How Southeastern made £15.9m from delay compensation

20161117-compensationFigures published this morning show that Southeastern’s compensation and Delay Repay payments to customers in 2015-16 were £2.270m – an increase of 68% in 2014-15.

But other figures from Network Rail show that  Southeastern were paid £18.217m in the same period in compensation for unplanned delays caused by Network Rail infrastructure (approximately 65-70% of all delays).

That means that Southeastern made an overall net surplus of £15.947m on delay compensation. And that’s after Southeastern have used Network Rail money to compensate passengers for delays due to Southeastern. 

Why is there such a difference between the amount Southeastern receive and the amount they pay out?

Part of it is due to customers not claiming the compensation to which they are entitled, or having difficulty in doing so. Although Southeastern have made some improvements recently, we still get many reports of legitimate claims being refused at first, and only the most determined passengers can get through the appeals process. Claim forms are not routinely handed out on late trains. On c2c services automatic compensation is being introduced for smartcard season ticket holders; but the smartcard season ticket Southeastern are introducing next month will not have this feature.

However the biggest difference is that Network Rail compensation becomes payable if the train is three or more minutes late [1], whereas Delay Repay only starts after 30 minutes delay. That’s a big difference on London and Kent routes where journey times are shorter and delays of 10-15 minutes are a chronic problem.

Southeastern’s overall profit for most of the period has not yet been published. But in the year to June 2015 they made a profit of £26.8m. If the same level of profit has been maintained since then, it would mean that at least 60% of Southeastern’s profits depend on delays. Some people might wonder whether this is a good incentive to do better.

There’s a public policy issue too. Now that Network Rail is part of the public sector and receives a large Government grant each year, it is essentially taxpayers money that is funding this compensation. Is it right that because compensation is calculated differently at each stage, most of the money is trousered by Southeastern rather than passed on those members of the public who have actually suffered? If the government policy is to pay compensation to passengers after 15 or 30 minutes, why is it right for the government to pay the private operator anything for shorter delays? Indeed wouldn’t it be better to use limited resources to improve services and reduce delays rather than reward the companies involved for failure?

What do you think? Let us know here.

[1] See Section 3 of the model Schedule 8 (archive): “any Minutes Delay which arise from a single incident or a series of related incidents and which are less than three minutes in aggregate shall be deemed to be zero“.


Comments

How Southeastern made £15.9m from delay compensation — 8 Comments

  1. Thanks for this illuminating posting. As a daily peak-time commuter but also someone engaged in political life, I would entirely agree we need to improve services and reduce delays accordingly. So already we have cuts to Dunton Green trains and this week again slower services due to leaves on the line.
    Last night when I arrived at Sevenoaks there were two policemen on the down platform, while people were trying to get through the shut ticket barriers and away from the pouring rain on the platforms as the queues mounted up. And if it’s a bad winter as predicted then we all know the train companies will almost inevitably not be prepared. And I assume we are still due for our annual fare increase in January, as night follows day…I would welcome more suggestions and ideas about how we disincentivise the current compensation culture and better reward specific rail service improvements for the wider benefit of all passengers.

  2. Pretty simple solution for Metro users.. TFL take the franchise ASAP, give us Oyster and automatically refund late running.

    It’s utterly scandalous that while the Government are apparently cutting their spend on rail (getting ‘customers’ to pay for improvements via ticket prices), they’re paying out millions to Network Rail and onto Southeastern for poor performance rather than giving it directly back to the ‘customers’.

    Simple solution – Network Rail pay out only what is claimed by the passengers plus a small % on top of that to the operator to cover their costs of processing the claims? Shared risk and reward..

  3. @paul

    Thanks for this. Your solution would also mean that at least £15m each year was available to invest in more reliable points and signals – which should in turn reduce the number and length of delays.

  4. We drew a parallel between the disparity in compensation arrangements at work today.

    In financial services, a field in which many commuters work, we have a regulatory principle called Treating Customers Fairly. One of the key points of TCF is that, as a firm, we cannot benefit from errors which we make.

    It’s time for a rail shake-up. As customers, we have a right to be treated fairly, and private companies shouldn’t be able to benefit at the expense of us and the wider tax paying public.

    First £20m to Southern and now £15.9m to Southeastern. TOCs are on a better gig than we had thought.

  5. Very good points made. I have tried twice unsuccessfully recently to claim for a journey that was 28 minutes late, as it’s two minutes under the threshold of 30 minutes. The fact that the journey actually took an hour instead of 30 minutes is not considered, as is the overall impact of missing onward connections and having to pay out for additional transport costs such as buses or taxis.

  6. @cheryl The Southeastern scheme is supposed to cover the whole rail journey, not just the train that is itself delayed. So if the first train is 15 minutes late, you miss an advertised connection, and the next onward train is not for another 30 minutes then the scheme should pay out. I’ve myself successfully claimed on this basis (Orpington to Bromley South was cancelled, next train in 15 minutes, missed connection to Rochester). But others have had to appeal have needed commuter groups like ours to intervene.

    Southeastern do sometimes make individual payments for additional losses – such as unavoidable taxi costs. But these are on a case by case basis and Southeastern have been reluctant to disclosure the criteria they use.

    There’s also a provision in the National Conditions of Travel that if you have an Advance ticket valid only on a specific train and miss it because of a delay on a previous rail leg of your journey then you should be allowed to travel on the next available service without extra charge. Sometimes this works, but we have had reports of Virgin refusing to honour the obligation.

  7. It’s what we all suspected happens isn’t it? And the Train Operating companies are loathe to pay out as we know, despite all the urging to claim which we hear on the trains. My own battles have been when the train has run fast from Maidstone East to Swanley, for example, which means it is cancelled at Borough Green. I have claimed for a cancelled journey and had it declined because “the service has run”. The fact that it has missed out intervening stations means absolutely nothing in SE Trains world.

  8. @karen We have been suspicious about the recording of skipped stops. Cancelled or late trains are detected automatically by Network Rail from the signalling system and put on the database, but the signalling system cannot distinguish stops from trains simply passing through the station. Skipped stops are supposed to be added to the database manually when the TOC report them, but it is difficult to verify that this is done.

    Skipped stops qualify for Delay-Repay. Could you email me details of your claim and the reply that you had from Southeastern please, and we will pursue it. Did you appeal when you received the first refusal?

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