The Department for Business and Trade has proposed giving the public corporation significant funding to deliver ongoing tech upgrade work this year in support of eventual migration from Fujitsu platform
The government has sought advice from competition regulators on a proposed £100m-plus subsidy for the Post Office to support the replacement for the troubled Horizon IT system.
The Department for Business and Trade, which is the parent agency of the Post Office, recently asked the Subsidy Advice Unit of the Competition and Markets Authority to compile a report on government’s proposed 2025/26 funding for the public corporation’s Future Technology Portfolio (FTP).
That report – which assesses the subsidy plans and rationale and provides government with “non-binding advice” – has now been published, outlining that the DBT is intending to hand the Post Office £136m to support delivery of FTP in the 2025/26 year.
“DBT is proposing to award POL (Post Office Limited) a grant of £136m, to allow POL to ensure that the current IT system remains functional and continue to develop the longer-term transition away from Horizon,” the report says. “The subsidy will enable POL to enact the first year of the FTP for financial year 2025/26, and will facilitate further activities in subsequent financial years as part of following phases of the FTP.”
SAU’s evaluation of the funding packages include four defined stages, covering assessment of: policy objectives; incentives for subsidy recipients; possible distortive impacts; and a concluding balancing exercise.
The regulatory unit found that the DBT’s proposal clearly sets out the policy objective for the proposed subsidy, and also proves that the department “has considered other ways of achieving its policy objective and explains why the subsidy was the most appropriate option”.
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The SAU also finds that, while the department largely “clearly describes what would be likely to happen if this particular subsidy was not awarded… [its] assessment could be improved by more fully exploring and evidencing the range of potential scenarios” that could unfold.
The report adds that “in our view, the assessment should provide more reasoning to demonstrate that the subsidy [of £136m] is the minimum level necessary to achieve the policy objectives”.
The CMA team further encourages government to “consider more rigorously the impact that IT upgrades will have on POL’s ability to compete, compared to the [alternative], in both the short- and long-term”.
The end of the report states: “In conclusion, DBT acknowledges that the subsidy may lead to possible negative impacts and distortion of the market within the UK but has determined that the benefits of achieving this subsidy’s policy objective, enabling POL to maintain its status quo service provision and subsequently ensuring the continuation of SPEI (Services of Public Economic Interest)… and the equity of access to services, outweighs the potential negative impacts. In our view, the assessment clearly sets out the positive effects of the subsidy in relation to the policy objectives, but it could more clearly set out how all of the benefits included as part of the balancing exercise relate to the specific policy objective.”
Having been implemented in 1999 by supplier Fujitsu, faults with the Horizon system led to almost 1,000 sub-postmasters being wrongfully prosecuted for fraud or false accounting in what is widely regarded as the biggest miscarriage of justice in British legal history. Interest in the scandal grew following the broadcast last year of a major TV dramatisation – since when governments in Westminster and Holyrood have expedited programmes and legislation to effect mass exonerations and financially compensate those wrongfully convicted as a result of the defective technology platform.
Over the past 26 years, the value of the Post Office’s engagement with Fujitsu has risen from about £1bn to almost £3bn, as of the latest extension – a one-year engagement that runs until March 2026 and is valued at about £75m.
