An ex-South Warnborough postmistress is set to receive compensation of up to £100,000 after her fraud conviction was quashed following a Post Office scandal.

Josephine ‘Jo’ Hamilton was wrongfully accused of stealing £36,000 from the Post Office and pleaded guilty to avoid prison after being pursued by the firm. However, the Post Office later admitted that it knew the software behind its computer terminals, Horizon, was prone to errors that caused money to apparently disappear from accounts.

The government will now fund interim compensation of up to £100,000 for each subpostmaster affected by the scandal while full settlements for their “immense hardship” are agreed. The Post Office is contacting postmasters and will aim to make an offer for an interim payment within 28 days of receiving an application from those whose overturned convictions relied on Horizon evidence.

Postal Affairs minister Paul Scully said: “The suffering and distress these postmasters and their families have gone through cannot be overstated.

“While nothing will make up for the years of pain they faced after this appalling injustice, I hope this initial step provides a measure of comfort.

“The Post Office has started to turn a corner in terms of dealing with its past mistakes – and this Government will support them in doing so wherever possible.”

63-year-old Jo first noticed problems in 2003 when her till system showed there was £2,000 missing.

Jo contacted Post Office support who advised her how to resolve the issue. However, after following their instructions, the discrepancy doubled to £4,000.

"I panicked and altered the figures in the system,” she said. “This eventually led to a missing amount of £36,000.”

She added: "I was officially summoned in 2006 and entered a plea bargain with the Post Office. I pleaded guilty to false accounting in 2008 because I was afraid of going to jail.”

The grandmother has to remortgage her house to pay back the missing money, and had to work as a cleaner to make ends meet.

However, evidence began to emerge that the Horizon software her conviction was based on was prone to “inexplicable discrepancies” that the Post Office were aware of, but chose not to investigate.

As a result, the Court of Appeal has now overturned 57 convictions relating to the scandal, with hundreds of others expected to apply to have their convictions quashed.

“I was persuaded by friends and family to join the group who were appealing their convictions and I am glad I did,” she said.

“It has been difficult but to be honest, I have been very lucky in the village. People have been very supportive.”

“I think this is the biggest miscarriage of justice,” she said.

“You think of the Birmingham Six and the Guildford Four – but there are hundreds of us.

“I was 45 when this started. It’s taken up nearly a third of my life. You think it’s never going to end.”

Neil Hudgell, who represented Jo and many of the other victims of wrongful convictions due to Horizon, said: “The dialogue we have been having with legal representatives instructed by the Post Office has been very positive to this date and there appears to be good intentions.

“This cautiously positive step is to be welcomed and suggests, hopefully, that the Post Office is now intending to do right by the many people it has harmed so badly.

“This cannot be a delaying gesture though. This is money to which these clients are entitled. With regards to how final settlements are agreed, we want them to come to the table and be meaningful in what they put forward.

“We don’t want to see any legal gymnastics, game playing or delaying tactics. We want to see words very quickly translate into actions, and hopefully this is a positive start that will ease some of the pressures our clients are facing.”