(STORY UPDATED 09.58)

THE Department for Transport has confirmed that it has signed the East Coast contract with Inter City Railways, a joint venture between Stagecoach Group and Virgin Trains. Labour has condemned the signing as a 'betrayal'.

The award of an eight-year franchise was announced in late November, but could not be legally completed until a 'standstill' period had expired.

The new operator will pay the Government roughly £2.3 billion in premiums at present day values, or £3.3 billion when adjusted for inflation. It has also undertaken to invest £140 million in upgrades to stations and the existing fleet. From 2018 the first of 65 Intercity Express trains, to be assembled at Hitachi’s factory in Newton Aycliffe, County Durham, will be entering service, with all the new trains due by 2020.

The winner had beaten FirstGroup and a consortium of Keolis and Eurostar, and will now begin talks with Network Rail and the Office of Rail Regulation over plans to run new direct services from London to Sunderland, Middlesbrough and Huddersfield.

It will also seek approval to run more trains to Edinburgh, Leeds, Lincoln, Shipley, Stirling, Harrogate and Bradford.

Stagecoach Group has 90 per cent of the new operator. The Group's chief executive Martin Griffiths said: "While the franchise officially begins in March next year, our team are already planning ahead to build on the strong pride, heritage and success at East Coast. In the coming months, we will be working closely with employees and the management team to ensure a smooth transition to the new franchise. Stagecoach and our partners Virgin see investing in people and delivering great customer service as key to the future. We look forward to welcoming staff into the Stagecoach and Virgin family and making Virgin Trains East Coast a huge success."

Unions and other campaigners had opposed the award, saying that Intercity East Coast should have remained in the public sector. It had been operated by DfT subsidiary Directly Operated Railways since November 2009, when National Express had surrendered the previous franchise because revenues had fallen short of expectations.

Labour shadow transport secretary Michael Dugher said: “This decision is a betrayal of taxpayers and the travelling public. It’s ridiculous that our own public operator was barred from running to continue to operate the line.  Labour has called for a wholesale review of the franchise process. A different approach is needed – one that puts the public interest first, reverses the presumption against the public sector and properly stands up for passengers."