The set-up has faced regular criticism for stifling the inventiveness and enterprise that the private sector was expected to bring to the rail industry. Operators are set strict rules by the Department for Transport about how they must operate, with their freedom of action mainly restricted to deciding where to make savings in order to meet the large payments promised to the department to win the franchise.

Many outsiders see the franchising system as a means by which the department can raise money from train operators to offset the huge bills it faces to fund Network Rail, the infrastructure owner. But it may no longer work even as a revenue-raising tool.

The department will now not only forgo most of the £1.4bn it had been pledged over eight years by National Express for the east coast franchise, but also looks unlikely to receive the large sums it had been promised by some other companies.

Both Stagecoach, due to pay £1.2bn to the government over the 10-year life of the South West Trains franchise, and FirstGroup, due to pay £1.13bn over the life of its Great Western franchise, look set to be protected by contract clauses reducing the amount they pay if revenue falls short of expectations.

The likely shortfalls will make it harder for the government to complete the comprehensive shift it had planned in the funding of the rail industry from taxpayers to users. Under plans announced by Ruth Kelly, then transport secretary, in 2007 , the government hoped to cut public funding to 25 per cent of costs by 2014, against 50 per cent in recent years. By 2014, that would represent an annual saving of £1.5bn.

Given the long list of problems, train operators have since May been demanding a serious rethink of the franchising system. Virgin Trains, holder of the West Coast InterCity franchise, yesterday added to those calls.

Yesterday, Lord Adonis, transport secretary, pledged to investigate whether future franchises should be longer. Such contracts might give operators greater incentives to invest and would allow them longer to recover from set-backs, such as the current economic downturn.

Yet Lord Adonis insists there is nothing fundamentally wrong with the system. Less than two months ago, while still a rail minister, he vigorously defended the department's increasing tendency to intervene in the minutiae of operators' businesses - a big bugbear for the industry. "The rail franchise market is vibrant," he said, pointing to the competition, completed last month, for the south central commuter rail franchise .

Such a view could continue to be tenable as long as National Express remains the only big train operator facing severe problems - as looks likely at present. But if others start to run into trouble, the system might start to look accident-prone, particularly since GNER, National Express's predecessor on the east coast, also had to withdraw after making an unrealistic bid.

One senior rail industry figure insists a wider rethink is needed. "It should be more of a sophisticated procurement process that prevents a recurrence of the National Express and GNER problems," said the insider. "We should test bids' deliverability, rather than it just being wishful thinking and blind optimism."