Train strikes: Why the numbers don't add up to a rail deal

Rail minister Huw Merriman will meet union leaders including Mick Lynch of the RMT on Monday after three weeks of unseasonal disruption left the two sides apparently as far apart as ever.

While both say they are ready to talk, unions remain committed to further strikes if required and the government is legislating to limit industrial action, an inauspicious background to the first direct talks between ministers and bosses since November.

Ultimately, progress will depend on concessions on both sides, but at its heart are financial considerations that have changed radically in the three years since COVID-19.

These changes, driven by necessity and government strategy, have fundamentally altered the incentives for the constituent parts of the fiendishly complex rail network to do a deal.

Understanding those changes may help explain why a dispute that began in high summer seems no closer to resolution in the depths of the following winter.

The pandemic has dramatically and perhaps permanently changed the financial model. In 2019-20, the last full year before COVID struck, there were 1.74 billion passenger journeys generating £10.4bn in fares. Government subsidy amounted to £6.5bn.

The following year COVID lockdowns and working from home saw the position flip, with a meagre 388 million passenger journeys producing just £1.8bn in fares, and government support to keep the wheels turning rising to £16.5bn.

Even in the year to March 2022, with the pandemic in abeyance and recovery under way, there were fewer than a billion journeys, fares revenue was still below £6bn, and the government was putting in £13.3bn, more than double the pre-COVID cost to taxpayers.

So when Network Rail says the railways no longer have the revenue to meet inflation-matching wage demands they are at least half right.

Passenger fares revenue has plummeted.

Yet the most recent pay offers, of 5% plus 4% over two years from Network Rail, and 4% plus 4% from the train operators, are below the 5.9% fare rise that will apply from March.

But there is another equally important change underlying this dispute; where that revenue goes.

Revenue risk from train operators removed

In response to the pandemic the government tore up franchise agreements with privately owned train operators and replaced them with service contracts, removing at a stroke the revenue risk from train operators.

Instead of fares going to train operators who paid guaranteed revenue to the government, fares now go directly to the Department for Transport, which pays the operator to run services.

Crucially though, the train operators still get paid when workers are on strike, receiving compensation for lost revenue of £20m-£25m a day. The RMT claims that adds up to £340m paid by the government to private companies since the dispute began.

The Department of Transport would not provide a figure for total compensation paid but did say: "We do not tend to penalise the train operators for failing to run a full service on a strike day given it's not the train operators who have opted to strike."

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