The Government has rejected pleas from the operators to ignore pricing rules as deflation looms.

Although the decision will be welcomed by commuters, it is likely to result in operators cutting services and jobs and raising prices on other fares. Those operators that are already struggling financially could be forced to surrender their franchises and large chunks of the railway could be nationalised temporarily.

The companies had argued that the formula — which says that fares will rise by 1 per cent above the retail prices index each January — was not designed to cope with deflation. Each stands to lose millions of pounds from January 2010 when commuters renew their season tickets.