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Long-term West Coast deal may not be settled until 2016

Virgin asked to keep running line until new contest can be held after franchise fiasco

The West Coast Main Line between London and Scotland could be operated by up to three different rail companies within four years as a result of the Government's franchising fiasco, it emerged yesterday.

The Transport Secretary, Patrick McLoughlin, said yesterday his department was negotiating with Virgin Trains for the company to continue running West Coast services for the next nine to 13 months. But instead of following that with a new long-term deal, the Government will instead hold a competition for another two-year franchise. It would only be after that, Mr McLoughlin suggested, that a long-term contract would be signed.

The new timetable has led to fears from MPs that the delays will result in long-term investment decisions on the West Coast line being put off. There are also concerns that having said that Virgin will keep running the line for the next year, the Government is now in a weak bargaining position with the company over the terms of the deal.

In his statement to the House of Commons, Mr McLoughlin also confirmed reports in yesterday's Independent that there had been significant staff cutback in his department in the run-up to the franchise fiasco. Documents show that dozens of directors including the head of procurement were "eliminated" as part of an aggressive cost-cutting programme, while another 400 more junior posts were closed.

However, Mr McLoughlin insisted that the job cuts had been "absolutely necessary" because of the "economic circumstances" that the Government found itself. He did not comment on claims that this had contributed to what he described as "very serious" mistakes being made in the franchising process.

But citing The Independent report, the shadow Transport Secretary Maria Eagle claimed the problems had been caused by the cuts being made "too far and too fast". "This was a franchise fiasco made by ministers," she said. "The result [is] chaos across the rail industry and tens of millions of pounds of taxpayers' money down the drain, the direct consequence of action taken by ministers."

Mr McLoughlin said he did not want to pre-judge two inquiries which he established in the wake of the cancellation of the West Coast franchise but insisted that he did not believe the overall franchise system was flawed. "I want to restate the Government's commitment to ensuring that we continue to have private sector innovation and investment in the railways," he said. "This growth brings significant benefits to the country's economy and to the environment, relieving congestion, improving connectivity for businesses, commuters and leisure travellers. I want to see these benefits continue. That is why I want this pause while the reviews are carried out to be as short as possible."

Mr McLoughlin added that he hoped that delays in other franchise competitions – due to in the next few months – would not be too severe and refused to speculate over the final cost of the problems to the taxpayer.