Taxpayers will foot a £67m bill after ministers extended a post-Brexit contract with the controversial firm at the heart of the Horizon IT scandal, The Independent can reveal.
His Majesty’s Revenue and Customs (HMRC) has granted a year-long extension to Fujitsu, which developed the faulty software leading to the wrongful prosecution of hundreds of sub-postmasters for theft and false accounting, to run its Trader Support Service (TSS).
The service educates firms trading between Great Britain and Northern Ireland on post-Brexit red tape including how to manage customs declarations.
Fujitsu ruled itself out of bidding for government contracts last January due to its role in the Horizon Post Office scandal.
But the extension, worth £66.8m and detailed in documents seen by The Independent, was approved because it is not a new contract.
Lord Arbuthnot, who campaigned for wrongly convicted sub-postmasters, said it was “a worrying decision by the government on several levels”.
He told The Independent: “First, it sends Fujitsu and other companies the message that the country doesn’t care about the unethical behaviour shown by Fujitsu in the Post Office scandal.
“Second, it weakens the government’s bargaining power in requiring Fujitsu to bear a substantial portion of the cost of that scandal.
“Third, it suggests that the government is uncomfortably dependent on Fujitsu. And fourth, it ignores the fact that Fujitsu’s capability on this contract may be no better than their Post Office capability.”
The campaigner added: “Why didn’t they start work earlier on finding someone else?”
HMRC said the extension was needed in order to “ensure a period of stabilisation” while new trading arrangements come into place under the Windsor Framework.
It has promised to run a procurement process in the coming months to replace Fujitsu in delivering the service.
The service was launched in January 2020 to help businesses navigate the Northern Ireland Protocol, replaced in 2023 by Rishi Sunak’s Windsor Framework.
In its first four years, the contract cost British taxpayers £443m, with two year-long extensions almost doubling the initial cost of the deal.
In the past, the firm has won nearly £6.8bn in nearly 200 contracts from the public sector, including 11 for HMRC to the value of over £1bn, and 12 contracts with the Ministry of Defence for £582m.
HMRC said “technical and economic reasons” meant it could not change to a new contractor this year, adding that it would cause “significant inconvenience”.
Liberal Democrat EU spokesman James MacCleary said the £500m bill for Brexit red tape showed leaving the EU was “not about taking back control” and was “a staggering waste of money”.
He added: “Businesses have been forced to navigate a bureaucratic nightmare, while the government scrambles to extend contracts to fix the mess.
“If they were serious about supporting trade, they’d stop throwing hundreds of millions at London consultants and start negotiating a new customs union with the EU – only then could they claim to back business.”
Meanwhile, Dr Mike Galsworthy, chair of the pro-EU European Movement, said there was a simple way to ditch the costs of the contract, by the UK rejoining the customs union.
He said the hugely costly agreement was “at last, a Brexit bonus”, but only one “for bureaucrats and customs services”.
Dr Galsworthy said: “It’s not even going to a British company. This is bureaucracy-to-alleviate-bureaucracy. Brexit red tape is sucking from the public purse, alongside other Brexit farces.
“Presuming that this contract delivers a return on investment, namely that it ultimately saves more costs than it costs itself, then just how many billions does all of this navigation of red tape cost British business to start with?”
The contract comes amid a post-Brexit reset of relations with the EU by Sir Keir Starmer. But the prime minister has so far refused to consider a return to the single market, a customs union or freedom of movement.
Despite heavy criticism of his attempts to rebuild ties with Brussels, and his chancellor’s relentless focus on growth, the PM has said the areas are “red lines” for Labour.
Sir Keir, 62, has even gone as far as to claim the UK will not rejoin the European single market or customs union in his lifetime.
A major report launched on Tuesday by Britain’s top post-Brexit think tank, UK in a Changing Europe (UKICE) branded the PM’s post-Brexit reset “anaemic” and said his EU policy is vague and unambitious.
The think tank said it appears that EU policy is “peripheral to Starmer’s government” and that lower economic growth appears to be “baked into Labour’s strategy”.
Sir Keir will hold a key meeting with the 27 EU leaders and other top Brussels officials next week, days after the fifth anniversary of Britain’s official exit from the EU.
Ahead of Sir Keir’s working dinner with EU leaders on Monday, European Council president António Costa said: “The UK is a key partner for the European Union, notably in the field of defence. I expect the discussion to focus on that dimension of our relationship.”
An HMRC spokesperson said: “This service has provided vital support for almost 60,000 traders moving goods under the Windsor Framework, enabling them to follow the correct processes without the need to purchase specialist software, saving them significant time and money.
“It’s critical this support continues while the new customs arrangements under the Windsor Framework are implemented.”
A Fujitsu spokesperson said: “We are working with the UK government to ensure we adhere to the voluntary restrictions we put in place regarding bidding for new contracts while the Post Office Inquiry is ongoing. Based on the findings of the inquiry, we will work with government on the appropriate actions, including contribution to compensation. We continue to offer our deepest apologies to the sub-postmasters and their families.”
