Credit: Robhullandemu/CC BY-SA 3.0     Image has been cropped

The government has created a £19.5m funding package through which to compensate more than 500 victims who fought to expose the Post Office Horizon IT scandal – with further money to be made available in due course.

After a lengthy legal battle, a collective litigation exercise brought by 555 postmasters was settled in 2019 when the Post Office agreed to pay out almost £60m in damages. However, more than three quarters of this was swallowed up by the legal fees of Therium – a company which specialises in providing funding for litigation.

This meant that, although the settlement agreed with the Post Office equated to about £100,000 a head, the successful litigants have each received only about £20,000. Moreover, their participation in the legal action meant they were excluded from a separate compensation programme – dubbed the Historical Shortfall Scheme – set up by the Post Office.

Ministers first announced in March the intention to create a dedicated government-backed compensation mechanism for the 555 postmasters. The £19.5m announced this week is an “interim compensation package… [that] will provide support while this scheme is finalised”. In addition to a compensatory payment, claimants will also be apply to reclaim “reasonable legal fees”.

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The interim support programme – which equates to additional compensation of £35,000 a head – will be administered on behalf of the government by Freeths, the law firm that represented the postmasters in their litigation against the Post Office.

Postal Affairs minister Paul Scully said: “These postmasters and their families have shown immense courage in the face of terrible circumstances. I hope this initial step provides some comfort to these pioneering postmasters while reaffirming our commitment to ensuring they receive their fair share in compensation.”

The Horizon IT system, developed by Fujitsu and implemented by the Post Office in 1999, caused accounting discrepancies that led to thousands of sub-postmasters – who run local Post Office branches as franchises – being wrongly accused of losing or stealing money. In 900 cases prosecutions were brought, with many people ordered to pay back thousands of pounds, and others sent to prison.

Beyond the 555 that launched the legal action, there are about a further 2,400 victims of the scandal that are eligible for compensation through the Historical Shortfall Scheme. Government claimed that about two thirds of these have received an offer via the scheme, with minister Scully setting a target of completing the offer process by the end of this year.