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Budget letdown for Network Rail

The Office of Rail Regulation has admitted “the challenges ahead are considerable” for Network Rail after it demanded the organisation increase efficiency and cut its budget

Releasing its decision on future funding, the ORR said Network Rail’s spending in the period 2009-14 should only be £28.5 billion – 8 per cent less than the £31.1 billion Network Rail said it would need.

The ORR said about £26.7 billion of that funding would come from Government subsidies, train operators and freight companies, while the balance would be financed through other sources such as property rents.

The figure represents a £200 million rise on the ORR’s draft plans released in the summer. Since the announcement of the draft, Network Rail has been lobbying the industry regulator to increase its funding for the 2009-14 period, claiming the proposed budget was “insufficient”.

But ORR chief executive Bill Emery said: “We consider that Network Rail can deliver the improvements in performance and its capital expenditure programme for 2009-14 safely.

“While the company has made considerable progress in improving its capability, the challenges ahead are considerable.”

The ORR will publish the final price lists and review notices for the determination in mid-December. Network Rail will then have until 5 February to accept or reject the offer.

If accepted, a delivery plan detailing how the money will be spent is likely to be released in March. The ORR has warned that, if rejected, the matter will be referred to the Competition Commission. The commission would review all the evidence and decide on Network Rail’s outputs, regulatory framework and access charges.

Mr Emery said: “While any reference to the Competition Commission is in progress our determination will apply.”

The ORR said the major schemes already planned for the period would be affordable under the settlement. These include connecting King’s Cross commuter services into the Thameslink route in London.

A Glasgow Airport rail link is also planned, as well as many smaller schemes. Mr Emery said: “The cost and availability of finance will be directly linked to the company’s performance, thereby creating stronger incentives for it to operate efficiently.”

A Network Rail statement said: “Continued high levels of investment in our railway network are to be welcomed but we must be sure that these clearly challenging targets and levels of investment set out today by the ORR are both achievable and adequate to meet the growing demands being placed on our railway.

“We will take away today’s determination and consider the implications. We must satisfy ourselves that what is proposed can be delivered and that it will be enough to solve the issues of capacity and deliver the much-needed investment we need to build a bigger, better railway.”

Norman Baker, Liberal Democrat transport spokesman, criticised the funding levels and said that “a serious programme to reopen closed railway lines, increase capacity and build new stations” was required.

PROJECTS IN THE PIPELINE

Network Rail is seeking funds for several major projects scheduled for the period 2009 to 2014. Among them is the renovation of Reading station, which involves major civil engineering works to reduce conflicting train movements.

Network Rail sought £456 million for the project, but the Office of Rail Regulation decided that only £448 million should be made available for the project.

However, the ORR has decided that Network Rail should be granted the money it requested for some of its other major planned projects including: Birmingham New Street station (which will cost £128 million), the Intercity Express Programme (£260 million) and the National Station Improvement programme (£156 million).

Meanwhile, the ORR said £2.75 billion should be made available for Thameslink, slightly more than the £2.7 billion requested.