Control of the West Coast Main Line rail franchise appeared to be slipping through Virgin Trains' hands last night, as its bitter row with the Government escalated.
In an unprecedented public attack on the operator, Rail Minister Tom Harris accused it of trying to "blackmail" the Government into extending its franchise beyond 2012.
The row focuses on plans to add 106 new carriages on the line, increasing each train from nine to 11 coaches.
The upgrade would provide much-needed capacity as passenger numbers grow, ensuring fewer people need to stand for long journeys. But as The Birmingham Post revealed in October, Virgin has refused to fit the extra carriages unless its franchise is extended by two years.
It planned to begin adding the coaches in 2009 but claimed it could not justify the cost if it was only going to use them for two or three years – and would not go ahead unless its franchise was extended.
The bitter stand-off between Virgin Trains and the Government means passengers will still be waiting for improved rail services – even after the £600 million refurbishment of New Street Station.
Mr Harris' comments, at a Commons hearing, effectively end Virgin's hopes of extending its contract to operate the service between London, Birmingham and Manchester beyond 2012 when its franchise expires. It is expected to be among the bidders for the new franchise.
"I wasn’t prepared for the department to be blackmailed, with the prospect of Pendolino lengthening as the prize," he said. Last month the Government gave the go-ahead to the £598 million revamp of New Street Station after announcing it would provide £400 million.
The redevelopment, expected to start in 2009 with the first phase completed in 2011, aims to ease congestion for 17 million passengers who use the station each year with a new concourse and improved passenger capacity.
But Mr Harris revealed the row with Virgin meant extra carriages would not be available until at least 2012 – when the second phase of New Street is expected.
He told the Commons Transport Committee: "We did say no to Virgin’s proposal for what they called a two-year extension to their franchise, and what I perceived as being a new two-year franchise without any competition.
"And they could not convince the department, they could not convince me, that process would provide better value for money than an open contest. Virgin’s negotiating position was, ‘we want an extra two years on the franchise, and on that basis we will co-operate with Pendolino lengthening’. The first part of that was not acceptable."
The Government was committed to adding the extra carriages but it would take longer than planned, and the carriages would not be fitted until 2012, he said.
"I accept if the conditions of that proposal had been different and had been acceptable to us, we would have been able to move more quickly," added Mr Harris.
A Virgin spokesman said: "This is very strong language. It is also surprising, because the proposal to add extra carriages came from us in the first place. We approached the Department with the idea, so I don’t see how we can be accused of blackmailing them."
Mr Harris also revealed the Government had misgivings about proposals for new high speed rail lines. The committee heard evidence last month from Iain Coucher, chief executive of Network Rail, who warned Britain needed to consider building high speed lines with trains running at 180mph.
Any such line is likely to run from London to Birmingham and Manchester, possibly linking with the Channel Tunnel.
But Mr Harris said he was not convinced. He said: "A number of assumptions are made about high speed rail. One of them is it’s environmentally-friendly. Another is it contributes to the economy, another is it will result in a certain amount of modal shift from planes to trains.
"A lot of these assumptions, I am not convinced have empirical data to support them."
Most of Britain’s urban conurbations were already well connected, he added.
"There may be a case in the future for high speed lines, but it’s not going to be made by saying our neighbours have got them, why can’t we have one."