MINISTERS revealed last night that the Government is poised to take over the running of the East Coast main line from troubled rail operator GNER if the current financial crisis worsens.

GNER's parent company, Bermuda-based Sea Containers, has claimed it will quit the London-Yorkshire-Scotland rail business because it cannot meet the agreed £1.3bn it has to pay the Treasury over the 10-year life of the franchise.

But Transport Minister Stephen Ladyman turned up the pressure last night by stressing that the mechanisms are in place for the Government to grab back control of the franchise in exactly the same way it did with cash-strapped operator Connex in the South East in 2000.

Connex remains to date the only rail operator since privatisation to have been stripped of a franchise midway through and the comparison will only serve to alarm those hoping for movement from the Government on GNER's franchise terms.

Asked by the Yorkshire Post to explain the Department of Transport's concerns, Mr Ladyman said: "At this stage we've been given assurance that the situation with the company won't affect the franchise and the operation of it.

"Beyond that I don't think really I ought to comment too much, except to say we're staying very close to it and if we need to we can take action.

"We have the mechanisms for doing that, as we did in Kent for example, where we had to strip a franchisee of the franchise and basically we stepped in and ran the franchise centrally until the franchise could be re-let."

But Mr Ladyman rejected suggestions that the franchise system was failing – and attacked the Conservatives for their

U-turn on the issue. Tory transport spokesman Chris Grayling said over the summer that the break-up of the railways, into separate track and train operator franchises, had only served to push up running costs and hinder expansion.

Speaking to a Westminster lunch of political editors Mr Ladyman said: "It seems odd to me that the Conservatives have raised the idea of the franchise system not working just as some of the franchises have to start paying money to the Government."

He added: "Some of the franchises are now running very profitable services, many to capacity, and there's no reason why the taxpayers shouldn't be getting something back from the franchises."

Mr Ladyman also attempted to address head-on the central plea of the Yorkshire Post's Road to Ruin campaign – more equitable transport funding compared to London and the South East.

He said: "One or two regions, and regional media, tend to highlight what they see as the disparity between the local per capita funding and the London per capita funding.

"But you can't do that because London is absolutely unique in UK transport terms in that it's the hub out of which all the major spokes emerge.

"It has to be seen that investment in London's infrastructure is an investment that tends to benefit the regions as well.

"It may appear at first glance that London gets a better deal but it's not as easy as that."

Mr Ladyman also reinforced his Government's now total commitment to future road pricing: "Ultimately, we need to get to a national road pricing system but ultimately we need to start off with some pilots."

He would not comment on where the pilots would be set up but did, however, signal that trials in areas with "complex" transport demands were clear favourites.