The Department for Transport has scrapped the decision to take the West Coast Main Line franchise off Virgin Trains and award it to FirstGroup.
Instead it will rerun the whole competition again.
The Transport Secretary Patrick McLoughlin told Today presenter Sarah Montague he was "very angry" and that there were "fundamental flaws" in the West Coast Main Line franchise competition.
"The original model didn't take into account inflation and also some elements of the passenger number increases over a number of years," he said.
"I want to make it absolutely clear that neither FirstGroup nor Virgin did anything wrong. The fault of this lies wholly and squarely with the Department for Transport. Both of those two companies acted properly on the advice that they were getting from the department."
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