FARE increases for Plymouth train travellers cannot be ruled out in the face of a cash squeeze and urgent investment needs of the rail network, according to a Cabinet Minister.

Transport Secretary Philip Hammond told The Herald that while passengers were "sensitive" to price increases, there was a need for a "reality check", with his department's unprotected budget facing being slashed by a quarter.

Ruling out rises would "shrink" the money available for urgent investment priorities such as extra train carriages to ease overcrowding.

It has been reported that the Department for Transport (DfT) wants to allow train operators to charge up to 10 per cent more for tickets in a bid to reduce the Government's £5billion rail industry subsidy.

Train companies are allowed to raise fares by 1 per cent above the level of next month's retail price index, the measure of inflation, already at its highest since 1991. It has been suggested the formula for limiting price rises to RPI plus 1 per cent could be at risk, allowing firms to levy larger increases.

Earlier this year, MPs on the now-defunct South West Committee called for a probe into already hefty ticket prices, pointing out that the region had some of the highest rail fares in Europe.

Meanwhile, plans for additional rolling stock, along with other major transport schemes including electrification of the Great Western main line, have been "paused", amid a wholesale spending review and warnings of painful cuts.

Mr Hammond said: "We will have to await the conclusion of the spending review.

"We are acutely conscious of the overcrowding issues."

He added: "If we rule out fare increases, we are essentially shrinking the pot of money that would be available to support investment in the railway.

"It's very clear there are some investments passengers urgently need, including additional rolling stock capacity. Until I've seen what my spending settlement from the Treasury is, I don't want to rule anything out.

"I'm acutely conscious of the fact passengers are very sensitive to fare increases but I don't want to rule out in advance even looking at the fare increase formula until we know what other money is available to deal with the urgent investment needs of the network, particularly additional rolling stock capacity."

Mr Hammond also indicated electrification of the Great Western Line was unlikely to go ahead, branding Labour's promises on the scheme "cavalier".

He said: "The coalition Government is very much committed to electrification, in principle.

"We have to look at all of these projects in terms of what can be afforded and what is value for money for the taxpayer."

However, Mr Hammond insisted the coalition Government's pledge not to slash capital budgets without considering the wider implications of schemes, such as the economic investment improved transport might attract, meant his department's budget was less at risk than it had been during previous recessions.

"Transport is a lot better position than it might have been given the overall state of public finances," he said. "All will be revealed once we know what our capital and resource envelope is."

Final funding settlements are to be announced on October 20.