UK: Network Rail faces official inquiry

[John Ashworth]

Network Rail faces official inquiry into claims of exorbitant payoffs

Transport secretary wants an independent investigation into claims of misuse of taxpayers' millions and a culture of sexual harassment

* Mark Townsend
* The Observer, Sunday 31 October 2010

Ministers are demanding an independent inquiry into allegations of sexual harassment and misuse of millions of pounds of taxpayers' money at Network Rail.

The transport secretary, Philip Hammond, has told rail and union officials that he wants an inquiry into lingering allegations of financial impropriety and an alleged culture of harassment at the body that runs the rail infrastructure. More than 150 staff at the company have been paid off between 2006 and 2009 after signing secrecy agreements.

Lord Berkeley, a Labour peer and chairman of the Rail Freight Group, said: "Whatever the truth, this running sore must be sorted out once and for all. Frankly, a good QC with the relevant experience could do an inquiry quickly and thoroughly. If he finds for the company, that must be the end of it all.

"If not, then on the allegations so far available there is a risk of the police being called in."

Berkeley said that an inquiry needed to be launched soon, and should be concluded before a replacement for the company's controversial former chief executive, Iain Coucher, arrives at the start of February. Network Rail's structure as a private company funded by public money has prevented the government launching its own investigation, although Hammond has promised to enforce changes to make Network Rail more accountable.

A Whitehall source said: "We are keen to see these allegations cleared up and are very keen to get to the bottom of this. They are serious allegations and we need to find out whether they are true or not. It is not for us to decide their veracity."

Network Rail has admitted that the controversial payoffs amounted to a total of £9m of taxpayers' money, including one thought to be worth almost £500,000.

The allegations an independent inquiry would examine are believed to include a sexual harassment case against Peter Bennett, head of human resources. Network Rail said a high-level internal inquiry into the allegation concluded that there was "no case to answer".

On 22 October, Coucher left the company after earning about £10m in salary over eight years as the highest-paid public servant in the UK. He has bought a £1m 178-acre Scottish estate, including two islands, which he calls "Iainland". Network Rail has admitted that he also received a £13,000-a-year allowance towards the cost of running an Aston Martin, which led to accusations of a "James Bond lifestyle". He was also paid a £20,000 a year "housing allowance" to rent a central London apartment up to 2007.

Manuel Cortes, assistant general secretary of the Transport Salaried Staffs' Association (TSSA), said he hoped that Coucher's departure "brings to an end the exorbitant bonus culture that allowed him to live a pop-star lifestyle off the back of taxpayers".

The Observer has learned that Hammond has written to the company, which receives £4bn a year in state funds, claiming that bonuses paid to Coucher were distasteful during a period of public sector cutbacks.

Berkeley said: "Philip Hammond didn't have any theological objection to Network Rail's public debt, but wrote to them saying he thought the bonuses were unacceptable. Network Rail has ignored what is effectively their own paymaster. We're not holding the company to account properly, we haven't got the means, and that needs changing."

Brendan Barber, general secretary of the TUC, is overseeing attempts to set the framework of a possible inquiry. One sticking point in negotiations is whether the confidentiality clauses of those paid off will be waived. Network Rail's chairman, Rick Haythornthwaite, has indicated that he may lift the secrecy agreements surrounding the 150 payoffs, enabling former staff to speak at the inquiry.

Officials at the salaried staff association say they possess a dossier of allegations against Network Rail which they want to submit to a future inquiry. Network Rail says it has repeatedly requested to see the dossier, but has been denied access. It is understood, however, that Hammond has seen the allegations assembled by the union.

Last August, Network Rail announced an inquiry to investigate the nature of the confidentiality payouts and allegations concerning the misuse of public money. Later that month the company said its inquiry had cleared the company and senior figures, including Coucher, of any wrongdoing.

The inquiry was overseen by the chairman of Network Rail's audit committee, Mike Firth, and vetted by PricewaterhouseCoopers, Network Rail's external auditor.

Firth said that he had "not identified any instances of impropriety" and concluded that the inquiry was carried out "diligently and thoroughly".

However, Berkeley said last week that he had been alarmed by recent allegations claiming the independently verified audit was based only on limited documentation. Network Rail denies the claim, saying its internal report was robust enough to "satisfy everyone". A spokesman said that all allegations, including claims of sexual harassment, were unsubstantiated.

The TSSA said: "We will be making no public comment while talks continue."