Automation 3 Steering Group. You were the chairman of that group. 4 A. Yes. It was something that I asked to be set up pretty 5 early on in the process, once we knew we were going down 6 the Horizon route. In one sense, it was a governance 7 issue for me. I wanted to make sure that there was 8 something where, periodically, I would have a detailed 9 look with the team at what was happening. 10 The idea was, I think, that the steering group 11 would meet probably every couple of months, bearing in 12 mind that I was having meetings with managing director 13 in between and there would probably a report to the 14 board meeting every month, that this would be a slightly 15 more detailed meeting that we would hold and, again, 16 I was accompanied by the group managing director, 17 strategy, Jerry Cope, and two of us would then meet with 18 the key people, including Stuart Sweetman, at these 19 meetings and would go through where we were in slightly 20 more detail than we probably would have put to the Post 21 Office Board. 22 But it was another way of getting me and everybody 23 up to the same point and, after that, there would have 24 been the usual monthly report to the board on how 25 Horizon was going. 36 1 Q. Can we look at page 2 of that document, please, and 2 point (iv). There are some concerns being raised here: 3 "ICL had taken steps to reassure POCL about their 4 ability to deliver the programme and had drafted in 5 additional senior resource to work on technical issues. 6 A number of interim project milestones had also been 7 created against which progress could be monitored ..." 8 Can we look further down at (vi), and this is 9 actually the paragraph that I took you to before, but 10 we'll have a look at that in a bit more detail: 11 "notwithstanding the work ICL had carried out on 12 improving project control, it was probably an opportune 13 moment for John Roberts, in his capacity as Chief 14 Executive, to meet the Chief Executive of ICL, to 15 reassure himself, on behalf of the Post Office ... that 16 ICL could actually deliver all that was being promised. 17 A presentation by ICL would hopefully provide this 18 reassurance and give both parties the opportunity to 19 demonstrate the commercial importance and significance 20 of Horizon. The commercial aspect which 'united' POCL 21 and Pathway was not an issue for the [Benefits Agency] 22 who actually had the means to pursue different options, 23 without infringing contract obligations. Given this it 24 was important that the meeting with Pathway was not 25 perceived by them or the BA as being in any way 37 1 conspiratorial ..." 2 So you were, at that point, liaising with your 3 counterpart at ICL to ensure that they could deliver on 4 the project; is that -- 5 A. I think you've got to go down to the next item, 6 Mr Blake, (vii), and see what the conclusion was. I was 7 liaising probably for the first time with the chief 8 executive because what had happened, going back to the 9 note that Paul Rich had written, with all the sidelines 10 and all the actions, that had also pulled out the fact 11 that ICL needed to up its game. This is a later 12 document showing that they were in the process of at 13 least upping their game or upping the numbers, and the 14 idea was that it was now perhaps sensible if the chief 15 executive of ICL and I met. 16 I don't think we ever created a presentation but 17 I think it was later in the year, towards the end of the 18 year, that he and I met and it was very much along the 19 lines of me and him talking about "Are you able to 20 handle this, are you able to do this, is it working with 21 the new people that you put in?" It would have been 22 that kind of discussion and almost for both of us 23 looking each other in the eye and saying "Is this going 24 to work?" 25 So that was the sort of genesis of that kind of 38 1 meeting. But my relation is it wasn't a presentation, 2 it was just a one-to-one meeting. 3 Q. Can you explain at the end that conspiratorial comment 4 about the Benefits Agency? 5 A. Yes. One of the things throughout this, as I said a few 6 minutes ago, is that the relationship with the Benefits 7 Agency was always quite difficult. If we had been seen 8 sort of clandestinely to be having meetings with the 9 bosses in ICL, they would have, I think, thought this 10 was not right. 11 At the same time, it was becoming clear that the 12 main thrust of all this was going to be, not through the 13 Benefits Agency, it was going to be ICL and POCL and, 14 therefore, it was just making sure that they would know 15 that this kind of meeting was happening and that if they 16 said "Oh, we want to come", I would have probably said 17 no and I would have explained why. 18 But we were sensitive to the fact that while the 19 relationship between us and ICL seemed to be growing, 20 and growing better, it was slightly different with BA 21 and that's what we were concerned about. 22 Q. That was the summer of 1997. Was the principal purpose 23 of that meeting to keep the show on the road, as it 24 were? 25 A. I think that's probably going a bit too far. It was 39 1 certainly -- I don't know -- to "oil the wheels" perhaps 2 is a better way of putting it. The two of us chief 3 executives, me and of ICL, to have had this kind of 4 conversation probably without a record to say, "Look, 5 you know where are we really? Come on. What is the 6 issue here? What's happening? Are you happening with 7 what the Post Office is doing? Am I happy with what ICL 8 is doing?" It was that kind of meeting where both of us 9 would have, if necessary, gone back to our people and 10 then said, "Look, we need to do this or we need to do 11 that". 12 Q. Would you have been meeting him in the absence of the 13 Benefits Agency because of your concerns about the 14 Benefits Agency's reluctance to engage in the programme 15 and you wanted to see effectively what ICL could do to 16 just make it happen? 17 A. Yes, and also there were just the signs, I think, at 18 this stage -- I may have got the timing wrong but 19 I think it was at this stage -- that ICL were starting 20 to worry about the Benefits Agency. 21 Now, I can't explain that much further because 22 I don't know really what the worries were but it was 23 something that then became much clearer later that they 24 felt -- and this was probably a year down the line -- 25 that there was no point in going on with the project as 40 1 we'd originally conceived it because they didn't feel 2 that the Benefits Agency would ever sign up to it. But 3 that's down the line. 4 This was much more just a sort of feeling that the 5 discussion would have been quite different if there'd 6 been somebody from the Benefits Agency there as well. 7 I wanted to get a very clear picture, if I could, of 8 exactly where ICL were and what they thought they were 9 doing and whether they felt they were now meeting some 10 of the issues that were set out in that earlier note 11 from Paul Rich. 12 MR BLAKE: Sir, I think that's probably an appropriate time 13 to take a short morning break. 14 SIR WYN WILLIAMS: What do you mean by "short", Mr Blake? 15 MR BLAKE: Could we come back at half past? Or is that too 16 short? 17 SIR WYN WILLIAMS: No, no, that's fine. I'll go by that 18 clock and I'll do whatever old-fashioned judges used to 19 do: march in, even if half the room isn't ready. 20 (11.17 am) 21 (A short break) 22 (11.30 am) 23 MR BLAKE: Mr Roberts before the break we were up to the 24 summer 1997. I'm now going to move on to March 1998. 25 Can we bring on to screen POL00069096, please. 41 1 Now this is a document that you received, I think 2 your name is on the recipients, and it says, "I attach 3 some notes the last CASG meeting." 4 Can we go on to page 3 please. In fact, if we go 5 over the page, page 2 we'll see that it's the meeting of 6 the Counter Automation Steering Group on 27 March 1998 7 and you're there as Chairman of that meeting? 8 A. Yes. 9 Q. Can we go to page 3 and look at the top two paragraphs. 10 Thank you. About three quarters of the way down that 11 first paragraph it says: 12 "POCL would not seek to delay Pathway's April 1999 13 roll-out date, but before accepting the system would 14 want to be certain that it was working correctly; work 15 on EPOS [that's electronic point of sale] was continuing 16 and Pathway had indicated that whilst it could provide 17 a system which met the contract, its lack of robustness 18 could generate high level of errors within POCL. This 19 was being investigated although it was difficult to 20 quantify how the system would work until after it had 21 been installed and was operational." 22 Now, EPOSS, electronic point of sale service, that 23 was crucially important to the Post Office, wasn't it? 24 A. Yes, it was because that was the basis on the whole of 25 the strategy for the future. 42 1 Q. Its reliability would have been essential to enable the 2 accurate reconciliation between physical cash and stock 3 held in branch with the transactions that were performed 4 by the subpostmaster; is that right? 5 A. I don't know whether it was the EPOS system itself or 6 whether it was a separate one but your point is 7 absolutely right, Mr Blake, yes. 8 Q. This is a year after the board follow-up report that we 9 looked at earlier this morning and there are certainly 10 echoes of that report in terms of, "Concerns over 11 robustness, "Could generate a high level of errors, 12 "Difficult to quantify until it's up and returning". 13 Would you accept that? 14 A. Yes, I would bearing in mind that the process of 15 developing Horizon was changing month by month so that 16 the first report would have been in relation to what had 17 happened up to that date. I think at that stage 18 probably EPOSS hadn't even started, they hadn't started 19 work on it. This would be another year I guess further 20 on and it was showing that for EPOSS there were the 21 sorts of errors. To be fair, I think that continued for 22 quite some time, that when there was a new element of 23 Horizon that came forward, when it first came forward it 24 was creaky and that had been to be worked on. I think 25 that is a theme that goes all the way through until we 43 1 reached -- not at the end but until the period when we 2 did say, "Yes, it's now okay". 3 Q. I mean, you'll remember the board document that we saw 4 earlier talking about a lack of robustness about a year 5 earlier, again concerns about lack of robustness as you 6 say this time in terms of EPOSS. As chair of that 7 committee, would you have been concerned about that at 8 that stage? 9 A. Oh, yes oh, yes. 10 Q. And would those concerns have been raised at board level 11 as well as in that group? 12 A. They would probably have been reported to the board in 13 the sort of monthly statements that came. It would 14 depend a bit on what we expected or what we thought ICL 15 were doing about them. What we wouldn't have done was 16 keep saying to the board, "It's not robust, it's not 17 robust, it's not robust". We would have been explaining 18 where we were at any particular time. The robustness 19 part, for me, would have been saying to the team, 20 "That's got to be sorted out, are you sorting that out 21 with ICL now? Is that happening?" and they would have 22 then explained hopefully that it was, in which case 23 I may have mentioned it to board, I may not. I think 24 that would depend a bit on what else we were saying at 25 the time. 44 1 Q. Would you have considered that that paragraph about the 2 lack of robustness to have been sufficiently serious to 3 have raised at higher levels? 4 A. I can't answer that because I can't judge that without 5 seeing what else there was around at the time and if 6 there was anything else within those minutes. We would 7 have normally given the board an overview of where we 8 were. Certainly I think robustness, that would have 9 come up and I think I made the point in my own evidence 10 that throughout this we were concerned about robustness. 11 Normally it was robustness for another piece of the 12 jigsaw that they had been working on. 13 But the board would have been under no -- it was 14 put in no surprise to the board that we were concerned 15 about robustness. That would have been a theme that we 16 would have used as we'd gone through this and the board 17 would have made the point, if you remember, going back 18 to the issue about -- this wasn't about time, this was 19 about getting it right and, therefore, if it wasn't 20 right we would certainly have reported that to the 21 board. 22 SIR WYN WILLIAMS: Mr Roberts, can I just ask you about the 23 language on there because I'm not making the point in my 24 head. Just reading "work on EPOSS was continuing and 25 Pathway had indicated that whilst it could provide 45 1 a system which met the contract, its lack of 2 robustness", et cetera. So this is Pathway themselves 3 telling you it's lacking in robustness. Have I got that 4 correct? 5 A. Yes, it is. 6 SIR WYN WILLIAMS: Yes, fine. 7 MR BLAKE: You have talked about a jigsaw. I mean EPOSS is 8 a pretty crucial piece of that jigsaw. 9 A. Yes, it is. I mean, actually all the pieces were 10 crucial for that jigsaw. We wanted all of the pieces of 11 the jigsaw to work if the whole Horizon approach was 12 going to work. 13 Q. At that time POCL hadn't accepted the system. Did you 14 think that the acceptance process and the acceptance 15 criteria were therefore important at that stage? 16 A. Yes, they were. They were important at any stage and 17 they were going to be crucial to the decisions we took 18 at the end to accept the system. 19 Q. Let's go on to May 1998. Can we look at RMG00000027, 20 please. That is a meeting of the board on 12 May 1998. 21 Can we look at page 2 at the bottom of that please 22 and a bit further down we see, on the left-hand side 23 chief executive's report, John Roberts, and this -- over 24 the page, the next page is a discussion about Horizon. 25 Can we look at the bottom of that page, it 46 1 provides an update on the Horizon project and in (i) it 2 says: 3 "Taking fully into account: 4 "the latest project slippage 5 "the likely consequences for ICL 6 "the absence, at this stage, of an alternative 7 POCL strategy ..." 8 Can we go over the page: 9 "the unequivocal legal advice to defer any action 10 until the Treasury Review was complete. 11 "The Board unanimously confirmed its view that The 12 Post Office should not join with DSS in issuing 13 a 13 week Cure Notice against ICL." 14 The reference, on the top of that page, to the 15 absence at this stage of an alternative POCL strategy, 16 is it fair to say that POCL was, at that stage, focusing 17 on how to make Horizon work rather than alternative 18 options to Horizon? 19 A. Very much so. 20 Q. We'll go back to that presentation. So that's 21 POL00028570. This is the presentation we saw this 22 morning. Can we look at page 7. Those were the 23 benefits we went over and page 9, "central to commercial 24 future/viability". So again, it was important at that 25 stage to stick with the Horizon programme? 47 1 A. Yes. 2 Q. Page 16 of that document shows probable impact of 3 termination: 4 "Over 25 per cent of POCL income lost. 5 "Inevitable spiral of decline for POCL ... 6 "Over 17,000 job losses estimated ... " 7 That's pretty dire stuff. Did those fears play 8 a part in committing to Horizon at that stage? 9 A. Yes, they had throughout. As we discussed earlier, one 10 of the driving forces for automating the Counters 11 business was that certainly I and the board at the time 12 were finding it very difficult to see what the future 13 would be for a 17,000 network of post offices which were 14 paper-based. There's probably a tiny element -- I think 15 this was a presentation to ministers -- of painting this 16 as black as it possibly could be, for obvious political 17 reasons, but that's a pretty good statement of what we 18 thought would happen if we were not able to automate the 19 business and the other consequence of this, that because 20 pension payments would have to continue to be paid in 21 some way, then the DSS would automatically go down an 22 automated credit transfer route probably faster than 23 they would have otherwise done. 24 Q. We can take that down, thank you. 25 Moving to the summer 1998, I'm going to look at 48 1 another document, that's POL00028648 and this is 2 a letter from yourself, at page 2, to Ian McCartney. 3 Ian McCartney was the minister in the DTI at the time? 4 A. Yes. 5 Q. That's 9 July of 1998. The second paragraph: 6 "Our unequivocal view is that the Horizon 7 programme, and with it the Benefits Payment Card, should 8 proceed." 9 That paragraph goes on: 10 "We are in no doubt that the programme is now 11 capable of being implemented successfully -- 12 a conclusion also reached by the expert panel." 13 I think -- is that the Treasury expert? 14 A. Yes, it is. 15 Q. That was led by Sir Adrian Montague? 16 A. Yes. 17 Q. Paragraph 3, it talks about needing sufficient time 18 before the Benefits Agency switches to payments through 19 banks and if we look at page 3, that's the second page 20 of the letter, let's look at the final paragraph, final 21 sentence is: 22 "Continuing with Horizon and the card, and in 23 parallel developing new services, offers us the best 24 chance of achieving that result -- and will help create 25 the modern Post Office enterprise for the next century." 49 1 It also says in this letter that if DSS wish to 2 abort the card, it wouldn't necessarily follow that you 3 would wish to continue the contract with ICL; is that 4 right? 5 A. Yes. 6 Q. So again, in this letter you are really pressing for 7 a continuation with the Horizon project together with 8 the benefits payment card? 9 A. I'm also pressing for a decision. What I wanted to 10 know -- and this was the start of, I think, a period in 11 1998 which I think I described somewhere almost as the 12 lost year. Where it was very important that we 13 understood what Government wanted to do, and there was, 14 inevitably, a tension between those in DSS who perhaps 15 wanted to go further and faster down the Automated 16 Credit Transfer route, and us who were saying, "Look, 17 the best answer for us is the Benefits Payment Card" and 18 then going beyond that to automate the business for the 19 future in the way that you and I have been describing. 20 Q. An important part of that penultimate paragraph there, 21 the final sentence: 22 "If DSS wish to abort the card it would not 23 necessarily follow that we would wish, or indeed be 24 able, to continue our contracts with ICL." 25 A. If we were going to lose the major customer through Post 50 1 Office Counters, I think it would have thrown everything 2 up in the air. We would have had no option but to 3 really sit down and say, "If we're getting 250 million 4 pounds' worth of income a year from this one customer 5 and they are going to leave us, how are we going to 6 handle that if, in fact, we then don't have an automated 7 system?" 8 I think all bets would have been off if we had 9 reached that stage at the time of this letter. 10 Q. Can we go to BEIS0000421, please. Now, this is -- 11 I think it's a Government document that you may not have 12 seen at the time. Can we look at page 5. There are 13 various different options there as at November 1998. 14 Option 2 is continuing the project without the benefit 15 card. Can we look at paragraph 17, which is a bit 16 further down that page. It says: 17 "The Post Office oppose the Option 2 route if 18 Option 1 fails. They would prefer to seek tenders for 19 a new system. They doubt anyway whether Option 2 would 20 be a commercially viable proposition for ICL at least 21 without payment of significant compensation to ICL for 22 their work on the benefit payment card ... which has 23 comprised the main element of their work to date." 24 Is that an accurate summary of the Post Office's 25 view in late 1998? 51 1 A. Yes, I think it is and I think it very much follows the 2 kind of point I was just making to you that if we had 3 gone to that position, we probably would have said, "All 4 bets are off. We've got to have a really strong think 5 now about what we do next". We couldn't have just 6 continued without this being a lot clearer than it was 7 with Government. 8 Q. So again, was there real pressure at that stage to keep 9 the benefits card option? 10 A. Yes, there was. I'd met Frank Field, now Lord Field, 11 who was Minister of State at the DSS, earlier on and had 12 quite a difficult meeting with him where I felt that the 13 route he wanted to take -- this was the cure notice -- 14 would have put the project in jeopardy and didn't want 15 to go down that route. So I think everything we were 16 doing at that time was to try and convince Government 17 that the benefit card route was the best one to take and 18 it was certainly the best one to take for us. 19 Q. Was your focus at that stage very much on the political 20 level and trying to convince the politicians and 21 officials? 22 A. Sadly, yes. One of the roles that came to me from all 23 parts of the Post Office, whether it was POCL or the 24 other businesses, was I did have to spend a large amount 25 of my time dealing with Government in one form or 52 1 another and when there was -- or there were issues of 2 this kind, it was certainly part of my role to make sure 3 that I was there, at times on my own, at times with the 4 Chairman, at times with the managing director of the 5 business. It was something that took an enormous amount 6 of time up and, while we were handling issues like 7 this -- I had a wry smile earlier on given current 8 events today -- which the top of the note you've shown 9 me said, "industrial relations in the Post Office". 10 There was a bit of that as well. 11 Q. We spent some time this morning on 1997/early 1998. At 12 that time was all of this anticipated or was it 13 something that you hadn't anticipated; the level of 14 political fuss? 15 A. It was a year in which there were a number of reviews 16 and I just felt that the issues were swinging 17 uncertainly. We were getting a lot of support from the 18 Department of Industry, who I think were worried about 19 an ultimate decision which might then effect the 20 sub-post office network, in particular. There was just 21 a feeling that I had, particularly after the meeting 22 with Minister of State at DSS, that there was a stronger 23 view that they were not keen to see this continue. It's 24 a feeling rather than -- I can't produce you evidence 25 for that apart from a difficult meeting. 53 1 There'd been the Treasury panel review with 2 Sir Adrian Montague. There had then been, later on, 3 a facilitation exercise by Graham Corbett, to see if new 4 heads of agreement could be reached in the light of the 5 Treasury panel review which, in the end, could not be 6 reached, mainly because DSS I think didn't accept them. 7 So there was this feeling throughout this period 8 that we needed a Government decision, one way or 9 another, at the same time as we were trying to keep work 10 going as far as we could on the basic Horizon programme. 11 Q. I am going to look at early 1999. Can we look at 12 POL00028603, please. 13 This is an update from Stuart Sweetman, to 14 yourself and others on 23 February 1999. He says, about 15 halfway down: 16 "I believe we should really give the new option 17 a thorough work out with the following key aims. 18 "1. It must be commercially acceptable -- as good 19 as previous board authority and meets agreed 20 non-negotiables ... 21 "2. The [Post Office's] vision for POCL is 22 sustained [and] accelerated 23 "3. Government public announcements support the 24 above and establish among our stakeholders 25 "4. Key strategic risks are mitigated (customer 54 1 retention, income flows, uncontrolled network changes 2 et cetera) 3 "5. A revised and agreed programme plan is 4 produced that matches POCL's key needs -- pace of 5 installation together with a plan for service 6 development (enabling process efficiencies as well as 7 market-based products." 8 There isn't any mention at that stage of technical 9 robustness as a key aim; is that fair to say? 10 A. Yes, and I think that it was fair that there shouldn't 11 be. This was part of a rather long-ranging negotiation 12 with Government. It was in the light of various other 13 things going on, either with the Permanent Secretary at 14 the Treasury or with ministers, around what line they 15 might take and it wasn't at all clear to us at that 16 stage what line they may take, although we did know that 17 they were looking at a slightly different option. I get 18 confused, there were so many "B" options but there are 19 a number of options that they were starting to look at 20 and you have got to see this as a negotiating document. 21 This was really setting out what we thought we needed 22 from a decision about the way the project should go 23 forward. 24 Whether the project was robust was almost a second 25 level -- at this stage -- issue because until we'd got 55 1 that clear, it didn't matter whether it was robust or 2 not, we might have not been going down the path at all. 3 So this is very much -- it had all gone up a level and 4 this was very much about trying to get a clear statement 5 of what Government, as our shareholder as well as 6 responsible for DSS, were prepared to accept or 7 wanted -- what route they wanted us to go down in order 8 to continue to automate counters. 9 Q. Stuart Sweetman was the managing director of Post Office 10 Counters? 11 A. Yes, he was. 12 Q. Again, was he spending quite a lot of time at that 13 political level at that stage? 14 A. Yes. He was doing quite a lot. At that stage I was 15 slightly involved in trying to merge the Post Office 16 with the Dutch Post Office, which was taking a bit of 17 time and in the end didn't happen. So there was 18 a balance between us. Some of the work, particularly if 19 it was getting more and more detailed, Stuart Sweetman 20 would be taking on as MD. As much as we could we would 21 go as a double act and then there were certain meetings 22 that I would go to on my own or sometimes with the 23 Chairman even, as this accelerated and went higher and 24 higher. 25 Of course, as you have said -- or as the first 56 1 line says, you know, once it's gone to Number 10, you 2 know there's going to be a fairly high level set of 3 political discussions that will go on from that. 4 Q. So as CEO at this stage, you were heavily focused on the 5 political side plus other duties such as an entirely 6 separate matter of a merger and Stuart Sweetman, who was 7 the managing director of Post Office Counters Limited, 8 also quite heavily involved in the political matters, 9 trying to see the project through? 10 A. Yes. 11 Q. Let's look -- you have mentioned the various Bs and 12 I haven't got to the grips with them but let's see what 13 we can make of POL00028574. This is a letter to 14 Sir Steve Robson in the Treasury, from Stuart Sweetman, 15 copied to you. So again, this is, at this stage, the 16 managing director of Post Office Counters Limited 17 getting involved at the political level. 18 Now, that second paragraph talks about a preferred 19 option B1 variant. Do you remember the various 20 options -- or some of the various options that were in 21 play at that stage? 22 A. Imperfectly I think this answer to that, yes. 23 Q. Is it fair to say that there are a lot of different 24 variants -- 25 A. There were. There were a lot of different variants -- 57 1 Q. -- offering a lot of different options? 2 A. -- and they tended to change as the negotiations went on 3 until we got a final set later that year. 4 Q. Can we look at page 8, please. Mr Sweetman says: 5 "I trust ... these proposals help to focus [our 6 discussions] now within Government as we have to commit 7 to ICL soon. I will be happy to discuss these issues 8 with you. Alternatively John Roberts has already 9 offered a meeting with you, him, and the DSS Permanent 10 Secretary very early next week, upon your return, which 11 would be another way forward." 12 So that's you offering again to get very involved 13 at the political level. 14 A. Yes. 15 Q. I am going to take you to your witness statement -- and 16 it can be shown on screen WITN03390100. 17 It is page 17 of that statement, 18 paragraph 31 -- so the bottom paragraph. This is how 19 you described that period: 20 "I have been asked by the Inquiry to comment on my 21 understanding of the technical issues and 22 robustness ..." 23 Sorry, one minute. Yes, sorry: 24 "I have been asked by the Inquiry to comment on my 25 understanding of the technical issues and robustness of 58 1 Horizon at this time. For me, the issues at that 2 moment, and throughout the process which ended with 3 acceptance of new Heads of Agreement, were not the 4 robustness of Horizon or technical problems, of which 5 some still remained, but whether the Post Office could 6 agree with the ministerial proposal. The negotiations 7 were not at any time affected by views on either side, 8 of the technology, they were solely about the overall 9 future of the project, its cost and the Government 10 proposal on the table. The prospect of major reductions 11 in the Post Office network if Horizon was terminated 12 were foremost [on] my mind." 13 So that's exactly what you were saying just now 14 that actually it didn't really matter about the 15 technical issues so much if the whole project didn't go 16 ahead and your focus therefore was on getting the 17 project. 18 A. Yes, and the interesting thing was while this had slowed 19 everything down, because there wasn't a lot of point in 20 spending a great deal of money on different technical 21 approaches if we didn't know which direction we were 22 going in, but the work was still going on between the 23 Post Office Counters team and ICL, but it was going on 24 at a much slower rate, and they were using some of this 25 time to sort through or retest some of the issues that 59 1 we talked about earlier where they weren't robust 2 enough. 3 So, in one sense, there was a positive coming out 4 of that but you couldn't take that too far because we'd 5 have been spending money to point in that direction 6 where, all of a sudden, we might have got a decision 7 taking us in that direction. 8 Q. Whilst these matters may have been dealt with or being 9 dealt with, presumably your focus at that stage, though, 10 was on the political level? 11 A. Very much so. 12 Q. Correspondence with Government, for example, at this 13 stage would have been about pushing through what was 14 option A, the Benefits Payment Card, rather than talking 15 about had technical issues? 16 A. Yes, it would have been, and I'm sure everybody can 17 understand that when it gets to this kind of level of 18 discussions, and you get Number 10, you get the 19 Secretary of State for Industry, you've probably got the 20 Secretary of State for Welfare, we're talking about 21 those sorts of level of discussions with briefing papers 22 being produced by those departments, not by us and, at 23 that stage, we were not clear which way government was 24 going. We could have had a decision fairly quickly that 25 said scrap the whole thing, and we didn't. 60 1 But then, the way that I remember it came out of 2 Number 10, was asking the Treasury to try and develop, 3 I think at that stage, something which included 4 a smartcard, which we hadn't really looked at at all 5 because that had been ruled out or opted out at a very 6 early stage. 7 So we were very much at that kind of level, where, 8 sadly and almost inevitably, you're sort of sitting back 9 with your arms folded waiting for somebody to say "It's 10 got to be like this". We were feeding in, as you have 11 seen from the letter from Stuart Sweetman, views on that 12 and I've got no doubt there would have been telephone 13 conversations between officials and between, probably, 14 Stuart Sweetman and his team, more than me at that 15 stage, but it was very much this would have to result at 16 some point in a ministerial decision. 17 Q. You mentioned a smartcard option. Let's look at 18 May 1999. That's POL00028618. This was a draft paper 19 for the board on 5 May 1999. Can we go over the page, 20 please, and paragraphs 1 and 2 give the context: 21 "The purpose of this paper is to 22 "update the Board on the progress of negotiations 23 on the future of the Horizon programme since the last 24 Board meeting on 27 April 1999 25 "decide the Post Office's view of the best way 61 1 forward as Ministers are meeting imminently ... 2 "The timetable for the discussions has been driven 3 by Fujitsu's written insistence to the Prime Minister 4 (7 April 1999) ... for new legally binding Heads of 5 Agreement (the 'Agreement'). The Agreement would mean 6 that Fujitsu will provide financial support for 7 a reshaped programme, and all historic claims [will be] 8 settled." 9 Can we look at paragraph 4, please. This is 10 precisely what you were just saying option B was at that 11 stage, at least about using a smartcard. Do you 12 remember that? 13 A. Yes, I do. Yes, that's quite right. 14 Q. If we look at paragraph 10, which is the final 15 paragraph, we there have discussions about a variant 16 known as "Option B.1.2". Do you remember that? 17 A. I remember the term, yes. I remember option "B.1.2". 18 I hope you are not asking me to describe it. 19 Q. I'm not. I think the fair impression that you get 20 around this time that lots of different options are 21 being up in the air and the discussion is very much 22 focused on which option at that stage? 23 A. Yes, it is. 24 Q. Let's look at POL00039916, this is an updated version of 25 21 May 1999, if we could look at page 2, I think it's 62 1 the same document just updated and there we're looking 2 in paragraph 5 at option B3. It talks about: 3 "... a new option (known as 'B3') as a way of 4 salvaging something from ICL's work to date as 5 an alternative to termination." 6 What did you understand or what would you have 7 understood by that? 8 A. I think it was the classic case of trying to both 9 continue with something and some of the work that had 10 been done and the money that had been spent, whilst, at 11 the same time, moving away from the original idea of 12 having a Benefit Payment Card because the 13 characteristics that are set out in that paragraph 14 changed the basis of the relationship between Post 15 Office and ICL and also changed the basis going forward 16 of what we were being asked to do. 17 At the same time, it would have met our biggest 18 worry that there was to be no automation. There would 19 have been some sort of automation following it. In one 20 sense, it's the classic middle of the road solution 21 keeps everybody reasonably happy. 22 It was being driven, as I think you said earlier 23 on when you read the part about ICL, by the fact that 24 Fujitsu, as far as I remember, had at that point, 25 because of pressures on their accounts and the fact they 63 1 were coming up to an audit and their annual general 2 meeting, or something like that, they wanted a clear 3 decision by something like the end of May from the 4 government about what was going to happen. So what we 5 had here, I think, was the start of what became the 6 Government's key option -- in fact, it wasn't an option? 7 This is what the government decided in the end they 8 wanted to do as a solution to both the pressures from 9 ICL and also from us, in terms of what we wanted. 10 There is -- I have seen one document which, if 11 I may, I just bring to your attention, which was a note 12 from the Prime Minister's private secretary, Sir Jeremy 13 Heywood, saying that what the Government needed to do 14 was to produce a policy or a decision which, on the one 15 hand, did not produce a major bust-up with the National 16 Federation of SubPostmasters, which, on the other hand, 17 would be acceptable to government and would be 18 sustainable in the context of the Public Accounts 19 Committee then asking why they had gone down this route. 20 Pretty tough ask. But I think that kind of 21 approach was behind option B3. 22 Q. Can we look at paragraph 15, which is page 4, to see the 23 analysis of option B3. Paragraph 15 is the impact on 24 the Post Office Counters Limited and it says, amongst 25 other things, about halfway down: 64 1 "In addition, it would be contracted to having 2 an IT infrastructure that will not be optimal as its 3 business requirements are likely to change following the 4 BA payment card service being stripped out from the 5 design. POCL will be faced with a loss of confidence in 6 its marketplace and the consequential need to reshape 7 its network much more rapidly than envisaged. It will 8 need to review its strategy, including facing the real 9 prospect of managed decline." 10 Now that seems to be an acknowledgement that 11 IT infrastructure would be suboptimal if the benefit 12 card system service was not part of it; is that right? 13 A. Yes, it is because the whole approach, right from the 14 period in 1994/96 when the contracts were let, was that 15 the benefit card was central to the automation project 16 itself and it was central partly because this was why 17 we're all there in the first place from the DSS benefit 18 agency point of view: this was a solution for them. 19 The key thing about it was that if you spent 20 two years, as they then had, trying to develop that kind 21 of system, then it wasn't true just to say, "Oh, well, 22 you can use that but do it in a different way". I've 23 got no doubt that a lot of the work on the benefit card 24 would have been kept and used again. I can't justify 25 that, for the reason I said before, that I don't 65 1 understand the technology well enough, but I'm petty 2 sure that would have happened but there would have been 3 a lot of work that had to be done to now handle this in 4 a slightly different way, and that was what B3 was going 5 to force us to do. 6 Q. The problem that faced the Post Office was that you will 7 be left not only without the benefit card and all the 8 benefits that came from that but you will be left with 9 a system that you considered to be suboptimal? 10 A. It would be suboptimal in the sense of the comparison 11 with the benefit card and remember again that, at this 12 stage, we were trying to set out a position to argue 13 strongly for the benefit card, not for option B3, and it 14 would have been suboptimal but when I look back now 15 I think we perhaps overplayed that a bit because you 16 could have worked on that. It would have certainly cost 17 more, which it did, and it took a lot more work, which 18 it did, but out of it came, actually, a Horizon System, 19 which, for whatever the many and very disturbing faults 20 that happened in the 20 years afterwards, actually 21 survived for almost 20 years. 22 Q. Can we look at page 9 of that document, that's 23 correspondence from the chair of the Post Office at that 24 stage, Dr Bain to Stephen Byers on 18 May 1999. Again, 25 18 May 1999, presumably a time of lots of frank 66 1 exchanges with ministers and officials? 2 A. Yes, because -- I can't now remember the precise date 3 but there was this end date in Fujitsu's mind where they 4 had to have some kind of decision and that was about 5 a week later than this note, I think -- something like 6 that. 7 Q. Can we turn to POL00039931. This was a briefing to 8 ministers but you may not have seen this at the time -- 9 A. I've seen it since, yes. 10 Q. Can we look at paragraph 4, the summary there, as at 11 May 1999, it says: 12 "POCL believe the Horizon hardware and software is 13 probably suboptimal as the platform for providing 14 network banking and Modern Government services, but 15 would need several months' work to have a clearer view. 16 They are therefore unable to take a view on whether the 17 Horizon hardware and software is preferable to the 18 system they might procure following termination." 19 That seems, again, to be a recognition not only 20 that there were all the problems with robustness that we 21 previously discussed but questions over whether the 22 system itself would be suitable in the absence of the 23 benefit card? 24 A. Yes, that is quite right and what we were tackling or 25 trying to tackle at this stage was to get across to 67 1 Government that you couldn't just switch from a benefit 2 card to the order books -- barcoding order books, which 3 I think is part of this particular option, and just 4 assume you put it on the same technical platform. 5 We weren't clear, at this stage, exactly what they 6 wanted to do and there was certainly not much definition 7 behind those options, the B3 option that you read out 8 recently and, until you knew that, then it would be very 9 difficult to say what the technical changes would be or 10 would be necessary. I think the word "probably" is very 11 important in that paragraph 4. We just didn't know, at 12 that stage, because we just didn't know exactly what 13 government in the end would be asking us to do. 14 Q. The word "suboptimal" there, do you think that that was 15 repeating a phrase that had been said by the Post 16 Office? It's similar to the language used in that 17 previous document we looked at. 18 A. Yes, I think it probably was. The definition of 19 suboptimal is always difficult, isn't it, unless 20 somebody comes out and says "It is suboptimal because". 21 I think what they are really saying is what I just said, 22 which is until we knew exactly what we had to do it was 23 so difficult to say that what had been worked on so far 24 would then work in the future without some major 25 changes. 68 1 Looking at the words and, as you say, this is 2 a second-hand, in the sense that they are quoting. This 3 is -- the ministerial briefing is quoting what somebody 4 believes POCL have said, and probably rightly, but 5 whether we would have defined that more clearly as far 6 as we could. 7 But no, it's certainly a word or phrase that's 8 been used by POCL. 9 Q. Still at that stage, POCL were presumably pressing still 10 for the benefits card system? 11 A. We pressed for the benefit card system until they told 12 us that we're not going to get it because we really did 13 feel that this was the best way to go. We worried a lot 14 about those customers at a post office counter who 15 didn't have technology, who didn't have a bank account 16 and, with the best will in the world, would find it 17 difficult, at first at least, to cope with some new 18 technical approach. Obviously we also wanted to retain 19 the work from the Benefits Agency. 20 Q. I was going to say, presumably, in your position, the 21 financial implications were also very significant? 22 A. The financial implications were very, very significant, 23 yes. 24 Q. We know that in late May 1999, the benefits card system 25 was scrapped. What did you think at the time was the 69 1 reason behind that? 2 A. Can I ask you to put up on the screen the annex from -- 3 on this document, which is the note from Sir Jeremy 4 Heywood. 5 Q. Yes, that's the very final page, page 7 of that 6 document. 7 A. Yes. This I read for the first time very recently when 8 I saw the document and it almost summarises the problem 9 that the government had in taking its decision: we don't 10 want a huge political row with the subpostmasters; ICL 11 was, at that time, the premier British IT company, even 12 though it's now owned by Fujitsu, and they don't want to 13 put its future at risk; and they want to be able to 14 defend the position. 15 In the light of that, coming from Number 10, 16 I think that ministers had to try and put together some 17 kind of compromise, if that's the right word, or some 18 kind of decision, which they would want to take, which 19 met those criteria and what we then had, eventually, as 20 a government decision, was taken in the light of those 21 three issues all of which are absolute sensible and 22 understandable issues but it did mean, at the end, that 23 that was driving, or must have had, some major impact in 24 driving the eventual decisions that ministers decided to 25 take. 70 1 Q. Can we move to June '99 and look at FUJ00058183. By 2 June '99, a core part of the original plan, the benefit 3 payment card, had been scrapped and this is an ICL 4 report. I don't think you would have seen it 5 necessarily at the time? No. 6 Can we look at page 8 of that document, please. 7 Can we look at the final two bullet points on page 8. 8 So this is ICL reporting: 9 "To date POCL have refused to enter into any 10 discussions with us about new business development plans 11 and programmes and this is likely to be the position 12 until we are through Codification and Acceptance. 13 "Although we are now some six weeks into the new 14 contract arrangements POCL continue to remain negative 15 and critical towards the programme and have not yet got 16 over their bitterness on the way they have been treated 17 within the public sector, for which unfortunately they 18 continue to hold us partially to blame. We have to work 19 at this as we make progress with the commercial, 20 financial and programme matters in order to find a more 21 positive and long-term relationship." 22 Is your recollection that business development 23 plans had been put on hold at that stage? 24 A. Yes, because I think we did not have a view yet about 25 whether we would want to continue to work with ICL after 71 1 they'd completed the contract and the contract, I think, 2 ran through to about 2005. I don't agree with the 3 second paragraph quite so much. I'd seen this word 4 "bitterness" used somewhere else. As a board, we were 5 fair heavily hacked off about the way that this had been 6 handled but it was a business decision. I don't think 7 bitterness really covers it, certainly in our terms. 8 Whether that was from some of the people who had been up 9 to their ears in dealing with all this in the programme, 10 maybe so. 11 What I think we were thinking at the time was 12 "Let's get this done". We did have views we started to 13 develop in more detail about how we would use the system 14 after it had been accepted and after it had been put in 15 fully. At that stage, I can well understand why ICL 16 wanted to know about this because they liked to be first 17 in the frame for any development beyond that that might 18 occur, whether that's in banking or whether it's in 19 Government Gateway or whatever. 20 Our view, at that stage, was, not surprisingly 21 after everything that had happened, we weren't yet 22 prepared to talk to them about future possibilities 23 beyond delivering the contract. I think it's fair, 24 afterwards, to say that this eased and as we got further 25 and nearer to the time when the system was accepted 72 1 I think there were then more discussions starting. So 2 I think this was very much at a point in time where we'd 3 had to go down this revised route that Government wanted 4 and there was doubtless something that was flowing over 5 to that into the relationship with ICL. 6 Q. By that stage, by the benefits card system not being 7 brought forward, presumably one of the reasons for that 8 was significant delays in the project. 9 A. Yes. I think in the minds of DSS it was and I can 10 understand it from their point of view. Their view was 11 they were paying more than they should have done, a view 12 we didn't accept, but that was their view -- "We're 13 paying more than we should have done for transactions at 14 post offices" -- and that had been a view which had gone 15 for many, many years. 16 The route that we'd taken with, at the start, 17 their agreement was the benefit card. This is -- my 18 view and perception of the time is that this was a good 19 reason, a sensible reason, from their point of view, not 20 to continue with that card and one of the things that we 21 didn't know at the time that this was being discussed 22 was whether that would have meant an immediate move to 23 Automated Credit Transfer and, therefore, a pretty 24 immediate loss of business, or whether that would come 25 later. That was clarified a bit later on. 73 1 But I do think that it was more to do with the 2 fact that they saw, for obvious reasons, a way out of 3 this project and not going down the benefit card route. 4 Q. Do you not think that there was at least some damage at 5 that time to the relationship with ICL? 6 A. Yes, there would have been, in a strange sort of way, 7 because what had sparked all this off had been the fact 8 that ICL, I think, were -- they were having to deal with 9 something in their accounts which was around £250,000, 10 some problem, and, therefore -- and quite rightly in my 11 view -- they were saying "This has got to be sorted 12 other by this date". 13 The sorting out ended up with a decision by 14 government which we had great difficulty in accepting 15 but then, in the end, decided to accept and, of course, 16 for a short period, maybe for a longer period at 17 different levels, this would have meant "You guys have 18 put us in a position", ICL, "where this has brought this 19 to a head in a way we're not happy with". 20 I don't think that lasted too long -- I really 21 don't -- because, at the end of the day, it was two 22 businesses trying to sort something out, both of us 23 stood to lose even more if the relationship between us 24 had not been good and I really do think that, as this 25 progressed, that got out of the way and they really got 74 1 down, both sides, to trying to make this work in the new 2 form. 3 Q. Staying on this document, could we just look at page 10 4 and towards the bottom of the page. It's at the bottom 5 of the page here, it says "moral" but it means "morale": 6 "The [morale] and motivation within the team is 7 not the best I have encountered during the past 8 three years. Following on from the initial shock caused 9 by the withdrawal of BPS, the staff are very uncertain 10 as to their future and that of ICL Pathway. We will 11 need to work very hard during the next few months if we 12 are not to experience a large exodus of key people." 13 I know that you weren't based at ICL but did you 14 experience any lowering of the morale or any issues with 15 ICL's approach to the work at that time? 16 A. No. The interesting thing -- I think I put it in my own 17 witness statement -- was that while all this was going 18 on at sort of my level, ministerial level, all of that, 19 the two teams were still working, and I think it may be 20 that the bitterness was on both sides that they put 21 enormous amounts of time in. Some of these people were 22 working incredibly long hours to try and handle all of 23 this and then, all of a sudden, somebody says, "We've 24 shifted the goal posts and it's now over here". 25 I think you don't get the exodus quite so much in 75 1 the public sector as you would in the private sector but 2 all of these people, we were saying earlier on, were 3 experts in an area where there were not too many experts 4 and I think that that was what was causing the problems. 5 Once they got back into trying to work out -- because we 6 were still at this stage having to work out what the 7 Government decision meant. I think we were given 8 three months to actually look at what this means and try 9 and develop new heads of agreement. Once they got stuck 10 into that, I think it worked a heck of a lot better. 11 Q. I'm going to move to July 1999 and we're going to look 12 at some board minutes and it's probably -- we'll 13 probably stay on that topic possibly until lunchtime. 14 Can we look at POL00000352, please. This is 15 20 July 1999. It is a meeting held in a manor. Was 16 this an away day or away period? 17 A. Yes. 18 Q. Horizon is addressed at page 8 and page 9 as well. Can 19 we, for our purposes, look at page 10. At the very top 20 of page 10: 21 "In particular the discussion had identified four 22 workstreams to be progressed: 23 "Influencing the timing of ACT. 24 "Getting the most out of Horizon. 25 "Reviewing channel strategy across The Post 76 1 Office. 2 "Defining options for the Counters network 3 including subsidy issues." 4 Then at (ii): 5 "The Board had to decide by 31 July 1999 whether 6 it wanted to terminate or sign the revised contract with 7 ICL ..." 8 Now, I want to spend a bit of time on the next 9 page but I think I'm going to first just take you back 10 to your witness statement about this, if that's okay. 11 Can we return -- 12 Is it possible to have two side-by-side or is 13 that -- yes? Excellent. 14 WITN03390100 and it's paragraph 36 of that witness 15 statement. I can tell you which page that is: 21. I'm 16 going to read you a little bit from your witness 17 statement. It says: 18 "I have been asked by the Inquiry to comment on my 19 understanding of any technical issues and the robustness 20 of Horizon at this time. I have also been asked to 21 comment on my knowledge of any problems experienced by 22 subpostmasters, any concerns I raised and why the 23 decision to sign the contract with ICL was remitted to 24 the Chairman and Chief Executive. The Board were 25 assured by the Horizon Project Director in the meeting 77 1 that the system was robust and fit for service. The 2 only issue reported was that some subpostmasters were 3 having trouble balancing their accounts which was seen 4 at the time as a training issue, not a system issue." 5 So that was your evidence in your witness 6 statement -- 7 A. Yes. 8 Q. -- which is that the only issue reported was that some 9 subpostmasters had trouble balancing their account. 10 Back to the minutes -- we don't need to keep up 11 the witness statement -- page 11 of those minutes, 12 I think exactly where we are, in fact -- could that be 13 blown up, thank you -- (v): 14 "System roll-out was scheduled for 23 August 1999 15 with acceptance needed by 18 August. There were three 16 categories of acceptance each with a threshold which 17 would determine whether or not roll-out could proceed: 18 high, medium and low. 19 "One incident within the high category, or more 20 than 20 incidents within the medium category, would 21 result in the system not being accepted. Currently 22 there were 270 incidents of which 1 was high and 29 were 23 medium. Of greatest concern was the inadequate training 24 of employees although a new package had been produced 25 and work on the other incidents was underway. At this 78 1 stage it was expected that there would be no reason for 2 not accepting the system by 18 August. 3 "It was noted that 4 "Excluding the concerns over training, David 5 Miller considered the system robust and fit for 6 service." 7 Down one: 8 "A number of subpostmasters were experiencing 9 difficulties operating the system and in particular with 10 balancing. To help overcome this and, in addition to 11 the new training package, additional resources 12 (300 managers) had been allocated to 'hand hold' staff 13 as offices came on line. This was a considerable but 14 necessary investment to ensure the human/technology 15 interface worked correctly. It was likely that a small 16 number of subpostmasters would continue to experience 17 difficulties." 18 Now, the news from David Miller that the system 19 was robust and fit for service, that sounds positive. 20 Do you remember that message being communicated to you? 21 A. Yes, I do. It was a very important message and I think 22 also explained what was being done to look at the key 23 area of balancing where, at that point, they were saying 24 that they didn't think this was a system, it was more -- 25 they didn't say this but it was more human nature. We 79 1 would have accepted that because the range of sub post 2 offices were from, at one end, a lady in her front room 3 operating a sub post office almost as a social service, 4 up to the other end, which was a highly professional 5 retail outlet, big private business, Post Office on the 6 side. 7 I could well understand -- and I don't know how it 8 spread -- but I could well understand the need for 9 a number of subpostmasters to need additional training 10 and additional help. 11 So we felt the point at paragraph (vi) there was 12 very important, that was coming from the project 13 director and, secondly, we felt that the issues set out 14 in paragraph (vii) were then being handled properly by 15 allocating a lot more staff, given that -- remember this 16 is all over the UK and including Northern Ireland -- 17 this would be through the local retail network managers 18 to help those subpostmasters who were having trouble 19 with operating the system, assuming throughout this that 20 it was a training problem, not a system problem. 21 Q. Can you just tell us a little bit about David Miller and 22 your relationship with him? Did you see him as the 23 expert in terms of IT matters? 24 A. Yes, he was the project director. My relationship with 25 David would not have been particularly close because he 80 1 was operating and reporting directly to Stuart Sweetman 2 and my relationship was much more with the managing 3 director than it was with the project director. 4 But, obviously, as we got closer and closer to the 5 end -- what we thought was going to be the end of the 6 project, it was important for the board to hear directly 7 from the project director his view of exactly where we 8 were. So he would have accompanied Stuart Sweetman in 9 this particular meeting and, between them, they would 10 have given an update on what was happening, where they 11 were, what the risks were as they saw them. 12 Q. How much faith did you have in what you were being told? 13 A. I think we had complete faith in that. He and Stuart 14 Sweetman had been working on this from the beginning. 15 I can't think of any reason, in the context of the 16 atmosphere that we tried to create within Post Office, 17 where someone would come and lie to the board. I can't 18 think of any instance where somebody would come to the 19 board and mislead the board. 20 In either case, there would have been consequences 21 because these things tend to come out and, therefore, 22 when the project director comes to you and says, 23 "I consider the system robust and fit for service", you 24 accept that. 25 Q. Can we just go up slightly on that page so that it 81 1 includes paragraph (v) as well as (vi) and (vii). Thank 2 you very much. 3 You said in your statement that the only issue 4 reported was that some subpostmasters were having 5 trouble balancing. Looking at those paragraphs as 6 a whole, that wasn't the only issue, was it? 7 A. No, it wasn't the only issue but the only issue reported 8 in detail was that subpostmasters were having trouble 9 with balancing. 10 Q. So it's "reported in detail" rather than "reported"? 11 A. Yes. 12 Q. Because there were 270 incidents, of which one was high 13 and 29 were medium, at that stage? 14 A. Again, this is where my lack of knowledge doesn't help 15 me but, from reading some of the papers since then, 16 I needed -- I would need now to understand the 17 definition of an "incident" and it did strike me that, 18 in some cases, these were tiny things which were on the 19 system, something had happened, something had gone 20 wrong. I can remember at the time that we thought that 21 the way in which they were handling this was very 22 sensible, splitting them into high, medium and low. 23 I can't answer the question I'm about to pose but 24 I suppose what we should have said at the time were 25 "Explain to us in more detail what 270 incidents were". 82 1 But you do have to get to a point where you accept that 2 the people who have been working on this all the time 3 are the ones who are going to deal with things and if 4 they say "Those kind of incidents we're going to get rid 5 of" -- and, in fact, later on in a further report to the 6 board as we got closer to the end, it was getting quite 7 specific about what the incidents were, down to about 8 three or four major ones. 9 At the same time, I think we were beginning to 10 understand very clearly that ICL didn't always accept 11 the definition of what was an "incident" but they did, 12 in fact, agree that more time should be taken to resolve 13 it, and I think that was happening. 14 So I think, really, between us -- and you may have 15 this from ICL, deciding and describing what an incident 16 is would probably help in looking at that paragraph 17 again. 18 Q. You have mentioned in your evidence about the training 19 issue. If we look at paragraph (vii) there, it doesn't 20 definitively say there that it is a training problem, 21 I don't think. It says a number of subpostmasters were 22 experiencing difficulties operating the system and, in 23 particular, with balancing, and the solution that's been 24 developed is to provide a new training package. Would 25 you agree with that? 83 1 A. Well, it does say to help overcome this. 2 Q. Yes. 3 A. I mean, the whole idea was, as I understood it, 4 understand it still, is that subpostmasters were 5 experiencing these difficulties. We had produced a new 6 training package and a lot more human resource to then 7 go and help those who were having a difficulty -- and 8 it's not every subpostmaster, which is why I made the 9 point earlier on about size and scope -- and the idea 10 was, as they describe later in that paragraph, that they 11 would have time to be with a subpostmaster or his or her 12 staff to actually take them through what was going on. 13 So I think I would say I think that is a sensible 14 solution to what the problem was as defined. 15 Q. So is it that the presentation to the board, effectively 16 the board's understanding at that time, was that the 17 issue was one of training? 18 A. Yes. 19 Q. It says at the end of that paragraph: 20 "It was likely that a small number of 21 subpostmasters would continue to experience 22 difficulties." 23 So even if Mr Miller was right about it being 24 robust and fit for service, you were aware that there 25 would be continuing problems, a small number of 84 1 problems, for some subpostmasters. 2 A. Yes, and can I just explain that? During my time, both 3 as managing director of Counters and then, later on, as 4 CEO, I tried as much as I could to get out to visit post 5 offices and the difference in capability of 6 subpostmasters was quite large, in the same way as 7 the -- I tried to describe it a few minutes ago -- the 8 sort of businesses that they were running were very 9 different. 10 We were trying to put these terminals into every 11 sub post office and that meant that the range of 12 people's capabilities would be quite large. 13 I'm sure if I'd been a subpostmaster and I'd been 14 asking to do this, I would have had somebody holding my 15 hand as well because it's a new system. It's putting 16 technology into these post offices where, before that, 17 the till had probably been the highest bit of technology 18 some of them would have had. 19 Therefore, I do think that what we were talking 20 about here, and it would have been a reasonable point of 21 it, was that you were dealing with such a range of 22 people, capabilities and, in the main, they were good 23 capabilities but some people, quite rightly, with 24 technology would have needed more help than others. 25 Q. In terms of that final sentence, that it was likely that 85 1 a small number of subpostmasters would continue to 2 experience difficulties, when it came to prosecuting 3 people based on Horizon data, do you think that 4 information would have been relevant or was relevant? 5 A. I don't know because I was never involved in any of the 6 prosecution cases at any time. What I do think was 7 important was that we were doing all the things we 8 should have done to help people understand the 9 technology and, again, if I may just for a second read 10 back to you: 11 "[The] necessary investment to ensure the 12 human/technology interface worked correctly. It was 13 likely that a small number of ..." 14 The whole of that paragraph, to me, is about the 15 people issues. 16 Q. Who do you think framed it as a people issue at that 17 meeting? 18 A. I think that would have been framed by the report from 19 the project team, which presumably, at that stage, would 20 be faced by either Stuart or David Miller. 21 Q. Can we look at paragraph (xii), that's over the page: 22 "Members were concerned that a number of technical 23 issues remained unresolved and that the BA contract 24 position was still unclear. These were two critical 25 issues and needed to be progressed further before the 86 1 Board would be content for the contract with ICL to be 2 signed. An update on the negotiating position with BA 3 would be provided to Members who were content that the 4 final decision on whether or not to sign the contract be 5 remitted to the Chairman and Chief Executive." 6 Having been told that there were some quite 7 technical Acceptance Incidences, for example, were you 8 content for that final decision to be delegated to you? 9 A. Yes. Let me explain that. I think that's not the way 10 I remember it at all. I think this issue was -- you've 11 got to go back to a meeting we haven't discussed, which 12 was when the board agreed to accept the proposal set out 13 by the Secretary of State for Industry for the future of 14 Horizon, it had been a full board meeting and all of the 15 board members had agreed. The follow-up from that was 16 getting to this point where we agreed to sign the 17 contract. What I think this minute was saying, or what 18 I remember, is the board as a whole did not mean -- did 19 not need to meet to review that contract and the process 20 of deciding that was remitted to me and the chief 21 executive, and it would have been with Stuart Sweetman 22 as well, managing director. 23 So it was more about that kind of process than 24 anything else. When I wrote my own evidence, I said it 25 was unusual and I thought that it meant that they 87 1 expected us to go through sort of line by line the 2 contract. I've thought about it since then and I've 3 reread this a number of times and I don't think it was 4 that. 5 I mean, there was a discussion, obviously, about 6 that contract but I think it's much more about a process 7 from the board saying, "Look, at some point you will 8 need to decide. You don't need to come back to all of 9 us". Given that the basis of the contract was the 10 Secretary of State -- basically the Secretary of State's 11 letter setting out what the Government was prepared to 12 accept, that they were prepared then for us ("us" being 13 the Chairman, chief executive and the managing director) 14 to decide if that could then go ahead. 15 Q. Given that you knew about various technical issues at 16 that time, did you feel that you had the expertise to 17 make that call? 18 A. The issues had come down to about three or four in the 19 end and one of the things we had learnt -- I can't 20 remember from who, probably from our director of IT -- 21 is that it was very unusual in any project, and it's 22 still the same today (not very far away from the legal 23 profession, I gather, from IT systems going wrong), it 24 was very unusual for any project to be 100 per cent 25 perfect when it was finished. And what we were being 88 1 told, I think rightly, was that there were still issues 2 that needed to be solved and this would be technically 3 -- and presumably software and presumably code writing 4 and everything else -- but they, in the views of our 5 people and ICL and others, should not hold up us 6 accepting, and therefore accepting the contract, 7 accepting it and that these would be worked on. 8 I think somewhere it talked about working on them 9 between about September and December. So I think again, 10 you know, going back 20 years, this would not be unusual 11 in any scheme, any big IT scheme, and the judgment had 12 to be made by those who understood it about whether 13 these were fundamental flaws in the IT system or whether 14 they were issues that, yes, had been recognised, were 15 being worked on, and, in the views of the experts, were 16 soluble. 17 Q. So would a fair summary of that be that you knew at that 18 time that the system wouldn't be perfect but that work 19 on the system would continue after it had been accepted? 20 A. Yes, and we'd already I think decided that there would 21 be a pause in the roll-out of the system until about 22 January 2000. 23 Q. Yes. If you look at paragraph 10 or (x) on page 11, 24 that in fact makes that point. 25 A. Yes. 89 1 Q. "roll-out to offices would be suspended for a 4 to 6 2 week period over Christmas 1999, at which point a review 3 of the process would be conducted." 4 A. Yes. 5 Q. The revised contract was signed at the end of July with 6 an acceptance date of 15 September 1999. 7 A. That's quite correct. 8 Q. And then roll-out proceeded after -- 9 A. With that pause, yes. 10 MR BLAKE: Sir, I know I said that that would be the last 11 topic before lunch. I think I can squeeze in one more 12 topic before lunch. 13 SIR WYN WILLIAMS: Certainly, Mr Blake. 14 MR BLAKE: So let's move to September 1999. That's 15 POL0000353. This is a board meeting of 14 September 16 1999. Can we go to the bottom of page 2, please. There 17 we have the chief executive's report, so that was your 18 report to the board, and can we look at page 3 and it's 19 point (iii): Horizon. I'm going to read a little bit 20 out there: 21 "When the board ... met in July, POCL's Horizon 22 programme director had been confident that system 23 acceptance would occur as planned on 18 August. 24 Unfortunately, three high priority acceptance incidents 25 around training, stability of the system (lock-ups and 90 1 screen freezes) and quality of accounting data, remained 2 unresolved and whilst ICL did not accept the 3 categorisation of those incidents, they had nevertheless 4 resulted in acceptance being deferred until 5 24 September. 6 "A decision on national roll-out had also been 7 deferred, although POCL had agreed to continue with live 8 trials with the number of offices operating the system 9 extended to 900. 10 "Progress on training had gone well and the 11 incident had now been downgraded to medium priority. 12 However, system stability and accounting was still being 13 analysed and rectification was not expected before 14 December. 15 "Under the terms of the revised contract, signed 16 at the end of July, the final acceptance date was 17 15 November 1999 and it remained uncertain whether the 18 plans that were current in place would enable [the] 19 deadline to be met." 20 Can we look at slightly down the note below, so 21 that's (vii): 22 "It was noted that the continued roll-out of the 23 system to a limited number of offices was at no cost to 24 Counters who would make any payments to ICL until the 25 system had been accepted. However, the logic behind 91 1 this approach was questioned as serious doubts over the 2 reliability of the software remained. It was also felt 3 that by continuing unchecked, it might also be harder 4 ultimately to refuse to accept the system." 5 At that stage -- that is September 1999 -- there 6 were three high priority acceptance incidents around 7 training, stability of the system, and quality of 8 accounting data; there was system stability and 9 accounting was still being analysed; serious doubts 10 about the software; a risk that it's getting too late to 11 refuse. Things weren't looking too good by that time, 12 were they? 13 A. No, I don't accept that. Remember where we've come 14 from. In other words, we've gone through all of this, 15 we've put in a new system since the Government's 16 decisions, or we'd made all the alterations or the teams 17 have, and to get it down to that I think was pretty 18 good. 19 Now, knowing what we know now the accounting 20 system obviously was an issue, or would prove to be an 21 issue. At the time, we agreed that they would not 22 accept -- I can't remember the dates now but we would 23 not accept the system in August which is with the 24 original date. It was going to be delayed and we knew 25 we had until the end of November to take that decision. 92 1 In the end, there was in the view of the project 2 team, and I guess ICL, enough progress made by the end 3 of September, or whenever the final decision was taken, 4 for us to say, "Okay, we're prepared to accept this" 5 knowing that work would at least go on until December to 6 rectify those faults. 7 Now, I can't remember how much discussion there 8 was about what needed to be done to rectify them but 9 I am pretty sure that the impression we had was that 10 they were rectifiable and that they ought to be able to 11 do that by December. One of the reasons I think that is 12 because if you go beyond the time quite soon after the 13 time when the whole project had been accepted, we were 14 starting as a board to look at how to use it. How do we 15 make a pitch for Government Gateway work or other work? 16 And I cannot believe that we, as a board, would have 17 been doing that if we'd felt that somehow there were 18 some major glitches in the way this system was 19 operating. 20 Q. I mean, that late on, issues with the reliability of the 21 accounting system, that was pretty fundamental to the 22 system, wasn't it? 23 A. Well, it depends what it was. I can't tell you exactly 24 what that was but the impression we got was that that 25 was fixable. What I haven't got, what maybe we all need 93 1 to see, is exactly what was that that was then causing 2 the problem? Is it something that affected every 3 office? That, to me, would have been a major 4 fundamental flaw in whatever we were trying to put in. 5 So I think before I'd agree with you, I'd want to be 6 clearer than I am now in my mind about the scale of or 7 the complexity of the issue that that meant. 8 Certainly at the time we would have felt that this 9 was, as I say, something which was handle-able, 10 something which was going to be put right, and that's 11 why we took the line that we did. 12 Q. A reliability of the accounting system, even if that 13 affected only some post offices, that would be serious, 14 wouldn't it? 15 A. Yes, it would be but it would be handle-able, wouldn't 16 it? I mean, we're talking 17,000 post offices. If it 17 was 17,000 post offices, I'd be saying to you yeah, 18 there's a fundamental flaw in this. If it's affecting 19 some things and it's a particular error, then we need to 20 know exactly why that error is being caused in those 21 offices, and the impression we had when we took this 22 line was that it was small enough to be handled and 23 rectified by December because that was what we were 24 being told. 25 Q. Do you think "fundamental flaw" was too high a threshold 94 1 for these problems to have to meet? 2 A. I'm not quite sure that I understand the question. 3 Q. Well, a fundamental flaw makes it sound as though the 4 system would be unworkable rather than it having, for 5 example, bugs, errors and defects. 6 A. Yes. 7 Q. Do you think there should perhaps have been more focus 8 at this time on the smaller problems rather than the 9 fundamental ability of the system? 10 A. Well, I'm sure there were but I don't think that's the 11 role for the board. If we did that, you would have been 12 consistent and you would have spent a lot of time in the 13 board looking at fundamental errors. 14 The governance of the system which we put in at 15 times I thought was almost over-governed, but the way it 16 was done was that you had to rely on the people who were 17 working on this day after day after day and you had to 18 rely on the views of ICL and the consultants, who both 19 sides were using, to tell you whether this was a big 20 issue or one that could be handled. Certainly the 21 advice we were getting was this could be handled and it 22 could be handled by -- I mean, quite specifically, 23 people would say it would take to December until we get 24 this right and, of course, there was then the pause into 25 January anyway before this would hit people for real. 95 1 Remember too, if I may, that this was a roll-out 2 process. It wasn't affecting every sub-post office at 3 that time because they weren't rolled out there. The 4 roll-out was taking time and, therefore, they were 5 seeing it in a number of offices, they weren't seeing it 6 everywhere, and that would mean that it would be easier 7 when we did fix it to then say, "Right, as we continue 8 to roll out we're rolling out something where that 9 error", we thought, "had been sorted out". 10 MR BLAKE: Thank you very much. I think that's perfect 11 timing for lunch. 12 SIR WYN WILLIAMS: 2.00. 13 MR BLAKE: Mr Roberts knows this but the usual warnings 14 apply at lunch. 15 SIR WYN WILLIAMS: Yes. Talk about anything except your 16 evidence. 17 A. Yes, sir. 18 MR BLAKE: Thank you very much. 19 (1.01 pm) 20 (Luncheon Adjournment) 21 (1.58 pm) 22 SIR WYN WILLIAMS: Yes, Mr Blake. 23 MR BLAKE: Mr Roberts, I think where we left things were 24 that you knew that there were issues but that they would 25 be monitored and presumably close scrutiny of the 96 1 acceptance process was therefore important during that 2 period; is that right? 3 A. Yes. 4 Q. Moving to October 1999, can we look at POL00000354 5 please. Thank you very much. Those are the board 6 meeting minutes of 26 October 1999. Can we look at 7 page 3, please. It's on page 3 that Horizon is briefly 8 mentioned in the minutes at number (vi): 9 "Following remedial work around two issues that 10 had previously prevented acceptance ... the system had 11 now been accepted with implementation proceeding at 12 a rate of 200 offices per week. Rollout would continue 13 until 8 November at which point it would cease until 14 January thereby allowing a period of analysis and 15 assessment of implementation to date to be undertaken. 16 When implementation recommenced it would be at a rate of 17 300 offices per week." 18 I think that's something that we spoke about 19 before the break, about the brief break in order to 20 monitor the progress. 21 A. Yes. 22 Q. January 2000, can we look at POL00000336, please. That 23 is another meeting of the board on 11 January 2000. Can 24 we look at page 10, please. It's at the bottom of 25 page 10 that we have an update on the Horizon programme 97 1 and that goes into page 11. Let's just have a quick 2 look at that: 3 "The rollout of Horizon was due to recommence on 4 24 January. A great deal of work had been undertaken to 5 rectify difficulties identified in three areas: 6 "system stability; 7 "accounting integrity; and 8 "the provision of support to offices. 9 "Although as yet uncertain, it was anticipated 10 that these issues would not prevent roll-out 11 recommencing." 12 You say at paragraph 42 of your witness statement 13 that accounting integrity was seen as a training issue 14 still at that time? 15 A. Yes. 16 Q. Would you agree with that? 17 A. Yes. 18 Q. Where did you get that from or that impression from? 19 A. Well, it would have been the impression I had at the 20 time, which I then remembered because we were down to 21 these three issues, which was much easier to remember at 22 a time when we were about to implement it. So it would 23 have been something I recalled, as opposed to anything 24 I'd read in a particular document. 25 There was nothing that I'd seen that suggested 98 1 that the accounting issue was anything other than the 2 training exercise that had been -- not training 3 exercise, the training issue which had been reported to 4 the board. 5 Q. Did your information about that come from ICL Pathway or 6 from the Post Office? 7 A. I can't recall that. I can't recall where it would have 8 come from at the time. 9 Q. Was there a financial incentive for ICL to place 10 emphasis on the training, rather than software issues? 11 A. No, not as far as I'm aware. 12 Q. Training sounds like something that's easier to overcome 13 as a difficulty than a software bug; would you agree 14 with that? 15 A. Yes. 16 Q. Then we look down to number (iii) on the next page: 17 "Given the programme was expected to recommence 18 rollout, it would be helpful for the Board to understand 19 what marketing opportunities were now being considered." 20 So the focus at that stage had then shifted -- 21 I think you said this before -- to marketing 22 opportunities by early 2000? 23 A. Yes, and I think that was entirely sensible. We had 24 reached a point where we knew, or we thought we knew, 25 that the system was acceptable, because we'd accepted 99 1 it, that it was working, because it had been rolled out, 2 and I was not getting any information either via the 3 team or via the unions or via the National Federation of 4 SubPostmasters that in general this was not working out 5 and rolling out properly and sensibly. 6 I just want to make the point, if I may, that 7 nothing was coming up to the board or to me, which was 8 saying we have problems with this. There may have been 9 issues and they may have been sorted out, maybe it's 10 training, maybe it is, I don't know, and I haven't seen 11 anything that said it was software, but whatever the 12 issues were they are obviously being sorted out because 13 that rollout was not generating, at least as far as 14 I was aware, massive protests about this isn't working, 15 or whatever. 16 So it was right that the board strategically 17 should start saying, "Fine, we've always said that the 18 purpose of this Horizon project was to get Counters to 19 a point where, first of all, they'd got more opportunity 20 to handle work for DSS", which they had, because part of 21 the deal was they wouldn't move to ACT until 2003 -- 22 sorry, yes, they wouldn't move to ACT before 2003 and 23 now we wanted to say "Well, the business knows that that 24 will be leaving -- a lot of it will leave them in 2003. 25 It's sensible now that we look at what the marketing 100 1 opportunities are" -- this was around 2000 -- "so that 2 when that happens we've started to build up a different 3 pattern of work which will then sustain the kind of 4 network that we had". 5 Q. So you'll remember from this morning that presentation 6 that you gave in the early days and the commercial 7 benefits of Horizon. Do you think the board's minds 8 then turned to those opportunities or were starting to 9 turn to those opportunities? 10 A. I think some of the opportunities, I can't remember how 11 many years back we're going, Mr Blake, but I think what 12 we said then would inevitably have been changed by the 13 marketplace. Remember when we were doing that kind of 14 presentation, we probably still thought that the whole 15 project was going to be over within the next 12 months. 16 Some of the things would have been current still, 17 banking would have been the key one in there, 18 particularly if DSS moved to Automated Credit Transfer, 19 there would be a lot of people, as we said earlier this 20 morning, who wouldn't have bank accounts and one of the 21 things we would have looked at would have been can you 22 do a simple bank account at the Post Office so that 23 those people didn't necessarily have to go into full 24 banking, they could do something different. There was 25 a lot of work, again as I said this morning, on 101 1 Government Gateway, access to government services in the 2 way that we can all now do through the internet. 3 We would also have been looking at whether there 4 were wider applications in the banking world, not just 5 a simple account, that we could actually take on, given 6 that it was a network by then, we hoped, that would be 7 an automated network and that would be much easier to 8 used than having the paper-based system that we had for 9 donkey's years. 10 Q. So marketing opportunities in that context was 11 an increase in the business? 12 A. Yes. Yes, what's the strategy for the future? If 13 you're looking, as we normally did, about five years 14 ahead, what would you want to do with this system that 15 we now thought was going to give us a real opportunity 16 to have different products in a post office and how 17 could you best use those to generate the kind of income 18 we thought we would lose in that same five-year period. 19 Q. Can we look at FUJ00118186, please. This is only a week 20 later, after that board meeting and this is the third 21 supplemental agreement with ICL Pathway. Is this 22 a document you are familiar with or were familiar with 23 at the time? 24 A. I would have seen this at the time. I can't say I've 25 been familiar with it ever since that. 102 1 Q. Presumably this is a document that would have been being 2 drafted at the time of that board meeting or in the 3 process of discussion? 4 A. It would have been the outcome after we'd said, "Right, 5 we're prepared to accept the system". 6 Q. Can we look at page 2, please. This sets out the 7 history of issues between the parties. So, for example, 8 (A) talks about the codified agreement of 28 July 1999 9 between POCL and ICL. That sets out the history. 10 (B) talks about 20 August '99, first supplemental 11 agreement, and I think that was because CSR or Core 12 System Release acceptance hadn't been achieved in time. 13 Is that something that you recall? 14 A. I can recall that one -- that that hadn't been -- one 15 thing hadn't been achieved in time and ICL were warned 16 about the fact that they would have been breaching the 17 agreement if we'd taken it that far. Is that the one -- 18 that's probably the best of my recollection. 19 Q. At (C), 24 September 1999, the second supplemental 20 agreement, CSR acceptance, would be deemed to have been 21 achieved and ICL would remedy outstanding faults. 22 Then (D) POCL had a right to postpone rollout if 23 the criteria hadn't been met. 24 (E) at least one of those criteria hadn't been 25 met. 103 1 (F) in relation to the Helpdesk, further testing 2 had been carried out. 3 (G) this third supplemental agreement addresses 4 issues of the suspension of the rollout. 5 Can we look at page 3, please. Paragraph 2.1, 6 there POCL agrees not to suspend the rollout. 7 2.2 there's some further agreement regarding the 8 Helpdesk. 9 2.3 ICL and POCL were agreeing to work together to 10 address, among other things, issues concerning 11 accounting integrity and end-to-end management of 12 reference data. Can you see that there, 2.3.2 refers to 13 "to improve the end-to-end management of Reference 14 Data"? 15 A. Yes. 16 Q. Can we go over to 5.2. Thank you very much. 5.2 is 17 an agreement to deploy software to prevent the 18 recurrence of cash account discrepancies. Is that 19 something you remember? 20 A. I haven't actually found it on the screen yet, sorry. 21 Q. I think my screen moves a little faster than everybody 22 else's, I apologise. 23 A. I've got 5.2 but I can't see where it mentions -- 24 Q. If we go down -- 25 A. That's -- sorry, I still haven't found where you're 104 1 quoting from but I understand the point that you're 2 making. 3 Q. Let's move to 5.3. 4 A. Right. 5 Q. It says: 6 "The Contractor shall from the date of this 7 Agreement until the end of the TIP Integrity Checking 8 Period make available to POCL promptly upon request 9 appropriate experts to explain to POCL the Contractor's 10 analysis of all root causes of Cash Account 11 Discrepancies and the measures which the Contractor 12 shall have implemented in order to prevent the 13 recurrence of any Cash Account Discrepancies which would 14 not have been detected by the Accounting Integrity 15 Control Release." 16 Do you understand what that says there? 17 A. No, in the sense that the detail of this is not 18 something that -- I'm sure that, at the time, I would 19 have read this document and I would have talked to 20 either Stuart Sweetman or David Miller about it. It's 21 not a document that I'm surprised is there because, 22 after we'd gone to the point where we'd accepted the 23 Horizon System, there was still to be this agreement 24 which would set out in legal terms exactly what was 25 happening from there onwards. So, in that sense, I'm 105 1 not surprised to see that there, and that picks up what 2 we were saying before, that this work had to be done and 3 this has obviously codified what the work is and set out 4 in quite considerable detail what the contractor now has 5 to do to make sure that those problems are completely 6 rectified. 7 Q. This particular bit of detail is quite important because 8 if we have a read of that very final bit it says that 9 there is going to be an accounting integrity control 10 release but ICL also have to notify the Post Office of 11 any cash account discrepancies that wouldn't have been 12 detected by the accounting integrity control release. 13 Is that something you can help us with? Is that 14 something you were aware of at the time? 15 A. I wouldn't have been involved at the time in that degree 16 of detail. I mean, these agreements obviously will have 17 been gone through legally. The precise definition of 18 what that meant, in terms of both ICL and the Post 19 Office, would not have come near me, nor should it have 20 done. I would have wanted to know that the agreement 21 had been signed. I would have wanted to know that the 22 agreement had been agreed with our lawyers. I would 23 have wanted to know whether, in fact, the agreement 24 covered those remaining issues which we knew were around 25 when we accepted the Horizon System but I would not have 106 1 got into the kind of detail that those paragraphs were 2 set out. 3 What I would have expected to be told was that the 4 people who should have looked through that did look 5 through that, got either consultancy or legal, or 6 whatever it was, backing for those words and that we 7 were being advised by the professional advisers that we 8 should accept that as a document. 9 Q. If you had been told that there were cash account 10 discrepancies which couldn't be detected by a certain 11 software release, is that something that you would have 12 been concerned about? 13 A. Yes. It goes back to the conversation we had this 14 morning. Please tell me the scale or the type of those 15 discrepancies. We had cash account discrepancies every 16 time people put in cash accounts. Some of them were 17 tiny. Some of them were errors where something had been 18 transposed from one line to another in the cash account. 19 So, yes, I would have been worried but I would also have 20 been expected -- well, to be fair, I wouldn't have 21 expected to be told. I would have expected the managing 22 director to have been told if necessary that this is 23 what the discrepancy was, this is the kind of thing that 24 this was not picking up. 25 I think the previous system was not perfect by any 107 1 means, the paper-based system. This one was expected to 2 be and, if there were issues like that, then the scale 3 and the magnitude of those issues would have been very 4 important. What I find very difficult to understand -- 5 and this may be me -- is that, if you've got a software, 6 part of the software is dealing with things like the 7 cash account, are these discrepancies which are being 8 caused by the human interface? Are they discrepancies 9 which are coming up frequently, extensively, 10 fundamentally something wrong with the software, or are 11 they discrepancies which are strange and odd things that 12 are happening? 13 That would need an IT expert to explain it to me. 14 But those are the kind of questions I would have asked 15 if, in fact, somebody was saying to me "We've got a big 16 problem with cash account discrepancies" and, to be 17 fair, it would have to be a big problem really to have 18 reached by desk. It's, again, something which was 19 within the business and I would certainly have expected, 20 if it was a big problem, for the managing director to 21 have been looking at that and seeing what needed to be 22 done. 23 Q. So this looks like a software issue rather than 24 a training issue and it leads to cash account 25 discrepancies. Have I understood you right that it 108 1 would have been the managing director who should have 2 been aware of that kind of an issue? 3 A. If these -- the line upwards, if I can put it that way, 4 is this would have come presumably to the project 5 director's attention, the POCL project director. We'd 6 said right at the beginning that the Counters' executive 7 board were the next stage in controlling the project. 8 So it would have then gone either to them or to the 9 managing director. 10 If the scale of this was of such magnitude that it 11 was going to affect the business in a big way, it would 12 doubtless have come to me. If not, I would have been 13 expecting either the project leader and/or the managing 14 director -- in other words, those within POCL 15 business -- to be handling this. 16 SIR WYN WILLIAMS: Reading that clause at least suggests to 17 me, whatever your understanding was earlier in the 18 chronology, by this stage, it's clear that it's more 19 than just training; is that fair? 20 A. Yes, I think that's fair. 21 SIR WYN WILLIAMS: Fine. 22 MR BLAKE: Given that those kinds of issues were still 23 occurring, do you think that it was appropriate for the 24 board to have moved on at that stage to marketing 25 opportunities? 109 1 A. Yes, I do. I don't think it was the role of the board 2 to run a project and I don't think you would find any 3 business -- remember, that this is an £8 billion 4 business. It has 190,000 people employed by it, of 5 which 17,000 are in sub post offices. The scale of 6 issues that the board tackles, rightly or wrongly, is at 7 a level where they've tried to work out what is the best 8 devolution so that the people best equipped to handle 9 them at the practical level are there, where the board's 10 role especially -- particularly as a public sector board 11 with all the stuff we've talking about with politicians 12 and the government, their role is to set the strategy 13 for the business and it's a big business and it was also 14 becoming an international business. So there's a whole 15 raft of things there. 16 We've seen and we've talked about the way in which 17 this project, which was very important for Counters, 18 came up to the board from time to time and there was 19 certainly a governance role for the board in being 20 appraised of what was going on. I wouldn't have 21 expected the board, or even me for most of this, to 22 really be into the kind of detail that we're talking 23 about now. 24 I would have expected there to be a proper line of 25 control, which led down to the business where the 110 1 business could then account for issues like this if they 2 were reaching a level where they came up. That, for me, 3 having been a managing director, was within the 4 business, not within the corporate centre. 5 Q. Can we look at the board minutes for 14 March 2000, 6 that's POL00021469. So these are the board minutes for 7 14 March. Can we look at page 7, please. So the first 8 mention of Horizon in these minutes is page 7, the 9 bottom left-hand corner "Commercial Development of the 10 Horizon Platform", number (i): 11 "For the past seven months all milestones had been 12 met in the rollout of Horizon. By the end of March, 13 4,000 post offices would have Horizon installed." 14 Just pausing there, that's not actually right, is 15 it, that all milestones had been met by that stage 16 because we've just seen in the third supplemental 17 agreement that there are a number of milestones along 18 the process that hadn't been met? 19 A. No, it says "For past seven months all milestones have 20 been met in the rollout of Horizon"; in other words, the 21 targets that we set for rollout have been met, ie the 22 300 a week, or whatever it was. 23 Q. So that's talking about numbers of branches? 24 A. Yes, yes. 25 Q. The next point: 111 1 "The commercial use of the platform was under 2 active consideration by the Performance and Innovation 3 Unit team looking at the future of the Post Office 4 Network." 5 The impression you get from there, and it's 6 exactly consistent with what you have already said, is 7 that the board at that stage has moved on to the 8 commercial opportunities from Horizon. 9 A. Yes, and the performance and innovation unit wasn't 10 a Post Office activity, it was a government activity. 11 So they were looking at it as well. 12 Q. That's March 2000. Can we look at POL00029222, please. 13 This is a monthly management summary of incidents from 14 ICL. It's provided to us by the Post Office, so the 15 Post Office have received it at some stage. Is it 16 a document that you personally would have received or 17 are familiar with at all? 18 A. No. 19 Q. You may not be able to help me then but I'm going to to 20 take you very briefly through this document just so that 21 you are aware of certain things that were going on at 22 ICL at that particular period. It's an incident review 23 from March 2000, so the same month as those minutes from 24 the Post Office that we've just gone to. Can we look at 25 page 13, please. So this is a "Management Summary": 112 1 "In March Pathway Management Support Unit received 2 434 incidents, as compared to 267 in February, thus 3 showing an increase of 38.48%." 4 So it seems as though the number of incidents are 5 rising during that period: 6 "The most numerous incidents were for the 7 Non-polled incident class, accounting for 245 incidents 8 received or 56.5%. This was followed by 'receipts and 9 payments' (migration) comprising 140 of all incidents 10 received ..." 11 Then the final point: 12 "Report 3.4 shows the closure status of incidents, 13 whereby in March 114 were Pathway fault 165 No Fault in 14 Pathway. Of the 165 which were No Fault in Pathway, the 15 majority of these incidents occurred due to 'receipts 16 and payments' (migration)." 17 Now, am I right in saying that level of detail was 18 not the kind of detail that would have reached you? 19 A. No, not at all. I'm not even sure how it would have 20 reached anybody else, unless Pathway were discussing it 21 with the Post Office because, just reading it, it looks 22 to me like an internal ICL report. So I must say 23 I can't help you because I don't know whether it even 24 came to the Post Office. 25 I take your point entirely that it looks as though 113 1 it did at one point, if they've provided the document. 2 But, no, it certainly would not have come anywhere near 3 me and I go back to the point I made before that, when 4 you get into this kind of detail as a report, that would 5 have gone into the business somewhere, into POCL, and 6 then what they decided to do with it would depend on 7 probably having a lot more background knowledge to that 8 note than I have. 9 Q. Would you have been aware during that period that there 10 were an increasing number of incidents? 11 A. Only if -- we're back to -- I'm not really quibbling on 12 words but we're back to what a definition of 13 an "incident" is. I don't know whether these were minor 14 incidents, whether they were major incidents. If, for 15 example, given what happened later, 434 incidents meant 16 that people couldn't balance, yes, I would have expected 17 to know about that because it's pretty fundamental. But 18 I just can't judge it from here. 19 It would have to be of a level that the managing 20 director felt that the board had to be told that this 21 was a big issue. 22 Q. Receipts and payments issues: were those seen as big 23 issues or were you aware of issues with receipts and 24 payments at that time? 25 A. I certainly wasn't aware of issues and, again, I'd have 114 1 to be told what the receipts and payments issue was. If 2 it meant money paid in to post offices, it could have 3 come for any number of customers and I mean customers 4 like DSS, the driver and vehicle licensing people the 5 Ministry of Defence even. 6 So whether it's something to do with that, it was 7 a particular product that was causing a problem, whether 8 it was a basic balancing issue, before I understood it, 9 I'd need to have a lot more definition behind it and, 10 again, the scale of it would be something that would 11 have brought it up through the organisation. 12 Q. If the scale was significant, would you have expected to 13 have been told about it? 14 A. Yes, I would, yes. 15 Q. Who would have been telling you about it? 16 A. The managing director. 17 Q. That -- 18 A. That would have come up through that chain. What 19 I didn't do, and I've had it done to me in the past and 20 didn't like it and I didn't do it myself, which is going 21 round the managing director and going in at a lower 22 level because I wanted to pick up some particular piece 23 of information. It doesn't work. I would have -- 24 normally, if there was an issue, I'd have called in the 25 managing director and said, "What's this issue?" I would 115 1 have expected him to explain it. 2 If it was a really difficult technical issue that 3 I needed to know, he would have brought with him who his 4 technical expert was and that, for me, was key to 5 management. You've got to trust the people you appoint, 6 you have to try and work with them, you'd have to try 7 and advise them when it's necessary, you have to try and 8 be tough with them when it's necessary but what you need 9 is a personal relationship there that works for the 10 company. 11 Q. Let's look at April 2000 and the Post Office board 12 minutes. That's POL00021470. Those are the minutes of 13 the Post Office Board of 3 and 4 April 2000. The chief 14 executive's report begins at the bottom of this page, 15 and can we go over the page to page 2. Horizon is 16 addressed very brief in these minutes. It says: 17 "Roll-out continued with over 4,500 offices 18 installed with the equipment. The Post Office was 19 involved with ICL in a tender to provide electronic 20 Government services -- me.gov -- in which the automated 21 Post Office network would play a leading role." 22 So again, entirely consistent with what you have 23 already said which is, the focus of the board, by that 24 point, was about the commercial opportunities that were 25 available. 116 1 A. Yes. 2 Q. In fact, the Post Office -- by that time there's 3 tendering for more work. 4 A. Yes. 5 Q. Can we look at POL00029221. Now, we're probably going 6 to come up with exactly the same issue as before because 7 this isn't a document that you saw at the time. It's 8 a document that's been highlighted by a Core 9 Participant, so I'm asking you about it but do say if 10 something is unclear to you. 11 A. Thank you. 12 Q. Can we look at page 6, please. This is a management 13 summary, the same kind of summary as we had for the 14 previous reports and this is November 2000: 15 "During November the number of incidents received 16 by MSU increased to 109 ... " 17 So again, it seems to go up and down but there 18 seemed to be an increase from October at least and it 19 says: 20 "The most frequently occurring incidents in 21 November were both types of Receipts and Payments 22 Incidents (Migration and Post Migration), with 23 31 incidents per category." 24 Can we go to page 19 of this document, please. 25 Again, this is going into some detail which you wouldn't 117 1 have seen at the time but these are the lists of 2 incidents and can you see, there is a "date received" on 3 the left-hand corner and a "class description" in the 4 fourth box and there are a number of incidents allocated 5 to each date which are described as, "Receipts and 6 Payments do not balance"; do you see that? 7 A. Yes, I do. 8 Q. Can we go over the page to page 20. So we see, for 9 example, there's one of £7,100 about halfway down the 10 page, on 10 November. The numbers continue. Can we 11 look at page 23. So we've got one for £8,167.41. At 12 page 30 -- we're actually going back in time as we go 13 along so page 30 is 19 October. The penultimate figure 14 on that page -- I think it's slightly further down -- 15 £36,042.02. 16 You've talked about numbers before and it depended 17 on how much of a Receipts and Payments not balancing was 18 occurring. Are these kinds of figures of concern to you 19 at all? 20 A. I think -- have I got it right that the heading of the 21 final right-hand column was date by which things were 22 cleared? 23 Q. Yes, that's correct. 24 A. So, a number of them, and certainly the last one that we 25 were both looking at, were cleared on the same day that 118 1 they were received; in other words that must have been 2 easy to sort out. I wouldn't be particularly worried at 3 the scale of the number £5,000 whatever it was because 4 we would have had examples of that in the non-automated 5 system and it was normally because somebody had just got 6 something relatively simple wrong. 7 More difficult to do, I accept in here, but yes, I 8 would be worried about the scale of the numbers. 9 I would be less worried if somebody had come to me with 10 this saying, "but we're sorting all these out on the 11 day". So understanding what that last column means, 12 I think is quite important in this because if it's 13 cleared on the day and it's a simple miscalculation, 14 somebody putting a number in a wrong line, because this 15 is a new system and they're getting used to it, I'd be 16 less worried. 17 If this is a fundamental problem -- I keep using 18 the word fundamental -- a big problem where the same 19 piece of software, for example, is not recording things 20 correctly, yes I would be worried about it. But, again, 21 as you said kindly at the beginning, I would not have 22 seen this and I would only have seen it, not because of 23 the scale of numbers necessarily but because of the 24 scale of problem and the problem would depend -- for me, 25 if I saw this, I'd want to know, "how was this cleared, 119 1 was this a simple thing? Was it cleared because 2 somebody suddenly realised that they'd input something 3 wrong?" So it would be all of those kind of questions 4 if somebody had actually stuck this on my desk and was 5 saying, "this is part of a big, big number that we can't 6 resolve". 7 Q. Big number cumulatively, yes? 8 A. Sorry yes cumulatively. 9 Q. Are you aware of anybody during this kind of period, so 10 late on in 2000, raising issues with you concerning 11 receipts and payments not balancing? 12 A. No, I'm not and one of the things that I would have been 13 concerned about if they had was whether we could have 14 gone on talking, as we have, about marketing the system 15 if somebody was coming to me and saying there was 16 a fundamental problem in it, because I don't see how we 17 could have gone out and attempted to get banks involved 18 or to deal with the tender for the Government activities 19 if we, the board, or even the marketing side of Post 20 Office Counters, felt that there was a glitch in the 21 system somewhere. 22 So the answer to your question is, "no" and 23 I think you can also take from the board perspective the 24 fact that if we'd felt that the system was not working 25 properly we would not have been pursuing marketing 120 1 opportunities in exactly the way that we were. 2 Q. I'm going to move on to prosecutions, and I know you 3 have said that's not your area of expertise but let's 4 see where we get to on it. 5 Are you aware that part of the contract with ICL 6 required that the system be capable of producing 7 admissible evidence for court proceedings? 8 A. No. 9 Q. During your involvement with Horizon, who was 10 responsible for prosecutions? 11 A. It would be the internal solicitor's department at the 12 Post Office. 13 Q. I think it may have been Royal Mail at one stage as 14 well? 15 A. Well, it was corporate. It was -- the solicitor's 16 function was a corporate function. So they would have 17 handled anything to do with stealing, you know, theft in 18 the mail and problems with accountancy, putting a hand 19 in a till somewhere, whether that was in a Crown Office 20 or sub post office if that happened. 21 Q. During this period that we've covered today, during all 22 of those incidents, did prosecutions play any role in 23 your thinking in your negotiations with Pathway, for 24 example? 25 A. Going right back to the beginning, one of the issues for 121 1 DSS was fraud at the counter to do with benefit payment 2 books. So that was one of the issues that they were 3 keen to see in the system that was eventually set up. 4 That was always sort of understood all the way through 5 and it was almost a sort of, you know, sine qua non, you 6 wanted a system that was as fraud-proof as you could 7 make it, whatever you ended up with. 8 So, certainly, that would have been there from 9 almost the very first set of specifications that would 10 have gone to the three tenderers right at the beginning 11 in 1994, or whenever it was. 12 Q. Did the link between issues with the system's robustness 13 and prosecutions ever take place, as far as you were 14 aware of, for example, while you were discussing -- 15 while you were negotiating, did you ever think about the 16 potential impact on prosecutions? 17 A. No, not at all and it might be worth very briefly saying 18 that -- if you worked in the Post Office for as many 19 years as I did, the one thing that you had drummed into 20 you was that you were dealing with public money and one 21 of the things that was clear to anybody who was employed 22 was that the money wasn't yours, it was government 23 money, it was taxpayers' money, or whatever. 24 The system that we had for prosecutions never came 25 near senior management, in the sense that once 122 1 a prosecution was initiated, it was normally done on the 2 basis of either the Post Office investigation department 3 had picked something up, in terms of in the mail 4 service, or that either the auditors or the local retail 5 manager had picked something up in a particular 6 suboffice. They would then decide with the auditors 7 that there was a case to answer, it wasn't some sort of 8 small change, it looked as though it was intentional. 9 That would then have gone to the internal solicitors who 10 would then have decided whether there was a prosecution. 11 So the one thing that managers didn't get involved 12 in was that sort of process. It was done by 13 a combination of the local manager -- I'm sorry, 14 I should have said "senior managers". The one thing we 15 wanted to avoid was any suggestion that we had got 16 involved in that process and, therefore, might have 17 altered the process. Once somebody found evidence, as 18 they thought, of something, that evidence was followed 19 through and then there was the decision made whether it 20 was something which really then ought to go to the 21 solicitors. 22 Quite often, in suboffices the local subpostmaster 23 would talk to the local regional manager and say "I've 24 got a deficit", or whatever -- normally deficit. He 25 would then sort it out and, more often than not, it was 123 1 sorted out and it was some local putting the figure in 2 the wrong place, let's put as simply as that. 3 If the local manager was not satisfied with that 4 or it happened twice then he'd start to wonder whether 5 that was something more than that and then that process 6 I've just described would take place. 7 Q. During the human impact hearings in this Inquiry we 8 heard, from among other people, Nichola Arch and Tracy 9 Felstead, who were being prosecuted in 2001 and 2002 10 based on Horizon shortfalls. Nichola Arch was suspended 11 some six weeks after Horizon was installed. Were you 12 aware of those kinds of actions being based on Horizon 13 shortfalls at that time? 14 A. No, not at all. 15 SIR WYN WILLIAMS: Can I ask you, not about individual cases 16 at all but there obviously must have come a point in 17 time when data in Horizon was going to be used in 18 prosecutions of people if the persons making those 19 decisions thought that justified. So what, if any, 20 discussion at senior management level or board level 21 took place about appropriate uses of Horizon data, in 22 the general sense, in prosecuting people? 23 A. I would say, Chair, none. 24 SIR WYN WILLIAMS: Right, thank you. 25 MR BLAKE: Is it right to say that, in terms of oversight by 124 1 senior management and the board over prosecutions, 2 individual prosecutions or over the broader issue, that 3 there wasn't any? 4 A. No, and I think that was right. I keep going back to 5 this. If you think that you're looking at 17,000 post 6 offices, spread over the whole of the UK and Northern 7 Ireland, if you had 10 to 12 cases in a year, they would 8 be spread over the whole of that area. We had a local 9 manager setup, regional manager setup at one stage, then 10 a local manager setup, who were the retail network 11 managers. 12 They would know the offices, they would know the 13 individuals, they would be able to judge what was 14 happening and, out of the number of transactions in 15 those offices over the case of a period of time -- 16 leaving aside for a moment things that go wrong and the 17 impact on the individuals -- ten transactions going 18 wrong, or ten cases, would have been absolutely tiny. 19 Very important for the individual, I absolutely accept 20 that but, in terms of us looking at statistics that 21 affected the running of the business, it wouldn't -- for 22 the reasons I've described before about not getting 23 involved in the process -- it would not have hit our 24 desk at all. 25 You are talking about a £1 billion business where 125 1 a number of these things would have happened. I fully 2 expected it at local manager, regional manager level to 3 be understood and to be dealt with but if you did this 4 all the time with a board then you would just do nothing 5 else. So it's looking at the degree of information at 6 whatever level. The people at regional or retail 7 manager level were capable, were, in fact, encouraged to 8 take the kind of decisions that we've just been talking 9 about. 10 As I said to the Chairman, we had no discussion, 11 I think, about the use of the data because the use of 12 the data would have been agreed lower down. It would 13 certainly have been within the business -- I don't know 14 what level in the business -- but once the system was 15 working I think it would have been assumed that people 16 would use the data in the cases like the ones we've been 17 talking about. 18 But it really is an issue of: at what point do you 19 say that these kinds of figures have to be dealt with by 20 managers at a different level, doing a different job 21 and, if it all comes up to the board, is that what the 22 board's role should be? I think that it would have 23 been -- I don't really want to say this because it was 24 after my time -- but if, in fact, we were seeing numbers 25 growing very fast, somehow or other I would have 126 1 expected -- and I suppose this is with hindsight -- 2 I would have expected to see there was some -- you know, 3 going further and further up the organisation. 4 But while there were a sort of relatively small 5 number of things like that then it needs something that 6 explodes it to really push it up higher. 7 Q. So there was a central investigations team and a central 8 prosecutions team? 9 A. Yes. 10 Q. Do you think the responsibility was on them to spot 11 those patterns? 12 A. I think it's probably the only place where all these 13 numbers would have come together but, as I said before, 14 one of the things that I guess we were probably 15 concerned about was that if you suddenly then started to 16 say, "Well, these are the numbers, that's fine", it's 17 very easy to send the wrong messages, and you start 18 sending a message saying, "Well, the numbers are too 19 high", at which point down the line that's interpreted 20 as "They want us to cut the numbers down", and if you're 21 not careful the next thing is "Oh, well, these cases 22 haven't been reported because the board is worried about 23 the numbers". 24 It's this sort of idea that you get these wrong 25 consequences from a statement like that. We would also 127 1 have not wanted to be seen to interfere in a process 2 like that, that was going through an investigation and 3 then a possible legal process. Again, the danger is you 4 say, "Well, there's a case of X, Y and Z and it's 5 Mr Bloggs". The last thing you want is then to be 6 anywhere near that case because that's got to be dealt, 7 as people here will know far better than me, on a basis 8 where there can be no suggestion that somebody senior 9 had influenced it in any way at all. 10 Q. I'm going to to move on to a few short topics before 11 I finish. The first is the NFSP and the unions. In 12 your statement, you talked about your role as managing 13 director of counter services in the 1980s and the early 14 1990s and, I think, were you involved in discussions 15 about the funding of the postmaster unions or 16 federations? 17 A. I was very much involved in pay negotiations with them 18 but not the funding of them as unions. 19 Q. Did you ever have concerns about the way in which, for 20 example, the NFSP was funded by the Post Office? 21 A. No, I don't think I did, no. I'm not even quite sure 22 when you talk about the Post Office funding the NFSP. 23 Q. I think a question that's been proposed is whether the 24 Post Office was involved in limiting their ability to 25 comment on the operation of the Post Office in some way. 128 1 Did you experience that at all? 2 A. No. I normally found that they were extremely forward 3 in wanting to criticise or comment on the Post Office 4 and, certainly, in all my negotiations with the managing 5 director, they were never backward at wanting to have 6 a go at me or the team in a very constructive way and 7 they were, in a strange way, some of the most -- I was 8 going to say "pleasant negotiations", I don't really 9 mean that. They were some of the most enjoyable 10 negotiations but they were tough. But I don't think 11 I was ever in meetings with the Federation, certainly in 12 those days, where the two or more senior people on the 13 committee were holding back on what they either wanted 14 from the Post Office or what they thought of us as 15 managers or what they thought of what was going on at 16 the time. 17 It was one of these relationships between 18 management and unions which was very good but it didn't 19 mean that one side was soft or the other side was soft. 20 They were pretty tough negotiations and this was in the 21 late '80s and early '90s, and the Federation there -- 22 and I used to go and speak at their main conference, 23 where I normally got booed -- that you went there and 24 you had the opportunity to talk not only to the main 25 Federation people but to the local committees or 129 1 whoever, and none of them would hold back in terms of 2 telling you exactly where you were doing it wrong, or 3 whatever. No, it was not something I ever thought 4 about. 5 Q. I think you said earlier in your evidence that you would 6 have expected the NFSP, or perhaps the CWU or other 7 unions, to have brought issues that subpostmasters were 8 experiencing to your attention? 9 A. I think I said that it was open to them to do that. 10 I did know them all quite well and I had a reasonable 11 amount of contact with them until I became chief 12 executive, where the contact became much more with the 13 head of the business. What I did say, and occasionally 14 happened with the CWU, not so much with the NFSP, was 15 that it was open to any of them to write to me or ring 16 me or to talk to me about something that they wanted to 17 raise. 18 More often than not, if it happened -- it was 19 normally, as I say, with the CWU -- I would bounce it 20 downwards because, of course, from the unions' point of 21 view, the more they can get in the higher up, the 22 better. I quite understand that. 23 But it was very much open to them to do that but 24 I think it was much more a contact by then with the 25 managing directors, the heads of each business, than 130 1 with me. 2 Q. Your departure: you retired in 2002. How did you pass 3 on the knowledge that you had gained during the history 4 of those Horizon discussions on your departure? 5 A. Well, it was difficult because there was a brief 6 period -- I'd announced at the annual general meeting in 7 July that I was intending to retire that year and the 8 original aim was that I would retire pretty soon after 9 the AGM. 10 The search for a new chief executive had not been 11 completed by then, so I stayed on for about another 12 five months until it had. In fact, at that time I said, 13 "Look, that's really it. I really must go, I want to 14 go". After that, it was about a month or so after I'd 15 left before, in fact, two people were then put forward 16 for -- they became, sorry, joint chief executives. 17 The answer to your question is that, at the 18 beginning of 2001, before I left, we'd recruited a new 19 managing director for POCL, who came from the banking 20 world, and that, of course, fitted with the way we'd 21 been talking about forward strategy for POCL. He would 22 have picked up from where Stuart and Paul Rich left off, 23 and David Miller, by then, I think, was the head of 24 Network. So a lot of the work briefing would have been 25 done by him. 131 1 Sadly, there wasn't much briefing done by me 2 because I wasn't there by then, but there was a fair 3 amount of history within POCL and a lot of the people 4 who had worked all the way through on Horizon were still 5 there, and I guess, and it is a guess, that the new 6 managing director would have picked it up through them 7 or through my board group colleagues, group managing 8 director, strategy, or the group managing director, 9 finance, who was still there and they would have had 10 some background in this as well. 11 Q. I'm going to ask you one quick question relating to 12 government. Can I ask for BEIS0000421, please, to be 13 brought onto the screen. This is a government document, 14 we've already looked at this particular document. Can 15 we look at paragraph 9 on page 4, please. 16 This describes a meeting that took place in 17 November 1998 between Keith Todd and Alastair Macdonald. 18 Who was Alastair Macdonald? 19 A. Alastair Macdonald was the deputy secretary in the 20 Department of Industry. So he was probably the most 21 senior official who had part of his brief for the Post 22 Office. 23 Q. Thank you. Paragraph 9, so the last part of the 24 paragraph, at the top of the page: 25 "The future of the project now lay between ICL and 132 1 POCL, but at a meeting the previous evening, John 2 Roberts had made it clear that he had been told by 3 Government that he had no authority to negotiate further 4 with ICL. Ministers should now empower John Roberts to 5 negotiate a deal." 6 Now, this takes us back in time to things we were 7 discussing a long time ago but, just to assist us, did 8 you see it as necessary for the Government to give you 9 authority to negotiate? 10 A. Yes. As far as I can tell -- I'm just reading the top 11 of paragraph 10 -- this was obviously around the time 12 that the Chairman of Fujitsu had become involved and was 13 talking to the Government, and he was talking to the 14 Government both at Number 10 level and I assume with 15 Alastair Macdonald at DTI. I did not have the authority 16 to negotiate a deal with them while that kind of meeting 17 was going on. In other words, by that stage, the 18 meetings were very much directly between the Government 19 and Mr Naruto and it was pretty clear that we had nobody 20 to deal with. 21 It's not as though I could have got hold of the 22 Keith Todd or whoever it was then and said, "Look let's 23 sort this out", because it was being sorted out by 24 ministers directly with the head of Fujitsu. So that's 25 why I had no power to negotiate. 133 1 I don't ever recall that ministers did give me the 2 power to negotiate a deal because, as we've seen from 3 the other papers, effectively, after this point -- or 4 from this point onwards -- ministers were dealing 5 directly through Number 10 with what they wanted to have 6 happen next. 7 Q. Finally, can we just look at your witness statement. 8 It's WITN03390100. Can we look at paragraph 5, at the 9 bottom of paragraph 5. 10 I think we went over this particular paragraph and 11 you emphasise there that your role as managing director 12 in the early 1990s was on resourcing and business 13 matters rather than IT; is that right? 14 A. Yes. 15 Q. Then paragraph 8. You talk there about your involvement 16 with Post Office Counters Limited between 1995 and 2001 17 and say it was mainly development of Horizon, not in any 18 technical sense, but in relation to government 19 negotiations? 20 A. Yes. 21 Q. Paragraph 25, bottom of page 13. You say at the bottom 22 there: 23 "My recollection of this period is that I was very 24 much involved the Government discussions but not in what 25 the teams might be doing as until we were clear that 134 1 Horizon would go ahead there was little point in 2 pressing them on their progress." 3 27, you say there, about halfway down: 4 "As far as I can recall, I was not ... briefed in 5 detail about what the software problems were, mainly 6 because I ... could add nothing to their possible 7 solution ..." 8 At 28, you say in the second sentence there: 9 "I did not get involved in the detail of this nor 10 [do] I offer advice on what might be done as I did not 11 have the knowledge to do so", talking about technical 12 matters. 13 Paragraph 28, at the bottom, you say, effectively: 14 "... only when the project reached its final 15 development stages later in 1999 were [you] and the 16 Board discussing specifically the last remaining 17 software issues ..." 18 That's, I think, the evidence that you gave today 19 as well. 20 A. Yes. 21 Q. Paragraph 31: 22 "For me, the issues at that moment, and throughout 23 the process which ended with acceptance of new Heads of 24 Agreement, were not the robustness of Horizon or 25 technical problems, of which some remained, but whether 135 1 the Post Office could agree ... the ministerial 2 proposal." 3 So that, again, is your focus being on the 4 politics sides that we've discussed. 5 A. Yes. 6 Q. Further on -- yes, sorry, if we stay with that 7 paragraph: 8 "The prospect of major reductions in the Post 9 Office network if Horizon was terminated [was] foremost 10 in [your] mind." 11 Looking back, do you think you were too focused on 12 driving the project through, rather than the technical 13 detail? 14 A. No. Because I didn't feel that I could add much at all 15 to the technical details. I'd been in the position, as 16 a managing director, where I'd had to deal with detail, 17 not necessarily technical detail but detail of running 18 the business. As the CEO, across whole of the 19 corporation, at home and internationally, I didn't 20 believe it was my job, even if I had been a technical 21 person, to get down to the level of detail that we've 22 talking about today. 23 The structure of the Post Office and my role, as 24 defined partly by the Chairman, partly by the 25 Government, was not about getting into the -- if I can 136 1 put it this way -- the really basic details of something 2 like that, it was about creating a situation in which 3 those people had the best opportunity to develop an IT 4 system, which we knew was going to be difficult and we 5 knew, by then, was going to take longer than we 6 expected; an IT system which had been effectively signed 7 off by the various reviews that had taken place. 8 It was important that I saw, as I did, the people 9 who led those reviews not to talk about the software but 10 to talk about was this the right direction for the 11 organisation to be going in, was this the right 12 strategy? Would we have enough money if they found 13 that, as they did, it was going to take much longer? 14 So my role, as I saw it, was almost to create the 15 situation where people could work. It was to create the 16 situation where they were not dealing with the 17 politicians or the civil servants all the time and they 18 focused on working with the technicians, whoever that 19 is, within ICL, up to and including managing director on 20 my side, managing director on their side, to do the 21 sorts of things that have been specified. 22 The moment I got down to the kind of detail that 23 we've talked a bit about, I might as well have gone back 24 to being managing director because that, in my view, was 25 the role of that person and their committee. They were 137 1 doing it -- at times, 24 hours a day. They were doing 2 it all the time. 3 I was going from this to Royal Mail issues, to 4 Parcelforce issues, to Civil Service issues, to 5 ministerial issues and it was more me then to try and 6 create with the board, and the board asking me to 7 create, a situation within which those people could then 8 deliver that project because that project in Counters 9 would have been only one of quite a number of projects 10 across the whole of the group that would have been dealt 11 with in one sense or another with those sorts of issues 12 going on. 13 A very simple example, a very quick example: a lot 14 of industrial relation problems in Liverpool with the 15 Post Office, and we had to sort out how we might handle 16 that and it involved me having quite long discussions 17 with the Minister of State at DTI. That was the sort of 18 issue that I get clawed into. If I'd been then saying 19 "Oh, right, I will go away and negotiate in Liverpool", 20 that's the equivalent, in my terms, of me saying, 21 "I will go away and talk to them about software 22 applications within counter automation". 23 That was the difference and the reason that the 24 structure was like that was to create at the top, as the 25 corporate board and those who were members of it, the 138 1 ability to set the direction for the Post Office and 2 make sure it happened; at the next level down, for those 3 people to run the business, run the businesses; and, 4 below them, the people who would do the necessary work, 5 including technical work or technical work in terms of 6 Post Office activities, to make sure that the thing 7 happened. My role, apart from the one I've just 8 described, is holding them accountable, helping them to 9 account for what they did. 10 Q. One of the things we saw at the very beginning of today, 11 in the early days of Horizon, was you asking them to 12 follow up on particular matters and that board follow up 13 was produced, and that was quite technical in some of 14 its detail. 15 A. Was it? I would say it was quite basic. A lot of it 16 was to do with problems of the electricity supply going 17 to different post offices. It didn't so much comment on 18 the technical detail because it said that those three 19 releases had actually been implemented without too much 20 trouble. 21 For me, that was a practical report around the 22 issues that Paul Rich and his team had discovered about 23 how to implement some of this in post offices. It 24 talking about the physical layout of some post offices 25 and the difficulties of getting the kit into it. It 139 1 talked about some of them where the scenes were not 2 right. It was all that sort of thing. It was 3 "technical Post Office", if I can put it that way. 4 I didn't think it was so much technical ICL. 5 Q. It was quite detailed. 6 A. It was detailed. 7 Q. It went into things like end-to-end testing, et cetera. 8 A. Yes. 9 Q. Do you think that there came a time where your attention 10 turned too much to the political side, so that you 11 didn't have enough time to focus on that kind of 12 approach? 13 A. It's very difficult to say to a politician "I haven't 14 got time to come and see you"; in other words, that they 15 were my bosses, in some ways, because they were the 16 shareholder. No, I don't think so, but if I can just 17 contrast what you've been saying about that first report 18 and then the question you've just asked, one of the 19 techniques I did like on something new like that, and it 20 was the other reason that I set up the account 21 automation steering group, was to, at an early stage, 22 probably go into more detail than any other time I would 23 because I wanted to know that it was being set up in the 24 right direction. 25 On this particular project, having the Counter 140 1 Automation Steering Group meant that I dipped into it 2 every couple of months, possibly in a bit more detail 3 than I otherwise would have done, but that was about 4 "Are you meeting there deadlines? Do we still have the 5 money? Do we have the people?" That kind of thing. 6 What I wouldn't have done is to -- I couldn't have 7 done was to say "Oh, well, I'm sorry, I need too much 8 time of the politics". That was almost out of my hands. 9 If I was asked to go and see a Minister of State or 10 senior civil servant, it's very difficult then to say, 11 "Well, I can't do that". Quite frankly, at the time 12 we've discussed, it was very, very important that I did 13 it because, as I think I described in my evidence, we 14 almost lost a year while the government was deciding how 15 it wanted to go forward and I think, at least, I might 16 have helped a bit in that or maybe hindered a bit in 17 that by trying to push hard on what the Post Office 18 wanted out of Horizon. 19 Q. Do you think that there was too much of a separation 20 between the strategic and the technical levels in the 21 Post Office? 22 A. I think that's difficult to answer. You've got to add 23 to that. Do you think that in the late 1990s there was 24 too much of a difference between the strategic and the 25 technical because, compared to now, the answer would 141 1 probably have been yes. I think my answer then would 2 have been -- it would have been difficult to make it 3 closer while so many of us had had a background that 4 wasn't technical. 5 If you started working in the 1960s, as I did, and 6 the whole of your background was in management from 1960 7 to 2000, technology hit you about 1995, and I think 8 that -- I was reading the evidence from your technical 9 adviser and I think he said he had been in the IT 10 business for 30 years. I don't know when his start 11 point was but, if you go backwards, he would have been 12 even in it for five years, if he had started in the 13 1990s. 14 Therefore, I think the ability to make that link 15 in the way you are suggesting, which probably happens 16 much more easily now, was much tougher then because you 17 would always ask yourself the question that I did -- 18 I can remember saying "The problems with IT is you're 19 not sure what questions to ask". If somebody talks to 20 me about a personnel issue or an operational issue, 21 I know what questions to ask. Therefore, you have to 22 be -- and it's an uncomfortable feeling at times -- far 23 more dependent on those who are your experts, that the 24 experts are then giving you what is correct in terms 25 that you can then understand. 142 1 Q. Thank you very much, Mr Roberts. 2 Chair we have a small number of questions from 3 some of the Core Participants. It would be good if we 4 are able to go straight to them rather than take a break 5 now if possible are you happy to do that? 6 SIR WYN WILLIAMS: I'm happy. Are you still comfortable, 7 Mr Roberts? 8 A. Yes. 9 SIR WYN WILLIAMS: I think it would be preferable for 10 Mr Roberts to complete his evidence before a break. I'm 11 reliably informed that Mr Blake wasn't underestimating 12 your questions when he confined it to a small-ish -- 13 I put-ish, but we will see where we go. 14 MR STEIN: I will turn this mic on. Do you object if 15 I remain sitting down? The reason for that is this 16 screen is quite low down. 17 SIR WYN WILLIAMS: No, no, no, please. Can I say to 18 everyone stand or sit as you prefer. 19 Questioned by MR STEIN 20 MR STEIN: As a bit of a test, as long as everybody can 21 hear, including of course Mr Roberts. 22 Good afternoon, Mr Roberts. I'm going to take you 23 to a document which you have looked at, I believe, and 24 had the opportunity to consider which is a report by 25 Mr Cipione. 143 1 A. Yes. 2 Q. The reference to that, Frankie, if you are dealing with 3 the system, is EXPG0000001. In theory, that will take 4 us to the report and, Mr Roberts, you have had the 5 opportunity, I think, of looking at this but obviously 6 you wouldn't be saying that you're an expert in this 7 report. 8 A. Absolutely. 9 Q. I'm very grateful. Can we go please to page 157 of that 10 report. Now Mr Roberts the topic that's being discussed 11 in this report at this stage is about the data server 12 tree build failure which, if I've got it right and 13 understand it, is essentially about whether 14 communication within the system is working properly? 15 A. Right. 16 Q. Okay. Now, here as we go down the page you'll see that 17 under the various headings, first of all, we've got the 18 date period that we're concerned with here which is -- 19 it's a PEAK, do you understand, Mr Roberts, what a PEAK 20 is? 21 A. I'm assuming it's when it's most used. 22 Q. Well, that's the other way of looking at it. A PEAK is 23 a problem existing within the system that's been noted 24 and the theory is it's going to be dealt with I'm sure 25 it's an acronym for something but we don't need to 144 1 bother to go into that right now? 2 A. Okay. 3 Q. This is one that's been looked at and you can see the 4 date opened 16 May 2000 then closed 14 September 2000, 5 okay? 6 A. Yes. 7 Q. Right. Now, you mentioned a number of times that at the 8 board level you wouldn't have been engaged with the 9 precise problems and errors and bugs within the system, 10 okay? 11 A. Correct. 12 Q. So I'm going to work on that basis and just go through 13 what we have here. Within this page, as we go down it, 14 you'll see that there are extracted comments roughly in 15 the middle of the page and as we go down you'll see that 16 on the third of those extracted comments there's 17 a mention saying, "This office" -- which we interpret as 18 being a branch office -- "has had big problems with its 19 receipts and payments. CAP 5, 6 and 7 did not match". 20 Now, CAP is short for Cash Accounting Period. 21 A. Right. 22 Q. Okay. So the Cash Accounting Period, Mr Roberts, you'll 23 understand and recall, going back to this time in 2000, 24 is that the branch subpostmaster or mistress had to 25 balance weekly? 145 1 A. Yes. 2 Q. This is at the time of the weekly balancing rather than 3 a rolling balance over weeks that happened later? 4 A. Okay. 5 Q. So you are with me so far? 6 A. I am. 7 Q. "This office has had big problems with its receipts and 8 payments. CAP 5, 6 and 7 did not match." 9 Then it talks about the differences and then you 10 see at CAPs 5, 6 and 7 are set out and we think these 11 are cash figures. 16284.72, 19296.15, and then going 12 down, turn it the other way round, 14,526.08? 13 A. Yes. 14 Q. So these are not small sums, you agree? 15 A. Yes. 16 Q. If you are running a post office branch this is much 17 more than the odd tuppence here and there and it's 18 causing a problem? 19 A. I'd also want to know what the turnover was at the 20 branch. 21 Q. Yes? 22 A. To understand whether that was small or not. 23 Q. Well, I don't think you're going to be saying, 24 Mr Roberts, that nevertheless this is chump change that 25 can be ignored? 146 1 A. No. no, certainly not. 2 Q. Go over the page please to page 158 and you'll see the 3 second of the entries at page 158, thank you very much 4 Frankie. You see under, "F} Response", so this is the 5 second of the entries between the tram lines in 6 grey-ish? 7 A. Yes. 8 Q. "This problem is the same as that already resolved on 9 PinICLs ..." 10 PinICLs used to be name for PEAKs, so: 11 "This problem is the same as that already resolved 12 on PinICLs", and then references to the PinICL numbers 13 that were concerned. 14 Then it goes on to say: 15 "... namely that of a DataServer not tree building 16 & populating correctly." 17 Okay? 18 A. Yes. 19 Q. So this seemed to be something of a recurring problem 20 that's been identified that they had thought, regarding 21 those earlier PinICLs, that they had fixed that's come 22 back? 23 A. Right. 24 Q. So we've got something that seems to make a difference 25 to cash balancing in relation to a branch subpostmaster 147 1 or mistress is that correct? 2 A. Yes, looks like it. 3 Q. We can't ignore the sums of money here because they seem 4 to be reasonable enough to be worried about? 5 A. Yes. 6 Q. Help us, please, understand what, from the board 7 perspective, you would think should be done with this 8 information. So, as an example, do you believe that 9 such information, that there is this problem within the 10 system, should be sent out to the subpostmasters, "Watch 11 out! There's a problem with the system in this period 12 of time, May 2000"? Do you believe that that should 13 have happened, or did happen? 14 A. I can't answer the second part of that, I don't know 15 whether it did happen or not. Whether it should happen, 16 I don't think that's for me to decide that. I think 17 that's for the head of the business to decide that. It 18 wouldn't have come to the board unless you were saying 19 that this is so fundamental that it's happening in a lot 20 of places a lot of times, then I would have expected us 21 to know about it. We would have then said to the 22 managing director, "What are you doing about it? What 23 is happening?" 24 Q. Right. So let's work out the system. The board has got 25 overall control of governance. It's setting the trend 148 1 if you like? 2 A. Yes. 3 Q. That's what you are saying you said to Mr Blake? 4 A. Yes. 5 Q. You have got a problem that we've identified, looking at 6 this data tree server building problem, that seems to 7 come up more than once, yes? It's got sums of money 8 that are worrying, particularly for a subpostmaster 9 trying to balance, yes? 10 A. Yes. 11 Q. Okay. So what's the make or break? Do you want 100 of 12 these, 200 of these that's causing a problem before 13 subpostmasters are warned, or 60? 14 A. There's got to be a judgement but the judgement has to 15 be made lower down the organisation. 16 Q. What's your judgement, 5 or 6 or 100? 17 A. My judgement doesn't matter because I don't know enough 18 about what you're saying to make that clear. If it was 19 5 or 6 I would have -- I wouldn't have seen it. If it 20 was 5 or 6 it would have gone to the managing director. 21 If it's 5 or 600 I would have expected him to be 22 reporting that to the board pretty sharpish. 23 Q. Did you think, fundamentally, that there should be 24 a system of warning subpostmasters that there are bugs 25 and errors in the system of this type? 149 1 A. Yes, there should have been. 2 Q. Was there, from the board, a direction to the managerial 3 level that there must be a system to warn subpostmasters 4 and mistresses there were problems? 5 A. No there wasn't. I wouldn't have expected the board to 6 take that decision. I wouldn't have expected a decision 7 like that to come anywhere near the board. It was 8 a business decision. They were the people who, every 9 day, were running the setup. When I was managing 10 director, I would have expected to deal with that myself 11 and, depending what it was, I might have reported I it 12 in my monthly report to the board -- or through to the 13 chief executive at the time to report to the board -- as 14 a matter of information because I'd dealt with the 15 issue. 16 I certainly agree with you, the issue, in the way 17 you described it, should have been dealt with -- should 18 be dealt with. Somebody ought to be warning people. 19 That's part of the way that you're training 20 subpostmasters. But certainly not at the level of the 21 board because if you do that, I could probably give you 22 back 50 examples of other things that people might say 23 to me, "that's a board issue" no, it's not a board 24 issue, its lower down in the business. 25 Q. Right. So your expectation is that there should have 150 1 been some system in place to warn subpostmasters and 2 mistresses, "Look, there are these problems existing at 3 this particular time"? 4 A. If the problems that we're talking about -- and I don't 5 know, because you've just shown me one -- if the problem 6 was more than that, I think it would be a perfectly 7 reasonable thing to expect that if those problems were 8 substantial, they should be -- subpostmasters should be 9 warned or they should be told that maybe they were doing 10 something wrong in the way that they were balancing. Or 11 maybe it was -- I know we talked about training issues 12 before. Maybe it was a training issue, maybe it wasn't 13 and if it wasn't then of course people should have been 14 warned. We don't just -- we shouldn't have carried on 15 with this going on if we knew there was an issue and it 16 was taking, whatever it was, three months to try and 17 resolve it. 18 Q. You've discussed with Mr Blake the question of what 19 relates to a "fundamental", was the word that was being 20 used often. 21 A. Yes. 22 Q. You have used the word "substantial" a moment ago. You 23 discussed with Mr Blake whether it's the words 24 "fundamental" or "substantial". There has to be a need 25 to evaluate whether a particular problem is big or 151 1 small? 2 A. Sure. 3 Q. So would you have expected a rule to have been in place 4 to try and govern, you know, the decision as to whether 5 it's a fundamental or substantial problem? 6 A. No, it's a judgement. 7 Q. Right. Whose judgement? 8 A. Managing director at the business' judgement. 9 Q. Managing director. At that level? 10 A. Yes, at that level or if he felt, for some reason, that 11 he couldn't make that judgment he would have pushed it 12 up the line, but I think at the same time I'd have been 13 saying, "well why can't you make that judgment? This is 14 your business." 15 Q. From the board level, again appreciating your evidence 16 about not being involved in the detail, would you have 17 expected this type of error to have been brought to the 18 attention of anybody being prosecuted if they, the 19 person being prosecuted, were saying, "I don't know 20 what's wrong. Something wrong with the system"? 21 A. I think it's the same kind of answer. The answer is yes 22 but if it was one person the answer will be no. If it 23 was 300 people, you know, I think the answer would then 24 be -- at some point, that has got to come up to the 25 board. 152 1 Q. So if one person being prosecuted raises it as 2 a difficulty with the system, that doesn't, for you, 3 merit a disclosure of such an issue as this; is that 4 correct? 5 A. Not for me as a member of the board. 6 Q. All right. Mr Roberts, I want to be fair to you. Have 7 you ever taken advice from an experienced criminal 8 solicitor or barrister in relation to the way that 9 disclosure occurs within the criminal justice system? 10 A. No. 11 MR STEIN: Thank you. 12 SIR WYN WILLIAMS: Ms Page? 13 Questioned by MS PAGE 14 MS PAGE: Mr Roberts, was opposing ACT effectively Luddite? 15 A. I wouldn't have described it like that. I would have 16 said it was a way of protecting a lot of subpostmasters 17 and a lot of sub post offices. 18 Q. If I can just ask for Mr Roberts' witness statement to 19 come up again, the reference WITN03390100, and if we 20 could go, please, to page 12, about three-quarters of 21 the way down you have a sentence which deals with ACT, 22 and you say: 23 "Later a further option of 'controlled migration 24 to ACT' by which I believe was meant a slower move to 25 ... ACT was suggested." 153 1 Suggested by whom? 2 A. I think it was suggested by the government. 3 Q. So you didn't suggest that yourself? 4 A. No, I don't think -- no, no. I think it came out of one 5 of the earlier studies or it may have been something 6 which came out of the Sir Adrian Montague study but, no, 7 it's definitely a government suggestion from one of the 8 studies that was going on around that time. 9 Q. So you took the view that ACT should just not happen, it 10 should never happen. 11 A. Yes. Not that it should never happen because we knew at 12 some point it would but, as I said earlier today, a lot 13 of this was in negotiation. Our position in the 14 negotiation, if you like to put -- if I put it that way, 15 was that we wanted to put off ACT purely from the point 16 of view of the Post Office, Post Office Counters, for as 17 long as we could, for two reasons: one was the revenue, 18 but the other reason was that, whenever we raised the 19 issue of, okay, you go to an Automated Credit Transfer 20 system, what are you going to do about those people who 21 don't have bank accounts, of which in mid-1990s there 22 are a lot more than there are now, that was one of our 23 arguments to make it a slower process than perhaps the 24 DSS had in mind. 25 We also wanted it because it would have been very 154 1 difficult to sustain the network that we had if they'd 2 moved rapidly to ACT because, in those days, there was 3 no suggestion of some kind of social subsidy for those 4 post offices that were in rural areas, or wherever. So 5 it was a combination of those things that we kept 6 pushing it back. 7 Q. Well, that's not strictly correct, is it, because 8 there's a number of documents which make it clear that 9 the Post Office did not want subsidy. That was 10 something that was discussed and mentioned at various 11 points. I can take you to them if you like. 12 A. No, I take your word for it. I'm just surprised. My 13 recollection might have been -- it might have been that 14 we wanted to try and run it commercially. But I think 15 we moved more and more over that period to a position 16 where we were saying probably the only answer, if ACT is 17 going to go ahead in the way it was -- remember ACT was 18 going to come in in 2003 -- that we were still trying to 19 work out how we would then justify some of the things we 20 wanted to spend money on without, as it were, getting 21 payment for some of the smaller sub post offices, whose 22 role was not going to feature very much in that, we knew 23 that, but would still be there to handle the basic 24 pension payments, stamps, or whatever. 25 Q. If you knew, as you say you did, that ACT was going to 155 1 come in at some point in time sure or later, leaving 2 negotiation to one side, why was the Post Office not 3 preparing for it? 4 A. Well, we were preparing for it. The whole Horizon 5 project was preparing for it, in the sense that, even if 6 we've gone ahead with the original plan, we knew at some 7 point this was going to come. It's very interesting, 8 I think, in 2022 we're almost at the end of it. It's 9 taken a very long time and, in one sense, that's 10 preserved the Post Office in the way it has. So, in one 11 sense, we knew it would happen; the issue was when. 12 One of the things that we did, at one stage, was 13 we were trying to negotiate and say, "Well, it shouldn't 14 be before, I think, 2005" because five years, in those 15 days, to try and prepare for it, in the end, it was 2003 16 when it was going to start. I don't know now whether it 17 did in 2003 but that was the deal that we did with the 18 government in the end. 19 Q. Could we perhaps bring up the next document, 20 FUJ00003599, please. This is an ICL document so, 21 obviously, not something you would have seen at the time 22 and if we could go to page 5, please, if we see there on 23 the left, it says, Sir Michael Butler, obviously a board 24 member. It describes his position, apparently as stated 25 in this meeting. 156 1 The second paragraph reads: 2 "The Government put us in a difficult position and 3 made us live a lie. They decided in January they did 4 not want to use the magnetic stripe payments card. 5 Probably we could subpoena the minutes of meetings which 6 cover this. They did not come clean about this because 7 if they had they would have to pay all the redundant 8 costs. John Bennett's team had been working 9 successfully for 4 months on a programme which they had 10 already decided they did not need at a cost of around 11 £50 [million] for the taxpayer." 12 So that's ICL putting a figure on the four months 13 of continuing to work on the payments card of 50 million 14 for the taxpayer. 15 Was your insistence on continuing with the 16 payments card option in the face of all odds a waste of 17 money, a waste of time? 18 A. Well, I'm not quite sure which year we're in. 19 Sir Michael Butler was the chairman of ICL and he was 20 an ex-diplomat. I'm not sure what point he's making. 21 We were pretty open with ICL about what we were doing 22 and what we were pressing for during this period when we 23 were trying to get a final decision out of government. 24 This idea that the government hasn't come clean, 25 I find that difficult to accept because the one thing 157 1 that was clear during the whole of this period, up to 2 the time at which we agreed with the Secretary of State 3 for Industry's proposal, was that there were lots or 4 studies going on, all the stuff that we've talked about 5 this morning, so I'm not quite sure which January we're 6 talking about. Perhaps you could help me with that? 7 Q. Certainly. We can go back to the start of the document 8 but I believe that he's talking about January '98 but 9 I'm potentially wrong about that, so it might be 10 appropriate to check. 11 A. Well, January '98 we hadn't even had the Adrian Montague 12 study, and the Adrian Montague study had been set up 13 with had panel of the Treasury. 14 Q. I'll stop you there. I've got that wrong. It's 15 January '99. These board minutes are dated 13 May '99. 16 A. Right. 17 Q. So he's talking about the four months in the run up to 18 signing the new heads of agreement. 19 A. January 1999, I still find that difficult because my 20 understanding from the minutes that we looked at this 21 morning was that the issue didn't go to 10 Downing 22 Street until February. So I find it quite hard to 23 understand that the chairman of ICL is saying it's all 24 been stitched up, before it's even gone to Number 10 25 because the responses from Number 10 then led to the 158 1 further meetings led by the Treasury and Sir Steve 2 Robson, which was the issues we talked about this 3 morning, and then led to a position where there was due 4 to be new heads of agreement but they weren't agreed 5 with everybody. So I just find that really hard to 6 understand. 7 Q. One thing that appears to have happened as a result of 8 the new heads of agreement is the government effectively 9 used the Post Office to sort of cover the 180 million 10 that ICL was insisting that they needed to recoup, in 11 terms of their sunk expenditure over the payments card; 12 is that right? 13 A. Yes. 14 Q. Would you say that the government took advantage of the 15 Post Office? 16 A. We were put in a very difficult position. The chairman 17 had made it clear that he didn't like that particular 18 deal. In fact, he felt it was not the right use of 19 shareholder funds. Dr Bain came from the private sector 20 and that was absolutely the right point to make. 21 Unfortunately, the shareholder is the government and we 22 had also got concerned that the Secretary of State could 23 direct us to do something and we then cleared with 24 lawyers that that probably wasn't going to happen. 25 We were faced with having to take a decision 159 1 within 48 hours of an ultimatum set by ICL -- ICL -- 2 Fujitsu's chairman, that he had to have a decision by 3 that time, were we going to agree to something which 4 would create new heads of agreement or not? The 5 proposal from the Secretary of State for Industry 6 Stephen Byers was very clear and it said "We are 7 prepared to do this, we're not prepared to do anything 8 else". He didn't use those words but that, effectively, 9 was what it was. 10 We as a board had to then take a view on whether, 11 for the Post Office, it was better to have not what we 12 would prefer but something which would still continue to 13 automate that network, given that that had been the 14 centre piece of our strategy for Post Office Counters 15 for quite some time, or to say we weren't going to do 16 it. 17 If we had decided to say we weren't going to do it 18 and it was a long discussion, then I think two things 19 would have happened. We'd have all been into legal 20 situations. I'm sure that ICL would have been suing for 21 the money that it believed it had lost. We were with 22 government, talking about who paid. So that was quite 23 a big issue. But the biggest one of all was getting 24 something that we could work with to actually then try 25 and continue to automate Counters. 160 1 So the answer to your question -- sorry, it's 2 a long answer -- but, basically, we were put at the end 3 of a gun and it was a yes/no choice and, in the end, we 4 said yes but I don't think we said yes with a great deal 5 of enthusiasm. 6 Q. Yes, well, we can see that as it sort of played out in 7 the formal minutes, can't we, if we look at -- 8 SIR WYN WILLIAMS: Do we need to pursue this any further? 9 I think the documents about what might be called the 10 pressures brought to bear upon each party really speak 11 for themselves. 12 MS PAGE: There's a document which perhaps put in quite 13 graphic terms. 14 SIR WYN WILLIAMS: Okay, one document then. Fine. 15 MS PAGE: If we could look at, please, FUJ000980480, at 16 page 21, and perhaps -- 17 SIR WYN WILLIAMS: This isn't a contemporaneous document? 18 MS PAGE: It's not, no. 19 SIR WYN WILLIAMS: It's Mr Smith's analysis, is it? Just so 20 I know what it is. 21 MS PAGE: It is. 22 Mr David Smith, is he someone you knew? 23 A. Yes. 24 Q. Perhaps you could tell us his position? 25 A. He was, I think, the deputy to David Miller on the 161 1 project team. 2 Q. So on the screen at the moment, as sir has just said, 3 this is not a contemporaneous document but this is his 4 recollection -- 5 A. I was given a copy at lunchtime, so I have read this 6 particular page. 7 Q. So what it says is that this is a sort of a recollection 8 of the period of time that you're talking about and it 9 says: 10 "The leaders at the POCL felt that they had been 11 shafted by a Government/Pathway stitch up 12 "Whilst the Group Board signed up to the deal 13 (Sunday afternoon in the CEO's kitchen!) 14 "They did so with a gun pointed at their head -- 15 'sign this all or the other things you want you can 16 forget' 17 "POCL felt stuffed by Pathway with terms that were 18 imposed 19 "Dave Miller, the MD of Post Office Network said 20 at the time 'I have the same feelings about Pathway as 21 I would have for the man who had just shoved 15 inches 22 of bayonet up my posterior' 23 "No statement could more adequately express the 24 attitude of Post Office towards Pathway." 25 No doubt not your words but would you agree that 162 1 that statement was one which reflected how POCL felt 2 about Pathway at that time? 3 A. I don't know how POCL felt about Pathway at that time 4 but it doesn't reflect the way the board felt about it 5 at the time. 6 Q. Do you remember the meeting in your kitchen? 7 A. I do indeed. It went on for rather a long time. 8 Q. Was POCL expressing the views that we see there in that 9 meeting? 10 A. POCL wasn't at that meeting. Stuart Sweetman was at 11 that meeting as a managing director. He was part of the 12 discussion all the way through and, with great respect 13 to Mr Smith, I don't think he would know anything 14 firsthand about the tone of that meeting, what the 15 meeting did, how long it lasted, what the colour of my 16 walls in the kitchen were, or anything else. 17 I do note that this is going to be part of a book, 18 by the look at it, and it does seem to me that the 19 language is probably appropriate to the book. I don't 20 think the language reflects -- although David Miller 21 might have done -- David Miller might well feel that 22 because he had put so much time into trying to get 23 solutions with ICL that it would have been -- I think 24 I would probably have felt the same as him. 25 But as a comment on the group board and everything 163 1 else, with great respect, again, to Mr Smith, he was 2 a long way away from the group board. He would not have 3 known any of this and particularly about whether we felt 4 there was a gun pointed at our head. We would not have 5 used language like that. It did not say "sign this or 6 all the other things you want you can forget". 7 It certainly said, as I've just described to you, 8 "You have a yes/no choice on whether you want to sign 9 this or not" and doubtless terms would have been 10 difficult afterwards. But remember too that, in his 11 response letter, the chairman of the Post Office had 12 said he was very unhappy about the way this had been 13 dealt with and he did want to have a meeting with the 14 Secretary of State soon after to sort out how all that 15 went. 16 We did have that meeting, we had it with the 17 non-executives, and you carry on with it. This was 18 a business issue. It was a government/business 19 decision. You don't take your bat home. This sounds as 20 though somebody wanted to. But I really do not feel 21 that that reflected more than maybe for a couple of days 22 the attitude of POCL. But you may find more from that 23 when you speak to either Stuart Sweetman or David 24 Miller. 25 Q. No doubt. What would you say the tone was at that 164 1 meeting -- 2 SIR WYN WILLIAMS: I think I've heard enough about the 3 politics now, Ms Page. 4 MS PAGE: Can I then ask about this: I think we've seen it 5 in another document that's already come up earlier on, 6 so I don't think we need to put the document on the 7 screen, but you referred to if the payments card was not 8 pursued, the Post Office position was effectively that 9 all bets were off. I think that was the word that you 10 used and that you -- that the documents showed us that 11 the Post Office position was that it would rather go 12 back to re-tender than continue with Horizon. 13 A. That was an option, yes. I don't think it said we would 14 do that but it was certainly an option, yes. 15 Q. Is that something that you made clear to ministers? 16 A. Yes, I think so. I mean, there was -- 17 Q. That Post Office would have preferred to re-tender 18 rather than continue without the payments card? 19 A. No, we didn't say "prefer". What we said was it was 20 an option. If, in fact, they took a decision not to 21 pursue the benefit payment card, they couldn't assume 22 that we would want to continue with the relationship 23 with ICL. We might -- we might prefer to get rid of 24 everything and start again. That was the line we took 25 and we would certainly have made that clear to the 165 1 Department of Industry. 2 Q. When you were discussing the options, and the option for 3 the payment card being the one that you were 4 predominantly trying to take forward, you used the 5 phrase earlier that you may have overplayed your hand; 6 what did you mean by that? 7 A. I don't think I used that phrase. 8 Q. Well, that was the phrase that you used, I think, when 9 you were taken to one of the documents where you were 10 dealing with this question of the payments card being 11 the one option, the one that Post Office really wanted. 12 A. I don't recall saying "overplayed our hand" this 13 morning. I may be -- I apologise if I'm wrong but 14 I don't recall saying that. 15 Q. Perhaps if I take you to one of the documents which 16 perhaps suggests that might be the case, if we could go 17 to BEIS0000421, page 7 -- 18 MR BLAKE: Chair, I don't want to rush Ms Page at all, we 19 will have to take a break at some point. I'm quite 20 eager to get on to Mr Rich as well. I don't want to 21 rush Ms Page. Can I just get an idea of how long you 22 think you will be? 23 MS PAGE: Well, perhaps 5 minutes. 24 SIR WYN WILLIAMS: Right. I'll hold you to that. 25 I should say -- and I have sympathy with all the 166 1 advocates in the room because once upon a time so was 2 I -- it's very, very easy, almost impossible to avoid, 3 picking up points that emerge in other people's 4 questioning and this isn't the idea of allowing the CPs 5 to ask their own questions. The idea is for you to have 6 your own discrete little block, all right, and I would 7 like you to stick to that, if you would, because 8 otherwise our timetable is going to get extremely 9 difficult to fulfil. 10 MS PAGE: Sir, if I may just explain, I'm actually trying to 11 do it to abbreviate my questions. 12 SIR WYN WILLIAMS: You have your five minutes, despite 13 Mr Henry's intervention, and then we will have a break. 14 MS PAGE: I don't know if that reference was picked up 15 there. 16 We are, page 7. Now, I think it's at the bottom 17 of the page. I'm sorry, perhaps if we go up again 18 because I'm not sure that I've got the right page 19 reference. I do apologise. Here we go, it's at the top 20 of the page, I do apologise. It runs over from the 21 earlier page, which was -- and so perhaps we should just 22 deal with that. 23 The paragraph 21 is dealing with: 24 "POCL's own estimates are that if they were to 25 lose all BA work 5,000 to 13,000 post offices could 167 1 close whilst with a 50% loss of BA income they estimate 2 that 5,000 to 9,000 offices could be lost -- depending 3 on the policy towards Crown offices and the rural 4 network. KPMG however believe these losses to be 5 exaggerated." 6 Was this sort of the negotiating tactic, if you 7 like? 8 A. No. I think it was the fact that, at that stage, we 9 didn't have a model which is good enough to predict more 10 accurately than that. I think there's a piece of 11 evidence later in something I've read, which said 7,000 12 and had a comment from KPMG after it saying that POCL -- 13 and this was some time on now had quite a good model of 14 trying to predict what the impact would be. 15 There were 17,000 post offices at the time. Even 16 if you took the lowest figure, that was still a major, 17 major political headache, apart from being a financial 18 headache for us. 19 Q. So just a last couple of questions, really. If we could 20 go, please, to CBO00000059 and if we just zoom in on the 21 middle of the page, it says here -- this is a document 22 that's going between government ministers, I hope you 23 have had a chance to have a look at it. It says here on 24 the third (sic) little sort of dash that, in effect, 25 there was a plan to: 168 1 "set in train a radical overhaul of POCL to 2 introduce new management, and to incentivise them to 3 maximise the returns from Horizon." 4 Was that a Government plan or a Post Office plan? 5 A. No, it was neither. That letter is from Geoff -- sorry, 6 I can't remember the surname -- who was one of the 7 special advisers in Number 10. As you can see -- Geoff 8 Mulgan. He is putting in another document to the 9 discussions that ministers are going have. I rather 10 suspect that that was his own idea for them to consider. 11 I don't think that idea got anywhere. 12 Q. Then, finally, this, please. If we could go to 13 BEIS0000123, a little further down, please, it just says 14 under the heading "Current Issues": 15 "On Board appointments, correspondence on the 16 reappointment of Richard Close", et cetera. 17 Then, finally, it says, at the end of that 18 paragraph -- sorry, it's just moved up: 19 "Decisions will be needed immediately after the 20 Summer break on the reappointment of John Roberts, Chief 21 Executive." 22 Now, this document, if we go up to the top, is 23 from -- actually the date isn't at the top but I can 24 hopefully tell you without controversy that this 25 document was from the year before the rollout, if you 169 1 like. 2 A. Yes. 3 Q. So it suggests that your reappointment was in the year 4 of rollout of the year 2000? 5 A. It could well have been. There was -- originally board 6 members were appointed for a fixed term, something like 7 three years. It moved, and I can't remember when, to 8 a one-year rolling contract and it could well be that 9 that was just the one-year rolling contract. 10 Q. Did you feel that you needed to deliver Horizon in order 11 to be reappointed? 12 A. No, no -- never came into my mind. I knew that I was 13 coming to the end. In my own mind, I'd been chief 14 executive by then for five or six years, during a pretty 15 intensive period and I'd already made it clear to the 16 board at one point that I wanted to go and -- this was 17 to the non-executive board -- and the non-executives 18 said to me "Well, we think the chairman will be going 19 next year, so you can't", roughly. So, no, there was no 20 connection between that. I mean, in a funny sort of 21 way, I find it sort of offensive if somebody suggested 22 that there was. 23 My role, until I finished -- and, remember, I had 24 been in the Post Office the whole of my career -- was to 25 try and make sure that whatever it was we were doing we 170 1 did and I did that until I finished, and I finished in 2 a year with probably the worst results we'd had for 3 a very long time but that didn't mean I gave up. 4 SIR WYN WILLIAMS: All right. I think that produces 5 a natural break, if I may say so, Mr Roberts. 6 You had about seven minutes, so somewhere between 7 Ms Page's willingness to have five and Mr Henry's 8 request for ten. 9 Thank you for your written evidence and thank you 10 for your oral evidence, Mr Roberts. We will take 11 a seven-minute break, so we can start at 4.00. 12 MR BLAKE: Thank you very much. 13 (3.54 pm) 14 (A short break) 15 (4.04 pm) 16 PAUL RICH (affirmed) 17 SIR WYN WILLIAMS: Mr Rich, I'm sorry you have had a bit of 18 a wait. I'm afraid these things inevitably happen in 19 courts or inquiries. 20 A. Yes, I understand. Thank you, sir. Okay to sit? 21 SIR WYN WILLIAMS: Yes, of course. 22 Questioned by MR BLAKE 23 MR BLAKE: Can you give your full name, please? 24 A. Paul Andrew Rich. 25 Q. Mr Rich, do you have in front of you a copy of your 171 1 witness statement? 2 A. I do. 3 Q. Can you tell the date of that witness statement? 4 A. Dated 21 September 2022. 5 Q. Is that signed by you at the end of the witness 6 statement? 7 A. Yes, it is. 8 Q. Is it true to the best of your knowledge and belief? 9 A. It's true to the best of my knowledge, belief, 10 recollection and given in good faith. 11 Q. Thank you very much. I'm going to start -- we'll be 12 about 20 minutes to half-an-hour today and we'll no 13 doubt go into tomorrow. 14 A. Okay. 15 Q. I want to start just by asking you about yourself. You 16 joined Post Office Counters Limited in 1987 in the 17 marketing department; is that right? 18 A. That is correct -- March '87. 19 Q. In 1993 you became the business head of the marketing 20 department, financial markets director? 21 A. Yes, that was courtesy title, yes. 22 Q. In 1995 you became partnership director attending the 23 Post Office Counters Limited Executive? 24 A. That's true, again a courtesy title. 25 Q. In 1996 you became a member of the Executive. So in '95 172 1 you were just attending the Executive but in '96 you 2 became a member of the Executive -- 3 A. Yes. 4 Q. -- with the title of development director? 5 A. That's right. 6 Q. What did the role of the development director involve? 7 A. At that time, from April '96, it was -- the focus of my 8 role was the Horizon project, including on behalf of 9 Post Office Counters Limited, POCL, if I may call them 10 that from now on, day-to-day sponsorship of the 11 programme delivery authority. 12 Q. What did you understand the POCL Executive to be? 13 A. POCL Executive was the management committee, really, for 14 Post Office Counters Limited. It involved -- in 15 March '97, I became a POCL company director but that 16 was -- the company was a limited company by guarantee 17 and was -- really didn't have a non-executive board or 18 anything like that. So the accounts of the Executive 19 Committee would have been headed by the POCL managing 20 director and that would have reported to the Post 21 Office, as it was then, CEO. 22 Q. Can we bring on to the screen WITN04030101, please. 23 A. Yes. 24 Q. So if we scroll down a little bit, that's the 25 announcement of your appointment as development director 173 1 and can we look at the bottom of that page. There are 2 two names there. There's RTB Dykes, and there's 3 Jonathan Evans, who were they? 4 A. Richard Dykes was the -- I think he was then the 5 managing director of Post Office Counters Limited prior 6 to Stuart Sweetman. Jonathan Evans was a colleague who 7 was the network director at that time and it's 8 clearly -- I think he has an annotation on top of that. 9 Q. Perhaps we could see -- 10 A. It's come from his office. 11 Q. Thank you. In 1997, you became a POCL company director, 12 as you've just said. Can you tell us briefly how your 13 career, in terms of job titles, et cetera, developed 14 from there? 15 A. From there on? 16 Q. Yes. 17 A. I was with -- I stayed in that development director role 18 until March 1999. At that time, there was a Post Office 19 group-wide reorganisation it was called Shaping for 20 Competitor Success, SCS, as we knew it, and a number of 21 new business units were formed at that time and I was at 22 that point appointed managing director of a new business 23 unit called customer management, which basically dealt 24 with contact centres for the three Post Office 25 businesses at the time and also a number of external 174 1 contracts, notably the TV Licensing contract for the 2 BBC, at that point. 3 So I formally took up that job, I think, in 4 March/April. There's a Post Office Board minute in 5 April '99 that minutes that managing director of one of 6 the companies within customer management. 7 I provided advice and -- given my previous 8 knowledge on a strategic level to the Post Office Board 9 when asked about the future of Horizon as an input to 10 them. I carried on with being managing director of 11 customer management until about September 2001 -- 12 August/September 2001, when I was called in by the chief 13 executive and said that three of the business units that 14 had been set up in the programme I alluded to before, 15 which would basically split up Post Office Counters 16 Limited into three separate business units, were being 17 reassembled into something that was going to be called 18 Post Office Limited, and the CEO asked me to take on, in 19 an acting capacity, the group MD role for Post Office 20 Limited, while the government recruited a new Post 21 Office Limited CEO from the financial services sector. 22 That was supposed to be for three months but took 23 longer. So that ran through until March 2002. I think 24 David Mills was appointed in April 2002. Then, after 25 that, I did couple of short-term projects for the then 175 1 chairman and the then CEO and three months later, as 2 a result of another issue, I was made deputy managing 3 director of Royal Mail, and the marketing director there 4 until I left in 2005. I left the group in 2005. 5 Q. Where did you go in 2005? 6 A. I stopped full-time work then and I was asked to set up 7 for the government a new National Health Service 8 national organisation, as an arm's length body, as its 9 Chairman. So I was a non-executive chairman of 10 something called the NHS Business Services Authority. 11 I did that for a number of years on a part-time basis 12 and, for that, I was a non-executive director of my 13 local water company South East Water. 14 Q. I want to ask about the Benefits Agency. 15 A. Yes. 16 Q. Can you tell us about your background working with the 17 Benefits Agency in the first half of the 1990s? 18 A. Yes. Well, when I became the financial markets director 19 as part of that organisation, the idea for that business 20 unit was to take on all financial service or financial 21 service-based clients and that included the Benefits 22 Agency, and it was clear that the Benefits Agency were 23 the largest client -- we called them clients -- Post 24 Office Counters Limited had, did over 30 per cent of its 25 income at that time and it was also, in retail terms, 176 1 what was called the lead transaction for the 28 million 2 customers a week who were coming through post offices at 3 that time because, with the money they got issued, they 4 then did a number of other transactions, if it was in 5 a sub post office in the private part of that sub post 6 office as well as at the post office and -- 7 So if you want me to describe the relationship 8 with Benefits Agency, at the time, coming in fresh to 9 it, it was difficult. It was fractious. 10 They had a belief that we were not value for money 11 and they had the possibility of moving towards what they 12 saw as both cheaper and less fraud-prone ways of paying 13 benefits. 14 There was a perennial and typically difficult 15 annual contract negotiation that had always been done 16 with them and, when I came in, I was surprised, given 17 some of my commercial background before the Post 18 Office -- I joined when I was 30-odd, 31 when I joined, 19 so I was in the private sector before that -- that 20 a different approach would have been needed to make this 21 a more sustainable and longer-term contract and try to 22 build some type of partnership that recognised and 23 acknowledged their wishes to move to a different payment 24 method over time. 25 Q. Were they seen as a customer or a partner? 177 1 A. They were essentially a client. We had what we called 2 a three-box model within Post Office Counters. There 3 was the business clients, for whom we operated and paid 4 us, and there were customers, who were users of the 5 service, the ones who turned up at post offices 6 nationwide. They were a client and we wanted to create 7 more of a partnership feel rather than an adversarial 8 feel, I think is the truth to be told. 9 Q. You mention in your statement a memorandum of 10 understanding. I'm going to take you to that. I think 11 you've been provided with it relatively recently, today 12 or yesterday? 13 A. Yes, it's okay, I agree, yes. 14 Q. Can we look at POL00028382, please. This is the 15 memorandum of understanding between the Benefits Agency, 16 Post Office and Social Security Agency. It's dated 17 April 1995. Can we look at the next page, please, and 18 that sets out the purpose. The purpose is -- well, it 19 says: 20 "This document summarises business and commercial 21 understanding so far reached between the parties at 22 paragraph 3 around the programme known as 'Bringing 23 Technology to Post Offices and Benefits Payments' and so 24 concerns this procurement of 'BA/POCL Automation' and 25 associated issues." 178 1 What was the relationship like at the time that 2 this memorandum of understanding was signed or agreed? 3 A. Well, just to take you back to the background, this was 4 the result of considerable work beforehand, over the 5 previous year or so, I would think, to try to come to 6 an understanding of a longer term contract. This 7 represents an eight-year type contract in outline -- as 8 an MOU not as a heads of terms at that stage -- with 9 a migration path that had various tapering floor levels 10 between the Benefits Agency and Post Office Counters, in 11 terms of guaranteed revenues, to allow a managed 12 transition. 13 But it also was the rut of a joint feasibility 14 study to see what could be done to mitigate some of the 15 fraud and cost issues that Benefits Agency were -- and 16 the result of that was an automation programme which we 17 were entering into as a joint procurement then. So this 18 was the basis by which that procurement process could 19 then be run. 20 Q. We can take that down. On the subject of PFI, can we 21 look at POL00028450. This was a document prepared for 22 the board. Can we look at page 2, paragraphs 8 and 9? 23 A. This is from 1996, is it, Mr Blake? 24 Q. Yes. That's right. Paragraphs 8 and 9 describe the PFI 25 arrangements. Perhaps we can have a read of this. 179 1 I don't need to read those out but perhaps you can tell 2 us why PFI was used and why it was seen as appropriate 3 in this case? 4 A. I think it was clear from the outset that the 5 Government, who were involved, of course, in the run-up 6 to this understanding being reached and the procurement 7 starting, wanted this to be done under a private finance 8 initiative. There were Treasury guidelines from memory 9 in the late '80s for that, and what essentially that did 10 was two things: one, it transferred the risk of the 11 design, build, develop and operate to the private sector 12 supplier and they would pay -- and two, they would put 13 out the capital outlay, rather than the procurers, and 14 then get paid as the outputs came along. 15 I think it's fair to say, in this particular case, 16 it was quite innovative in the sense of, I'm not sure 17 how many IT contracts had been done in this way before. 18 Often buildings and property have been done, where there 19 were secure cash flows coming through from leases and 20 the suchlike, but that was the way the Government wanted 21 to take it. Anyway the 140 or 150 million that 22 probably, I think I read in another document -- I can't 23 remember this but I've seen documents -- that would be 24 a capital outlay otherwise. It probably wouldn't have 25 been affordable by the Post Office at that time. 180 1 Q. We see in paragraph 8 it says: 2 "There is a requirement to demonstrate transfer of 3 risk from the public to the private sector." 4 A. Yes. 5 Q. At paragraph 33 of your witness statement you say: 6 "Crucially, it also enabled the risks of the 7 project (such as the risks of benefit fraud and the risk 8 of design, build, installation and operation of the 9 system) to be passed on to the service provider." 10 A. Yes, thank you for reminding me of that. I should have 11 added about the risk, that the DSS and the Benefits 12 Agency were insistent that the transfer of the benefit 13 fraud risk from such payments should fall to the 14 supplier. 15 Q. Did you understand that to mean that Fujitsu or Pathway 16 would be financially responsible for losses within 17 a post office branch? 18 A. No, not specifically. I hadn't thought about that. But 19 this was for fraudulent activity to do with benefit 20 encashments. 21 Q. Was that to the subpostmasters or to the Post Office 22 that that risk was being transferred away from? 23 A. What, the benefit encashment fraud? That was 24 transferred away from the Benefits Agency essentially. 25 There was, I think -- and I'm doing this from memory so 181 1 forgive me -- I think between the annual contracts there 2 was a limit between POCL and Benefits Agency of fraud 3 liability, if proven, on benefit encashments at 4 a ceiling. But this took away, from the DSS point of 5 view, I think they'd -- I subsequently found this out, 6 I don't think I knew this at the time, that their 7 business case to the Treasury assumed that, once the 8 system was up running and fully rolled out, it would 9 save them something in the region of 15 million. 10 Q. So the transfer of risk, as far as you understand it as 11 part of this project, really focused on benefit fraud 12 risk? 13 A. Yes, the DSS. Hence why it was very necessary to join 14 it up technically with the DSS's own systems that 15 authorised. 16 Q. I'm going to move to early 1996 and the project 17 evaluation board. Can you tell us what was the project 18 evaluation board? 19 A. The Project Evaluation Board was a multi-organisation 20 board that recommended, to what was then a joint 21 steering committee -- I think it was called -- made up 22 of senior ministers and officials, which supplier -- 23 after an OU procurement process had been completed -- 24 should be recommended. It did that on the basis of 25 arm's length technical, operational and 182 1 commercial/contractual teams that were, again, 2 multi-organisation and the reason they were 3 multi-organisational, of course, because the Benefits 4 Agency and DSS and the Post Office were jointly 5 procuring. 6 Q. Can we look at POL00028275, please. This is a document 7 that's very hard to read? 8 A. It is very hard to read. I used a magnifying glass but 9 it didn't help much. 10 Q. Can you tell us, in broad terms, what the value 11 assessment model was? 12 A. Only in the very broadest of terms because it was not 13 something I was intimately involved with or participated 14 in, myself. The value assessment model was, I believe, 15 a generic procurement model that broke down various 16 technical contract and assessment issues in order to 17 take an objective and -- weighted and scored after due 18 consideration, evaluation of each bidder or supplier 19 that was there. 20 It was generic but customised to the extent of 21 what was relevant to the procurement and the 22 specification of service requirements that would have 23 gone into the invitations to tender and the processes 24 that led up to those invitation to tender. 25 Q. Just returning to the Project Evaluation Board, which 183 1 organisations sat on that board? 2 A. It was chaired by a Post Office Counters Executive 3 Committee member, at the time the resources director, 4 but it also included people from Post Office Counters, 5 people from DSS and the Benefits Agency. 6 Q. The chairman was Bob Peaple, I think? 7 A. Yes, I was working to Bob at the time when I was 8 a partnership development director. 9 Q. Thank you. We can take that document down. 10 Can you take us through the respective roles of 11 the assessment team, the board and the stakeholder 12 organisations? 13 A. Can I just clarify which board, please? 14 Q. So the Project Evaluation Board. 15 A. Thank you. So the assessment teams would have been, as 16 I said, working independently under one -- actually, it 17 was under one director, for the purposes of that, who 18 came from the DSS, and he had quite extensive IT 19 knowledge. He went on to be I think a Cabinet IT Office 20 head. 21 Q. Can you remember his name at all? 22 A. Andrew Stott. 23 Q. Thank you. 24 A. So he would have been -- it's a lengthy and quite 25 exhaustive process and I think it was fundamental -- as 184 1 the National Audit Office report said, I think it was 2 fundamentally a sound process. It was done with care, 3 diligence, et cetera, with no hint of impropriety. 4 That assessment included various stages where 5 risks were identified and addressed, be they of either 6 a contractual nature, a technical nature or something 7 about the financing of the companies or consortiums, as 8 some of them were, to make sure that they were robust. 9 They would have called on a number of experts. 10 Once that all was assembled, and it took some time to 11 assemble, with various iterations going on between the 12 suppliers to clarify matters and things, then the 13 evaluation team would have reported to the Evaluation 14 Board. 15 Q. The assessment team? 16 A. Sorry, the assessment team -- thank you -- the 17 assessment team would have reported to the project 18 evaluation board what the outcome of those evaluations 19 were, including if any hurdles were remaining or were to 20 be overcome still, because we wouldn't have accepted 21 something if a hurdle was still there, and what the 22 risks were with each supplier. 23 Therefore, the Project Evaluation Board would have 24 ultimately and did ultimately decide what its 25 recommendation to the joint steering committee within 185 1 government and, within the joint steering committee, 2 I assume that would have taken account to DSS and 3 Treasury clearances but also reported up to the Post 4 Office Board for purposes of its Finance Committee and, 5 ultimately, you showed me a document with the Post 6 Office Board, because it was a major contract, which 7 would have itself included a number of financial 8 strategic and technical concurrencies to go with it. 9 So alongside the evaluation team, the Post Office 10 Group IT people were allowed access to the suppliers to 11 question them and make sure that they thought it was 12 acceptable. 13 Q. Can you tell us which boards or committees within Post 14 Office or Post Office Counters Limited would have needed 15 to approve the recommendations? 16 A. Yes, it would have gone -- within Post Office Counters 17 Limited there was the equivalent of the Major Projects 18 Expenditure Committee at the board level. So there was 19 something called ComPEC, which -- and that would have 20 cleared it and that would have given some financial 21 scrutiny, you know, from our FD and an investment 22 appraisal team and looking at the alternatives and 23 options, and ensuring that the models that had been 24 used, for example, were validated by external experts, 25 such as Coopers & Lybrand, or the financial parental 186 1 guarantee-type issues were cleared by people like 2 Charterhouse that have done that. 3 Once it had recommended it with the managing 4 director of Counters' blessing and support, that would 5 have then gone to MaPEC, the Major Projects Expenditure 6 Committee and then, ultimately, to the board to 7 sanction, because of the scale of the investment and the 8 strategic importance of it, to go ahead. 9 So that's the Post Office line. 10 Q. So there are three levels of scrutiny. 11 A. So there is scrutiny there and, indeed, as you 12 mentioned, Bob Peaple earlier on, he would have been the 13 person presenting the report both to ComPEC and to MaPEC 14 with, I think, Stuart Sweetman had taken over from 15 Richard Dykes by then as the managing director. 16 Q. Thank you. We don't have very long. I'm just getting 17 the very basics out of the way -- 18 A. One last point remember, though, that was one mandate 19 within the Post Office and there was this other mandate 20 from the project evaluation board, which went to the 21 joint steering committee within government, as 22 I mentioned earlier on. 23 Q. What about the embryonic programme delivery authority? 24 A. Yes, the embryonic programme delivery authority was, 25 again, a multi-organisation thing and it grew out of the 187 1 evaluation team, the assessment team, sorry, that had 2 been multi-organisational and we thought it was 3 necessary to have Benefits Agency and Post Office people 4 working closely together, given that we'd agreed to 5 prioritise the benefit encashment service as the first 6 one because, clearly, they were setting the business 7 rules and testing the end-to-end security with their own 8 systems, which were in a bit of state of flux -- but we 9 might come back to that later on -- at that stage. 10 It then reported in principle project terms to 11 a programme steering committee made up post contract 12 approval of the chief executives of the Benefits Agency, 13 the MD of POCL and the chief executive of ICL. 14 MR BLAKE: Thank you very much. Sir, I see the time. We 15 have been through the very basics it will get a bit more 16 exciting tomorrow, I hope? 17 A. I can hardly wait. 18 SIR WYN WILLIAMS: That's quite a good word upon which to 19 end: excitement. 20 All right. 10.00 tomorrow, Mr Blake? 21 MR BLAKE: Yes, please. The usual warnings for Mr Rich. 22 SIR WYN WILLIAMS: I'm sure you understand you are not 23 supposed to chat about your evidence to anyone. I can't 24 think of any reason why you would. 25 A. I have been advised fully about that. 188 1 SIR WYN WILLIAMS: Fine. Thanks very much. 2 (4.33 pm) 3 (Adjourned until 10.00 am the following day) 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 I N D E X 189 1 ANTHONY JOHN ROBERTS (affirmed) ..................1 2 Questioned by MR BLAKE ...........................1 3 Questioned by MR STEIN .........................143 4 Questioned by MS PAGE ..........................153 5 PAUL RICH (affirmed) ...........................171 6 Questioned by MR BLAKE .........................171 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 190