One of Britain’s biggest rail operators has referred itself to the Serious Fraud Office after being kicked off the network for failing to repay £25 million of public funds.
Southeastern, which runs commuter links into the heart of London, has been nationalised after failing to declare millions of pounds of government money that should have been returned.
Government sources told the Telegraph newspaper 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 should have been returned to the government—which did not occur in this case.
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, Go-Ahead and Keolis, said they had returned the money. And that they were conducting a review of how the mistakes happened.
The same two companies also run Britain’s biggest rail network, Govia Thameslink. Government sources said that if investigations linked further discrepancies back to the owning groups, further sanctions could be taken.
RMT transport union general secretary Mick Lynch said, “For years RMT has said that the private railways in Britain have been run by a gang of spivs.” He said they’ve been “trousering hundreds of millions of pounds of taxpayers' money with impunity while services were left to rot”.
“Today's announcement on Southeastern proves we were right all along,” Lynch said.
“We do not believe for a moment that this scamming of the British people is restricted to Southeastern.
“There now needs to be a forensic examination of all the private rail contracts with those caught cooking the books called to account.”
Lynch is right. The whole system of rail franchising has been used to fleece public money and hand it over to shareholders.
The Tories privatised the rail network in the 1990s, insisting that this would lead to more competition, better services and lower prices.
Network Rail, then known as Railtrack, was set up to look after the tracks, tunnels and signalling. Meanwhile, private companies could bid to run the trains.
The bosses of large private firms licked their lips. They cherry-picked the most profitable lines, but would only run loss-making services if the state paid them a huge subsidy.
In the Tory franchise market, different firms bid against each other to run services. And those that put in the bid with the lowest amount of state subsidy won a seven-year contract.
Often low bids beat rivals, but were later revealed to be too low to guarantee enough profit for the bosses.
As a result, firms such as Virgin and Stagecoach ended up handing their franchises back to the government. In the ensuing chaos, politicians and bosses didn’t think about people whose lives depended on a decent rail service.
The disaster of privatisation has another lasting legacy.
Britain now has some of the most expensive tickets in Europe. A day ticket from London to Sheffield costs up to £113.50. One from Paris to Dijon, a journey of similar distance, costs just £32.43.
The revelation of corruption at Southeastern is only the most recent reason why the rail should be re-nationalised.