The most expensive train fares on Britain's main London to Scotland route will be cut by 10% thanks to the privatisation of the line, Transport Secretary Patrick McLoughlin has said.

The East Coast mainline which connects London to Yorkshire and the North East and beyond to Scotland will be run by a consortium involving Virgin Group and transport company Stagecoach from March.

Mr McLoughlin said the most expensive fares will be cut, journey times will be reduced, and extra and new services will operate to towns and cities in the North.

In addition, a new train-building plant will be set up at Newton Aycliffe in Country Durham.

The Transport Secretary described the deal, worth £3.3 billion over eight years, as "good for passengers, staff, communities and taxpayers".

He said: "This morning I announced the intention to award the intercity East Coast franchise to Stagecoach Virgin, exactly on the schedule we promised two years ago.

"It is great for passengers, it will bring more trains, faster trains, newer trains, better services and better value for money.

"It is good for towns and cities up and down the East Coast.

"It is good for our economy and jobs.

"It is proof that the right route forward for our railways is the private sector and the public sector working together.

"This deal will make the route of the Flying Scotsman a world beater once again."

He added: "This award is further proof that private competition is good for the passengers, staff, communities and taxpayers.

"The quality of the new operator's plans will benefit the whole country."

Mr McLoughlin was responding to an urgent question from shadow transport secretary Michael Dugher, who questioned why the public sector provider that has run East Coast since 2009 was not allowed to bid for the franchise.

But the Tory minister accused Labour of denying benefits to the North.

Mr McLoughlin told the Commons: "I ask you, why do you want to deny the North all these benefits?

"The new operator will provide 50% more capacity across the East Coast network, a 40% increase in the peak seats to and from Kings Cross and a refurbishment of the existing fleet.

"It will cut some of the most expensive fares by 10% from May of next year."

Mr Dugher questioned whether Virgin's record of charging some of the highest peak-time fares in the country on other lines would hit the pockets of travellers on East Coast.

Describing the deal as an "absolute disgrace", he claimed the consortium had said it will pay £1 billion less than the figure quoted by the Government.

Mr Dugher said: "The Government says £3.3 billion will be paid to the Exchequer over eight years but the operator is saying that it's £2.3 billion.

"Why the discrepancy?

"Is your announcement already unravelling?

"And, given that Virgin charges some of the highest peak fares in the country on the West Coast, are passengers on the East Coast main line going to face more rises to pay for this today?

"Finally, isn't it time that the Government looked at legislating to allow a British not-for-profit public sector operator to take on and challenge train operators on a level playing field?

"It's clear that the whole franchise process now - this should never have happened.

"It was rushed through, a rigged political timetable.

"This is a service that, by the time it's privatised, will have paid into the Exchequer over £1 billion.

"This entire process is an absolute disgrace. The taxpayer and the travelling public have been sold down the river."

Later in the debate, Labour's Dennis Skinner (Bolsover) called for the railways to be brought back into public ownership.

He asked the Transport Secretary: "Do you agree that on two occasions the private sector have run this East Coast line and have been a failure?

"Whereas the public sector that have been running it for some considerable time have handed over more than £1 billion to the Treasury. Why change a winning formula?

"Why don't you agree with 70% of the population who believe that rail should be brought back into public ownership? And I'm one of them."

Mr McLoughlin said the nationalised system had been "dying on its legs" and only provided 768 million journeys a year compared with 1.6 billion today.

He said: "And it's employing more people.

"More people working on our railways, more people using our railways. I would have thought you would have welcomed the fact that instead of the railways being a dying, declining industry, it is today a vibrant industry ... giving more people the opportunities from whatever background they come from.

"It is something I celebrate. It is something you are disappointed with."

Labour's Barry Sheerman (Huddersfield) also took up the point, asking: "Do you not realise that most people in Yorkshire see privatisation as having been a disaster for the train service across our region? It has been rotten. It is still going to be rotten.

"I'm not the most radical member of these benches but I have been persuaded to take back into public ownership the rail system of this country. That is what we need, that is what we deserve."

Mr McLoughlin hit back: "I think if I'm right, the person who has just spoken is the honourable member for Huddersfield.

"Not a single welcome of a new trains service to Huddersfield, but rather talk about dogma than celebrating the first time since 1960 that your area is going to be served with a direct link.

"That sums up the Labour Party 100%. It is a Labour Party of Kinnock rather than of Blair or Brown."

Labour's Helen Goodman (Bishop Auckland) asked why the minister had been so happy to consider a French national bid but not a British one.

But the deal was repeatedly welcomed by MPs on the Government back benches.

Conservative Andrew Jones (Harrogate and Knaresborough) said it represented a boost for the economy of the whole of the north of England.

And his colleague Philip Hollobone (Kettering) accused Labour of "economic illiteracy".

He insisted it was a good deal for passengers, for those who want to see the economy improve and for taxpayers.