Ex-Post Office boss Paula Vennells told the government “with something of a pained expression” that subpostmasters “had their fingers in the till”, the Horizon IT inquiry has heard.

Former postal affairs minister Jo Swinson told the inquiry Ms Vennells was trying to convey the message that “although these might seem to be lovely people, clearly some of them are actually just at it”.

Ms Swinson said she was reassured that the former chief executive “spoke not only with the standing of a CEO of a major institution, but also with the moral authority of an ordained vicar”.

Ms Swinson, who was postal affairs minister between 2012 and 2015, told the inquiry she recalled “probing Paula Vennells on matters relating to Horizon on several occasions in person”.

She also said Ms Vennells “knew there was a problem with an unsafe witness, and she never told me”.

The former Liberal Democrat MP was referring to leading Fujitsu engineer Gareth Jenkins, who is the subject of a Metropolitan Police investigation on suspicion of perjury and perverting the course of justice.

Ms Swinson told the inquiry she “did not ask many questions” about the nature of the government’s role as shareholder of the Post Office and wished she had “intervened more”.

She added that she is “really sorry that I asked lots of questions and it wasn’t enough”.

Addressing what Ms Vennells told her about subpostmasters in her witness statement, Ms Swinson said: “On another occasion I recall Ms Vennells explaining to me in a tone of taking me into her confidence, with something of a pained expression, that while it was a sad situation, the reality was that some subpostmasters ‘had their fingers in the till’ or something to that effect”.

Asked by counsel to the inquiry Julian Blake what exactly was said, the former Liberal Democrat leader said: “What she was trying to clearly… explain to me was saying that… these are not words, this is my impression of what she was saying – that although these might seem to be lovely people, clearly some of them are actually just at it.

“It was that kind of tone, you know, ‘we have looked into this and it is very sad, but that is just the reality and so we have to act’.

“That’s what I recall from that – with the caveat that I don’t know the exact words.”

Ms Swinson described a memo labelling Mr Jenkins as an unsafe witness as a “bombshell”.

She told the inquiry: “Having seen the details provided to me by the inquiry, I am staggered that I made my statement in the Commons on July 9, and on July 15 Post Office Ltd received the memo… that said that the credibility of their key witness was fatally undermined.

“I cannot quite square in my mind how it was possible for, as the minister, as the shareholder, me to be responding to these issues, being given this briefing – and then that bombshell.

“I’m not a lawyer, but when I read that document in the briefing notes I couldn’t believe it. You do not need to be a lawyer – how could anyone read that document and not realise that this is something which demands urgent attention?

“And yet, where did that go? Well, we know that Paula Vennells was aware that there was problems with an unsafe witness, and she never told me.”

Concluding his questions, Mr Blake asked: “What do you think you did to contribute to the scandal?”

Ms Swinson replied: “There’s various things that I wish I had done differently. I should have met with Sir Alan Bates. I wish I’d asked to meet with (forensic accountants) Second Sight directly. I wish on a couple of occasions I had pushed more and probed more.

“One of those was when I was told that the Post Office was changing their prosecution policy… I think my response at the time was kind of relief and ‘about time’.

“But actually, I wish I’d asked more questions at that point, because I suspect that there were reasons for that, and if Post Office had been frank about that advice that they’d received – which I’m sure must be why they changed their prosecution policy – about the unsafe witness, years of anguish could have been saved for subpostmasters.

“Justice could have been years earlier if that… memo had been properly acted upon at the time. I didn’t know about it, and I wish I had, and I’m just really sorry that I asked lots of questions and it wasn’t enough.”

More than 700 subpostmasters were prosecuted by the Post Office and handed criminal convictions between 1999 and 2015 as Fujitsu’s faulty Horizon system made it appear as though money was missing at their branches.

Hundreds of victims are awaiting compensation despite the previous government announcing that those who have had convictions quashed are eligible for £600,000 payouts.