Mr Prescott will move to expand state-funded railways later this year when he announces plans for a more fundamental overhaul of the railways.
The Government last week announced its intention to step in and take over if the London and Continental Railways consortium, responsible for the high-speed link, did not sort out its financial problems within a month.
Mr Prescott is hoping to create a much bigger role for state-run railways by reinvigorating the old British Rail.
The Government is committed to creating a strategic authority for the rail network to help plan investment and development in the future.
Under his proposals, which will be outlined in a White Paper later this year, British Rail will be able to bid for franchises that are currently privatised, as and when they become vacant. Ministers believe that the organisation still has the expertise to operate train services.
BR will also assume responsibility for any more franchises that run into trouble. The Government believes that several operators made unrealistic bids for franchises and, as the parliament progresses, will be unable to continue operating them.
Meanwhile, industry watchers are suggesting that difficulties over the high-speed link, coupled with problems over his West Coast train franchise, could signal Richard Branson's Waterloo.
When the consortium London and Continental Railways was awarded the 68- mile link from St Pancras to Folkestone, it also took over Eurostar UK, which runs the rail passenger services under the Channel. Questions are now being asked about the marketing strategy - in which Virgin was involved - of the Eurostar trains.
"When the consortium took over the franchise, there were boasts that Eurostar would carry nine or even 12 million customers a year. Last year, there were only six million," said an industry analyst. "Virgin had a role in the marketing side of things and you wonder whether Branson lost his touch on this one," he added.
A number of marketing executives moved across from Virgin to be employed directly by Eurostar when LCR was awarded the concession two years ago.
A spokeswoman for Eurostar denied that the company's marketing policy - and Virgin's input - had been poor. "We increased passenger numbers by 23 per cent last year, which is a fantastic achievement. Several Virgin employees came across to us and helped to improve things dramatically," she said.
Virgin, however, is sensitive to suggestions that its marketing strategy played a part in LCR's problems. In fact, senior executives at Virgin are themselves believed to be unhappy with the way in which Eurostar UK has been marketed.
"We never got the contract for marketing Eurostar. Had we been offered it, we would have been very keen to take it up. We were never allowed to take over the marketing properly," said an insider. "Our two people on the marketing board of Eurostar left because they could not agree with the business plan that was being developed."