The Government has issued London & South Eastern Railway Limited (LSER) a £23.5 million penalty notice following a breach of its Franchise Agreement.

An investigation by the Department for Transport (DfT) revealed that between October 2014 and March 2020, LSER had deliberately concealed over £25m of historic taxpayer funding relating to HS1, money which should have been returned to the taxpayer.

Following the breach of trust, in September 2021 the Transport Secretary announced that the franchise would not be renewed, and LSER would be run by the Operator of Last Resort (OLR).

The OLR maintains the continuity of passenger rail services if a passenger rail franchise terminates and is not immediately replaced. Since the OLR took over Southeastern, services have continued as normal, and further passenger benefits, including the rollout of Citybeam trains, have continued.

The review also identified evidence that LSER was guilty of similar behaviour during its previous franchise agreement that ran from April 2006 to October 2014.

Today’s confirmation of the penalty reflects the seriousness of the misconduct over a substantial period. The action taken is designed to send a clear signal to all rail operators that breaches of public trust will not be tolerated.

In total the Department is recovering £64m from LSER in relation to:

• Franchise Agreement contraventions outlined in the penalty notice;
• other balances identified;
• adjustments to profit share payments;
• interest owed.

The latest £23.5 million penalty notice is in addition to the £64m recovery.

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.”