Former postal minister Pat McFadden and Lib Dem leader Ed Davey appear before Horizon inquiry
The former postal minister Pat McFadden has arrived at Aldwych House to give evidence to the inquiry into the Post Office Horizon IT scandal.
McFadden, a Labour MP, was the minister in charge of postal affairs between July 2007 and June 2009. He ran Labour’s recent election campaign and is a member of Keir Starmer’s government as chancellor of the duchy of Lancaster.
The Liberal Democrats leader Ed Davey, who was postal affairs minister between 2010 and 2012, is also due to give evidence later. They are among politicians who have had responsibility for the Post Office in the past and face questioning this month.
All three main political parties face questions over what they knew about the scandal, which gained fresh prominence after a powerful ITV drama, Mr Bates vs the Post Office, documented the fight for justice waged by Sir Alan Bates.
You can watch it live here:
McFadden told the BBC earlier this year that he wished he had asked more questions about Horizon. He said:
Each time an MP raised a question about this, the reply would come back from the Post Office that they thought the system was robust, they had no evidence to suggest there was anything wrong with Horizon.
But even in 2009 there were warning signs. Computer Weekly published its first article about convicted Post Office operatives in May that year, and Bates formed his Justice for Subpostmasters Alliance a few months later.
More than 700 post office operators were wrongly prosecuted by the Post Office and handed criminal convictions between 1999 and 2015 because the Japanese firm Fujitsu’s faulty Horizon IT system made it look as though money was missing at their branches.
Key events
The former postal affairs minister told the Horizon IT inquiry he was first made aware in February 2009 that the Post Office was prosecuting subpostmasters for alleged shortfalls at their branches.
Pat McFadden said an email from a Computer Weekly journalist asking for comment on allegations made by subpostmasters was the first time he was made aware of complaints about the manner in which the Post Office conducted its investigations.
In his witness statement, McFadden said:
As far as I can tell from the documents this was the first time I was made aware that the Post Office was prosecuting its subpostmasters in respect of these shortfalls.
It was also the first time I became aware that there were complaints regarding the Post Office’s investigation of the issues.
McFadden said a handover note given to him when he took on the postal affairs minister role in mid-2007 “did not mention anything” in relation to subpostmasters’ complaints about the Horizon system.
In his witness statement, the Labour MP said:
The note did not mention anything in relation to any issues subpostmasters and subpostmistresses were having with the Horizon IT system, and I did not receive any oral briefing upon appointment to the department in relation to any such issues.
Horizon was mentioned in briefings and statements when I was first appointed only as an investment in the future of the Post Office.
I did not at the time of appointment know of complaints made by subpostmasters about the system, or any Post Office Limited or Royal Mail Group investigations into such matters, or any prosecutions by Royal Mail for fraud, theft or false accounting.
My knowledge of Horizon matters did not materially change or develop until early 2009.
Also in his witness statement to the inquiry, McFadden said he does not recall officials telling him that “they thought a miscarriage of justice was under way”.
He told the probe he believed that he was not told of it because the Post Office’s responses to queries about the system were that it was robust.
I have no evidence or reason to believe that the officials in the department were receiving any information different to that set out in the replies from the Post Office.
Ministers are reliant on the information they get from officials.
At no point do I recall officials saying to me that they did not believe these replies or that they thought a miscarriage of justice was under way.
I expect this was because they were being told the same thing by the Post Office, as was set out in the replies.
McFadden also told the Horizon IT inquiry “of course I wish I had done more” to question the Post Office over its Horizon IT system.
In his witness statement, the Labour MP and Cabinet minister said:
Rereading this correspondence now, and knowing the injustice done to so many subpostmasters, of course I wish I had done more to ask the Post Office if they were really sure their IT system was as robust as they suggested.
Yet if I had done so, I suspect they would have continued to insist that it was not to blame for these accounting errors and they would have continued to use the court judgments as proof points.
That was what they said in all the replies at the time in very strong terms and was the position they maintained for years afterwards.
It was only through pursuing appeals and litigation through the courts that the truth emerged and convictions were overturned as unsafe.
It is only now, 14 years on from my time in office, that parliament has taken the unprecedented step of legislating to overturn the remaining cases which have not been otherwise dealt with through the courts.
McFadden says IT flaws resulted in ‘many innocent people being convicted’ but minsters can’t overturn court verdicts
In his witness statement to the Horizon inquiry, cabinet minister Pat McFadden said flaws in the Post Office’s IT system resulted in “many innocent people being convicted” but added that ministers “do not intervene in court judgments and cannot overturn court verdicts,” PA reported.
He said:
At the root of all this was the Post Office’s insistence that its IT system was robust and not to blame for accounting errors and their willingness to bring prosecutions through the courts over many years.
This resulted in many innocent people being convicted or being held liable for debts they did not owe in the civil courts.
Ministers do not intervene in court judgments and cannot overturn court verdicts.
The separation of powers between the legislature and the judicial system is valued by all governments.
McFadden says he didn’t discuss Horizon with secretary of state
Jasper Jolly
Cabinet minister Pat McFadden has said that he did not discuss allegations about the Horizon IT system with the secretary of state during his time in the business department during the last Labour government.
McFadden served as junior minister in the Cabinet Office and the business department under first John Hutton and then Peter Mandelson from 2007 until 2009. He said that his main focus for Post Office issues was on a plan to close 2,500 out of 14,000 branches. He said:
It was quite hot politically, that programme.
On Horizon, McFadden was asked by counsel to the inquiry, Sam Stevens:
To the best of your recollection, did you have a conversation with the secretary of state at any point regarding the allegations made by sub postmasters as to the integrity of the Horizon IT system?
McFadden responded:
I don’t believe so.
Pat McFadden said that in his first 15 months in the job as as postal affairs minister the focus was on closing 2,500 Post Office branches, taking the total to 11,500.
The Post Office was run as an arm’s length body, the inquiry heard.
Former postal minister Pat McFadden and Lib Dem leader Ed Davey appear before Horizon inquiry
The former postal minister Pat McFadden has arrived at Aldwych House to give evidence to the inquiry into the Post Office Horizon IT scandal.
McFadden, a Labour MP, was the minister in charge of postal affairs between July 2007 and June 2009. He ran Labour’s recent election campaign and is a member of Keir Starmer’s government as chancellor of the duchy of Lancaster.
The Liberal Democrats leader Ed Davey, who was postal affairs minister between 2010 and 2012, is also due to give evidence later. They are among politicians who have had responsibility for the Post Office in the past and face questioning this month.
All three main political parties face questions over what they knew about the scandal, which gained fresh prominence after a powerful ITV drama, Mr Bates vs the Post Office, documented the fight for justice waged by Sir Alan Bates.
You can watch it live here:
McFadden told the BBC earlier this year that he wished he had asked more questions about Horizon. He said:
Each time an MP raised a question about this, the reply would come back from the Post Office that they thought the system was robust, they had no evidence to suggest there was anything wrong with Horizon.
But even in 2009 there were warning signs. Computer Weekly published its first article about convicted Post Office operatives in May that year, and Bates formed his Justice for Subpostmasters Alliance a few months later.
More than 700 post office operators were wrongly prosecuted by the Post Office and handed criminal convictions between 1999 and 2015 because the Japanese firm Fujitsu’s faulty Horizon IT system made it look as though money was missing at their branches.
Here is our full story on the labour market figures
UK wage growth slowed in May to the lowest level in two years amid a cooling jobs market, underscoring the challenge for the Bank of England as policymakers decide whether to cut interest rates.
Figures from the Office for National Statistics (ONS) show annual pay growth eased from 5.9% in the three months to April to 5.7% in the three months to May, matching City economists’ predictions.
Unemployment was unchanged from 4.4% in April, while the number of job vacancies fell by 30,000, led by dwindling demand in retail and hospitality amid a continued slowdown in hiring across the economy.
After a sharp fall in headline inflation over recent months, real wage growth taking into account the rising cost of living has strengthened. Total real pay – including bonuses – rose by 3% on the year in the three months to May. Growth was last higher in the three months to August 2021, when it was 4.5%.
Meanwhile, Sanjay Raja, chief UK economist at Deutsche Bank, said the cooling labour market keeps an August rate cut in play.
After a sticky services CPI [consumer prices index] print, today’s data paints a more encouraging picture of the labour market. Wage growth is receding and vacancies continue to drop. The economic activity rate also picked up – for the first time in four months. And redundancies remain slightly elevated.
For the Bank of England, today’s wage data should validate its projections on private sector regular pay (they project Q2 data to slow to 5.1% ). And there are clear signs in today’s labour market report of a cooling jobs market – vacancies are down, the single month unemployment rate is up, participation is up, and the claimant count rate also ticked higher. All up, while it was ALWAYS going to be a close call, today’s data should keep an August rate cut on the table.
Viraj Patel, global macro strategist at Vanda Research, is also not ruling out a Bank of England rate reduction in August.
⚠️ UK headline jobs in line but that’s stale data from May. Unofficial payrolls data for June shows softest wage growth since Covid (from 6% to 3.6%!). Yes this will get revised. But a sign of base effects coming. Jobless claims high again for Jun. Not ruling out Aug BoE cut $GBP pic.twitter.com/5mdTtN9NMb
— Viraj Patel (@VPatelFX) July 18, 2024
Resolution Foundation: Wage growth ‘still too hot to handle for Bank of England’
Luke Bartholomew, deputy chief economist at the investment firm abrdn, said:
There were no nasty surprises for the Bank of England in today’s labour market report, with wage growth continuing to slow in line with expectations. Household spending should continue to be supported by wages growing well in excess of inflation.
But the double edge to this sword is that wage growth is still well above a level that the Bank would consider consistent with its 2% inflation target. So policy makers need confidence that wage growth will slow further before embarking on rate cuts. Given the mixed data recently, if the BoE does plan on cutting in August – which we still just about expect – then the market may benefit from some guidance to this effect from key Bank decision makers very soon.
The Resolution Foundation, a think tank, also said that wage growth is “still too hot to handle for the Bank of England”.
Despite cooling labour market, some economists say September rate cut more likely than August
Even though wage growth is cooling, some economists believe the Bank of England’s first rate cut is more likely to come in September rather than August.
Ashley Webb, UK economist at the consultancy Capital Economics, said the slowdown in the jobs market probably wasn’t enough to offset strength in services inflation.
As a result, we have changed our forecast for the timing of the first interest rate cut from 5.25% from August to September, although it is a close call.
But we think the cumulative effect of weak GDP growth last year and some improvement in supply this year will mean that services inflation falls from 5.7% in June to 3.5% in early 2025 and wage growth slows to 3% by the end of next year. That’s why we still expect rates to fall to 3% by the end of 2025 instead of 4% as investors expect.
Rob Wood, chief UK economist at Pantheon Macroeconomics, is also expecting a rate cut in September rather than August.
Rate setters will breathe a sigh of relief after today’s labour market data, which leaves open the option to cut in August despite hot CPI services inflation. Rate setters will be encouraged by softer private sector pay growth in May, suggesting only small upside risks to their forecast for Q2 pay growth.
We think an August rate cut is a very close call. The MPC could easily dismiss yesterday’s stronger-than-expected CPI services reading as volatile, just as they did in June, note slowing wage growth, and plough on with a rate cut in August. But we think services inflation is just too hot for the MPC to go ahead in August, and instead expect them to wait until September to reduce interest rates.
Looking ahead pay growth should slow as that boost from the minimum wage fades and pay deals in the second half of the year are set in the context of sub-3% inflation.
Introduction: UK wage growth slows; global chip stocks fall amid growing tensions between US, China and Taiwan
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The UK job market has continued to cool, with wage growth slowing to a two-year low while the unemployment rate remained at 4.4%, according to the latest official labour market figures.
Average earnings growth slowed to 5.7% between March and May from 5.9% in the three months to April, said the Office for National Statistics. Both regular wages, and earnings including bonuses, grew at an annual rate of 5.7%.
Regular wage growth was last lower than this in the three months to August 2022, while total wage growth was last lower in the three months to January.
The figures are closely watched by the Bank of England, which next meets on 1 August. Following higher-than-expected inflation yesterday, financial markets scaled back expectations of a rate cut at that meeting, putting the probability at 35%. This has just risen to 40% after the labour market data.
In the public sector, wage growth remained strong at 6.4% for the third consecutive period while in the private sector, it was 5.6%.
The finance and business services sector saw the largest annual regular growth rate at 6.7%; while the construction sector saw the smallest rate at 3%, the same as the previous three-month period.
Liz McKeown, the ONS director of economic statistics, said:
We continue to see overall some signs of a cooling in the labour market, with the growth in the number of employees on the payroll weakening over the medium term and unemployment gradually increasing.
Earnings growth in cash terms, while remaining relatively strong, is showing signs of slowing again. However, with inflation falling, in real terms it is at its highest rate in over two and a half years.
Annual growth in real terms – adjusted for inflation – for regular pay was 2.5% in March to May, and for total pay was 2.2%.
The UK’s unemployment rate stayed at 4.4% in the three months to May. The number of job vacancies fell by 30,000, led by dwindling demand in retail and hospitality amid a continued slowdown in hiring across the economy.
We’ve published the latest UK labour market figures.
Headline indicators for the UK labour market for March to May 2024 show:
– employment was 74.4%
– unemployment was 4.4%
– economic inactivity was 22.1%Read Labour market overview ➡️ https://t.co/MdXZmfY8cb pic.twitter.com/gjSFyoyNgv
— Office for National Statistics (ONS) (@ONS) July 18, 2024
Global chip stocks tumbled, with the Dutch company ASML, US firm Nvidia and Taiwan’s TSMC hit by reports of tighter export restrictions from the US and remarks from Donald Trump.
Bloomberg reported yesterday that the Biden administration is considering using the most severe trade restrictions available to clamp down on companies exporting their critical chipmaking equipment to China.
Washington’s foreign direct product rule (FDPR) allows the US to put controls on foreign-made products if they use a small amount of American technology. This can affect non-US companies.
Trump, the former US president who is running for the presidency again, said Taiwan should pay the US for defence, in an interview with Bloomberg Businessweek. He also claimed Taiwan took “about 100%” of America’s semiconductor business.
ASML shares tumbled by 11% despite better-than-expected sales and profits, with 49% of its sales coming from China. Tokyo Electron shares in Japan closed 8.8% lower and TSMC dropped by 2.4%. The Cambridge-based chipmaker Arm closed down by 10%, along with US firms AMD and Marvell, while Qualcomm and Broadcom fell by around 8% and Nvidia lost 6.6% on Wall Street. This drove the tech-heavy Nasdaq lower by 2.77%, while the S&P 500 lost 1.4%.
The Agenda
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1.15pm BST: European Central Bank interest rate decision
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1.30pm BST: US Initial jobless claims for week of 13 July
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1.45pm BST: ECB press conference
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3.15pm BST: ECB president Christine Lagarde speech
