LSER Issued with £23.5 Million Penalty over Breach of Contract

London & South Eastern Railway (LSER) has been issued with a penalty notice of 23.5 million GBP by the UK government, following a ‘serious’ breach of its franchise agreement.

This penalty notice is in addition to the 64 million GBP being recovered by the government following the decision not to renew LSER’s contract in October 2021.

In September 2021 the transport secretary said the franchise would not be renewed with LSER and would be run by the Operator of Last Resort (OLR) because of a breach of trust.

The Department for Transport found that between October 2014 and March 2020 LSER had deliberately concealed more than 25 million GBP of historic taxpayer funding relating to HS1, which should have been returned.

The government review further found evidence of similar behaviour committed by LSER during its previous franchise agreement that was in place from April 2006 to October 2014.

The government said that this penalty reflected ‘the seriousness of the misconduct over a substantial period’, adding that the action taken would send ‘a clear signal to all rail operators that breaches of public trust [would] not be tolerated’.

Transport Secretary Grant Shapps said:

“I took decisive action and did not renew the contract with Southeastern following this appalling breach of trust.

“Our rapid and firm action protected taxpayers and passengers – ensuring much-needed services continued to run.

“LSER’s behaviour was simply unacceptable and this penalty sends a clear message that the Government, and taxpayers, will not stand for it.”

In total – including sums already recovered – the DfT is recovering 64 million GBP from LSER regarding contraventions to its franchise agreement outlined in the penalty notice, other balances identified, adjustments to profit share payments and interest owed. Today’s penalty notice is in addition to this recovery.

The Operator of Last Resort ensures that passenger services continue to run should a franchise terminate without an immediate replacement being at hand.

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