In my third instalment on Britain’s greatest miscarriage of justice in living history, I covered past Post Office executives who are living the good life, completely untouched by the scandal of hundreds of innocent subpostmasters who have been suffering with unsafe criminal convictions, broken lives and poor health.

Today, I look at the history of large Government contracts being awarded with the help of politicians, which started in the 1960s with the Labour MP Tony Benn (1925-2014). These led to projects that were, as we would say today, ‘too big to fail’.

On January 21, 2024, The Sunday Times published Robert Colvile’s excellent article, ‘The unlikely villain of the Horizon scandal? Tony Benn’, excerpts of which follow, emphases mine.

Colvile lays out the history of ICL, later bought out by Fujitsu UK. ICL was a shining star during Harold Wilson‘s first premiership, 1964-1970, which was partly characterised by his theme of ‘the white heat’ of technology:

In the 1960s the Wilson government had a problem. No one wanted to buy the products Britain was making. So it decided to form giant new national champions that could conquer the export markets, by merging a host of existing companies at gunpoint. This was the process that gave us British Leyland. And, thanks to Benn, then minister for technology, it also gave us Britain’s answer to IBM — International Computers Ltd, or ICL …

Benn didn’t just shower ICL with grants. He gave it first refusal on government contracts. Even into the 1980s, any computer above a certain size had to come from ICL. Which was a problem, because ICL’s computers weren’t very good. “It would be fair to say,” recalled Sir Peter Gershon, who worked at the firm, “that most of the customers were not very happy.” Not least because the products those public servants were forced to use, as he euphemistically recalled, “had quite a lot of technical challenges”.

The hope was that ICL would rival IBM. Even though it could never achieve that lofty, global status, it became too big to fail and had to be saved, hence Fujitsu’s rescue:

ICL wasn’t good enough to beat IBM. So it made most of its money from the British government. But that left the government with computers that weren’t good enough. In 1981, when ICL was facing bankruptcy, Margaret Thatcher wanted to let it die. But, says Gershon, “some very very brave civil servants … stood up and basically persuaded her, and Keith Joseph, that … if ICL went bust, the government would grind to a halt.” ICL was, like the banks in 2008, too big to fail. So a rescue was arranged. The tie-up with Fujitsu was critical to that process, because ICL’s customers actually trusted the Japanese tech.

ICL lost its monopoly status, but throughout its complicated corporate history it remained deeply embedded in the British state, which continued to provide the lion’s share of its revenue.

Then along came Pathway, the precursor to Horizon for the then-Department of Social Security in conjunction with the Post Office, where many people collected their benefits payments:

In the 1980s it got the contract for the state pension database. So it was the natural choice when, in 1995, the government decided to automate the entire benefits system.

That project, called Pathway, was awarded jointly by the Department of Social Security and the Post Office. It was a disaster, and in 1999 it was abandoned with nine-figure write-offs. But it was agreed that ICL (by then fully owned by Fujitsu, which knew a captive market when it saw one) would get another massive contract: to use the Pathway technology to computerise the Post Office branch network. The project’s name? Horizon.

In 1999, Tony Blair was Prime Minister. The Horizon software, like Pathway, was full of bugs, yet Fujitsu persuaded Blair to press on with it:

… according to evidence submitted to the official inquiry, Fujitsu executives told the Blair government that if it didn’t sign the deal, ICL would collapse, with catastrophic implications for the services it was already running. As in 1981, it was too big to fail. And the sub-postmasters paid the price.

However, looking beyond Horizon, a history of poor — expensive — procurement has characterised various governments with shocking results:

… the ICL/Fujitsu story also reminds us of something else: how very bad the British state is at spending money. In 2020 the procurement expert Peter Smith published a book called Bad Buying. A disproportionate number of his examples involved the British state: HS2, PFI, Blair’s NHS IT programme, the lease rip-off that left a Suffolk primary school owing £500,000 for 125 laptops.

But the anecdotes were even worse. Smith had been appointed commercial director of a huge government project that involved paying a large consultancy firm more than £600,000 a week. He asked to talk to the person managing the contract. There wasn’t one. Whitehall officials “didn’t think it was worth it” to pay someone £30,000 to £40,000 a year to oversee a deal worth a thousand times that. So Smith looked at the invoices himself. He found that the 100 “full-time” staff the contractor was providing included the partners’ personal assistants. And that the firm had charged full whack for the day of its Christmas lunch. “An unfortunate error,” the consultants said.

Our procurement systems were designed to prevent officials from just giving contracts to their mates. But the result has been a process that too often revolved around ticking the right boxes and offering the lowest headline price, rather than actual performance.

Even recently, government procurement contracts have had safeguards wrapped around the suppliers. If one performs badly, no one else can find out about it and choose an alternative:

David Halpern, founder of the government’s Behavioural Insights Team (aka the Nudge Unit), tells a Fujitsu-related horror story. The company built a system for No 10 and the Cabinet Office to work on highly classified material. But it was a living nightmare: just booting it up took half an hour. The minister in charge got so fed up he refused to use it.

Eventually the system was dumped — prompting Fujitsu to sue for breach of contract. But, even as the Cabinet Office was decommissioning the software, another branch of government was buying the same product. How on earth could that happen? Well, partly because of EU rules, government procurement policies banned departments from telling one another about their experiences with a given supplier or system, lest it should prejudice future buying decisions or disadvantage new suppliers.

The results could be absurd. In 2017 Halpern’s team asked a sample of public sector buyers to rate their suppliers on a five-star scale. But when they showed the minister the results — which did not exactly match up with the number of contracts those firms received — there was a heated debate over whether he could legally see the company names. Because if he knew who was doing a good or a bad job, it might inform decisions on future contracts. And everyone would be sued.

Which answers the question, asked by many, many people, of why Fujitsu kept getting contracts after Horizon. The government was legally prevented from taking Horizon into account.

Colvile says:

This is an incredibly depressing story. But it teaches all manner of important lessons. Beware of politicians who think they know more about industry than industry does. Beware of “national champions”. Beware of monopolies, both public and private. Beware of the way that bad decisions cascade through the generations, not least because the people who built the shoddy software are often the only ones who know how to maintain it.

However, help might be at hand:

Thanks to the efforts of various Whitehall reformers, this flaw is being addressed. The Procurement Act, passed last year, makes it easier for past performance to be considered. But Britain’s poor public procurement is ripping all of us off. We need to give it a hell of a lot more attention.

I hope the Procurement Act works.

Another post will follow on more politicians’ involvement — good and bad — with the Post Office Horizon scandal.