Arise Sir Shambles: Network Rail chief given a knighthood on the day his company is fined a record £14million for New Year rail chaos

On the day the company was handed a record £14million fine for making passengers' lives a misery over New Year - and admitted there would be more of the same throughout the summer - its boss was at Buckingham Palace receiving a knighthood.

Sir Ian McAllister, who stayed away from the office during the New Year crisis, saying he would "only get in the way", was honoured for "services to transport".

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While Sir Ian, who earns £250,000 a year for a three-day week, was meeting Prince Charles, the Office of Rail Regulation was announcing the record fine on his company after its engineering works overran at New Year, hitting more than a quarter of a million passengers.

ORR chief executive Bill Emery said Network Rail had seriously breached its licence.

He added: "What happened over the New Year was totally unacceptable for passengers and freight customers, and to train operating companies.

"The weakness in Network Rail's management of these projects had a serious impact on all of them and on the reputation of the railway."

Mr Emery said the watchdog has ordered Network Rail "to address these failings and thus reduce the risk of similar events in the future."

But both long-suffering passengers and the ORR believe the shambles is far from ended.

Network Rail announced earlier this week that further engineering works on the West Coast mainline will mean five days of disruption over Easter, including three days of complete shut-down between London Euston and the Midlands.

Yesterday the company warned that it needs still more time to finish work on the line - one of the two main rail arteries between London and Scotland.

It would have to be shut for 13 weekends over summer to meet the completion deadline of December.

But the ORR made clear it does not believe Network Rail has a "robust plan" to deliver the upgrade and ordered it to produce one quickly.

The previous highest fine imposed on Network Rail was £2.4 million in 2006 for failing to carry out resignalling work at Portsmouth on time.

The financial "merry-go-round" on the railways means that the new fine will effectively be taken from taxpayer subsidies to Network Rail and returned to the Treasury via the ORR and the Transport Department.

Critics said there should be a way of making the penalties hit the company's management responsible for the failures.

Last year, Network Rail's top bosses received bonuses totalling nearly &£700,000 as the company made a record £1billion profit.

Former chief executive John Armitt - who retired in July and is now chairman of the Olympic Delivery Authority - received £201,060 on top of his £522,000 basic salary and his deputy and successor Iain Coucher received £179,060 over and above his basic £466,000.

Finance director Ron Henderson and engineering director Peter Henderson received bonus packages worth £133,937 each.

In all, some £30million was handed out to senior managers and staff, although Sir Ian did not receive a bonus.

Although the ORR has no direct control over bonuses, it said it would draw to the attention of the Network Rail remuneration committee - which sets the awards - that the engineering overrun in the New Year represented "a shortfall" in performance. ORR chairman Chris Bolt said it could press for a possible tightening up of the bonus procedures.

The Department for Transport said: "The fine is a public acknowledgement that Network Rail has breached its licence.

"One of the functions of a fine is to ensure that it is more expensive for Network Rail to breach its licence than it is for it to take the appropriate action to comply."

Network Rail chief executive Iain Coucher said: "What happened at the New Year cannot happen again.

"We will make changes in the way we plan and manage future work."