Lord Adonis is calling for the resignation of transport secretary Chris Grayling for using hundreds of millions in taxpayers’ money to bail out private rail companies – a decision which the former government infrastructure tsar says is symptomatic of a government that has “broken down” under the strain of Brexit.

Adonis, who resigned as head of the government-backed National Infrastructure Commission on Friday, says in an interview with the Observer that the decision has landed taxpayers with a potential bill running into billions and will lead to higher fares and less investment in the network.

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His intervention comes as rail passengers brace themselves for the biggest fare rises in five years, which come into effect on Tuesday. Commuter groups and opposition politicians are planning protests across the country.

With the price of season tickets set to increase by up to 3.6% Labour, unions and transport groups warned that commuters were starting to turn their back on rail travel.

Adonis said his relations with government had become severely strained over Brexit in recent months. But it was Grayling’s move to bail out Stagecoach and Virgin, which were contracted to run the East Coast line until 2023, that was the final straw.

“Handing a cheque worth hundreds of millions of pounds to Richard Branson and Brian Souter [chair of Stagecoach] would be indefensible at the best of times but we are now at the worst of times with a Brexit squeeze on the public finances and with rail fares going through the roof,” Adonis said.

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“The cost of this bailout is going to be a slashing of the national infrastructure programme and even bigger fare rises – and as that becomes apparent in parliament and in the media I think Chris Grayling’s position is going to become untenable. It is of a piece with him being a radical Brexiter to whom everything is subordinate to hard-right ideology.”

Adonis added: “I think he is going to have to go because, as he is forced to defend a massive bailout to the private sector, the question will be asked by the public accounts committee and the National Audit Office – why didn’t you adopt the alternative course which was to set up state companies to avoid the need for a bailout? He has no answer to that. He deliberately avoided doing so for ideological reasons and he was not even upfront about not doing so.”

Facebook Twitter Pinterest Andrew Adonis: ‘Independent advice is being dismissed because remember experts were supposedly part of the problem.’ Photograph: Oli Scarff/Getty Images

Grayling announced at the end of November that a new partnership would take responsibility for intercity trains and track operations on the East Coast route in 2020. Virgin Trains East Coast, involving Stagecoach and Sir Richard Branson’s Virgin, had previously agreed to pay the government £3.3bn to run the service until 2023.

The Department for Transport refused to comment on Adonis’s criticism of Grayling. But sources said it was “unacceptable” for Adonis to make “misleading” statements. They said there was no bailout and the Virgin Stagecoach joint venture would continue to meet its financial commitments.

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Adonis said Grayling should have followed his own example when, as Labour transport secretary in 2009, he set up a new state-owned company to take over the line on a temporary basis when National Express ran into difficulties. He claimed that the reason Grayling did not do so was because he did not want to “legitimise” Jeremy Corbyn’s policy of taking rail back into the public sector.

Adonis said his experience in working with the Tory government in recent months had shown him that the entire system had become dysfunctional: “Good government has essentially broken down in the face of Brexit. Normal standards of conduct are not being observed. Independent advice is being dismissed because remember experts were supposedly part of the problem. All the experts in Whitehall are trying to square the circle of leaving the EU, the single market, the customs union without undermining British trade and British jobs and, since that is an impossibility, even the best minds in Whitehall are not able to do that. There is very low morale in Whitehall because almost no civil servants agree with the policy of the government.

“I do not think there has ever been a period when the civil service has been more disaffected from the government it serves.”

A Department for Transport spokesperson said: “No one is getting a bailout and Virgin Stagecoach will continue to meet its financial commitments made on the East Coast rail franchise to the taxpayer as it has done since 2015.

“Stagecoach has also – on average - paid 20% more back to the taxpayer than when the line was operated by Directly Operated Rail and we continue to receive hundreds of millions of pounds.

“The decision bring in a partnership to run the service from 2020 is to ensure the train companies work more closely with those responsible for the infrastructure like the track and signalling to help improve the service for passengers.”