Andrew Adonis was in church in the Austrian village of Alpbach on Christmas Day when he decided to step down as chair of the national infrastructure commission. The Alpine air had cleared his mind and led him to what he had suspected for some weeks might be his eventual decision.

In a nutshell, he had realised his differences with Theresa May’s government were simply too profound. It was time to break free: “I decided in the middle of mass that I was going to resign. When I was skiing the following day I started writing the letter of resignation in my mind while looking out over the Austrian Alps. I was thinking to myself that there may just be a better future.”

The Labour peer was first appointed by George Osborne in 2015 and then confirmed in the role by Theresa May a year later. The post as a paid adviser to a Tory government was supposed to be one that showed how, these days, governing parties can draw on the talents of political opponents in the national interest.

Adonis is a former Labour transport secretary and prime mover behind the HS2 high speed rail project. His abilities would be wasted on the Lords’ opposition benches when the country was crying out for bright ideas, experience and talent. At least that was the plan.

As it was, in Adonis’s case, things turned sour fairly fast, not least because of Brexit. Adonis is an outspoken remainer and not one inclined to keep quiet on issues he feels deeply about. “Relations with the government had become increasingly tense in recent months because they kept telling me to shut up on Brexit, which I declined to do,” he says in an interview with the Observer, the day after news of his resignation broke. Officials in the Treasury ordered him to hold his tongue but he refused. “I told them my views on Brexit were quite separate from the future of national infrastructure.”

If that was the extent of his differences with the Conservative government, Adonis would probably have stumbled on into 2018 still in post. But something else, to do with his former brief at transport, had riled him. He had fallen out spectacularly with the current transport secretary Chris Grayling over a decision Grayling took in late November over the future of the East Coast rail line.

Essentially the joint venture between Stagecoach and Richard Branson’s Virgin that had won the franchise to run the line from 2015 to 2023 found it had overbid and wanted out of the deal. Grayling stepped in and allowed them to pull the plug without the companies having to pay around £2bn that was payable for the final years. Adonis was outraged.



“The manner of doing so, was in my view, deplorable,” says Adonis. “He used some smokescreen about reopening closed Beeching lines and bringing Thomas the Tank Engine back to East Grinstead [to conceal what he was really doing]. He didn’t spell out that what this meant was that the companies were going to be excused from making £2bn worth of payments to the government.”

The result, Adonis says, is that “there is going to be a massive loss to the taxpayer as a result of this”.

Adonis calls the move a “scandal” because it is, he argues, taxpayers who will be left to pick up the bill, and rail users who will be hit with still higher fares. In 2009 Adonis faced a similar problem when National Express wanted out of the same East Coast franchise. He set up a nationally owned company, East Coast, to take temporary control.

“If I had offered a bail-out to National Express, I would have had everyone demanding the same treatment. What we are now facing is not only hundreds of millions of pounds of losses to the taxpayer, but potentially billions of losses to the public purse from the deal that will have to be offered to other train companies running other lines that will demand the same treatment.

“About half of the rail companies at the moment are operating at a loss or are threatened with losses because they have overbid for their contracts.

“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. The cost of this bailout is going to be a slashing of the national infrastructure programme and even bigger fare rises in future – and as that becomes apparent in parliament and in the media I just 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.”

He adds: “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 a state company to avoid the need for a bailout? He has no answer to that. He deliberately avoided doing so for ideological reason and he was not even upfront about not doing so.”

Adonis made his grave concerns known to the chancellor, Philip Hammond, but found himself shouting in the dark. There were tense text exchanges between him and senior civil servants, which led eventually to him being cut out of social events in the Department for Transport.

“I had a very unpleasant period just before Christmas when the government threatened the National Infrastructure Commission with non-cooperation if I carried on criticising Chris Grayling’s bailout. I thought that was deeply improper since I am an independent adviser. In my whole experience of government, I have never come across bully-boy tactics of this kind before.”

The East Coast mainline episode is, Adonis believes, just one example of a government that is falling to pieces as it directs all its energies into dealing with a Brexit conundrum it cannot solve. Civil servants who had doubts about a hard Brexit are not being listened to. Advice, he says, is being ignored. Ideology is trumping good governance.

In Grayling’s case, Adonis thinks the transport secretary was simply averse to taking the East Coast line into public ownership because he did not want to do anything to legitimise Labour leader Jeremy Corbyn’s policy of returning the rail system to state ownership. As a result, he allowed the private sector off the financial hook.

“I think, unfortunately, it is of a piece with the nervous breakdown that has taken place across Whitehall since Brexit,” Adonis says. “The senior civil service is now totally drained physically and psychologically by attempting to deliver the impossible with Brexit, such that it is no longer able to deliver the ordinary business of government. This is now apparent department by department, and in the Department for Transport it is why we have had the breakdown of good government over the East Coast line and the threats to me. It is deeply unpleasant.”

He paints a picture of a political system that is consumed by an impossible goal of securing a Brexit that is good for the UK economy, and a civil service at war with its governing masters.

“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.

“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 with the government it serves. I do not know a single senior civil servant who thinks that Brexit is the right policy, and those that are responsible for negotiating it are in a desperate and constant argument with the government over the need to minimise the damage done by the prime minister’s hard-Brexit stance.

‘It is an open secret that no one will go and work in David Davis’s department, and Liam Fox [pictured] is regarded as a semi-lunatic,’ says Adonis. Photograph: Alberto Pezzali/Rex/Shutterstock

“It is an open secret that no one will go and work in David Davis’s department [DexEU], and Liam Fox is regarded as a semi-lunatic. The only departments that have retained their institutional integrity during this crisis are the Foreign Office and the Treasury, but they have been sidelined in the Brexit negotiations which is a huge mistake because that is where most of the brains and ability in Whitehall is located.

“What essentially is happening is that a government-in-exile in the Treasury and Foreign Office is waiting for the collapse of the current strategy and the moment when it will have to pick up the pieces. The tragedy for the country is that unless something dramatic changes, that collapse will not happen until after we have left the EU in March 2019, whereas it is profoundly important that we understand the crisis that will hit and that we do not leave the EU.”

Now free of his ties to the Tories, Adonis wants to devote his considerable energy to leading the campaign to keep the UK in the EU. The key task, he believes, is to persuade Corbyn to back a second referendum, this time on the eventual deal that May strikes with the other 27 member states. The public should be given the option to back the deal or stay in the EU. “The strategy now is to persuade Labour and my very good friend Jeremy Corbyn.

“I have huge admiration for Jeremy as a politician, even though there are areas of policy where we do not see eye to eye. What I hope Jeremy will do is come out for a referendum on Mrs May’s final deal, which I do not believe he can in all conscience support, since it is going to destroy British jobs and British trade.

“Once that happens, the whole issue will be decided by 10 or 15 votes in the House of Commons. It will all come down to Dominic Grieve [the Tory MP who led the recent rebellion in favour of a final vote by MPs] and his friends, and I hope they do the decent thing for the country as they did before Christmas. In which case we can have a referendum on the final deal – between accepting the deal and staying in the EU– and we can put this national nightmare behind us. That is my strategy for the next year.”

And that is the brighter future which he caught a glimpse of while skiing in the Alps.

The texts that led to the resignation

These are excerpts from texts leading up to the resignation of Andrew Adonis

2 December

Andrew Adonis to chancellor Philip Hammond

Philip, I sense a serious scandal over [transport secretary] Chris Grayling’s decision last week to bail out Stagecoach/Virgin on East Coast.

Just want you to be aware – obvious HMT [Treasury] interest (it looks to me as if your officials have been AWOL on this) but also because I suspect it might get very tense between me & Chris as I expose more about it. I would be happy to brief either of your perm secs on my view of what happened and why it is a scandal if you wish. Best, Andrew

5 December

Bernadette Kelly, permanent secretary at the Department of Transport, to AA



Andrew do you have a moment to speak later today? Bernadette



AA Bernadette - I’m in Kuala Lumpur about to get on plane to London. Can we speak first thing in morning? Assume its about Stagecoach. I have a strong sense of public duty on that ... but happy to speak. A

BK to AA



Yes fine. It is linked to Stagecoach. Concern here is that it becomes more difficult to work cooperatively on NIC [National Infrastructure Commission] business if you are attacking Dept on other aspects of policy. Let’s speak tomorrow however. Bernadette.

AA to BK



VG. Maybe I have to resign from nic tho that wd be a huge pity ... problem is, I think CG put party before country on east coast and given money and policy at stake, I have to go for him. A



6 December

AA to BK

Bernadette, I’ve thought about this a lot on the plane overnight & I think my duty lies in sticking to my guns - ie both the NIC and my criticism of CG for bailing out the private rail companies. Problem is, there aren’t many others who can do either of these well - ie expose the racket on East Coast &/or plan infra for the future. I know this is tricky for you, but you and I didn’t get where we are without juggling tricky situations.



The Chancellor could, of course, dismiss me as Chair of the NIC, but I would have thought that the worst possible reason would be that I am criticising the ethics and value for money of HMG undermining the rail franchising regime! Very happy to speak, tho I suspect you might prefer not to, given my view.

Andrew

BK to AA



Thx Andrew. I have to say I think you are quite wrong about the East Coast. Clearly the politics around franchising are sensitive but I am frankly dismayed that you should characterise the action being taken as unethical, or imagine that the Dept would allow a reckless view of VFM to be taken. Rather we are working very hard with CG [Chris Grayling] to ensure we have a ­positive way forward for the franchise. I’d be happy to elaborate though it is more difficult, and possibly pointless, for me to do so when you are taking such a strong political position yourself, or if you are not open to the points I might make. I am tied up today with PAC prep today but will reflect on whether a conversation may be helpful.



PS – am not sure if you were still planning to attend our Annual Reception but given your current views, this may be awkward!

PPS – yes it is the best Dept in Whitehall.