A former Post Office chairman has accused the Business Secretary of making “an astonishing series of claims” and mischaracterisations after she told MPs he had spread “made-up anecdotes” following his dismissal.

The row between Henry Staunton and Kemi Badenoch deepened on Monday after he claimed over the weekend that he had been told to stall compensation payouts for postmasters affected by the Horizon scandal.

In a statement to the Commons, the Business Secretary said there was “no evidence whatsoever” of his account and branded it “a blatant attempt to seek revenge” for his sacking.

She also claimed he was being investigated over bullying allegations before he was fired as chairman, and that concerns were raised about his “willingness to co-operate” with the probe.

Hitting back later on Monday, a spokesperson for Mr Staunton said Ms Badenoch had made an “astonishing series of claims” about the saga.

In a statement given to reporters, they said he had recorded the comment about delaying compensation “at the time in a file note which he emailed to himself and to colleagues and which is therefore traceable on the Post Office Server”.

In relation to the alleged bullying investigation, the spokesperson said: “This is the first time the existence of such allegations have been mentioned and Mr Staunton is not aware of any aspect of his conduct which could give rise to such allegations.

“They were certainly not raised by the Secretary of State at any stage and certainly not during the conversation which led to Mr Staunton’s dismissal. Such behaviour would in any case be totally out of character.”

Mr Staunton, who was sacked by the Business Secretary last month, used a Sunday Times interview to suggest that the alleged request to delay payouts was linked to concerns about the cost of Horizon scandal compensation heading into the election.

Ms Badenoch had said allegations relating to Mr Staunton’s conduct, including “serious matters such as bullying”, were being examined and concerns were also raised about his “willingness to co-operate” with the formal investigation.

Speaking in the Commons, she also described it as “so disappointing that he’s chosen to spread a series of falsehoods, provide made-up anecdotes to journalists and leak discussions held in confidence”.

Ms Badenoch said it had confirmed in her mind that “I made the correct decision in dismissing him”.

She told MPs: “Mr Staunton claimed that I told him that someone’s got to take the rap for the Horizon scandal and that was the reason for his dismissal. That was not the reason at all.

“I dismissed him because there were serious concerns about his behaviour as chair, including those raised from other directors on the board.

“My department found significant governance issues, for example, with the recruitment of a new senior independence director to the Post Office board.

“A public appointment process was under way but Mr Staunton apparently wanted to bypass it, appointing someone from within the existing board without due process. He failed to properly consult the Post Office board on the proposal, he failed to hold the required nominations committee, most importantly he failed to consult the Government as a shareholder – which the company was required to do.

“I know that MPs will agree with me that such a cavalier approach to governance was the last thing we needed in the Post Office given its historic failings.

“I should also inform the House that while he was in post a formal investigation was launched into allegations made regarding Mr Staunton’s conduct. This included serious matters such as bullying. Concerns were brought to my department’s attention about Mr Staunton’s willingness to co-operate with that investigation.”

Mr Staunton’s spokesperson said that the Business Secretary’s comments about the public appointment process were “once again a mischaracterisation of the situation”.

They said the Government via the UKGI had proposed an external candidate for the post, but the Post Office board ultimately voted 6-2 to appoint an internal candidate who was “in their view better qualified”.

A statement attributed to Mr Staunton, who took up the Post Office role in December 2022 following nine years as chairman of WH Smith, said: “It was in the interests of the business as well as being fair for the postmasters that there was faster progress on exoneration and that compensation for wrongly convicted postmasters was more generous, but we didn’t see any real movement until after the Mister Bates programme. We will leave it to others to come to the conclusion as to why that was the case.”

For Labour, shadow business secretary Jonathan Reynolds said ministers must ensure claims the Government had looked to stall Horizon compensation payments are “shown to be false in no uncertain terms”.

He said: “Yet we do now have two completely contrasting accounts, one from the chairman of the Post Office, and one from the Secretary of State, and only one of these accounts can be the truth.”

Ms Badenoch reiterated her denial of the claims and said: “There would be no benefit whatsoever of us delaying compensation.

“This does not have any significant impact on revenues whatsoever. It would be a mad thing to even suggest, and the compensation scheme which Mr Staunton oversaw has actually been completed, and my understanding is 100% of payments have been made, so clearly no instruction was given.”

While Ms Badenoch said the Government would not publish all relevant correspondence it had with the Post Office due to the ongoing inquiry, she did say that ministers would “consider” releasing “correspondence between departments and Mr Staunton in accordance with Freedom of Information rules”.

More than 700 branch managers were prosecuted by the Post Office between 1999 and 2015 after faulty Horizon accounting software made it look as though money was missing from their shops.

Hundreds of subpostmasters and subpostmistresses are still awaiting compensation despite the Government announcing that those who have had convictions quashed are eligible for £600,000 payouts.