The UK has announced a compensation scheme for 555 postmasters who brought a groundbreaking High Court case against the Post Office but saw most of their £57.75mn compensation settlement swallowed up by legal costs.

The postmasters played a crucial role in exposing a scandal involving the state-owned Post Office’s Horizon IT computer system after they brought the legal action. A judge ruled in 2019 that the IT system contained bugs, errors and defects that had caused financial discrepancies in thousands of postmasters’ accounts.

The discrepancies had led to hundreds of people being wrongly accused by the Post Office of theft and prosecuted between 2000 and 2013, in what MPs have dubbed the biggest miscarriage of justice in recent British history.

The pivotal High Court ruling in 2019 has paved the way for 73 postmasters to have their criminal convictions quashed with further appeals pending. It also triggered a public inquiry, which is being chaired by retired judge Sir Wyn Williams, into what went wrong at the Post Office.

However, the 555 postmasters who brought the High Court case said they have received little compensation from the lawsuit and had called on the government for financial redress.

The Post Office settled the High Court case for £57.75mn in 2019, but an estimated £46mn of the settlement went towards paying the legal fees of the postmasters and the costs of a litigation funder who financed the lawsuit. This left less than £12mn in compensation to be split between the 555 postmasters.

The postmasters who brought the case were ineligible to apply for compensation from the Post Office via its Historical Shortfall Scheme under the terms of the High Court settlement.

Only postmasters who were not involved in bringing the High Court case were eligible to apply to the scheme, which compensates those who had to repay thousands of pounds of “missing money” in branch accounts to the Post Office after shortfalls were shown by the Horizon IT system.

Chancellor Rishi Sunak announced a new government compensation scheme on Tuesday, which will be set up in the coming months, to ensure that the 555 postmasters receive their share of compensation.

Sunak said in a statement: “Without the efforts of these postmasters, this terrible injustice may never have been uncovered, so it is only right that they are compensated fully and fairly.”

Alan Bates, who heads the Justice for Subpostmasters Alliance, and was the lead claimant in the High Court action said: “This seems a positive step but we would need to see more detail of what is being proposed.”

The government has already set up a separate scheme to fund settlements for postmasters who have had their Horizon-related criminal convictions overturned, with each person eligible to receive an interim payment of up to £100,000.

The Post Office is still state-owned after being separated from Royal Mail in 2012, which was later privatised. The Department for Business, Energy and Industrial Strategy is responsible for its direction.

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