There is still "a very long way to go" before significant rail improvements are made, the Rail Passengers Council has said.

In its annual report, the organisation warned that the most difficult issue for Network Rail involves reducing the running costs of the service.

"The greatest challenge for Network Rail is to bring under control the spiralling costs of work on the railway," said chairman Stewart Francis.

He added that reducing costs is vital "if we are to see a growing railway rather than a diminishing one".

The company replaced Railtrack after it was placed in administration by former transport secretary Stephen Byers.

The RPC suggests that Network Rail faces an "immense challenge" in restoring public faith in the system.

"It is clear that in the transition from a private shareholder-owned company to the new structure, a new ethos and new ethics are called for to help build passenger faith in the network," said Francis.

He said it was "unacceptable" that it may take until 2006 for performance levels to reach those achieved before the October 2000 Hatfield crash.

Questions also remained "worryingly unanswered" about the 2002 Potters Bar accident.

Passengers' experiences on the rail network varied widely across the country, according to the Rail Passengers Council's report.

Those in Scotland, and in East, North West and West England saw improvements, as well as in London.

However, in Wales, the Midlands and the South of England reported failings.

Francis refuted claims that only six per cent of journeys were taken by train.

"Every day, half a million passengers use the railways to commute to work in London alone, representing 46 per cent of all daily travel into the capital," he said.

"Nearly 20 per cent of all longer-distance journeys are made by rail. Where rail competes, it plays a vital role and we need to recognise the importance of the railways to the country and to people's lives when making the case for sustained investment."

"Last year I said that I remain optimistic - despite some setbacks, I still am," he concluded.

"Major change on the railways takes a long time but the rail industry, with firm strategic direction from the Strategic Rail Authority and a real effort to develop a passenger-centred railway based on strong regional consultation, can now focus on delivering what passengers want: a safe, reliable, and affordable railway."