The Liberal Democrats have promised to open thousands of miles of new railway tracks across UK, costing around £3.5bn ($5bn).
The rail expansion fund would be raised by cutting the government's road budget for three years, until 2013/14, by 90%.
The UK's third largest party said it plans to use £480m ($730m) to cut rail fares, and the remaining £2.95bn ($4.4bn) for a new rail fund.
The fund would allow councils and transport authorities to bid for funding to pay for rail improvement and expansion projects.
The party spokesman Norman Baker said decisions on which services could be expanded would be made when bids were received.