Network Rail put in a bid yesterday for almost £29bn of funding for the next five-year period of regulation, including £8bn to upgrade the country's infrastructure.
The company, which owns the rail tracks and stations, warned that the upgraded expenditure was needed to cope with soaring passenger numbers. It warned that, without the extra investment, 70 per cent of the additional morning peak-time passengers in London and the South-east would have to stand during their journey.
Network Rail said it needs £20.8bn just to maintain the existing network, for the 2009 to 2014 "control period". The figure is just above the top of the range recently published by the industry's regulator but it does assume £4.2bn worth of cost savings.
In addition, Network Rail has asked for £7.9bn to fund a development programme - within that, an expansion of the Thameslink route, which runs north-south through London, is easily the biggest project - at an estimated cost of £3.2bn in this period.
Network Rail pointed to a predicted 30 per cent growth in passengers and freight across the 20,000 mile network over the next decade.
John Armitt, the chief executive of Network Rail, stressed the level of cost savings the company is hoping to achieve. "In the future we are going to be able to run today's railway for almost £1bn less each year - a huge saving for the taxpayer. The standard and level of service will not drop, but the efficiencies we are delivering month by month, and the progress we are making on catching up on decades of under-investment, will see costs fall further," he said.
Costs will fall from £25bn in the current five-year control period to £20.8bn, to maintain the existing network. However, the rail regulator recently estimated these costs at between £15.6bn and £20.3bn, setting Network Rail up for a confrontation with the industry's watchdog.
Stephen Joseph, the executive director of the pressure group Transport 2000, said: "We're supportive of the need for more money to pay for growth. But it's the £20.8bn costs that are a concern. Costs in this country are higher than other comparable railways in Europe and have to be brought down."
The figures put forward by Network Rail will now be subject to a two-year negotiating process, both with the rail regulator and the Department for Transport. The Treasury will also be involved, particularly as the Government guarantees Network Rail's debt.
Mr Armitt acknowledged he would face wrangles ahead. "You can bet your bottom dollar that we'll get less than we believe we need, but they [the Government] will still want the outputs."
The Network Rail business plan does not assume any jump in the rate that fares increase every year - at 1 per cent above the rate of inflation. Roughly half of the company's revenues come from government, with the rest coming from charges levied to train operators and its commercial activities.
Alec McTavish, director of policy at the Association of Train Operating companies, said: "The industry has to respond to the growth in demand. We've got to spend money to meet the additional passengers."
The Thameslink scheme is not funded at all under the £20.8bn base line expenditure. The project will triple the number of trains that can use the line, which runs from the south coast through London and out to Bedford. It will require London Bridge station to be rebuilt and enhancements to its other stops, including Blackfriars station.
Under the Network Rail plan, debt will rise from £21bn at the end of the current control period, in 2008, to £29bn by 2014.