Bonuses for Network Rail directors could be vetoed by the rail regulator under plans outlined by the Conservatives. They also want to replace the company's panel of 106 members, who act as shareholders, by a body of only 20 with greater powers to scrutinise the operation.

Network Rail's directors would play no role in appointments to the new panel, which would include business leaders from outside the rail industry.

In an interview with The Times, Theresa Villiers, the Shadow Transport Secretary, said that the governance of Network Rail had to be reformed to secure better value for money for taxpayers from the £5 billion annual subsidy to the industry.

She said that the existing incentive arrangements for the directors rewarded failure. Network Rail paid its three executive directors more than £1.2 million in bonuses this year, despite being fined £14 million by the Office of Rail Regulation (ORR) after it failed to reopen tracks for several days over the new year. More than 60,000 passengers a day were disrupted by the over-running engineering works in London, Rugby and Glasgow.

However, Ms Villiers ruled out breaking up Network Rail, the monopoly owner of Britain's track and stations. The not-for-dividend company was created by the Government in 2002 to replace Railtrack.

The Conservatives had considered backing a return to the old system of integrated regional companies running both track and trains, but the idea was scrapped because of fears that it would be unpopular with passengers, who are enjoying the highest level of punctuality since the railways were privatised 12 years ago.

Ms Villiers said: “We would give the regulator power to block or amend the bonuses of senior management of Network Rail where there has been serious failure. At the moment, the only way to penalise [the company] is a fine, which the taxpayer picks up. The end result is less investment in the rail network.”

The last £14 million fine ended back in Treasury coffers, prompting claims that passengers had been penalised twice: by the delays and then by the loss of £14 million that could have been spent upgrading the railway.

Turning to the issue of Network Rail's panel, Ms Villiers said that the Conservatives would prevent the directors from playing any part in the selection of members. At present, members are selected by a three-strong team, themselves appointed by Network Rail's board.

“There will be a much smaller membership, appointed independently. We are talking probably around 20... independent people with heavyweight, serious experience in business. We need a body to which Network Rail is accountable, smaller and more streamlined, and with a much stronger focus on passenger concerns.”

Ms Villiers said that train companies would be invited to bid to undertake small-scale infrastructure upgrades, such as station refurbishments. “Having competition for Network Rail will drive efficiency and value for money.” But Ms Villiers said that Network Rail would continue to have a monopoly over big upgrades. The Conservatives would leave Network Rail's overall responsibility intact for the bigger upgrades: “We have no plans to throw all the cards up in the air and radically restructure.”

A study by the watchdog of rail infrastructure costs in other countries found that Network Rail was much less efficient.

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