Network Rail last week submitted a formal response to the Office of Rail Regulation's draft findings, published in June, from its five-yearly review of the railtrack company's funding.

In the 400-page response, published yesterday, Network Rail said ORR's conclusions about the efficiency and costs savings it could make were unrealistic, lacking in transparency, inconsistent and flawed.

ORR's draft findings suggested that Network Rail be given a budget of £27.8bn, 11 per cent less than the £31bn the company said it needed to operate, maintain and improve the rail network in the five years from April.

While Network Rail has made some concessions, saying it could trim £800m from its initial forecasts, it maintained that another £1bn for expansion projects might have to be raised from alternative funding sources. "The remaining £1bn shortfall, mainly attributed to very aggressive efficiency targets, is currently unrealistic. It is not the quantum of the targets but the proposed speed at which they are expected to be delivered."

Network Rail said ORR had assumed it could achieve annual savings of 3.5 per cent and 5 per cent in operating and maintenance costs respectively over the five-year period. But the company was unable to make significant annual savings in insurance, pensions and signaller costs, accounting for 40 per cent of operating costs.

"Reducing costs in line with ORR's draft determinations would require annual savings of over 7 per cent in other areas, which is double the overall rate assumed by ORR. It has given no evidence to suggest that this is realistic. It is also out of line with assumptions made by other regulators."

ORR must publish its final budget for Network Rail by the last day of October. If it is rejected by Network Rail, it can take the matter to the Competition Commission.

"We believe that the scale of the [improvement] gap identified by ORR lacks credibility," Network Rail said.