Sir Rod Eddington has spent more than year studying the long-term needs of Britain’s transport system and has decided that investment in rail should be focused on more modest schemes linking cities such as Liverpool, Manchester and Leeds. He also wants more road tolls.

Sir Rod is a former chief executive of British Airways, and his conclusion will prompt accusations that he is favouring airlines, which would be the main losers if a new rail line halved the London to Edinburgh journey time to just over two hours.

However, Sir Rod promised to conduct his review with an open mind after Gordon Brown, the Chancellor, appointed him in March last year. He has conducted painstaking research into every mode of transport in every region, travelling the length and breadth of the country and interviewing dozens of transport experts.

A previous study, commissioned by the Strategic Rail Authority in 2001, found that a 400-mile-high speed line would cost £33 billion but would reduce Britain’s North-South economic divide by boosting the economies of Scotland, Yorkshire and Humber, the North East, the West Midlands and the North West.

Sir Rod believes that with a limited budget for transport investment, there are better ways of attracting businesses to northern cities. He supports improvements to rail lines between key cities to allow them to compete together as a well-linked economic zone. Under his plan there would be a fast and frequent train service between Liverpool, Manchester and Leeds. Employers could establish themselves in one city but have easy access to others for business and recruitment.

Sir Rod also doubts whether investing heavily in rail will arrest worsening congestion, which the CBI says is undermining the economy. Half the Department for Transport’s budget is already spent on rail even though trains account for 6 per cent of the total distance travelled by the population.

Sir Rod, whose report is due to be published in November, believes that the key to preventing gridlock on the roads is to ration use with a nationwide system of road tolls. The Government will use his support for road charging to press ahead with trials, which may include some motorways.

But ministers will struggle to reconcile the rejection of the high-speed line with their repeated statements supporting the idea. Labour’s manifesto for last year’s election mentioned the line as a promising solution to transport problems.

Passenger Focus, the rail passenger watchdog, supported Sir Rod. Anthony Smith, the chief executive, said: “We are wary of big projects because they suck up all the resources for years to come. We want a series of smaller improvements.”

A Department for Transport spokesman said: “What Rod Eddington has to say on the North-South rail link will be considered very carefully.”

THE TIMETABLE

January 2001 Strategic Rail Authority announces feasibility study into new North-South line

Spring 2003 the study, which cost £1.3 million, recommends that the London to West Midlands section should open by 2016

February 2005 Tony Blair writes to a Labour MP that high-speed rail is being seriously considered, including magnetic levitation technology

April 2005 Labour’s election manifesto promises: “We will look at the feasibility and affordability of a new North-South high-speed link”

May 2006 Network Rail supports high-speed line, which it says could be built for £11 billion