A Parliamentary committee session threw up some real surprises – including accusations that were “elements of fraud’ when it became clear that a direct email instruction from a senior Department for Transport official had been ignored by the Chief Executive of HS2 Ltd.
The Public Accounts Committee were taking evidence from HS2 and Dft senior officials on HS2 Ltd accounts, specifically overpayments made to staff which were outside their contracts and had specifically been forbidden by the Department for Transport.
This followed on from the the National Audit Office review of HS2’s accounts where it turned out that made redundancy payments of £2.76m in the last financial year, £1.76m of which compromised of “unapproved enhancements”, which had been expressly forbidden by Transport Secretary Chris Grayling. HS2 Ltd got around rules which cap redundancy payments to civil servants at £95,000 by allowing those leaving HS2 Ltd to go on paid ‘gardening leave’, on full pay after they had effectively left the organisation, with some staff receiving as much as £200,000.
The witnesses were Bernadette Kelly, Permanent Secretary, Department for Transport, Steve Allen, Chief Financial Officer, HS2 Ltd, and Mark Thurston, Chief Executive, HS2 Ltd. The Chair of the committee as Meg Hillier (Hackney South and Shoreditch).
The first thing the committee asked about was Steve Allen’s departure. He told the committee he had resigned after a second report audit report looking at the excess payments.
Early on the questioning outlined the facts of the case:
Geoffrey Clifton-Brown (Cotswolds): Moving on from the Chair’s question, can we just establish the facts? Under a redundancy scheme on enhanced terms, without receiving authority as required by your framework document—the Department’s framework document with HS2—commitments were made to 94 individuals, totalling £2.76 million, and in the C&AG’s estimate this was a whacking £1.7 million in excess of the amounts payable on the statutory rates that were authorised by the Department. Do you accept those figures, Mr Thurston?
Mark Thurston: Yes, I recognise those numbers.
Geoffrey Clifton-Brown: So £1.76 million of taxpayers’ money has been paid out on an unauthorised basis and, as we heard from the Chair’s question, cannot be recovered. Is that correct?
Mark Thurston: That is correct.
Chair: Can I just interject? We know that a colleague of ours—the right hon. Cheryl Gillan—has been tabling parliamentary questions and, in an amazing coincidence, she received answers to those questions at five minutes past four this afternoon, while we were in session. Why has this information not been in the public domain before, Ms Kelly?
Further questioning established that there had been discussions between HS2 Ltd, who had been pushing to be allowed to make payments in excess of their agreements, and the Dft in February to April 2016. The day after a request from HS2 Ltd, David Prout, a senior DfT official emailed Simon Kirby, then Chief Executive of HS2 Ltd, which described the issue as a ‘red line’ for the Dft, “making it very clear that the Department would not approve such terms”.
Looking into the matter to transpired that an unnamed individual at HS2 Ltd – who has since left – altered two documents between 2016 and 2017 to make it look references to enhanced payments had been contained in them. In particular a presentation used in August 2016 did not contain references to the enhanced terms, but a copy of it sent to the DfT in April 2017 did. Allen denied that the HR “lied” to the Board, instead arguing “misleading statements were given to the board, the remuneration committee and the executive“.
Steve Allen subsequently said that it appeared emails changed between February and April 2017.
Meg Hillier: It sounds like people knew exactly what was happening with these enhanced redundancy payments—or somebody did.
Geoffrey Clifton-Brown: This is shocking, really, Mr Thurston. It is shocking reputational damage for HS2. Surely somebody in your organisation must have realised that something was going wrong before the C&AG came along to expose all this. Was there nobody in your organisation, Mr Allen? Did nobody in your financial department realise that these emails, reports and slideshows had been tampered with?
On a discussion of the so-called gardening leave, Thurston said that the enhanced redundancy was to keep people in post during the move to Birmingham, although as the meeting’s chair pointed out later in the session, the payments of £95,000 to individuals was“more than five time the salary of many of our constituents”
There was a discussion of the framework document for HS2 Ltd which made it cleat that Treasury and Dft had to both agree extra payments beyond statutory requirements, with Geoffrey Clifton-Brown saying
Mr Kirby, as the chief accountable officer at the time and the steward of public taxpayers’ money who was responsible for this excess payment of £1.76 million—I have thought long and hard whether I ought to ask this question. Surely there is an element of fraud involved here, and should not action be taken against Mr Kirby for carrying out those actions?
and following a response from the Dft’s Permanent Secretary, Clifton-Brown followed up :
I am sorry to labour this question, but Mr Kirby was paid £750,000 and he has made unauthorised payments that have defrauded the taxpayer of £1.76 million, and you are saying that no action should be taken against him.
Clifton-Brown subsequently asked:
As a final question, do you not think that it is absolutely shocking that taxpayers have been defrauded of £1.76 million by one individual? If he had read that document, he must have known perfectly well what he was doing. Do you not think that that is absolutely shocking and should never, ever be repeated?
Bernadette Kelly: I think it is absolutely shocking. I completely agree. I wholly condemn the fact that an unauthorised scheme was carried out within HS2 Ltd. That is why as accounting officer I wanted a full and thorough audit into exactly what had happened. What I would say about that audit’s conclusion is that it points to a number of failures within the company; it does not necessarily point to a single individual as having been wholly responsible for that failure. Equally, though, I can understand the Committee’s remarks and view of the matter.
During a discussion of problems with HS2 Ltd’s accounting systems, Luke Graham (Ochil and South Perthshire) pointed out that ”the problem is that this company has been going for a while now—a few years. It is not a thrifty start-up. It has had the full support of Government—it is £55.7 billion.”
Bernadette Kelly said it was 81% certain that HS2 would open in December 2026, according to a a confidence assessment produced by HS2 Ltd.
In follow up questioning on the “top three risks” to the opening date Kelly said one of them “Community support and engagement around the route is enormously important, particularly now, as construction starts to get under way. That will become an increasing challenge, but also an important risk to be managed by the company”. The other two were the budget and whether HS2 would be delivered on time.
In questioning Mark Thurston, he conformed that the route for Phase 2b was finalised. There was also some discussion as to whether HS2 Ltd have withdrawn the excess offered to staff
Meg Hillier: Mr Allen, earlier, when I think Mr Thurston said that once the redundancy offer had been made it was legally impossible to rescind that offer—am I right in quoting you?
Mark Thurston: It was not legally impossible. We took legal advice, and the advice we were given was that if we were to revert to the statutory terms, which is all we had approval for, that could force us into a situation in which we had either single or multiple tribunals, in all of which we would not have had a very strong position as a company, because we had consulted on the enhanced scheme.
Meg Hillier: So it was a probability. Legal decisions are often about probability. On the balance of probabilities, you would have been tied up in tribunals and spending a lot of money on that.
Later Geoffrey Clifton-Brown asked Kelly whether the DfT “Would you welcome an investigation by our sister Committee—the Public Administration and Constitutional Affairs Committee, which is expert in these matters—into your new governance arrangements, so that it can examine whether they are the best available in the industry?”
Summing up the Chair, Meg Hillier said:
Can I just stress that, leaving aside the global figure, the £95,000 for gardening leave is more than five time the salary of many of our constituents? It is just unbelievable that in a few months people could earn more than five times what many people in this country earn in a year. It is a staggering amount of money when you look at it like that and when you look at the governance issues.