Network Rail has given warning that the record £14 million fine imposed today by the Office of the Rail Regulator (ORR) for non-performance will have a "material impact" on bonuses (writes Angela Jameson)

Iain Coucher, the chief executive of the rail infrastructure group, declined to give further details, but said that everyone would be hit.

Mr Coucher said that the bonuses would be affected so that "every single person inside Network Rail gets the message that no overrun will be tolerated".

The regulator has said that it intends to write to the Network Rail remuneration committee to ask it to take special account of Network Rail's breach of its licensing conditions when it considers bonuses

The move comes as more Virgin Rail passengers face fresh rail misery this Easter as Network Rail closes the West Coast Main Line south of Birmingham for four days over the Bank Holiday weekend.

No rail services will run in or out of London Euston from Good Friday to Bank Holiday Monday.

Passengers who wish to travel from the capital will have to take a bus replacement service to Coventry or travel from Marylebone station to Birmingham.

To add to the rail misery, Easter Sunday services on the East Coast Main Line — the other main route to Scotland through Yorkshire and the North East — will be subject to significant delays as trains are diverted after Doncaster, through Leeds.

Nor will the end of the Easter Bank Holiday see a return to normal services.

Network Rail has said that there will be a greatly reduced service into Euston, with longer journey times, on Tuesday, March 25, as trains will have to be diverted through the West Midlands.

Network Rail, which is upgrading the line to make it possible to introduce a new timetable with faster journey times in December, has also confirmed that it will have to close sections of the line for 315 hours — as many as 13 weekends — this summer to finish engineering works.

The prospect of Easter rail misery will also disappoint passenger groups that today welcomed moves by the rail regulator to take action against Network Rail after the delays at Rugby and Liverpool Street station in January, which it said were "totally unacceptable" and part of a "continuing breach by the company of its licence".

The regulator said in a statement this morning that the rail infrastructure group had jeopardised the reputation of the railway through its weakness in planning engineering projects and its failure to communicate properly within the company and with train operators.

And the watchdog also criticised the rail infrastructure group for not having a "robust plan" to complete improvements to the West Coast Main Line, in time to make changes to the timetable in December 2008.

Bill Emery, the chief executive of the ORR, said: "It is quite clear from our thorough investigation that Network Rail is failing to manage major engineering work consistently well as it should.

"This is due particularly to weaknesses in the company's planning, risk assessment and site management of projects as well as to failures of communication within the company and with train operators."

Network Rail has been ordered to produce a plan by the end of March detailing how it intends to complete the West Coast Main Line improvements in the next nine months.

The project, which is understood to be delayed, is likely to cause repeated shutdowns for engineering work between now and December.

The fine on Network Rail, the biggest since it was fined £2.4 million for allowing engineering works to overrun at Portsmouth in 2006, comes on the day that Sir Ian McAllister, the chairman of the infrastructure group, collects his knighthood from Buckingham Palace.

Sir Ian has been heavily criticised for staying at home during the new year chaos. He told a newspaper that he would only get in the way if he went into the office.

The disruption to services comes only two months after Mr Coucher told The Times that trains would run 365 days a year and that it would find ways of restricting its engineering work to eight-hour stretches over nights so that lines would not have to be closed over weekends.

Mr Coucher said: "Following the new year, we have listened to passengers and those who represent them and now our planning and preparation is more robust than ever.

"Each project is an immense engineering challenge in its own right, and Network Rail is absolutely determined to deliver a safe and reliable railway back to passengers and freight users at the promised time."

Over the four-day holiday the rail infrastructure group has said that it will deliver 300,000 hours of engineering work.

About 6,000 engineers are expected to be employed around the clock on the projects.

However, the Easter disruption will pose a crucial test of Network Rail's planning and engineering competence and all eyes will be fixed on whether they are able to complete the planned work on time.

Commenting on the ORR's fine, Mr Coucher said: “We are clear that the ORR has said that what happened at the new year cannot happen again.

"We agree and accept the findings in the report. We will make changes in the way we plan and manage future work on the railways."

The rail infrastructure boss, who took over from John Armitt last year, added that Network Rail had already made changes since the new year to bring in more specialist engineers.

In particular it has said that it will reduce its reliance on agency staff, specifically in overhead line engineers.

The shortage of overhead line engineers during the Christmas and new year period was the main reason for the rail group's inability to complete engineering work at Rugby on time.

Network Rail told the Transport Select Committee that some days only 50 per cent of the overhead line engineers who were hired turned up for work.

Mr Coucher said: “We are now focused on delivering our improvement programme for Easter and have already begun informing passengers about the works taking place.

"We will work with the train operating companies and National Rail Enquiries over the next few weeks to get the message out so passengers will be able to check their journeys before they travel."

Network Rail has said that it will accept the fine but has suggested that the money, which goes to the Department for Transport, should be used to deliver additional and concrete benefits for passengers.

The ORR’s report said today that at Rugby, while Network Rail had good planning and project management processes in place, it failed to ensure that site management was adequate.

This meant that at key times it was unaware of the extent of the problems on the ground, unable to minimise their impact and unable to provide reliable information to passengers and train operators.

At Liverpool Street it failed to conduct effective assessment of the risks involved before beginning work and failed to ensure that site management was adequate, leading to the same consequences as at Rugby.

At Shields Junction, Network Rail failed to conduct effective assessment of the risks involved before beginning work, which meant that it failed to design and install the signalling equipment effectively and efficiently.

Norman Baker, the Liberal Democrat Transport spokesman, said: "This sounds like a huge fine, but it is a pointless one. All it means is Network Rail will have £14 million less to invest in railways, and the Chancellor £14 million more in his coffers. This is actually bad news for passengers.“

He added that the only sensible option was to penalise directors through their bonuses.

Politicians and transport unions have criticised the fining system, arguing that the not-for-dividend Network Rail, which has more than 100 members made up of stakeholders rather than shareholders, is effectively a public company and, therefore, taxpayers merely pick up the fine.

A spokesman for Virgin Trains, the train operator that was most affected by the disruption at Rugby over the New Year said that travelling on the West Coast Main Line was going to be extremely difficult for its passengers this year.

"We think it is an extraordinarily tight timetable to get the work completed. But now we have a month to sit down and agree a timetable with Network Rail. What we really want is certainty and guarantees that their timetable is workable," the spokesman said.

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