The completion of the £10 billion upgrade of the West Coast mainline has been put in doubt after Network Rail was called on to make major cutbacks.
Tom Winsor, the rail regulator, said the scheme should be deferred for a year in order to save up to £1 billion.
Plans to introduce a 125mph tilting train service between London and Manchester by autumn 2004 will go ahead.
But Mr Winsor said further work on the line, which runs from London to Glasgow, could be delayed or "may not be done".
Mr Winsor also told Network Rail - the successor to Railtrack - to slash billions of pounds from its "exploding" costs before he announces in December how much it can charge rail operators for using its network.
Sir Richard Branson's Virgin Trains, which runs the West Coast service, said it was "deeply concerned" about a further delay to the upgrade of the track.
The company has already had to delay its tilting train project because engineering work has been held up. The costs of the upgrade have also spiralled out of control and are now four times greater than the initial budget of £2.5 billion.
Mr Winsor made his assessment on the basis of an independent consultants' report which was highly critical of Network Rail. It said the company had shown poor organisational skills and that its costs were higher than other rail companies.
The report added that there was a "critical lack of knowledge about the condition of West Coast assets and poor definition of the work required for enhancement schemes".
Mr Winsor said that it should be possible for Network Rail to reduce costs by up to 10 per cent per annum over the next three years.
That would mean that the company would have to cut at least £1 billion from its annual budget.
But even with the cuts, the level of track access charges - what Network Rail can charge rail companies for using the network - was likely to have to go up, Mr Winsor added.
Network Rail said that it already intends to reduce its budget by 30 per cent over the next six years.
It pledged to work with Mr Winsor to "identify the speeds at which these efficiency savings can be made".
Richard Bowker, the chairman of the Strategic Rail Authority, welcomed the "clampdown on costs".
But Chris Green, the chief executive of Virgin Trains, said "stop-go" tactics on the West Coast line should be avoided.
