Derailed: 'Flawed' West Coast mainline decision reversed

The government will reopen the competition for the West Coast mainline franchise because of a "flawed" bidding process, in one of the coalition government's biggest U-turns yet.

Department for Transport (DfT) officials confirmed the decision in the early hours of this morning. Instead of handing over the franchise to FirstGroup in December the competition will now be rerun, giving Virgin Rail the chance to retain its 14-year hold over the business of running trains from London to Glasgow.

Transport secretary Patrick McLoughlin said he had had to cancel the competition for running the West Coast franchise "because of deeply regrettable and completely unacceptable mistakes made by my department in the way it managed the process".

"A detailed examination by my officials into what happened has revealed these flaws and means it is no longer possible to award a new franchise on the basis of the competition that was held," he explained.

McLoughlin said he had ordered two independent reviews to look at the matter "so that we know what exactly happened and how we can make sure our rail franchise programme is fit for purpose".

Those reviews have not stopped the demand for answers. Louise Ellman, chair of the Commons' transport committee, said she would haul McLoughlin up before MPs shortly. Labour is set to lambast the government further at its autumn conference in Manchester, one day after Ed Miliband attacked ministers for incompetence.

"The government's belated admission that it ran a flawed tendering process will come as a surprise to no one," shadow transport secretary Maria Eagle said.

"The West Coast rail franchise fiasco has yet again exposed the shambolic incompetence of this Tory-led government."

Former transport secretary Justine Greening had refused to accept that the bidding process had been unfair, despite anger from Labour, Virgin Rail and the 173,994 people who have so far signed an e-petition calling for the decision to be reconsidered.

FirstGroup had said they would give the government £5.5 billion, compared to Virgin's £4.8 billion. Some observers had doubted their ability to achieve that figure, which requires annual revenue increases of ten per cent, but Greening had insisted that the bid was "achievable".

Her replacement at the DfT had continued to insist the process had been conducted properly as recently as last week. But this morning McLoughlin conceded that the government would not contest the judicial review challenging the decision.

"At the House of Commons select committee we called for all franchise competitions to be paused and a thorough, independent review of the process. We are grateful that Patrick McLoughlin is now doing this," Branson wrote on his blog.

"We also appreciate the DfT publicly acknowledging these errors, and are hopeful they will now accept that Virgin Trains should carry on running the West Coast Main Line and ensure that passengers continue receiving our team's award-winning service."

FirstGroup said it was "extremely disappointed" by the news.

"The DfT have made it clear to us that we are in no way at fault, having followed the due process correctly. We submitted a strong bid, in good faith and in strict accordance with the DfT's terms.

A spokesperson insisted: "Our bid would have delivered a better deal for West Coast passengers, the taxpayer and an appropriate return for shareholders."

It is now possible that the West Coast line may be temporarily nationalised until the reassessed bidding process is completed.

Eagle added: "If the government now transfers the running of this line to its own not for private profit rail company, as seems sensible and likely, then Labour will support that decision."