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Network Rail bonus 'u-turn' could swell coffers of safety fund

Network Rail chief executive David Higgins has said any “bonus” awarded to him and his directors would be donated to the safety improvement fund for level crossings.

Higgins said a decision on whether bonuses were to be awarded would not be made until the end of the financial year in May and would depend on performance measures.

The company has also delayed the board meeting at which it has been widely reported that Network Rail board members would decide whether Higgins should be awarded a £340,000 bonus.

The suggestion of that bonuses would be paid to Network Rail executive provoked a storm of criticism. Politicians and commentators argued that such huge bonuses were unfair and inappropriate when British workers were  tightening their belts.

“Even if this situation does arise this year, I and my directors decided last week that we would forego any entitlement and instead allocate the money to the safety improvement fund for level crossings. I can confirm that remains our intention,” said Higgins.

Before this announcement transport secretary Justine Greening said she would use her position as a Network Rail board member to veto the bonus but that the outcome would depend on the other votes cast.

Network Rail chairman Rick Haythornthwaite said the meeting on Friday was not to decide executive pay.

“Friday’s meeting was not to approve a specific annual bonus payment for executive directors, but rather to amend a previously approved long term incentive scheme to ensure additional external scrutiny of performance,” he said.

“The issue of annual performance payments would only arise if Network Rail surpassed stretching performance thresholds and would only be decided in May after the end of the financial year.”

Labour issued a statement saying that Greening’s department had powers to veto the bonus because she had to give “prior written consent” to Network Rail before there can be any changes to its incentive policy”.


Network Rail status

The concern surrounding bonuses at Network Rail follows recent debates by MPs over whether the firm should be regarded as a company rather than a public body.

Public Accounts Committee chairman Margaret Hodge has said the company’s finances ought to be more open to public scrutiny as two thirds of its income comes from the government and the remainder from fares.

She said because of the lack of transparency it was difficult for the government to see where cuts could be made. The has resulted in the “outrageous” situation where Network Rail has only to make a 1% budget cut for 2014/15 when any company could find 3% in savings “without flinching”.  

Just £250M is expected to be made in savings from Network Rail over the spending period to 2014/2015, which is equivalent to little more than 1% of its budget, said the committee, which was in stark contrast to the efforts of other companies in the government’s supply chain, said the committee. Hodge added that any company could find 3% in savings “without flinching”.

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