Time may be up for Post Office Ltd

This publication http://www.rugbyadvertiser.co.uk/news/local-news/long-lawford-post-office-will-close-next-month-despite-battle-to-save-it-1-7178828 sums up the crisis that Post Office Ltd now face.

The COOP do not make decisions like this easily and without a good business case.   There are hundreds more similar examples even from Martin McColls who boast of having 600 Post Office outlets.  McColls have recently placed many of these on the market and not surprisingly they remain unsold.   Registered users of the business sales agency Christie’s web site get to see the recent financial performance of these outlets and it is clear that the strategy of combining high turnover newsagents and/or convenience stores is not the magic potion that POL promised NT would deliver.

The Newsagency business has been in decline for years as has the Post Office business.   What NT has now delivered is a 50% reduction in Post Office income to the retailer on top of the natural decline.   These CNT and Post Office outlets are now practically unsaleable to anybody but fools with money to burn.   NT promised to make the network sustainable and now it can be seen it has had the opposite effect.   POL continue to hide the true numbers but with over 1000 outlets on their own website for sale and hundreds more on other internet sites for sale it can be seen that not many people want to take on a post office these days and a significant number of those who already have one want to get rid of it.

There will come a time when the Post Office business sales market collapses completely and shrewd investors will see opportunity.   That opportunity could well be the footfall that the Post Office brings to the business but without the hassle of owning one.   For example purchase a Convenience Store with a Post Office except don’t take the Post Office on but rather invest in a franchise that provides Mailing services to the customers that previously used the Post Office.   These customers will be provided with a cheaper service for sure and not have to wait in line because the customer in front is being fed the hard sale for POL financial products (the same hard sell he got the week before)

Royal Mail Group may well consider such a mailing franchise as a replacement for dwindling numbers of Post Office outlets.  They certainly cannot afford to take the risk of the network collapsing inwards to its optimum commercial size as has often been mooted and indeed threatened by none other than POL themselves when applying for EU State Aid approval.  That optimum size will now surely be well below the 3600 they previously forecast.  Probably closer to 2000.  RMG will also have to consider the fact that if they don’t enter the direct franchise market then someone else will and that will be outside of their control.

An RMG franchise would offer the retailer the opportunity to provide Mail services to their customers at a significant premium to what POL pays.   No hassle from having to provide any underpaid financial services such as banking and more importantly not having to deal with the arrogance of POL management.   In my model the Retailer would purchase Postage credits from RMG (online) on a sale or return basis up front (quite a significant permanent cash flow advantage to RMG) The retailer would be part of a local hub of RMG outlets, and RMG would appoint one of them to act as an area supervisor for standards etc letting at least one retailer in the group earn more.   There would be very little management structure above that required and only a small team to supervise the Franchise structure as well as a help desk of course.   RMG could expand the network as they required and in doing so (with adequate demographic protection for the franchisee built in) would make them more attractive to the growth industry that is Click and Collect.

The key advantage though over all else that it would be a franchise that was sought after and when that happens you not only get a massive increase in customer satisfaction but you get a sustainable network which from a government perspective is in Private hands without the need for a subsidy.  There would also of course be the hidden advantage that politicians who to this day still think the Post Office is part of Royal Mail will not have to change their minds.

From the retailer’s perspective the risk reward factor is significantly reduced.   The high risk of armed robbery is reduced as their would be no additional cash held on the premises from banking and pensions etc.

In my opinion – there are greater minds than I considering this very option – that this proposal is no longer a possibility it is more likely a probability.

Are Post Office Ltd Guilty of Fraud by their own admission?

In a startling admission, Post Office Ltd yesterday revealed, in a response to a Freedom of Information Act request (https://www.whatdotheyknow.com/request/304062/response/757684/attach/html/4/Tony%20Williams%20FOIA%20Response%2021%2001%2016.pdf.html) that they were aware of bugs and errors in the Horizon system but declined the request to list these.

The FOI request was put like this:

Fujitsu have stated that they will be releasing a system upgrade to
the Horizon system, used in Post Offices, in March 2016 which will
include fixes to a list of known bugs in the system.

Could you please provide me with a list of the bugs/errors that
they are currently aware of and intend to fix as of 23/11/2015.

Post Office Ltd replied :

I confirm that Post Office does hold the information you have requested.

Let me be clear here – the question was about bugs and errors nothing at all to do with this explanation from POL:

…. updates for the Horizon system are released on a regular basis to ensure that
operational performance is maintained at optimal levels, as you would expect for any
large IT system. Such updates include, for example, security-related matters;
upgrades and improvements to functionality. Depending on the nature and extent of changes they are applied in carefully managed periodic releases, following thorough impact assessment and testing

No mention of Bugs and Errors then, even though they did acknowledge that they held the information.   Of course it is important to point out that presumably this FOI request was placed as a result of the investigation by the CWU and revelation by Computer Weekly (http://www.computerweekly.com/news/4500257572/Post-Office-IT-support-email-reveals-known-Horizon-flaw).   This revealed that there was not only a bug in the Horizon system but that Fujitsu had incorrectly identified the cause of it prior to declaring that it would be ‘fixed’ in a software release in March 2016.

It is quite unbelievable that Post Office Ltd has made no attempt to warn the subpostmaster network of this bug’s existence but the fact is that they never have revealed these bugs.

In reply to further questions from Computer Weekly POL stated:

The Post Office said: “We will not be commenting on this issue any further other than to say that the Post Office takes its responsibilities towards its postmasters extremely seriously and wholeheartedly rejects any suggestion to the contrary.”

The suggestion that they take their responsibilities towards their subpostmasters extremely seriously is extremely worrying.  How they can come to that conclusion while not informing their subpostmasters about serious errors in the Horizon system that could easily result in Subpostmaster Losses is beyond me but rather more significantly not beyond the law.

You see in the case of the error that Computer Weekly reported to Post Office Ltd, the loss incurred by the subpostmaster in question resulted in a gain to Post Office Ltd.   While thankfully it was noticed by the subpostmaster and eventually the loss was resolved, it could be that the error has occurred at another branch and not been noticed by the subpostmaster meaning that Post Office Ltd may have recovered monies from the subpostmaster that POL were not entitled to.   Such a situation is clearly covered by the Fraud Act 2006.

4 Fraud by abuse of position

(1)A person is in breach of this section if he—

(a)occupies a position in which he is expected to safeguard, or not to act against, the financial interests of another person,

(b)dishonestly abuses that position, and

(c)intends, by means of the abuse of that position—

(i)to make a gain for himself or another, or

(ii)to cause loss to another or to expose another to a risk of loss.

(2)A person may be regarded as having abused his position even though his conduct consisted of an omission rather than an act.

Of course this law is open to interpretation but I leave that to the courts and/or the Serious Fraud Office to decide.   The fact is though that once Post Office Ltd decided not to reveal the error to their network of subpostmasters they did so with intent (not to reveal) and in their response to the Freedom of Information request they cited their reasons for doing so.

They exposed their subpostmaster network to a risk of loss without question and they did so in the knowledge that in this particular instance that loss would result in a gain for Post Office Ltd.   I am sure POL would argue that they have systems in place to identify errors such as these and to repay any such sums to subpostmasters eventually but unfortunately that is not entirely correct and is another story for another day.

The Misra Trial

There is a strong connection between this turn of events and the recent publication of the Misra Trial Transcript http://journals.sas.ac.uk/deeslr/article/view/2217

In this trial the prosecution (remember the prosecution in this case is actually Post Office Ltd) say the following:

“because the defendant is saying there was a computer problem – easy to say it, but a computer problem should be visible, at least the symptoms of it to the user of the computer and this defendant was using the Horizon computer system”

What is interesting about this quotation (other than the fact it is wrong in its assumption that computer errors should be visible to users) is that it comes in the part of the trial where the prosecution is arguing not to disclose the Known Error Logs!   As we all know with POL you really cannot make it up at times.

If the losses a SPMR can incur due to a computer fault (and we now know that at least one is present in the system as I write this) give rise to a gain to POL then as far as I can interpret the Fraud Act they (POL) are legally bound to inform the network of the possibility of this error occurring.

So why wouldn’t they?  This question must be asked and answered at a very senior level.

The trouble is they have denied these errors exist for so long it seems they have to continue to do so – even in the face of clear and undeniable evidence to the contrary.

Back to the Misra Trial.  At the end of the trial the Judge summed up the evidence before the jury and I quote “Mr Jenkins told you “I cannot find anything that shows any significant fault in the system.”

Mr Jenkins was the Fujitsu “Expert” witness.  Yet even he didn’t know what was on the Known Error Log!

It is frankly appalling to think that Ms Misra, or indeed any other SPMR, who has and will question the reliability and robustness of the Horizon computer system, can end up in jail as a result.   This is not the end of the story/scandal and more people will eventually end up in prison as a result.  I don’t think they will be subpostmasters though.


Crown Office Closures

A New Year and the same old story from Post Office Ltd.

Some Crown Offices to be closed and others to be hived off to the private sector.

Roger Gale from Post Office Ltd comes out with the startling comment.

“We have to continue to adapt to customer demands, which our network must reflect. We cannot look to the taxpayer to subsidise crown branches that lose money.”

But in the same breath another Post Office Spokesman said “The Post Office said losses in the network of crown post office branches had been reduced from £46m a year in 2011-12 and that part of its network was now breaking even.”

Taken together the two statements make no logical sense whatsoever.   Crown Offices are not losing money but we have to close down Crown Offices that are losing money.   Why?  So they can make more profit?  So what are they going to do with that extra profit?

As I have said before here, POL Management operate under the belief that they are accountable to no-one.  They can do their own thing without the slightest intervention from the Government.  Latest example is that for some strange reason they have decided not to publish their interim results this year.   So critics of the Crown Closure program cannot refer to the latest set of results to show that there is in fact no reason for the closure or sale of these branches until the deed has been done.

This is not a new process.  They have done this before.  WH Smith did very nicely thank you very much when they agreed to take on Crown Post Offices in the past.  What was hidden away in POL’s accounts was the payment that POL made to WH Smith to ensure they took them – it was many millions of pounds.   WH Smith were so proud of the contribution their newly acquired Post Offices made to their bottom line they omitted to mention the words ‘Post Office’ from their annual accounts for years afterwards.    Since then of course WH Smith has been closing Post Offices as have another recipient of Post Office public money, McColls.  Again several million pounds changed hands as an incentive for them to take the new style branches on – yet only a few months later McColls started unloading these branches and will continue to do so.

Crown Offices aren’t the problem here.  POL management are.   They represent the totally unnecessary overheads required to operate what is basically a shop selling postal and financial services.  Royal Mail Group should be particularly concerned that Post Office can’t make a going concern of selling RMG’s products – perhaps RMG should now be considering whether their Mails Distribution Agreement with POL is worth re-negotiating?   Who needs POL as a middleman?  What added value does POL bring to the table?