PAC’s report says that during 2016–17 HS2 Ltd made £1.76m of unauthorised payments to staff through compulsory and voluntary redundancy schemes offered at enhanced terms well in excess of those authorised by the Department for Transport (DfT). There is no means for these sums to be recovered.

The inquiry found the unauthorised schemes were able to proceed because weak internal processes at HS2 Ltd prevented key decision-making and scrutiny bodies from receiving accurate information. HS2 Ltd lacks basic financial controls in other important areas, heightening the risk of fraud and financial errors such as duplicate payments.

PAC says this situation is exacerbated by an excessively high rate of staff turnover, which it wants both the DfT and HS2 Ltd to address as a matter of urgency to ensure that the flagship infrastructure project is delivered successfully.

In 2016, HS2 Ltd’s management decided to relocate staff from its London office to Birmingham, and chose to run a redundancy scheme for staff who would no longer be needed or who were unwilling to move.

Despite David Prout, the then-director general High Speed 2 Group within the DfT, telling Simon Kirby, the then-chief executive, in April 2016 that it was only allowed to offer statutory redundancy terms, HS2 Ltd committed to paying a total of £2.76m in redundancy payments to 94 individuals.

In comparison, statutory redundancy terms would have resulted in payments to the same individuals worth a total of only £1m. That unauthorised payment, plus other weaknesses in controls, led the National Audit Office to issue a qualified audit opinion on the company’s accounts in July 2017.

In the report PAC said it was concerned that about an apparent culture within HS2 Ltd of failing to provide full and accurate information to those responsible for holding it to account.

The report states: ‘The former chief executive of HS2 Ltd, Simon Kirby, had been specifically instructed by the department that enhanced redundancy terms were not acceptable but apparently chose not to communicate this to anyone else within the company.

‘Even though the former chief executive no longer has a contractual relationship with either the company or department, they both should carefully consider whether any further action can now be taken against that individual.’

PAC also flags up concerns about future progress with the £55.7bn project, which is currently forecast to exceed the funding available by £1.8bn. It said the department was unable to identify the three top risks facing the HS2 programme, explaining that it primarily relied on HS2 Ltd to identify and deal with risks.

For its part, HS2 Ltd said that although progress was being made in reducing costs, the forecast cost of phase two of the HS2 programme still exceeded funding by a significant amount, despite the company having identified £3.5bn of savings.

PAC report on High Speed 2 Annual Report and Accounts is here.