The taxpayer will have to cover a £160 million shortfall in private-sector funding for London's Crossrail project after the Department for Transport failed to secure the expected contribution from Heathrow Airport, a new report has revealed.
But the report from spending watchdog the National Audit Office said the Department for Transport has set aside a large enough contingency fund to cover the missing cash, and found that taxpayers' interests had been "well protected".
Plans for the £14.8 billion rail line initially envisaged a £230 million contribution from Heathrow, to reflect the benefit the airport can be expected to gain from the new train link to central London, Maidenhead in Berkshire, and Shenfield in Essex.
A number of civil servants have been suspended over the rail franchise fiasco and two reviews have been ordered.
The first one will be overseen by Centrica Chief Dxecutive Sam Laidlaw and former PricewaterhouseCoopers Strategy Chairman Ed Smith, both Department for Transport (DfT) non-executive directors. It will look at the lessons to be learned from the DfT's handling of the flawed competition process.
The second review, undertaken by Eurostar chairman Richard Brown, will examine the wider DfT rail franchising programme and look in detail at whether changes are needed to the way risk is assessed. The bidding and evaluation processes will also be examined.
Transport Company FirstGroup released the following statement:
"Until this point we had absolutely no indication that there were any issues with the franchise letting process and had received assurances from the DfT that its processes were robust and that it expected to sign the contract with FirstGroup soon.
"We are extremely disappointed to learn this news and await the outcome of the DfT's inquiries. The DfT has 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."
Writing on his blog on the Virgin website, Sir Richard said:
"From the moment we found out that FirstGroup had been made the preferred bidder with a completely unrealistic bid, we questioned the way the offers had been assessed, and asked the Government to review and explain how it came to its decision.
"We were convinced the process was flawed but despite our best efforts we were met with silence by the DfT.
"We also asked for the Government to appoint an independent adviser to look at the situation, which was turned down. Reluctantly we were forced to seek a judicial review."
He continued: "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.
"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 line and ensure that passengers continue receiving our team's award-winning service."
Politicians, consumer groups and trade unions have all lined up to criticise the government over its handling of the West Coast Mainline franchise process.
"The whole sorry and expensive shambles of rail privatisation has been dragged into the spotlight this morning and instead of rerunning this expensive circus, the West Coast route should be renationalised on a permanent basis."
– Bob Crow, General Secretary of the RMT transport union.
"Only last week the Transport Secretary repeated his claim that the process was conducted properly and he would hand over the franchise to First on time, despite all the concerns that had been raised.
"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 MP.
"This extraordinary announcement highlights the weaknesses in the franchise process. It's a process that puts finance first rather than passengers, but now it seems we can't even rely on the numbers for that.
"The Government's review of franchises must now be used to look at how we can get rail services that meet passengers' needs and grow and improve our railway."
– Richard Hebditch, The Campain for Better Transport