Public spending watchdog the National Audit Office has announced it will investigate the Department for Transport’s decision to allow Virgin and Stagecoach to pull out of the East Coast Main Line franchise agreement three years early.

The DfT announced in November that it would let the two firms back out of the agreement in 2020 – three years before the contract was meant to end – and look for a new franchisee. Critics labelled the decision a ‘bailout’ for Virgin and Stagecoach, saying it could cost taxpayers billions of pounds.

Virgin Group owner Sir Richard Branson defended the decision, saying the original agreement was based on “a number of key assumptions and a promise of a huge upgrade of the infrastructure by Network Rail”. He said delays to the upgrade works would have cost the company “significant lost revenue”.

Former chair of the National Infrastructure Commission Lord Adonis pointed to the decision as one of his reasons for resigning from the role.

Now, the National Audit Office has said: “We expect to examine the Department’ management of the franchise to date and the implications of its plans for the new ‘partnership’.”

According to the BBC, a spokesperson for the Department for Transport said the notion that ending the franchise early would put taxpayers out of pocket “is completely wrong” and that Virgin Stagecoach would continue to meet its financial obligations.

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