MINISTERS have denied doing a deal with rail firms which were seeking to recover £40 million in costs over the ditched bidding competition to run services between Bath and London.
MPs on the influential Commons Transport Select Committee raised questions over the four operators dropping legal action after the Government announced it was extending their existing franchises without a competition.
Pressed over whether these two developments were linked, Rail Minister Simon Burns insisted they were not.
It comes after the decision to scrap the contest for the franchise to run the Great Western network, which includes services between Bath and London.
The bidding contest, which was at an advanced stage, was put on hold last year after the Government was forced to pull the plug on the controversial West Coast deal, following the discovery of "significant technical flaws" in the way the franchise process had been conducted.
There were four companies shortlisted for the Great Western contract - FirstGroup; Arriva Trains; National Express; and Stagecoach.
Following the cancellation of the tendering process, the firms started legal action in March aimed at recouping an estimated £40 million in costs, which the Government had refused to reimburse.
Later that month Transport Secretary Patrick McLoughlin announced he was extending a series of rail franchises, as a result of significant delays to awarding new contracts.
The rail companies subsequently dropped their claims.
FirstGroup's franchise to run the Great Western line was extended by 33 months.
Arriva's franchise to run Cross Country services was extended for 43 months.
National Express's franchise to run the Essex Thameside service was extended by 16 months.
And Stagecoach's franchise to run the East Midlands service was extended by 30 months.
Tackling the Minister over the extensions at a select committee hearing, chairman Louise Ellman said: "The bidders for the aborted Great Western competition - Arriva, First, National Express and Stagecoach - have reportedly dropped their claim for costs.
"Is there any connection between that and the fact that all four are in line to benefit from these extended franchises?"
Responding, Mr Burns said: "No."
Pressing him again Mrs Ellman said: "Is there any link there? First, is it true that they have dropped their claims as far as you know, and is there any connection?"
The Minister replied: "It is absolutely true that all four have dropped pursuing any claims. Is that as a result of any connection to what might happen to them in the future? No."
Delays to the franchising timetable and subsequent extensions followed a Whitehall-commissioned independent inquiry into the process which concluded that contracts should be staggered, with no more than three or four contests held each year.
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