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Railways: Network Rail

Volume 702: debated on Thursday 19 June 2008

asked Her Majesty’s Government:

Whether the recent bonuses paid to Network Rail directors were awarded on the basis of merit.

My Lords, Network Rail is a private sector company, limited by guarantee. Decisions on bonuses are a matter for Network Rail’s independent remuneration committee, not the Government. The level of bonuses is determined by the degree of achievement of key performance-indicator targets, under Network Rail’s incentive plans, produced in accordance with a licence requirement of the independent Office of Rail Regulation.

My Lords, does my noble friend agree that Network Rail is funded largely out of public money, that it was recently fined £34 million for incompetence, and that its directors have received bonuses of hundreds of thousands of pounds? Does he not agree that there is something wrong with that system? Certainly, many people are puzzled as to why we go on paying large bonuses for inefficiency.

My Lords, as I said, the bonuses are a matter for Network Rail’s independent remuneration committee, not for government. I understand the concerns expressed by my noble friend. The Office of Rail Regulation is now consulting on changes to Network Rail’s network licence, which is aimed at strengthening the company’s accountability. This includes a proposal to require Network Rail to publish its remuneration committee’s bonus-level deliberations.

My Lords, we are probably in for a summer of chaos on the railways. There were track problems on the line from Liverpool Street to Norwich on three evenings last week. People were discharged in villages, with no transport; there were almost riots as people tried to get taxis. This is unacceptable. Should not the Government encourage Network Rail to do rather better in repairing its track, not simply fine it, as they did at Christmas? They should do something to encourage an improvement to the track in this country.

My Lords, there have been record levels of investment in the rail network. For that reason, punctuality has improved. Something like eight out of 10 passenger trains now arrive on time, which is a rather higher figure than we experienced some years ago. The Government are committed to increasing the amount of money spent to ensure continued improvements in reliability. That is an indication of our commitment. We meet rail industry executives regularly, on the basis of delivering improvements to the network. There have been many improvements to the network and to how repairs are carried out.

My Lords, can the Minister tell us whether the Government will have any influence on the appointment of a new chairman for Network Rail, which will happen shortly, and whether, in so doing, they can do anything to make sure that the organisation lives up to the promises it is making, for example, about having a railway that is open on weekdays and weekends?

My Lords, it is extremely important that the railway network is open at all times, but one has to acknowledge, and I am sure the noble Lord would, that we have to ensure that there is a proper programme of repair works; otherwise the network will begin to fail. We have experienced the worst of those failures. It is right that we seek those standards, and whoever heads Network Rail will be charged with those responsibilities.

My Lords, to get to the basis of this, roughly what percentage of the bonus is represented by public money?

My Lords, as has been said many times in your Lordships' House, the railway network is funded by the farepayer and the taxpayer, and we seek to achieve the appropriate balance between those two elements of its funding. I cannot give the noble Lord a precise answer to his question, but the independent remuneration committee reflects on the performance of the rail network, and in some years, performance bonuses are reduced. Roughly speaking, only 3 per cent of bonuses paid to staff employed across the network are paid at the executive level. The vast majority of bonuses are paid to frontline staff, quite rightly so.

My Lords, while my noble friend is undoubtedly right that the performance of the railway has improved considerably in recent months compared with, say, 12 months ago, does he not agree that one of the fundamental responsibilities of Network Rail is to establish a proper method of working with the train operating companies and that it is in nobody’s interests for there to be stand-offs between the TOCs and Network Rail, which have led to some of the problems that occurred in the summer, which were referred to by the noble Lord, Lord Hanningfield?

My Lords, my noble friend always speaks with great wisdom on these matters, and he is absolutely right. We want to see all parts of the industry working well together to deliver a safer rail network that is well invested in and that continues to expand to ensure that we have extra capacity to meet the increasing demands that are made upon it.

My Lords, having been employed by this organisation, my view is that there is very little justification for believing that politicians make a better deal of running large companies than the people who spend their professional lives doing it.

My Lords, do the Government agree with the award of a knighthood to Moir Lockhead, chairman of First Great Western, which is the worst performing rail franchise in the country? Do they think that that is a suitable reward for such inefficiency?

My Lords, tempting as it is in your Lordships' House to speculate and discuss the awards that people get for work in the public service, it is an invitation I shall decline this morning.

My Lords, I agree with the Minister that there have been improvements in rail services, and I welcome the fact that the Office of Rail Regulation will look at this. The Government set up Network Rail. There are no shareholders, as far as I can tell. It is run as a self-perpetuating oligarchy, and the Government say they have no responsibilities. Somebody must be in charge of it. It is our money. Who?

My Lords, in the end, Network Rail is responsible as a not-for-profit organisation to the stakeholders in the industry. There is a defined structure that sets that out. It has measures and levels of accountability, ultimately to government. I know that from time to time there is speculation about how effective that structure is, but it is what we have at the moment, and our objective in government is to make it work well.