Examination of Witnesses (Questions 20-39)
DEPARTMENT FOR
TRANSPORT, STRATEGIC
RAIL AUTHORITY
AND NETWORK
RAIL
26 MAY 2004
Q20 Mrs Browning: Mr Bowker, on that
same page 9 it says, "Poor industry relationships and general
lack of leadership" and then goes on to talk about the Strategic
Rail Authority being created to bring leadership to the industry.
Could you comment on the report we read in the Telegraph
this week on Monday of this rather unenviable slagging match between
the Strategic Rail Authority and Network Rail?
Mr Bowker: I think on the specific
issue of the creation of the Strategic Rail Authority there was
a desire to create some leadership; that was clear from the Transport
Act 2000 which created the Strategic Rail Authority, and we have
done that to the best of our ability and there has been some success
in doing that. The report that appeared in the Telegraph
was yet one more example of reports that often seem to appear
in the press from time to time. The reality tends to be extremely
different. The relationship between the Strategic Rail Authority
and Network Rail is by and large extremely good. We do occasionally
disagree on some matters and we tend to work extremely hard to
resolve those matters professionally and amicably and, by and
large, we do so.
Q21 Mrs Browning: But you will be aware
of this Report; it is very concerning. For example, it is talking
about a £9.7 billion projected portfolio of which you are
claiming only half, and costs arise from either direct costs and
construction. Is not that a matter of great concern to you?
Mr Bowker: It would be a matter
of great concern but I think it is worth pointing out that the
calculations that were referred to in that piece form a part of
a whole suite of calculations that we did and have done over the
last 18 months or so; they provided a great deal of the input
that we put into Tom Winsor's access charges review, and a lot
of the concerns that we identified are being addressed, so I am
afraid to say that what was being discussed in that piece relates
to some quite historic information.
Q22 Mrs Browning: But when you have two
people, one from Network Rail and one from the Strategic Rail
Authority—Ceri Evans from the Strategic Rail Authority and
Iain Coucher of Network Rail—having this exchange in the
press on the record, it does not give any confidence that these
relationships between these various bodies that need to work together
and work constructively together are any better than when Mr Rowlands
identified a historic case for us just a moment ago? Try and convince
me.
Mr Bowker: I can categorically
tell you that they are. It is the job of the press, as I have
observed over the last two and a half years, never to report the
99.9% of excellent relationship that carries on on a day-to-day
basis but to work very hard, with apparently some considerable
success, in identifying those areas where there is disagreement.
This is a relatively new industry with some extremely competent
and highly motivated individuals and in any such circumstance,
every now and then, those individuals will have disagreement.
It is a sign of maturity, in my view, that that happens, but on
the particular matter of the West Coast Main Line, which was one
of the items identified in that Report, the working relationship
between Network Rail and the Strategic Rail Authority is extremely
good and that is why that project is back on track and is going
to be a great success for this country.
Q23 Mrs Browning: But in order to get
the success that we all want to see, throughout this whole National
Audit Office Report, it is out-dated management practices and
poor communications between the various bodies that show that
progress is constantly impeded. We started off with the way Mr
Rowlands described a historic situation. I cannot see how you
are ever going to improve, meet targets, work effectively together
and create some synergy between you, unless you are going to share
information and deal with things in a "mature" way—your
words—rather than us having to read about what is—I
am sorry—nothing more than a slanging match in the press?
Mr Bowker: Mrs Browning, if we
were to evidence the correspondence and the detailed analysis
that passed between the Strategic Rail Authority and Network Rail
over the West Coast Main Line, you would not need the pages of
the Daily Telegraph to record it but something probably
akin to the Oxford Library. There is an astonishing amount of
correspondence and very hard work that has gone on between those
two organisations to put what was an absolutely disastrous project
under Railtrack back on track, and it has broadly worked. That
project is happening now; it is meeting its milestones; and it
is largely down to the very effective project work between not
just the Strategic Rail Authority and Network Rail but also all
the train operators involved, and I would defend absolutely the
fact that the story of the West Coast Main Line and many other
projects over the last 18 months/two years is evidence of an improvement
in relationships, not the reverse.
Q24 Mrs Browning: But there is a responsibility
on the Strategic Rail Authority because the Strategic Rail Authority
was created to bring that leadership to the industry. Mr McAllister,
from Network Rail's point of view, how do you see these obvious
difficulties of communication?
Mr McAllister: There may be blips
like that. I do not know the particular circumstances of what
the reporter was asking but if he was asking, for example, "Is
there any truth in the story that costs are high?", I would
expect our people to answer and give the information to the journalist
appropriately. What the journalist may make of that is entirely
up to them, and I often read stories in the press that, quite
frankly, I find incredulous and I do not know how they are arrived
at, and, frankly, I ignore most of them. As Richard Bowker has
already said, the relationships between ourselves and the Strategic
Rail Authority are very good indeed. We have regular communication,
and there is a complete sharing of information.
Q25 Mrs Browning: But Mr Coucher—who
presumably is known to you?
Mr McAllister: Very much so.
Q26 Mrs Browning: —is quoted as
saying, "it is a shame the Strategic Rail Authority did not
come to talk to us about this". Why did they not?
Mr McAllister: You may be looking
at a different version of the newspaper than the one I saw—
Q27 Mrs Browning: It is right at the
bottom. I will ask you to look at it when you get home!
Mr McAllister: It depends what
edition you have. I cannot add anything to what I have already
said.
Mrs Browning: Can I just say to you,
gentlemen, and thank you for responding to my questions, that
I think the National Audit Office have picked up a theme, there
is clearly an historic basis for it, but I think it is something
I would hope you would address seriously, because I cannot see
from the answers you have given me that there has been that much
progress. Not in this area.
Q28 Mr Steinberg: Mr Bowker, I cannot
resist this, I am sorry, but there was an article in the newspaper
recently which said that you hired Mr Steve Norris to show you
how to deal with the Committee of Public Accounts and that it
cost £1,500 for an hour out of public funds. Was the advice
worthwhile?
Mr Bowker: I have to say, and
you will forgive me for not being able to resist this, Mr Steinberg,
that it is another example of the media being highly selective
in their reporting of what happened. It is true that we used the
services of Mr Norris in that capacity. It is not true that it
was for an hour and, in fact, it involved a very considerable
amount of preparation time. I think it is entirely appropriate
for us to use external advice where that advice is relevant and
where it does not exist internally, which in that case it did
not.
Q29 Mr Steinberg: Did you find that the
advice was good?
Mr Bowker: I certainly believe
that the advice we paid for represented value for money, yes.
Q30 Mr Steinberg: For the taxpayer?
Mr Bowker: All our expenditure—
Q31 Mr Steinberg: Who have you been to
before this meeting?
Mr Bowker: We did not feel the
need to do that because that was the first time I appeared before
the Committee of Public Accounts and I did not feel I needed to
repeat the exercise.
Q32 Mr Steinberg: Can I just give you
some information? I am retiring at the next election, and I can
honestly tell you that I will charge half of what Norris charged,
so I will give you my card at the end of the meeting!
Mr Bowker: I will take you up
on that, Mr Steinberg.
Mr Steinberg: Mr Armitt, I watched television
the other night, I think it was during the weekend, and I watched
the news on TV and it was announced by Mr Crow that the union
was going on national strike, and I thought, "Oh, dear me,
here we go again, the same old rhetoric that we have heard for
years and years and years", but then I read the Report which
was entitled Making a fresh start, and that was a bit ironic,
was it not, and I thought "Here we are, a fresh start, and
we have a national strike looming in the next few weeks or so",
but then I read the Report and I got to paragraphs 2.31 and 2.33,
if you would like to turn to them, on page 20. Shall I finish
this after the vote, Chairman?
Chairman: Just finish your question and
then they will have time to think about the answer!
Mr Steinberg: No!
Chairman: You see? I want to give you
an easy time but I am not allowed to!
The Committee suspended from 4.00 pm to
4.10 pm for a division in the House.
Q33 Mr Steinberg: As I was saying, if
you have a look at paragraphs 2.31 and 2.32, I listened to Mr
Crow's words and thought "Here we go again" but then
when I read these particular paragraphs I thought to myself, "I
can understand what he is saying now", because I stumbled
across—
Mr Curry: You are lucky!
Q34 Mr Steinberg: —the bonus system
for managers and executives, and I can honestly say I did not
really understand how it worked but I did glean from it that the
bonuses that the managers and the senior executives can expect
to receive are 18%, 36%, and, in some cases, 60%. Is that right?
Mr Armitt: The maximum that could
be earned under the bonus scheme by directors is 60% of salary,
and to achieve that you have not only to achieve targets for the
current year but you have to meet all the targets of the year
following, so you achieve everything that was expected a year
ahead of time. As far as the strike itself is concerned, what
has happened is that a ballot has been held—
Q35 Mr Steinberg: I am well aware of
what is happening, yes.
Mr Armitt: —but the issues
within the—
Q36 Mr Steinberg: The issue, as I see
it, is that the ordinary workforce are getting around about inflation,
or have been offered around about inflation, increases but the
people who they are accountable to are getting bonuses of up to
60%. No wonder they are not happy about it. I would not be happy;
I do not think you would be. It is quite outrageous. These huge
bonuses are coming out of public money and public subsidy for
doing a job that they are supposed to do in the first place—which
they are not doing very well anyway. It is incredible. I cannot
understand it!
Mr Armitt: When Network Rail was
set up it was essentially a requirement that there was a management
incentive programme set up for the company, and the programme
which was set up was one which the remuneration committee, which
obviously the executive directors are not members of so it is
the non executive directors, took advice on from external experts
as to what was an appropriate level of incentive to put in place
to attract the right level of people to the company—
Q37 Mr Steinberg: I have no objection
to anybody being paid what they are worth for doing the job but
what I cannot accept is that the man, or woman, almost gets double
the salary for doing the job that they have applied to do in the
first place. Let's give some examples. I am not trying to be at
all rude but what do the executives and the managers actually
earn? What is their basic salary? What is your basic salary? I
will tell you mine, which is fifty something thousand a year.
What is yours?
Mr Armitt: My basic salary is
468.
Q38 Mr Steinberg: 468—?
Mr Armitt: Thousand.
Q39 Mr Steinberg: £468,000? And
you get a 60% bonus on top of that, if things go well?
Mr Armitt: If things went extremely
well and we exceeded all targets by a significant amount.
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