Three civil servants have been suspended after the Government was forced into a costly and embarrassing U-turn over the award of a new franchise for the West Coast main line.
Laying the blame for the fiasco "wholly and squarely" on the Department for Transport (DfT), new Transport Secretary Patrick McLoughlin said he was cancelling the competition for the London to Scotland line.
In August, with Justine Greening in charge at the DfT, the department had announced that a new 13-year, four-month franchise for the West Coast had been awarded not to Sir Richard Branson's train company Virgin Rail, which had operated the line since 1997, but to rival transport company FirstGroup.
Describing the franchise process as "flawed" and "insane", Sir Richard launched a legal challenge but Ms Greening and, later, Mr McLoughlin contested this, saying they were happy that the bidding for the line had been carried out correctly.
But, on Wednesday, Mr McLoughlin pulled the plug on the process, saying "unacceptable mistakes" had been made by the DfT in the way it managed bids from FirstGroup, Virgin and two other companies. He said the mistakes had been uncovered as the DfT prepared for the Branson legal challenge. He added that taxpayers will now face a £40 million hit as the DfT will be paying back the money the four companies spent on their franchise bids.
The civil servants suspended were among those who had been involved in the West Coast franchise competition, said the DfT.
Mr McLoughlin said he was "very angry" about what had happened over the franchise, was dropping opposition to the Virgin court proceedings and ordering two independent inquiries into what went wrong with the West Coast process. He has also put on "pause" the bidding process for three other rail franchises.
It was planned that FirstGroup would take over the line on December 9. Passengers were assured services would continue as normal, with Virgin possibly being asked to carry on for the time being or the DfT operating the line in the same way as it is already supervising the East Coast line operation.
Labour leader Ed Miliband dubbed the West Coast process "a fiasco and another Government screw-up" while rail union TSSA spoke of passengers paying "sky-high prices for this long-running farce" while the Campaign for Better Transport said it "highlighted the weaknesses in the franchise process".
Bob Crow, general secretary of the RMT transport union, 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 West Coast route should be renationalised on a permanent basis."