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Network Rail must make more savings - Regulator

The Office of Rail Regulation (ORR) has told the govenments in Westminster and Edinburgh that the funds it approved for 2009-2014 are sufficient, and Network Rail needs to make an additional £1bn in efficiencies.

The Regulator is comparing the government's shopping list for rail - the High Level Output Specification (HLOS), the money it committed to fund HLOS, and Network Rail's business plan to achieve rail improvements.

Network Rail's business plan is around £1bn more than the funds the Government has committed, although Ian Coucher had previously said that the plan was "there or therebouts".

The ORR's initial assessment of Network Rail's plan, which was submitted in October, comes from forming a range for Network Rail's costs and required revenues. It has also taken account of the cost of government support to franchised passenger train operators.

Bill Emery, ORR Chief Executive, said: "These are exciting but also challenging times for the mainline railway in Great Britain.

"Having started our detailed review of the industry plan for 2009-14, we are satisfied on the basis of the work we have carried out to date that it is likely that the requirements of the governments in England & Wales and Scotland can be accommodated within the public funding they are each making available.

"We consider that Network Rail's plans significantly overstate the revenue it will require for 2009-14. We believe the company could achieve greater efficiency improvements than assumed in the strategic business plan.

"For England & Wales we consider that the total public funding required to deliver the government's output requirements lies between £10.2bn and £13.5bn, compared to £13.3bn of public funding available. For Scotland, we consider that the total public funding required lies between £3.1bn and £3.6bn, compared to £3.6bn of public funding available."

The ORR will give greater detail in its analysis in February 2008, along with further decisions on the framework for setting access charges, including the definition of outputs and the financial framework for Network Rail.

Network Rail will then provide an update of its strategic business plan in April 2008 and ORR will publish its draft determinations on Network Rail's access charges and outputs for 2009-14 in June 2008.

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