"I want to make it perfectly clear to you that you are on trial," he told his audience of industry bosses.
"You are failing your customers and those who continue to fail them have no place in the rail industry of the future."
Mr Blair said present contracts would have to be honoured but he added: "We are willing to go beyond those arrangements by opening negotiations now, negotiations which will lead to an extension of the franchise for the best- performing companies...
"We know that there are companies who will steer clear of this offer. The poor performers, those who are unwilling or unable to improve. For them, the end of their franchise will mean exactly that."
The conference, in London's Queen Elizabeth II Centre was addressed by a clutch of ministers, including the Deputy Prime Minister, John Prescott, who called the meeting to address the rising tide of customer complaints about poor service on the railways.
Mr Prescott, who is also Secretary of State for Transport, unveiled his vision for the railways at the summit, called after official figures showed punctuality and reliability were worse than when the network was controlled by British Rail.
Under his plans rail passengers will get a vote in whether their train companies can stay in the industry under a radical plan aimed at raising standards, increasing investment and putting power in the hands of the commuter.
The troubled passenger rail network is to be thrown open to auction, the Government said. Successful operators will be allowed to bid for an extension to their franchise if they meet a six-point test. But only a limited number of franchises would be extended and the Government called on the operators to compete with each other.
Ministers warned that companies which failed their passengers would have no future in the industry and said the Government had powers to punish the failures and even step in and run the trains.
John Reid, the Transport minister, said the Government could not wait until 2003, when the franchises expired, to deal with the "glaring inadequacies" of existing arrangements.
"Only a limited number of franchises will be renegotiated and operators will have to compete with each other to be part of the first tranche." Dr Reid declined to say how many franchises would be up for grabs.
Mr Prescott said: "We need to see progress in the next 12 months. If you fail we are going to cop it as well."
The six hurdles are:
past performance, including the views of train passengers;
the level of extra investment offered and how far it would meet passenger demands;
tougher standards of performance and greater levels of compensation to passengers in cases of failure;
willingness to commit to measures such as through-ticketing and rail- bus links;
giving an extra say to passenger groups in the level of service offered;
value for money; whether the Treasury would get a better deal by offering the franchise to the market.Reuse content