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Network Rail to spend £850M less than planned


NETWORK RAIL is heading for an £850M underspend for 2004/5. Total investment for the year will be £5.9bn, 14% less than the £6.7bn trumpeted at the launch of the 2004 business plan in March last year.

Of the underspend, £350M relates to renewals projects that 'have yet to be fully justified', Network Rail said. The other £500M 'is made up of genuine effi encies and enhancements that are not yet ready to move forward'.

Network Rail this week insisted that there was no underspend but confi rmed that it had not borrowed as much cash this year as it was allowed to under the terms of the interim review.

But suppliers have been complaining for months that work has been drying up (NCE 4 November).

The news has prompted the Rail Regulator to ask the rail operator to justify the reduced spending.

'We are asking for a clarification of the reasons for the underspend, ' said a spokesman.

'Clearly there must be no reduction in outputs but there may be good reasons for re-phasing work.' A Network Rail spokesman confi med: 'We have not borrowed up to our limit so we don't have to raise debt finance and pay the interest.' Network Rail's current debt is £13bn.

Network Rail said it 'fully intended' to complete its five year programme of work.

'Maintenance in-house hasn't slowed and our efficiency drive externally is fi nding its teeth, ' the spokesman said.

'We will get value for money out of every pound spent and if that means putting back projects to later in our five year plan to ensure we realise best value, then that is what will be done.' The company is squeezing out savings across the board.

Consultants have been told to reduce their hourly rates by 20% and contractors have had margins slashed on new structures renewal contracts let last week (see box).

On top of this, 180 agency staff in the major projects and investment division were this week told that Network Rail would no longer be using contract workers because it did not wish to pay the mark-up. People will instead be invited to apply for permanent posts.

'We will be doing the same throughout the entire business, ' said a spokesman.

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