Rail in Public Ownership

RMT Press Office:

RMT says damning new financial investigation shows Govia should be stripped of remaining GTR franchise after government nationalises Southeastern.

RAIL UNION RMT has called on the government to strip Govia of its Thameslink, Southern and Great Northern franchise and nationalise it after the union published research today raising further questions about the senior management of the company.

Govia’s subsidiary, London and Southeastern Railways, is rumoured to have been reported to the Serious Fraud Office following the government’s action this week in taking over the franchise in response to what it calls ‘a serious breach of the franchise agreement’s “good faith” obligation in relation to financial matters’.

The research, titled ‘Fit and Proper People? Govia’s profits and the South Eastern franchise’ reveals that:

• The senior management of Govia knew that the DfT was concerned about their reporting of profits as early as March 2020, even as they negotiated a bailout with the government;
• The South Eastern franchise was seen by Govia as being vital to the Go-Ahead Group’s ability to pay dividends, with senior executive remuneration packages linked to maintaining the contract and its profitability;
• During the period in which LSER is accused of breaching good faith in reporting around its profit-share obligations, Govia received in excess of £360 million in net subsidy from the government and extracted £182 million in dividend payments, accounting for more than 60% of all rail dividends paid to the Go-Ahead Group.
• Company CEO David Brown personally made more than £9 million in the same period, much of it in performance-based bonuses, some of which were linked to Southeastern’s profitability;
• Four out of Govia’s five Directors are also Directors of LSER, meaning that the same people who oversaw what was happening at Southeastern are running the Thameslink, Southern and Great Northern franchise, the biggest in Britain.

RMT General Secretary Mick Lynch said:

“Govia’s executives, the same people who are today running trains out of London and across the Southeast, were up their necks in what was going on at South Eastern.

“They were fixated on maximising Southeastern’s profitability and whatever it was exactly that they were up to, Govia’s shareholders and key executive personnel benefited financially, apparently from money that belonged to the taxpaying public.

“This is yet another story of the failure of rail privatisation, as if we needed any more, but it must also be the end of Govia’s time on the railways. They are demonstrably unfit people. They should pay back the dividends and bonuses they took over the last seven years and the government need to add their franchise to its growing public sector in rail without further delay.”

“I’m repeating our call for a forensic investigation into what happened in this franchise and whether it’s happening elsewhere on the network, but we also need to ask questions of the government because it’s clear they knew there were issues on South Eastern even as they were negotiating a multi-million pound bailout deal which guaranteed Govia profits.” 

More from RMT:

7 October 2021

RMT Press Office:

Railway rolling stock fat cats paid out £1 billion dividends during pandemic year.

Rolling stock fatcats paid out nearly £1 billion in dividends at taxpayers’ expense last year, the RMT revealed today in a new report, the equivalent of half the £2 billion in fares paid by passengers and or 23% of the £8.3 billion in taxpayer support to the industry in the same year.

While the government has imposed pay freezes on heroic keyworkers, and passengers face massive fare rises in the New Year, the companies who own Britain’s trains have been siphoning taxpayer’s money overseas into the murky world of low tax jurisdictions and tax havens. 

According to the RMT’s research, published today, the three rolling stock companies, Angel, Eversholt and Porterbrook paid £950 million in dividends through their complex group structures last year, with most of it disappearing overseas into opaque companies based in Luxembourg and Jersey, traditionally used to minimise tax liabilities. 

The payments have been effectively made by the taxpayer as the government has guaranteed the pre-pandemic payments they make to the Rolling Stock companies for leasing their trains and refused to cap either lease charges or dividends. 

RMT General Secretary Mick Lynch said:

“Another week, another tawdry pandemic profiteering story on our railways. 

“While staff were risking their lives and passengers were doing the right thing, pulling together to keep the country moving, the well-heeled spivs who rent out trains kept on raking it in at taxpayers’ and fare payers’ expense and shuffling our money into overseas bank accounts. 

“These people do nothing. They don’t build trains, they don’t operate them, they take no real risks and the taxpayer is bankrolling them. Their only real ingenuity is in devising company structures so complex they can hide what they’re doing.

“£I billion pounds in profits is more than enough to pay for a decent pay rise for rail workers and freeze fares for passengers.  Ultimately, all our rolling stock should be publicly owned but as a first step we are calling on the government to use the Comprehensive Spending Review to announce a windfall tax on the profits of the Rolling Stock Companies to fund a rail rebate for fairer pay and fairer fares.”

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