THE East Coast Main Line is to be run by the Government after National Express refused to fund the loss-making rail franchise beyond the next few months.

With National Express stating funding for East Coast would run out later this year, a public organisation has been set up – East Coast Main Line Company – which will operate the line.

The Government intends to invite tenders for an operator from the end of next year.

Transport Secretary Lord Adonis said: “It is simply unacceptable to reap the benefits of contracts when times are good, only to walk away from them when times become more challenging.”

However, Ray O’Toole, who was named as National Express chief operating officer yesterday, claimed the minister had “jumped the gun” and it had not walked away.

He said the company had warned that if existing economic conditions continued, then during the second half of the year “there may be a requirement to hand over the franchise in an orderly manner”.

Mr O’Toole also claimed it was possible that if the economic downturn began to ease, it could continue to run the line.

National Express – whose chief executive Richard Bowker quit yesterday – had been contracted to run East Coast until 2015, having agreed to pay £1.4bn to do so in 2007.

This is likely to be the second franchise termination on the line, following the early ending of GNER’s previous stewardship, which also stemmed from financial problems.

Lord Adonis said the events did not represent the failure of the franchise system, “but the failure of one company”.

But the Conservatives accused the Government of “incompetence”

in running the railways, while the Liberal Democrats said East Coast should stay permanently in public hands.

Faced with lower-than-expected passenger growth due to the recession, National Express tried and failed to renegotiate its franchise with the Department for Transport.

This led to its decision not to commit any further money to it.

Virgin chief executive Richard Branson, whose rail company was beaten by National Express in the bidding for East Coast in 2007, said the Government should “look again at the franchise system”.

Virgin confirmed its interest in the route, as did transport operator FirstGroup.

Brian Brock, a regional organiser with the TSSA union, which represents ticket office staff, said: “They bid far too much for the franchise – they actually bid more than the GNER bid – and they could not make enough money from it.”

Roberta Blackman-Woods, MP for Durham City and Deputy Minister for the North-East, claimed National Express “didn’t deliver” on their promises.

City of York MP Hugh Bayley, who sought assurances over hundreds of National Express jobs in the city, said: “We’ve had two franchise failures in the past two years.

“I have asked the Government to inquire deeply why it’s gone wrong twice and whether they should look again at different ways of awarding the contract for the service.”

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