Drivers in bid to run East Coast main line as a co-op

Aslef, the train drivers union, is putting together the offer as an attack on the franchise system and to test Labour's manifesto pledge to allow not-for-profit organisations to compete for contracts.

The union claims that millions of pounds of taxpayers' money is wasted on the running of the franchise system and millions more is then taken out of the rail industry in profits for shareholders.

A spokesman for Aslef said: "We are putting a bid together and we will enter the franchise process. We believe the franchise system is wrong, it is open to abuse and means money is being taken out of the industry to pay shareholders, accountants and lawyers.

"Transport Secretary Lord Adonis has said he will welcome bids from not-for-profit organisations and co-operatives, we want to demonstrate whether that is possible. By going through the franchise process we hope to show how wasteful and inefficient it is."

The spokesman claimed that the Government spends about 35m-a-year just running the franchise system, with further millions spent on the process of vetting bidders and awarding contracts.

It is understood that the union may adopt part of the model used by the John Lewis retail group, where all permanent members of staff are partners.

The news marks yet another twist in the East Coast Main Line saga, in the last three years two companies running the franchise have gone bust and been forced to hand it back to the Government.

The line was taken over by the Government last year and will be state-run until next summer, when a new operator is expected to be announced.

A formal invitation for tenders is expected this autumn and the Department for Transport (DfT) have said the line will definitely not remain in public ownership.

A spokesman for the Labour Party said: "As we made absolutely clear in our manifesto, we will welcome rail franchise bids from not-for-profit, mutual or co-operative franchise enterprises and will look to remove unfair barriers that prevent such bids benefiting passengers and taxpayers."

The Tories have also unveiled a major shake up of the rail franchise system as part of their election campaign, promising to introduce both longer franchise contracts to encourage investment and greater powers for the Office of Rail Regulation.

The East Coast franchise has attracted interest from a number of high profile firms, including Sir Richard Branson's Virgin Trains company.

National Express won the contract in 2007, after it was surrendered by GNER. It agreed to pay the Government 1.3bn in premium payments.

The company set up by the DfT to run East Coast, Directly Operated Rail, will continue to pay a premium in the same way as National Express and GNER did before it, but at a much lower rate. Part of the profits will go to the Government.

In February the Tories called for an inquiry into the Government take-over, claiming Lord Adonis "stretched the truth to its limit" in his statements about the National Express failure.

The party said documents obtained under the Freedom of Information Act reveal the operator made it clear to the DfT in April and June last year it had severe problems and would not be able to continue with the franchise.

But it claimed Lord Adonis failed to disclose that to the House of Commons or the House of Lords, instead telling a Transport Select Committee that no train operating company had "defaulted on its obligations" and the franchising system had "continued to prove its worth".