Britain’s rail strike exposes reforms needed to put industry back on track

The biggest strike to hit Britain’s railways in decades has highlighted the extent to which coronavirus wrecked the sector’s finances and exposed a deep rift on how to modernise the industry in the country that invented it 200 years ago.

A collapse in passenger numbers at the height of the pandemic, and the subsequent shift to remote working, has left a £2bn annual funding gap as ticket revenues have fallen.

RMT union members this week walked out in protest over how the government and rail companies propose to balance the books: cutting staff costs through limited pay rises, redundancies and changes to working practices to boost productivity.

Some 40,000 union members will hold the second of three one-day strikes on Thursday in a dispute over redundancies, pay and working practices. Only about 20 per cent of services will run as a result of the action. The third day of action is scheduled for Saturday.

For Mick Lynch, the RMT’s combative general secretary, the government’s “transport austerity” is a grave threat to his members, particularly with inflation at a 40-year high, and to the wider future of the railways.

I work Sundays. If my manager calls me on my day off, I answer the call. We work Sundays, late shifts, early shifts . . . I am not a person from the 1970s

But for ministers and the industry, it is the only way to respond to an environment in which the numbers do not add up any more.

“I think, frankly, it is taking too long for some of our trade union colleagues to recognise that this isn’t some sort of class war, this is about the fundamental financial deficits that the industry is facing,” said Andrew Haines, chief executive of Network Rail, the state-owned company which oversees the network infrastructure.

Passenger numbers fell to 5 per cent of normal levels during the first wave of Covid-19 and two years later are still down by a fifth. While leisure trips have rebounded, commuters, who tend to pay higher prices, have been slower to return.

South Western Railway recently disclosed that commuter numbers were still at only roughly half their pre-pandemic level and those with the longest, and most expensive journeys, have returned in the smallest proportion. Its passenger surveys show that people expect to make about 60 per cent of pre-pandemic journeys, in line with working in the office three days a week.

“Covid has left the railways in a critical financial situation,” transport secretary Grant Shapps said last week, as he argued the network was competing with video conferencing as much as the car.

The state pumped in £16bn of emergency funding to keep trains running over the past two years. But Shapps said the industry must now reshape its finances to fit the new landscape. “It is not like the old days . . . for millions of passengers rail is now a choice not a necessity,” he said.

The railway has always received some level of taxpayer subsidy. Government support for the operational funding of the railway rose from less than £4bn in 2015-16 financial year to £6.5bn in 2019-20, about 30 per cent of its overall revenue.

But the pandemic supercharged this. In 2020-21 government support for day-to-day operations rose to £16.9bn, while revenue from fares was just £2.5bn, down £9bn in a year.

There are only three ways to close a funding gap, which has since stabilised at roughly £2bn per year: more taxpayer money, even higher ticket prices or cost cutting.

Ministers believe pumping in more money would be unpalatable given the demands on other services and limits on public spending, and that increasing fares further would also prove difficult.

Cuts could come through running fewer trains, but the biggest savings are expected to come from staff costs.

The RMT has rejected a pay rise of about 3 per cent, well below inflation, which is 9.1 per cent, and has asked for 7 per cent in addition to no compulsory redundancies.

But the government and industry argue that the way to unlock the dispute is for unions to modernise working practices rooted in a bygone era, which would create savings to put back into pay.

Haines this week told unions he needed to cut 1,800 jobs, but that almost all of these could be done through an oversubscribed voluntary redundancy scheme.

Haines and Shapps have revealed some “unacceptable” working practices that unions have tried to hold on to, from taking a year to negotiate a new app to message staff to a refusal to stop sending teams to physically check voltages on trackside cables that could be monitored remotely.

Sundays are still also classed as overtime rather than a day of the working week, meaning that during a 2018 England World Cup match hundreds of trains were cancelled as staff chose not to work.

“It feels like this is a bit of a wake-up moment, in saying we cannot continue to fund pay and pay awards when we live with such unacceptable practices,” Haines said.

But for union members and RMT bosses, every “efficiency” is a job at risk or a change to hard-fought working conditions.

Lynch said he had negotiated modernisation in every business his union had members in, and accepted that the rail industry would get smaller over time as technology replaced some jobs.

Many new technologies, such as to detect faults on tracks, had already been deployed with union blessing, he added. But, he argued, anyone who wanted to stay in the industry should be allowed to and workers should be paid more for the work they do.

RMT officials are angry at what they see as attempts to caricature their members. “I work Sundays. If my manager calls me on my day off, I answer the call. We work Sundays, late shifts, early shifts . . . I am not a person from the 1970s,” one RMT branch secretary said.

Haines said there was a pathway to a deal if the RMT could move on working conditions, but Lynch this week said he was ready for a long dispute.

“What else are we to do? Are we to plead? Are we to beg? We want to bargain for our future. We want to negotiate and if you are not bargaining you have to beg,” he said.

Additional reporting by Delphine Strauss and Jim Pickard in London