MPs blast 'unacceptable' rail chiefs' bonuses

Published on Monday 11 July 2011 15:45

The big bonuses enjoyed by Network Rail (NR) bosses were "simply unacceptable", a report by MPs said yesterday.

The level of executives' pay-outs should be something taken into account by rail regulators when assessing NR's performance, the report from the House of Commons public accounts committee said.

MPs were unhappy with the fact that NR had fallen short of efficiency targets for the five years to 2008-9.

They said: "The high level of performance pay and bonuses enjoyed by previous rail executives is simply unacceptable given their inability to meet the efficiency target."

Launching the report yesterday, committee chairman Margaret Hodge said: "The underperformance of NR makes it all the more unacceptable that its senior managers should enjoy excessive bonus and performance payments."

The committee said the Office of Rail Regulation (ORR) should put in place a more robust system for monitoring NR's performance, and the Department for Transport should review the ORR's powers.

The report said:

n?The sanctions and incentives for NR, in particular penalties and bonuses, have not been effective in driving the company's efficiency.

n?There is doubt whether the ORR is able to exert sufficient pressure on NR's performance.

n?There are concerns that the main sanction of fines is just taking money away from investment in the railway.

n?The relationship between the organisations involved in reviewing NR's efficiency "may be too cosy".

n?The complex structure of the rail industry creates inefficiencies and risk to value for money.

Ms Hodge said: "We doubt whether the ORR can put effective pressure on NR to improve its performance.

"Britain needs a (rail] regulator with teeth, who can ensure proper value for money for both the taxpayer and farepayer.

"Our railways cost up to 40 per cent more than our European equivalent operators" She went on: "We are not convinced that NR's plans to defer about 1 billion of renewal work, such as to tracks and signalling, over five years will result in genuine efficiency savings. The regulator (the ORR] must obtain evidence that putting off maintenance work on this scale is efficient, sustainable and safe."

The report said that NR had told the committee that punctuality could not be improved to 95 per cent in five years' time without making trade-offs with efficiency and capacity.

Bob Crow, general secretary of the RMT union, said: "This report confirms everything we have been saying about the dangers of deferring and delaying safety-critical rail renewals."

In 2007-8, former chief executive Iain Coucher received bonuses worth 511,000.In 2008-09, he announced he was not taking his annual bonus but still received 150,000 as part of a three-year rolling management incentive plan.

In 2008-9, two of his fellow top executives received bonuses of more than 300,000 each, while in 2009-10, Mr Coucher's bonus package came to 641,000.

Earlier this year, NR announced that its executive directors would not be receiving any annual bonuses for 2010-11.