BILLIONS of pounds were today cut from spending on the railways just 24 hours after the Government said it planned to make "best use" of the national transport networks.

Network Rail, responsible for the national infrastructure including tracks, signals and stations, planned to spend £29.1 billion between next year and 2014. This has been cut back to £26.7 billion in a plan laid down by the Office of Rail Regulation today.

That is £2.4 billion less than what NR considers "essential".

Senior figures at the network were stunned. One said: "The money is not enough for what we had planned."

Transport Secretary Geoff Hoon yesterday announced a programme of works "to ensure we make the best use of our national transport networks and accelerate the process of identifying where future expansion is needed".

But the cutbacks put scores of improvement plans at risk of cancellation or delays.

The shortfall also threatens a major political confrontation over the funding of the railways, used by more than three million people a day.

There were clear signs that ministers were behind the cutback.

Bill Emery, chief executive of the Office of Rail Regulation, said: "In this particular process we have been given a clear steer from the Government on the output it requires from the industry and the public funds they are going to make available to the industry. We worked within that framework."

Passenger numbers on many routes, including London commuter lines, are forecast to increase by up to 50 per cent over the coming decade.

NR had planned to spend £30.5 billion between 2009 and 2014. It then cut this back to £29.1 billion saying that was the "bottom line" figure.

The ORR, however, today ruled the network must improve its housekeeping and cut costs.

Chris Bolt, chairman of the ORR, announced in July that the network, a not-for-profit organisation, should be limited to £26.5 billion, a target which NR branded "unrealistic".

The ORR today said the network must improve its efficiency by 21 per cent by 2014. It is also demanding:

● 93 per cent of local London services to run on time.

● A 20 per cent reduction in late and cancelled trains for which NR is responsible.

● A reduction in disruption caused by engineering work.

● A 25 per cent reduction "at least" in delays caused by freight trains, a frequent cause of disruption.

The ORR says the money will be enough to deliver all the benefits to passengers laid down by the Government's output specifications including expansion of the network through Thameslink and speeding-up train services through London Bridge and Reading, both notorious bottlenecks.

Paul Plummer, NR's director of planning and regulation, said the target was "clearly challenging".

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