Insight from Richard Lungmuss
This article has been prompted by the ORR’s recent Statement on Network Rail’s delivery of CP& efficiency targets in 2025/26, with some related thoughts on how industry senior management headcount costs are also being affected by HS2.
Members of the public frequently see the salaries of train drivers in the Press, usually as part of “sensationalist” coverage of various industrial disputes. Less visible, although available online, are the salaries and numbers of senior managers in the industry, in this case Network Rail.
The Railway Industry has a well funded, and generous, final salary pension scheme which is a rarity in modern Britain. This is largely due to farsighted action by the rail unions in the early 2000s, who prevented its closure and agreed to new members being admitted after a defined period in Network Rail’s employment. In the past UK civil servants often accepted lower pay awards to reflect their access to such generous pensions. Network Rail appears to buck this trend, with good rates of pay AND a generous pension.
For context, from the latest available figures, 5 of the top 10 highest paid public sector employees work in Network Rail. Well over 70 members of Network Rail earn over £150k pa (or close to the Prime Minister). Add to these figures that the highest paid public sector employee works for HS2 and around 45 members of HS2 earn over £150k, with more than 300 HS2 employees earning more than £100k. The rail public sector is certainly well paid for those at the top! There also appears to be diagonal movement between the two organisations which has undoubtedly lead to senior management wage inflation within the industry. The often stated quote that, “you need to pay high salaries to attract the best”, might be true but with so many roles available in the rail industry I would contend that salaries should start to reflect the risks and responsibilities of those taking them rather than just the title of the role! There may also be a feeling that paying high salaries to senior staff also stops them “jumping ship” and heading off to consultancies, where their skills can be sold back to the rail industry at a premium.
The underlying story on headcount costs from the ORR’s statement concerns rising senior management headcount and costs in Network Rail over a significant period. Whilst between April 2015 and March 2026 Network Rail headcount rose by 113% overall, and costs by 116%, senior management headcount rose by 145%, and costs by 170%.
In the first year of CP7 total staff costs rose 5%, compared with 9% for senior management, reflecting a 2% headcount increase and a 1% above inflation payrise for overall staff but a 5% headcount increase and a 3% above inflation payrise for senior managers.
[For context over 10 years average UK earnings ran at some 3% above inflation, whilst for Network Rail staff over 10 years they were 2% above inflation]
The ORR’s statement makes no real comment on the numbers above but they do beg some questions: Why have the senior manager numbers been allowed to continue rising? Is there a strategy of devolving authority and responsibility to the regions that require such increases or are these also HQ staff with no real customer facing delivery function? The increasing numbers do not appear to reflect a significant improvement in train performance so what is their justification?
At a time when GBR is forming does the increase perhaps reflect a Network Rail desire to ensure they have a significant proportion of NR senior managers in the new organisation. I do wonder how Network Rail, and HS2 for that matter, can justify such high salaries when there appears to be such limited accountability for delivery and train performance by those concerned. I do appreciate that certain managers bear a safety responsibility which a premium salary acknowledges but for the majority of senior managers the “delivery risk” is pretty minimal and there certainly appears to be very few performance related sanctions linked to the delivery of the railway.
I fail to see how the rail industry can be sustainable if it continues to increase the number and salaries of its senior managers at this rate. Surely the opposite should be happening? The acknowledged difficulty of delivering efficiency targets, increasing inflationary pressures and organisational issues surrounding GBR in CP7 is apparently set to lead to a strategy of decreased renewals and increased maintenance of ageing assets. It feels inevitable that network reliability and train performance will suffer, producing further pressure on the industry that should be celebrating nationalisation with positive moves. The ORR has identified the issue of increasing senior management headcount in Network Rail but is probably unable to do very much to change it. Does that responsibility lie with the DfT?
This article is not seriously considering headcount and potential cost saving measures as GBR forms (future articles will) but will there be significant reductions as the industry consolidates into a single organisation? I sincerely hope so, and that the transition to GBR’s ownership has already been planned to deliver significant savings in senior management numbers. Unless it does it will be very difficult to incentivise staff to deliver further efficiency savings across the entire organisation. I think too that it will be particularly difficult to cut “deals” with the rail unions, e.g. Driver Only Operations, if they can point to senior managers’ statistics in the industry as an example. Given the ORR’s recent statement I would like to see the rail industry acknowledge that they have got senior management numbers and costs “out of kilter” with what the country, and especially the rail industry and travelling public, can afford and show by their actions that they are going to bring them in line with other comparable industries.
