Network Rail is to end the involvement of private contractors in the maintenance of Britain's rail network.

The not-for-profit infrastructure company has concluded that using private contractors was wasting hundreds of millions of pounds of public money.

It is thought that the company can save around £200 million a year by doing the work itself.

"We have studied the implications in great detail and concluded that it is the right thing to do," said chairman Ian McAllister.

The company had already decided to bring some maintenance back "in house" in order to gain more information about the costs of rail maintenance.

The head of the Strategic Rail Authority, Richard Bowker, also backed the move and predicted that Network Rail would "continue to enjoy a healthy relationship with private contractors for track renewal work".

"The private sector's continuing involvement at the heart of the railways is important to passengers, important to taxpayers and important to the rail industry," he said.

"This is the final piece in the jigsaw of reshaping the privatised industry. This is a stable base from which to just get on and deliver."

But unions welcomed the new move as a step towards re-nationalisation.

"It will be far better now, with people coming to work dedicated to one company, not working for one contractor one week and the next for another," RMT chief Bob Crow told BBC Radio 4.

"You will see the dedication being put back into the industry. It's good news for the travelling public and it will be a lot safer as well."

Transport secretary Alistair Darling denied the government had sanctioned a policy of effective re-nationalisation.

"To try and recreate British Rail would be a big mistake," he told BBC Radio 4's Today programme.

"What we are talking about here is an entirely sensible, rational decision by Network Rail which is to take back in-house the maintenance contracts.

"They are doing that because, when we started to look at them after Railtrack collapsed, they found there were inefficiencies, they found there were cost savings to be made and, as far as I am concerned, we are spending record sums in renewing and rebuilding Britain's railways."

He said the move would deliver efficiency savings and an improved deal for taxpayers and passengers.

"This is not about nationalisation. This is about getting a better railway whether it is on London's Underground or whether it is the main line, the commuter lines," Darling explained.

Liberal Democrat transport spokesman John Thurso said privatisation "has not delivered the safety and reliability" passengers need.

"This is not about who owns the railways, this is about ensuring that there is a direct responsibility for maintenance and the consequent safety for everyone," he said.