Parliament’s watchdog, the National Audit Office, has qualified last year’s annual accounts of the Department for Business and Trade, for failing to providing accurate estimates of the money needed to compensate the Post Office victims of the Horizon scandal and overspending its budget by over £200m.

The disclosure is the latest blunder in the handling of the scandal where hundreds of postmasters were wrongly accused of fiddling their books and some spent time in prison for crimes they did not commit Instead there was a cover up by the Post Office when the computer system was at fault.

Gareth Davies, the head of the National Audit Office, who audited the ministry’s accounts, says the omission to provide Parliament with the correct figures and the £208m proposed overspend on the scheme amounted to a breach of the ministry’s spending limits and has been classified as irregular spending.

The decision to pay out compensation to the postmasters and quash their convictions happened when Kemi Badenoch, now the Tory Party leader, was business secretary. She was the sole shareholder of the Post Office under the present constitutional arrangement for running the business.

Last year the government set up compensation schemes for the postmasters – one to compensate them for the money they lost through the computer misrepresenting their accounts and another to compensate those who had been wrongly convicted.

What the accounts revealed is that the ministry did not hold enough data to properly estimate how much compensation it would have to pay out and put forward to MPs estimates to approve its spending that were not accurate – hence the overspend.

Under the first scheme the Horizon Shortfall Scheme (HSS), which is intended to support
those who accounts were falsified by the computer system , Individuals who qualify can choose to either accept a fixed sum of £75,000 or opt for full assessment by an independent advisory panel.

The Post Office is inviting current and former postmasters to apply if they wish to but haven’t yet done so, as there will be a closing date for the scheme. It has advised the ministry that it anticipates a response rate of approximately 25-30% and that the majority of new claimants will accept the fixed sum offer.
However, the auditors say due to the limited amount of available data on which to base this estimate,
the eventual outcome could vary significantly.

Under the Horizon Conviction Redress Scheme (HCRS) intended to compensate individuals who had their convictions overturned. Because this scheme is in its early stages, there is limited data upon which to base an estimate of future settlement values.

But the ministry just assumed that the proportion of applicants who choose to accept the fixed sum offer
(rather than submit a full claim for detailed assessment) will be similar to the take-up rate for those who had their convictions overturned by the court and are being compensated through the Overturned Conviction (OC) scheme;
It also assumed that the average settlement value for those choosing not to accept the HCRS fixed sum award will be significantly lower than its equivalent estimate for OC claimants.

Neither of these propositions could prove to be accurate because the period for claiming compensation is not over. And by estimating an extra £208 million to be spent on the second scheme led to the ministry breaching its obligation to tell Parliament how much it intends to spend.

The Department for Business and Trade said:”This issue took place as a direct result of the decision to rightfully offer further redress to Horizon scandal victims, at a time when the high volume and complexity of claims meant there was significant uncertainty on the cost estimates.

“We have acknowledged this to the NAO and remained determined to ensure that all affected postmasters receive the financial address they deserve to right these historic wrongs’

A further £1.8 billion has been provided since these accounts were reported.