Network Rail bonuses under fire

First Stephen Hester, now Network Rail boss Sir David Higgins. Government has bonuses squarely in its sights.

by Rebecca Burn-Callander
Last Updated: 19 Aug 2013

A restructured pay scheme is currently in the works at Network Rail. The proposal, which will be voted on this Friday, will allow chief executive Sir David to receive a bonus of up to 60% of his £560,000 salary – down from 100%. Long-term incentives will remain unchanged. He could take home a bonus of 500% of his annual salary after five years.

So, what’s the problem? When compared to the billions glugged down by some CEOs in the financial sector, Higgins' £336,000 bonus doesn’t even touch the sides. Except for one thing. If there is any one industry (outside of beleaguered banking) that practically everyone in this country agrees is not up to par, it’s rail. Just look up #trains on Twitter and pages and pages of stranded, delayed and irate commuters are venting spleen over the British rail system (expect more of the same if the snow continues). A report out today puts Britain at the bottom of the European league for fares, efficiency and comfort. 'In terms of bang for buck, not only does the UK come bottom of the index of outcomes but it also spends a relatively large amount of money to achieve this woeful result,' it said.

Moreover, Network Rail is part-funded by the taxpayer and the mob has decided that reward for poor performance is not justified. As with Hester and Fred the Shred, government is backing its play.

Transport secretary Justine Greening plans to vote against Higgins’ bonus at this week’s meeting. But it could just be an exercise in lipservice to appease the masses: her vote is just one of 80 and, as she told the BBC yesterday, ‘I won't be able to stop it 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.’

But Shadow Transport Secretary Maria Eagle disagrees. ‘Justine Greening is wrong to say that she cannot block these bonuses,’ she says. ‘Not only does the secretary of state have a place on Network Rail's remuneration committee, but we now know that she must also give prior written agreement to any change to the incentive scheme for senior managers.’

So, either Greening has failed to read the small print, or Eagle has her wires crossed.

Network Rail is definitely in for a pummelling. More than 20 MPs have signed the House of Commons motion that finds Network Rail ‘to be in breach of its licence by the Office of Rail Regulation’, responsible for ‘major asset failures, congested routes and poor management of track condition’.  The deaths of Olivia Bazlinton and Charlotte Thompson at a level crossing have also cast a shadow over the company - the firm was recently found guilty of health and safety breaches.

If government steps in over these bonuses, it will be its second veto in as many weeks. The problem with its chosen approach is that kiboshing the odd bonus does nothing to address systemic failures, but simply appeases public opinion for a day or two. Either way, MT bets any other firms announcing bonuses this week will be keeping a low profile...

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