Yahoo Finance Government to take over Southeastern after ‘serious’ breach of franchise
The government is to strip Southeastern railway services from the private operator, Go-Ahead, after uncovering a missing £25m in what it said was a “serious” breach of the franchise agreement.
The railway, one of Britain’s biggest commuter networks, will come under direct public control from mid-October.
The transport secretary, Grant Shapps, said an investigation had found that since 2014 Southeastern had not declared more than £25m of historical taxpayer funding that should have been returned, and described this as a serious breach of the franchise agreement’s “good faith” obligation.
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Shapps said the money had been recovered and further investigations were being conducted into historical contract issues related to the franchise, and further options for enforcement action including fines could follow. It is understood the matter is to be referred to the Serious Fraud Office, although the Department for Transport did not comment.
Unions called for a wider fraud investigation and for Go-Ahead to be stripped of its other train operations.
Go-Ahead said “while the contracts concerned are highly complex”, it “acknowledges that errors have been made in relation to the franchise” and that the £25m had been repaid.
Shapps said: “There is clear, compelling and serious evidence that for years, London and South Eastern Railway Services have breached the trust that is absolutely fundamental to the success of our railways. When trust is broken, we will act decisively.”
The franchise will be run by the government’s in-house operator of last resort – which currently manages both London North Eastern Railway and Northern – from 17 October. Shapps said the move would not affect the 4,000 jobs at Southeastern or fares, tickets and train services for passengers.
Southeastern is run by Govia, a joint venture with France’s Keolis, dominated by Go-Ahead with a 65% share. At its peak before the pandemic, Southeastern was carrying about 640,000 passengers a day on commuter routes between London, Kent and Sussex, including fast services on the High Speed 1 line.
The chairs of Go-Ahead and Keolis are conducting an internal investigation. The Go-Ahead Group chair, Clare Hollingsworth, said: “It has always been this group’s intention to provide the best possible public transport, and to work in partnership with the government and related agencies. We recognise that mistakes have been made and we sincerely apologise to the DfT. We are working constructively with the DfT towards a settlement of this matter.”
Go-Ahead has again postponed its annual financial results, which had been put off from 1 September to this Thursday. The group’s chief financial officer, Elodie Brian, has resigned after two years in the job and 13 years with the company. She was previously the finance and contracts director of Southeastern.
The takeover leaves Govia with Govia Thameslink Railway (GTR), which runs the Thameslink, Southern, Great Northern and Gatwick Express services.
Go-Ahead also runs trains in Germany and Norway and is the biggest operator of buses in London.
Labour and unions said the rest of the railway should follow Southeastern into public ownership. Jim McMahon, the shadow transport secretary, said: “This is yet another example of the complete failure of the franchise model, which prioritises private company profits over passengers and service.”
The RMT union said any fraud investigation should be widened. Its general secretary, Mick Lynch, said there should be “a forensic examination of all the private rail contracts”, adding: “It defies belief that even after this scandal was exposed that Govia are still running UK rail services.”
Manuel Cortes, the leader of the TSSA union, said: “We need the government to dump the failed franchise system, end the profiteering of the train operating companies and take over the whole thing.”
