Senior executives at the Post Office suggested that “lots and lots of cash lying around in unexpected places” might have meant sub-postmasters were led “into temptation”, rather than accept IT failings, an official inquiry has heard.

The inquiry into faulty Horizon IT software at the Post Office, and the associated prosecution of hundreds of sub-postmasters for theft and false accounting, heard evidence from former North East Hampshire MP Lord Arbuthnot on Wednesday.

He was a champion of victims in the late 2000s and 2010s and appeared in the ITV drama Mr Bates vs The Post Office, which reinvigorated interest in the scandal’s miscarriages of justice.

As well as those who were wrongly prosecuted many more wracked up significant debts, lost their homes, were ostracised from their communities and suffered ill health, while some left the country.

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Rather than accept the IT system’s failings, senior officials within the Post Office told Lord Arbuthnot that sub-postmasters were led “into temptation”, he told the inquiry.

“Alice Perkins [former Post Office chair] and Paula Vennells [former chief executive] had both raised the problem of there being lots and lots of cash lying around in unexpected places,” Lord Arbuthnot said.

“I do not know whether that point – which Alice Perkins made strongly – affected her approach towards the honesty or otherwise of sub-postmasters,” the peer added in his witness statement to the inquiry.

Minutes recorded of what Ms Vennells said during a meeting with MPs in 2012 read: “It appears that some sub-postmasters have been borrowing money from the Post Office account/till in the same way they might do in a retail business, but this is not how the Post Office works.

“Post Office cash is public money and the Post Office must recover it if any goes missing.”

Unsafe convictions

As early as March 2013 Lord Arbuthnot said he told the Post Office that its convictions of sub-postmasters could be unsafe as evidence of flaws within Horizon had been unearthed by forensic accountants Second Sight, who were hired by the organisation to investigate allegations.

Lord Arbuthnot felt this evidence undermined convictions and showed there was a risk the Post Office wasn’t doing its duty to disclose any evidence that might undermine its prosecution case or help sub-postmaster defendants.

Second Sight found Fujitsu – the company behind the Horizon system – could access Post Office accounts remotely.

Lord Arbuthnot told the inquiry: “If Fujitsu or the Post Office can manipulate a sub-postmaster’s account without the post business knowing about it, then how can you prosecute that sub-postmaster for something which could not be provably down to the postmaster?”

He added this fact alone undermined the “standard of proof required in a criminal trial”.

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‘Profoundly wrong’

Sub-postmaster victims of the faulty software were told they were the only ones having problems with Horizon – something Lord Arbuthnot found “profoundly wrong” and intimidating, as he was aware of several cases.

“There was something at the back of my mind which continued to trouble me, which was these people who were being told, ‘you are the only person this is happening to’.

“And that struck me as being profoundly wrong, because first – it was obviously disprovable. They were not the only people it was happening to.

“Second, it was isolating those sub-postmasters and sub-postmistresses so they could not get support from others in the same position.

“And third, it had an element of intimidation about it, all of which set the Post Office and its way of operating with its sub-postmasters in a bad light.”

‘Government refusing to take responsibility’

The whole nature of the government’s hands-off approach to the Post Office, which it entirely owns, came in for criticism from Lord Arbuthnot as the inquiry heard of the numerous government ministers he contacted about the injustices.

“What this arm’s length arrangement essentially means is the government is refusing to take the responsibilities that go with ownership,” he said.

“If you have an organisation that is as important to the community as the Post Office is, then the people have got to be able to have proper control over it.”

Lord Arbuthnot also accused the Post Office of “stringing MPs along” in a “behind-the-scenes deception process” to cover up issues with the Horizon system.

He said the organisation grew increasingly defensive in 2013 after the investigation by Second Sight.

The peer said: “They knew there was a large number of bugs in the system that they hadn’t told MPs about.

“That’s what I know now, but I didn’t know that then.”

The peer also told the inquiry he was not satisfied with the “brush-off” response he received from Ms Vennells after he raised concerns over sub-postmaster complaints about the Horizon system.

During her time as managing director, Ms Vennells defended the Horizon system when it was queried by the former MP, describing it as “robust”.

In a statement this week after the inquiry resumed, Paula Vennells said: “I continue to support and focus on cooperating with the inquiry and expect to be giving evidence in the coming months.

“I am truly sorry for the devastation caused to the sub-postmasters and their families, whose lives were torn apart by being wrongly accused and wrongly prosecuted as a result of the Horizon system.

“I now intend to continue to focus on assisting the inquiry and will not make any further public comment until it has concluded.”