Sir Tony Blair was warned the IT system at the centre of the Post Office scandal was “flawed” before it was rolled out, a document shows.
The warning appears in a memo written to the former prime minister by special adviser Geoff Mulgan in 1998, which has been released by the public inquiry into the scandal.
It said the problems which beset the Horizon system “may well continue” and that signing it off could leave “what many see as a flawed system” in place for more than a decade.
Mr Mulgan said cancellation would allow the Post Office to take advantage of “newer, cheaper and more flexible” technology instead.
Pushing ahead would be “unsatisfactory” and leave the government “dependent on a hugely expensive, inflexible, inappropriate and possibly unreliable system”, the adviser warned.
However “short-term considerations and expediency” pointed towards the deal going ahead, he added.
The adviser said then-work and pensions secretary Alistair Darling was against the deal, but the department for trade and industry was more supportive.
The document does not reveal any concerns at the time that Horizon software could lead to subpostmasters being wrongfully prosecuted for fraud, theft and false accounting.
In response, the former prime minister said: “I would favour Option 1 (pressing ahead with Horizon) but for Geoff’s statement that the system itself is flawed.
“Surely there must be a clear view on this. Speak to me on that: ie reading the enclosed paper, it all focuses on the financial deal.
“But there the risks are pretty even, probably coming down on the side of continuing. The real of heart of it is the system itself.”
In a separate letter released by the inquiry, then-trade and industry secretary Lord Mandelson told then chief secretary to the Treasury Stephen Byers he believed proceeding with Horizon was the “only sensible choice” available.
He said the system had been “thoroughly evaluated by independent experts” who pronounced it “viable, robust and of a design which should accommodate future technological developments”.
Any alternative could lead to post offices being closed, damage the confidence of subpostmasters in the government and “produce political fallout, no matter how carefully we try to handle it”.
Mr Mulgan acknowledged concerns in his memo that subpostmasters feared scrapping Horizon would lead them to lose customers and a support package would be needed if it was scrapped.
A spokesperson for Sir Tony said: “As the documents show, and make completely clear, Mr Blair took the issue very seriously.
“His response to the Mulgan note, and in other interactions, was to raise the issue of the viability and reliability of the end project as this was his overarching concern. He subsequently received these reassurances.
“It is now clear that the Horizon product was seriously flawed, leading to tragic and completely unacceptable consequences, and he has deep sympathy with all those affected.”