Network Rail boss Iain Coucher resigns as pressure mounts over funding

Infrastructure firm faces serious budget cuts

Network Rail chief executive Iain Coucher quit today with a warning that his successor will have to "work hard" to stave off a funding crunch.

Coucher's departure was revealed as publicly funded Network Rail prepares to announce next week whether it will award bonuses to executives who are already among the most lavishly remunerated in the public realm.

Coucher said his decision to step down after three years in charge was not influenced by the financial pressures bearing down on the company, which faces tough cost cuts regardless of the state of the wider public finances.

However, the Network Rail boss admitted that a case still had to be made for further state investment in the industry. Coucher said: "We have to work hard to convince people about the need to invest in the railways."

Network Rail must deliver £35bn worth of work between 2009 and 2014 for £30bn, including efficiency savings of 21% that have triggered a serious industrial dispute with the RMT rail workers' union. Network Rail's funding and works programmes are set every five years and Coucher said he resigned because he could not guarantee that he would see through negotiations for the 2014-19 period, which begins in 2012.

"This was purely a personal decision. When you look at the challenges my successor will face, it is about securing the financing for the next control period. That would have taken until 2015 or 2016 and having been here for eight years, with three as chief executive, I was not able to give an unequivocal guarantee that I would be here." He added: "I rapidly came to the conclusion that leaving sooner rather than later would be better." Coucher will remain in his post for several months until a successor is found.

Having benefited from a five-year plan struck at the height of an economic boom in 2007, Network Rail faces a much tougher round of negotiations this time. The government spends about £5bn a year on the railways, with Network Rail receiving £3.7bn of that investment in grants last year. Senior figures within the rail industry are openly speculating whether the new transport secretary, Philip Hammond, will order a review of the 2014-19 period in a move to curb that expenditure more drastically. Network Rail has warned that meaningful cuts in its budget can only come at the expense of a smaller railway that will have to carry fewer passengers than the 1.3bn journeys it managed in 2009.

The government is expected to lean heavily on a rail industry review by Sir Roy McNulty, former chairman of the Civil Aviation Authority, for guidance on how best to squeeze costs out of Network Rail and the train operators who use its tracks and stations. An initial report by Sir Roy warned this week that the current funding structure, supplemented by fare income of around £6bn a year, could be "unsustainable".

The financial burden of supporting a costly rail industry became even heavier for the government today when Stagecoach won a claim that it is owed £100m of extra subsidies from the Department for Transport for its South West Trains franchise. At the same time, the DfT announced a consultation on rail franchise reform, which involves private companies bidding for the right to operate passenger services on designated routes – often in exchange for premium payments. The move is expected to cost the DfT millions of pounds in the short term because it has suspended bidding for the Greater Anglia and Essex Thameside franchises while it holds the review. Bidders for those contracts, currently owned by National Express, are now expected to demand compensation.

The transport minister, Theresa Villiers, said the consultation would ask whether longer franchises, of between 15 and 20 years, would encourage operators to finance improvements in in trains and services. The government hopes that the lure of extended contracts will entice greater investment from the private sector and allow the government to reduce the taxpayer's contribution to the railways.

(See also http://www.savethetrain.org.uk/forum/index.php?topic=8125.msg13168#msg13168)

Departure board

Iain Coucher, right, waived a £300,000 bonus last year but his basic salary of £605,000, plus £105,000 from a long term incentive plan, still made him one of the highest-earning employees at a state-backed company. His departure, and impending news on 2010 bonuses next week, drew criticism from unions today. "He has presided over a culture at Network Rail that has attacked jobs, working conditions and rail safety at the sharp end while his salary and perks have gone through the roof," said Bob Crow, leader of the RMT. Coucher said he had a "good" relationship with the RMT but admitted that cutting costs was always going to generate friction with the union.