Network Rail emerges from the ashes of Railtrack

Although the company has since embarked on a massive capital expenditure programme, the country's rail system continues to be dogged by delays and track closures, much to the chagrin of passengers.

David Higgins, the London 2012 head who is to become the new chief executive of Network Rail, has vowed to completely overhaul the organisation's controversial "command and control" working style, cut costs for running the UK's railways and introduce a collaborative and open culture.

In a private memo circulated to the organisation's staff, Mr Higgins, the Olympic Delivery Authority's (ODA) CEO, claims that "train performance is better than ever," but adds: "Our goal needs to be that passengers and customers take punctuality for granted and rely on us to deliver the timetable.

"Rightly, the company is also under pressure to reduce the costs of running the railway. This will not be easy and the way we set about the challenge will be crucial to its success.

"I want to create an environment at Network Rail, as I have at the ODA, where there is a strong, open, 'can-do culture': a culture where all are motivated and empowered to feel they can get results and make a difference. I will bring this approach to Network Rail from my first day."

The comments come as Network Rail's chairman, Rick Haythornthwaite, claims the Australian's arrival will be a "seminal moment" in the development of the company and in the UK rail industry as a whole.

Network Rail has been heavily criticised for a macho industrial style, with claims that a bullying culture exists and separate allegations of under-reporting of accidents. The Transport Secretary, Philip Hammond, has questioned the appropriateness of six senior executives sharing "performance bonuses" of £2.25m while Iain Coucher, the outgoing chief executive who took home £1.2m last year, has been accused of enjoying a "James Bond lifestyle".

His package, the most lucrative enjoyed by any executive at a publicly-funded UK company, included a £348,000 bonus and a £300,000 long-term incentive payment. He also has a company Aston Martin, funded by his Network Rail car allowance.

However, Mr Haythornthwaite said in an interview with The Sunday Telegraph that he had thoroughly investigated all expense abuse allegations that had been brought to him and had found no impropriety.

Asked about the bullying allegations, he said: "I do not know whether there is a bulllying culture or not." But he added: "The job the team has done up to this point has been done very deftly but through a very tightly-controlled command and control approach which was absolutely necessary for what has happened in the past. We have reached the limits of improvement given that style, approach and culture and there's a recognition internally and externally that now is the time to change.

"Add to that the challenges to deliver better service and greater capacity at a significantly lower cost and it all requires a level of collaboration and an approach in the industry which is fundamentally different to where we are today."

Mr Haythornthwaite said Network Rail considered 70 candidates for CEO from a list of 500 put forward by headhunters Egon Zehnder. The board had been impressed with Mr Higgins' achievement in bringing in Europe's biggest construction project at the Olympic site on time and to budget. "We were looking for someone who would be naturally comfortable with much higher levels of transparency than this company has been known for in the past," he said.

"We have to engage our front-line workforce at a much deeper level than we do today. We need to be able to ally and partner with our train operating company customers and freight customers to a far greater extent than we have in the past. We need to align incentives and share risk and reward to a far greater level.

"Iain has recognised that he is not the right guy for the next phase and is moving on. David Higgins' very arrival will signal the change that is so critical to Network Rail and our approach to the industry."

Mr Haythornthwaite said the proportion of trains arriving on time has risen from 78pc to 91.5pc since 2003, while over the past 10 years the number of passengers has increased by 50pc to 1.3bn per year. Freight is up by 60pc. An average of 24,581 trains now run each day – 50pc more than used to under British Rail in the late 1980s and early 1990s.

During its current five-year "control period" up to 2014, Network Rail plans to invest £34.6bn in the rail network, spending £22.7bn on operations, maintenance and renewal and £11.7bn on adding capacity. Some £5.5bn is being spent increasing capacity on the Thameslink line, £600m on rebuilding Birmingham New Street, the busiest station outside London, and £850m on a new station, track flyover, remodelling and resignalling at the biggest bottleneck on the Great Western line at Reading.

Some £500m is also being spent on refurbishing Kings Cross station and building a new concourse, while a new line between Airdrie and Bathgate in Scotland is costing £300m and there is a £60m refurbishment of part of Paddington station in London.

Network Rail delivered efficiency improvements of 27pc in its last five-year period and has to achieve 22pc in the current period.

This year, the Department of Transport is contributing £3.75bn to Network Rail's total income of £5.94bn but fresh cuts to Britain's railways are expected to be announced in the Government's Comprehensive Spending Review on October 20. Initial findings from Sir Roy McNulty's report into the rail industry's costs are scheduled to be published before the end of this year.

"The debate that's taking place with the coalition Government right now is very intense," said Mr Haythornthwaite. "There's a recognition that a great deal has been achieved over the last few years in terms of efficiency but this is still a partially subsidised railway and there's a general belief to which we subscribe that we are still less efficient than other benchmark railways in the world."