Labour has demanded a Cabinet Office investigation into allegations made by former Post Office chairman Henry Staunton, including that he was told to delay payouts to sub-postmasters ahead of the next election.

Shadow business secretary Jonathan Reynolds has said there remain “significant discrepancies” in the accounts given by Mr Staunton and Business Secretary Kemi Badenoch following an escalating war of words that began over the weekend.

In an interview with The Sunday Times, Mr Staunton – who was sacked as Post Office chair last month – claimed he had been told to delay compensation to sub-postmasters in the run-up to the election owing to concerns about costs.

Ms Badenoch strongly refuted the claim, telling MPs they were “completely false” and that there was “no evidence whatsoever” for his account.

She also accused Mr Staunton of being motivated by “revenge” and claimed he was being investigated over bullying allegations before he was dismissed from his short-lived post.

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Later that evening, Mr Staunton hit back at what he called Ms Badenoch’s “astonishing” claims and said he stood by his assertion that he had been told to stall on issuing the payouts.

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In a statement released yesterday evening, a spokesperson for Mr Staunton said he was “not in the habit of resorting to fabrication or invention” and that he had decided to go public “out of a desire to ensure that the public were fully aware of the facts surrounding the multiple failures that have led to postmasters in this country being badly let down”.

They said Mr Staunton was told to stall on compensation payments to Horizon victims and on spend on the Horizon replacement so the government could “limp into the election” with the lowest possible financial liability.

They added that Mr Staunton recorded this at the time in a file note which he emailed to himself and colleagues “and which is therefore traceable on the Post Office Server”.

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In his letter to Mr Dowden, Mr Reynolds said: “With these circumstances in mind, and following Mr Staunton’s refutation of the secretary of state’s statement yesterday evening, I am asking you to commit to instigating a Cabinet Office investigation into the serious and maintained allegations made by Mr Staunton.

“There is agreement across the House that in order to rebuild trust with the British public – especially those sub-postmasters whose lives, liberty and livelihoods were robbed as a result of the Horizon scandal – we must avoid political point scoring in the search for answers.

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“I hope you will agree with me that the public deserve a swift and decisive resolution to these conflicting accounts.”

Downing Street on Tuesday said “it was right” for Ms Badenoch to make a statement about the circumstances surrounding Mr Staunton’s departure from the Post Office but insisted it could not “get into more detail about HR matters” when asked to provide evidence of bullying claims against him.

The prime minister’s spokesman said it would encourage the Post Office to share a note Mr Staunton said he had made of a senior civil servant telling him to delay compensation spending, “if such a note exists”.

Hundreds of sub-postmasters and sub-postmistresses are still awaiting payouts despite the government announcing that those who have had convictions quashed are eligible for £600,000 in compensation.

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