The Government has banned companies from introducing extra trains to cope with overcrowding and has ordered them to cut loss-making rural services.

The Department for Transport last week tried to blame First Group, Britain/s biggest train company, for a series of cuts across the West Country.

But a document obtained by The Times reveals that the cuts were ordered by the DfT, which is trying to reduce the £5 billion annual rail subsidy by more than £1 billion.

The document, a briefing note written by senior managers at First, states that new train franchises are very tightly controlled by the DfT.

It runs: "The significant difference this time is that although train companies clearly must run the services specified, they CANNOT run any more. In addition, any changes must first be agreed with the DfT."

The DfT has ordered train companies not to speak publicly about the changes to the contracts. But many industry leaders are privately voicing concern that the DfT is seeking to control the network and preventing the companies from expanding services.

The growth in trains and passengers has been one of the few success stories of privatisation.

Since the first private train ran in February 1996, services have increased by 20 per cent to 19,600 a day and passenger numbers have grown by 42 per cent to 1.1 billion a year.

The Association of Train Operating Companies predicts that rail travel could grow by another 40 per cent by 2015 if its members were given freedom to respond to demand.

Adrian Lyons, the director-general of the Railway Forum, the industry lobby group, said: "The Government wants to run the cheapest possible system and is stifling the entrepreneurial vision to expand the network. Train companies' inability to grow is storing up big problems in terms of overcrowding."

Mr Lyons said the new type of franchise, which typically lasts only seven years, gave companies no time in which to recoup major investments.

Chiltern is the only company with a 20-year franchise and is also the only one to have increased capacity by building lines and upgrading stations.

The Conservatives yesterday wrote to Alistair Darling, the Transport Secretary, calling on him to admit that the DfT had ordered the cuts in the West Country.

Chris Grayling, the Shadow Transport Secretary, said: ?When it came to office, the Government said it wanted to get people out of cars and on to public transport.

"The Government's plans for the rail network seem to show that in many parts of the country, this ambition has been completely abandoned. I fail to see how we will boost the railways by stopping train companies from laying on extra services. It just does not add up."

A spokesman for First said the company had been given very little room for manoeuvre when it bid to run the new Greater Western franchise.

The DfT not only set the usual minimum levels of service but also specified the maximum number of trains that the company could run.

On the Looe branch in Cornwall, the DfT told bidders they could run a minimum of eight services a day and a maximum of nine, compared with the current thirteen trains a day.

On the Newquay branch, the DfT fixed the number at four a day compared with seven at present, with no option of increasing the frequency.