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Network Rail: regulator's analysis 'flawed'

Rail operator Network Rail has slammed the Office of Rail Regulation (ORR) for a 'flawed' analysis of projected spending over CP4 (2009-2014) control period, and asked for a further £1bn to make ends meet.

The response is the latest in the horse-trading between the regulator and Network Rail, over what Network Rail will be permitted to spend in CP4.

The ORR wants Network Rail to reduce operating, maintenance and renewals costs through efficiencies by 21% by 2014. It has previously stated that the outputs demanded by the government in last year's High Level Output Specification (HLOS) are affordable.

The Government's budget for this is £26.5bn, but Network Rail want around £1bn more.

Network Rail has already concluded that, "In our view, there are serious flaws in ORR's analysis with the result that the potential cost savings in CP4 are very substantially overstated. Unless the draft determinations are revised, Network Rail would therefore be unable to finance its activities."

"Our clear view is that the overall package proposed in the draft determinations is currently unreasonable and unrealistic. This situation arises because every element of the package is, on its own, extremely challenging since ORR makes optimistic or aggressive assumptions across all parts of the business. Taken together the scale of the challenge is simply too great."

The track operator did agree that £800M could be shaved from the original £31bn expenditure projection for 2009-2014, but that a further £1bn of funding is lacking for 'expansion' projects that are needed for the long term.

Network Rail said it, "may need to seek alternative sources of funding for some of these projects," although the regulator may not allow Network Rail to do this.

Director of planning and regulation, Paul Plummer,said: "We have made good progress in discussing some aspects of our plans with ORR and we believe we have provided strong evidence that further changes are required to enable us to build a bigger better railway over the next five years.

"There are still issues we need to resolve, but we are hopeful that we can find a satisfactory conclusion. This will enable us to move forward and deliver the further performance improvements and investment schemes our railway desperately needs to meet the challenge of continued passenger and freight growth."

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