Archive for the ‘Network Rail’ Category

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£53.1 million Network Rail fine

Tuesday, July 8 2014

Good governance… or Smoke and Mirrors?

Grayrigg

Network Rail was fined £4 million after the Grayrigg derailment.
Photo Lawrence Clift. Licence CC BY-SA 3.0.

The papers today are all carrying the story that the Office of Rail Regulation (ORR to its friends) have fined Network Rail a whopping £53.1 million for causing trains to run late. At the same time the Treasury has kindly agreed to recycle some of the fine to improve WiFi access on commuter trains. So surely that’s a Good Thing isn’t it?

Well possibly not? Over the years Network Rail has been collected a large number of fines. Here are some examples of fines imposed by during the period 2011 – 2013:

In May 2011, St Albans Crown Court imposed a fine of £3 million on Network Rail following a prosecution brought by the ORR relating to the Potters Bar derailment in May 2002 which led to the death of 7 people and injuries to 76.

In March 2012, following another prosecution brought by ORR, Network Rail was fined £1 million pounds at Chelmsford Crown Court for contributing to the deaths of two schoolgirls who were killed by a train while trying to cross the railway line at a level crossing at Elsenham station in Essex in December 2005.

In April 2012, Network Rail was fined £4m for safety failings leading to the 2007 Grayrigg derailment that resulted in the death of 1 passenger and injuries to 86. There were similarities to the Potter’s Bar accident in that in both cases the condition of the facing point that caused each accident could not be satisfactorily accounted for.

In April 2013, Network Rail was fined £450,000 by Birmingham Crown Court when a driver was killed after her car she was in was hit by a train at Moreton-on-Lugg, Herefordshire, in January 2010.

At the end of these court cases representatives of the victims’ families regularly made the point that the railway executives responsible for the decisions (or lack of appropriate decisions) that caused the incidents are totally unaffected by such fines.

Network Rail is a not-for-profit company with its Directors appointed by the government. Though it has ‘members’ to perform a governance role akin to that usually performed by shareholders, in practice this mechanism is very weak.

Network Rail is financed from three sources: government grants, borrowings and track access charges. The ‘fines’ are simply cuts to the money that would be paid by the Treasury to support the railways. The shortfall is made up by extra borrowing with the tax payer picking up the bill for the extra interest charges. So in effect the people being fined are not Network Rail executives, but you and me.

Though these fines may reassure certain members of the public ‘that something is being done’, there is no evidence that the fines are helping to create a safer railway or to make the trains run on time. While solutions have been proposed by the train operating companies, so far their suggestions have been steadfastly ignored by the Department for Transport.

In February 2012 – a time of financial austerity brought on by the financial crisis – the Chairman of Network Rail, Sir David Higgins announced that he and his executive team were giving up the 60% bonuses that were due to them that year, but by July the same year Network Rail announced that senior executive pay would be topped up by a £2 million bonus scheme..

Surely there must be a better way to manage Britain’s railways?

 

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UK railway cable thefts slashed!

Friday, January 10 2014

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Cable thief caught in the act by Network Rail CCTV.

Joint action by Network Rail and the government has dramatically reduced cable theft on Britain’s railways. There were 285 incidents and 2,700 hours of train delays in the 12 months to April 2013, compared with 845 incidents and 5,740 hours of delays in the previous year. The cost to Network Rail, which includes compensation payments to train operating companies, fell from £18.3m to £12.7m. A year earlier, Network Rail suffered more than 1,000 thefts and 6,000 hours of delays.

Action taken by Network Rail included the more effective deployment of British Transport police, installation of CCTV at the worst trouble spots, and working with suppliers to make the cables, harder to steal and easier to identify.

Railway cable theft is part of wider problem which includes thieves stealing telecommunications cables, the lead from church roofs, metal sculptures and even metal tablets from cemeteries. The Association of British Insurers (ABI) stated that during 2012 its members were paying out more than £1m a week to victims. The Association said UK metal theft had doubled in the previous five years to about 1,000 reported incidents a week and the Police service estimated the damage to the UK economy to be around £770m a year.

Government action involved providing £5m funding for a Metal Theft Taskforce (led by British Transport Police), and introducing preliminary legislation in December 2012 giving police new powers of entry to metal yards.

The case for further legislation was strongly pursued by Network Rail, British Telecom and The Church of England. This lead directly to the Scrap Metal Dealers Act which received Royal Assent in February 2013. Its main provisions, which came into full force towards the end of 2013, gave local authorities new powers to inspect and licence scrap metal yards, obliged dealers to record all scrap metal transactions, and introduced major penalties for non-compliance.

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Higgins to be new Network Rail CEO

Wednesday, September 29 2010

Haythornthwaite poaches ODA’s ‘silver bullet’.

David Higgins. Photo Network Rail.

(Click image to download a high-res image from the Network Rail website.)

EnglishRail has been known to have been a tad cynical about Network Rail’s senior management in the past, so it makes a nice change to be able to assign some brownie points. David Higgins, currently CEO of the Olympic Delivery Authority, will become CEO of Network Rail as from 1 February 2011. His predecessor, Iain Coucher, is leaving Network Rail on 1 October and Peter Henderson, Director Asset Management, will take on the role of acting chief executive until Higgins can pick up the reins in the new year.

There can hardly be a greater contrast than between the outgoing and the incoming CEO. Familiar as a ‘safe pair of hands’ to his DTI colleagues, Croucher, once a guided missile designer, was part of the team of civil servants and advisers that created Network Rail as a ‘not-for-profit company’ to take over the running of Britain’s railway infrastructure from Railtrack in 2002. Croucher was appointed Network Rail’s first Managing Director and then became CEO in 2007. In 2004, Network Rail had taken over some of the performance monitoring and strategy creation functions previously carried out by the Strategic Rail Authority. Theoretically free from direct government oversight, and responsible for defining its own performance measures, Network Rail attracted increasing criticism from the railway unions, the Office of Rail Regulation, politicians and its own members. There were accusations that Croucher ran the company like his own private fiefdom and that performance bonuses paid to NR’s top management were overinflated and not linked to objective performance.

David Higgins was born in Brisbane, Australia. He obtained a B.Sc. in civil engineering at the University of Sydney; and a diploma from the Securities Institute of Australia. After graduation, he worked in the United Kingdom and Africa, before returning to Australia in 1983, and joining the Lend Lease Corporation in 1985. In 1995, he was appointed their MD and CEO, at a time when the corporation’s developments included the 2000 Summer Olympics Olympic Park in Sydney, and the Bluewater Shopping Centre in Kent. In 2003, he became CEO of English Partnerships, the UK government national regeneration agency. With a reputation for delivering projects on time and on budget he was head-hunted to the post of Chief Executive of the Olympic Delivery Authority in 2005, and took up his appointment in 2006. Here he worked under ODA Chairman, former Network Rail CEO, John Armitt where he reinforced his reputation and proved to be a loyal and effective second-in-command.

John Armitt was generous in his farewell tribute. David has done an inspirational job at the ODA over the last five years. We have been tasked with delivering the biggest construction project in Europe on a highly contaminated site to the ultimate fixed deadline. David set up the ODA from scratch and leaves it with the project on time, within budget and on the verge of completing the first major venues on the Olympic Park. He has done all this at the same time as helping achieve a first class safety record and driving forward innovation in terms of sustainable construction. This is an exciting opportunity for David and I am sure he will do a brilliant job leading Network Rail over the years to come.

Rick Haythornthwaite, Network Rail’s chairman, gave David Higgins a warm welcome. We recruited David to the board earlier this year because of his track record in leading large organisations, delivering demanding projects and managing a complex range of commercial interests and wider stakeholder sensitivities. With Iain Coucher deciding it is the right time to leave Network Rail, David emerged as the outstanding candidate to lead Network Rail into a challenging new era following an extensive search process. There are significant challenges and opportunities ahead for both Network Rail and the industry such as the comprehensive spending review, the McNulty value for money review and the planning of HS2. Public, passengers, politicians and the industry are demanding a better, safer railway delivered at a lower cost where success will depend on pervasive collaboration. David is well-placed to lead both Network Rail and the industry forward to meet these challenges.

Commenting on his own appointment, David Higgins said, It has been a privilege to lead the ODA over the last five years and I am leaving with the Olympic Park on time, within budget and with the finish line in sight. Looking forward, Network Rail is one of the most important companies in the UK – an efficient railway underpins a modern economy – and therefore a challenge I could not turn down. Network Rail and the rail industry have transformed the train service in Britain in the last eight years – trains run on time and the railway is safer than ever. My priority is to bring Network Rail and the industry closer so that together we can continue to improve service, efficiency and safety and add much needed capacity to a railway network that is nearly full.

We wish David and Rick a long and successful partnership.



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Network Rail rebels take aim at Kong

Tuesday, April 20 2010

Network Rail non-exec board member Janis Kong

The Fact Compiler, the thinking man’s favourite railway blogger, published this delicious post yesterday.

NR board appointment fires up reformers zeal

Yesterday’s Independent on Sunday reported that there is disquiet amongst NR members about the proposed appointment of Janis Kong to the company’s board.

The decision is due to be rubber stamped in July at NR’s Annual General Meeting but with reform to Network Rail governance mentioned in both the Tory and newly resurgent LibDem manifestos this could become a cause celebre.

Kong was a non-Exec at RBS when Fred the Shrek ran the doomed banking group and she was also on the remuneration committee that boosted the failed banker’s pension pot by £20m.

Regular readers who were with us in our Tunnel Vision days may feel a twinge of deja vue. We had Kong in our sights in January when we wrote.

Her main claim to fame is that she was a member of the Royal Bank of Scotland’s Remuneration Committee, which approved at £20m pension deal for disgraced RBS ex-chairman Sir Fred Goodwin.

We trust that the rest of 2010 will be an interesting time for the Network Rail board.

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Coucher bags £1 million estate

Sunday, January 31 2010

Keills Estate, a 567 acre estate on the west coast of mainland Argyll, near Lochgilphead. Photo Rettie & Co.

(Click to see the description of the property on the Rettie & Co website.)

Network Rail CEO, Iain Coucher who enjoys an annual salary of £613,000 has just bought himself three-quarters of the Keills estate, including a house, complete with boathouse, jetty and 173 acres of surrounding land, and two little islands. Estate agents Rettie and Co describe the house as follows.

The 3 bedroom Keillmore House with its own barn and boathouse set in over six acres of land also incorporates the historic Keills jetty and pier. A mooring is currently rented from the Crown Estate within Keills Port.  Subject to planning consent some of the outbuildings offer scope for residential conversion.

Now I have no problems with generously rewarding top management for a job well done, but I question whether Coucher’s work at Network Rail deserves a £1.24m per annum reward package. Massive inconvenience was caused to passengers by civil engineering work which over ran during the 2007/8 and 2008/9 winter holidays. ORR imposed a hefty fine on Network Rail, but were the senior management held responsible? Not a bit of it NR’s remuneration committee approved 6 figure bonuses for the company’s top bosses.

Today the Observer’s Nick Cohen summed up the situation as follows.

You are paying, of course, and getting very little in return. The nationalised British Rail, in its last year of operation in 1994, cost the taxpayer £950m. The private rail operators cost the taxpayers £5bn in 2008, £4bn of which went direct to Network Rail. All that money has produced a pathetic dividend.

We are the only the European country to allow a fragmented privatised rail network. Last year, state-run Spanish rail opened a high-speed line between Barcelona and Madrid. The two-and-a-half-hour journey costs £52 return. The European public sector is delivering prices and speeds which are beyond the dreams of British passengers. But I suspect Spanish railway managers are not buying country estates or hiring the attack-dog lawyers of the super-rich, but using public money to provide public services.

But that is not the only scandal which deserves to be aired in this ‘not-for-profit’ company. Nick’s incisive article is worth reading in full. It is high time that Rick Haythornthwaite, newly arrived Network Rail chairman, reviews as to whether Iain Coucher is delivering value-for money to Network Rail’s customers and stakeholders.

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NR’s New Non-threatening Non-execs

Tuesday, January 12 2010

Straws in the wind…

Janis Kong and Lawrie Haynes. Photos Network Rail.

Network Rail announced the appointment of two new non-executive directors today, Janis Kong and Lawrie Hayes. Rick Haythornthwaite, Network Rail’s chairman, is barely 6 months in post and the appointment of the first new directors under his regime is the first indication of the strategic direction in which he wants the ‘not-for-profit’ infrastructure company to go.

Janis Kong (59) has held senior positions in Britain’s airport industry: former main board director of BAA plc (2002- 2006), former chairman Heathrow Express 2005 to 2006, former chairman of Heathrow Airport (2001-2006), managing director of Gatwick airport (1997-2001). Her main claim to fame is that she was a member of the Royal Bank of Scotland’s Remuneration Committee, which approved at £20m pension deal for disgraced RBS ex-chairman Sir Fred Goodwin.

Lawrie Haynes (57) was appointed President of Nuclear at Rolls-Royce Group Plc earlier this year. After a 5 year stint as the first ever chief executive of the Highways Agency (1994-1999), he was a main board director and former chief executive of BNFL plc (2003-2007), and then became chief executive of the consultancy, White Young Green plc (2007-2009). Haynes has adapted the organisations he leads to comply with the political whims of his masters while at the same time being prepared to lead the employees that work from him ‘from the front’.

Cynics will conclude that both Kong and Haynes offer Network Rail a ‘safe pair of hands’ who will not upset NR’s senior executives by relating their remuneration to real performance, or try to challenge the government by pointing out some of the absurdities that arise from the way the Department for Transport attempts to run Britain’s railways.

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Will NR awayday bring returns?

Friday, September 11 2009

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Tynley Hall, Conference Room.

(The ‘awayday’ referred to in the article is not actually taking place at Tynley Hall, but we had to have a picture. So we choose a photo of a room in a rather nice hotel in Hampshire where Dyspozytor used to organise such events in his shady past.)

Network Rail’s hundred or so members are enjoying a two day ‘awayday’ to discuss corporate governance. We have been sworn to secrecy regarding the location. “Don’t want hordes of placard waving customers trampling all over the golf course, do we old boy?” Ironically, it is the angry customers that are part of the reason the reason that NR’s members are enjoying their two days of luxury.

Each Christmas – New Year holiday brings misery to hundreds of thousands of passengers who suffer badly delayed trains or services cancelled altogether as civil engineering works over run. Each year, the Office of Rail Regulation imposes heavy fines on Network Rail for missing key targets. Yet every year, Network Rail’s remuneration committee awards senior directors very large bonuses! Clearly something is not right.

Network Rail is a not-for-profit company limited by guarantee. Imposing fines on the company does not hurt the shareholders – there are no shareholders! It does not hurt the executive directors – they continue to enjoy their bonuses. The fines only increases Network Rail’s costs and these are ultimately passed on to the passengers – a double whammy!

For some time now a debate has been gathering momentum about the mechanisms which are supposed to ensure that Network Rail is effectively governed. At Network Rail’s 2008 AGM, a group of renegade members including Lord Berkeley, chairman of the Rail Freight Group, and Rob Holden, the London & Continental Railways chief executive, forced through a resolution by 42 votes to 34 to establish a governance ‘Review Group’ to consider the effectiveness of the company’s corporate governance practices, with particular reference to the accountability of the Board to its members and of its members to the company’s wider stakeholders.

Also in 2008, the House of Commons Transport Committee, in its report Delivering a sustainable railway: a 30-year strategy for the railways stated in its circumlocutory manner, we do not agree…that the governance structure of Network Rail is adequate… Passengers, Government and train operators all have a significant stake in the success of Network Rail. The current system where members are effectively approved by Network Rail’s Board, albeit indirectly, is inadequate. [emphasis added D.]

The NR Governance Review Group report has not been made public. (If you have the report do please send us a copy!) However, the Office of Rail Regulation did published the Report it commissioned from KPMG on Network Rail: Membership aspects of governance.  The reported noted that, members with experience of the railway industry agreed that the current membership structure and approach are flawed.

The views of the remaining Members differed both from this view and from one another! The report observed that the divergence of views seems to stem from a lack of consensus between Members about their role… this is not conducive to the exercise of effective governance.

Two particular issues emerged from the study. There is insufficient clarity about the role of Members and the way they are selected. Members also lack access to the information and analysis needed to take an informed view of Network Rail’s performance, including future prospects, and to hold the company to account efficiently.

The ORR has the option of requiring changes to Network Rail’s corporate Governance procedures through alterations to its licence conditions as part of the periodic review process. Let us hope that the output from today’s ‘awayday’ will make it unnecessary for the ORR to impose reform from above.

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