STEAM engines will run again in Newham if proposals to transform a local railway are accepted.

A report presented to Newham Council's cabinet outlines plans to have a steam locomotive running on the North London Line between North Woolwich and Customs House.

If accepted, it will be London's first ever heritage railway, and will carry both steam and electric locomotives.

However the plans can go ahead only if the Secretary of State for Transport, Douglas Alexander, agrees to suspend the line between Stratford and its current terminus at North Woolwich.

The plans are part of wider proposals for an overhaul of the North Woolwich Old Station Museum, currently run by the council, and the last remaining museum in the borough.

The council began advertising last November for a private firm to run the museum and the proposals are being made by a Newham-based company called Train of Events (ToE).

A heritage railway could interchange with the DLR at Customs House which, by 2009, will also have a new £65m aquarium.

The museum could then be combined with DLR and riverboat services to make a historical trip around east London, taking in Woolwich Arsenal and Greenwich.

Earmarked for use is one of the last steam engines to serve London, which was taken out of service in 1971.

It could be running once a week within a year and four times a week by 2009.

ToE's plans also include RailSchool, a Government-subsidised centre providing vocational training for 14 to 19-year-olds with rail industry ambitions.

The cabinet agreed to allow officers in the council's culture department to work with ToE to develop the proposal further.

The council will make a final decision on the museum's future by December.

ToE managing director Neil Howard told the Guardian: "I think, at the moment, the museum is tired and it shows that it has not had any investment for 20 years.

"But it is a glorious little place and I am very excited about it."

At present, the Old Station Museum tells the history of the Great Eastern Railway, the line between Liverpool Street Station and Norwich now operated by One railway.

However Mr Howard wants to change the emphasis of the exhibition to include more local history, focusing on the importance of the railways to the local area, including the Stratford train-building industry.

ToE was set up in 1999 and its first project was to run an aid train between Carlisle and Kosovo in eastern Europe.

Among its current contracts is a partnership with Hungarian Railways to run leisure services.

The Old Station Museum is owned by the Abbey Mills Tidal Mill Trust.