The Commons Select Transport Committee blamed the Health and Safety Executive and the rail franchising director for failing to abolish the ageing Mark I trains when the rail industry was privatised.
Gwyneth Dunwoody, the committee chairman, said: "There is a danger and a problem with Mark I rolling stock and we believe it should go. We don't think it's acceptable that companies should have any deals whereby they say, `We are very sorry but we can't afford to get rid of these carriages'.
"We don't want any bargains to be entered into which allow retention of rolling stock which could be a danger to the public. This committee is not happy with safety, which is not far enough up the level of priorities for some people as it should be."
The report called on the HSE, the franchising director, the new Strategic Rail Authority and the train companies to replace and modify the trains by 1 January 2003. "The failure in the first franchising round to secure the withdrawal of Mark I stock must not be repeated."
There are about 2,300 Mark I carriages in use, mainly on three franchises in southern England - South West Trains, Connex SouthCentral and Connex SouthEastern. Connex SouthEastern is committed to replacing them by 2006.
Jimmy Knapp, leader of the rail union RMT, said: "Privatisation, fragmentation and contracting out of the railway is creating a pass-the-buck attitude, with the danger that safety standards could be put on the back burner."
The report also said the rail industry was not doing enough to combat vandalism, which it said was "a very serious and growing threat to railway safety". It called for a three-year programme to clear lineside rubbish and repair all rail boundary fences. A vandalism and trespass hotline should be set up by Railtrack and British Transport Police.
The committee called for the role of rail safety regulator to be taken away from Railtrack and given to an independent safety authority. It said Railtrack's plans for creating an arm's-length organisation were "not acceptable". The Government effectively pre-empted this recommendation on Tuesday when it said it was looking at setting up such a body, which could cut the time taken to find the cause of disasters.
A Railtrack spokesman said there was no criticism of the company implicit in the recommendation, adding: "If someone can come up with a justification that improves safety, then we would consider it." The RMT welcomed the committee's recommendation.
In a crash, the relatively weak body of the Mark I carriages, caused by the method of construction, offers less protection to passengers than modern rolling stock. Also, most carriages have doors that must be slammed shut and have no lock mechanism, so doors can open while the train is moving. This can lead to people falling out or the doors striking people on platforms.