Posted 23rd July 2008 | 1 Comment

Network Rail boss slams Commons committee report on 'huge' bonuses paid to executives

Above: Transport Select Committee chairman Louise Ellman. Home page picture: Network Rail chief executive Iain Coucher

NETWORK Rail chief executive Iain Coucher has hit back strongly at criticism by the Transport Select Committee of big bonuses awarded to top executives in the company.

The "huge financial bonuses" given to Network Rail's senior managers have been criticised as "extraordinary" by MPs.

The Commons Transport Committee has published a blistering report on the way the Network Rail performed during the engineering overruns at Christmas and the New Year.

But the report's conclusion touched a raw nerve at Network Rail, which hit back by saying it did not give credit for its role in clearing up the "mess" left by Railtrack.

Iain Coucher, said: "We are disappointed by the comments in the report which do no reflect the pivotal role Network Rail has played in turning around the railway from the mess inherited from Railtrack.

"The railway is now performing at the highest levels of punctuality ever recorded and it is passengers and freight users who are benefiting from this turnaround.

"Our 34,000 people have worked diligently with our industry partners to deliver a better railway. That joint effort has also delivered for passengers, who have shown their confidence in us and returned to the railway in their millions.

"The cost of running the railway has been cut by over £2 billion under Network Rail's stewardship and investment is at record levels.

"Since New Year we have invested over £2 billion in thousands of projects across the country applying the lessons from the unacceptable overruns at New Year.

"These are the results of a successful company and we are determined to continue with our job to build a bigger and better railway." 

The company announced earlier this year that it had taken a number of action since the New Year overruns, including bringing in more specialist engineers and creating military style command posts on major projects.

The Committee said the company had announced bonuses for staff totalling £55 million for the financial year to April 2008, including £305,000 for Mr Coucher.

Yet this was the "year in which Network Rail was awarded the biggest fine ever awarded for licence breach as a consequence of the New Year overruns".

The report concludes: "It is quite extraordinary for Network Rail to reward its senior managers with huge financial bonuses in a year where passengers have been humiliated and inconvenienced by three major engineering fiascos, where an entire catalogue of management failings has been laid bare for all to see, and where a record fine has been imposed for breach of the Network Licence.

"It is a gesture which adds insult to injury for the long-suffering passengers who have had to struggle with the consequences of the company's failings.

"If Network Rail's members cannot, or will not challenge and block such a move, they are not a body worth having."

The report says the festive season overruns "were quite simply unacceptable" and the Office of Rail Regulation's "careful analysis of events exposes serious management failures".

It adds: "Much excellent work is done by a large workforce of good and dedicated staff at Network Rail, but the lack of clear procedures, consistency, communication and management controls combine to undermine all these undoubted achievements."

The MPs note the similarities between the Portsmouth overrun in 2007 and those at London Liverpool Street and Glasgow Shields Junction at New Year 2007-08.

"The lack of discernable improvement in the intervening 12 months, despite the imposition of a significant fine for the Portsmouth overrun, is a clear indication that either Network Rail's management has failed to act effectively, or that their actions have not filtered down to the operational level."

The report says it is surprising Network Rail does not include penalty clauses in its key contracts as a matter of course, and suggests it re-balances the distribution of risks between itself and its contractors as a matter of urgency.

But MPs were "not inspired" by Mr Coucher's claim that contractors' main incentive to carry out projects on time and on budget is the threat of failing to win further contracts.

"We remain to be convinced that Network Rail is any more cautious in handing out contracts to companies with a history of failure than other areas of the public sector," the report finds.

"We conclude that the threat of future exclusion is an insufficient spur to effective discharge of contracts."

The MPs say communication within Network Rail, as well as with train operators, is "seriously deficient" and has serious consequences for passengers.

And they fear the "lack of a sense of urgency" shown by Network Rail chairman Sir Ian McAllister when he appeared before the Committee "is symptomatic of widespread complacency" within the organisation.

"The Government along with the ORR must ensure that the risk of this kind of overrun occurring again - ever - is minimised.

"The Government, along with the ORR, must monitor closely the progress made by Network Rail over the next year, and examine what structural changes might be required to ensure that Network Rail is capable of managing its projects effectively and consistently."

The report also said Network Rail should bring all strategic resources, such as overhead line engineering staff, back in-house.

Committee chairman Louise Ellman said the management of the New Year works had "provided evidence of flawed management of teams and of contractors, including the dubious practice of self-certification".

Labour's Lord Snape, a former railwayman, added: "There is something wrong in the governance of Network Rail where despite the dislocation, particularly to the West Coast mainline every weekend and right through the forthcoming holiday season, Network Rail's chief executive and some of their directors are paid bonuses that quite frankly many of us would feel are obscene."

Government Minister Lord Bassam said changes to Network Rail's' corporate governance were "matters for its board and members, not for Government".

The Government had to "observe a proper distance" and any attempt to micro-manage Network Rail would be a "profound mistake".

Reader Comments:

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  • David Marshall, Southport, United Kingdom

    I find Lord Bassam's comments extrordinary about not micro managing Net Work Rail when effectively they are already doing this with the train operators
    by stipulating service levels etc when TOC's should be allowed to make decisions based on passenger requirements. one rule for NR and another for the TOCs?