The government faced urgent calls to renationalise Britain's railways yesterday after it was forced to scrap the award of the country's busiest rail franchise.
Three government officials have been suspended and taxpayers will have to cough up £40 million to compensate bidders as the whole West Coast Main Line franchising process is rerun.
Rivals FirstGroup and Virgin Rail had been squaring up for what would have been a lengthy legal battle after the Department for Transport triggered a public spat by picking FirstGroup over Sir Richard Branson's Virgin, which has run the London-Glasgow line since 1997.
Incandescent Transport Secretary Patrick McLoughlin said yesterday he was scrapping the award entirely and that the decision was "wholly and squarely" down to his officials.
The franchise competition had been cancelled because of "deeply regrettable and completely unacceptable mistakes made by my department," Mr McLoughlin said.
He said: "A detailed examination by my officials into what happened has revealed these flaws.
"I have ordered two independent reviews to look urgently and thoroughly into the matter."
The brake has also been put on bidding processes for three other rail franchises - Great Western, Essex Thameside and Thameslink.
Mr McLoughlin called the decision "embarrassing and regrettable."
He said he was "very angry" and revealed flaws in the procurement process.
"The original model didn't take into account inflation and also some elements of the passenger number increases over a number of years," the minister said.
He added: "I want to make it absolutely clear that neither FirstGroup nor Virgin did anything wrong.
"The fault of this lies wholly and squarely with the Department of Transport."
Labour leader Ed Miliband condemned the U-turn as "the latest fiasco" by the government, saying he thought it was a matter of ministerial incompetence.
But rail workers said the problem was the system itself.
RMT general secretary Bob Crow said: "The whole sorry and expensive shambles of rail privatisation has been dragged into the spotlight and instead of re-running this expensive circus the route should be renationalised on a permanent basis."
Drivers' union Aslef agreed.General secretary Mick Whelan said it was clear franchising was "not just going through a bad patch.
"It is time to accept that franchising has failed and to begin a serious study of alternative rail financing involving the workforce, companies, users, politicians, rail experts and any other stakeholders."
The Campaign for Better Transport said the announcement "highlighted the weaknesses in the franchise process."
And rail union TSSA said passengers were paying "sky-high prices for this long-running Whitehall farce."
Even Institute of Directors director-general Simon Walker said: "It is shocking that such a crucially important process has gone so seriously wrong."
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