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Regulator to rule on Network Rail's 'efficiencies' underspend


NETWORK RAIL will find out next month if the rail regulator is satisfi ed with its reasons for a £1bn underspend in the last financial year.

The Offi ce of the Rail Regulator (ORR) has been investigating the rail operator to see if this is the result of getting better value for money, cutting out unnecessary work or just putting work off.

The ORR is reviewing the findings of independent regulatory reporters this week, before announcing its conclusions.

'Network Rail's reasons are given as 'efficiency' but we have to examine if 'efficiency' is unit cost efficiency or changing scope, or another word for deferrals, ' said director of regulatory economics John Thomas.

The rail operator has been under pressure since last February when it revealed to NCE that it was heading for an £850M underspend for 2004/5 (NCE 3 February).

It said £350M of the total related to renewals projects that 'have yet to be fully justified'.

The other £500M was 'made up of genuine efficiencies and enhancements that are not yet ready to move forward'.

Network Rail will be allowed to keep money from genuine effi ciency savings - for the duration of the period 2005-2008.

But it will not be allowed to benefi from underspending resulting from missed targets or scope reductions affecting the long term sustainability of the network.

The ORR can squeeze Network Rail budgets in its next review of track access charges, if it is unsatisfi ed with its performance.

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