Rail chief: Recovery will take five years

The head of Network Rail, the not-for-profit organisation which took control of the railways yesterday, said passengers will have to wait five years to see sustained improvements in services.

John Armitt, the chief executive of the Government-backed organisation whose chairman is Ian McAllister, also indicated that it would be seeking about £4.5bn a year in subsidies to run the network – £1.2bn more than its predecessor Railtrack was receiving.

Network Rail, which starts life with a £21bn cushion from the taxpayer, intends to go to the bond markets late this year or early next year to refinance its £10bn of short-term facilities. Over the next five years it plans to raise about £20bn in bond finance.

Mr Armitt said his key priority is to improve the safety and reliability of the railways free of the "tension" of having to deliver dividends to shareholders. But he admitted that whilst some improvements should become visible in the next 12 to 18 months it would take three to five years to achieve a "sustainable" railway.

Mr Armitt is paid £450,000 and is eligible for a 50 per cent bonus depending on his success in improving the punctuality of train services. The target for the year to next April is to reduce delays by 20 per cent. But so far he has only achieved 11 per cent which, with autumn and winter to come, means he is unlikely to receive this year's bonus.

Apart from the £10bn in short-term financing, Network Rail also has £7bn in medium-term finance to cover the costs it has inherited from Railtrack and a further £4bn "contingency buffer" which lasts for 50 years. Adrian Montague, Network Rail's deputy chairman, described the £4bn as "rainy day, last resort" money that it expected never to draw on.

The Rail Regulator, Tom Winsor, has agreed to an interim review of the network's financing requirements, which is expected to lead to a new five-year agreement governing track access charges starting in April, 2004.

Mr Winsor has said that "conceptually" the review could result in a reduction in track access charges, but Mr Montague said he expected it to lead to a "substantial increase" in funding. For the three years up to April 2004, Network Rail calculates it needs £13.7bn for the operation, maintenance and renewal of the network – £3.6bn more Railtrack was allowed.

The new performance targets that Network Rail must meet will be announced in mid-November ahead of the first meeting of its "member council" – the 100-strong group of industry executives, Strategic Rail Authority officials and "public interest" members who will act as Network Rail's shareholders.