It has taken six weeks, but already the government has lost control of public finances. The decision to award train drivers a pay rise of 15 per cent spread over three years, and backdated, without any requirement to reform outdated working practices, won’t break the government’s piggy bank on its own, but is has set a course which, once again, will end with a Labour government leading the country to fiscal ruin – as every single Labour government has done before.
Public subsidy has corrupted the entire industry
Train drivers are already one of the highest-paid groups of workers in Britain, with basic salaries of £65,000 and with many earning over £100,000. This is not because they are being rewarded for huge commercial success. This is the backdrop to the long-running rail dispute: in 2022/23 the railways earned £9.2 billion from passenger revenue and a further £1.5 billion from other sources such as freight. Yet the railways cost £25.4 billion to run. The industry was saved from bankruptcy thanks only to £11.9 billion of government subsidy. That excludes, by the way, money spent on HS2 – it covers only current running costs.
The railways are already hopelessly unprofitable – and now Labour wants to make them even more so by forcing up rail operators’ pay bills, and without the possibility of any reform to improve productivity. True, it might be acceptable for public service to run at a loss if it is in the public interest, yet the government is treating train drivers as if they were working for some brilliantly successful industry and were simply demanding their fair share of the glittering profits. It is also true that train companies are themselves being allowed to walk off with fat profits in spite of making an underlying loss. Public subsidy has corrupted the entire industry.
A genuinely dynamic rail industry wouldn’t be racking up the wage bill for train drivers; it would be eliminating drivers altogether – with some higher-paid jobs available for those who were prepared to re-train for higher-skilled engineering roles. There are already over 100 metro systems around the world which operate entirely without drivers. The Victoria line was built 55 years ago with a minimal role for the ‘drivers’ – they only really open and close the doors. Britain once led on this technology, but has lost the initiative thanks to a craven attitude to rail unions.
It is not hard to see where this is going to lead. Now that the government has caved so easily to the train drivers’ demands, they will soon be back demanding more. Next year they will want 10 per cent. Other public sector unions, too, will take this settlement as a signal. What would you do as a nurse, currently paid half that of a train driver? You have seen the government grant above-inflation pay rises to junior doctors, teachers and others. You will want a slice of the cake, too. The government has set off what will very rapidly develop into a public sector pay spiral.
It is too early to guess who might be our next prime minister, but of one thing I am sure: that sooner or later we are going to end up electing a Javier Milei figure – the Argentinian President who posed at election rallies with a chainsaw, to symbolise what he was intending to do with public spending. Trouble is, Argentina went on for decades before it came round to accepting what was necessary to tackle the country’s rampant debts. It may take a while yet before we are forced to accept the inevitable: that we can no longer carry on living beyond our means. But Britain has certainly set off down the same path: the fact is that no UK government of any colour has succeeded in balancing the books in 22 years. On its form so far, the present government is definitely not going to be breaking that run.