Lord Adonis hits out at Transport Secretary over East Coast rail ‘bailout’

Theresa May’s former infrastructure tsar has gone to war with Chris Grayling over his “bailout” of the East Coast rail franchise, accusing the Transport Secretary of letting down taxpayers and questioning whether he should remain in post.

Lord Adonis said he was “ready to share troubling evidence” about Mr Grayling’s “totally unjustifiable” decision to change the East Coast rail franchise, as he launched a broadside against the Transport Secretary.

It comes on the heels of a blistering attack on the Prime Minister over her “destructive” Brexit policy.

The former Labour transport secretary, who quit as chairman of Mrs May’s National Infrastructure Commission on Friday evening, told Sky News he believed it would “become very difficult” for Mr Grayling to keep his job once details of the deal came to light.

“We are in this crisis over the East Coast franchise where hundreds of millions of pounds is essentially being gifted to private companies by letting them off their contracts early. I have been pointing this out, the Government would far rather I wasn’t pointing this out.”

The Government was forced to deny claims it was bailing out private companies earlier this month after ministers said it would be intervening on the franchise and terminating the contract three years early. The franchise is operated by Stagecoach and Sir Richard Branson’s Virgin.

Lord Adonis said the decision to give “two of the richest companies in the country a big hand out” by letting them walk away from the franchise in 2020 instead of 2023 “reflects extremely badly” on the Government.

He said the taxpayer could end up picking up a bill of hundreds of millions of pounds because of Mr Grayling’s decision.

“The two private operators are being let off the contract which they had freely entered into,” he said. “This is the £2bn worth of payments they were due to make between 2020 and 2023 which the Government has cancelled.

“Now I know Sir Richard Branson and Sir Brain Souter, who run these private companies – they are great businessmen. They are quite right to be fighting for their shareholders but the job of the secretary of state is to stand up for the public interest and I don’t believe that Chris Grayling has done that and that’s why I think his position is going to become very difficult.

“I will be giving evidence to the public accounts committee [which scrutinises government spending] on what I believe has been a really serious mishandling of the East Coast rail franchise.”

:: Lord Adonis says Theresa May is ‘allying with UKIP’ on Brexit as he quits Government role

The public accounts meeting said earlier this month it would look at the deal but has yet to set up a formal inquiry.

The Government has pledged to establish a new partnership between track and train operators for the East Coast franchise after its decision to terminate the contract three years early.

The joint venture – 90% owned by Stagecoach and 10% owned by Virgin – has run the service since it was re-privatised in 2015 after six years in public hands.

The Government has insisted the early release from the contract is not a bailout, despite Stagecoach’s shares rising 13% on the news. Stagecoach has admitted overbidding for the franchise.

:: Read Lord Adonis’ letter to PM in full as Labour peer quits as Govt’s infrastructure tsar

Lord Adonis told Sky News he expected Stagecoach and Virgin to bid “a lot, lot less” for the new post-2020 franchise than what they offered when they expected higher traffic projections.

He said the “difference between the £2bn they were going to make and whatever sum they generously agree to make for this public private partnership will be the scale of the bailout” by the taxpayer. “I would be astonished if it was not hundreds of millions of pounds,” he added.

Government sources said it was “unacceptable” for Lord Adonis to “use his position to make statements that could mislead the public on other aspects of transport policy”.

“No one is getting a bailout and Virgin Stagecoach will continue to meet its financial commitments made on the East Coast rail franchise to the tax payer as it has done since 2015.”

(c) Sky News 2017: Lord Adonis hits out at Transport Secretary over East Coast rail ‘bailout’