Mr Grayling promised to re-open the rail connection between Oxford and Cambridge and will set up a new organisation, known as East West Rail, to deliver the project.
He described the area between the two cities as “one of our most important corridors” on the closure of the line connecting them in the 1960s as “a decision we have lived to regret”.
The Government recently scrapped plans to electrify the stretch of railway between Selby and Hull.
It has also shown signs of waivering over targets to electrify the trans-Pennine North route and the Midland Mainline, which connects Sheffield to London.
Hull North MP Diana Johnson said: “Hull people pay taxes and ever-higher fares, and are frequently assured by Ministers that we’re part of the ‘Northern Powerhouse’.
“But even when private finance is available for rail electrification, Hull doesn’t get a fair share of the infrastructure investment that is going elsewhere – including to re-establish the rail link between Oxford and Cambridge.”
The Government justified its decision not to go ahead with electrification of the Selby-to-Hull line on the grounds that new trains are being bought for that route which can operate under either electric or diesel.
It said the investment in the new trains would achieve the same benefits as electrification without the disruption.
Mr Grayling set out proposals for the biggest change in the way the railways are run since Network Rail was created 14 years ago.
The Transport Secretary said in future train operators and Network Rail would be jointly responsible for track maintenance as part of efforts to reduce delays.
He used a speech at the Policy Exchange think-tank to claim that a lack of a co-ordinated approach made disruption worse
Mr Grayling said: “In my experience, passengers don’t understand the division between the two.
“They just want someone to be in charge. They want their train to work. I agree with them.
“I intend to start bringing back together the operation of track and train on our railways.
“Our railway is much better run by one joined up team of people. They don’t have to work for the same company. They do have to work in the same team.”
But the idea raised concerns that there would be confusion over the responsibility for safety.
Network Rail was created to take the track over from Railtrack amid concerns that commercial pressures were having an impact on rail safety.
Lianna Etkind, public transport campaigner at Campaign for Better Transport, said passengers “are not interested in the finer details of the structure of the railways”.
She went on: “They just want trains that are punctual, safe and reliable and don’t cost the earth to use.
“We hope that these reforms will work, but ultimately they will be judged on whether they actually deliver better and cheaper services for passengers.”
Mr Grayling also used his speech to repeat the Government’s commitment to phasing out paper tickets on the railways.
The Government wants passengers in all parts of the country to use their smartphones or contactless cards to make rail journeys by the end of 2018.