Rail sale hit by new sleaze

The rail privatisation process has again been hit by sleaze allegations after an management buy-out team bidding for a rail franchise was found to have used inside information not available to its rivals.

Confidential documents from the Office of Passenger Rail Franchising, reveal that the team, Northstar Pennine, which is bidding for Regional Railways North East and seeking pounds 1bn of public funds over the next seven years, used financial information in preparing their offer which was three months more recent than the figures supplied to the other bidders.

The Labour MP Hugh Bayley, has called for the franchising process to be re-run.

The revelations place a question mark over the role of management teams in the franchising process which is being carried through quickly to ensure all 25 rail lines are in private hands before the election.

Last year, one of the first franchises, LTS, was won by a buy-out team which was barred because of ticketing fraud.

So far, 18 franchises have been allocated and final bids from the three shortlisted companies for Regional Railways North East are due in today. The successful bidder will get around pounds 1.05bn over the next seven years.

Minutes of a meeting held in late October and leaked to a regional BBC television series Close Up North, due to be shown tonight, says a passenger rail franchising official asked Northstar Pennine "why they had used Period 6 projections to prepare their bid documentation when this was not available to other bidders".

The information allowed the buy-out team to estimate that revenue in the year before the franchise started would be pounds 2m higher than projected. Mr Bayley, MP for York, where Regional Railways North East is based, said: "The management buy-out team used commercial information which, in a clear breach of the franchising rules, was not made available to other bidders."

Mr Bayley will be tabling an early day motion in the Commons on Monday.

A rival bidder, which did not reach the shortlisting stage even though it had asked for the least amount of subsidy, is now also asking for the bidding process to be re-opened and is considering legal action.

Ian Yeowart, head of the Grand Central team, said: "I had given up on this weeks ago and thought we had just lost out. But these documents suggest that the process was not carried out fairly."

Last night, the franchising office issued a statement saying that the franchising director had maintained "a level playing field for all bidders".

The management buy-out team bid had been "adjusted" to remove the use of the more up-to-date figures. And he added: "The shortlist represents what the franchising director considers to be the best and most credible proposals for running the Regional Railways North East franchise."