The Department for Transport has told First Group that it must pay for punctuality and customer service improvements at its Great Western franchise which will cost at least £60m.

A Remedial Plan to address issues which have contributed to FGW's long standing position as the country's least punctual train operator has been ordered by transport secretary Ruth Kelly and is likely to cost in excess of £30m. In addition, First has agreed to fund customer service improvements worth a further £29m. In return, the DfT has agreed to revise FGW's performance targets until August 2009, to give the company breathing space to recover.

"The performance of First Great Western has fallen persistently short of customersÕ expectations and has been unacceptable to both passengers and government," Kelly said in a statement to parliament. "The measures I have announced today will lead to a reduction in train cancellations and also provide a substantial package of benefits to First Great WesternÕs customers."

She added that failure to comply with measures and performance targets in the Remedial Plan could lead to First being stripped of its franchise.

"Material non-compliance would be a default of the franchise agreement, which could lead to the government terminating First Great WesternÕs franchise," Kelly said.

The announcement follows over a year of sustained criticism from passenger groups at the poor quality of FGW's service and at ministers' apparent inability to demand improvements. However, Kelly was able to take action following the conclusion of an investigation which revealed that FGW had breached its franchise agreement by failing to meet required performance standards during the second half of last year.

The breach came to light after FGW informed the DfT voluntarily that it had misreported service cancellation figures last September. Kelly said subsequent investigations by First revealed that it had "breached the franchise agreement from August to December 2007 in respect of cancellations", and that misreporting also constituted a breach.

The Remedial Plan to improve performance requires First to recruit additional guards, drivers and technicians, provide an additional High Speed Train to improve operating resilience, and make fleet and depot improvements. The additional staffing element alone will cost an extra £3-4m/year over the remaining eight years of the FGW franchise.

Meanwhile, the passenger benefit package First agreed with the DfT will attempt to deal with several longstanding passenger concerns.

First will address the notorious overcrowding on Bristol area services by increasing capacity by 40% on the Cardiff-Portsmouth route. This will be achieved by leasing five additional Class 150 units freeing up additional Class 158 trains for Cardiff-Portsmouth.

Meanwhile, investment in station customer information screens will be increased by £7m, investment in the Thames Valley fleet will be increased £5m, including doubling the amount previously allocated to refurbishment, and a £4m enhanced customer service training programme will be set up.

In addition, First will make an extra 500,000 cut price tickets available for off-peak travel to popular destinations over the next year and offer further improvements to its improved Passenger Charter by increasing compensation paid for delays by 50% in 2009. The company has previously announced that compensation will be doubled this year because of continual poor punctuality and errors which resulted in passengers being overcharged for season tickets in the Thames Valley.

First chief executive Moir Lockhead said that aspects of the Remedial Plan had been introduced prior to KellyÕs announcement and were having a positive effect.

"We are encouraged that during January 2008 performance improved and cancellations were at their lowest level for 18 months and this trend has continued during February," he said.

A First Group spokesman told Transit that in January and February FGW punctuality was 85% compared to 79% in December when he said operating conditions had been similar. FGW is no longer the least punctual TOC over the past year, having overtaken Intercity East Coast.