After a damning report from MPs in which the bonuses of NR bosses were described as extraordinary, given passengers had been "humiliated and inconvenienced" by engineering overruns, the issue of NR's future was raised in the second chamber.

Lord Foulkes told peers that the targets and governance of NR could not be right when executives received such huge pay top-ups while passengers suffered "so much misery and inconvenience".

NR's top three directors are to get annual bonuses in excess of £200,000 each with Iain Coucher, its chief executive, receiving £305,000. Thousands of rail passengers have been delayed by the engineering overruns at Glasgow Shields junction, Rugby on the West Coast Main Line and at Liverpool Street station in London.

During Lords Questions, Lord Foulkes highlighted the Co-operative Party blueprint for a "people's rail", that NR members themselves had called for a review of how the company was run, and the report by MPs calling for better governance and scrutiny.

He added: "Surely, it's time that the government joined the growing groundswell to give the British people real power over Network Rail."

Lord Bassam of Brighton for the UK Government insisted there was going to be a review of NR governance and pointed out that the Office of Rail Regulation was looking at how the company's licence worked.

On the issue of executive pay, he simply noted that Lord Foulkes had made some "interesting and useful points".

During brief exchanges, it was pointed out from the Conservative front bench that NR, while a private company, had no shareholders, but simply had members and that this was a situation that could be looked at.

Lord Bassam replied that it was a previous Tory government which left "us with the mess of rail privatisation all those years ago and we are still paying the price for that".

He noted that the "people's railway" publication was a useful contribution to the broadening debate.

It was pointed out from the Labour benches that Britain was one of the few countries in the world that did not have state ownership of its railways.

Lord Bassam argued that the UK Government's role was to ensure the right level of investment was going in to improve services and that Britain was now "reaping the benefit", with the numbers travelling by rail up substantially on two years ago.

Lord Snape, the Labour peer and a former railway signalman, said it was "bizarre" to suggest that the governance of NR was somehow nothing to do with the public given that millions of pounds of taxpayers' money was spent on it.

He added: "There is something wrong with the governance of Network Rail when despite the dislocation, particularly to the west coast mainline every weekend and right through the forthcoming holiday season, NR's chief executive and several of their directors are paid bonuses that many of us would feel are obscene."

However, Lord Bassam said there was a difference between government and governance and that for ministers to seek to micromanage things would be a "profound mistake".

Outside the chamber, Lord Foulkes told The Herald that a fundamental review of NR was needed and the Co-operative Party proposal should be considered. "Since the people own the road network, I don't see why we can't own the rail network. The pressure is growing."

In response to the MPs' critical report, Mr Coucher insisted that it did not reflect the pivotal role NR had played in turning round the railway from the mess inherited from Railtrack.

"The railway is now performing at the highest levels of punctuality ever recorded and it is passengers and freight users who are benefiting from this turnaround," he said.