The Post Office is looking into the possibility of creating a “losses pool”, funded by branch owner-operators, as it seeks to address the mounting financial issue of shortfalls in its network of 11,500 outlets.
Following damning high court judgments in 2019, which ultimately resulted in hundreds of postmasters being exonerated over wrongful prosecutions for shortfalls linked to faulty Horizon software, the Post Office pursues losses only if there is an agreement with the branch owner-operator.
This has led to the Post Office having to write off increasingly large amounts of money in its own accounts. Alisdair Cameron, the former finance director at the Post Office, has told the inquiry into the Horizon IT scandal that losses are at least £1m a month.
The Post Office aims to start recovering these losses through more direct action, exploring a number of options including a return to the court system for the civil recovery of losses, which it stopped in 2018.
Other options include planned deductions from branch operator remuneration over an agreed period of time, another practice it used to implement.
The inquiry heard last week that another option being explored was setting up “some form of ‘losses pool’ to which all postmasters contributed and from which repayments would be made”.
This option was noted in a paper of a meeting of the strategic executive group, the highest level leadership team at the Post Office, in July.
“That was something suggested by one of our legal team,” Melanie Park, the central operations director at the Post Office, told the hearing on Wednesday.
“This is something [the losses] where we need to look at all options. If we had a budget for losses, and that budget wasn’t achieved in any one year – however much we were short – the benefit we created from not spending all that money on losses would go back to postmasters.”
Sam Stevens, counsel to the public inquiry, suggested that the “losses pool” seemed designed to make the post office operators make up for losses or discrepancies at branches.
“That is not my understanding,” said Park, who said branch operators could ultimately end up benefiting if the losses being footed by the Post Office could be cut.
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“[It might] encourage postmasters to run operationally robust branches and seek support for discrepancies when they first saw them,” she said. “And as a result of that the cost in our profit and loss account would be less, which would ultimately mean we would be able to give more remuneration to all our postmasters.”
Park said she could not say for certain whether the “losses pool” option was still under discussion, because she had not attended a working group for the “last month or so”, but added: “This will form part of the working group looking at the options and alternatives we have [for cutting shortfall write-offs].”
Owen Woodley, the interim chief executive at the Post Office, has said that any action to recover established losses from postmasters would have to be handled only after obtaining “wide endorsement”, given the IT scandal and because that Horizon data would be needed to prove shortfalls.
“In my opinion, and I know this has been looked at, we need to make sure we have external expert assurance with that data given where we have been,” Park told the inquiry. “My opinion is how we review and support discrepancies with subpostmasters now is not the same as in the past, which was awful. That external assurance would help everyone.”