Darling planning extra £2bn for Network Rail

Alistair Darling has drawn up radical new funding plans for Network Rail that would see the state-backed company receiving an extra £2bn of taxpayers' money.

The confidential proposals, presented by the Secretary of State for Transport to the rail regulator, Tom Winsor, on Friday, will allow Network Rail to increase its investment in the creaking network without busting the Strategic Rail Authority's budgets.

Prepared with the SRA chairman, Richard Bowker, and Network Rail's chief executive, John Armitt, the five-year plan contains three main proposals, insiders say.

In the next two years, the not-for-dividend company will be allowed to increase its borrowing by £3bn. Planned increases in track access charges to the train operators would then be deferred for two years. And to make up the shortfall, the Government would increase state grants by around £2bn between 2007 and 2009.

But there is no guarantee that Mr Winsor will approve the proposals. The regulator will make a ruling on 10 March.

If the plans are given the go-ahead, the Government will be handing out more state grants to Network Rail than it did to its predecessor, Railtrack. The former transport secretary Stephen Byers forced Railtrack into administration because it asked for extra government handouts.

Mr Darling's proposals, which have Treasury approval, will see Network Rail spending £22.2bn over five years, as set by Mr Winsor's December interim review of the company's finances.

A Network Rail spokesman said: "We can confirm that we have made a submission to the regulator to re-profile the income of Network Rail."

The SRA did not return calls. However, it is understood that one of the reasons for the new funding plan is to prevent the SRA running low on cash. The SRA has promised to shoulder any increases in train operators' track access charges.