Dramatic increase to £80m in cost of Southeastern train accounting scandal

Go-Ahead finds that total amount of taxpayer money retained by operator has risen from £25m to £51m

Last modified on Thu 24 Feb 2022 08.35 EST

The cost of the Southeastern trains accounting scandal has now risen to more than £80m, the franchise’s former operator Go-Ahead has revealed.

The government stripped the transport group of the right to run one of Britain’s biggest networks in September for a “serious breach of trust” after discovering that £25m of taxpayer’s money had been retained by the Southeastern franchise over five years from 2014.

After further investigation, the full amount owed to the Department for Transport has been established as £51.3m, with discrepancies dating back to 2006. Go-Ahead has also set aside a further £30m for an expected fine from the DfT, although the government has yet to confirm any penalty.

Publishing its delayed full-year results for 2020-21, postponed for an audit after the scandal emerged, Go-Ahead also revealed it may have to pay the DfT a further £21.3m related to the franchise, in a disputed profit share agreement. Go-Ahead said this was a quite separate commercial negotiation rather than any further “breach”.

Go-Ahead commissioned what it described as an independent review, led by the chairs of the group and Southeastern co-owner Keolis, that found “serious errors had been made” over several years, and that “by failing to notify the DfT of certain overpayments or monies due to the DfT, LSER [London & South Eastern Railway] breached contractual obligations of good faith”.

Investigations found £27m, rather than £25m as originally thought, was taken in the breaches first discovered at Southeastern, relating to overpayments for track access on HS1. Another £17.3m was wrongly pocketed by LSER in overpaid subsidy from the DfT between 2006 and 2020, which will be repaid with £7m interest.

Go-Ahead’s new chief executive, Christian Schreyer, said “mistakes were made by the business”, adding that “a detailed independent report has been provided to the government and we are optimistic of reaching a settlement soon”.

The group’s interim chief financial officer, Gordon Boyd, said Go-Ahead did not know if it was under investigation by the Serious Fraud Office.

Schreyer said the firm’s own inquiries had gone beyond LSER, including the neighbouring Thameslink, Southern and Great Northern franchise, and governance would be overhauled across the group. He said: “We have deeply investigated also GTR [Govia Thameslink Railway] and not found any matters of concern.”

He said Go-Ahead was in “constructive talks” with the DfT to continue running the GTR network when its deal expires at the end of March.

Passenger groups said they would take legal action to stop Go-Ahead being awarded a further contract to continue running GTR. Bring Back British Rail and the Association of British Commuters accused the government of burying the report on the investigation into Southeastern’s alleged seven-year “serious breach of trust”.

Go-Ahead has also suffered problems in its ventures in Europe, having to make provisions for £36m in wrongly understated losses in Germany, and a £76m loss in Norway where government support for Covid losses has been pared back and the new government has said private firms could not bid for rail contracts.

Despite it all, Schreyer said that Go-Ahead was “in good shape”, as it reported increased operating profits of £115.5m for the year.

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