The Government is to take over running services on train operator Southeastern after a “serious breach” of its franchise agreement.
Transport Secretary Grant Shapps said an investigation by his department identified evidence that since October 2014 the company has not declared more than £25 million of historic taxpayer funding which should have been returned.
Further investigations are being conducted and the Government said it will consider options for more action, including financial penalties.
Mr Shapps said: “There is clear, compelling and serious evidence that LSER have breached the trust that is absolutely fundamental to the success of our railways. When trust is broken, we will act decisively.
“Under the new operator, we will prioritise the punctual, reliable services passengers deserve, rebuild trust in this network, and the delivery of the reforms set out in our Plan for Rail – to build a modern railway that meets the needs of a nation.”
Southeastern is run by Govia and operates services across south-east England, covering London, Kent, East Sussex and the High Speed 1 Lines.
Manuel Cortes, general secretary of the Transport Salaried Staffs Association said: “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.
“We need the Government to dump the failed franchise system, end the profiteering of the train operating companies and take over the whole thing, lock stock and rails.
“Our union will now be seeking assurances that this mess in no way impacts our members’ jobs because so many of them have been true heroes on the frontline of the pandemic since day one.
“Passengers at Southeastern and right across our rail network need services they can trust and a railway that works for them, rather than private profit.”
Rail, Maritime and Transport union general secretary Mick Lynch said: “This latest public sector rescue of a privately operated rail service should kill off the risky and expensive nonsense of rail privatisation once and for all.
“It appears that this collapse is all about Govia playing fast and loose with their financial commitments and raises serious questions about the viability of their other operations including the busy Thameslink services.
“It’s time to put the rest of Britain’s failing private rail operations out of their misery, cut out the middleman and build a public railway that’s fit for a green, post-Covid future.”
The Government will take over running services on Southeastern from October 17, saying a serious breach of the franchise agreement’s “good faith” obligation in relation to financial matters was identified.
Ministers stressed the announcement will have no impact on frontline staff, who they said have been at the frontline of delivering services throughout the Covid pandemic.
“The decision is no reflection on their professionalism and dedication and will not affect jobs,” said the Department for Transport.
“All tickets will remain valid after transfer and new tickets can continue to be purchased in the usual way.”
Southeastern has been running the train service between London and Kent and parts of East Sussex since 2006, operating one of the busiest networks in the country including the UK’s first domestic high-speed service with Javelin trains.
Southeastern is operated by Govia, a joint venture between transport operators Go-Ahead (65%) and Keolis (35%).
Shares in Go-Ahead, which are listed on the London Stock Exchange, plunged more than 13% in early trading.
The company employs 4,000 workers and runs more than 2,000 services on weekdays.
It has almost 400 trains and serves 180 stations.
Southeastern’s latest contract started in April 2020, running until October 16, with the option to extend at the Department for Transport’s discretion until March 2022.
During the course of the contract term, Southeastern said it would deliver a range of “customer experience improvements” including exploring options to boost capacity as additional rolling stock becomes available.
Go-Ahead Group’s chairwoman Clare Hollingsworth said: “It has always been this group’s intention to provide the best possible public transport, and to work in partnership with the Government and related agencies.
“We recognise that mistakes have been made and we sincerely apologise to the DfT. We are working constructively with the DfT towards a settlement of this matter.”
The group said the release of its results for the year ended July 3 2021, scheduled for September 30, has been postponed.
The group also announced that Elodie Brian has resigned as group chief financial officer and will be standing down from the board with immediate effect.