HS2 Ltd threw away close to £2m more in redundancy payments in 2016-17 than it was allowed to by the civil service framework and despite direct instructions to not offer such generous terms from the Department for Transport (DfT).
In a damning report, Sir Amyas Morse takes HS2 Ltd to task for 'weakness' in its management and culture. These weaknesses had even been previously highlighted by the National Audit Office last year and acknowledged by HS2 Ltd itself.
Sir Amyas writes: ‘During the year [2016-17], HS2 Ltd spent outside the agreed framework, and did not comply with HM Treasury rules, by running a redundancy scheme at enhanced terms without the necessary approvals. Relevant commitments of £2.76m were, I estimate, £1.76m in excess of the amounts payable on the statutory rates authorised by the Department.’
This is despite a DfT instruction to not offer enhanced terms and evidence that a senior DfT official directly rejected HS2 Ltd’s request for enhanced redundancy terms via e-mail to a senior executive at the Government-owned company. This rejection was apparently not passed on to other members of staff.
Sir Amyas writes: ‘I have seen evidence that the Department rejected HS2 Ltd’s request, via an e-mail from a senior official at the Department and a senior executive at the company. No evidence has been presented to me suggesting that this was passed on within the company.
‘I would have expected HS2 Ltd to be conscious of the Department’s previous rejection, and in any case to await explicit written approval before taking action.’
On top of this, HS2 Ltd seemed unaware of changes to the civil service framework - even though there was public consultation on the issue - which could have prevented it offering the enhanced terms.
‘HS2 Ltd argued that the terms proposed were reasonable since they were similar to those of the Civil Service Compensation Scheme (CSCS) operating at the time. However, the Cabinet Office changed CSCS terms in November 2016, before HS2 Ltd finalised any redundancies, from one month to three weeks pay per year’s service. HS2 Ltd should have been aware of this change as the Cabinet Office consulted on the proposed changes in February 2016 and publicly responded to the consultation in September 2016.’
Sir Amyas Morse states: ‘It is clear to me, and should have been clear to HS2 Ltd as it made commitments, that:
- explicit approval from the Department was required for any departure from statutory levels;
- the Department rejected the company’s request to enhance schemes to civil service rates;
- additional enhancements had 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’ to work around this constraint'
HS2 Ltd made the redundancies for a range of reasons including moving its headquarters to Birmingham, the end of the Hybrid Bill period, and re-structuring the business as it moved from the initial phases of the project into delivery and construction.
The chairman of HS2, Sir David Higgins, said: 'The NAO report is clear that we did not have the approvals we needed to proceed with these redundancy payments and, therefore, that was a serious error. We are now implementing all of the NAO’s recommendations in full and our new chief executive, Mark Thurston, will ensure this doesn’t happen again.'
Retrospective approval has not been given either by the Department or HM Treasury. However HS2 Ltd has been advised it is legally obliged to honour agreed exit packages.
The DfT has asked HS2 Ltd not to agree any further redundancy packages under these terms, where the point of obligation has not passed.