A railway omnishambles proves Miliband's point

West Coast rail contract scrapped after "significant flaws" in the bidding process.

One of the most powerful sections of Ed Miliband's speech came when, with remarkable fluency, he declared of the government: "Have you ever seen a more incompetent, hopeless, out of touch, U-turning, pledge breaking, make it up as you go along, back-of-the-envelope, miserable shower?" Less than a day later, ministers have demonstrated exactly what he meant.

The Transport Secretary Patrick McLoughlin has announced that the decision to award the West Coast Main Line rail franchise to FirstGroup has been cancelled after the discovery of "significant technical flaws" in the bidding process. The government will no longer challenge the judicial review sought by Virgin, the current operator, which has long argued that the process did not adequately assess the risks of competing bids (it warned that FirstGroup's £5.5bn bid was a recipe for bankruptcy). According to McLoughlin, the reopening of the bids will cost the taxpayer "in the region of £40m".

The staff involved have been suspended from the Department from Transport and two independent reviews, one into what went wrong with the West Coast competition and the other into the wider franchise bidding process, have been launched. What makes this particularly damaging for the government is that Labour had previously called for the contract to be halted in order to allow such a review to take place.

McLoughlin said:

I have had to cancel the competition for the running of 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.

I have ordered two independent reviews to look urgently and thoroughly into the matter so that we know what exactly happened and how we can make sure our rail franchise programme is fit for purpose.

The government will now likely transfer responsibility for the running of the line to the state-owned Directly Operated Railways, which took over the East Coast Main Line in 2009. Labour has called for the government to immediately halt the planned privatisation of the latter. Indeed, with 15 rail franchises due to be awarded before the general election, the argument for full renationalisation has been immeasurably strengthened.

A Virgin train passes along the West Coast mainline route near Abington. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Could Labour lose the Oldham by-election?

Sources warn defeat is not unthinkable but the party's ground campaign believe they will hold on. 

As shadow cabinet members argue in public over Labour's position on Syria and John McDonnell defends his Mao moment, it has been easy to forget that the party next week faces its first election test since Jeremy Corbyn became leader. On paper, Oldham West and Royton should be a straightforward win. Michael Meacher, whose death last month triggered the by-election, held the seat with a majority of 14,738 just seven months ago. The party opted for an early pre-Christmas poll, giving second-placed Ukip less time to gain momentum, and selected the respected Oldham council leader Jim McMahon as its candidate. 

But in recent weeks Labour sources have become ever more anxious. Shadow cabinet members returning from campaigning report that Corbyn has gone down "very badly" with voters, with his original comments on shoot-to-kill particularly toxic. Most MPs expect the party's majority to lie within the 1,000-2,000 range. But one insider told me that the party's majority would likely fall into the hundreds ("I'd be thrilled with 2,000") and warned that defeat was far from unthinkable. The fear is that low turnout and defections to Ukip could allow the Farageists to sneak a win. MPs are further troubled by the likelihood that the contest will take place on the same day as the Syria vote (Thursday), which will badly divide Labour. 

The party's ground campaign, however, "aren't in panic mode", I'm told, with data showing them on course to hold the seat with a sharply reduced majority. As Tim noted in his recent report from the seat, unlike Heywood and Middleton, where Ukip finished just 617 votes behind Labour in a 2014 by-election, Oldham has a significant Asian population (accounting for 26.5 per cent of the total), which is largely hostile to Ukip and likely to remain loyal to Labour. 

Expectations are now so low that a win alone will be celebrated. But expect Corbyn's opponents to point out that working class Ukip voters were among the groups the Labour leader was supposed to attract. They are likely to credit McMahon with the victory and argue that the party held the seat in spite of Corbyn, rather than because of him. Ukip have sought to turn the contest into a referendum on the Labour leader's patriotism but McMahon replied: "My grandfather served in the army, my father and my partner’s fathers were in the Territorial Army. I raised money to restore my local cenotaph. On 18 December I will be going with pride to London to collect my OBE from the Queen and bring it back to Oldham as a local boy done good. If they want to pick a fight on patriotism, bring it on."  "If we had any other candidate we'd have been in enormous trouble," one shadow minister concluded. 

Of Corbyn, who cancelled a visit to the seat today, one source said: "I don't think Jeremy himself spends any time thinking about it, he doesn't think that electoral outcomes at this stage touch him somehow."  

George Eaton is political editor of the New Statesman.