URGENT ACTION is needed to prevent damage being done to the fabric of the railway network, Britain’s biggest rail union says today as research suggests that passenger numbers could continue to fall for three years after the current recession bottoms out (details below).

RMT today urged ministers to prevent long-term harm to the industry by blocking cuts in rail service and jobs and halting fares hikes – and to bring franchises back into the public sector if private operators cannot deliver within their contracts.

The union points out that more than 3,000 rail jobs are under immediate threat as private franchises seek to protect profits and Network Rail implements a huge spending squeeze.

And it warns that failure to check selfish private interests in the industry would result in damage to the network that could take years and billions more in taxpayers’ money to put right.

“During the recession in the early 1990s passenger numbers fell for three years after the economy reached its lowest point, which suggests that the worst is yet to come for our railways this time round as well,” RMT general secretary Bob Crow said today.

“The difference is that this time we have private operators that have already squeezed tens of millions of pounds out of the railways straining at the leash to cut services and staff, and to renegotiate their franchise agreements.

“If we are to see the railways play their full potential role in the economy and for the environment it is crucial that the government does not allow any more attacks on rail services and jobs solely to satisfy the short-term selfish interests of shareholders.

“The study we commissioned suggests that passenger numbers will fall, perhaps for as long as three years after the recession bottoms out, and it should be unthinkable to allow the resulting fall in revenue to be paid for in cuts in jobs and services or even higher fares.

“If franchises cannot or will not deliver the services they are contracted to within the terms of their agreements they should be allowed to hand back the keys and the services operated in the public sector,” Bob Crow said.

ends

For further information contact Derek Kotz on 020 7529 8803 or 07939 595 092

Note to editors: Rail jobs under immediate threat:

* National Express Group is seeking to cut 750 jobs across its East Anglia and East Coast franchises.

* At least 800 jobs at risk as a result of Network Rail deferring 28 percent of rail renewals, such as laying new track, installing new signals – a decision not related directly to the recession.

* The UK’s main railfreight operator DB Schenker (formally EWS) has announced over 500 jobs losses and that further significant numbers are at risk as a result of Network Rail’s deferral of renewals.

* South West Trains has announced plans to cut at least 660 jobs, including ticket-office and platform staff, despite the partial rejection by the Department for Transport of its plans to reduce ticket-office opening times.

* 300 as yet unspecified jobs at Southeastern

* 40 unspecified jobs at First Scotrail

* Proposed cuts to ticket office opening times at First Capital Connect leaving over 20 posts at risk

Research undertaken for RMT by the Left Economics Advisory Panel

For further information on this research please contact Andrew Fisher on 07957 725 845

January 2009

Rail passenger use and the Economy

Introduction

This short briefing paper looks at the relationship between the UK economy and the impact on rail passenger use.

For the first time since rail privatisation the UK is in recession.

This paper therefore looks at the effect of previous recessions on passenger use the rail industry, and looks ahead to the impact that recession might have upon the privatised rail industry.

Looking at data for the last twenty-one years (1987-2008), we found some correlation between the rates of growth in UK GDP and in rail passenger use. For example:

· At the height of the ‘Lawson boom’, rail passenger growth was over 8% - the highest rate in the period under study;

· When the economy went into recession in the early 1990s, rail passenger use also declined;

· Rail passenger use has grown consistently every year since the mid-1990s, coinciding with the period of sustained GDP growth under the final Major years and New Labour.

The data

Table 1 (below) shows the growth in both the economy and in rail passenger growth in each of the past twenty-one years.

Table 1

Year | GDP growth | Rail passenger journeys (millions) | Passenger growth

1986/87 4 738
1987/88 6 798 8.13
1988/89 2.9 822 3.01
1989/90 1.7 812 -1.22
1990/91 -1.2 810 -0.25
1991/92 -0.6 792 -2.22
1992/93 1.5 770 -2.78
1993/94 3.2 740 -3.90
1994/95 4 735 -0.68
1995/96 3.1 761 3.54
1996/97 2.7 801 5.26
1997/98 3.9 846 5.62
1998/99 3 892 5.44
1999/00 4.4 931 4.37
2000/01 3 957 2.79
2001/02 1.8 960 0.31
2002/03 2.3 976 1.67
2003/04 3.1 1012 3.69
2004/05 2.2 1045 3.26
2005/06 2.7 1082 3.54
2006/07 2.9 1151 6.38
2007/08 2.4 1232 7.04

There is not a perfect correlation between rail passenger use and GDP growth as of course there are other variables, which may include rail investment levels, rail performance (e.g. punctuality, cancellations), and the relative costs between rail and other alternatives.

Charts 1 and 2 (below) show a clear correlation between rail passenger use and the economy. We therefore believe economic performance to have been the central determinant in rail passenger growth in this period.

Chart 1

Chart 2

Looking to the future

As the blue line (GDP growth) in Charts 1 and 2 show, GDP growth has begun to trail off – and there are fears that passenger growth, which has slowed in the last year, may descend into negative growth in 2009.

Such concerns are consistent with the early 1990s downturn when the economy reached its nadir in 1991/92 the low point in rail passenger use did not come until 1994/95.

This raises serious questions about the viability of the Department for Transport’s (DfT) franchise model in a period of recession. Most rail franchises are expected to receive either lower subsidies in 2008/09 or to pay higher premiums to the DfT.

There are therefore fears that rail companies will come forward with unpalatable solutions:

1. Either attempting to renegotiate franchise agreements, which could include:

a. Reducing premium payments or requesting extra subsidies
b. Cutting services on less profitable routes

2. Cutting staff numbers to reduce overhead costs, which would increase unemployment and could lead to worse services and less passenger safety

3. Raising rail fares, which could drive passengers from the rail into private transport

All of the above options, raise serious doubts about a range of public policy objectives on the railways, including:

1. Modal shift from road to rail to reduce carbon emissions;

2. Social exclusion – increased rail fares will drive poorer farepayers with no alternative private transport options from the railways;

3. Increasing employment towards a target of 80%;

4. Improving passenger safety at rail stations and reducing staff assaults.