Labour former transport secretary Lord Adonis has accused Chris Grayling of "another unjustified bailout" of Virgin and Stagecoach over the East Coast mainline franchise.

Virgin has been awarded the new West Coast franchise and Lord Adonis said this was "without any competition whatsoever" and Stagecoach was being allowed to bid for further franchises "despite walking away from the East Coast mainline".

Lord Adonis claimed the Transport Secretary's actions were "costing the taxpayer very dearly" after peers heard a Government statement on the contract for running the East Coast franchise ending earlier than expected.

He told the Lords Mr Grayling was "undertaking another unjustified bailout of Virgin and Stagecoach at the expense of taxpayers".

Lord Adonis said: "The reason for these disgraceful bailouts we've been seeing from Mr Grayling is because he simply is not prepared to contemplate putting his duty above ideology and substituting for failing private companies a state company.

"He wants to make a whole set of cheap points about private good and public bad, which demean his office and are costing the taxpayer very dearly."

Transport minister Baroness Sugg, who had repeated the Government's statement in the Lords, dismissed Lord Adonis' accusations, saying: "I'm afraid we don't recognise the bailout accusation."

"Stagecoach will be held to all their contractual obligations in full," she added, and it would lose nearly £200 million under the change.

Lady Sugg acknowledged the West Coast franchise was a "direct award" and no other bidder was involved.

She said the privatisation process had brought benefits to rail users through investment in new trains, and highlighted customer satisfaction with services on the East Coast route.

Virgin Trains issued a statement about the West Coast Mainline. it said: "Virgin Trains customers on the West Coast will see a significant improvement in on-board WiFi later this year.

"All 56 Pendolino trains will undergo a refit which will vastly improve the on-board equipment, and allow free WiFi to be extended to all Pendolino customers.

"The £7.5 million investment is part of a new deal agreed with the Government, which will see Virgin Trains continue to run the West Coast franchise through to at least March 31 2019, with the option for up to a further one-year extension at the Department for Transport's discretion.

"The existing franchise expires on March 31 2018, and the new contract will bridge the gap between the existing franchise and the new West Coast Partnership, due to start on April 1 2019.

"Installation of the WiFi upgrade is planned to begin on the Pendolino fleet from May 2018, with the work expected to be completed by January 2019, when free WiFi will be extended to all Pendolino customers.

More than 85 per cent of our customers travel on Pendolinos. In addition, the new technology is 'future-proofed' so it will work with 5G mobile phone networks as they come on stream and offer further speed improvements.

"The upgrade will also unlock the ability to offer more technology-led improvements in the future, all of which will increase customer satisfaction."