RAIL passengers will be hit in the pocket from 2012 after the Government decided to increase regulated fares.

Instead of train companies having to restrict their rises in regulated fares to the Retail Price Index (RPI) plus one per cent, they will, from 2012, be allowed to raise them against the RPI plus three per cent.

The new formula is expected to result in price hikes of eight per cent or more in regulated fares, which make up about half of all tickets.

Last night the move was described as a “body blow” by Martin Murphy, chairman of the action group Rail Future North-East.

Road schemes for the A1 between Leeming and Barton, in North Yorkshire, and on the A19 at Moor Farm and Seaton Burn have been cancelled.

The Chancellor reaffirmed a £500m boost for running costs and modernisation for the Tyne and Wear Metro.

However, there was no news about a hoped-for Metro system for the Tees Valley. A decision on the £140m project could be made later this year.

Mr Osborne also confirmed plans to spend £57m on improvements to the Tees Valley bus network.

However, a grant from the Government to commercial bus operators will be reduced by 20 per cent, saving £300m by 2014-15.

This is likely to affect rural bus routes in particular.