NETWORK Rail has been told that it will have £2.4 billion less than it wanted to spend on the national rail network during the next five years – and that could lead to an appeal by the company.

In its final report on how much the company will be able to spend, the Office of Rail Regulation has ruled that its income will be £26.7 billion, compared with the figure of £29.1 billion Network Rail had called for.

The ORR wants to see much of the gap made up in tough new efficiency targets which mean savings of 21 per cent over five years.

The move by ORR, following three years of deliberations over Network Rail’s next ‘control’ period from next April, could lead the infrastructure company to make an appeal to the Competition Commission, the final ‘court of appeal.’

The report also came less than 24 hours after new transport secretary Geoff Hoon told the Commons Transport Committee that he had set up an expert group that will look at building new high speed lines and the electrification of key part of the current network.

However, no funding has been earmarked for such schemes in the 2009/14 Network Rail spending period.

In its report the ORR says: “Our determination is £2.4 billion - eight per cent - less than the £29.1 billion Network Rail asked for.

“Network Rail’s income is principally recovered through track access charges paid by passenger and freight operators, station access charges and network grant paid by the governments in England & Wales and Scotland to Network Rail in lieu of access charges.

“The efficiencies that we judge Network Rail can achieve will lead to lower track access charges for train operators. Freight operators will see their total charges fall by 35 per cent.”

But only two months ago Network Rail said in its response to the draft determination that the “very aggressive” efficiency targets the ORR had placed on the company were currently unrealistic although it had agreed to the shaving of £800 million from its original £31 billion spending projection and said it might have to seek a further £1 billion from alternative sources.

Even then the company was ‘very concerned’ about how another £1 billion could be shaved off its five year budget from next April.

But soon after the publication of the final review on funding Network Rail’s director planning and regulation Paul Plummer said guardedly: “Continued high levels of investment in our railway network are to be welcomed, but we must be sure that these clearly challenging targets set out by the ORR are both achievable and adequate to meet growing demand.”

A NR spokesman said that the company had to study the report in detail before making further comment.

The ORR said the £7.6 billion package of rail network improvements contained in NR’s plans were to be coupled with demands on the infrastructure provider for greater efficiency and more accountability.

It stood by its judgement of the need for a 21 per cent efficiency improvement by the end of 2013-14 – two-thirds of the current efficiency gap – but said it had reduced the improvement profile during the first two years to give Network Rail time to plan and implement.
ORR chief executive Bill Emery said: “Our determination is a challenging and achievable package that delivers a bigger, better railway at an affordable price.

“Our determination provides the funding necessary for Network Rail to build on its significant improvements to reliability, asset condition and efficiency of the past five years and deliver further improvements for train operators, passenger and freight customers and expand capacity.

“We will proactively monitor its progress in delivering all its obligations and take action to require any shortcomings to be addressed promptly. We shall view any culpable failure to deliver as a serious breach of Network Rail’s licence.”

Key improvements specified in the review include demands for a 20 per cent reduction in late and cancelled trains, an increase in punctuality to at least 93 per cent for local services in the South East and 92 per cent for all other services, at least a 25 per cent reduction in delays to freight trains and a one-third reduction in passenger service disruption caused by engineering work.

Provision is also being made in funding to help Network Rail achieve its aims of a ‘seven day railway by improving engineering techniques and plant.

It also requires improved safety for passengers and staff and for the largest network enhancement programme in decades to accommodate 20 per cent more passengers and 30 per cent more freight.

Key schemes include increasing Thameslink capacity, rebuilding Reading and Birmingham New Street stations, capacity improvements in Cardiff and on the East Coast main line and improving speeds on the Midland main line.

In Scotland, a new Glasgow Airport rail link and a new line from Airdre to Bathgate are under construction, and many smaller scale schemes throughout the country include lengthening more than 500 platforms to accommodate longer trains.