Southeastern to be taken over by OLR

[dk1]

Okay maybe for many of the staff below board level, but if the Govia exec board originally running things were to benefit from this in some way they won't now I'd have thought.

They have to continue as if nothing has happened until the very end & offer a smooth transition to the next operator. Staff will notice no difference apart from possibly a change of operator on their payslip. I see the Chief Financial Officer has left the business.

 

[brad465]

As a bit of trivia I'm due to go to Cardiff for the weekend of the 16-17 October, so it looks like I'll be going out on Southeastern's last day, then returning on the Government run franchise's first day, whatever it will be called (with GWR travel in the middle of the trip of course).

 

[Simon11]

It's not obvious when this "breach" took place, either during the formal (pre-covid) franchise contract period, or during the more recent EMA/ERMA contract periods.
I suspect it's the former, as the DfT takes all the revenue for a management fee in the present situation, with less scope for fiddling the books.
Really the action amounts to removing Govia from the expectation of a direct award for the South Eastern service contract.
It does turn the spotlight on other Govia matters, though (ie GTR), if they allowed irregularities like this to happen at SE on their watch.
Keolis are in there too as part of Govia, but I imagine they wouldn't be involved in day-to-day operation of the franchise.

Is Michael Holden busy at the moment?
It could be déjà vu, all over again...

Going right back, apart from DfT intervention over the two South Eastern issues, the franchising process found irregularities at the LT&S (now c2c) BR operation which delayed the initial franchise award.

Southeastern stripped of franchise over undeclared funding

Southeastern failed to declare more than £25m of taxpayer funding that should have been returned.

www.bbc.co.uk

"A statement from the Department for Transport (DfT) said it had found evidence that since October 2014 historical taxpayer funding of £25m, which should have been returned, had not been declared."

I wonder whether anyone is at fault within DfT for not noticing it earlier either?

 

[dk1]

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

 

[pdeaves]

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.

 

[Djgr]

More karma for the bus bandits

 

[Watershed]

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.

Could be something as 'simple' as Network Rail compensation. But yes, questions need to be asked about how the DfT didn't catch this sooner.

 

[Fincra5]

Could be something as 'simple' as Network Rail compensation. But yes, questions need to be asked about how the DfT didn't catch this sooner.

What's to say they weren't aware already...

It's very well timed with the end of the current SE Franchise, if you ask me... political brownie points for Shapps..

People excited about what OLR will bring to the SE, probably nothing. Will be run the same, branded the same etc...

 

[cjohnson]

This looks to have been flagged in Go-Ahead's annual accounts for year ended 27 June 2020, announced in September 2020. So looks like DfT/LSER have been aware of it for at least 18 months.

On 31 March 2020, the Secretary of State for Transport notified one of the Group’s subsidiary companies, London and Southeastern
Railway Limited (LSER) that it was required to recalculate the Profit Share payable over the period from 12 October 2014 to 29 June 2019
pursuant to the Franchise Agreement dated 10 September 2014.
LSER has subsequently provided the Secretary of State for Transport with an explanation for the historical calculation of profit share
and has recognised a best estimate of the assessed outcome within these financial statements. Any additional amounts payable are
disputed due to LSER’s statement of position being supported by express terms or agreement, correspondence between LSER and the
Secretary of State for Transport, treatment in practice and the development and terms of the Franchise Agreement.
Should the Secretary of State for Transport’s notification prove successful then the outflow of resources could be in the region of £8.0m.

 

[Shug]

Arguably the most cursed franchise! Fingers crossed that new management comes up with an exciting fleet strategy.

Don’t hold your breath!

 

[Horizon22]

Wow that’s quite sudden. There had been no suggestions or even slight rumours of anything like this on the cards. It seems to have been a long term, structural issue regarding profit - which I think SE was maxing out at one point - and I would gather it’s been picked up in auditing over a few years. Hopefully the transition is smooth for all involved.

 

[theageofthetra]

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?

 

[Dai Corner]

According to Southeastern's website

A new contract commenced on 1 April 2020 and will run until 16 October 2021, with the option to extend at the Department for Transport’s discretion until 31 March 2022.

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.

 

[Horizon22]

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.

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

SE was making profit which should be returned to gov in that time, so perhaps they under-reported those levels?

A statement from the Department for Transport (DfT) said it had found evidence that since October 2014 historical taxpayer funding of £25m, which should have been returned, had not been declared.

 

[skyhigh]

Can they use other operator of last resort services e.g LNER?

Doubt it, Northern staff can't use LNER and vice versa.

 

[Fincra5]

According to Southeastern's website



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.

Exactly... its hardly "stripped" just not extended.

 

[nedchester]

Am hearing the Serious Fraud Office are involved.......

 

[iphone76]

Wasn't there due to be a change of MD at Southeastern next month? I wonder if they will still take over?

 

[rd749249]

From The Times, reporting on a conversation on the Today programme with the Head of the Transport Select Committee, that the SFO may be involved.

https://www.thetimes.co.uk/article/...inisters-after-25m-franchise-breach-ww8s7xtxh

Huw Merriman, the Conservative MP and chairman of the Commons transport committee, told Today on BBC Radio 4: “I understand the Serious Fraud Office will be involved in this, so there is a limit to what I can say.”https://www.thetimes.co.uk/article/...inisters-after-25m-franchise-breach-ww8s7xtxh

 

[Horizon22]

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?

Will be a major issue if that is the case for staff - there’s been cross/commuting for years especially after TL took over some services.

 

[Grumpy Git]

Paper shredders harder to come by than a gallon of unleaded in that neck of the woods this morning.

 

[Bletchleyite]

Will be a major issue if that is the case for staff - there’s been cross/commuting for years especially after TL took over some services.

I didn't think staff free travel facilities were allowed to be used for commuting. Or is that just TfL?

 

[dk1]

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?

It will revert to just SE services unless an extension with others such as GTR can be agreed. GA & C2C continued an agreement long after NXEA ended. I very much doubt whether travel on other OLR will be permitted other than normal priv facilities of course.

 

[hwl]

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?

Each operator OLR is a separate company

 

[DelW]

'Significant breach' sounds like code for suspected fraud (or something of that ilk). Notable that the CFO has resigned without comment. You have to wonder about the future of GTR, if another arm of Govia has done this...

Resigning to spend more time with her solicitors?

It does seem from the suddenness of the announcement that the apparently long running dispute between SE and DfT has now morphed into allegations of outright deception by the company.

 

[hwl]

Could be something as 'simple' as Network Rail compensation. But yes, questions need to be asked about how the DfT didn't catch this sooner.

SE was one of the last franchises on revenue support (see "profit share" comments) so I suspect it could be a combination of the end of that (whether ticketless travel was included or not) and potentially the complex compensation issues with the London Bridge rebuilding.
Then add a huge number of direct awards with potential small changes to T&C.

It looks the issues may relate to the Horton era as SouthEastern CEO (2008-2015)

 

[Fincra5]

I didn't think staff free travel facilities were allowed to be used for commuting. Or is that just TfL?

Well it isn't just that. A lot of GTR and SE staff use each others services to get to places of work, within the TOCs. If you're an employee Staff Travel Facilites are allowed commuting to their place of work (could be anywhere on the SE/GTR network).

 

[DNCharingX]

Well, things are starting to fall into place (as opposed to clueless and shocked me in the early morning)

Respect for the decisive action from the Government, not that I'm excited that a Conservative government is now in control of my local TOC, but for sending a clear message that the fraud won't stand. If it is true, this was the correct action to take and I'm sort of disappointed at both SE for "cooking the books" and the DfT for not noticing this (with taxpayer money I might add)

I'm not too familiar with LNER/Northern so it would be appreciated if someone could fill me in on what changed after the OLR took over Virgin/Northern, and what to expect with SE.

I know they've quite the reputation for their services, though what's the alternative? Not going to work?

 

[Bletchleyite]

Basically very little has changed on either TOC from a passenger perspective apart from them being used for the odd Government "pilot project" e.g. single fare pricing on LNER and a different font.

 

[43066]

I'm not too familiar with LNER so it would be appreciated if someone could fill me in on what changed after the OLR took over Virgin, and what to expect with SE.

A change in branding, and that’s probably about it from the passengers’ perspective. It’ll still be the same staff operating the same trains to the same places.