Labour’s deputy leader, Tom Watson, has called on Chris Grayling to resign as transport secretary over what he described as a “grubby backroom deal to bail out the East Coast line”.

Watson added his voice to that of the Labour peer Andrew Adonis, who resigned as head of the government’s National Infrastructure Commission with a broadside against the minister.

In addition to speaking about his vehement disagreements with the government over Brexit, Lord Adonis said Grayling’s decision to bail out Stagecoach and Virgin, which were contracted to run the east coast mainline until 2023, was the final straw.

Handing a cheque worth hundreds of millions of pounds to Virgin’s founder, Richard Branson, and the Stagecoach founder, Brian Souter, “would be indefensible at the best of times but we are now at the worst of times with a Brexit squeeze on public finances and with rail fares going through the roof”, Adonis told the Observer. He said the move would cut infrastructure spending.

Grayling could have opted for a state rescue, Watson said, but “that would have meant borrowing a key Labour policy - taking our failing rail system back into the public sector. Instead, Grayling has agreed to hand over billions of pounds of our money to the ridiculously wealthy Richard Branson and Brian Souter.

“Using taxpayers’ money as an act of political expediency is indefensible and Grayling should go now.”

Passengers are currently bracing themselves for the biggest rise in rail fares for five years, with the price of season tickets to increase by up to 3.6% on Tuesday.

A senior Conservative source said it was disappointing to see “someone of Lord Adonis’s experience making completely inaccurate statements based on a lack of knowledge of the facts”.

A Department for Transport spokeswoman said: “No one is getting a bailout. 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 to 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.”

The new rail strategy Grayling announced last month contained plans to replace the Virgin Trains East Coast contract running to September 2023 with a model of a partnership between track and train operators from 2020.



Although the minister denied that he was bailing out Stagecoach, the company’s share price rose by 15% after the plan was published.