The Foreign Office warned Sir Tony Blair that scrapping the Horizon scheme would damage relations with Japan, The Telegraph can disclose.
The former prime minister ordered officials to go ahead with the new Post Office IT system despite being told it had been “plagued with problems” and that independent IT experts had found the firm behind it was “failing to meet good industry practice” in its handling of the project.
Documents released by the Cabinet Office show that Sir Tony’s decision came after Sir David Wright, the UK ambassador to Japan, warned that scrapping the deal would lead to the collapse of the Japanese-owned firm building the system and have “profound implications … for bilateral ties” with Tokyo.
Sir Geoff Mulgan, a Number 10 adviser to Sir Tony and now professor of public policy at University College London, told The Telegraph that a reluctance to strain relations with Japan “had a big influence” on decision-making over Horizon.
The revelation raises fresh questions over the then PM’s decision to continue with the troubled scheme, which Labour inherited from the Conservatives after coming to power in 1997.
Bugs in the system created problems for thousands of sub-postmasters for more than a decade and led to the biggest miscarriage of justice in British history.
A spokesman for Sir Tony said Britain’s relationship with Japan was “one of a number of factors” considered when he decided to go ahead with Horizon, but his “primary concern was the technical capability of the system”.
Government documents show that in 1998, ministers and officials in the Labour government were concerned that Horizon was significantly behind schedule and, according to an official note by Sir Geoff, was “plagued with problems”.
A Treasury document submitted to the then prime minister on April 22, 1999, entitled “ICL Pathway: list of failures” stated that “independent reviews of the Horizon project by external IT experts have all concluded (most recently this week) that ICL Pathway [the subsidiary building the system] have failed and are failing to meet good industry practice in taking this project forward, both in their software development work and in their management of the process.”
Each version of the software released to date had been subject to “faults and problems”, the document said.
But Sir Tony made it clear that the project must not be scrapped, with Jeremy Heywood, his principal private secretary, telling ministers the following month that the prime minister wanted to avoid putting “ICL’s whole future at risk”. The Government decided to proceed with a pared-back version of the project.
Now it can be revealed that the decision followed an intervention by Sir David in which Sir Tony was warned that scrapping the agreement with ICL, owned by Fujitsu, would “lead to major internal difficulties within Fujitsu and the collapse of ICL.”
The warning came in an urgent dispatch written in December 1998, which stated at the top: “CABINET OFFICE PLEASE PASS TO PS/NO 10” – a reference to Sir Tony’s private secretary in Downing Street.
Sir David warned that “we have a major and potentially damaging problem on our hands.” He described a meeting in which Michio Naruto, the Fujitsu vice-president and chairman of ICL, expressed concerns about the risk of the Government pulling out of the scheme.
He said Naruto “repeatedly stressed that failure of the project will have serious repercussions for Fujitsu’s international standing, lead to major internal difficulties within Fujitsu and the collapse of ICL”, adding: “Any threat to ICL’s continued viability would have profound implications for jobs in the UK and for bilateral ties.
“The waves created would be damaging politically at home and to the UK’s position of strength here vis-a-vis our European competitors. This is already being weakened by perceptions of distancing from the centre of Europe over the single currency. We can do without more trouble.”
Sir Geoff said it was difficult to overstate “just how important Japanese inward investment was in the 1980s, and in the 1990s, it almost saved British manufacturing. So the stakes were pretty high, and that was definitely an important factor.”
He added: “My recommendation was, despite that, I still thought [Horizon] should have been cancelled and started again. I think Alistair Darling took a similar view.”
According to testimony by a former senior official at the trade department, in early 1999 Downing Street made it clear to ministers and officials that Sir Tony “was not looking for an outcome that involved walking away from Horizon or ICL”.
A spokesman for Sir Tony said: “As has been made absolutely clear from the published correspondence inside Government, Tony Blair as prime minister took very seriously the issues raised about the Horizon contract, which by the time he took office, was behind schedule but considered vital to savings in the benefit system.
“After the Mulgan warning … Mr Blair wrote on that note: ‘I would favour Option 1 [pressing ahead] but for Geoff’s statement that the system itself is flawed. Surely there must be a clear view on this.
“Speak to me on that: ie reading the enclosed paper, it all focuses on the financial deal. But there the risks are pretty even, probably coming down on the side of continuing. The real of heart of it is the system itself.’”
The spokesman pointed to a note by Mr Heywood stating that the prime minister’s “only concern was to get a viable system agreed that would actually deliver what the Government wanted”
“There was an independent panel of experts asked to provide a technical assessment of the viability of the project, which concluded it was viable,” the spokesman added.
“Therefore, at every stage the issues were taken seriously and investigated … The implicit idea that Tony Blair received warnings and ignored them is categorically wrong.
“It is now clear that the Horizon product was seriously flawed, leading to tragic and completely unacceptable consequences, and Mr Blair has deep sympathy with all those affected.”
