Sort it out, Mr Darling

The cash crisis facing the railways has been baldly exposed by yesterday's announcement from Tom Winsor, the rail regulator, that Network Rail should drastically cut back spending. This has not only sent shivers down the spines of passengers, already fed up with a declining service - it also raises a fundamental question about who runs the railways.

Britain's railways have been a state of limbo following the effective renationalisation of Railtrack and its transformation into the not-for-profit Network Rail. The new dawn the Government promised has been very short-lived.

We now have the bizarre sight of a regulator, rather than the Treasury, determining how much subsidy an effectively Government-owned company should be allowed to have. It is a unique situation and, by taking such a firm stance, Winsor has demonstrated that he, rather than the Strategic Rail Authority of the Department of Transport, appears to be in charge of the railways.

And Winsor is going to be a skinflint, trying to make sure that money is not wasted. While that is a good thing, passengers may well suffer as a consequence.

There is no doubt that there is a lot of waste in the industry. The companies that carry out the maintenance have generous contractual arrangements which allow them to determine what work should be done and then charge it all to Network Rail.

They have also become adept at playing the game. One, realising that payments started once the workforce arrived at the site, gave them all motorbikes to get there quicker, even though they could not start work until the lorries with the equipment arrived on site much later.

But the scale of the cutbacks may well go beyond simply finding such obvious sources of waste. Winsor has the power to determine how much Network Rail should be allowed to spend on maintenance, operations and renewal each year and he has decided that it should be nearer £4 billion than the £6 billion which had been set out earlier this year in the company's business plan.

Such a dramatic cut, to be made over five years, will prove a tough target for Network Rail to meet. It raises concerns about what will happen if it fails to do so.

Passengers will understandably be worried that services will have to be cut back or, worse, that safety might be compromised. On safety, there should be little worry. The mistakes of the Hatfield crash, where a cracked rail was neglected for so long that it broke under a speeding train, are unlikely to be repeated.

If Network Rail cannot afford to fix a section of line, then the traditional solution of a speed restriction will be imposed.

But on reduced services and other cutbacks, passengers have more to fear. Indeed, Winsor, a corporate lawyer with a sharpness of mind which is frequently matched by his tongue, has stressed that it is in his power to determine whether the country can afford to keep the present size of the rail network or whether there should be cutbacks.

This is very strange. Four years ago, the Government created the Strategic Rail Authority, which ministers said would not only allocate the money available to the train operators to run services but also take a long term - indeed "strategic" - view of what rail services should be provided and where investment for improvements would be targeted. Last year, the SRA extended its role when Network Rail was established as the replacement for the failed experiment of having a conventional profit-maximising firm, Railtrack, at the heart of the railways.

Much of the money available for railway maintenance and renewal was channelled through the SRA to Network Rail and the SRA was supposed to determine investment priorities.

Yesterday's announcement suggests that the SRA is not the all-powerful body the Government claimed it was. Much to the fury of Richard Bowker, the head of the SRA and that of Virgin Trains, the operator on the West Coast Main Line, Winsor has said that the SRA's recently published strategy for the West Coast is misplaced and the £10 billion investment programme should be reined back.

Bowker is said to be furious, and this is likely to be a precursor to a fierce row over the future of the project.

In some respects, Winsor is right to suggest that spending north of Crewe on the West

Coast Line should be postponed. A high proportion of the investment money available to Network Rail is being poured into a project which will benefit a comparatively small proportion of rail passengers. Spending equivalent sums on improving services for London commuters would be better value for money.

But it is strange that the regulator is second-guessing how a state-controlled company, Network Rail, should invest in the rail industry, irrespective of the wishes of the body set up by the Government to determine these priorities. One could not imagine a more cumbersome or muddled way to run a public service.

In the old days, British Rail used to ask for money for investment from the Department of Transport, which would then put its case to the Treasury. It might not have been a perfect structure, but it delivered a reasonable railway at a relatively low price.

Without getting nostalgic, BR was a lot better than its reputation suggests. It ran nine out of 10 trains on time (compared with eight today) and did so for about a quarter of the subsidy currently being paid to the privatised industry. Moreover, this process was transparent and was set out annually in the Government's accounts.

Now, we have a much more complex process taking place through proxy. Meanwhile, those truly responsible for the state of the railways, the politicians, can pretend that they are not involved, which means no one is accountable. When, at the end of this year, Winsor comes to his final decision over how much Network Rail should be allowed to spend, he will be giving all the various players - the SRA, the train operators, Network Rail and Government ministers - the opportunity to blame him or each other for the ailing state of the railways.

Alistair Darling, the Transport Secretary, should not hide behind these various squabbling organisations whose very existence is testimony to his failure to get to grips with the problem.

He knows that ultimately it is the Government which is responsible for the mess and it is he who has the power to do something about it. He must simplify the structure that is responsible for much of the waste of resources Winsor has identified.

Come clean, Mr Darling: the buck stops with you.