New HS2 fraud allegations as cost could pass £100bn and further delays expected

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HS2 has been plunged into fresh chaos after whistle-blowers came forward with claims of “large-scale” tax fraud, The i Paper can reveal.

The claims relate to the West Midlands section of the high-speed railway project between Birmingham and London which has been hit by repeated delays and cost increases.

The allegations are that an HS2 sub-contractor has been falsely declaring self-employed workers as PAYE (Pay as You Earn) salaried staff and charging an inflated rate for them, then submitting “fake” payslips, it is claimed.

An internal investigation has been launched, overseen by HS2 Ltd’s central fraud team, and the firm has been suspended from working on the West Midlands section of the project pending the outcome. It has been permitted to continue working on the other three sections of HS2. The company has denied any wrongdoing.

HS2 could refer the claims to either HMRC or the police, though The i Paper understands neither are involved at this stage.

The new investigation will increase further pressure on the Government over the project, which has been dogged by consistent allegations of fraud.

Labour promised to get a grip on HS2 when it came to power and announced the Government would be taking back “ministerial oversight” before Christmas.

However, the tax probe threatens to give critics fresh ammunition for claims Labour is failing to take control. Nigel Farage’s Reform party has said it would cancel the “bloated” HS2, saving the taxpayer £25bn.

A Government source said: “We are taking a keen interest in this issue on behalf of the taxpayer and expect there to be serious consequences if these claims are substantiated.”

Claims of ‘fake’ PAYE slips to mislead auditors
The investigation has been sparked by two separate whistle-blowers.

The claims relate to the Balfour Beatty VINCI (BBV) joint contractor venture which is building the West Midlands section of the high-speed railway between Birmingham and London.

Danny Sullivan Group, a business which supplies labour to HS2, has been suspended from involvement in the BBV section of the project pending further investigation.

An employee first raised concerns about Danny Sullivan Group, which relate to the alleged misclassification of self-employed workers, in February, HS2 Ltd said.

On 11 April, a HS2 employee sent an anonymous email to HS2’s chief executive Mark Wild and the entire HS2 board concerning Danny Sullivan Group.

In the email, shared with The i Paper, the employee claims that during an audit “it was discovered that Danny Sullivan Group had around 70 operatives working under CIS [the Construction Industry Scheme].”

The CIS allows contractors to deduct payments from subcontractors to count towards their tax and national insurance contributions.

The previous Conservative government announced new rules in 2024 to tighten up the scheme amid concerns it was open to manipulation. HMRC had discovered abuses relating to CIS deductions, including but not limited to deductions being claimed by subcontractor companies that did not operate in construction.

The whistle-blower email claims that when questioned, staff at Danny Sullivan Group “submitted fake PAYE payslips in an attempt to mislead auditors”.

They added: “I find it deeply concerning that our taxes are being wasted through ongoing fraudulent activity.”

Last week, a second whistle-blower also shared their concerns about the alleged PAYE fraud in an anonymous letter sent to The i Paper as well as HS2 Ltd.

“This is fraud on a large scale which the public have a right to be informed of,” the letter said.

Although the current allegations relate only to the BBV joint venture, all the other sections of HS2 have also been alerted and are carrying out audits.

The i Paper can also reveal that the investigation has led to the resignation of a senior manager at BBV over his failure to declare football tickets he accepted as gifts from clients.

A second business was also investigated in January and subjected to “monitoring” but has since been reinstated.

‘They try and butter you up’ – former HS2 manager
Investigations into the alleged PAYE fraud at HS2 appear to have led to the resignation of John Gill, a senior manager at Balfour Beatty for 37 years.

He told The i Paper he was hauled into a HR meeting in February after the company received an anonymous complaint that he was accepting tickets to football matches from clients, including labour suppliers, without declaring it.

Gill admits this was true and that he was forced to resign, even though he felt he had done nothing wrong.

A whistle-blower claims Gill was accused of accepting bribes in return for facilitating “extra labour allowance” on HS2.

Gill denied this allegation.

“That’s nothing to do with me [the alleged tax fraud] but that’s what they’ve been doing,” he said.

“It was never done for labour. It was done out of… goodwill really. They still do it now.

“All the agencies all over the country [ask] ‘oh do you want some tickets for Man United?’ and they try and butter you up with it.

Gill added: “HR took me down an ugly route and I was forced to hand my notice in before I lost my job – it was horrible.

“Now I’m stuck at home out of work.”

Labour supplier ‘acted swiftly’ over allegations
It is understood BBV is leading the internal investigation, though its work will be subject to a review by HS2 Ltd’s central fraud team.

A HS2 spokesperson said: “We treat all whistle-blower allegations seriously and employees are actively encouraged to speak up if they see or hear something that concerns them.

“We are aware of the claims that have been made, and an investigation is currently under way.

“Additional monitoring and controls have been implemented while the current investigation is under way.”

A spokesperson for Danny Sullivan Group said: “We are aware of the allegations that have been raised in relation to HS2.

“As a business with a long and reputable history we take these allegations extremely seriously and are co-operating fully with the ongoing investigation.

“We have acted swiftly to respond to the information, commissioning a detailed and thorough internal review, which remains ongoing.”

The existence of an investigation does not mean that any wrongdoing has necessarily occurred.

Balfour Beatty VINCI is not accused of any wrongdoing – the company did not reply to a request for comment.

The second firm which was investigated earlier this year denies any wrongdoing and says it has not been suspended from HS2, nor notified that it is under investigation.

Only one third of HS2 ‘civils’ phase complete
It is not the first time HS2 has been dogged by allegations of fraud. In 2023, its internal fraud unit began investigating claims that cost overruns had been deliberately covered up.

Whistle-blowers told The Sunday Times that parliament was not made aware of the true costs of the high-speed line when it voted on laws that approved the construction.

The company denied any wrongdoing.

More than £32bn has been spent on HS2 to date but only 15 of 310 structures – including bridges, viaducts, cuttings and embankments – needed for phase one are complete, according to the latest figures supplied by the project.

Speaking at a conference earlier this month, Wild, HS2’s chief executive, admitted the “civil engineering” phase of construction should be between 70 to 80 per cent complete by now.

He is currently carrying out a full assessment of HS2, including costs and a new estimated completion date, and is due to report back to the Government later this year.

However, according to RAIL magazine, Wild has already informed Transport Secretary Heidi Alexander that the cost will go beyond £100bn and will not be complete until the late 2030s.

A spokesperson for the Department for Transport said: “The Government and HS2 ltd take all whistle-blower allegations extremely seriously and have a zero-tolerance attitude towards fraud, bribery, and corruption.

“We will therefore ensure any claims of wrongdoing in HS2’s supply chain are thoroughly investigated.

“We have taken action to grip the delivery of HS2, tasking CEO Mark Wild to fundamentally reset the project and change the company’s culture and capability to deliver the line as cost effectively as possible.

“uSiNg ThE pRiVaTe SeCtOr MaKeS eVeRyThInG mOrE eFfIcIeNt”.

It’s known that DSG are dodgy and it’s amazing anyone still uses them. This isn’t the only scheme they’ve done this on this year. I’m aware of at least one other where they did this exact same thing.

They were also doing it on Smart Motorways.

At this point I don’t think it’s hyperbolic to say that HS2 is probably the most badly managed and procured infrastructure project in human history.

Building also requires hefty paperwork, which slows projects. reopening a 3.3-mile train line to Portishead from Bristol took 79,187 pages of planning documents. Printed out, that’s 14.6 miles of paperwork — 4.5 times the length of the actual railway. The process has taken 16 years so far.

Blows my mind how inefficient our government is. Any other country could have had this done by now for a fraction of a fraction of that price

When will financial crime be punished properly?

This is an easy win for Starmer. He needs to go after this and win the next election on an anti-corruption ticket. It outflanks Farage from the right.