Sir Richard Branson: rejecting my rail bid is bad for Britain

Shortly before Sir Richard Branson took his place before the Transport Select Committee in the Grimond Room of the House of Commons yesterday, the Red Arrows flew over central London.

The post-Olympics flypast made an ideal warm-up act: if the Virgin Trains boss fails in his bid to have the West Coast mainline franchise decision overturned, he can look forward to a peerage by way of consolation – and the inevitable nickname, the Red Baron.

According to Sir Richard and his lieutenants, though, a forthcoming judicial review will find that the bidding process was fundamentally flawed. Virgin bid £750m less than First Group – which, it maintains, won the right to run services from London Euston to the Midlands, North-West and Scotland by forecasting "extremely unrealistic" revenues in the last three years of the 15-year franchise.

The bearded billionaire, wearing a velvet jacket of the kind popular when the West Coast mainline was first electrified in the 1960s, said that First Group had some "cash issues", and suggested that the rival firm had concluded "let's bid a small amount for the first 10 years to help our cash flow".

"If you're renting out your house," he said, "you don't take the person who says they'll pay the rent in 10 years time, and will pay only a small deposit."

He criticised the Department for Transport for failing to follow its own rules on franchising and told MPs that if First Group took over the contract it would be "bad for the country, bad for passengers on the West Coast mainline and bad for passengers on other lines". First Group's bid was "absolutely preposterous", he said, and its forecasts for passenger growth were impossible. "Physically, you can't get that many passengers on the trains," Sir Richard insisted.

Kwasi Kwarteng, the Tory MP for Spelthorne, suggested that "to the man in the street" it might seem Sir Richard was "taking this badly". He added: "You've lost the bid, it's a profitable line, and now you are resorting to heavy artillery tactics to get your own way – using your prestige and your fame."

But Sir Richard said he had the principal aim of "making something really special". In a revelation that is unlikely to surprise many rail users, he said the profit motive was not compelling. "I can afford breakfast, lunch and dinner every day for the rest of my life," he said,

If First Group's right to operate the franchise from December is confirmed, Sir Richard will be able to dine at his seat, according to First's chief executive, Tim O'Toole. He the committee that a trolley service would return to the trains, while Wi-Fi would be free for all passengers. Some could find themselves in a premium economy carriage, a class between "standard" and "first" – as pioneered on Virgin Atlantic's 747s. Fares would rise in line with inflation.

Mr O'Toole said Virgin's figures about the risk involved were "flat-out wrong". He said his rival's accusation that First had not been asked to put up sufficient performance guarantees were "just another bad guess [Virgin] made about our bid because they haven't seen our bid".

He also refuted the assertion that First Group would walk away from the franchise before the end, as has happened on other franchises with other operators. "I don't see any chance of us handing the keys back," he added. "It would destroy our ability to continue to run a rail business in this country."

If Virgin loses the right to run trains on Britain's flagship railway, Sir Richard said: "With the current process where someone can effectively get away with murder, we would not bid again."