Ministers promised in July to increase rail capacity by more than a fifth by 2014 and improve punctuality to 93 per cent of trains arriving on time. But The Times has learnt that the Department for Transport (DfT) has cut the public subsidy for the railways so severely that there is not enough money to pay for the promised improvements, even assuming big efficiency gains by the industry.

Key schemes, such as lengthening trains on the most overcrowded routes, removing bottlenecks on the tracks and expanding stations, may have to be abandoned.

The rail regulator will write to the DfT on Thursday urging it to consider which schemes it is prepared to sacrifice if the funding gap is confirmed.

A Network Rail source said that the DfT could choose to delay the purchase of extra carriages. The DfT may also be forced to reduce the punctuality target, which Network Rail estimates would cost an extra £400 million to meet on top of the work already planned to reduce signal failures, broken rails and other causes of delay. Both the regulator and Network Rail believe that the Treasury is unlikely to agree to bridge the gap by allocating extra funding to the railways.

Ruth Kelly, the Transport Secretary, announced in July that the Government wanted passengers to contribute a much greater share of the cost of running the railway.

At present, passengers pay half the £10 billion annual cost and taxpayers contribute the other half. The Government wants the balance to shift so that, by 2014, passengers are paying 75 per cent and the taxpayer 25 per cent. It intends almost to double the amount collected in fares to £9 billion and cut the annual subsidy from £4.5 billion to £3 billion.

Ms Kelly has claimed that the subsidy can be reduced at the same time as relieving overcrowding on all the key commuter lines.

The Campaign for Better Transport, an environmental group, said that no other European country took the view that passengers should pay such a large share of the cost of the railway.

Stephen Joseph, the group’s director, said: “Every other country recognises that the railways bring wider social and economic benefits and that they deserve proper public support.”

Some train companies, such as Virgin West Coast and CrossCountry, have experienced an almost 20 per cent rise in passengers in only two years.

The Association of Train Operating Companies estimates that passenger numbers will grow by 40 per cent by 2014. With the Government planning to increase capacity by only half that amount, trains would be overwhelmed.

The Government claimed six months ago that the high growth rate was a blip, but official figures released yesterday revealed that it was continuing. Passenger numbers in London and the South East grew by 11.5 per cent in the three months to the end of September compared with the same period last year. There was 7.1 per cent growth on intercity trains.

Tom Harris, the Rail Minister, said that the Government still believed that its forecasts were accurate and was confident that its expansion plans could be implemented with the budget that it had already allocated.

He said: “We are a long way away from asking for more money or cutting projects.”