The National Audit Office (NAO) has qualified the accounts of High Speed Two (HS2) Ltd, the company set up by the Department for Transport (DfT) to develop, build and operate a high speed rail network, on the grounds it paid out £1.76m in unauthorised redundancy payments and lacked sufficient controls
In March 2016, the company sought formal permission for a redundancy scheme, as it needed to restructure its workforce, partly as a result of a decision to transfer its headquarters to Birmingham. The DfT gave written permission, which included a clear restriction that redundancy terms should be at statutory levels, as per HS2 Ltd’s established framework agreement with the department.
In response to a further request from HS2 Ltd to enhance redundancy terms to civil service levels, a senior official at the department instructed a senior executive at HS2 Ltd that no enhancements would be approved. In its report, the NAO has not seen any evidence suggesting that this instruction was passed on within the company, and retrospective approval has not been given either by the department or the Treasury for the enhanced terms.
The audit watchdog’s review has found that despite this, HS2 made commitments of £2.76m, of which the NAO estimates that £1.76m were not authorised because they related to unapproved enhancements.
Redundancy compensation was, as HS2 Ltd had proposed, paid at one month’s salary per years’ service. This was broadly in line with the Civil Service compensation scheme (CSCS) terms which had been superseded in November 2016, before any redundancies were finalised, and was well in excess of the authorised statutory level.
Additional enhancements in the voluntary element of the scheme have also been made well beyond civil service rates – for example, where individuals would be due lump sums in excess of the £95,000 CSCS maximum, they were offered ‘gardening leave’. In substance, this allowed exit packages of more than £95,000 to be paid.
In the NAO report, Amyas Morse, head of the NAO, said: ‘The sequence of events I describe suggests a weakness in HS2 Ltd’s control environment, and provides an example of ineffective communication both between the company and the department, and within the company.
‘Whilst deriving from a single redundancy scheme, these findings highlight the need for improvements in the company’s general control environment, where the company has itself acknowledged areas of weakness.’
Report of the comptroller and auditor general on the 2016-17 accounts of High Speed Two (HS2) Ltd is here.
