TRANSPORT Secretary Chris Grayling was accused of “misleading” Parliament yesterday as the row over a controversial private rail bailout gathered steam.

On Wednesday, the government announced that the Virgin Trains East Coast (VTEC) franchise would now finish in 2020, three years early.

Shares in the firm’s parent company Stagecoach jumped 12 per cent as it emerged that it is likely to pay the government a fraction of the £3.3 billion premium it signed up to at the start of the franchise.

Mr Grayling insisted in the Commons that “no-one will get a bailout at all” and suggested that Stagecoach would meet its franchise commitments “in full.”

But his Labour opposite number Andy McDonald has now written to the minister pointing out that the taxpayer will be left £2 billion short as a result of the decision.

This is because the bulk of the payments that the company was due to make to the government were weighted towards the end of the franchise.

“It is abundantly clear that, despite your assertions to the contrary, you have indeed bailed out Stagecoach/Virgin and I would urge you to confirm that the position is as I describe it,” Mr McDonald writes.

“Without such clarification, I regret to say that your statement as it stands misleads the House of Commons and I would urge you to correct the position as a matter of supreme urgency by placing a letter of explanation in the House of Commons library today.”

The government said the new “partnership” arrangement for the route would bring “track and train under a single leader and unified brand.”

However, it follows reports that VTEC could become the third franchisee on the route to fail since 2006.