Common use of Background/Context Clause in Contracts

Background/Context. Rail employees as key workers have played an important and vital role in keeping the UK moving by ensuring key workers, essential travel and freight services have been able to continue to operate throughout the coronavirus pandemic. In 2020/21 the Government has been funding the large gap created by the loss of passenger revenue which has declined by more than 80%. This has required the government support for the railways to increase significantly to circa £800m per month since the start of the pandemic. The financial commitment from the government is not unlimited and is not sustainable. Whilst passenger revenues have declined to critically low, unprecedented levels, the industry’s pre- Coronavirus operating costs (excluding capital investment) have remained broadly unchanged with staffing costs making up circa 30%. It is clear Coronavirus has had a damaging impact on the finances of the GB rail industry with little optimism of a return to former revenues in the short to medium term and some speculate even in the longer term. This has created a major gap in the industry’s finances currently estimated circa £2bn per annum. This gap has to be addressed urgently to make the industry financially sustainable in the future. Workforce reforms and cost savings need to be identified as part of a rail industry-wide review. It is planned that train service levels will be curtailed, reduced or flexed in the future to align service levels and capacity to predicted variable passenger demand with the flexibility to expand as passenger growth returns: The May 2021 base timetable has train service levels of around 85% of the current December 2020 base timetable. • Where duplication exists, train services may be removed or reduced e.g. services with similar calling patterns on lines of route that currently exist; • Future capacity enhancements to meet passenger growth will initially be provided by “strengthening” existing services before consideration of introducing increased service frequencies. Whilst these service changes are expected to have an impact on staffing levels, the actual financial savings will vary depending on whether future train service levels increase or decrease based on actual passenger demand. Recognising the high support levels being provided to the industry, the Government has advised it is unable to fund any of the outstanding pay reviews for 2020 and similarly for 2021 with the exception of funding an increase of £250 per annum for the lowest paid rail workers who earn less than £24k per annum. The employers and DfT regard such a financial saving as a contribution to reducing the overall staffing costs of the railway. In summary, the impact of the above will mean that we shall see reduced services and a change in passenger behaviours in the way in which they use the rail network including accessing information and ticketing services. This is expected to see passengers make greater use of technology as and when they return for both work and leisure travel. The objective is to jointly address and lay the foundations for a sustainable future whilst complying with any Government and health guidance,