RAIL union RMT condemned government plans to terminate the East Coast rail franchise three years early in what Labour has branded a “bailout” that could cost taxpayers hundreds of millions of pounds.

The train operator, made up of Stagecoach and Sir Richard Branson’s Virgin Group, had pledged to pay £3.3 billion to run the service until 2023 when it was re-privatised in 2015, after six years of public ownership.

But Virgin Trains East Coast will avoid paying huge sums back to the public purse, since the bulk of payments were due in the final years of the franchise. The line will then be run by a new partnership model.

Shadow transport secretary Andy MacDonald said: “The real issue is that the East Coast franchise has failed again and the taxpayer will bail it out.

“The secretary of state [Damian Green] has let Stagecoach off the hook for hundreds of millions of pounds. He’s tough on everyone except the private sector.”

RMT general secretary Mick Cash renewed calls for a return to public ownership and an end to “corporate welfare at the taxpayer’s expense.”