George Osborne is being urged by fellow ministers to scale back steep rail-fare rises due in the new year amid fears that the planned increases will force passengers back on to the roads.
Ticket prices are due to go up by an average of 8 per cent in January under a formula approved by ministers for above-inflation rises for the next three years to raise cash for investment on the railways. But Justine Greening, the new Transport Secretary, has urged the Chancellor to announce a rethink in his Autumn Statement on Tuesday.
Ms Greening is suggesting that fares should go up by about 6 per cent – 1 per cent above inflation – in a move to reduce the impact on hard-pressed commuters and long-distance travellers. The move would cost the Treasury an estimated £26m.
The Independent understands talks on the issue are still "live", but the Department for Transport is privately optimistic of success in its negotiations with the Treasury. A DfT source said: "We've been fighting very hard and we're very hopeful we have won something. There is money around for things when we think they are worth it, such as [weekly] bin collections."
The department is arguing that the potential benefits from higher fares have to be offset by the danger of a drop in revenues as travellers swap trains for other forms of transport.
Ms Greening's move signals a change of approach at the DfT. Insiders last night said she places far more emphasis than her predecessor, Philip Hammond, on passengers' needs.