THE rail industry is waiting for the McNulty report this morning amid reports that fares are likely to be increased after the morning peak, although other off-peak fares chargeable later in the day could fall.

It's being suggested that fares in the 'shoulder peak' -- the hours after 09.30 -- could be set to rise in a bid to increase railway revenues.

However, true peak fares are thought to be less likely to increase beyond the RPI+3 per cent formula which will apply for three years from January 2012.

Sir Roy McNulty will be publishing his long-awaited findings at 10.30 this morning.

Other areas which have received detailed analysis from him include the management of Network Rail, which has already started to devolve the day-to-day running of its business to new Route Managing Directors. So far, just two routes have been converted to virtual standalone business units -- Wessex and Scotland -- but more are set to follow. These include a new Welsh route, which is to be carved out of the present LNW and Great Western routes.

But Sir Roy may go further, recommending moves towards at least partial vertical reintegration, with TOCs taking over responsibility for maintaining some lines. Industry sources are suggesting that two early candidates could be the the southern end of the Chilltern Railways network, and South West Trains.

The Department for Transport appears to have placed much of its work on hold until the implications of the McNulty report can be taken into account. It failed to issue the promised Invitation to Tender for West Coast on 10 May, and the start of the next franchise has been postponed from April 2012 to January 2013. Speculation continues about how the gap will be bridged. Virgin could be granted a short franchise extension, or the Department's own 'operator of last resort', Directly Operated Railways, could step in.

DOR is currently running East Coast following the withdrawal of National Express in November 2009, and the date when that franchise will return to the private sector is officially said to be 'late 2012'. Even so, the Department's franchise programme now appears to be fluid at best, with some commentators accusing it of falling into disarray.

Sir Roy's report today should allow the DfT to restructure its plans, once future costs and management processes have become clearer.