UK - Ministers urge rail chiefs to waive £1m bonus

[John Ashworth]

Ministers urge rail chiefs to give up £1m bonuses

From The Times
April 14, 2009

Ben Webster, Transport Correspondent

The Government is to put pressure on Network Rail to reduce or cancel bonuses of more than £1 million that are about to be paid to its directors.

Ministers are planning to make a private approach to Iain Coucher, the chief executive, to advise him that the bonuses would cause a public outcry and could do lasting damage to the reputation of Network Rail.

They may also threaten to reform the governance of the company unless Mr Coucher makes substantial cuts in bonuses voluntarily.

The Government created Network Rail in 2002 to replace Railtrack and approved the bonus system. But Geoff Hoon, the Transport Secretary, is concerned that the public will blame the Government if the bonuses, of between £300,000 and £500,000 per director, are paid in full.

While the Government has no direct powers over Network Rail, it is funded mainly by public money and its £20 billion of debt is guaranteed by the taxpayer.

Last month, Mr Coucher defended the bonus scheme and said that it would be wrong to compare the company and its directors with bankers and car manufacturers that have had to be bailed out by the taxpayer.

“The comparisons with Fred Goodwin and car manufacturers are completely wrong,” he said. “Every time Network Rail has paid a bonus it has only been on the back of success. We have saved the taxpayer billions of pounds and driven up the number of people using the railway.”

He refused to say whether he would volunteer to have his bonus reduced.

Last year Mr Coucher received a total of £1.24 million, including salary of £539,000 and two bonuses together worth £511,000. Peter Henderson, the infrastructure director, received £917,000, including bonuses of £372,000. Ron Henderson, the finance director, received £873,000, including bonuses of £362,000.

Network Rail claims that it is necessary to pay bonuses and high salaries, comparable to pay rates in FTSE companies, to attract high-calibre executives. However, its directors are not subject to the same competitive pressures because they have a monopoly of Britain’s tracks and stations. While more than 90 per cent of trains were on time in the past year, Network Rail has mismanaged some key engineering works and made little progress towards its long-standing pledge to run a seven-day railway with no replacement buses.

Last month, Lord Adonis, the Rail Minister, wrote to Mr Coucher to complain that he had closed both lines between London and Scotland — the West Coast and East Coast Main Lines — at the same time, giving passengers no alternative route.

Lord Adonis wants to give the impression that he is being tough with Network Rail because the Conservatives have accused the Government of creating an unaccountable monopoly. They would give the rail regulator the power to veto bonuses and appoint a supervisory board of passenger and train company representatives to scrutinise Network Rail’s decisions.

Mr Coucher is paid more than twice as much as Peter Hendy, the Commissioner of Transport for London, who has a similar budget and is responsible for Tube and bus systems that carry more passengers than Network Rail.

Boris Johnson, the Mayor of London, has sharply cut the bonuses of Mr Hendy and other senior Transport for London officials. A Whitehall source said: “We can’t just order a cut as Boris can and therefore we have to use a more subtle form of pressure.”