The report by PwC, commissioned by members of Network Rail, examines corporate governance of the unusually-structured company, which is limited by government guarantee and has 104 members instead of shareholders. The members have no financial interest in the company but are meant to protect the well-being of the rail system.

PwC interviewed members, many of whom are drawn from the rail industry, and other industry figures for the report. Referring to the targets set by the Office of Rail Regulation, the report says: "A common view among the stakeholders who participated in the interview programme is that the board of Network Rail is too focused on meeting the ORR targets."

Respondents tended to think the board should take a more holistic approach, it goes on.

The report, which Network Rail has declined to publish, reflects long-running concerns over the best means to ensure Network Rail is held to account for its operation of the rail network, given its lack of conventional shareholders.

The company, which is technically in the private sector, took over the network in 2002 after the collapse of Railtrack, its stock market-listed predecessor. The ORR has set the company tough targets, reflected in management's bonuses, in an effort to recreate the kind of pressure normal shareholders would exert.

The PwC report was commissioned after a series of engineering overruns during the 2007-08 new year period that raised questions about the company's governance. The report says understanding of the company's corporate governance arrangements is poor and that members are unsure of their role.

Decision-making could be more effective if the number of members were reduced to a about 30, if some were paid to improve attendance and if more secretarial and analytical support were provided, to help members to follow the company's performance in more detail.

Network Rail denied that the company was overly focused on the ORR targets.

"We believe we have a bigger purpose to serve," it said.

See also:

Network Rail urged to publish damning report on line delays

Guardian online: 2 March 2009
Nicholas Watt, chief political correspondent

Company accused of tolerating 'systematic weaknesses'

Network Rail was today urged to publish a secret report which accuses the not-for-profit company of tolerating "systematic weaknesses" after the west coast mainline was severely disrupted last year.

The Cooperative party, which launched the People's Rail group to campaign for greater openness, accused Network Rail of adopting a "Basil Fawlty" approach to management and of suppressing the critical report.

Network Rail came under fire today after the Guardian revealed that it is refusing to publish a secret report by PricewaterhouseCoopers into its corporate governance. This reveals that Network Rail regarded the disruption to the west coast mainline last year as a "trivial" matter that should not have led to a fine.

Michael Stephenson, the general secretary of the Cooperative party, told the Guardian: "The evidence compiled by PWC for this report reveals an organisation imbued with the Basil Fawlty school of customer relations: 'This rail system would run much better if it wasn't for the passengers.'

"Network Rail's determination to suppress this evidence further vindicates the People's Rail campaign for passengers and the public to get real control over their rail network."

Mark Lazarowicz, the Labour MP who chairs the Cooperative parliamentary group, has written to Sir Ian McAllister, Network Rail's chairman, to demand the publication of the PWC report. He told McAllister: "I understand this report has now been completed but you have decided not to make it public. Further, I understand your organisation has no plans to do so.

"We find this situation unacceptable given the enormous public interest in this issue and the overwhelming importance of the needs of the travelling public in having an effective and accountable rail system. The suppression of this report is clear evidence of the gross failings in accountability of Network Rail and the corporate governance structure of the organisation."

Louise Elllman, the Labour chair of the Commons transport committee, said: "We must be assured that Network Rail will take this report and its criticisms seriously and change the way it is run. It should be published. It is absolutely essential that Network Rail improves its efficiency if we are going to get value for money in difficult circumstances."

Their comments came after Network Rail went to extraordinary lengths to suppress the PWC report, which was commissioned after a vote at its AGM last year amid fears that it had become unaccountable. To deter leaks, numbered copies of the report were sent to its members, who act as proxy shareholders, with a warning that it was confidential.

But the Guardian can reveal the report's key findings:

• The Office of Rail Regulation (ORR) had deep concerns about the disruption to the west coast mainline service over the 2008 new year. Thousands of passengers were stranded, prompting a £14m fine on Network Rail by the ORR. The ORR told the report's authors: "We have concerns as to the inconsistency of the Network Rail board's response to some of the regulatory interventions, specifically the 2007-08 new year overruns, where they responded on one level to disagree that there had been a breach, on another level that it had been a trivial breach and that even if there was a breach that a fine was inappropriate ... They took a whole series of positions."

• Sir Ian McAllister, chairman of Network Rail, is deeply sceptical about the £16bn Crossrail project, a scheme to link east and west London. One unnamed senior figure told the report's authors: "The chairman told me that he needs Crossrail like a hole in the head."

• Network Rail has packed its board with second-rate non-executive directors. The report says: "They are perceived to be weak and ineffective at carrying out their role of challenging the board."

Network Rail, whose £20bn debts are guaranteed by the taxpayer, is highly sensitive about the report. Stuart McVernon, its head of public affairs, warned members who were sent copies: "We and the members' review group would like to remind all members that ... the report is still being distributed as a confidential report and is individually numbered accordingly."

The report was commissioned after Network Rail's 101 members won a resolution at last July's AGM to undertake a review of its corporate governance.

A spokesman for Network Rail said: "Network Rail welcomes the members' review group's suggestions on further developments to Network Rail's corporate governance and its membership. The company will now work closely with its members in considering the way forward including reaching a common understanding of the detail of the proposals and the level of support for them."