Higher fares will be the price of railway expansion

Passengers face a fresh round of "stratospheric" fare rises to pay for a huge package of expansions on Britain's railways, ministers have been warned.

Ruth Kelly, the Secretary of State for Transport, announced plans to increase passenger numbers by 180 million a year by 2014 and cut overcrowding, but raised fears of fare rises by confirming that government rail subsidies would be cut by £1.5bn a year.

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Ministers insisted that the cost of regulated fares, such as season and saver tickets, would rise by no more than one per cent more than average prices. But critics warned that unregulated off-peak fares could soar to pay for a package of measures to cut overcrowding, increase passengers and implement a series of major improvements to the rail network.

Plans in the White Paper include putting 1,300 new carriages on the railways to cut overcrowding while increasing passenger numbers. Officials said they aimed to improve the number of trains running on time from 88 per cent to 92 per cent and cut services running more than half an hour late by a quarter. The £5.5bn upgrade of the London Thameslink line was approved to increase capacity in time for the 2012 Olympics, and major redevelopment of Birmingham New Street and Reading stations will go ahead.

A simplified pricing structure will introduce four main types of ticket, while work will start on making Oyster card-style smart card systems available on routes outside London.

Ms Kelly hailed the five-year settlement for the railways, insisting that the network would emerge "bigger, stronger and more flexible". But Theresa Villiers, the shadow Transport Secretary, argued there was little new in Ms Kelly's announcements and warned "extortionate" fare rises were in the pipeline.

Under the plans, annual public subsidies for the railways will fall from £4.5bn to £3bn by 2014. Meanwhile, income from passengers will rise from £6.7bn in 2009 to £9bn by 2014.

Sources confirmed that the level of subsidy would fall from about 50 per cent to around 25 per cent and suggested that around half of the projected increase in fare revenue would come from increased prices. Ms Kelly said the plans amounted to "the most ambitious strategy for growth on the railways in over 50 years". She told MPs that the strong rise in passenger numbers meant state subsidies could be cut. But Ms Villiers said: "If the travelling public could get around on your promises, there would be no delays, no over-crowding." And ridiculing claims of improvements in services, she said: "Tell that to commuters packed so tightly in the rush hour it would be a criminal offence to put animals in such conditions." She added: "Many families are feeling the pinch because of stratospheric fare increases."

Susan Kramer, the Liberal Democrat transport spokesman, said: "Passengers will have to suffer many more years of fare hikes and overcrowding."

She said the strategy represented a "missed opportunity" to demonstrate its green credentials, and referred to figures, highlighted last week in The Independent, that showed the cost of car travel had fallen while it had increased for trains and buses.

Gwyneth Dunwoody, the Labour chairman of the Commons Transport Committee, doubted the rail companies could deliver the targets as they were "monopolised franchises", while Fiona Mactaggart, Labour MP for Slough, said: "In my constituency three years ago there were 10 fast trains a month into Paddington - now there are four."

A series of fare increases are planned this year. Stagecoach and Arriva want to raise prices in the East Midlands and Cross Country franchises by 3.4 per cent a year. Go-Ahead intends to raise fares by 3 per cent a year on the London to Northampton route.

Main points

* Railways to carry an extra 180 million passengers a year by 2014.

* Overcrowding to be reduced.

* Trains running late to be reduced.

* Government to deliver 1,300 extra carriages by 2014 at a cost of £10bn.

* More than 150 stations to be refurbished at a cost of £150m.

* Green light given to £5.5bn Thameslink upgrade, to be completed in time for the Olympics.

* Major redevelopment at Birmingham New Street and Reading stations.