Government steps in after LSER '£25m breach of franchise agreement'


London & South Eastern Railway (LSER) has been kicked off its Southeastern railway franchise after the Department for Transport discovered it had failed to repay £25m of taxpayer cash.

The Government's Operator of Last Resort (OLR) will take over services on the network from 17 October 2021, after what the Department for Transport (DfT) called 'a serious breach of the franchise agreement’s “good faith” obligation in relation to financial matters'.

The DfT said an investigation identified evidence that since October 2014 LSER has not declared over £25m of historic taxpayer money.

All of the money has now been recovered, the DfT said, while further investigations are being conducted by the owning group into all related historic contract issues with LSER.

Following these investigations, the Government said it will consider options for enforcement action, including statutory financial penalties under the Railways Act 1993.

'On the basis of the available evidence, we consider this to be a significant breach of the good faith obligation within the franchise agreement and will not be extending a further contract to LSER,' the DfT said in a statement.

'The Government believes it is essential that there is public trust in operators, who should prioritise the very best for passengers. Given the Government’s commitment to protecting taxpayers’ interests, this decision makes clear we will hold private sector operators to the highest standards, and take swift, effective and meaningful action against those who fall short.'

Transport secretary Grant Shapps, said: 'There is clear, compelling and serious evidence that LSER 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.'

The OLR will ensure passengers see no interruption to their services, and there will be no changes to fares, tickets or services as a result of the move, the DfT confirmed. The OLR's management already owns and oversee London North Eastern Railway and Northern.

The DfT added that the intention is to eventually move services back into the private sector on a new Passenger Services Contract.

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