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Network Rail

4.10 pm

Mr. Jim Devine (Livingston) (Lab): It is a pleasure, Mr. Jones, to initiate this debate under your chairmanship.

I wish to raise a serious matter. It is to do with an article in the latest edition of the journal of the Transport Salaried Staffs Association by Gerry Doherty, the organisation’s general secretary. First, I declare an interest, inasmuch as the TSSA has a constituency agreement with the Livingston constituency, which I am proud to represent.

TSSA is a trade union with some 30,000 members. It organises clerical, supervisory and managerial workers in the transport and travel industries, as the name suggests. About 7,000 of its members are employed by Network Rail, the not-for-profit company that replaced the failed Railtrack, which was put in charge of Britain’s railway structure following the privatisation of the railways in the mid-1990s.

Network Rail receives about £3 billion of Government subsidy per annum. The company is managed by a board of six executive directors and a number of non-executive directors. There are no shareholders, because it is established on a not-for-profit basis, so the board is theoretically held to account by some 100 persons appointed by the board from within and outwith the railway industry. Mr. Doherty, the general secretary of TSSA, is a member of that body.

In his article in the union journal, Mr. Doherty says that he refused to endorse Network Rail’s annual accounts at last year’s annual general meeting; he alleges that public money is being used to mask breaches of employment law and possible discriminatory practices by the company. He says that for some time the company has been dismissing employees with no regard to the agreed procedures for dealing with alleged poor performance—or, more worryingly, to people’s employment rights. According to Mr. Doherty, Network Rail achieves its aims by paying off employees to avoid matters being exposed in the public domain at employment tribunals. Details of the settlements, including the financial details, are covered up by the insertion of a confidentiality clause.

In an article in yesterday’s Daily Record, Network Rail says that its position—an astonishing position—is no different from that of other companies of a comparable size in matters of that nature. Whether or not that is the case I have no way of knowing; nor do I know to which companies Network Rail is comparing itself. If other companies wish to spend their shareholders’ money on such despicable practices, that is a matter for them. However, Network Rail is funded from the public purse, and the use of public money in that manner is utterly indefensible. We, the taxpayers, give Network Rail an annual subsidy of £3 billion to be invested in the renewal of our railway infrastructure—not to be used to dismiss its employees in breach of employment laws laid down by Parliament.

Sir Ian McAllister wrote to Mr. Doherty on 15 January this year; I have had sight of that letter. In it, Sir Ian indicates that in 2007 the company dismissed 247 employees, 38 of whom were covered by compromise agreements—that is, by confidentiality clauses. The figures for 2008 were 270 and 57 respectively. In the past two years alone,
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95 employees have been dismissed by the company, and the details of their settlements have been covered up. The number seems to have increased year on year.

If an employee is successful at an employment tribunal in establishing unfair dismissal, the maximum compensation that can be awarded is £64,000. If Network Rail settled each of those cases at that level, it means that more than £6 million of taxpayers’ money would have been used to cover up those illegal practices.

Mr. Jim McGovern (Dundee, West) (Lab): I congratulate my hon. Friend on securing this important debate. He says that the maximum compensation payable is £64,000. Is that a hint that, somehow, the company is paying greater sums of money as hush money, to guarantee people’s silence?

Mr. Devine: That is one of the essential charges that I intend to make. I hope that the Minister will be able to say how much public money has been spent by Network Rail on such things. The minimum figure is £6 million.

If Network Rail has settled these cases at a lesser amount, what is the problem in putting that global figure into the public domain, as Mr. Doherty has asked? We could then judge whether our money was being used wisely. No one’s identity would be revealed by making public a global sum, and it would not breach confidentiality clauses in individual agreements.

Even more worrying, however, is the assertion in Mr. Doherty’s article that some of the settlements involved discrimination, and that last year the figure was 30 per cent.

Mr. McGovern: I thank my hon. Friend for giving way; he is being generous with his time. As a former trade union official, he will be aware that in cases of discrimination there is no financial limit on the amount of compensation that can be paid. Does he understand that to be the case?

Mr. Devine: I do, and I am grateful for my hon. Friend’s intervention. I am sure that the House is aware that such payments can run to hundreds of thousands of pounds. It is therefore even more important that we find out how much Network Rail is paying in the cases that I have cited.

If the company uses public money to ensure that the allegations never see the light of day—that they never reach the public domain—that surely is a matter for the House and for the Minister. My information is that Mr. Peter Bennett, Network Rail’s head of human resources, is presiding over a culture of fear and bullying. Long-serving staff are being forced out, but only after they have signed confidentiality clauses that prevent the culture of fear from being exposed in the public domain. There is a saying among Network Rail’s staff that if someone is called to meet a senior manager, they are “away to a brown envelope meeting”. That is indicative of the prevailing culture.

In November 2003, Mr. Bennett presided over Network Rail’s so-called “Project Violet”. Almost overnight, some 600 employees, senior and long-serving managers among them, were dismissed and offered terms that in effect precluded them from voicing concerns in an employment tribunal, given the substantial settlements that were offered—settlements paid out of the taxpayer’s pocket.
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Again, we do not know the full extent of those settlements, because they are not reflected in Network Rail’s annual report.

Potentially millions of pounds of taxpayers’ money is being wasted because the company appears not to want Mr. Bennett’s management style to be examined at an employment tribunal. I remind hon. Members that claims of sex discrimination or other discrimination are not subject to the £64,000 compensation limit regarding unfair dismissal. There is no limit on the level of compensation that a tribunal can award in such cases. If my information is correct, therefore, and any of the 95 cases that Network Rail has settled in the past two years have involved such claims, the potential cost of settlement is likely to be much higher than the £6 million that I quoted earlier. No wonder that Mr. Doherty, doing his duty as a public member, refused to endorse the company’s accounts last year without receiving answers to the legitimate questions that he raised. I suspect that he will do the same this year.

It is simply unacceptable for Network Rail to come to the Government annually to seek taxpayers’ money to carry out its legitimate business of renewing our railway system, but then to use that money to circumvent the employment rights of its employees—employment rights laid down by this Government. Then to cover up how much money is involved in subsequently covering up these practices only exacerbates the crime. If, as alleged, any of that money is used to cover up alleged discriminatory practices on the part of the company, words fail me.

Mr. McGovern: My hon. Friend will be aware that, since I was elected in May 2005, I have campaigned on the subject of Dundee railway station, which is an atrocious station and is the first thing that many visitors to Dundee see. How does he think that the people of Dundee would feel if they knew that £6 million, and possibly more, has been spent covering up bad employment practices, when it could have been invested in Dundee railway station?

Mr. Devine: They would be as angry as the TSSA, Network Rail employees and my hon. Friend, because frankly it is an abuse of public money. We do not know how much is involved, but as he rightly says, it could have been spent on improving and investing in the rail network.

If Network Rail has nothing to hide, let it answer Mr. Doherty’s questions in relation to the 2007 annual accounts and the questions that he will no doubt raise when the 2008 accounts are published. These questions are very simple: how many employment tribunal claims were taken out by employees or ex-employees against Network Rail over the years? How many were contested at tribunal by Network Rail? How many were successfully defended at tribunal by Network Rail? How many were unsuccessfully defended at tribunal by Network Rail? What was the total amount awarded against Network Rail by tribunals? How many settlements were reached between Network Rail and employees or ex-employees during the course of tribunal proceedings, but prior to a final hearing, whether by way of compromise agreement or otherwise?

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What was the total amount paid by Network Rail in settlement of these claims? The general public have a right to know the exact figure, without breaching any compromise agreement or confidentiality clause, because this is our money. How many compromise agreements were reached between Network Rail and employees or ex-employees without the matter ever being the subject of proceedings in an employment tribunal? What was the total amount paid by Network Rail in settlement of these claims? Are these amounts included in the annual accounts, and if so, where can we find them? Those are crucial questions, answers to which should be detailed in the annual reports. We should know how much money Network Rail is spending in that manner. Finally, we need to know what bonuses were paid to senior directors of Network Rail in 2007 and 2008. In particular, it would be enlightening to find out the director of human resources’ bonus and the performance criteria to achieve it.

I want to go further, however, and challenge Network Rail to indicate how many of the 95 cases that it settled by means of compromise agreements with former employees, in 2007 and 2008, included claims of sex, race or other discrimination. I have highlighted the potential cost implications for taxpayers of a substantial number of such agreements being for sex, race or age discrimination. It has been explained that a company can incur unlimited costs at an industrial tribunal over such charges. How much was paid in total in settlement of those claims, and has any action been taken against those responsible? Failure to answer these questions in an open and transparent manner will only add to the suspicion that this company has been using taxpayers’ money to cover up breaches of its employees’ rights and, even worse, alleged breaches of discrimination legislation.

4.25 pm

The Parliamentary Under-Secretary of State for Transport (Paul Clark): I congratulate my hon. Friend the Member for Livingston (Mr. Devine) on securing this debate, which raises some important issues. I also congratulate my hon. Friend the Member for Dundee, West (Mr. McGovern) on his interventions, which added to the points made.

Hon. Members will be aware that Network Rail is the not-for-dividend owner and operator of Britain’s railway infrastructure, which includes the tracks, signals, tunnels, bridges, viaducts, level crossings and stations. The company’s aim and purpose is, of course, to provide a safe, reliable and efficient rail infrastructure for freight and passenger trains to use. The company’s set-up and governance affect the issues to which I can refer. Network Rail is a company limited by guarantee—a private company operating as a commercial business—is independent of the Government, is directly accountable to its members, to whom my hon. Friend the Member for Livingston referred, and is regulated by the Office of Rail Regulation.

Network Rail’s members are drawn from the rail industry and general public. They do not have any financial or economic interest in the company and do not receive dividends, share capital or any other form of payment from Network Rail, except for travel expenses. Members perform a similar role to shareholders in a plc. As such, they review the performance of Network Rail against its commercial and other targets, as well as
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industry benchmarks for its provision, maintenance and management of the railway infrastructure. It is the members’ duty to act in the best interests of the business without personal bias. They do not make any strategic decisions themselves, but hold the board to account for its management of the company.

In particular, members seek assurances from the board that the necessary processes are in place and are being implemented to maintain high standards of corporate governance. The board is responsible for governing the strategic direction of the business, supervising its operational management and providing leadership within a governance framework, which it oversees. This extends to taking overall responsibility for financial performance, internal controls and risk management of the company, which, like any other employer in this country, has certain duties to its staff and must operate within relevant employment legislation and directives.

Network Rail is a company of some 35,000 people. My hon. Friend said that people have been dismissed for alleged poor performance, ignoring employment rights. His comments are on the record, but those are matters for the management to follow through on; as I have already indicated, the Government do not have direct day-to-day control over those matters.

Mr. Devine: I suspected that the Minister might use this argument, but he cannot seriously be telling the Chamber that, despite an investment of £3 billion a year, the Government have no remit to look after the management of that money.

Paul Clark: Of course the Government have responsibility to ensure that there is value for money. Whenever taxpayers’ money is used, they have to ensure that it is used in the most effective and efficient way. As my hon. Friend is aware, numerous agencies exist within the Department for Transport—for example, those that run safety regimes for the Driving and Vehicle Licensing Agency—that operate on behalf of the Government, but which are not managed day in, day out by Ministers or their civil servants. I will come to some of the other points raised by my hon. Friend later in my speech.

In return for commitment from its staff, the company provides training and development for its signallers, maintenance workers, professionals and leaders. All permanent employees participate in incentive arrangements that reflect the company’s performance against its key business targets for train punctuality, asset stewardship and financial efficiency.

In addition, the company offers a company pension scheme, which I know is the subject of usual industrial relations negotiations, and a 50 per cent. discount on season tickets. As well as helping to meet immediate needs, Network Rail believes that such an approach encourages people to stay and develop within the organisation. The company’s equal opportunities policy seeks to ensure that anyone who meets the requirements of the job is eligible for employment within Network Rail irrespective of age, disability, employment status, gender, health, marital status, membership of a trade union, nationality, race, religion, sexual preference, social class or other non-job-relevant personal characteristics. The company also makes every effort to eliminate discrimination—direct and indirect—from the recruitment and selection process.

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As I said earlier, this is a company of some 35,000 people, and as such there will always be cases in which someone gets dismissed. There are proper, recognised channels that have been negotiated over time and, in Network Rail’s case, have been agreed by the trade union and the employer representatives. My understanding of the level of staff turnover in Network Rail indicates that there is nothing exceptional in its operation.

I take seriously the comments that Network Rail’s management is presiding over a “culture of fear.” I also noted the reference to 2003, which was, if I recall correctly, just after the Government replaced Railtrack with Network Rail, which has managed the infrastructure in a far better way. I do not know whether that incident was related to what my hon. Friend said about the dismissal of some 600 people. Again, the issue of what can be claimed from employment tribunals is a matter for discussion elsewhere. We are not discussing the legislation that governs employment tribunals and levels of compensation. One would assume that there would be substantial numbers of employment tribunal cases if that culture of fear was such that it was leading to many people fearing for their jobs.

I understand that Network Rail offers a range of positions with development programmes specifically tailored to suit the needs of everyone from school leavers through to graduates and experienced engineers. Those programmes lead to nationally recognised qualifications. I am told that some of the company’s most senior engineers and managers have come through those programmes in past years.

Network Rail’s success in meeting the challenges of the future will depend on the skills, motivation and capabilities of its people. More than 50 per cent. of Network Rail’s work force are engaged in engineering functions.

Mr. McGovern: I should like to ask the Minister one question before he concludes his speech. My hon. Friend the Member for Livingston (Mr. Devine) asked 10 specific questions. Does the Minister intend to answer them today, or will he forward his answers to my hon. Friend at a later date?

Paul Clark: I intend to answer them, but I wanted to set out that we have a company that is making provision to recruit, train and retain staff within its organisation. That is why I was referring to the apprenticeship schemes that my right hon. Friend the Secretary of State for Transport visited at HMS Sultan in Gosport recently, and the advance apprenticeship scheme that was launched in September 2005. Moreover, NVQ and BTEC qualifications have been introduced, which will help to raise skills and to maintain a qualified work force within Network Rail, which is important both to the company and to the travelling public. The company has recently signed up to the Government’s skills pledge and is working with the local learning and skills council to undertake an audit of all maintenance operations people on adult literacy and numeracy courses, and will then put in place a plan to help and support them.

As I have said, the Government do not operate and manage Network Rail on a day-to-day basis. Management and employment policies are negotiated through the usual channels, of which my hon. Friend the Member
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for Livingston is well aware. Therefore, the matters that have been raised today have already been raised by members of Network Rail at the annual general meeting. I am sure that there will be another opportunity to do that at the July AGM that will shortly be upon us. None the less, they are not matters over which we, as Ministers, have any locus to intervene.

As for bonuses, let me say again that that is a matter for Network Rail. However, I am sure that hon. Members would expect Network Rail’s remuneration committee to be mindful of the public mood and not to award bonuses that the travelling public would consider unjustified by their own experiences of Network Rail’s performance. I am referring here to the hundreds of thousands of commuters on the west coast main line whose services were cancelled and massively disrupted in the new year due to the poor maintenance of overhead wires.

Mr. McGovern: The Minister says that Network Rail will take on board the public mood about bonuses. Would he expect it to take on board the public mood about using public money to keep people silent?

Paul Clark: That is why this debate is important. I am sure that members of the Office of Rail Regulation and of the Network Rail board will read this debate with interest and focus their minds on the issue.

In conclusion, Network Rail is running policies that are helping to recruit and retain members, but there is, as always, a long way to go. This debate will highlight the concerns that exist across certain sections of Network Rail.

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