The Strategic Rail Authority today effectively ruled out riding to the rescue of troubled Arriva Trains Northern.

And it cast doubt over whether the company will be able to hang on to its Trans-Pennine franchise - the region's second biggest.

The authority, which has overall responsibility for Britain's railways, has been under pressure from passenger groups to intervene in a long-running pay dispute involving Arriva conductors. But last night its chairman Richard Bowker hinted that its main concern was keeping the costs of the franchise down.

Mr Bowker said with the franchise due to run out in February the SRA had the right to veto any material change in its financial circumstances.

This was to protect passengers and taxpayers and ensure surplus costs were not passed on to the next holder.

Such a stance is likely to rule out a bank breaking offer to conductors by Arriva in the hope of ending a series of strikes which began at the start of the year.

Mr Bowker told The Northern Echo that the conductors dispute was a matter for negotiation between managers and staff.

The former Virgin Trains chief added a stern "no comment" when asked if the dispute would affect Arriva's chances of hanging onto its franchise.

A decision on the franchise - being contested between Arriva, First Group and Connex - is due shortly, he said.

It is up for grabs together with a new Northern rail franchise combining rail routes local rail routes from both sides of the Pennines.

Mr Bowker was in Leeds to attend a summit on rail investment organised by the North West and North East Rail Passenger Committees.

The RPCs have said that funding is unfairly skewed in favour of the South-East and the north deserves more.

Hitting back, Mr Bowker claimed that a "vast amount" of investment was planned for both the West and East Coast Mainlines.

He said a tremendous amount of work was already going on plans for a multi-million pound upgrade of the East Coast Mainline which is due to be in place by 2010.