Railtrack bonuses 'unjustified': MPs

Train companies pay Railtrack millions in bonuses

MPs have accused the rail regulator of allowing Railtrack to get huge bonuses from train operators, despite missing targets to reduce train delays.

The Commons Public Accounts Committee said in a report the Office of the Rail Regulator (ORR) had not set out Railtrack's maintenance responsibilities properly.

After privatisation, the ORR did not have adequate information on the condition of the network, so contracts were weak and the regulatory regime had serious deficiencies, MPs said.

Rail regulator Tom Winsor said he had been appointed last year to bring in tougher regulation and the ORR was now sweeping away the past shortcomings of the company's contract.

It is fundamentally wrong that Railtrack is receiving generous bonuses for reducing delays, despite missing the regulator's targets for exactly that

David Davis MP

He told BBC Radio 4's Today programme: "Railtrack was privatised with a fantastically weak licence, weak contracts and a poor financial regime that did not give it an adequate regime for investment."

He admitted "serious miscalculations" were made when performance bonuses were set, and said he had acted "as quickly as legislation will allow" to reform Railtrack's financial structure, bonus system, contracts with train operators and network licence to improve accountability.

"The beauty of the system is that it contains change mechanisms available in the hands of the regulator which, if he has the will to use them and I do, can effect improvements in the public interest."

Railtrack said its performance standards and bonuses had been negotiated after consultation with the industry, and that the National Audit Office had concluded it had not gained any windfalls from bonuses.

'Serious shortcomings'

Railtrack spokesman Gerald Corbett said: "Quite a lot of good things have come out in the last few years.

"This fantastic growth that we are now seeing on the railways which is one of the main reasons why the regime as it was set up is not currently working."

The committee said Railtrack received £139m bonuses from the train operators between 1995-96 and 1998-99 and was expected to receive further bonuses for 1999-2000 despite failing to meet targets for reducing train delays.

The committee's findings confirm that privatising Railtrack was bad news... resulting in not only increased cost to the public, but also poor quality services

Rail union leader Vernon Hince

Conservative MP and committee chairman David Davis said: "Railtrack's licence at privatisation contained serious shortcomings because of haste in privatising.

"As a result, passengers have seen poorer quality track, weak contracts between Railtrack and train operators and possibly unjustified performance bonuses to Railtrack.

"We are concerned that this haste contributed to serious deficiencies in the subsequent regulatory regime."

Mr Davis added: "It is fundamentally wrong that Railtrack is receiving generous bonuses for reducing delays, despite missing the regulator's targets for exactly that."

Regional differences

The number of broken rails had increased since privatisation, the committee added.

The MPs were also concerned that the company's performance in reducing delays had varied considerably between different regions.

In the Great Western zone, delays caused by Railtrack had actually increased.

But as penalties imposed on Railtrack by the regulator are set at a national, not regional level, serious delays can persist on individual lines.

The committee said the incentive regime should be targeted to achieve improvements across the network.

Vernon Hince, assistant general secretary of the biggest rail union, the RMT, said Railtrack had always been able to "bamboozle" regulators.

"Privatising Railtrack was bad news for the public and travellers alike, resulting in not only increased cost to the public, but also poor quality services."