Public and not-for profit organisations could be given the right to bid for rail franchises under new plans being drawn up by the Labour Party.

The party has pledged to create a level playing field during the bidding process, with the leadership resisting the demands of rail unions to bring back full privatisation.

A new, overarching body could be created to implement a national strategy for the railways, while power may also be devolved to regional bodies.

A motion set to go before the party's annual policy forum at Milton Keynes says a Labour government could cap annual fare rises on every route, simplify fare structures and bring in a legal right to the cheapest ticket.

According to a source close to Jon Cruddas, quoted in The Guardian, the Labour Party wishes to abandon the Conservatives' "failed" franchising model "without going back to the bad old days of British Rail".

However, transport secretary Patrick McLoughlin dismissed the proposals, describing it as a "short-term gimmick" that would ultimately result in higher rail fares, worse services and increased government borrowing.