UK government to take control of London and Southeastern Railway

By - World Infrastructure Journal

UK government to take control of London and Southeastern Railway

The discovery of unreturned government support, that was initially provided to cover track access fees for High Speed 1, has prompted the central government to step in – which might provide a glimpse of what the governance of Great British Railways will look like.

After the recent discovery that London and Southeastern Railway were guilty of “serious breaches” of their franchise agreement, the UK government has made the decision to take over. Beginning next month, the central government will be responsible for all services that have previously been provided by the group.

The case for the takeover is rather clear. According to Transport Secretary Grant Shapps, a probe found that Southeastern had failed to declare over £25 million in taxpayer funding that was due to be returned October 2014. The company (run by the UK’s Go-Ahead and France’s Keolis) self-referred to the Serious Fraud Office, who have stated that they “are aware of the matter but can neither confirm nor deny interest. ” Previously, however, Go-Ahead had reported that the funds – which were made available to pay the access fees for the High Speed 1 route between London and the Channel Tunnel – had been returned.

Shapps has stated that he hopes the decision, “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. ” Southeastern’s fraudulent accounting is, however, not an isolated incident.

In 2018, the East Coast mainline franchise (operated by Stagecoach and Virgin Group) was taken over by the Department for Transport due to the line’s owners grossly miscalculating demand. Hoping to put together an attract proposition, Stagecoach and Virgin Group had overestimated passenger growth along the rail line – and within 3 years were unable to continue operations. Interestingly, this was the third time overestimation had resulted in the collapse of a private rail enterprise on the east coast.

In March of 2020, the government stepped in to seize control of the Northern franchise from Arriva (part of the German state-owned railway company Deutsche Bahn). Again, questions were raised about the sustainability of the franchise system, this time as a result of Arriva’s consistent difficulties with delays and long-running disputes with unions.

Then, only weeks later, the government bailed out the entirety of the railway system because of the drop in passenger numbers precipitated by the Covid-19 pandemic. Underwriting the industry’s losses, which amounted to roughly £20 million per day, the government was moved to put forward an amount of support that was eventually classified by the Office for National Statistics as nationalisation.

In light of these events, the government announced in September 2020 its plans to end the rail franchising system for good. Instead, from 2022, franchising will be replaced by a contract-based system that will shield companies from the risks of falling passenger numbers.

The arrival of this new system cannot come soon enough for some, In the words of the general secretary of the Transport Salaried Staffs Association, Manuel Cortes, “The days of rail franchising must now be well and truly over. Time and time again we see the private sector fail and taxpayers ride to the rescue. ”

Whether this new system will deliver the change it promises, however, is yet to be seen. Though Shapps has promised to set a new tone for rail franchises, Go-Ahead will continue to operate Govia Thameslink Railway (GTR), which runs the Thameslink, Southern, Great Northern and Gatwick Express services. As such, there is work to be done should people be convinced of the government’s new passenger-centric message.

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