Post Office Paid £600M to Keep Flawed Horizon System Despite Decade-Old Decision to Replace It

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Post Office Paid £600M to Maintain Discredited Horizon System—Here’s What Went Wrong

The Post Office has spent over £600 million in public funds to maintain the error-prone Horizon IT system, despite deciding to replace it more than ten years ago, a BBC investigation has revealed. The original 1999 deal with Fujitsu, the Japanese tech giant, has trapped the Post Office, preventing it from building a replacement and contributing to one of the UK’s biggest miscarriages of justice.

The deal, originally valued at £548 million, stipulated that the Post Office would not own the source code for the core part of the Horizon system. This key detail, agreed upon under pressure from the Labour government led by then-Prime Minister Tony Blair, left the Post Office reliant on Fujitsu’s assurances that the system was functioning correctly.

Internal documents show Blair and then-Chancellor Gordon Brown were warned about potential problems with the terms of the deal before it was signed.

The Post Office “apologizes unreservedly to victims of the Horizon IT scandal,” according to a statement, adding that it’s committed to moving away from Fujitsu and the Horizon software.

Without ownership of the code, the Post Office was unable to independently inspect the transaction-processing part of the software. Instead, it relied on Fujitsu’s word while prosecuting roughly 700 sub-postmasters between 1999 and 2015 for theft, fraud, and false accounting based on Horizon-reported cash shortfalls. These convictions were later overturned by Parliament.

Business Minister Baroness Jones of Whitchurch recently stated that the Post Office is “unfortunately, still dependent on the Horizon system.” She added that cutting Fujitsu out of the picture immediately would mean shutting down local post offices entirely.

An initial attempt to replace Horizon with a system built by IBM failed in 2016, costing £40 million, leading the Post Office to extend its contract with Fujitsu by at least four years for £107 million.

The Post Office says it finally obtained rights related to the Horizon software and code in 2023, though it’s unclear whether this includes the core system that processes transactions.

IT expert Jason Coyne, one of the first to identify flaws in the system, called the £10 million price for the license “cheap – because who else would buy it?” He slammed the original decision to rely on Horizon without owning the code as “utter madness.”

“Fujitsu were fighting the whole time to protect their investment and their intellectual property, rather than looking after the interests of the sub-postmasters,” said procurement specialist Ian Makgill.

The BBC understands that the Post Office may try to use this newly acquired license for Horizon’s replacement. However, IT experts believe the Post Office’s contract with Fujitsu will need to be extended beyond its current end date of March 2026 while the replacement system is being built.

Sir Tony Blair’s spokesperson did not address specific questions about his knowledge of the IPR issues but stated that he “took very seriously the issues raised about the Horizon contract” at the time.

“The final decision was taken after an investigation by an independent panel recommended it was viable. It is now clear that the Horizon product was seriously flawed, leading to tragic and completely unacceptable consequences, and Mr Blair has deep sympathy with all those affected.”

A spokesperson for Gordon Brown said he “would not have been shown the memo” from 20 May 1999 and he would have been copied in as a “formality.” He was not involved in work related to the Horizon contract.

Since 1999, the Post Office has spent £2.5 billion on contracts with Fujitsu, including the £600 million spent on extensions since 2012, when it began seeking new suppliers, according to data firm Tussell and the BBC.

Fujitsu declined to answer specific questions but said it was “focused on supporting the Post Office in their plans for a new service delivery model” so branches can continue to operate.

“They didn’t have to take those prosecutions, they didn’t have to take people to court,” Makgill said. He asserted the Post Office bears the “ultimate responsibility” for the fate of wrongly accused sub-postmasters.

Despite the overturned convictions, many sub-postmasters continue to report issues with the Horizon system. A 2024 YouGov survey commissioned by the Post Office Inquiry found that seven in ten sub-postmasters had experienced an “unexplained discrepancy” on the system since January 2020.

The Department of Business and Trade said it was providing £136 million over the next five years to the Future Technology Portfolio, and was “working at pace” to ensure the Post Office had the technology it needed, including replacing the Horizon system.