Train fares are set to rise by nearly a third as passengers are forced to pay for extra carriages, writes Dean Kirby.

Mr Osborne said he would allow rail firms to increase regulated fares, which include season and saver tickets.

He said they could increase by an extra 3 per cent above inflation from 2012, which passenger watchdogs say equates to a total increase of 31.2pc by 2015.

The Campaign for Better Transport said a standard off-peak return ticket from Manchester to London could leap from £66 to £87 by the next general election. There was better news as Mr Osborne promised to bankroll a £200m scheme to electrify rail lines between Manchester, Liverpool, Preston and Blackpool.

The rail watchdog Passenger Focus welcomed the electrification project, but said passengers would find fare hikes difficult to stomach. Mr Osborne also revealed direct bus subsidies would be reduced – prompting fears firms could cut services and increase fares. But he said statutory concessionary fares and free passes for pensioners would remain.

The Department for Transport will reduce overall spending by 15pc, including an 11pc reduction in capital spending.

That was better than feared – but the real cost of the review for transport projects in the region is yet to be revealed.

The region is still waiting to hear the fate of projects totalling more than £560m.

They include the £54m cross-city bus scheme, the £100m Longdendale bypass and a £290m plan to improve road links between Manchester and Stockport. A DfT spokesman said: "Details of the process for individual schemes will be announced in the coming weeks." Coun Ian Macdonald, the chairman of Greater Manchester Integrated Transport Authority, welcomed the commitment to electrifying rail lines. He said: "This is good news and something for which GMITA has been making the case for the past two years."

Richard Critchley, transport policy manager at Greater Manchester Chamber, said the speech offered 'some positive statements' for transport in the region. But he said there was still considerable uncertainty about how cuts would affect local transport schemes.

Bob Crow, from the RMT union, said: "The massive increase in rail fares will drive people off the trains and on to the roads."

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