Published on 17 March, the Department for Transport’s Notice proposing the imposition of a £23.5 million penalty over London & South Eastern Railway’s (LSER, the trading name for Southeastern) failure to meet its obligation to act in good faith exposes a 13-year record of LSER profiting from overpaid subsidies. The scale of the overpayments, and the way in which they were concealed before being released as income, subsequently emerged from an investigation initiated by the Chairmen of franchise owner Govia’s shareholders, Go-Ahead and Keolis.
TRIGGER
Overpayments had first been identified in July 2020, when DfT discovered that an indexation error had been made in the calculation of franchise payments due under the 2014 franchise agreement. The error affected payments covering LSER’s High Speed 1 Track Access Charges (TAC). DfT and LSER were already in dispute over profit share payments.
DfT initially believed the amounts overpaid would have largely been recovered through the profit sharing arrangements in the franchise agreement. But LSER eventually admitted that the amount of subsidy to be repaid in connection with the HS1 TAC was higher than DfT had identified.
ACCRUALS
Accountants use accruals t…
