Planned increases in regulated fares of RPI+3 per cent in January 2013 and 2014 have been capped at an average of RPI+1 per cent. The level will stay the same in 2015 as well.

The Prime Minister has announced the u-turn on the eve of the Conservative Party conference.

The proposal to increase regulated fares by an average of RPI+3 per cent was confirmed in mid-August, when the level of the Retail Price Index in July was announced.

But the level of the planned rise was widely criticised, and compared unfavourably with the confirmed postponement of a rise in fuel duty.

The Government had previously decided to cap last January's rise at RPI+1 per cent.

Announcing the change of heart, the DfT said: "The decision to reduce the planned increases, funded from savings identified in the DfT’s budget, will benefit hard-pressed commuters and passengers. In future years the DfT will look to absorb the costs by reprioritising within existing budgets."

The news has been welcomed by ATOC, whose director general Michael Roberts said: "The government's change in policy is a positive move for passengers because it will mean lower than expected fare rises. All the extra money that ministers had instructed train companies to raise through the planned, higher increases in regulated fares would have gone to the government.

“It is the government, not train companies, that decides how much season tickets should rise on average each year. For almost a decade, successive governments have instructed train companies every year to increase these regulated fares on average by more than inflation. In doing so, ministers have been seeking to cut the contribution from taxpayers towards the running costs of the railway and increase the share paid by passengers.”

However, the Government's change of heart does not go far enough, according to the TSSA's Manuel Cortes, who is calling for an end to inflation-plus increases.  

He dubbed the change as 'too little, too late,' and said that Mr Cameron was still "punishing commuters with an inflation plus increase of 4 per cent which he will repeat in both 2014 and 2015.

"He is still planning to inflict a lot of pain on passengers who have seen their incomes squeezed over the past two years. All he is saying is that he will now do it more slowly."