Handing out franchises to train operators, first introduced when state-owned railways were sold off in 1993, hasn't led to more innovation or shifted enough financial risk from taxpayers to private companies, a report by the House of Commons Transport Committee said.

The criticism comes as the Department for Transport has cut the number of franchises by a quarter to 19 this year to increase cooperation between the train operators and Network Rail, the government-backed owner of the tracks and stations.

"Passenger rail franchising, far from being a model capable of delivering quality rail services for the next half century, appears to be a policy muddle,'' the committee, headed by Gwyneth Dunwoody, a Labour Party lawmaker, wrote.

While criticizing the franchising system, the report doesn't suggest an alternative way of running the railways. Instead, it recommends increasing the average length of a franchise to 15 years to encourage operators to invest.

The franchises are currently run by seven companies, including FirstGroup Plc, National Express Group Plc, Stagecoach Group Plc and billionaire Richard Branson's Virgin Rail Group Ltd.

"The claim that the current franchising policy is a `muddle' is just not true,'' George Muir, director of the Association of Train Operating Companies, said in an e-mailed statement. "The huge growth in passenger numbers would not have happened without franchising.''

The number of journeys taken annually has surged 35 percent to 1.08 billion in the past 10 years, according to Muir's association.

To contact the reporter on this story: Richard Blackden in London at rblackden@bloomberg.net .