The Department for Transport has set out details of its review of executive pay and reward packages at delivery bodies including Highways England, Network Rail and HS2 in the wake of the debacle surrounding the delayed and over-budget Crossrail project.
Members of parliament’s Public Accounts Committee demanded answers on the department’s oversight of performance-related pay after it emerged senior managers at the trans-capital rail scheme continued to receive bonuses as the project veered off-track.
Crossrail services were due to begin running through central London tunnels last year, but there is still no confirmed start date for the line’s proper opening. Its cost has now climbed £2.8bn above its original budget to £17.6bn, with the expectation of further increases to come. Despite the issues with the project – trailed for years as being “on time and on budget”, former chief exec Andrew Wolstenholme was paid a bonus of £481,000 for his performance in 2015-16 and £160,000 for 2016-17.
Although it is a co-sponsor of the Crossrail project, DfT said Crossrail Ltd was wholly owned by the capital’s Transport for London body, putting its bonus arrangements beyond departmental reach. However just-published Treasury minutes have confirmed the DfT is reviewing pay-and-reward structures at the bodies it is responsible for.
“The department will write to the committee setting out its findings about the effectiveness of the senior pay frameworks within Highways England, HS2 Ltd and Network Rail and their redundancy arrangements,” the minutes record.
“This will include: setting out how central government guidance on pay and reward has been incorporated into delegations for the bodies; how the bodies attract, retain and develop the expertise they require; the relationship between performance and reward; and frameworks and redundancy arrangements.”
According to an Institute for Government crunch of official high-earners data, DfT dominates the Whitehall league for civil service pay because leaders at the likes of Network Rail, HS2, and the Civil Aviation Authority are permitted to earn private sector rates of pay.
In demanding the Crossrail-inspired review earlier this year, the PAC also referred to HS2’s 2016 failure to abide by DfT instructions on redundancy payments that saw dozens of staff awarded cap-busting packages that cost £1.7m more than permitted.
HS2’s chief executive at the time was Simon Kirby, who was Britian’s highest-paid civil servant and earned £750,000 a year. After Kirby left for a job with Rolls-Royce, Network Rail chief exec Mark Carne became the UK’s highest paid civil servant.
Carne’s successor at Network Rail Andrew Haines was appointed on a lower salary of £588,000 when he moved from the CAA last year. However his remuneration package is understood to include a performance-related bonus worth up to 9%.
The DfT said it would use input from the different companies’ remuneration committees to set out “what measures have been taken to align pay and reward with programme delivery” and individual performance.
“The department is working with the remuneration committees of HE, HS2 Ltd and NR and with ministers to agree common principles for senior executive remuneration, which will help to ensure greater parity in the way remuneration committees hold executives to account for their performance,” it said.
DfT added that it was working with Highways England and Network Rail to “amend their existing performance-related pay systems to improve the alignment between company performance and individual performance”.
In a suggestion that HS2 Ltd does not already have a performance-related pay system, the DfT said it would work with the company “to design and introduce a PRP system that does this amongst its workforce”.
It added: “These systems will continue to be linked to delivery objectives, milestones and key performance indicators for programme and project delivery, and the remuneration committees for these delivery bodies will be expected to provide justification to ministers for PRP awards within their organisations.”
DfT is expected to report on the issues by the end of the year.
Last month the government revealed HS2 is now expected to exceed its budget by more than the current total cost estimate for Crossrail, if it goes ahead.