Transport chiefs today hit back at criticism over the handling of the extension of First ScotRail's contract to run trains.

Transport chiefs today hit back at criticism over the handling of the extension of First ScotRail's contract to run trains.

Transport Scotland's finance chief Guy Houston resigned after the publication of an auditor's report which confirmed he took part in meetings about the deal.

Mr Houston was a First Group shareholder, although this was declared in Transport Scotland's annual report.

Malcolm Reed, chief executive and chair of Transport Scotland, faced claims today at Holyrood's public audit committee that Mr Houston had a "material interest" in the extension.

But Dr Reed said: "Mr Houston only ever participated at a very late stage in the process.

"He attended two meetings after the deal had been struck.

"He played no part at all in either the shaping of the deal or the management of the deal."

Mr Houston did not declare his shareholding in First Group at his interview for the Transport Scotland job but told bosses after taking up the post in May 2006 - protocols were then put in place to "manage" the situation.

However it was not clear when he declared his shareholding, the committee heard today.

But committee convener Hugh Henry said Dr Reed knew that Mr Houston had a "material interest" in the outcome of any discussions.

The contract extension to 2014 was announced in April, without widespread consultation.

The franchise contract is the largest of its kind let by the Scottish Government and is worth about £2.5 billion over 10 years.

The committee also heard from Sir John Elvidge, the top civil servant in Scotland, who said it would have been "helpful for everyone" if Mr Houston had told bosses at his job interview that he had shares in First.

Sir John also accepted that Mr Houston should not have attended any meetings on the contract extension.

"It would have been better for Mr Houston to be present at no meetings" he said. "That's more about addressing public concerns than the realities of the discussion at the meeting."

He also said data protection laws prevented him from revealing why Mr Houston left his post and if he received any severance package.

Dr Reed also rejected the claim that there had been no business case behind the contract extension, adding that this was available for ministers if they had asked for it.

Ministers were given a "detailed walk-through" at a presentation which set out all the headline figures behind the contract extension, but a business case was "completed and available", according to Dr Reed.

"There was a very robust business case for this," Dr Reed said.

"The minister did not at that stage ask to see a business case."

Ministers have previously been accused of doing a "secret deal" over the lack of consultation with the contract extension.

Dr Reed said the deal must be kept confidential because of "market sensitivity" and insisted that if the negotiations had come to light, it may have affected the ScotRail share price.

He added that a consultation on rail services had been carried out in 2006.