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Friday, 31 October 2014

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Bill for rail West Coast Line fiasco could rise further

The bill for taxpayers from the West Coast rail franchise fiasco could grow, MPs have been warned.

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Cost: £49m already to be paid out over bid failure

The public already faces paying out about £49m following the scrapping of the West Coast bidding process over Department for Transport (DfT) faults.

Facing angry MPs at a select committee hearing yesterday the DfT’s Permanent Secretary Philip Rutnam gave details of further costs.

Asked if there would be further calls on the public purse, he replied: “I can’t say there won’t be.”

There were stormy scenes as Mr Rutnam and his department’s corporate director general, Clare Moriarty, appeared before the House of Commons Public Accounts Committee.

Amid fierce questioning both were forced to defend the department, which had originally awarded a new 13-year West Coast franchise not to Sir Richard Branson’s company Virgin Trains but to rival transport company FirstGroup.

After Sir Richard launched a legal challenge to the decision, Transport Secretary Patrick McLoughlin scrapped the bidding process in October saying that the DfT had made serious mistakes in the bidding process.

These centred on the subordinated loan facility – the amount of risk money each bidder offered in the event of defaulting on the franchise.

Mr McLoughlin has already said that taxpayers’ bill for repaying the bidders for their bidding costs would amount to about £40m, while the National Audit Office has identified a further £8.9m.

Mr Rutnam told the committee of further costs of around £6m, including £5m for FirstGroup’s now-scrapped plans to take over the West Coast line.

Mr McLoughlin has been extremely critical of his department officials. Three were suspended when the franchise bidding was scrapped.

Mr Rutnam told the committee that he had “started disciplinary proceedings in relation to a number of individuals”.

Public Accounts Committee chairman Margaret Hodge told the two department chiefs today that FirstGroup’s figures for passenger and financial growth on West Coast – initially accepted by the DfT – were “too good to be true” and “belied common sense”.

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