Train operator Southeastern has been stripped of its franchise after failing to declare more than £25 million of taxpayer funding, the Department for Transport (DfT) has announced.
Elodie Brian, the chief financial officer of transport firm Go-Ahead – the majority owner of the rail firm’s parent company Govia – has resigned.
Conservative MP Huw Merriman said he understands that the Serious Fraud Office “will be involved”.
The Government will take over running services on Southeastern’s network – which runs across south-east England, covering London, Kent, East Sussex and the High Speed 1 line – from October 17.
Investigations have identified a serious breach of good faith by Southeastern.
To protect taxpayers’ interests and passengers I have ordered the Operator of Last Resort to urgently take over the running of rail services in the South East. [1/3]
— Rt Hon Grant Shapps MP (@grantshapps) September 28, 2021
Transport Secretary Grant Shapps said an investigation by his department identified evidence that since October 2014 the company has not declared more than £25 million of historic taxpayer funding which should have been returned.
Further investigations are being conducted and the Government said it will consider options for more action, including financial penalties.
Mr Shapps said: “There is clear, compelling and serious evidence that LSER (London & South Eastern Railway) have breached the trust that is absolutely fundamental to the success of our railways. When trust is broken, we will act decisively.
“The decision to take control of services makes unequivocally clear that we will not accept anything less from the private sector than a total commitment to their passengers and absolute transparency with taxpayer support.
“Under the new operator, we will prioritise the punctual, reliable services passengers deserve, rebuild trust in this network, and the delivery of the reforms set out in our Plan for Rail – to build a modern railway that meets the needs of a nation.”
Southeastern’s services will be run by the Government Operator of Last Resort, which already oversees London North Eastern Railway and Northern.
The DfT said this will have “no impact” on Southeastern’s staff.
Mr Merriman, who chairs the Transport Select Committee, said a need for “confidence in our railways” likely led the Government to take action.
Asked about the situation on BBC Radio 4’s Today programme, he said: “This has just been announced at 7 o’clock and I understand the Serious Fraud Office will be involved in this, so there is a limit to what I can say.”
He added: “If there appears to be evidence of wrongdoing, then it is right to sweep away.”
A brief statement on Southeastern’s website said: “Our passengers will see no change in our day-to-day operations.
“All tickets will remain valid after transfer and new tickets can continue to be purchased in the usual way.”
Southeastern has been running services since 2006, operating one of the busiest networks in the country including the UK’s first domestic high-speed service with Javelin trains.
It employs employs 4,000 workers and serves 180 stations using a fleet of almost 400 trains
Southeastern’s latest contract started in April 2020, running until October 16, with the option to extend at the DfT’s discretion until March 2022.
Go-Ahead shares fell more than 22% in morning trading.
The firm’s chairwoman Clare Hollingsworth said: “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.”
The group said the release of its results for the year ended July 3 2021, scheduled for September 30, has been postponed.
Shadow transport secretary Jim McMahon said: “This is yet another example of the complete failure of the franchise model, which prioritises private company profits over passengers and service.
“Labour has long argued that public ownership of the rail network will provide better value for the taxpayer.”
Govia, a joint venture between Go-Ahead (65%) and Keolis (35%), also runs Govia Thameslink Railway, which operates Thameslink, Southern, Great Northern and Gatwick Express trains.
Rail, Maritime and Transport union (RMT) general Secretary Mick Lynch said it “defies belief” that the company is still running rail services “after this scandal was exposed”.
He added: “They should be kicked out and the whole network should be brought into public ownership.”
Analysis by the PA news agency shows that the DfT’s announcement will result in a quarter of passenger journeys in Britain being on trains directly run by governments.