The radical plan is being considered by the government's Strategic Rail Authority (SRA) as a way of funding its overhaul of the national network.

The proposal, which suggests selling bonds whose return would be guaranteed by future fares to City investors, will be one of several discussed at a rail funding conference on Tuesday.

The government has promised to pump �65bn into the railways by 2010 - half of which has to come from private companies.

Firms have already committed around �7bn and the SRA, which is responsible for awarding licenses to run trains and organising investment, is looking at ways to raise the rest.

U-turn

Although the bonds would be guaranteed by the SRA they would not appear on the government's balance sheet.

The funding of the railways requires innovative and stable financing, which may include selling bonds backed by fares

SRA official

If the proposals win approval it would signal a big shift away from direct investment by the private sector.

Critics say it would be a dramatic U-turn, as similar proposals for London Underground and National Air Traffic Services were rejected.

The SRA has denied claims that it will reveal a completed financing plan at Tuesday's meeting, which will be addressed by its senior managers and Transport Minister Alistair Darling.

An SRA official said: "There will not be a formal announcement on Tuesday.

"What we will be saying is that we are open to suggestions from the financial community."

Golden Arrow

The official added: "The funding of the railways requires innovative and stable financing, which may include selling bonds backed by fares, but that is just one potential element of the whole package."

It is thought the bond programme would be called Golden Arrow and organised by US bank Morgan Stanley and Babcock & Brown.

"Golden Arrow is likely to be a part of our funding package but we are not going to tell the financial community how to do its job," the official said.

The job of finding the money to revamp Britain's railways has become increasingly difficult, with costs now far greater than previously estimated.

Among the projects is the upgrade of the West Coast main line, which is now expected to cost around �10bn - four times the original estimate.