Periodic viability reviews of Connex's South Eastern franchise would have shown up the company's emerging financial difficulties more quickly, the report from the House of Commons Public Accounts Committee said.

The travelling public suffered most as Connex "became a byword for incompetence among cold and angry passengers waiting for trains that limped in late or simply didn't arrive", said the committee's chairman Edward Leigh (Con, Gainsborough).

He added that the Office of Passenger Rail Franchising (OPRAF) and its successor, the now-defunct Strategic Rail Authority (SRA), had had "myopia over what Connex could realistically deliver".

Connex took over the franchise in 1996 and was sacked from it in November 2003, with the SRA taking over in the form of the South Eastern Trains company. South Eastern is now part of a new Integrated Kent franchise run by the GoVia company.

The report said neither OPRAF nor the SRA adapted their franchise monitoring to manage the associate risks of the Connex operation.

Mr Leigh said: "The parties couldn't communicate properly and felt no trust in each other. The SRA was slow to realise that Connex was running into money problems and Connex didn't rush to make this clear to the SRA.

"When further subsidies of £183 million were to be poured into Connex, there were no strings attached whatsoever."

He went on: "It is essential that, in future, the Department for Transport identify the train operating companies at greatest risk of financial and operational failure and develop an early warning system for detecting emerging threats to the viability of their franchises.

"And the management and monitoring of franchises will be effective only if the responsible staff have the expertise and resolve to ask hard questions about the financial information. In the event, the termination of the franchise and handover to South Eastern Trains in 2003 went well and, overall, passenger satisfaction increased. But the need for such drastic remedial action, at considerable cost to the taxpayer, should never have arisen in the first place."