Government ministers have denied doing a deal with rail operators who were demanding £40 million in compensation after the bidding competition for the Great Western rail franchise was scrapped in January.
The Transport Select Committee demanded answers due to four operators dropping their claims – after the Government announced it was extending their franchises to run other rail services without a competition.
Committee chair Louise Ellman asked whether the two events were connected during a Commons evidence session.
Rail Minister Simon Burns insisted they were not.
The exchange follows the decision to scrap the contest for the franchise to run the Great Western line, which includes services to Worcestershire and Herefordshire as well as London, Cornwall and Wales.
Transport Secretary Patrick McLoughlin announced in January that he was reviewing the franchise arrangements, following the collapse last year of the competition to run the West Coast Main Line, which links Birmingham New Street and London Euston.
But the four firms which had been shortlisted in the contest for the Great Western franchise responded with anger. They were National Express, Stagecoach and Arriva, as well as FirstGroup, the business which currently runs the line.
In March this year, it emerged that they had all launched legal action to try to recover their costs – an estimated £40 million.
Later that month, Mr McLoughlin announced he was extending a series of rail franchises. The four businesses then dropped their legal action.
Arriva’s franchise to run Cross Country services, which include services to Birmingham, Manchester, the Westcountry, Reading, Newcastle and Scotland, was extended for 43 months.
FirstGroup’s franchise to run the GreatWestern line was extended by 33 months.
National Express’s franchise to run the Essex Thameside service was extended by 16 months.
And Stagecoach’s franchise to run the East Midlands service was extended by 30 months.
Raising the extensions as the committee questioned Mr Burns, Ms Elman said: “The bidders for the aborted Great Western competition, that’s Arriva, First, National Express and Stagecoach, have reportedly dropped their claims for costs.
“Is there any connection between that and the fact that all four are in line for benefitting from these extended franchises?”
Mr Burns said: “No”. He added: “It is absolutely true that all four have dropped pursuing any claims, and is that as a result of any connection to what might happen to them in future? No.”
Franchises had been extended because an independent review of franchising arrangements conducted by Eurostar chairman Richard Brown, and commissioned by the Department, had concluded that franchises should be staggered, with no more than three or four contests held each year, he said.