UK: Transport secretary to vote against Network Rail bonus

[John Ashworth]

Transport secretary to vote against Network Rail £20m bonus

Justine Greening to attend firm's AGM to vote against executive payout – though Labour says she is failing to use full powers

Rajeev Syal, Juliette Garside and Jill Treanor
guardian.co.uk, Sunday 5 February 2012 19.53 GMT

The transport secretary, Justine Greening, is planning to vote against a proposed £20m bonus pool for Network Rail executives. But she was accused by Labour of failing to use her powers to put a stop to the payments.

On Friday, she will attend Network Rail's annual general meeting to vote against a package which could see chief executive Sir David Higgins collect a £340,000 payout in addition to his £560,000 basic salary.

Greening's intervention will put pressure on Network Rail to reduce the bonuses which have been paid annually to executives for many years. The company that operates most of Britain's railway structure has faced criticism over its safety record and poor track conditions.

"I'm going to go to the meeting next Friday, I'm going to vote against them," said Greening on the BBC's Sunday Politics programme. It will be the first time that a minister of state has voted against bonuses at Network Rail.

Despite her vote against the company, she claimed that she would not have the powers to stop the payments from going through. "The governance structure that the last government set up means I can go and vote against it. The problem we have got is that won't actually change the result," she said.

However, Labour is claiming that the Department for Transport has powers over remuneration and incentive schemes thanks to its position as Network Rail's "special member".

Maria Eagle, the shadow transport secretary, said: "Greening is wrong to say that she cannot block these bonuses … It is difficult to see why Network Rail would have felt able to propose this new bonus package without knowing if it had ministerial backing."

Those close to Greening hit back, saying that Labour has misinterpreted company documents. "Justine can't block bonuses, because she has one vote among 80. Labour knows that the government doesn't have a power of veto and when in office repeatedly said that bonuses were an issue for Network Rail and not for government," a source said.

Higgins will also share in a long-term bonus scheme which could be worth up to £15.6m over the next three years for the rail group's six executive directors. The six will also earn £2.3m a year in salaries plus a maximum of £4.2m in bonuses.

On the same day that Greening casts her vote, Barclays will announce an estimated £1.7bn bonus pool, some 30% less than last year but a sum that will see staff at its Barclays Capital arm remain among the highest-paid UK workers, earning an average of £210,000 each.

Barclays, one of the world's largest investment banks, is forecast to report profits of £6bn, barely changed on a year ago despite the eurozone crisis.

While the bonus of its chief executive, Bob Diamond, is unlikely to be revealed until March, he could get up to £11m.

The latest round of payouts will fuel the controversy around City pay, which prompted Royal Bank of Scotland's chief executive, Stephen Hester, to waive his near-£1m bonus a week ago.

More than 20 MPs have signed a Commons motion saying Network Rail had been "found by the Office of Rail Regulation to be in breach of its licence" and had been responsible for "major asset failures, congested routes and poor management of track condition".

Last week, the company admitted health and safety breaches over the deaths of two teenagers killed at a level crossing in Essex in 2005.

A Network Rail spokesperson said that no decisions have yet been taken on any potential bonuses. "Friday's vote is not on whether directors will receive a bonus but on a proposed scheme, the shape of which is a result of discussions with our regulator. The independent remuneration committee will have full discretion on any decision to award bonuses."