GOVERNMENT transport bosses missed out on £30m when they took back control of the East Coast Main Line from National Express, it has emerged.

A parliamentary select committee report has revealed the Department of Transport received a lesser sum than possible, taking £120m from the rail operator when it cancelled the contract in 2009.

Ministers turned down the £150m they could have received because they wanted to be free of a “no fault” clause in the higher payout.

But MPs sitting on the public accounts committee last night said the department made this gesture pointless by then publicly stating “that the termination would not be held against National Express in future bids”.

Since the changes, the line has been nationalised and is now run as East Coast trains.

National Express’s failure on the line brought into question the then Labour Government’s policy on franchising rail lines, a process often criticised by unions and passenger groups.

Gateshead MP Ian Mearns, who sits on the all-parliamentary rail in the North group, described the revelation as the latest proof that the entire rail franchising system “is in a mess”, adding that “the National Express time was a very poorly managed period on this line.”

The report said the DfT judged that giving up the extra cash would reduce the risk of other train operating companies with loss-making franchises seeking similar deals, but the taxpayer did forfeit £30m.

The Department allowed National Express to keep its two other franchises, and told National Express last December that the termination would not be held against the company if it were to bid for future franchises.

Committee MPs said in their report: “We are, however, concerned that the Department created a moral hazard by allowing National Express to pay a lesser financial penalty through terminating a contract than they would have done by paying £150m to exit conventually, and by choosing to not hold the termination against Nation Express in future bids.”