UK Network Rail in political row over £2.4bn bonuses

[John Ashworth]

Network Rail in political row over £2.4bn bonuses

Unapologetic state-backed firm told it needs to justify payouts which include £641,000 for outgoing chief executive

* Terry Macalister
* guardian.co.uk, Thursday 24 June 2010 18.28 BST

An unapologetic Network Rail is at the centre of a political row for handing out £2.4m bonuses to senior management in the week the government announced savage public sector cuts.

The biggest winner was the outgoing chief executive Iain Coucher, whose £641,000 bonus bumped his total earnings to £1.45m, a 53% increase on last year, according to the annual report published today.

The Office of Rail Regulation (ORR), which sets Network Rail's level of funding, said the bonuses would have to be justified. They were described as a national scandal by the rail unions while the government was "very disappointed".

Network Rail, which obtains 60% of its funding from the taxpayer, was unapologetic, insisting the rewards were suitable for directors who had rescued the network from the "ashes" of privatisation. The company boasted it had enabled the transport system to be more punctual, safer and handle more passengers.

"Network Rail only rewards success," said Rick Haythornthwaite the chairman. "This is measured against what matters most to passengers – a better railway with more trains on time. On that basis, awards for the past have been earned, are a contractual right and should be paid."

The company's asset management director, Peter Henderson, obtained nearly £243,000 annual bonus plus a further £210,000 from the incentive scheme. His basic salary was worth £440,000, while Coucher's was £613,000 with pension rights on top.

Network Rail, whose pre-tax profits slumped by more than half to £284m, pointed out it had frozen salary levels and had suspended the bonus scheme while a review of pay is underway.

The ORR called earlier this year for "clear evidence" to justify any bonuses having criticised parts of the operator's performance – including the death of three railway workers in the past year – during its annual assessment.

A spokesman said: "NR's remuneration committee has partly exercised its discretion in awarding reduced bonuses to senior executives.

"While the committee has considered our assessment of the company's mixed performance, it has taken a different view on some issues. It will now need to fully justify how it has reached its decisions.

"We have made clear our concerns, including on safety, asset management and efficiency – and these concerns still stand."

Bob Crowe, general secretary of the RMT union, said the payouts could not be justified. "While this new government tells low-paid workers that they've got to stomach a two-year pay freeze and attacks on their pensions they are sitting back while Network Rail, to all intents and purposes a public company, fills up the coffers of the highest paid public sector boss in the country. It makes a mockery of the claim that we will all have to share the pain."

Gerry Doherty, general secretary of the Transport Salaried Staffs Association (TSSA), called on ministers to cancel the bonuses, adding: "It is wholly wrong that Iain Coucher should be allowed to get away with daylight robbery at the public expense.

An embarrassed transport secretary, Philip Hammond, said he wanted to see a far-reaching pay review at the organisation which looks after 23,000 miles of train track and more than 2,000 stations.

"Network Rail is a private company but one that is dependent on taxpayer funding. In the week when everyone has been asked to share the burden of reducing Britain's deficit, people will rightly be asking how Network Rail's top executives feel this is appropriate."