A crucial email from government forbidding HS2 from handing an extra £1.76m to departing colleagues can be revealed by the Guardian – and it shows that HS2’s chief executive was warned that even proposing such payouts “would cause enormous reputational damage to the company”.

Last week, MPs on the House of Commons public accounts committee said they were concerned that HS2’s then boss, Simon Kirby, had not been held to account for his role in the “shocking” £2.76m redundancy payouts that directly contravened civil service rules.

The MPs’ criticism of Kirby came even though they had not been made aware of the full contents of an email sent to him in April 2016 by David Prout, the Department for Transport’s director general for HS2.

MPs call for legal action over 'shocking' HS2 payouts Read more

Kirby said he “did not recall” whether he forwarded the email to others within HS2, the company responsible for building the new high-speed rail network.

The text of the email shows that Prout demanded he “nip something in the bud for me”: a request by HS2’s human resources staff to offer higher redundancy payouts than the statutory terms. Prout spelled out in capitals: “This is an absolute RED LINE for us. Company employees are not civil servants. They have to take the rough with the smooth.”

He added: “If this proposals [sic] surfaces in terms of a written proposition that gets anywhere near the top of the office here it will do enormous reputational damage to the company.”

MPs last week called on the government to consider legal action against Kirby, who has since left HS2 to become chief operating officer of Rolls-Royce. They said the forbidden payouts made by HS2 to 94 individuals, which should have totalled just £1m on statutory redundancy terms, were “a shocking waste of taxpayers’ money”.

Given details of the email by the Guardian, Geoffrey Clifton-Brown, a Conservative MP on the committee, said: “It would seem to be more damning on Simon Kirby than anything we’ve heard so far. It couldn’t have been stronger or clearer.”

After the email was sent, an HR director of HS2, Peter Gregory, briefed the board and executive committee that the DfT had approved the scheme.

The payouts have cast a pall over HS2, whose opponents have already long alleged that the £55.7bn budget to build the high-speed rail network is liable to spiral upwards. The PAC report warned that HS2 Ltd “lacks basic financial controls … heightening the risk of fraud and financial errors”. It recommended that “HS2 Ltd needs to make significant improvements to demonstrate probity, value for money and appropriate anti-fraud, bribery and corruption.”

While MPs said legal action should be considered against individuals, the DfT said it had received legal advice that bringing a claim against Kirby for breaching his duties would not be justified.

Kirby said in a statement last week: “I did not approve the payments at issue and deny any allegation of wrongdoing. I have had no contact from either the NAO or DfT on the audit of HS2’s accounts and redundancy payments.

“I left HS2 in December last year and the decision to make senior managers redundant, and under what terms, was not made until after I left. While I do not recall whether I forwarded one specific email from David Prout to others within HS2, the issue of statutory severance was well known within HS2 and I recall regular contact between HS2 and DfT – at a number of levels – on this specific issue.”

HS2 Ltd, a government-owned company, was set up in 2009 to create a proposed high-speed rail link between London, Birmingham, Manchester and Leeds.

The redundancy payouts, some of more than £200,000 rather than the £95,000 maximum, were offered after HS2 decided to relocate its HQ from London to Birmingham. HS2 Ltd has admitted that payments were “a serious error”.

The email in full