Commuters face another day of disruption owing to rail strikes on Friday, amid renewed questions over the government’s handling of two rail franchises.

Chris Grayling, the transport secretary, said there had been no bailout of the Virgin Trains East Coast franchise but admitted it may not run as far as 2020, and he did not rule out allowing Stagecoach-Virgin to continue operating the service.

Earlier on Wednesday Grayling was accused of passing the buck over severe rail disruption on Thameslink, Southern and Great Northern trains as he blamed staff shortages on “militant unions” despite a critical National Audit Office report.

In heated exchanges in the Commons, Labour demanded answers on an apparent £2bn shortfall in expected payments on the East Coast franchise. Stagecoach’s £3.3bn contract to run trains until 2023 will be replaced in 2020 with a new partnership model on fresh terms. Grayling said he had “no viable legal mechanism” to make the firm pay the full amount.

The shadow transport secretary, Andy McDonald, said franchising had failed and there had been a “scandalous” succession of direct awards – contracts allocated without competition. He said the chances of a competitive tender to run the East Coast line in 2020 were slim: “I also predict that Virgin-Stagecoach will get a direct award.”

Grayling said Virgin-Stagecoach had “got their figures wrong” and lost more than £100m. “Despite that I am holding them to their full financial obligations, taking every last penny of the £165m guarantee.

“This is not a bailout. There is no viable legal mechanism through which I can extract any more money from them. My department is preparing contingency plans as we do not believe the franchise is financially viable through till 2020.”

Asked by McDonald whether the £2bn premiums due from 2020 to 2023 would be paid, he said: “Currently we are not convinced the franchise will make it as far as 2020.”

The NAO report on the government’s management of the UK’s largest rail franchise, held by Govia Thameslink, found that Department for Transport policy and targets had negatively affected millions of passenger and led to strikes by trade union members.

However, Grayling said blame for the disruption should primarily be shouldered by the unions. He said: “It was the unnecessary action of militant trade unions that caused the vast majority of disruption for passengers, which was awful, I know. It’s not passing the buck.”

McDonald said Grayling was “in complete denial”.



Strikes by RMT train crew across four rail franchises will take place again on Friday, following action on Monday and Wednesday, in an ongoing row over the role of guards.

Services on Northern trains have been worst affected, with around half of all services running. South Western and Merseyrail services will be reduced, while Greater Anglia expects to run a normal service.