Government cost cutting that led to West Coast mainline franchise fiasco could cost tax payer £100 million

An internal Department of Transport investigation led by the businessman Sam Laidlaw found that 'organisational changes and resourcing constraints' contributed to flaws in the franchising process

Government cost cutting and a botched reorganisation of the Department of Transport contributed to “unacceptable flaws” in deciding who should run the main railway line between London and Scotland, two damning independent reviews have concluded.

An internal Department of Transport investigation led by the businessman Sam Laidlaw found that “organisational changes and resourcing constraints” contributed to flaws in the franchising process which could end up costing the tax payer up to £100 million.

At the same time a separate report by the National Audit Office concluded that spending cuts which forced the department to reduce its £295 million administration budgets by 33 per cent had led to 500 staff losing their jobs had led to a loss of expertise which might have prevented the fiasco.

It added: “We have consistently highlighted the risks that departments run in cutting costs without fully understanding value.”

Both reports concluded, as first revealed by The Independent earlier this year, that the loss of institutional knowledge and experienced staff members with knowledge of franchising had exacerbated problems.

However Laidlaw cleared politicians of having any direct responsibility for the botched process saying ministers were given “inaccurate reports” on which to base the ultimate award of a new 13-year West Coast franchise to transport company FirstGroup last August.

It was only when Sir Richard Branson, whose Virgin Trains' company had lost out to FirstGroup in the bidding, mounted a legal challenge to the decision that the flaws in the process were discovered.

The mistakes made, the Laidlow report said, were based on making inaccurate risk calculations on the merits of the two bids and giving misleading information to the two companies preparing their bids.

It also highlighted a meeting of Department of Transport officials which suggested there might have been a desire not to eliminate FirstGroup from the bidding process.

At that stage calculations on the risk presented to the taxpayer of the bidders defaulting on payments to run the line was changed to favour FirstGroup.

Ministers were then given “inaccurate statements” as “to the manner in which” civil servants had decided upon the franchise bid.

Today three civil servants who had been suspended while an internal disciplinary investigation was carried out were given permission to return to work. However departmental sources said this move was purely procedural and not an indication of any disciplinary action which might be taken against them in the future.

In another move Mr McLoughlin announced Virgin would carry on running West Coast trains until November 2014 when a new long-term franchise would begin.

In the Commons Mr McLoughlin, who had initially defended the original FirstGroup decision when he succeeded Justine Greening at the DfT in September, told MPs that the report would make “uncomfortable reading for the department”.

He stressed that ministers had made the original franchise award “without being told about the flaws and after being given inaccurate reports”.

“It has identified precisely what went wrong, revealing serious failures, as well as offering us a number of sensible recommendations to put things right,” he said.

“We will not allow these mistakes to be made again and the department is determined to ensure all future franchise competitions are conducted on the basis of sound planning, the rigorous identification and oversight of risk, and the right quality assurance.”

But shadow transport secretary Maria Eagle said it was “decisions and failures by ministers” that led to the collapse of the franchise.

Both Ms Eagle and House of Commons Transport Committee chairman Louise Ellman said the Laidlaw report was “damning”.

Mr Laidlaw said his report had found “a lack of transparency, inadequate planning and preparation, as well as a complex and confusing organisational structure with weak quality assurance and insufficient governance oversight”.

The DfT's Permanent Secretary Philip Rutnam said: “There is no question that this has been a serious blow for the department and I am determined that we learn everything we can from this episode.

“We will implement all of Mr Laidlaw's recommendations, and go further, to ensure we have the right set of skills, support and training to ensure failures like this do not happen again.”

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Ashdown Group: Marketing Manager (B2B) - Romford - £40,000 + car

£35000 - £40000 per annum + car and benefits: Ashdown Group: Marketing Manager...

Ashdown Group: Helpdesk Analyst - Devon - £20,000

£18000 - £20000 per annum: Ashdown Group: Helpdesk Analyst - Devon - £20,000 ...

Ashdown Group: Data Scientist - London - £50,000 + bonus

£35000 - £50000 per annum + generous bonus: Ashdown Group: Business Analytics ...

Ashdown Group: IT Project Coordinator (Software Development) - Kingston

£45000 - £50000 per annum: Ashdown Group: IT Project Coordinator (Software Dev...

Day In a Page

General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

'We will not sit down with Nicola Sturgeon'

In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

How ordinary Britons celebrated VE Day

Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
They came in with William Caxton's printing press, but typefaces still matter in the digital age

Typefaces still matter in the digital age

A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

'Missing link' between Earth's two life-forms found

New microbial species tells us something about our dark past, say scientists
The Pan Am Experience is a 'flight' back to the 1970s that never takes off - at least, not literally

Pan Am Experience: A 'flight' back to the 70s

Tim Walker checks in and checks out a four-hour journey with a difference
Humans aren't alone in indulging in politics - it's everywhere in the animal world

Humans aren't alone in indulging in politics

Voting, mutual back-scratching, coups and charismatic leaders - it's everywhere in the animal world
Crisp sales are in decline - but this tasty trivia might tempt back the turncoats

Crisp sales are in decline

As a nation we're filling up on popcorn and pitta chips and forsaking their potato-based predecessors
Ronald McDonald the muse? Why Banksy, Ron English and Keith Coventry are lovin' Maccy D's

Ronald McDonald the muse

A new wave of artists is taking inspiration from the fast food chain
13 best picnic blankets

13 best picnic blankets

Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
Barcelona 3 Bayern Munich 0 player ratings: Lionel Messi scores twice - but does he score highest in our ratings?

Barcelona vs Bayern Munich player ratings

Lionel Messi scores twice - but does he score highest in our ratings?
Martin Guptill: Explosive New Zealand batsman who sets the range for Kiwis' big guns

Explosive batsman who sets the range for Kiwis' big guns

Martin Guptill has smashed early runs for Derbyshire and tells Richard Edwards to expect more from the 'freakish' Brendon McCullum and his buoyant team during their tour of England
General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'