Southeastern to be taken over by OLR

ExRes · 28 Sep 2021

Chrisgr31 said:
Cynics might suggest it is an attempt to get fuel and the Labour conference off the front page.

I can hardly imagine a railway matter would take either of those out of the news, I probably saw more cars in petrol station queues last night than there are trains in the UK

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Horizon22 · 28 Sep 2021

Brissle Girl said:
So if the CFO of the Group is implicated from his time at Southeastern, I'd suggest that's pretty serious for the Group, as he clearly knew about it during his time as Group CFO. Thus the Group cannot claim that its officers weren't aware of what was going on.

And of course, there is the other point that someone who turns out to have been book-cooking at a subsidiary was rewarded (albeit possibly unwittingly) by a promotion. Maybe that promotion came about because of good results on the back of the potential fraud.

The CFO is (was) female, but yes it is rather concerning.

LNW-GW Joint · 28 Sep 2021

Dai Corner said:
So today's announcement is really that the DfT has decided not to exercise its option to extend the contract. The financial irregularities may be a factor of course. £25m doesn't seem to be that much in the context of the total payments which will have been made between the two organisations over the last seven years though.

£25m is a sizeable sum, and "irregularities" are to be condemned, but the railway loses much larger sums without even blinking.
Such as the class 442 refurb debacle, electrification project overruns, cancelled franchise competitions or train procurement etc.
It probably simplifies the actions DfT were planning to take over establishing GBR.
The remaining question is whether Govia will be allowed to continue long-term with GTR - they are clearly trying to localise the damage to the SE operation.

Hophead · 28 Sep 2021

If the DfT is trying to claw back £25m, I hope there are some nervous (non)-suppliers of PPE out there.

matt_world2004 · 28 Sep 2021

I don't know why people are conspiratorialising that the dft used the missing £25 million as a pretence to take back the franchise. They could have taken back the franchise on the 17th October anyway likewise, they could have taken back the GwR franchise too but that was given a direct award that continues it up until after the start of GBR

Dai Corner · 28 Sep 2021

LNW-GW Joint said:
£25m is a sizeable sum, and "irregularities" are to be condemned, but the railway loses much larger sums without even blinking.
Such as the class 442 refurb debacle, electrification project overruns, cancelled franchise competitions or train procurement etc.
It probably simplifies the actions DfT were planning to take over establishing GBR.
The remaining question is whether Govia will be allowed to continue long-term with GTR - they are clearly trying to localise the damage to the SE operation.

The Department for Transport extended Govia Thameslink Railway’s Emergency Recovery Measures Agreement from September 20 2021 until March 31 2022 so it would appear Govia succeeded in limiting the damage to SouthEastern.

Taunton · 28 Sep 2021

Horizon22 said:
BBC quotes a DfT report saying it has been going on for about 6 years (up until the EMAs presumably)

Frauds etc within one year are of course something that companies have to contend with from time to time. However for long term issues like this one has to ask additional questions.

Firstly, who were South Eastern's auditors? Their prime responsibility is to go through the accounts after the end of the year and report back that all the calculations have been done correctly. Or not. £25 million is not a sum which is readily lost such that the auditors do not see it. There have been multiple issues recently with auditors charging large fees but not identifying some key issues, as something of a style has developed that if they cause too much of an inquisition and upset, they won't get offered the lucrative audit next year.

Secondly, the DfT. They should have a principal function of overseeing the various calculations of money going back and forth between them and the operators. After all, it is the DfT who set the rules in the first place, and it is them who set down what sort of reporting they want back to justify the position, and have accountants on the DfT staff to check it all out. There are invariably some discussions back and forth, and recalculated final figures, that happen under normal circumstances in such relationships, so how was this missed by them for so long?

The "decisive action" is not particularly decided upon by Grant Shapps personally off his own bat, but by the senior staff at DfT advising him, so one wonders if they should be looking in the mirror as well.

XAM2175 · 28 Sep 2021

Hophead said:
If the DfT is trying to claw back £25m, I hope there are some nervous (non)-suppliers of PPE out there.

Nah, they're all pals of the current Cabinet. Nothing to see there.

dk1 · 28 Sep 2021

43096 said:
Or you get the response that it wasn’t “real Labour” in power, it was Tory-lite Tony.

zwk500 · 28 Sep 2021

Taunton said:
Frauds etc within one year are of course something that companies have to contend with from time to time. However for long term issues like this one has to ask additional questions.

The "decisive action" is not particularly decided upon by Grant Shapps personally off his own bat, but by the senior staff at DfT advising him, so one wonders if they should be looking in the mirror as well.

It is entirely possible (although I have absolutely no way of knowing either way) that both sides have been aware of this for a while and have been attempting to reach an agreement that lets everybody save face, but with the contract coming up for renewal the DfT has been forced to make a decision. A decision of this size is unlikely to have been made particularly soon after discovering the problem.

Out of interest, does anybody know if this is about SE misrepresenting their income but they've not taken more than they should have from the taxpayer, or if there genuinely is £25m to be reclaimed?

matt_world2004 · 28 Sep 2021

zwk500 said:
It is entirely possible (although I have absolutely no way of knowing either way) that both sides have been aware of this for a while and have been attempting to reach an agreement that lets everybody save face, but with the contract coming up for renewal the DfT has been forced to make a decision. A decision of this size is unlikely to have been made particularly soon after discovering the problem.

Out of interest, does anybody know if this is about SE misrepresenting their income but they've not taken more than they should have from the taxpayer, or if there genuinely is £25m to be reclaimed?

Iirc it was discovered in March 2020 so they have been negotiating all this time. It also raises the possibility that the resignation of the govia CFO was not as a result.of being involved in the fraud or failing to prevent it happen. But because they didn't get a favourable outcome with the dft.

brad465 · 28 Sep 2021

Bletchleyite said:
Slightly surprised they haven't shouted about nationalising it, as that's about the most popular policy decision the Government could make at the moment. I guess it's too unTory a policy

I've seen plenty of jokes surrounding Corbyn having de facto won the election and/or ticking off more of the Corbyn policy implemented by the Tories' bingo card.

ExRes said:
I note the usual Labour ramblings of "complete failure of the franchise model" and "bring rail franchises back into public ownership" are already being aired, why do they never mention the failure to do so between 1997 and 2010?

Probably because at the time Labour were trying to shake off the apparent troubles of nationalisation in their previous stint in power, and the big failure of neoliberalism (2008), which brought the "privatise profits, socialise losses" concept to reality hadn't happened until late on in that tenure.

Chrisgr31 said:
Cynics might suggest it is an attempt to get fuel and the Labour conference off the front page.

Trying to get the petrol situation off the front page, yes I can see them trying that easily. I'm not so sure about the conference though, as that doesn't seem to be going terribly well for Labour at the moment so if anything they'd want to keep that visible if they can.

Grumpy Git · 28 Sep 2021

I'm just imagining the negotiations I wouldn't have with HMRC if my VAT return was "out" by £2,500, (never mind £25,000,000)!

Wilts Wanderer · 28 Sep 2021

pdeaves said:
One of the press releases quoted above states "Decision follows an investigation which identifies over £25 million of taxpayer money was not declared by LSER". Given where the taxpayer's money comes from, I find this hard to square up. Can someone with better financial understanding than me explain what's going on here, please? It looks to my non-expert view that SE hasn't told government departments something they should have known anyway.

To belatedly answer this question, it may be that the £25 million funding in question didn’t originate with the DFT per se, it might have come from another governmental funding source such as local councils, or perhaps from LEPs, for particular targeted service improvements? If Southeastern Railway were maxing out their profits during this period it is easy to see where there could have been an incentive to conceal a source of income from the DfT.

stuu · 28 Sep 2021

Grumpy Git said:
I'm just imagining the negotiations I wouldn't have with HMRC if my VAT return was "out" by £2,500, (never mind £25,000,000)!

Big businesses do negotiate with HMRC all the time over the absolute minutiae of tax codes and any possible interpretation of them.

This definitely has the ring of distraction from the fuel crisis, after all stripping a company of it's contract on the day the contract runs out is hardly the most draconian measure to take

Brissle Girl · 28 Sep 2021

The fact that the SFO is involved, and Go-Ahead notes the possibility of additional costs beyond the £25m refunded means that we may not have seen the most draconian measures yet. But clearly, a statement needed to be made to the market regarding Go-Ahead not continuing beyond the expiry date, and both parties have acknowledged the reason that the decision was made. Once that decision is communicated to G-A, it can't not tell the market, as it is a very material fact.

So I don't think this is a distraction from the fuel crisis, just a necessary announcement that was required.

Hophead · 28 Sep 2021

stuu said:
This definitely has the ring of distraction from the fuel crisis, after all stripping a company of it's contract on the day the contract runs out is hardly the most draconian measure to take

But it's not being reported as such - it's all about "stripping the contract". So Shapps gets the good news vibes from his apparent decisiveness. Given that the Metro operations at least don't have a great reputation, he can also get further kudos from, for example, introducing a small fleet of reasonably new, refurbished, trains which can replace some of the older units "shamefully left in a poor state by the previous operator".

Which obviously sounds rather cynical, but this is mainly politics, so worth keeping an eye on future press releases.

Class 466 · 28 Sep 2021

I really hope “investing in passenger improvements on the existing fleet of trains” actually means something tangible.

infobleep · 28 Sep 2021

Domh245 said:
It's also been pointed out that the emergency agreement signed last year ran until 16th October 2021, which makes this a convenient 'run-out' ending rather than any particular proactive termination

Southeastern confirms new Direct Award Contract

Southeastern today confirms that the Department for Transport (DfT) has awarded a Direct Award Contract to Govia (a subsidiary of the Go Ahead Group (65%) and Keolis (35%)) to continue operating the Southeastern franchise.

newsroom.southeasternrailway.co.uk

Interesting that they choose not to take up the extension of contract option.

Of course, if they knew something might not be right last year, would changing the operator to one of last resort be high on the cards given the pandemic was the focus.

stuu · 28 Sep 2021

Brissle Girl said:
The fact that the SFO is involved, and Go-Ahead notes the possibility of additional costs beyond the £25m refunded means that we may not have seen the most draconian measures yet. But clearly, a statement needed to be made to the market regarding Go-Ahead not continuing beyond the expiry date, and both parties have acknowledged the reason that the decision was made. Once that decision is communicated to G-A, it can't not tell the market, as it is a very material fact.

So I don't think this is a distraction from the fuel crisis, just a necessary announcement that was required.

The SFO is involved because Go-Ahead referred themselves to it, which strikes me as more about limiting any reputational damage, as if no case to answer is found they can claim to be squeaky clean. I suspect they wouldn't do that voluntarily if there was genuine criminal conduct.

JonathanH · 28 Sep 2021

Class 466 said:
I really hope “investing in passenger improvements on the existing fleet of trains” actually means something tangible.

If it is going to happen it would be good if it came with some improved passengers as well.

WesternLancer · 28 Sep 2021

ExRes said:
I note the usual Labour ramblings of "complete failure of the franchise model" and "bring rail franchises back into public ownership" are already being aired, why do they never mention the failure to do so between 1997 and 2010?

Because the labour party have been run by several different franchisees since that period :lol:

Same name, different party....

43096 · 28 Sep 2021

WesternLancer said:
Because the labour party have been run by several different franchisees since that period

Same name, different party....

The last one was the “operator of last resort”.

Grumpy Git · 28 Sep 2021

stuu said:
The SFO is involved because Go-Ahead referred themselves to it, which strikes me as more about limiting any reputational damage, as if no case to answer is found they can claim to be squeaky clean. I suspect they wouldn't do that voluntarily if there was genuine criminal conduct.

How many CEO's and/or CFO's accused by the SFO in the last 25 years have actually been found guilty and if so actually done time?

My vague recollections of recent history are of collapsed trials and massive bills for the tax payer, (great business for the legal profession however).

HamworthyGoods · 28 Sep 2021

theageofthetra said:
So what happens in this situation for staff travel facilities? Presumably they can no longer use other Govia services? Can they use other operator of last resort services e.g LNER?

The terms and conditions of such passes uses have a clear statement they are only valid whilst the owning group retains the franchise and extra benefits outside the usual PRIV/TOC pass arrangements cease on ending of the relevant franchise.

quantinghome · 28 Sep 2021

ExRes said:
I note the usual Labour ramblings of "complete failure of the franchise model" and "bring rail franchises back into public ownership" are already being aired, why do they never mention the failure to do so between 1997 and 2010?

Political parties have been known to change their policies from time to time.

Also, whatever you think about the franchise model, with some obvious exceptions, they ran reasonably well under Labour. Where they didn't, they were transferred to a management contract, or the franchise was removed from the holders. And frankly they had other fish to fry - Railtrack's collapse, sorting out the WCML upgrade, Thameslink, Crossrail, HS1 etc.

stuu · 28 Sep 2021

Grumpy Git said:
How many CEO's and/or CFO's accused by the SFO in the last 25 years have actually been found guilty and if so actually done time?

My vague recollections of recent history are of collapsed trials and massive bills for the tax payer, (great business for the legal profession however).

No idea, but I suspect they would fit in a taxi, and probably a phone box

Royston Vasey · 28 Sep 2021

JaJaWa said:
Serious Fraud Office are involved

Bexhill and Battle MP Huw Merriman, who chairs the Transport Select Committee, told the BBC: "I understand the Serious Fraud Office will be involved in this, so there is a limit to what I can say."

He probably shouldn't have even said that!

MotCO · 28 Sep 2021

The Daily Telegraph has updated its report

The Telegraph has learned that the operator has asked the Serious Fraud Office to investigate.
The Transport Secretary, Grant Shapps, said: “There is clear, compelling and serious evidence that [Southeastern railway] has breached the trust that is absolutely fundamental to the success of our railways. When trust is broken, we will act decisively.”
Whitehall sources said that the Department for Transport investigation into the matter is ongoing and could yet uncover more undeclared sums.

The issue is understood to relate to “variable track access charges". The operator runs services on high-speed tracks, known as HS1, which is owned by a group of private investors.
Under its agreement, the Government would pay Southeastern a fee, which it was supposed to pay to HS1. Any excess ought to have been returned to Westminster, which in this case did not occur.
However, errors dating back to 2014 have been identified. Industry sources said that problems were noted during negotiations between the Government and Southeastern to agree a new national rail contract.
The two companies that ran Southeastern in a joint venture, FTSE 250 bus and rail operator Go-Ahead and state-backed French firm Keolis, said they had returned the money and were conducting a review of how the mistakes happened.
The two companies also run Britain’s biggest rail network, Govia Thameslink. Whitehall sources said that if investigations linked further discrepancies back to the owning groups, further sanctions could be taken.
Sources close to the operator insisted that the issue was an isolated incident and had not been replicated on the owners’ other line.

Go-Ahead's finance chief, Elodie Brian, who was previously Southeastern’s finance head, has stepped down with immediate effect.
David Brown quit as chief executive of Go-Ahead in May, but there is no suggestion that this was in relation to Tuesday’s revelations.

Southeastern refers itself to fraud office after being nationalised

Government will run the franchise's rail services after it failed to repay £25m of taxpayer cash

www.telegraph.co.uk

It seems as though the issue relates to Access Charges for HS1, dating back to 2014, and was picked up during contract negotiations.

It also appears that Go-Ahead referred itself to the Serious Fraud Office

Snow1964 · 28 Sep 2021

dk1 said:
Go Ahead share price dropped almost 14% since opening today.

Go Ahead share price now over 25% down today

Group has lost over £100m in value

Southeastern to be taken over by OLR

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