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Network Rail rapped for second underspend

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NETWORK RAIL was last week rapped by the rail regulator for underspending its budget for the second year running.

The Office of the Rail Regulator (ORR) said it had underspent by £500M by the end of the third quarter of the current financial year.

But Network Rail said the underspend reflected a need to defer renewals so that it could maximise value for money.

By the end of the third quarter the rail operator had spent £3.9bn on operating, maintaining, renewing and enhancing the network, against a budget of £4.4bn which was agreed with the ORR.

The figures are revealed in the latest edition of the Network Rail Monitor, the quarterly report by the ORR on Network Rail's performance.

We note that progress with renewals and rail enhancements activity continues to run well below the levels included in Network Rail's plans and budget, ' said ORR chief executive Bill Emery.

'We will continue to monitor Network Rail's performance closely.' Last year the ORR accepted Network Rail's justification for a £527M underspend (NCE 6 October 2005).

This year's underspend is in similar areas, with enhancements - capacity increases - 24% below budget and renewals 12% underspent.

Renewals work on telecoms, information systems, signalling and structures is most behind.

But track renewals are 7% over budget.

Network Rail chief executive John Armitt defended the underspend.

'We are now at the end of year two in a five year programme, ' he told NCE.

'The fact that we have spent less than predicted shouldn't really surprise anyone, given that the railway was suddenly given a lot more money [in the last regulatory review].

'The important thing is: where we are going to be at the end of the five year regulatory period?

'If we spend money, then we must spend it efficiently and get value.' The ORR said that the current level of spend had been discussed with Network Rail and that the operator accepted the need to speed up spending in the final quarter.

'It has assured us that appropriate plans are in place for this and we will review on an ongoing basis during Q4, ' it said.

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