The government will lay out its plan for compensating subpostmasters affected by the Horizon scandal this month.

Business and trade minister Justin Madders said in the House of Commons on Thursday that the government would be outlining this by the end of July.

He said: “We intend to work cross-party, we believe that there’s absolutely no reason why that should not continue, because we absolutely agree the importance of delivering fast and fair compensation is at the heart of what we are all trying to achieve here.

“We will be making a statement by the end of the July.”

Madders said the statement would be made “by the end of summer recess”, but the Department for Business and Trade later confirmed that this was a slip of the tongue and he had meant to say “before summer recess starts”.

Former postal affairs minister Ed Davey has said he would have “acted differently” if the “Post Office had told the truth”.

In his witness statement to the Horizon IT inquiry, he said:

With all issues in such a busy portfolio, you had to be able to rely on the advice of civil servants, and you were not in a position to dig into the detail of every question that came across your desk.

As I have stated publicly, I believe I was seriously misled by the Post Office. I do not know if one or more civil servants misled me during my time as a minister, or if they were themselves misled by the Post Office. I hope the inquiry can shed light on this.

However, if I had known then what we all know now - if the Post Office had told the truth - of course I would have acted differently.

Asked about this by Jason Beers KC, counsel to the inquiry, Davey said:

Yes, I now know I was being lied to. I follow this inquiry, and it’s pretty clear what they told my officials was not true.

Asked which executives had lied to him and his officials, Davey said:

The senior executives I dealt with were David Smith and then Paula Vennells. There may have been one or two others…. And they were the ones giving the information to my officials and to me. So they were the people passing information which was untrue.

Smith was the Post Office’s managing director between April and December 2010, and Vennells was chief executive of the Post Office from 2012 to 2019.

Back to the Horizon inquiry.

Ed Davey said he was “deeply sorry for the individuals and families who have had their lives ruined” by the scandal, and that it took him five months to meet Sir Alan Bates, the subpostmaster who spearheaded a campaign for justice. The Liberal Democrats leader was postal affairs minister between 2010 and 2012.

He apologised to Bates for declining a meeting with him in May 2010 and saying “I do not believe a meeting would serve any useful purpose”.

He said in his written submission to the inquiry:

The Post Office Horizon scandal is the greatest miscarriage of justice of our time, and I am deeply sorry for the individuals and families who have had their lives ruined by it.

As one of the ministers over the 20 years of this scandal who had postal affairs as part of my ministerial responsibilities, I am sorry that it took me five months to meet Sir Alan Bates, the man who has done so much to uncover all this, and that I did not see through the Post Office’s lies when I and my officials raised his concerns with them.

Davey also said that he was not aware that the Post Office and Royal Mail Group themselves investigated, prosecuted and obtained convictions against sub postmasters. Some people in the room shook their heads when this was read out by Jason Beers KC.

Davey told the inquiry:

If I had known about it [the private prosecutions] I would have been surprised... It seems quite an old fashioned thing to do.

Now we know that it was wrong and it seems that power should be taken away. I wasn’t aware and it seems odd that they were.

In other news, the European Central Bank has held interest rates unchanged, as expected. President Christine Lagarde will explain the bank’s thinking behind the decision in a press conference in half an hour, and markets will be hoping for clues on when the next rate cut might come – possibly in September?

The ECB became one of the first major central banks to reduce interest rates, cutting its three key rates by a quarter point in June.

A lot of the pre-lunch questioning of Pat McFadden, a former postal affairs minister who ran Labour’s election campaign and is now a member of Keir Starmer’s government, focused on what warnings he received about possible problems with the Horizon system.

That included the letter from former home secretary Jacqui Smith on behalf of a constituent, and another from Brian Binley, an MP at the time, forwarding a letter from Computer Weekly journalist Rebecca Thomson. In that 2009 letter, Thomson wrote:
“The Post Office refuses even to entertain the possibility that their system could be going wrong.”

McFadden said that he wished that he had challenged the Post Office more on its insistence that the Horizon system was robust. However, he said he was reliant on the Post Office, which gave an “emphatic defence” of the system.

Asked about a particular letter, he said:

The Post Office kept insisting that the system was robust and fit for purpose.

The terrible thing is that those court judgments were found to be unsafe and unsound. I did not know that at the time.

With this particular letter, I’m not sure, because it was so emphatic, but if you ask me over the whole story here, of course I wish I had done more to question these responses. I believe if I had I would have got the same response from the Post Office.

McFadden is shown an email from Alan Cook, the former managing director of the Post Office, who wrote to two staff members: “My instincts tell that, in a recession, subbies with their hand in the till choose to blame the technology when they are found to be short of cash”. (There are gasps in the room when the email is shown.)

Cook told the inquiry in April that he will “regret for the rest of my life” that email.

McFadden says he had not heard senior Post Office people express this view at the time, but that it was “shocking”.

Counsel to the inquiry Sam Stevens asks:

Any recollection of Mr. Cook expressing those views to you?

McFadden replies:

No, I never saw this. I think it was published by this inquiry some weeks ago, I saw it in detail for the first time on Monday. I think it’s shocking and revealing about the instincts inside the Post Pffice at the time, but I never heard senior Post Office people say that at the time.

Cabinet minister Pat McFadden has told the inquiry that “wrong” information on the Horizon system has had “terrible human consequences”.

Counsel to the inquiry, Sam Stevens, has been asking about the process by which ministers make statements and write letters on the Post Office. McFadden said ministers have to trust that the information being given to them is accurate. He said:

It’s very difficult, and it’s relevant to this issue, because at the heart of this issue is that in the process that I’ve been describing… the information turns out to have been wrong, with terrible human consequences for some of the people who were here.

Decisions were made on the basis of information passed on by officials both in the department and from the Post Office itself, McFadden said. Ministers have very little room for manoeuvre if that information is incorrect or false, he said:

The minister is very reliant on those other layers having told the truth about the information that’s put in front of them to sign.

A feature of the Horizon correspondence and probably other things to do with an individual post office… the department and me as the minister we’ve got no independent information about that other than in the Post Office. Most of the time queries like this are answered directly by the Post Office themselves.

Away from the inquiry, the new Labour government answered an urgent question about the Post Office scandal in parliament and said compensation to wrongly convicted subpostmasters would be “fast and fair,” the BBC reported.

Asked when the compensation scheme would be up and running, business and trade Minister Justin Madders said the government would make a statement on the issue by the end of this month. He told MPs:

[We] intend to work cross-party, we believe that there’s absolutely no reason why that should not continue.

We absolutely agree with him... delivering fast and fair compensation is at the heart of all we are trying to achieve here.

In his witness statement to the Horizon inquiry, cabinet minister Pat McFadden said flaws in the Post Office’s IT system resulted in “many innocent people being convicted” but added that “ministers do not intervene in court judgments and cannot overturn court verdicts”.

He said:

At the root of all this was the Post Office’s insistence that its IT system was robust and not to blame for accounting errors and their willingness to bring prosecutions through the courts over many years.

This resulted in many innocent people being convicted or being held liable for debts they did not owe in the civil courts.

Ministers do not intervene in court judgments and cannot overturn court verdicts.

The separation of powers between the legislature and the judicial system is valued by all governments.

Cabinet minister Pat McFadden has said that he did not discuss allegations about the Horizon IT system with the secretary of state during his time in the business department during the last Labour government.

McFadden served as junior minister in the Cabinet Office and the business department under first John Hutton and then Peter Mandelson from 2007 until 2009. He said that his main focus for Post Office issues was on a plan to close 2,500 out of 14,000 branches. He said:

It was quite hot politically, that programme.

On Horizon, McFadden was asked by counsel to the inquiry, Sam Stevens:

To the best of your recollection, did you have a conversation with the secretary of state at any point regarding the allegations made by sub postmasters as to the integrity of the Horizon IT system?

McFadden responded:

I don’t believe so.

The former postal minister Pat McFadden has arrived at Aldwych House to give evidence to the inquiry into the Post Office Horizon IT scandal.

McFadden, a Labour MP, was the minister in charge of postal affairs between July 2007 and June 2009. He ran Labour’s recent election campaign and is a member of Keir Starmer’s government as chancellor of the duchy of Lancaster.

The Liberal Democrats leader Ed Davey, who was postal affairs minister between 2010 and 2012, is also due to give evidence later. They are among politicians who have had responsibility for the Post Office in the past and face questioning this month.

All three main political parties face questions over what they knew about the scandal, which gained fresh prominence after a powerful ITV drama, Mr Bates vs the Post Office, documented the fight for justice waged by Sir Alan Bates.

You can watch it live here:

McFadden told the BBC earlier this year that he wished he had asked more questions about Horizon. He said:

Each time an MP raised a question about this, the reply would come back from the Post Office that they thought the system was robust, they had no evidence to suggest there was anything wrong with Horizon.

But even in 2009 there were warning signs. Computer Weekly published its first article about convicted Post Office operatives in May that year, and Bates formed his Justice for Subpostmasters Alliance a few months later.

More than 700 post office operators were wrongly prosecuted by the Post Office and handed criminal convictions between 1999 and 2015 because the Japanese firm Fujitsu’s faulty Horizon IT system made it look as though money was missing at their branches.

Luke Bartholomew, deputy chief economist at the investment firm abrdn, said:

There were no nasty surprises for the Bank of England in today’s labour market report, with wage growth continuing to slow in line with expectations. Household spending should continue to be supported by wages growing well in excess of inflation.

But the double edge to this sword is that wage growth is still well above a level that the Bank would consider consistent with its 2% inflation target. So policy makers need confidence that wage growth will slow further before embarking on rate cuts. Given the mixed data recently, if the BoE does plan on cutting in August – which we still just about expect – then the market may benefit from some guidance to this effect from key Bank decision makers very soon.

The Resolution Foundation, a think tank, also said that wage growth is “still too hot to handle for the Bank of England”.

Even though wage growth is cooling, some economists believe the Bank of England’s first rate cut is more likely to come in September rather than August.

Ashley Webb, UK economist at the consultancy Capital Economics, said the slowdown in the jobs market probably wasn’t enough to offset strength in services inflation.

As a result, we have changed our forecast for the timing of the first interest rate cut from 5.25% from August to September, although it is a close call.

But we think the cumulative effect of weak GDP growth last year and some improvement in supply this year will mean that services inflation falls from 5.7% in June to 3.5% in early 2025 and wage growth slows to 3% by the end of next year. That’s why we still expect rates to fall to 3% by the end of 2025 instead of 4% as investors expect.

Rob Wood, chief UK economist at Pantheon Macroeconomics, is also expecting a rate cut in September rather than August.

Rate setters will breathe a sigh of relief after today’s labour market data, which leaves open the option to cut in August despite hot CPI services inflation. Rate setters will be encouraged by softer private sector pay growth in May, suggesting only small upside risks to their forecast for Q2 pay growth.

We think an August rate cut is a very close call. The MPC could easily dismiss yesterday’s stronger-than-expected CPI services reading as volatile, just as they did in June, note slowing wage growth, and plough on with a rate cut in August. But we think services inflation is just too hot for the MPC to go ahead in August, and instead expect them to wait until September to reduce interest rates.

Looking ahead pay growth should slow as that boost from the minimum wage fades and pay deals in the second half of the year are set in the context of sub-3% inflation.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

The UK job market has continued to cool, with wage growth slowing to a two-year low while the unemployment rate remained at 4.4%, according to the latest official labour market figures.

Average earnings growth slowed to 5.7% between March and May from 5.9% in the three months to April, said the Office for National Statistics. Both regular wages, and earnings including bonuses, grew at an annual rate of 5.7%.

Regular wage growth was last lower than this in the three months to August 2022, while total wage growth was last lower in the three months to January.

The figures are closely watched by the Bank of England, which next meets on 1 August. Following higher-than-expected inflation yesterday, financial markets scaled back expectations of a rate cut at that meeting, putting the probability at 35%. This has just risen to 40% after the labour market data.

In the public sector, wage growth remained strong at 6.4% for the third consecutive period while in the private sector, it was 5.6%.

The finance and business services sector saw the largest annual regular growth rate at 6.7%; while the construction sector saw the smallest rate at 3%, the same as the previous three-month period.

Liz McKeown, the ONS director of economic statistics, said:

We continue to see overall some signs of a cooling in the labour market, with the growth in the number of employees on the payroll weakening over the medium term and unemployment gradually increasing.

Earnings growth in cash terms, while remaining relatively strong, is showing signs of slowing again. However, with inflation falling, in real terms it is at its highest rate in over two and a half years.

Annual growth in real terms – adjusted for inflation – for regular pay was 2.5% in March to May, and for total pay was 2.2%.

The UK’s unemployment rate stayed at 4.4% in the three months to May. The number of job vacancies fell by 30,000, led by dwindling demand in retail and hospitality amid a continued slowdown in hiring across the economy.

Global chip stocks tumbled, with the Dutch company ASML, US firm Nvidia and Taiwan’s TSMC hit by reports of tighter export restrictions from the US and remarks from Donald Trump.

Bloomberg reported yesterday that the Biden administration is considering using the most severe trade restrictions available to clamp down on companies exporting their critical chipmaking equipment to China.

Washington’s foreign direct product rule (FDPR) allows the US to put controls on foreign-made products if they use a small amount of American technology. This can affect non-US companies.

Trump, the former US president who is running for the presidency again, said Taiwan should pay the US for defence, in an interview with Bloomberg Businessweek. He also claimed Taiwan took “about 100%” of America’s semiconductor business.

ASML shares tumbled by 11% despite better-than-expected sales and profits, with 49% of its sales coming from China. Tokyo Electron shares in Japan closed 8.8% lower and TSMC dropped by 2.4%. The Cambridge-based chipmaker Arm closed down by 10%, along with US firms AMD and Marvell, while Qualcomm and Broadcom fell by around 8% and Nvidia lost 6.6% on Wall Street. This drove the tech-heavy Nasdaq lower by 2.77%, while the S&P 500 lost 1.4%.

The Agenda

• 1.15pm BST: European Central Bank interest rate decision

• 1.30pm BST: US Initial jobless claims for week of 13 July

• 1.45pm BST: ECB press conference

• 3.15pm BST: ECB president Christine Lagarde speech