It does not necessarily follow that 20% of the subsidy should be removed or indeed that 20% of the service should be removed in the event that demand reduces by 20%. The DfT, treasury or other subsidising bodies such as Local Authorities will each need to evaluate what benefits they are buying for their subsidy and whether those benefits are still being delivered. They will also need to understand and forecast as best they can what will happen to the drivers of demand. Many services are the same frequency now as they were when demand was more than 20% lower (in London this would have been around 2010).
There are several benefits that lead to subsidy. Historically access to employment opportunity has been a key driver, especially for more rural rail routes. Promotion of employment in city centres, plus pollution and congestion reduction have tended to drive subsidy of commuter services. Some of these benefits may still hold at 20% lower demand.
Historically, demand is a function of the number of potential passengers and their trip rate. The former is a function of population growth or decline and the number of tourist visitors from elsewhere. In addition to the more recent influence of the ability and desire to work from home, the trip rate is a function of employment levels, real fares growth or decline, real incomes growth or decline and 'weighted' journey time (frequency, convenience, run time and crowding) Since government will be at least trying / hoping to improve these in the future, further recovery in passenger demand can be expected if they are successful (I accept that is quite a large 'if' for the moment)! Much as I personally like working from home, employers (including mine) and government are becoming aware that it does come at the cost of 'economies of agglomeration' and this is a further benefit of the rail subsidy.
Political factors are likely to play a part of course. While not really stated as a rationale, the DfT's revealed preference has been to make up much of the increased cost of the fragmented model of UK rail privatisation, while consistently expressing a desire to see these costs fall. British Rail may not have been totally effective at providing the quality, safety or volume of rail services the country desired, but at least in its last years, what those services it did provide, were operated more cost effectively. Subsidy may be protected by a strong aversion to voter's reaction to cuts in rail services and an apparent desire not to admit the present fragmented model of privatisation has been very expensive and is still falling short of delivering the originally stated goals.