THE joke was never much good, but it will have to do: this is no way to run a railroad.

The tax-payer's ticket for the next west coast franchise has already cost £40m and taken us precisely nowhere. Privatisation – as an idea, a principle, a dogma – has been derailed yet again.

No-one involved will admit as much, of course. Each is, as they say in those circles, "invested". The real investors, paying out £4 billion a year while franchises fail and dividends are collected, are granted only the privilege of the most expensive rail travel in Europe. But national ownership of a national asset? This is, of course, unthinkable.

Privatisation brings the efficiencies of the market to the business of getting people to their destinations: such remains the claim. It is proof that private enterprise can do this crucial job better than the state. Privatisation is not only right, as some will always believe, but better.

So how did the old, derided British Rail, criminally neglected in the Margaret Thatcher years, consume less than half the subsidy (in real terms) of the present motley crew of companies? Why is it estimated that Britain's passengers are paying £4bn a year more for equivalent tickets than their French counterparts? Why are fare structures fiendishly – and expensively – complex? Why are so many trains still dangerously overcrowded? And why should a season ticket make a joke of the idea of inflation?

Inflation. That concept would be second nature, you might think, to those promoting market forces. It's not something that even the man in the street could easily overlook. Yet if you believe the excuses for the west coast fiasco – and let's not assume that I do – teams of Government specialists managed to "forget" about inflation while juggling multi-billion sums in the tussle between Virgin and FirstGroup.

"Technical flaws" were blamed by straight-faced ministers. The "complexity" of the franchise process was mulled over by privatisation gurus. Since when was there anything complex about the fact of inflation? You might as well ask about the last time the rights of rail users were taken seriously. The Government just suffered a £40m bout of forgetfulness. Allegedly.

The debacle raises all sorts of questions. Not all of them bear directly on the future of Britain's railways. One might be this: what's the point of privatisation if you cannot even conduct an auction with minimal efficiency? Set aside the "philosophical" arguments, in other words, the ones to do with rights and wrongs. What earthly good is achieved for the country when the selling agents can't even do the sums?

You can suspend three civil servants for mislaying their pocket calculators, of course. That might distract attention from ministers and the smell of rat. You can promise to get it right next time, and hope that all the previous debacles – we can start with the east coast franchise – will be forgotten. But this is a matter, as those gurus might say, of process. The inability to manage a process suggests some simple explanations for certain other debacles, notably Britain's record in defence procurement.

In short, the people who venerate this process – and that would be most politicians – have shown themselves to be unfit to handle congress with the private sector. Invariably, meanwhile, that entity isn't much fussed by the problem. It would happily keep the privatisation game unchanged for all time because, quite simply, it cannot lose.

The big, original Thatcherite lie said that privatisation would transfer risk from the public sector to the private. Instead, the reverse has happened. If things go wrong, the taxpayer takes the hit. If things go to plan – or if the season-ticket holder has to be gouged once again – the private company picks up its winnings.

Never has it been suggested that the private sector should shoulder the real costs involved in the right to possess Britain's railways. That would make investment "unfeasible". Failing to offer long-term franchises, as on the west coast, is also defined as unfair or "unrealistic". No-one in government wonders whether this might be a licence to the private sector to squeeze profits before abandoning a franchise at a time that suits.

Though the statement requires gritted teeth, Richard Branson appears to have had a case in his outrage over the west coast process. Those "flaws" identified by the Department of Transport this week were hardly minor or hard to spot. FirstGroup's bid, with payments loaded towards the end of the 13-year franchise, promised premiums far in excess of the bond it was offering as security. This gulf was to be bridged, supposedly, by a large increase in passenger numbers. Ministers forgot to ask the easy question: how?

The mess could be cleared up quickly if control of the west coast line was handed to Directly Operated Railways (DOR). In the end, the Government might have no choice about that. For the privatisers, though, it would involve a fresh horror: DOR is state-owned. It became so three years back when National Express, given charge of the east coast line, couldn't handle the job and quit six years before its franchise was due to expire.

Last month, DOR reported a 7% increase in its operating profit, a rise in turnover and an increase in profits returned to the state. The company also said the number of passenger journeys on the east coast had increased, customer satisfaction had risen by 2% and its punctuality figures were the best since records began to be kept in 1999. Under current plans, DOR will be punted back into the private sector next year.

It is fair to say, of course, that if piecemeal rail privatisation has been a nonsense and a disaster, piecemeal renationalisation would be no picnic. The west coast farce has been only one part of a bigger story. The absurdity that is Network Rail, the "not for dividend" private company given charge of the track system when Railtrack foundered, shows how nonsensical things can become. Labour is reviewing its policy. There is a lot to review.

It is worth remembering, however, that Railtrack collapsed under the weight of its liabilities after the Hatfield crash 12 years ago. That event demonstrated a single fact rarely evident in balance sheets: privatisation, with all its economic imperatives, was and remains a threat to passenger safety. Few of those berating civil servants and their masters this week even mentioned the fact.

The west coast humiliation might meanwhile have put another hole in the Coalition's shredded reputation for competence, but the real issue is one of governance. Why remain wedded to the grand theory of privatisation when the evidence says, time and again, that you cannot manage the rudiments of the practice?

Some market evangelist would no doubt counter that the entire Department for Transport should therefore be put out to tender. I wouldn't put it past such types. It is a fact, nevertheless, that had the chief executive of a semi-respectable private company dropped £40m by failing to do his sums, swift retribution would have followed.

In the bizarre world of rail privatisation, catastrophic error is just an excuse to have another go. After all, someone else is picking up the bills.