Network Rail’s controversial bonus scheme has been defended by the chairman of the rail industry watchdog in the teeth of political attacks on the programme.

Chris Bolt, of the Office of Rail Regulation, said it was “clearly important” that management at the company that owns Britain’s rail network was made to focus on meeting its targets.

“That’s what the financial incentive plan is there to do,” he said.

His remarks follow signals last week from Lord Adonis that the government would prefer managers to forgo their bonuses this year – although the rail minister stressed that the issue was out of the government’s hands. The bonus scheme came under fire from Conservative members of the Commons transport select committee last month.

The ORR requires Network Rail, as a condition of its licence, to operate a management bonus scheme. The requirement was put in place because the unusually structured company has no shareholders to pressurise management.

Mr Bolt said provided the bonuses were “linked to the regulatory targets, this was a perfectly sensible way to get the management to focus on what customers want”.

Iain Coucher, chief executive, was paid £511,000 ($740,821) bonuses for 2007-08, on top of his £529,000 basic pay. The bonus was reduced because Network Rail’s remuneration committee was concerned about engineering work over-runs in January 2008.

The previous year’s bonuses were trimmed after the fatal Grayrigg crash in February 2007.

Mr Bolt declined to comment on whether the 2008-09 bonuses should be paid in full. The ORR will write to the remuneration committee in May.

Lord Adonis last week pointed to three overhead line failures in January on the London-Glasgow west coast main line as evidence of a “mixed” performance.

Mr Bolt said: “I don’t comment on whether the overhead line problems are sufficiently significant to make a big dent in the bonuses. But, very clearly, we do think there’s a place for a management incentive scheme for Network Rail.”

There had been a debate about whether the regulatory targets for the five years to March 31 2009 had been sufficiently tough, Mr Bolt conceded. Network Rail met targets for a 30 per cent cut in costs and reduced the number of trains arriving late by 10 percentage points over the period. But there would be no such questions over the new period that started from April 1.

“We think they’re appropriately challenging,” Mr Bolt said. “It’s not going to be easy for Network Rail to deliver them.”

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