It should be all smiles for the minister and his spin-doctor. It may end in tears

He was the ambitious cabinet minister who styled himself in Tony Blair's image. She was the spin-doctor who thought she was Alastair Campbell in a skirt.

They worked tirelessly together, controlling policy officials, cajoling press officers and courting journalists. But a week that should have seen their greatest popular triumph – the virtual re-nationalising of the railways – has instead ended with both their careers hanging by a thread.

On Saturday 6 October, as the bombers went into Afghanistan, Jo Moore – schooled by Peter Mandelson in the art of spin – was briefing journalists on the demise of Railtrack. The decision had been taken the previous day. The company would receive no more money from the Government.

Stephen Byers planned to put Railtrack into administration and replace it with a non-profit company. The scheme was said to have been dreamed up by one of Gordon Brown's advisers in the Treasury, Shriti Vadera. Not that she would want to take the credit now. Instead, it is being depicted in Downing Street as a "very bold decision" taken by the Transport Secretary.

On 25 July, Railtrack had asked Mr Byers for a four-year breathing space free of regulatory interference plus extra funding worth £3.6bn. The proposal, Mr Byers was advised by officials at the Department for Transport, Local Government and the Regions, was "unacceptable". He said he was "astonished" by it.

A series of meetings followed between Mr Byers, officials in the DTLR, the Treasury, Railtrack's chairman John Robinson and the company's chief executive Steve Marshall, who resigned on Monday in protest at the way the Government had handled the matter. What Railtrack did not know then was that in mid-September the department's own plan – Project Ariel – was ready to go. Ernst & Young, now the administrator, was instructed on 11 September to prepare to take control of Railtrack. It was officially informed it would be called in two days before Railtrack was told the money had dried up.

The inevitable questions followed: why did Mr Byers, with the backing of his bosses in both No 10 and No 11 Downing Street, pull the rug from under Railtrack? Crucially, why did they choose to do it that Friday afternoon? The Government knew Railtrack would be insolvent without its help back in July. Why did it wait until 5.45pm last Sunday to go to Cameron McKenna's chambers for a judgement?

The DTLR's defence was simple: if it had failed to act then "the railways would have closed. The Secretary of State would not allow that to happen" – a contention impossible to now prove.

But on the following Tuesday, The Independent ran a story that placed a question mark over the motives of Stephen Byers and his key aide, Ms Moore. Just minutes after the second hijacked plane had struck the twin towers of the World Trade Centre on 11 September, Ms Moore had fired off an e-mail to senior colleagues at the DTLR. "It's now a very good day to get out anything we want to bury," it said.

After the memo was published, Ms Moore found herself under siege. David Blunkett, the Home Secretary, called it "extraordinarily stupid". Clare Short, Secretary of State for International Development, called Ms Moore's behaviour "cynical". And Downing Street, as late as Friday afternoon, was insisting the memo was "extremely unfortunate, to put it mildly". Mr Byers was alone in defending his special adviser. But privately, even he was taking soundings as to whether he should sack her.

Ms Moore apologised in time for the Wednesday morning papers. A day later she was officially reprimanded by the department's Permanent Secretary, Sir Richard Mottram.

It took until Friday for Mr Byers to re-emerge for a meeting with Railtrack chiefs. Downing Street swung right behind Mr Byers. The Prime Minister's spokesman said Mr Blair had "complete confidence" in him. But the same could not be said of the spin-doctor he had protected. "The Prime Minister's view is this is obviously an extremely unfortunate and foolish thing to have done. But he doesn't believe that for one mistake your whole career should be over in this way."

Everyone else seemed to think Ms Moore's career, in government at least, should end in precisely that way. More allegations followed. Ms Moore was accused of forcing Alun Evans, who had been the DTLR's communications director, out of his job after he refused to co-operate in a campaign to "vilify" Bob Kiley, London's Transport Commissioner. But why did the Secretary of State insist on backing her?

Some said it was because she knew "where the bodies were buried". But the real answer lies in Mr Byers' deep mistrust of the civil service machine, his contempt for its rules and his associated reliance on Millbank-style control in the person of the former head of Labour's press office, Ms Moore.

One victim of the duo, who have seen off a number of civil service press officers in their time together, said: "Byers is a thrusting young man who has very little patience with the Civil Service, and no patience with the rules. He has clearly taken the view that the Civil Service is second rate. This is all about his ambition and wanting to protect his back at all times by a praetorian guard. He does not want a civil service that is neutral. He wants people who are committed to him."

Mr Byers has made enemies in the four government departments he has served in. One senior official at the DTLR said he would be "buying down the pub" if Mr Byers got his comeuppance. The official described his style as like that of a headmaster.

Mr Byers' track record with press officers is not good. Jonathan Haslam, chief press officer at the Department for Education when Mr Byers was a junior minister, handed in his resignation after refusing to sanction a press release by Mr Byers attacking the Tory record on education. At the DTI, Mr Byers went through at least two press heads. And now Alun Evans is looking forward to a new challenge as a policy adviser to the foot and mouth inquiry.

Mr Byers is also thought to have attracted some powerful enemies in government, including the Chancellor, Gordon Brown. So, too, has Ms Moore. One senior source in the Labour Party said: "She has not got a lot of credit in the loyalty bank account and there's not much goodwill out there towards her." Another former colleague said: "She's got to go. And no one will be that sorry when she does." In typical New Labour style, Ms Moore is probably more likely to be moved sideways than dismissed. Her boss, at least, will probably see to that – if he can save her.

Mr Byers continues to insist there was no substance to rumours that the bombing had been used as a "fig leaf" for slipping out the Railtrack announcement. But that hardly matters now. In a government fixated on image, appearance is all. And it looked awful.