Network Rail bosses not worth City salaries

Claims by Network Rail senior managers that they deserve six-figure bonuses on top of their generous salaries are based on the idea that the company is in the private sector and that they are highly skilled managers at the cutting edge of capitalism who could easily get much better paid elsewhere.

That is nonsense. Network Rail is a publicly funded organisation dependent on vast subsidies from the Government because the railways are inherently a loss-making industry and it is the infrastructure, for which the company is responsible, that eats up huge dollops of taxpayers’ cash. Network Rail does not have shareholders and therefore its managers have very little accountability. Its 100 “members” who have a supervisory role are little more than a sounding board.

Iain Coucher and his senior colleagues have shown themselves to be competent managers but the notion that they would obtain much better remunerated employment in the City is laughable. The skills of running a rail company are not easily transferred. Yes, Network Rail has done better of late, reducing the proportion of late trains to less than 10 per cent but that is merely what the private railway companies of yore and, indeed, British Rail, would have considered a minimum. Mr Coucher did himself no favours by accepting a huge bonus last year despite the debacle of delayed engineering works after Christmas 2007.

The improvements achieved by Network Rail since its creation have merely been to restore the railway to its performance before the Hatfield crash in 2000, which was caused by a broken rail and led to a sharp increase in delays.

Passengers are still far more inconvenienced than in the past, what with weekend closures and transfers to ancient replacement buses. Lord Adonis, the Rail Minister, last month took the unusual step of publicly criticising managers for allowing the closure of both main routes between London and Scotland over the same weekend. With passengers also having to bear above-inflation rises, it is hardly surprising that he is trying to limit what would be very unpopular bonus payments. His difficulty is that interfering too directly in Network Rail’s governance would result in it and its £20 billion debt being included on the Government’s balance sheet, which was why the company was not nationalised when it was created out of the ashes of Railtrack

  • Tom

    In order to do what it’s signed up to do for the money available in control period 4, Network Rail has to save approximately £1bn each year for the next five years — a tall order in anyone’s book. Not many FTSE 100 companies are often called upon to do that by their shareholders — actually I’d be morbidly fascinated to see a ‘big four’ bank chief take NR through CP4. This also shows that NR’s regulatory regime and some very strong media and public interest mean that the members, frankly, have less to do than shareholders would. However, I agree with your point (made elsewhere) that NR’s governance is questionable.

    In response to your idea that railway management skills aren’t easily transferred, this is almost an affront to your intelligence. Running a railway requires similar technical skills needed to run an oil business, an electricity supplier or a fleet of coaches or lorries — all activities that exist firmly in the private sector. Beyond that level the skills for running a large business don’t really vary that much. I would also point out that many of NR’s senior managers have in fact come *from* the private sector, mostly PLCs. So, NR needs to behave like any other business with regard to its remuneration packages.

    Just a thought: even if your ‘railway people will always be railway people’ idea was true, why should those who run the country’s railway system (and I’m not just talking directors here) be paid less than those who work in wealth management, PR or hotels?

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