The Post Office inquiry is finally exposing the part politicians played in the Horizon scandal | Sam Fowles

If the Horizon inquiry has one consistent theme, it’s ignorance. Alan Cook (managing director, 2006-2010) wasn’t even aware that the Post Office oversaw prosecutions of subpostmasters, he told the inquiry last week. Sir Michael Hodgkinson (chair, 2003-2007) knew nothing of the problems with Horizon (and seems to have done nothing to find out). David Smith (managing director, 2010) believed his junior colleagues when they told him Horizon was “robust”.

That Post Office leaders would be so clueless may strain credulity. Almost every senior witness, however, has told the inquiry (in one way or another) that they didn’t pay proper attention to the Horizon scandal because they were focused on making a profit. Before we put this down to greedy businessmen being greedy, it might be worth actually listening to one of the victims of the scandal: Alan Bates. Since being catapulted to household-name status by the eponymous ITV programme, Bates has offered some of the most nuanced and insightful analysis of the scandal. Last week, giving his own evidence to the inquiry, Bates argued that the Post Office itself is institutionally flawed.

Politicians have been keen to foist the blame on to Post Office executives. Thus far they’ve done enough to avoid questions about whether political decisions played a role in the scandal. As the revelations at the inquiry show, however, it’s now time those questions were asked.

The modern-day Post Office emerged from the 1980s and 90s mania for privatisation. Policymakers saw the market as a panacea rather than a tool. They pushed to introduce the “private sector” into every facet of the state. In the case of the Post Office, this created a public/private hybrid, combining the disadvantages of both and the advantages of neither.

The Post Office is essentially a public utility. It’s supposed to provide mail and government services to communities (it now offers some financial services as well). This requires offering services where there is no market incentive to do so (such as in remote or low-use areas). Yet politicians decided the Post Office should be run as a business (despite being wholly owned by the government). This meant, as Hodgkinson appeared to agree with the inquiry counsel Julian Blake, the “overall theme” of his chairmanship was “reducing costs, increasing profitability”. It was, however, only able to do so with repeated bailouts from the taxpayer (£3bn in 2006, more than £1bn in 2010, £640m in 2015 and, recently, up to £1bn to cover the cost of compensation for the Horizon scandal). The Post Office still closed hundreds of branches, and the rest of the Royal Mail Group was sold off in 2011 at a loss of around £2.2bn.

Simultaneously, the Post Office had the privileges of a public body but none of the accountability. According to Lord Arbuthnot: “The government is refusing to take the responsibilities that go with ownership … 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.” The attorney general has the power to regulate private prosecutions. It seems unlikely that a responsible attorney general would allow a purely private entity to bring hundreds of private prosecutions (as the Post Office did) without at least making an inquiry.

The result was a quagmire of perverse incentives. Ministers needed the public to believe that their stewardship of prized national assets was successful. Post Office leaders needed to make a profit. It didn’t seem to matter whether the Post Office was actually working well for its users or employees. The origins of the Horizon scandal appear to lie in decisions to prioritise PR over people. Subpostmasters were prosecuted seemingly because the Post Office couldn’t admit that Horizon, its flagship IT project, didn’t work very well. As we heard last week, Ed Davey’s meeting with Alan Bates seems to have been treated as a PR exercise. Davey was advised to accept the meeting to avoid bad press (from a forthcoming Channel 4 documentary) but briefed to avoid committing to any real action.

From this angle, the Post Office worked exactly as it was designed to work. Bosses were incentivised to make profits ahead of all else. So, by their own admission, they focused on this task and ploughed on with the prosecutions of subpostmasters. Ministers, whether invested in the decision to run the Post Office as a business, keen to see through the full privatisation of Royal Mail, or just believing that a state-owned company would always be transparent with government, didn’t ask too many questions. As Smith told the inquiry, “institutional bias” prevented proper investigations of Horizon. What else could be expected when the institution had nothing to gain?

Over the next month witnesses to the inquiry will include former Post Office boss Paula Vennells, Davey, Vince Cable and a host of senior executives from Royal Mail and the Post Office. The inquiry’s lawyers will (and must) ask each of these individuals tough questions about their own knowledge and decisions, and compare it with the statements they initially made to the public, courts or parliament. But, beyond the inquiry, we need to think more deeply about why the Horizon scandal was allowed to happen. Politicians of all stripes now flirt with pushing other public services, including the NHS, further into the same no man’s land between the public and private sectors occupied by the Post Office. When they do so, we need to know that those in charge of cherished national institutions are incentivised to run them well, not simply for profit or good PR.