UK Politics

Network Rail chief executive to turn down bonus

Sir David Higgins, left, at a recent event with Transport Secretary Justine Greening
Image caption Sir David Higgins, left, at a recent event with Transport Secretary Justine Greening

Network Rail bosses, including chief executive Sir David Higgins, have said they will not accept bonuses this year.

They had come under growing political pressure to waive the potential six-figure awards.

Sir David, who was eligible for a bonus of up to £340,000, said in a statement that they would be donating the money to a rail safety charity.

The government said Network Rail had "recognised the strength of public opinion" over the issue.

Sir David, who joined the firm last year, said he took the decision before the row over remuneration broke out.

'Reflect further'

"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 crossing," he said.

"I can confirm that remains our intention."

Labour had said the bonuses could not be "justified" in the current financial climate and the firm's performance did not merit it.

Network Rail has also postponed a meeting on Friday at which the bonuses were set to be criticised and at which Transport Secretary Justine Greening had said she would vote against the bonus plan.

In a statement, Network Rail, which owns most of Britain's rail network infrastructure, said its board "will take the opportunity to reflect further on how to incentivise performance in the company against the backdrop of the current context".

Sir David and six other directors had been eligible to receive up to 60% of their annual salaries in one-off performance-related bonuses as as well as longer-term bonuses of up to 500% after five years if certain targets were met.

The firm insisted no decision had yet been made but came under sustained pressure to curb the payments.

Before the decision was announced on Monday, Labour leader Ed Miliband appealed for a "culture of responsibility" at the firm and said ministers should have intervened earlier to stop bonuses on such a scale.

'Need for restraint'

Ms Greening made it clear she opposed the bonuses but insisted she did not have the power to block them under the terms of Network Rail's governing arrangements - something Labour disputed.

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Media captionTransport Secretary Justine Greening: "It was my job to stick up for taxpayers"

The transport secretary said the firm's decision to rethink its remuneration scheme was "sensible and welcome".

"I have made it clear to Network Rail at every stage that this proposed package did not go far enough in reflecting the need for restraint," she said.

"It was also the wrong time to look at this issue, given I will be shortly unveiling a rail review that will strengthen the corporate governance of Network Rail and see a special director appointed to the board to represent the views of taxpayers.

"The fact that its executive directors have also chosen to forfeit their annual bonuses to charity is a sign that they have recognised the strength of public opinion."

No 10 said ministers were not permitted to interfere in the "day-to-day running" of the firm - which receives £4bn of taxpayer funding a year and is guaranteed by the government.

But it said it would be looking at the firm's corporate governance in light of "problems" that had arisen.

Taxpayer support

Shadow transport secretary Maria Eagle said: "The senior management of the publicly-funded Network Rail have done the right thing.

"At a time when so many families and rail commuters are being squeezed financially, when fares are rising by up to 13 per cent and the rail network is performing inadequately, it was completely wrong for bonuses of this scale to have been even considered, let alone agreed."

The growing political attention on the proposed Network Rail bonuses followed the row over bonuses at the majority taxpayer-owned Royal Bank of Scotland.

RBS chief executive Stephen Hester turned down a £963,000 bonus last week following a political outcry.

Employer groups have expressed concern that anger over executive remuneration may create a climate of "anti-business hysteria" and dissuade firms from investing in the UK.

Since it was set up in 2002, as a replacement for Railtrack, Network Rail has been criticised for its performance.

More than 20 MPs have signed a House of Commons motion saying Network Rail had been responsible for "major asset failures, congested routes and poor management of track condition".

Network Rail has admitted health and safety breaches over the deaths of two teenagers killed at a level crossing in 2005 while it also faces prosecution over the 2007 Grayrigg train crash in Cumbria in which one passenger died.

However, the firm has argued it has made progress in improving reliability and reducing the cost to the taxpayer.

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