Britain cannot afford not to renationalise the railways, according to a left-wing think tank.

A paper published by Catalyst concluded that since privatisation in 1996 some £6bn had been taken out of the railways in payments to shareholders.

It said that around £800m a year was continuing to leave the industry in returns to private lenders and investors.

In contrast, argued the report, bringing the railways back into public ownership could produce immediate cash savings of £500m a year or more.

The savings would come from reduced bureaucracy and leakages to private providers of finance, it said.

Catalyst argued that by 2013 the majority of passenger services could be returned to the public sector at no cost.

But it conceded that restoring network infrastructure and rolling stock to public ownership would entail a one-off increase in public debt of 2.15 per cent of GDP.

"Ministers have suggested that we cannot afford to take the railways back into public ownership," said the think tank's Martin McIvor.

"The reality is that we cannot afford not to. Continuing with the status quo means continuing with low growth, poor performance, compromised safety - and spiralling cost escalation.

"The Exchequer will not bear this increasing burden indefinitely - sooner or later there will be pressure to shift the costs of privatisation to passengers, through fare rises and cuts in services. Either way, the public loses."