Our Ref BR6/0001

14th February 2022

Dear Colleagues


I am writing to update members following talks between RMT and Network Rail which took place last week. Your representatives presented a set of proposals to protect jobs, terms and conditions and to counter the cuts which the company are planning.

The company has been planning to make cuts since at least February 2021 and is seeking an immediate cost saving of £100 million in maintenance and £170 million in management.
They intend to deliver a proposal to a joint national council which will feature:

50% reduction of Maintenance Scheduled Tasks with a corresponding fall in work by approximately 17% and 600 job cuts. This is already happening and has gone live in some areas.
Removal of the Operative Grade, slashing more than 4,500 posts and replacing them with 1050 new Assistant Technician roles on inferior pay and conditions, which would be nonaligned to any discipline or route and rostered individually. This equates to cutting headcount by almost a third.
They plan to supplement the role of Assistant Technician with Apprentices working in the role in full while not in the classroom.
The role of working supervisor to be removed.
All Maintenance workers to adopt the higher rostering principles contained in Phase 2bc.

The company has indicated they will not meet our demand for a cost of living pay increase that is not funded through cuts to jobs and conditions or to our other demands, although they have indicated they do not intend to make reforms to pensions until 2024.

These cuts to safety-critical jobs and maintenance tasks will create a serious health and safety risk to passengers and rail workers alike. These cuts are also unnecessary.

Staff Costs have been falling against revenue and operating costs. The real financial issue faced by Network Rail is servicing huge debts it incurred through issuing bonds within the Debt Insurance programme - a result of the disastrous decision to privatise rail infrastructure during the Railtrack era. Network Rail spends £2 billion annually servicing that debt.

The same figure the DFT has determined must be cut from Railway’s expenditure. It is no surprise that the £400 million figure for proposed cuts to Network Rail corresponds with the repayments on bonds due to mature in 2023.

Our response to the company has been to highlight this and demand that debt restructuring must be a feature of any cost savings in Network Rail and that we cannot tolerate our members’ jobs and conditions being cut to protect creditors, mainly banks, from declining profits on their Network Rail bonds holdings.

We also demonstrated that Network Rail’s reliance on outsourcing is unaffordable and provides another area where savings can be found while also protecting jobs and even expanding the numbers of directly employed secure jobs.

ORR analysis of Network Rail’s spending shows that in 2019/20, Network Rail spent £2.9 billion on renewals. Last year that figure rose to £3.9 billion. Commercial profits on renewals projects are reckoned within the industry to be around 6%. That means that outsourced renewals work is likely to have generated profits of around £175 million in 2019/20 and £235 million last year.

Insourcing even half of Network Rail’s outsourced renewals work would save around £115 million in commercial profits, enough to prevent the cuts in maintenance work that are being envisaged.

Network Rail paid out £75 million to its contractors in facilities management, including around £28 million to Mitie and a further £6.4 million to its subsidiary Interserve.

With commercial profit margins on facilities management contracts at 6%, this means that Network Rail could save a further £4.5 million by insourcing this work and cutting the profit extraction from facilities management – these contracts are up for tender this year and we have demanded they be in-sourced

Estimating commercial margins on the provision of maintenance agency work at around 8% and that NR Spent £8.12 billion with the Top 20 construction companies within its supply chain in 20/21 even if you took the conservative estimate that 50% of that spend was on labour, in-sourcing only half of that work would deliver a £200 million saving in profit leakage.

In 2021, according to its data published for spending over £25,000, Network Rail spent more than £14 million on Contingent Labour. This included almost £2 million to Ganymede Solutions Ltd, almost £7 million to McGinley Support Services, £1.3 million to Morson and £1.3 million to Vital Human Resources.

Estimating commercial margins on the provision of maintenance agency work at around 8%, the companies involved may be skimming around £1.1 million each year on the existing workforce.

NR has already made savings in staff costs through wage restraint and an estimated £49 million in a managed decline in filling vacancies in Maintenance.

The Bonus Scheme paid out an average of £50 million pre-pandemic and should be abolished entirely.

Director pay is out of control. If NR cut Director pay to the same salary as the Prime Minister it could save £5 million per year.
Nine non-executive directors were paid £605,000 in 20/21 for attending eight meetings that year. Peter Hendy alone was paid £29,600 for the equivalent of one Operative Shift.

We have demanded that the company now table their proposals at national level and respond in full to our demand for a cost of living pay increase, commit to no compulsory redundancies, and commit to protecting our pensions, terms and conditions.

Your union’s National Executive Committee will be giving further consideration to this matter at an early date, following which I will write to you again with an update and full details of any decisions made.

Members will be familiar with what has been called the “cost-of-living crisis.” The Retail Price Index (RPI), the measure of inflation that is used for pay negotiations on the railway has risen to 7.5%. Energy prices are also increasing at an incredible rate with Ofgem having announced that the price cap – determining the maximum energy companies can charge – will rise by 54% in April. In April the government are increasing National Insurance (NI) contributions by 1.25%. Food and drink, as well as vehicle fuel costs, have all increased.

As the costs that members must pay have all risen, as well as the NI hike, it is high time that Network Rail meaningfully engages with RMT’s Pay Claim and table a proposal that not only reflects the massive rise in living costs but rewards the work members have been doing throughout the Covid-19 pandemic, as key workers enabling the country’s essential transport infrastructure to keep moving.

I will write to you again on this matter as developments arise.

Yours sincerely

Michael Lynch
General Secretary