The government would not have accepted faulty accounting software Horizon being phased out, a former Post Office chief executive told the inquiry into the wrongful prosecution of sub-postmasters.

The inquiry seeks to find out who knew what and when about the accounting computer programme that falsely generated financial losses at Post Office branches across the UK and led to the conviction of hundreds of sub-postmasters who ran branches for theft and false accounting.

As a result of Horizon’s errors, many other sub-postmasters lost homes, moved out of their communities, and became unwell having wracked up significant debts and had their reputations ruined.

‘Loosing £1m a day’

But it was the state of Post Office’s finances in the early to mid-2000s that was the focus for the company and government who owned it, former chief executive David Mills told the inquiry on Tuesday.

When he took on the job in 2002, “Post Office Limited was insolvent. It was a crisis”, he said.

“It didn’t take me very long to realise that we had a burning ship. It was losing £1m every single day it operated”.

As a result of the financial situation, there was no way Horizon would be phased out, despite it “not being fit for purpose”, Mr Mills said.

“It would have been a massive write-off for the government, just a huge hit on the bottom line of a company that was already insolvent.

“It was pretty obvious that Horizon was not going to be written off, nor was it going to be closed down. No one would have accepted that in government or indeed in the wider surroundings,” he added.

‘More focus on solvency than prosecutions’

Issues with Horizon were already being raised with shortfalls at the time.

The Post Office, however, “certainly had more focus on solvency than it did on prosecutions”, Mr Mills said.

“It took me at least six months to really understand what was going on… I didn’t have any briefing whatsoever about it. I had no papers, no people telling me what was going on. I had to try and discover all these things myself,” he said.

“Even the building security team was not expecting me. On my first day I arrived to an empty open plan office”.

By the time he exited in 2005, Mr Mills had received more than £2m in pay and bonuses.

It would be another 10 years before prosecutions based on Horizon data would end and another 14 before an apology came for sub-postmaster victims.

In the circumstances, the numbers could hardly look much better.

A year or two ago, the conventional wisdom was that America was facing a terrific recession.

Instead, according to the latest data from the International Monetary Fund, the US has outperformed pretty much every other major economy in the world (including China).

In its latest World Economic Outlook report – the most closely-watched set of international forecasts – it upgraded the US more than nearly every other major economy.

From a European perspective, there is much to be jealous of about America’s recent performance (most European nations, including the UK, saw the IMF downgrade their growth forecasts).

Yet here’s the puzzle. Despite this comparatively strong economy, despite having seen a lower peak in inflation than most European nations (especially the UK), American consumer confidence remains in the doldrums.

It’s not just Europeans who find this perplexing. So too does the White House.

They pumped cash into the manufacturing sector at the very moment it needed it, via a series of expensive programmes including the CHIPS Act (to bring semiconductor manufacturing back home) and the Inflation Reduction Act (to encourage green technology firms to set up factories in the US).

The idea was that from the depths of the pandemic, America would “build back better” – that Biden would emulate Franklin D Roosevelt and his New Deal of the 1930s.

And most conventional statistics suggest that strategy is bearing fruit. Manufacturing employment is rising; factories are being constructed at the fastest rate in modern history. And gross domestic product – the most comprehensive measure of output – is rising. Unlike in the UK or Germany, there was no recession.

So why, then, is consumer confidence so weak? Why are Biden’s approval ratings – the key polling benchmark for the US leader – lower than pretty much any of his predecessors at this stage in their terms?

Travel around Pennsylvania, as we have done over the past few days, and you encounter all sorts of explanations.

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It’s the inflation, stupid

Food banks are getting busier; and while some businesses are beginning to see that federal money trickling down, many of the programmes are still at the approval stage. The money hasn’t arrived yet.

But, above all else, you hear one recurrent answer: it’s the cost of living. It’s food prices, it’s gas prices, it’s rents.

And there’s also a big gap here between life through an economic prism and the life lived on Main Street in places like Bethlehem PA – an old steel town trying to reinvigorate its economy.

Talk to an economist and they’ll remind you that inflation – the rate at which prices are changing over the past year – is finally beginning to drop. But while this is statistically true, it misses a couple of pragmatic realities.

First, prices aren’t going down; they’re just rising a bit less quickly than they were before. The squeeze hasn’t gone away.

Second, while economists often fixate on the change in the consumer price index over the past year (3.5% in March), what the rest of the population notices is the change in prices over a longer period.

Over the past two years prices are up around 9%. Over three years, they’re up 18%.

In other words, the explanation for the “vibecesssion”, as economists have christened it (there’s no formal recession but the vibes feel bad), might actually be exceptionally simple: It’s the inflation, stupid.

In Pennsylvania, perhaps the most critical of all the swing states in the US, the question is whether Donald Trump can capitalise on this disaffection to win over the citizens who abandoned him last time around.

In the meantime, the Biden White House is biding its time, hoping that those New Deal economic textbooks they followed when pumping cash into the economy are really to be trusted.

The UK economy is going to grow less than expected this year – with the International Monetary Fund warning the country will remain the second worst performer in the G7.

Newly revised forecasts indicate the UK’s gross domestic product will expand by just 0.5% in 2024 – a slight downgrade from previous estimates in January – compared with global growth of 3.2%.

However, UK GDP is tipped to increase by 1.5% in 2025 – making it the third-best performer among G7 nations – as households recover following a prolonged cost of living crisis.

According to the IMF, inflation in the British economy will remain at about 2.5% for the rest of this year but fall towards the Bank of England’s target of 2% next year.

Follow latest: Financial markets take Middle East escalation in their stride

When looked at per head – with output split across the UK’s population – GDP flatlines, with no growth at all for 2024 and 1.1% in 2025.

This metric gives a better sense of living standards and how the economy feels for individuals by adjusting for the UK’s growing population with record legal immigration flows.

According to the IMF, the global economy has been “remarkably resilient” over the past two years – but the escalating conflict in the Middle East could push up food and energy prices around the world.

Pierre-Olivier Gourinchas, the IMF’s director of research, said: “Yet, despite many gloomy predictions, the world avoided a recession, the banking system proved largely resilient, and major emerging market economies did not suffer sudden stops.”

The IMF believes lower-income countries would be harder hit if food, energy and transport prices rose.

While negative risks include a slow recovery of China’s troubled property sector, economists believe the outlook could be improved if elections being held around the world lead to tax cuts and a short-term boost to activity.

Overall, global output is expected to grow by 3.2% this year – an 0.1 percentage point rise from its previous report in January.

Both the Conservative government and Labour opposition have staked their successes on a growing economy.

Prime Minister Rishi Sunak made economic growth one of his five key priorities at the start of 2023 – but the UK entered a recession late last year.

Labour is hoping more growth will allow for greater tax takes and generate money to fund increased public service spending.

It has adopted the same rules on borrowing as the Tories and said it will not grow debt.

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A HM Treasury spokesperson said: “The forecast for growth in the medium term is optimistic, but like all our peers, the UK’s growth in the short term has been impacted by higher interest rates, with Germany, France and Italy all experiencing larger downgrades than the UK.

“Today’s report shows we are winning the battle against high inflation, with the IMF forecasting that it will fall much faster than previously expected.

“With inflation falling, wages rising, and the economy turning a corner, we have been able to lower taxes for 29 million people, as part of our plan to reward work and grow the economy.”