Studies by the Office of Rail Regulation have concluded that Network Rail is one of the least efficient rail infrastructure companies in Europe and that its business plan is overpriced by up to £5bn.

A key factor in its verdict was analysis of 13 rail European infrastructure managers which showed that Network Rail may be 30-40% less efficient than the European average.

Whereas Network Rail has insisted in its business plan that it requires £24.6bn to deliver the government's requirements for the rail network between 2009-14, ORR said the company needed £19.8-22.8bn. It described many of Network Rail's arguments for additional funding, including £400m to meet the DfT's 92.6% punctuality target, as "poorly justified". In addition, ORR said it had concerns over Network Rail's ability to deliver the huge enhancement and renewal programmes set out in the plan, citing slower than scheduled progress in planning and developing infrastructure projects. It highlighted that over the past year development of a third of projects in the business plan had regressed.

The regulator also announced that from 2009 tougher new controls would be placed on Network Rail covering issues including moving towards a seven-day railway and improvements to punctuality.

"Network Rail will be required to meet new targets on the amount of time the network is available to run train services and, for the first time, specific five-year targets for improvements in reliability for individual train operators," ORR chief executive Bill Emery commented.

ORR's final verdict on Network Rail's business plan will be published in June.

"We expect the company to respond to this challenge," said Emery.