Plans to build a new high-speed rail line from Manchester to Leeds have been shelved in favour of cheaper projects to improve journey times in the North and Midlands.

Whitehall sources said the so-called ‘High Speed Three’ line across the Pennines has been dropped from a £96billion package of improvements designed to slash travel times.

The eastern leg of HS2 linking Birmingham to Nottingham, Sheffield and Leeds has also been axed, with a potential saving of £40billion.

Ministers are focusing instead on improving existing links, arguing it will produce benefits far more quickly and cheaply, with travel times from Birmingham to Nottingham slashed from 72 minutes to 27, and Birmingham to Manchester from 90 to 40 minutes.

Sources said improving the Liverpool to Leeds route would see journeys between Manchester and Leeds cut to half an hour.

However, ministers are braced for criticism that previously promised flagship schemes are being dropped. Boris Johnson pledged a new high-speed line between Manchester and Leeds in July 2019, in one of his earliest promises as Prime Minister.

But officials have warned that the need to drill a tunnel under the Pennines would lead to exorbitant costs and delay benefits for up to a decade compared with upgrading the existing route.

A source said the new scheme, which will be unveiled as part of the Integrated Rail Plan this week, would produce similar journey times far more quickly.

Former Labour transport secretary Andrew Adonis said the decision to axe the eastern leg of HS2 was a ‘historic mistake’. He added: ‘Building only the western leg of HS2 to Birmingham and Manchester but not the eastern leg to Sheffield, Leeds and Newcastle is like the Victorians deciding to build railways in the west of the country but leaving the east with canals.’

But ministers hope that the £96billion package – the biggest investment in rail for decades – will lead to improved services and shorter journey times for millions of people, making rail commuting a reality for many more workers living in the Midlands and North.

The package is a central part of the PM’s pledge to ‘level up’ opportunity across the country.

Mayor of Manchester Andy Burnham said not delivering HS2 in full would be seen as a betrayal in the North.