Network Rail is preparing to defy ministers by awarding bonuses to directors amid criticism of its performance and public anger over executive pay.
The owner of Britain's rail system made the case for payouts in a letter sent to trade union officials and train companies, seen by the Guardian. The company's determination to maintain its bonus scheme puts it on a collision course with the government, which funds the company but is powerless to prevent any executive windfall.
In a statement that played down comparisons with banks and rail businesses that have cancelled or reduced bonuses, a senior Network Rail director said: "Network Rail is in a different situation." The TSSA rail union dismissed the consultation letter as a "sham" designed to smooth the way for payments. The head of Network Rail's remuneration committee, which determines annual bonus payments, signalled that bonuses could be awarded this year because targets including train punctuality had been met.
Jim Cornell, Network Rail's senior independent director, said the company's performance in the year to 31 March 2009 had exceeded the previous year "on all measures", according to initial figures. Senior directors including the Network Rail chief executive, Iain Coucher, could receive combined payouts worth more than £1m under the terms of two bonus schemes. Depending on how Network Rail fared on punctuality, financial efficiency and maintenance, they could receive awards worth between 17% and 100% of their salaries. Last year, Coucher was paid a salary of £539,000 and bonuses worth £511,000. Peter Henderson, infrastructure director, received bonuses of £372,000. Ron Henderson, finance director, was paid bonuses of £362,000.
The letter was sent to Network Rail's 105 members, who can vote down remuneration packages but have not done so since the company was founded in 2002.
The letter acknowledges "additional sensitivities" due to the recession and the furore over bankers' pay awards, but stresses the importance of recognising the "achievements" of Network Rail management. Cornell added: "Some commentators have suggested that remuneration at Network Rail should reflect that in essence it is not a private but a public sector company. This ignores the fact that many private sector companies also receive substantial government grants, including many train operating companies."
The rail minister, Lord Adonis, said yesterday that he expected Network Rail's remuneration committee to act "responsibly" when awarding bonuses, but added: "It is not the government that decides bonuses for Network Rail executives. It is an independent company in the private sector." He issued a more strongly worded warning to Network Rail in a recent debate in the House of Lords, in which he urged the remuneration committee to consider the public mood on bonuses.
Network Rail is dependent on government funds for survival, with the state providing half of its £6bn annual expenditure and underwriting its debt burden of more than £20bn. Adonis recently admonished Coucher for closing both main rail lines from London to Scotland on consecutive weekends.
The Co-operative Party, which has campaigned for tougher oversight of Network Rail, said the letter showed that the company's hierarchy was "arrogant and out of touch". Michael Stephenson, the Co-Op general secretary, said: " In 2007/08, Network Rail's subsidy cost the average household approximately £160, and the average passenger £3.84 per journey. Network Rail's executive management are among the highest paid public servants in the country. In these difficult times, and when their entire industry is suffering, they should not be further rewarded for failure."
