Birmingham transport group National Express is set to go under the spotlight again after the public cost of it pulling out of the East Coast rail line started to emerge.
Transport secretary Lord Adonis has said the nationalisation of the East Coast mainline after National Express pulled out will cost at least £50 million.
But reports have indicated the eventual cost to the public purse could be many times that, with the government losing out on revenue worth hundreds of millions that National Express had originally agreed to pay.
The Edgbaston firm dropped the East Coast Main Line earlier this year after refused to fund the loss-making route any further.
This sparked accusations from politicians that they had “ripped off” the taxpayer, when the government had to step in and set up a public franchise to manage the line.
It was the second time the line has lost a private operator after GNER collapsed in 2006.
Speaking before the House of Commons transport committee, Lord Adonis said the Department for Transport (DfT) was still working out the cost of the takeover of the franchise.
He said: “There will be a significant loss. Many tens of millions will fall to the taxpayer.” He could not give a precise figure but said the cost to the public purse would be “in excess of £50 million”.
Despite the two previous failures he told the committee it was “very unlikely” another train company would default on its franchise, and said the DfT was looking into see if there could be more significant immediate financial penalties for defaulting companies.
And he insisted: “My view is the best deal for taxpayers and the travelling public does come from having a competitive regime among private companies.”
But there are rumours the new publicly-owned company that runs the line – East Coast – would be putting far less into the public purse than the failed National Express East Coast franchise had been set to.
National Express East Coast was set to pay the government £766 million between now and 2012 under the original conditions of its franchise.
The East Coast Main Line passed in to public hands in the middle of November.
National Express gave up the franchise after paying too much to run services on the line in 2007. The move came during a year of unprecedented turbulence for the firm.
It has been fending off acquisition bids from both private equity house CVC and rival Stagecoach in recent months.
It is still without a full time chief executive after former top man Richard Bowker left to take a job in the Emirates earlier this summer.
The company also made a massive rights issue in an attempt to cut its debt pile, which had grown into the region of £1 billion. TO make the rights issue it had to go against the wishes of its largest investor, the Cosmen family.
The Cosmen family had previously supported the CVC acquisition bid, and has been publicly dismissive of the rights issue.