Kemi Badenoch has said former Post Office chair Henry Staunton was being investigated over bullying allegations before his dismissal – as she accused him of seeking “revenge” against the government.

The business secretary told the Commons that allegations regarding Mr Staunton’s conduct, including “serious matters such as bullying”, were being examined and concerns had also been raised about his “willingness to co-operate” with the formal investigation.

Speaking in the Commons, Ms Badenoch said: “Mr Staunton claimed that I told him that someone’s got to take the rap for the Horizon scandal and that was the reason for his dismissal,” she said. “That was not the reason at all.

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“I dismissed him because there were serious concerns about his behaviour as chair, including those raised from other directors on the board.

“My department found significant governance issues, for example, with the recruitment of a new senior independence director to the Post Office board.”

But shortly after Ms Badenoch made her statement, a spokesperson for Mr Staunton released a fresh statement hitting back at the “astonishing” claims, saying it was the “first time the existence of such allegations have been mentioned”.

“Mr Staunton is not aware of any aspect of his conduct which could give rise to such allegations,” they added.

“They were certainly not raised by the secretary of state at any stage and certainly not during the conversation which led to Mr Staunton’s dismissal. Such behaviour would in any case be totally out of character.”

The heated exchange came after Mr Staunton, who was dismissed from his post last month, claimed in an interview with The Sunday Times that he was told to delay pay-outs to sub-postmasters ahead of the next general election due to concerns about costs.

Speaking in the Commons, Ms Badenoch said the claim was “completely false” and accused Mr Staunton of seeking “revenge” after he was sacked.

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‘Pretty obvious to everyone’

Mr Staunton stood by his claims about stalled compensation this evening and earlier told Sky News it “pretty obvious what was really going on” following the government denials.

Mr Staunton said there was “no real movement” on the payouts until after the airing of the ITV drama Mr Bates Vs The Post Office earlier this year.

He added: “It was in the interests of the business, as well as being fair for the postmasters, that there was faster progress on exoneration and that compensation was more generous, but we didn’t see any real movement until after the Mr Bates programme.

“I think it is pretty obvious to everyone what was really going on.”

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But Ms Badenoch told MPs this afternoon there was “no evidence whatsoever that this is true”.

“For Henry Staunton to suggest otherwise, for whatever personal motives, is a disgrace and it risks damaging confidence in the compensation schemes that ministers and civil servants are working so hard to deliver,” she said.

“I would hope that most people reading the interview in yesterday’s Sunday Times would see it for what it was: a blatant attempt to seek revenge following dismissal.”

As the war of words between the pair ramped up, opposition parties demanded the government release all documents relating to Mr Staunton’s sacking to provide clarity on the allegations.

In his interview with The Sunday Times, Mr Staunton claimed that when he was sacked Ms Badenoch had told him “someone’s got to take the rap” for the Post Office scandal – and that he was offered no apology for learning about his dismissal from Sky News.

A readout of a call between the pair, seen by Sky News, shows that Ms Badenoch did apologise, but only for the call being at short notice.

‘Truly shocking’

As well as denying the claims, the business department also published a letter sent to Mr Staunton after his appointment which said one of his priorities should be to resolve historic litigation issues relating to the Horizon software.

However, Labour described the allegations were “truly shocking” and said there were “clear discrepancies” in the accounts of Mr Staunton’s short time as chairman.

Mr Staunton became chairman of the Post Office in December 2022, but he was ousted last month as the government reeled from the backlash of its handling of the Horizon scandal.

This saw hundreds of sub-postmasters prosecuted because of discrepancies in the Horizon IT system between 1999 and 2015, in what has been called the biggest miscarriage of justice in UK history.

The airing of Mr Bates Vs The Post Office last month led to widespread outrage and promises from the government to introduce a new law to exonerate all victims and speed up the compensation process.

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Appearing opposite Ms Badenoch in the Commons, shadow business secretary Jonathan Reynolds said the revelations in The Sunday Times “could not be more serious”.

He singled out the claim that the Post Office was “instructed to deliberately go slow on compensation payments” to wrongly convicted sub-postmasters to save the government money ahead of an election.

He added it would be a “further outrageous insult to a scandal that has already rocked faith in the fairness of the British state”, if true.

Mr Staunton claimed he received the direction from a senior figure in Whitehall, but a spokesman for the government said on Sunday it “utterly” rejected the claim and said Mr Staunton was given “concrete objectives” to focus on reaching settlements.