The owners of Southern rail have been fined £13.4m, the department for transport (DfT) announced this morning.
The government said the fine would have been higher but the majority of the delays had not been Southern's fault, with blame being attributed to strikes and high levels of sick leave. Southern owner Govia Thameslink Railway (GTR) will now fund a package of "performance and passenger improvements" worth £13.4m.
The firm has been arguing that severe delays and cancellations were mostly down to sickness and industrial action outside of its control, and argued last year that this constituted force majeure, so it couldn't be held accountable for breaching contractual commitments.
GTR said it was pleased that the DfT had settled its force majeure claim for the disruption caused by the industrial action on Southern. The firm said it regarded it as a "fair outcome which draws a line under an issue that has been hanging over the franchise for many months."
Charles Horton, GTR’s chief executive, said:
We are pleased that this issue has been concluded, and accept and are sorry that our service levels haven’t been good enough for passengers.
We run the most congested network in the UK where passenger journeys have doubled in the last twelve years.
This has meant we have been running services for more and more passengers while also allowing stations to be rebuilt, platforms extended, track and signalling replaced and new trains and technology introduced too.
Go-Ahead, which owns 65 per cent of GTR, said the agreement "resolves financial uncertainty" relating to past industrial action, and allows it to focus on improving services for Southern customers. It said the outcome of discussions with the DfT was in line with the financial judgements made by management, so the payments won't have any further impact on its financial forecasts.
Go-Ahead also said there was a remaining range of uncertainty of up to £5m to reflect a number of other ongoing contractual variations.
Transport secretary Chris Grayling was told by the High Court a fortnight ago that he must give his verdict on Southern's performance in 14 days. Campaigners had said the DfT's response to the force majeure claim was needed to assess whether GTR should be stripped of its franchise.
Passengers have suffered more than a year of disruption with a long-running industrial dispute with the Rail, Maritime and Transport (RMT) union and train drivers' union Aslef still unresolved.
Part of the controversy surrounding Southern has been the use of a management contract for the franchise, which differs from the typical types of franchise provision. The DfT receives revenue from ticket sales and takes on the revenue risk, with the company - GTR - operating the service in exchange for a management fee, in the region of £1bn.
The Transport Select Committee pointed out in February that this exposes the DfT financially. In the case of GTR, the net revenue losses for the year amount to at least £38m - "revenue, which could have been re-invested in rail services, lost to the public purse".
Despite the significant operational failings of GTR, it paid just £2m in penalties for its first year of operation – only 0.2 per cent of its £1bn management fee.
The RMT called today's announcement a "whitewash of the Southern rail shambles".
General secretary Mick Cash said:
This pathetic response to the abject failure by Southern/GTR to deliver on their contract doesn't even stack up to a slap on the wrist. No wonder the company are gloating. Chris Grayling has let them off the hook big style.
The network is used by 300,000 passengers a day.