Regulator warns Network Rail over poor service

Network Rail (NR) chiefs are under pressure to forego bonuses after rail regulators said on Wednesday that the company failed to meet some performance targets.

The Office of Rail Regulation (ORR) said it had written to the NR committee that decides on bonuses pointing out the company's shortcomings.

These included an "unsatisfactory" performance on the West Coast Main Line on which a huge £9bn upgrade programme has just been completed.

The ORR said it had given NR until the middle of this month to produce a credible plan for improving performance on the line.

It said failure to do so would mean regulators would have to consider whether NR was in breach of its licence – something that could trigger a fine.

The ORR also said the rail infrastructure company had presided over an increase in delays caused by signalling problems and was perceived by train and freight companies as being "bureaucratic and unresponsive".

Also, NR failed – by 4 per cent – to reach its ORR-set target of making efficiency savings of 31 per cent between 2003/04 and 2008/09.

The company's bosses are eligible for annual performance-related bonuses as well as an additional bonus as part of a rolling three-year management incentive plan.

Details of this year's bonuses are due to be released at the end of this month.

Network Rail's chief executive Iain Coucher has already said he will forego any annual bonus this year but he is still eligible for the incentive scheme payment.

Last year Mr Coucher got an annual bonus of more than £305,000 and a further £205,000 bonus under the incentive scheme. This was despite the company being fined a record £14m by the ORR for three serious engineering work overruns during the Christmas and new year 2007/08 period.

The ORR's chief executive Bill Emery has written to NR's remuneration committee saying it would need to explain "how and why" it reached its decisions on this year's bonuses.

Mr Emery said: "Network Rail's performance over the past year has been mixed. While it has met many of its regulatory targets, it has missed others.

"Most notably, it has failed to make the efficiency savings expected of it over the five-year period to April 2009, and has fallen short of the levels of performance passengers and the industry expect on the West Coast Main Line."

The ORR's comments came as it published a report on the railways. Earlier on Wednesday, NR announced that it made a pre-tax profit of £1.52bn last year but its net debt rose to more than £22bn.

The pre-tax profit for 2008/09 was roughly comparable with the £1.59bn figure achieved in 2007/08.

But the not-for-dividend company said its net debt had risen from £19.7bn to £22.3bn.

And its profit after tax dipped from £1.2bn in 2007/08 to £609m in 2008/09, mainly due to a £524m increase in the deferred tax charge following the abolition of the industrial buildings allowance.

Mr Coucher said: "We have delivered a good set of results, meeting or exceeding almost all its targets and those set by the ORR.

"Train performance is at an all-time high, the railways have never been safer to travel on, millions of pounds are being saved from the cost of running the network and billions invested to make further improvements. Our strong focus on innovation and investment to improve our operations and reduce operating costs is driving our performance."

Bob Crow, the general secretary of the RMT transport union, said: "If NR are running more trains and are so flush with cash why are they taking the risk of another major disaster like Hatfield, Potters Bar or Grayrigg by cutting back the vital track renewals programme by 28 per cent and axing key engineering jobs?"

Gerry Doherty, the leader of the TSSA rail union, said: "Iain Coucher boasts of record punctuality at 90 per cent but he simply ignores the fact that the old InterCity services on British Rail clocked 92 per cent punctuality.

"He also fails to mention that Virgin Trains reported punctuality as low as 39.4 per cent in April thanks to the disastrous £9bn upgrade on the West Coast main line.

"No director should receive a penny of bonus this year and that includes Coucher himself. His offer to give up 60 per cent of his bonus last month was just a publicity stunt to divert passenger fury at his abysmal record."

Anthony Smith, chief executive of customer watchdog Passenger Focus, said: "Trains arriving on time continues to be a top priority for passengers and the industry has done well to improve the number of punctual trains.

"However, 10 per cent of trains still run with delays and for those passengers left on the platform or stuck on a stationary train, this isn't good enough. In particular, it is imperative that performance on the West Coast line soon improves so that Virgin and London Midland passengers finally get a punctual service.

"Passengers are due compensation when delays occur and we urge those passengers who are held up on the railway to claim money owed."

The Liberal Democrat transport spokesman, Norman Baker, said: "Bonuses should be paid for exceptional performance, they are not an automatic enhancement of salary.

"NR bosses should not take excessive bonuses. That is not what the system is intended to do."

Virgin Rail Group, which operates the West Coast line, said: "We welcome NR and the ORR's acknowledgement of the unsatisfactory performance on the West Coast line, which is vindication of the warnings we have given both organisations over the last three years.

"We are disappointed that NR have spent £9bn on the 'upgrade' to deliver the worst-performing route on the rail network today. This is an unacceptable position for our customers."

A group spokesman continued: "The key now is to address the many failings urgently. We welcome ORR's determination to take action if NR fails to deliver a credible plan for improved performance.

"We would expect to see that any plan which is proposed delivers a sustained improvement to at least the level of performance expected when NR planned the upgrade."