Network Rail told to cut costs by £2bn as damning report lays bare passengers' misery

Regulator demands debt-ridden company reduces five year budget and improve punctuality

Network Rail is already forecast to have delivered efficiencies of 40 per cent in running the railways from 2004 and 2014 and ORR said it expected to see a further 20 per cent from 2014 to 2019

The frustration felt by millions of rail users at the network's poor standards and punctuality has been laid bare in a new report.

The Office of Rail Regulation (ORR) has highlighted the gulf between Britain and the rest of Europe, with UK trains being 23 per cent less efficient than on the Continent, despite fares and funding being 30 per cent higher.

Network Rail, the state-funded company that owns and manages the track has been warned by the regulator that it must now cut nearly £2 billion from its spending plans over the next five years at the same time as improving train punctuality.

This comes after the government-subsidised company announced last month that its debt had passed the £30 billion mark.

The Office of Rail Regulation (ORR) said the five-year savings plan must not come at the expense of safety.

It also said at least nine out of 10 trains must run on time across the entire network by 2019.

Network Rail (NR) has set out plans to spend £23.3 billion running the railway network from 2014 to 2019 but the ORR has calculated the day-to-day costs at the lower figure of £21.4 billion.

In an assessment of NR's plans for the five-year period, the regulator also said it will also expect higher standards of management of the network's infrastructure as well as improved safety for passengers and railway workers.

The ORR said that savings on spending for the period could be achieved "through the implementation of new technologies, better management of the railways and more efficient ways of working".

It said maintenance expenditure would be protected, with additional funding for the improvement of structures such as bridges and tunnels as well as upgrading level crossings.

The ORR said money could be saved through measures such as keeping better data on the condition of the network so that problems could be identified and fixed before they occur, reducing delays.

The regulator also said analysis showed that train operators, NR and suppliers could save money by working together more efficiently.

Network Rail is already forecast to have delivered efficiencies of 40 per cent in running the railways from 2004 and 2014 and the ORR said it expected to see a further 20 per cent from 2014 to 2019.

A total figure for running and expanding Britain's railways for the five-year period - which includes the cost of servicing its vast debts as well as enhancements to the network - has been put at £40.1 billion by NR but the ORR said this should be £37.9 billion.

The regulator said that while it had approved a £12 billion programme of enhancements, some £7 billion of these were in the very early stages of planning.

It said that to safeguard taxpayer interest, it was requiring NR "to provide well-developed plans to ensure they represent real value for money".

Meanwhile, it has set out a new punctuality regime under which, for the first time, each train operating company must achieve punctuality targets of 90 per cent.

The regulator wants to see NR ensuring that all operators achieve a minimum standard, rather than being able to balance out underperforming areas with those that easily exceed targets.

The overall national average target is 92.5 per cent. Figures show NR failed to achieve this in 2011/12, at 91.6 per cent, with 90.8 per cent achieved in 2010/11 and 91.5 per cent of trains on time the year before that.

The minimum figure for train operating companies is replacing a previous system that had targets of 92.7 per cent for London and the South East, 91.9 per cent for regional railways and Scotland and 91.5 per cent for long distance routes.

The ORR chief executive Richard Price said: "Britain's railway is a success story and it has made significant progress over the last decade.

"In order to sustain this progress and retain support and confidence, the industry must continue to improve its efficiency to reduce its dependence on public subsidy.

"We have set out what Network Rail and its industry partners will need to deliver between now and 2019 for passengers, freight customers, train operators, and taxpayers.

"Passengers will benefit from increases in capacity through a major programme of enhancements and improvements in punctuality, tackling in particular the worst-performing lines.

"Not only that, we are proposing that rail users should have more say in what enhancements to the railways are delivered and how.

"This determination is stretching but achievable and it gives Network Rail incentives to build on past successes, and do even better than the challenges we have set."

Network Rail said the ORR's proposals would need "careful and detailed thought" before a formal response in September.

A spokesman said: "There is no question that our railway needs to sustain the high levels of investment seen in recent years if we are to continue expanding the railway to provide for the ever growing numbers of passengers and trains.

"Getting the balance right in making the choices between performance, growth and value for money is critical if we are to build on efficiency savings of around 40% achieved over the last two control periods."

Michael Roberts, chief executive of the Association of Train Operating Companies (ATOC), said: "We will consider carefully today's draft determination.

"This is an important opportunity to incentivise Network Rail and operators to work more effectively together, allowing the industry to build on current near record levels of customer satisfaction and meet growing passenger demand by providing better trains, more seats and quicker journeys."

Transport unions have threatened to strike if cost-cutting results in widespread job losses.

Bob Crow, general secretary of the Rail, Maritaime and Transport Workers union, told The Times: "Cuts on this scale would drag us back to the grim days of Railtrack and the tragedies of Hatfield and Potters Bar. RMT is making it clear this morning that any threat of compulsory job losses at Network Rail would lead to preparations for a national strike ballot.”

Manuel Cortes, leader of the TSSA union, said: “It will mean a slower, less efficient and less safe railway."