Network Rail set to unveil £40bn plan

Network Rail will place further strain on the Strategic Rail Authority's already over-stretched finances this week by setting out plans to spend more than £40bn on the rail system over the next 10 years.

Even with an anticipated 30 per cent improvement in cost savings over the next few years, the owner of Britain's rail infrastructure still expects to be spending more than £4bn a year on the operation, maintenance and renewal of the network.

The latest spending plans come as Network Rail squares up with the train operators for a battle over who runs the railways. A number of train companies, led by National Express, are pressing the Government to remove responsibility for signalling and train movements from Network Rail and hand it to the train operators in an effort to improve punctuality.

Network Rail has hit back, arguing that it should control not only stations but also train services themselves to improve reliability and achieve greater efficiencies in the maintenance of the network.

All sides of the rail industry agree that the separation of track from wheel at the time of privatisation was a mistake that has caused many of the problems the network suffers from today. But they are deeply divided over the best way to re-integrate the system.

A wide-ranging review of the industry, ordered in February by the Transport Secretary Alistair Darling, is expected to be complete by June or July. Among other things, Mr Darling has hired KPMG to look at the present structure of the industry.

Network Rail's 10-year business plan, to be published on Wednesday, will set out detailed spending proposals for the next three years. Over the five-year period to 2009 the Rail Regulator Tom Winsor has allowed it to spend £22.7bn. Together with other income from sources such as property, the total expenditure comes to £24.5bn. This is £5bn less than Network Rail had originally planned to spend but £6bn more than Mr Winsor was proposing to allow its successor, Railtrack.

Network Rail's priorities in the early years of the plan will be the completion of the upgrade of the West Coast Mainline, now budgeted to cost £8.5bn and the £837m upgrade of the power supply system in southern England, which has held up the introduction of new trains. Beyond that, there is a huge investment programme designed to tackle the backlog of track replacement work that has built up over the past decade, whichcoversabout 4,000 miles.

Network Rail has already brought all maintenance work back in-house and argues that this vast renewal programme can best be managed if it has ultimate control over the way services operate.

As a halfway house towards a British Rail-style re-integration of the industry, the Government is creating a new breed of "fat controllers" to coordinate track and train operations across chunks of the network. There will be eight of them, each running major control centres, the first of which is already up and running at London's Waterloo station, where the dominant operator is South West Trains.

The bulk of Network Rail's income comes from track access charges that the SRA either pays directly in the form of capital grants or indirectly, through subsidies for the train operators. To ease pressure on the SRA's budget, Network Rail has been allowed to borrow £3bn over the next two years to fund the railways that will then be compensated for by higher access charges in the following three years.