Network Rail bonuses 'unacceptable'

The level of executives' bonuses 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 2008/09.

The report 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 today, the committee's chairman Margaret Hodge MP 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 went on: "As part of this, the Regulator's (ORR) assessment of NR's performance should directly inform the level of bonuses paid to its executives."

The report said:

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

• There is doubt whether the ORR is able to exert sufficient pressure on NR's performance;

• There are concerns that the main sanction of fines is just taking money away from investment in the railway;

• The relationship between the organisations involved in reviewing NR's efficiency "may be too cosy";

• 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. Everybody needs to focus on improving the efficiency of British railways."

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.

Ms Hodge said: "Safety must not be traded off against other outcomes.

But with growing demand for more trains, limited capacity and less maintenance, trade-offs between efficiency, capacity and punctuality must be explicit."