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27 April 2021updated 28 Apr 2021 1:00pm

The £2bn question: How did Fujitsu emerge unscathed from the Post Office scandal?

Despite its involvement in one of the worst miscarriages of justice in British history, the Japanese tech giant has reaped £2bn from the public sector over the last five years. 

By Oscar Williams

On Friday 23 April, the Court of Appeal overturned 39 convictions of Post Office staff who had been falsely prosecuted because of the organisation’s flawed IT system. The ruling marks the latest development in a 20-year scandal that is widely regarded as one of the worst miscarriages of justice in British history.

But while the decision clears the names of some of the affected Post Office employees, the damage will never truly be undone. Employees were stripped of their livelihoods, robbed of their reputations and imprisoned for crimes they did not commit. Several died before they could be vindicated by last week’s ruling.

At the centre of the scandal is Horizon – a bug-ridden back-office system that misreported accounting and stocktaking practices, leading to the false fraud allegations that resulted in criminal convictions. The system was rolled out in 1999 by the British technology company ICL, which had been acquired by the Japanese tech giant Fujitsu nine years earlier and had become deeply embedded in the public sector.

ICL’s mainframes continue to underpin the welfare state to this day. Fujitsu’s contracts with the Department for Work and Pensions and HMRC have traditionally focused on maintaining these platforms. “They are very significant [contracts],” said Rob Anderson, a GlobalData analyst who worked at ICL in the 1980s. “Fujitsu is the only supplier left in the marketplace that can do it, so it can afford to charge the Earth for maintaining them.”

New Statesman analysis shows this has helped give Fujitsu, which was found to be complicit in covering up the software bugs that led to the false Post Office prosecutions, a taxpayer-funded income stream worth more than £2bn over the last five years alone. Just three weeks ago the company won a £42.5m contract from the Post Office to continue maintaining the Horizon system, and over the last five years it has been the fifth-largest provider of public sector technology in the UK.

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As a student in the 1980s, Anderson met Harold Wilson, the former Labour prime minister, at Bradford University, and remembers telling him he had a job lined up at ICL. “He said, ‘Oh yes, I saved the British computer industry by shoring up ICL and now the government is committed to buying stuff from [them]’,” Anderson recalls. “It was very much a political decision.”

But long after the company was bought by Fujitsu, it continued to secure lucrative public sector contracts. In 2002, Fujitsu won what came to be known as the Fujitsu Connecting for Health contract, part of the £12bn NHS national programme for IT. But six years later, the contract was terminated after a dispute over revisions to the terms of the deal.

This triggered a long-running legal battle between Fujitsu and the Cabinet Office that may have affected its role in the public sector further. Anderson, who was working in the Cabinet Office at the time, says that, as a “Japanese company, with Japanese headquarters, losing faith is very much not something they like to do”, and that the company strongly defended its reputation.

In 2014 Fujitsu won the case, leaving taxpayers with a £700m bill. Anderson believes that, as a result of the case, “people were reluctant to take [Fujitsu] on or accuse them of wrongdoing”. 

Over the last decade, the government has sought to limit its dependence on legacy suppliers such as Fujitsu, by breaking up large contracts and awarding them to smaller suppliers. But as Fujitsu’s continued presence in HMRC and the DWP reminds us, this is a long and complex process.

Many UK-based public sector tech suppliers are concerned that the government is once again finding itself locked into large contracts with overseas firms. As the New Statesman reported in January, Peter Thiel’s controversial data analysis company Palantir is quietly extending its reach through various parts of the British state, and even Fujitsu is starting to secure modern software development deals.

[See also: How Palantir is quietly extending its reach through the British state]

But perhaps the company that causes the greatest concern today is Amazon Web Services (AWS) – the cloud computing arm of the online retail giant. In February it emerged that the firm had won twice as much public sector work as any other cloud computing provider last year, sparking a row over its growing role within Whitehall and across the public sector.

Anderson said it is supposed to be easier to remove data from the cloud than from on-premises data centres. “But the services they build around it means they become dependent on it, too.”

As the government seeks to unshackle itself from one generation of legacy suppliers, it would be a mistake to create another one in the gap left behind.

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