Blow for East Coast rail hopes

Transport Secretary Philip Hammond will decide in October whether to proceed with the 7.5bn contract for a fleet of Inter City trains for the East Cast main line after saying it would be "irresponsible" to make a judgment before the spending review.

A value-for-money study commissioned by Labour before the General Election – when a decision over the deal was first deferred – said the project was "positive and attractive" in a number of ways although it no longer represented "exceptionally high" value.

But the order to take a fresh look at alternatives raises doubts over whether the deal to overhaul the East Coast main line's ageing fleet – cutting journey times to the capital by 10 minutes, seeing new depots built in Leeds and Doncaster and possibly creating a new factory in Sheffield – will ever go ahead.

Sir Andrew Foster, who carried out the review, said there were substantial concerns with the current proposal and questioned whether all credible alternatives had been examined. It could mean other trains being bought, existing ones upgraded or others brought in from elsewhere but passengers will fear they could be left with years of misery in existing dated and overcrowded trains.

"Whilst Sir Andrew's report acknowledges that whilst the programme has exceeded the department's value for money thresholds, the value for money has declined over time, and Sir Andrew suggests that he is not convinced that all of the viable alternatives to the programme have been assessed alongside it on an equal footing," said Mr Hammond.

"Therefore the Government will use the period until the spending review announcement in October to give further consideration to the alternatives to (the] Intercity Express Programme."

Doubts were first raised over the project in February when, months after the deal was expected to have been signed, the then-Transport Secretary Lord Adonis put the contract on hold saying it was not "appropriate" to sign it until after the General Election.

The scheme has been controversial since it emerged that part of the work would be done abroad after Agility Trains, a consortium including Japanese manufacturing giant Hitachi, which would build the trains in its own country, was given preferred bidder status over a rival bid including British train-builder Bombardier.

The deal would replace existing 20 to 30-year-old Intercity trains and the previous Government had claimed it would "create and safeguard" more than 12,500 jobs.

The new "super express" trains would be used on the East Coast – linking London with Leeds, Hull and York – and Great Western main lines.

Some of the manufacturing work was expected to be done at a new UK factory at Sheffield, Gateshead or in Leicestershire, eventually employing 500 people, while new depots were due to be built in Doncaster and Leeds.

Stuart Andrew, the new Conservative MP for Pudsey, said: "I think the Secretary of State's decision is an infinitely sensible one to take. The last Government requested it to be looked at and then the review is suggesting to look at the alternatives. It would be remiss of Government not to take that advice.

"OK, we've been waiting long enough as it is but we might as well wait a few more months so we've got the best information in front of us."

A spokesman for Agility Trains said it understood the Government's wish to make a co-ordinated decision on major rail projects and to look again at the points raised by Sir Andrew Foster.