Short-term bonuses could tempt rail chiefs to fix results, warns NAO

Network Rail directors could be keen to "manipulate results" to earn short-term bonuses at the expense of long-term objectives, a senior official at the National Audit Office said.

The warning came yesterday after it emerged that senior figures at the infrastructure company could be paid financial incentives worth 20 per cent of their salaries even though the organisation missed its punctuality target last year.

Launching a report into Network Rail (NR), Jeremy Colman, the assistant auditor general, said: "Setting objectives or incentives over the relatively short term could encourage game-playing where you could manipulate results to achieve short-term targets without regard to long-term objectives."

The report by the NAO, an independent Parliamentary watchdog, urged ministers to introduce a long-term incentive system. Mr Colman said that because Network Rail was a "not-for-profit" organisation in the private sector with "members" rather than shareholders, there was no clear incentive to deliver value for money to taxpayers, the main source of finance.

He said a better means of incentivising an organisation delivering a public service was through the kind of public-private partnership at National Air Traffic Services where the Government retained "reserve powers" . The report said the Government would have to overcome "serious challenges" in the structure of Network Rail, which replaced Railtrack, if railways were to be reliable and affordable.

The NR structure was "complex", its long-term funding costs were unknown and improvements in punctuality levels would be hard to achieve, the report said. Management at NR were trying to control costs but the report suggested that in the longer term there should be targets for costs per kilometre per passenger carried.

Bob Crow, general secretary of the RMT, the industry's biggest union, said: "These bonuses are a grubby reward for squeezing Network Rail's workforce." The RMT is balloting its members at the company for strikes over pensions, conditions and pay.

The shadow Transport spokesperson, Theresa May, said the report showed that pouring more than £14m a day into the network would not deliver the improvements passengers should expect. Network Rail said its remuneration committee would not meet until mid-June so no one could say whether bonuses would be paid or how much they could be.