The House of Commons transport committee has announced it will launch an inquiry into the decision to end the East Cost Mainline rail franchise early.

Last week, transport secretary Chris Grayling said Stagecoach and Virgin would have to withdraw from the franchise agreement ‘within months’ after the companies revealed that operating the line would cost them “hundreds of millions of pounds”, according to Sir Richard Branson.

Originally, Grayling announced that the government would allow Stagecoach and Virgin to leave the franchise in 2020, three years earlier than agreed, but last week said the situation was ‘more urgent than originally thought’.

Now, MPs will scrutinise the decision, with transport committee chair Lilian Greenwood saying: “There are serious questions to be asked of the train operator, Network Rail and ministers and the transport committee intends to ask them.

“The failure of the East Coast franchise has wider implications for rail franchising and the competitiveness of the current system. Lessons need to be learned by all concerned.

“In the meantime, the Department for Transport must take the right steps to protect passengers and taxpayers. Safeguards must be put in place to restore public confidence in the sustainability of our railways.”

Speaking to the BBC’s Today programme, rail minister Jo Johnson said Stagecoach and Virgin had “overbid” for the franchise and that the department would be looking into the bidding process for future agreements “to ensure there aren’t any incentives for bidders to overbid”.

However, he said risks are unavoidable and it is “unrealistic to expect the government to eliminate that altogether.”

The National Audit Office has said it will also launch an inquiry into the government’s decision.

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