Commuters will see a drop in rail fares from January
Almost half of UK rail fares, including most commuter journeys, are set to fall by 0.4% next year after a key inflation measure remained near a record low.
Regulated rail fares, which also include long-distance off-peak journeys, are based on July's Retail Prices Index (RPI) figure, plus 1%.
It was -1.4% in July, after hitting a record low of -1.6% in June.
"For the first time in a generation passengers will see their fares fall," Transport Secretary Lord Adonis said.
Last year, the July figure for RPI was 5%, meaning that rail prices this year rose by 6%.
Regulated fares make up 60% of rail journeys and up to 45% of rail fare income.
In 2010, the rules on regulated fares change, with most rail companies having the limit of RPI plus 1% imposed on them. Previously, train operators have been allowed to increase individual regulated fares by as much as 6% over the RPI rate.
TYPES OF FARES
Regulated fares Commuter fares (weekly, monthly and season tickets), anytime day singles and returns, short-distance walk-up fares in commuter areas, and long-distance off-peak fares
Unregulated fares Advance and anytime fares on long-distance routes
"This means most regulated fares will fall in line with the national fare change, which will be welcomed by passengers," Lord Adonis said.
Regulated fares refer to weekly and monthly season tickets in commuter areas, where the Department For Transport (DFT) keeps prices in check by means of fares 'baskets' .
Two train companies, Southeastern and West Yorkshire PTE, are exempt from the change in rules.
Both will allowed to raise fares by 3% on top of the RPI rate from January to fund additional investment in services in those areas, the DFT said.
Rail fares have risen by 5% in real terms since 1997.
"While this will provide welcome respite from the normally unrelenting rise of annual fares, it is just a pause, not the end of higher train fares," Liberal Democrat transport spokesman Norman Baker said.
"Passengers shouldn't be fooled by today's announcement - we already have the highest rail fares in Europe and the government's franchise policy will force up unregulated fares even further."
There are concerns that unregulated rail fares will surge as train companies seek to recoup the money lost from falling season ticket prices.
Some rail firms have raised fares by as much as 11% recently on advance ticket purchases. First Great Western announced increases of up to 20% on some off-peak services last week.
"We expect a wave of companies now to try and make the passengers pay for January's fares cut by jacking up the unregulated off-peak fares in September," said Gerry Doherty, head of the TSSA rail union.
"They will also hike first class and advance fares as well because these are not controlled by the RPI formula."
Mr Doherty also expects rail companies to raise prices at train station car parks.
Hassard Stacpoole, spokesman for the Association of Train Operating Companies, said that train companies set the prices for unregulated fares in the autumn and suggestions of any price increases were "sheer speculation" at this point.
The BBC learned in February that the government had rejected a request from train companies to make sure fares stay rising, even in the event of deflation.
There have been fears that several train companies will not be able to afford cutting the price of fares and may run into financial difficulties.
RAIL PRICE INCREASES 1997-2008
1997 is the first year after the entire rail network was privatised
Regulated fares, e.g. season tickets and longer-distance, off-peak fares, are capped by the government at 1% above inflation, as measured by the Retail Price Index. Prior to 2004 they were capped at 1% below inflation.
Unregulated fares, e.g. most leisure fares including what used to be known as cheap day returns, and advance tickets, are not pegged to inflation