A former postal minister has said it was a mistake for the government not to step in as Post Office executives developed their ultimately unsuccessful legal defence of the flawed Horizon IT system against a lawsuit brought by branch owner-operators.

Margot James, who held the role from mid-2016 to early 2018 when Sir Alan Bates and 554 other prosecuted post office operators brought the case to clear their names, told the public inquiry into the IT system she should not have stuck to the line adopted by the executives and UK Government Investments, the body that manages state-owned assets.

The Post Office and UKGI had argued that the litigation and defence strategy was an operational issue that should be left alone by government until the court action had run its course.

“There is a strong argument that we should have delved more closely into operational matters, especially when they involved group litigation,” she told the public inquiry on Wednesday.

“The briefing that was given to me was that resolution of the complaints was not a matter for government but instead for the court to decide. Given the regrettable lack of suspicion on the part of myself at the time there was nothing wrong in my view with that position.

“Because of the way the Post Office was behaving it most certainly should have been a matter for government, the owner. Refraining from any public comment did not preclude me from challenging the Post Office board in private. In retrospect, I wished I had done that more vigorously than I did.”

James voiced frustration at the lack of information from the Post Office and UKGI, saying she was not made aware of the mounting number of internally commissioned reports showing that the Horizon IT system was to blame for branch shortfalls, and not post office operators.

“We wouldn’t be at this position at that point in time if we had the information by virtue of those reports. [We] would have been all over it demanding change,” she told the hearing. “I have concluded they were withheld from me deliberately.”

She was made aware of two critical reports by the forensic investigators Second Sight, but admitted she never asked to see them. “I should have asked for … [them], that was possibly my biggest mistake,” she said.

James said she asked about Horizon issues only a handful of times during her time in office, even as her suspicions grew that she was not being given the full picture about the situation, but felt she was “fobbed off” when she did raise the topic.

“The demeanour of the Post Office was they were very good at presenting themselves as the victim,” she said. “I formed an impression later that Horizon was the last thing that the Post Office board or the chief executive ever wanted to discuss. They were reluctant to speak about it in detail.”

In James’s first meeting with Paula Vennells, the chief executive of the Post Office from 2012 to 2019, the issue of Horizon was not raised.

“Had my initial briefing pack contained a comprehensive briefing on the Horizon issue I would definitely have expected to cover it in my first meeting with the chief executive,” she said.

James admitted that when she was appointed as minister she failed to ask about any MPs campaigning on behalf of the post office operators, previous parliamentary debates regarding Horizon or any ministerial statements regarding the issue.

“All of these things would have been good things to ask for but I’m afraid I didn’t ask about any of them,” she told the hearing.