DfT perm sec to seek legal advice on former HS2 chief accused of ‘defrauding taxpayers’

Written by Tamsin Rutter on 31 October 2017 in News
News

Bernadette Kelly asked by MPs to look into “possibility of fraud” over £1.7m made in unauthorised redundancy payments

The Department for Transport’s permanent secretary has promised MPs that she will seek legal advice on what action can be taken against a former HS2 chief who may have allowed £1.76m to be paid out through enhanced redundancy terms, despite knowing that they were unauthorised.

Bernadette Kelly said yesterday it was “clearly extraordinary and extremely disappointing” that the payments had been made despite clear instructions from the department to then HS2 chief executive Simon Kirby that a scheme was to be implemented on statutory terms only.

She was responding to questions from MPs on the Public Accounts Committee, one of whom accused Kirby – who, on £750,000, was at the time Britain’s highest paid civil servant and now works for Rolls-Royce – of “defrauding” taxpayers.

A July National Audit Office investigation revealed that of a total £2.76m paid last year in redundancy to 72 former HS2 employees, payments worth £1.76m were “unapproved enhancements” in line with the 2010 Civil Service Compensation Scheme.


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It emerged during a Public Accounts Committee hearing yesterday that an email was sent on 14 April 2016 by senior DfT official David Prout to Kirby, stating that enhanced redundancy terms were “a red line for the department”.

Steve Allen, HS2’s chief financial officer who announced his resignation this month, told MPs the email was not seen by anyone else in HS2, and that he had only became aware of it in April of this year. The company proceeded with the enhanced payouts on the assumption that permission had been granted.

Geoffrey Clifton-Brown, a Conservative MP on the committee, asked Kelly whether taxpayers had been “defrauded” by Kirby. “Surely there is an element of fraud involved here and should not action be taken against Mr Kirby?

“He knowingly authorised a scheme to pay out excess sums of taxpayers’ money when he knew that it wasn’t authorised.”

The permanent secretary said it wasn’t clear what steps Kirby had taken to disseminate the information within HS2, and that the company was now “rightly focusing on… strengthening its [financial] controls”.

But pressed on what legal action the department could take against Kirby, Kelly said she wasn’t sure what can be done now he has left government but she promised MPs she would seek legal advice and update them on the courses of action available to her.

“Despite a very clear instruction from a senior official in the department to Mr Kirby, the fact that that instruction was not acted upon is clearly extraordinary and extremely disappointing,” she said.

An internal audit by the department pointed to a number of failures at HS2 rather than one individual being wholly responsible, she added.

In a statement seen by the Financial Times, Kirby confirmed he had been contacted by DfT about the audit of HS2’s accounts and redundancy payments, and claimed he had not approved the payments.

“I left HS2 in December last year and the decision to make senior managers redundant, and under what terms, was not made until after I left,” he added. “I did not approve the payments at issue and deny any allegation of wrongdoing.”

Allen, who is to leave the company next March, told the committee that it was right for him to take responsibility after it became clear that teams that reported to him had misled the board and executive of HS2.

But he denied that he had been involved in “what has been alleged as a cover up” and insisted that he’d cooperated fully with the NAO and DfT’s internal audit. Allies of transport secretary Chris Grayling were among those to accuse HS2 of a “cover-up”.

“I have been completely open and transparent about what I knew of these payments at the time and subsequently,” Allen added. 

Allen also said that no-one involved in putting together the enhanced redundancy scheme received any payments under it.

Asked by committee chair Meg Hillier whether there was any prospect of reclaiming some of the money, Mark Thurston, the current chief executive of HS2, confirmed there was not.

“I think it’s worth saying up front that we got this wrong as a company,” he said, adding that HS2 had accepted all recommendations made by the NAO.

The scheme was put in place as part of the company’s decision to relocate its headquarters from London to Birmingham, and Thurston said HS2 had sought enhanced terms to encourage staff to stay on until they could be replaced.

Enhanced redundancy terms, in line with the 2010 Civil Service Compensation Scheme, were set at one month’s salary per year of service – much higher than what is guaranteed under statutory redundancy terms. 

HS2’s board, executive and remuneration committee had all been briefed that the Department for Transport had approved the enhanced terms, despite there being no documentary evidence to support this, the HS2 officials said.

Another concern raised by the PAC was about claims that HS2 attempted to change information relating to the payments retrospectively.

A presentation on HS2’s redundancy scheme, which was dated February 2016 and sent to DfT, made no reference of enhanced terms. But in the version later sent to the NAO during its investigation an additional slide illustrating enhanced terms had been inserted.

Thurston said HS2 had instigated a review into this, which suggested that an individual in the HR department – who has now left the company as part of the restructuring process – had altered two documents to correct an earlier mistake.

“The signs of the review we’ve done thus far suggest that it’s contained to one individual and just those documents,” he added.

HS2 Ltd, an executive non-departmental public body, is running the £56bn scheme to build a rail line from London to Birmingham, which is due for completion in 2026 and will be extended to Manchester and Leeds in 2032-33.

About the author

Tamsin Rutter is senior reporter for Civil Service World and tweets as @TamsinRutter

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