The Department of Transport is in talks with the West Yorkshire passenger transport executive regarding devolving the Northern and TransPennine rail franchises to local control.
One of the options under discussion includes the government subsidising a Northern Rail Executive for a period of 15 years, with the executive paying a train operator to provide the required level of service.
The franchise area, which includes Merseyside, Greater Manchester, Yorkshire, Humberside, Teeside, Tyneside along with large areas of North Yorkshire, Derbyshire, Lancashire, Cumbria, Nottinghamshire and Northumberland, would have its own business units which would be aligned to, where they exist, metropolitan passenger transport executive areas.
The DfT has been told that if it agrees to the devolution request it can expect to pay less for rail services.
One of the main challenges is to source funding to replace the Pacer vehicles that are due to be scrapped by 2019, as they are unable to be modified to meet the disability discrimination act.
A 15 year contract could see the DfT delegate this responsibility to the new executive, with the risk being shared with the franchisee.
In the summer, former transport minister Philip Hammond said the two franchises could be combined, with a new single franchise being let in 2014.
