Chorley MP Lindsay Hoyle urged ministers to dump ETS Europe, which is still frantically attempting to mark a mountain of delayed Sats papers.

The firm has set up "marking panels" in top hotels, including in the Hilton Hotel at Manchester Airport, in a desperate bid to beat the backlog.

It is reported to have already run up a bill exceeding £100,000 for rooms, food and conference facilities at that one hotel alone.

Mr Hoyle said he had talked to exasperated markers who had waited for days for scripts to arrive.

He said: "Not only have they failed the schoolchildren, but they have failed the people who should have done the marking.

"This is a complete shambles. This contract should be taken off the company immediately. It shows complete incompetence and they are not fit for purpose."

As well as the mountain of delayed papers, serious questions have also been raised by teachers at the quality of the marking.

Janis Burdin, the headteacher of Moss Side Primary School in Leyland, described the marking of Key Stage 2 tests as "absolutely off the radar".

Schools Secretary Ed Balls, however, told the Lancashire Evening Post last week that officials had reassured him that mistakes remained "rare" and that "there had not been a decline in marking quality".

The Qualifications and Curriculum Authority (QCA) has announced it was considering "all available options" to ensure the tests go smoothly in 2009.

'Confusion'

It said it was "in discussions" with the firm, but refused to say whether the talks included the possibility of ending the company's five-year £165 million contract.

But Shadow schools secretary Michael Gove said ministers should "act quickly" to ensure that ETS Europe was not allowed to run Sats next year.

He said: "There is confusion at the heart of Government because ministers have failed to get a grip on this unfolding crisis."

Mr Balls said: "I share the frustration and anger of teachers, children and parents about the delays in the release of test results."

An ETS Europe spokesman said: "To complete the marking of national curriculum test papers, seven external marking panels were set up across the country.

"These were staffed by experienced markers who were recruited following National Assessment Agency (NAA) approved guidelines. Marker recruitment has been closed for some time."

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