Network Rail faces "serious challenges" before the management of Britain's track infrastructure delivers a reliable and affordable network, the National Audit Office has concluded.

Publishing a report on the not-for-dividend company, parliament's spending watchdog highlighted a series of areas where concerns remain.

These included the long term incentives in place for delivering value for money, and the need to bring down rail costs.

The NAO said this would require the cooperation of the rest of the industry.  "Network Rail alone cannot bring down costs in the industry," warned the report.

And the watchdog also concluded that questions remain over Network Rail's relationship with the Strategic Rail Authority and the Office of the Rail Regulator.

"The improvements to planning and cost control are to be welcomed. The outlook is certainly better than it was in 2001," said auditor general Sir John Bourn.

"But there are still serious challenges in Network Rail’s own structure and in the rail industry in general which the government must overcome if we are to see a reliable and affordable rail network in the future."

'Making progress'

Responding t the report, transport Secretary Alistair Darling said Network Rail was "making progress in resolving the problems inherited from the disaster that was Railtrack".

"NR has made a good start in reducing costs, and is driving up performance. The government wants to build on this progress as part of the rail review which will be completed in the summer," he said.

The Conservatives warned that more work is needed if the rail industry is to deliver value for money.

"This report illustrates that the decision to pour over £14 million a day into the rail network will in itself not deliver the improvements that passengers should expect," said shadow transport secretary Theresa May.

"Committing yet more taxpayers money, without demanding the necessary efficiency and delivery of service is no answer to the problems on the railways.

"What is clear is that despite the extra cash, punctuality is set to continue to be a major problem for many years to come."

And Liberal Democrat spokesman John Thurso said there was a "desperate need" for lower rail costs.

"So much money is being wasted on consultants and managers that nothing is actually being invested in the future of the railways," he said.

"This advice from the NAO must not be overlooked and should be fed into the government's ongoing rail review.

"We need a simple structure and less waste if Britain is to get the safe, reliable and affordable rail network it deserves."