Derailed: How transport has become Labour's most spectacular failure

* 10-year plan in tatters * Rail fares to rise again * £33bn disappears in cost 'explosion'

The failure of the Government to get to grips with the growing transport crisis was laid bare yesterday by revelations that rail passengers face inflation-busting fare increases and cuts in mainline services.

And the one piece of good news for "customers" was not as good as it seemed. Richard Bowker, chairman of the Strategic Rail Authority, said the reliability of services was "static".

Despite a massive increase in investment, train services are still deteriorating, though marginally. Some 19.5 per cent of services did not arrive on time in the first three months of the year, compared with 19.1 per cent in the same period last year. Passengers were unimpressed. Complaints increased over the year by 8 per cent.

A loudly trumpeted 10-year plan for the network, launched by John Prescott, the Deputy Prime Minister, in July 2000, has quite simply fallen apart.

His boast that the plan would "get Britain moving again" and lure motorists out of their cars is clearly meaningless. Research published yesterday by the respected Independent Transport Commission showed that if the Government's present policies were pursued, motorists would face a 25 per cent increase in the volume of traffic over the next seven years. It also said a congestion charge on main roads could solve the problem.

So far, the strategy of the Alistair Darling, the Secretary of State for Transport, to divert attention from the Government's failings by keeping his head down seems to have worked. Under his stewardship, and perhaps partly because of world events, the issue has slipped down the political agenda. But the transport system is probably in a worse state than it was when Mr Prescott outlined his vision three years ago.

Yesterday, Mr Darling added to the gloom by warning that fares would have to rise to pay for higher investment in the privatised industry, while rail chiefs indicated that reducing the number of trains was the only conceivable way of making the services more reliable.

Mr Darling is understood to have approved fares rises of about 4 per cent, which he wants to publish within a few weeks, although Downing Street has yet to approve them.

Mr Darling and Mr Bowker admitted that performance was still "disappointing", after the latest figures showed one in five trains ran late.

Announcing his "capacity utilisation policy" yesterday, Mr Bowker said that his strategy was "not about cuts" and that there would be no sweeping changes, but a targeted analysis of parts of the network that were over-stretched. He refused to rule out reducing the timetable in busy areas to enhance reliability, but would not be drawn on how many trains would have to be cut.

Among the routes subject to big cutbacks could be inter-city lines, which official figures show have had a 60 per cent increase in services but only a 10 per cent increase in passengers since privatisation. Main routes in the South-east could also be the subject of "pruning", although the increase in passengers in the region has outstripped the rise in capacity, largely because commuters have few alternatives to the train.

Mr Bowker believes the failure to attract passengers to inter-city routes has been caused mainly by their unreliability. He made no mention of the huge fares paid by passengers who failed to book ahead.

The SRA chairman indicated that he would abolish trains on such routes if it meant an improvement in punctuality, as he has done on the Virgin CrossCountry network. He said that reliability on the Virgin franchise had improved "dramatically" since the services were cut. Yet a third of trains were reported to be late in the first three months of the year.

The aim of increasing the number of passengers using the network by 50 per cent, writ large in Mr Prescott's 10-year plan, has evaporated. The SRA envisages that the increase will be nearer 30 per cent.

All the £33bn of taxpayers' money earmarked for rail in the Prescott plan has been allocated and there are no massive improvements in the system in prospect. Mr Prescott's hope of attracting £34bn of private- sector money is no longer mentioned by ministers.

Half of the passenger train operating companies are being bailed out by massive and unforeseen handouts from taxpayers, with nearly a quarter of them technically insolvent. Most observers agree that the train network is "privatised" in name only. Network Rail, the not-for-profit organisation that took over from the bankrupt Railtrack, has become a financial black hole.

Tom Winsor, the rail regulator, has said that the lack of private shareholders in the company had led to an "explosion" in costs. Network Rail is asking Mr Winsor for £27.8bn to run the network over the next five years, compared with the £16bn agreed with Railtrack for the same period. The money will be spent, not on important projects to build high-speed trains similar to the TGV in France, but to stop the existing infrastructure falling apart.

Steve Hounsham, of Transport 2000, said that the Government should be given credit for initially placing rail near the top of its agenda, but he criticised it for failing to put in place efficient systems for spending the extra investment. "The whole system has run into the buffers," he said.