The Department for Transport pushed the chief financial officer of High Speed 2 to step down this week, after a government audit suggested an attempted cover-up relating to nearly £2m in unauthorised redundancy payments.
Steve Allen said on Tuesday that he would be leaving his role as finance director of HS2 at the end of the year, less than six months after the National Audit Office said the £56bn rail project had ignored orders from the DfT forbidding a £1.76m publicly funded redundancy scheme.
But an internal government report produced this month and seen by the Financial Times indicates that there may have been attempts to change information relating to the payments retrospectively.
The “enhanced” redundancy regime was first introduced last year. Some staff were put on paid leave to top up their redundancy payments to more than the £95,000 civil service compensation scheme limit. A small number of employees received more than £200,000.
In total, HS2 made redundancy payment commitments of £2.76m through the programme. According to the NAO, some £1.76m of payments were not authorised, despite the DfT ruling in March 2016 that any payouts should be on the standard statutory basis of one week’s pay for every year worked — a package designed to reflect market conditions in the rail sector.
But the report this month from the Government Internal Audit Agency suggests that some documents relating to the payment scheme were retroactively changed by unknown individuals at HS2.
The report’s findings left transport secretary Chris Grayling “apoplectic”, according to one ally, who accused HS2 of a “cover-up”.
Mr Grayling relayed his concerns to DfT officials, and Bernadette Kelly, the department’s permanent secretary, contacted HS2 management this week. Ms Kelly asked how Mr Allen would respond to questions on the audit report at a planned appearance at the Commons public accounts committee next Monday.
There were also multiple conversations involving DFT officials and their HS2 counterparts, in which the government made clear “it may not be a good idea for this person to stay”, according to one person familiar with the discussions.
A spokesperson for HS2 refused to comment on whether Mr Allen had been under pressure from the ministry to resign but said: “Steve himself made the decision to step down from his position as he felt it was the right thing to do.”
Mr Allen, who joined HS2 from Transport for London in October 2015, said on Tuesday that HS2 management had been “misinformed about the status of critical approvals for redundancies”.
Mr Grayling has been very clear that this kind of abuse of taxpayers’ money and abuse of process won’t be tolerated
“Those assurances were given by teams for which I was responsible and, obviously, I regret that,” he said, adding: “Whilst we are now putting in place the measures to strengthen financial governance systems and to provide robust financial stewardship for the company, I believe it will be appropriate for me to move on.”
The government audit confirmed that HS2 introduced the enhanced redundancy scheme “even after the department had instructed it not to”.
The auditors said DfT officials had emailed HS2 on at least two occasions with direct instructions that any variation from statutory terms needed further permission from the department.
“A senior official at HS2 acknowledged this instruction, yet the enhanced scheme proceeded,” the report said.
The auditors also found multiple examples of HS2 officials apparently changing official documents referring to the redundancy scheme.
One PowerPoint presentation sent by HS2 to the DfT in March 2016 mentioned the planned redundancies but made no reference to higher payments. One year later, a near-identical presentation was sent by HS2 to the NAO, with an additional slide illustrating the “enhanced redundancy terms”.
The auditors concluded that the PowerPoint had been amended, saying: “The limited evidence indicates the presentation was amended by someone at HS2, and HS2 have confirmed this.”
On another occasion, an email sent from HS2 to the department made reference to an “earlier communication of the full extent of the redundancy scheme”.
But the auditors said that after searching IT servers, they concluded that the referenced email “was not sent” and “appears to have been created to demonstrate earlier communication”.
“Why this was done is unclear,” the auditors said.
HS2 said it is looking into the auditors’ findings, including any allegations of a “cover-up”, and confirmed plans for staff to be given a “re-induction” on managing public money.
The DfT said: “Mr Grayling has been very clear that this kind of abuse of taxpayers’ money and abuse of process won’t be tolerated.”
Mr Allen could not be reached for personal comment on Thursday.