Warning on Network Rail spending

ORR said Network Rail had exceeded regulatory targets

The rail network could face problems in the future because bosses underspent by £1bn last year, its watchdog has said.

In its annual report, the Office of Rail Regulation (ORR) asked Network Rail to show it was not "storing up problems" by underspending.

But the regulator praised the "good progress" in improving infrastructure and reducing the number of delays.

Network Rail said it was "not prepared to spend money on projects that simply aren't ready".

Chris Bolt, ORR chairman, said he didn't believe the underspending would jeopardise passenger safety.

We will get value for money from our spending plans John Armitt Chief executive, Network Rail

"But if signals are not renewed in appropriate time, that will start to have an impact on performance," he said.

He called on Network Rail to prove it could meet the longer term challenge of making further improvements in train performance and efficiency.

"Network Rail needs to demonstrate more clearly that its plans will deliver all the performance and capacity improvements for which it is funded," he said.

"Only then can we be confident that any underspending represents real efficiency improvement."

Network Rail's chief executive, John Armitt, said he would "make no apology" for deferring spending.

"We are determined to ensure tight budgeting and a clear understanding of what needs to be delivered.

"We will get value for money from our spending plans, ensuring we get the most from every pound spent."

'Robust plans'

Network Rail owns and operates the national rail network in Britain.

ORR is an independent body which continuously monitors its operational and financial performance.

The ORR report said Network Rail had made good progress but needed to produce better analysis of the underspending.

There were also concerns the firm's longer term plans were not yet sufficiently detailed.

In response, Mr Armitt said Network Rail recognised "the need to develop more robust plans for future spending".

He said the firm's recently published 2005 business plan "set out a whole series of action plans that we will take forward in consultation with the ORR".