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East coast mainline to be temporarily renationalised

East coast mainline to be temporarily renationalised

He will then appoint an "operator of last resort" to run the train services on the line.

"It will have representatives of both the train operating team and Network Rail, as well as independent members who will importantly ensure the interests of other operators on the route are taken into account".

Announcing the decision, Grayling said: "I will terminate Virgin Trains East Coast's contract on 24 June".

It is the third time since 2007 that the 393-mile flagship route between the English and Scottish capitals has been returned to government hands after contracts failed, giving ammunition to the opposition Labour party which opposes privatization.

Virgin Trains East Coast - a joint venture between Stagecoach and Virgin was awarded the franchise for eight years back in 2014.

He told the Commons that Stagecoach and Virgin have lost nearly £200m, but there had not been a loss to taxpayers "at this time".

After looking into problems with the service, Mr Grayling said he was advised "that there is no suggestion of either malpractice or malicious intent in what has happened".

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The Department for Transport will run the service until a new public-private partnership can be appointed in 2020. "We can not expect companies to take on unlimited liabilities otherwise they would not bid for franchises".

It included the East Coast Main Line from London to Edinburgh via York and the routes from Edinburgh to Aberdeen and Inverness. But Virgin founder Richard Branson launched a staunch defence of the much-criticised Stagecoach/Virgin East Coast rail franchise "bailout" in January, claiming he and his partners had not "received a penny in dividends" and will in fact lose well over £100m.

He said he has received "official advice" that Virgin and Stagecoach should be allowed to continue bidding for future rail franchises.

Stagecoach said it and Virgin had been negotiating for a new contract with the Department for Transport but that it understood Mr Grayling was "no longer considering" them for the deal.

He added: "However, we respect the government's decision".

The loss-making service is being renamed London and North Eastern Railway (LNER) which is the name used by the company that operated the line before BR in the late 1940s. The chair of the Commons Transport Committee Lilian Greenwood said it was "a very sorry tale".

Critics of denationalisation fear the collapse of the franchise will cost taxpayers hundreds of millions of pounds. He said in the last three years, Vtec had "attracted more passengers, greatly increased investment, achieved industry-leading customer satisfaction and made significant payments to the taxpayer to reinvest in public services".