Alan Kelly (Tipperary North, Labour) | Oireachtas source

Thank you, Chairman. The term suits you well.

This year the Department of Transport, Tourism and Sport requires a Supplementary Estimate of €4 million. In addition, a technical adjustment for €32.3 million is also required to reallocate savings between subheads within the Department's Vote 31. Current and capital expenditure savings of €32 million will be reallocated to subhead B7, public service provision payments, National Transport Authority public transport contracts. On 24 July last, the Government decided to provide additional public service obligation, PSO, funding of €36 million to Córas Iompair Éireann, CIE, to ensure the companies could continue to operate for the rest of 2012. This brings the total subvention to CIE for this year to €278 million.

Each year funding is provided for socially necessary but financially loss-making public transport services. Funding for such services is made available under the Vote for the Department by way of a payment to the National Transport Authority for public service obligation services. The CIE group has had to confront a very difficult financial situation. As in most business sectors in the State, the current economic environment is very challenging for public transport providers. The cause of the problem is primarily the recession, which has caused a drop of over 20% in passenger numbers from the peak in 2007. This has been partly offset by fare increases. The group's revenue is down by over 11% from the 2008 level. The PSO subvention has reduced by 21% between 2008 and 2012, and is due to fall by another 14% in the next two years.

The removal of the fuel rebate is estimated to have cost the group approximately €22 million, at a time when it has had to absorb even higher fuel prices. In 2006 and 2007, as a result of the CIE operating companies expanding their network of services and growth in the economy, CIE experienced an increase in passenger volumes and revenues. However, the impact of the economic downturn, which started in 2008, resulted in decreases in passenger numbers in each year from 2008 to 2011. Once the expected increase in demand did not materialise as a result of the economic downturn, CIE was faced with an expanded network of services and reduced revenues which resulted in each of the operating companies incurring deficits in each of the years 2008 to 2011. The exception was Bus Éireann, which generated a small surplus in 2011.

The CIE group reported surpluses in each of the years from 2006 to 2008. 2007 was the only year in the period 2006 to 2011 in which the group generated a surplus when the gains from the disposal of fixed assets were excluded. In the past three years 2009-11, CIE suffered a total loss of more than €137 million, after exceptional items. Clearly, this level of losses cannot be sustained and must be addressed.

The 2011 annual report and financial statements for CIE and those of the three subsidiary companies were recently laid before the Houses of the Oireachtas. An unqualified audit report was issued by the group's auditors on CIE's 2011 financial statements. However, the auditors have included a heading "Emphasis of Matter" regarding the group's ability to continue as a going concern. They note that funding and trading difficulties give rise to uncertainty for the business and challenge the group's ability to continue to trade as a going concern. The board of CIE expects these uncertainties to be addressed through a range of measures, including the realisation of non-core assets; a reduction of the cost base, including pay-roll reductions; multi-annual fare increases and the curtailment of the own-funded capital programme. The CIE companies have been endeavouring to deliver savings which will not have an adverse impact on services. However, it will be a struggle every year to meet the reduction in the PSO budget while maintaining services.

The Minister for Transport, Tourism and Sport, Deputy Leo Varadkar, and I meet regularly with the four chairs and senior executives of the CIE companies as well as with union representatives. While facilitating a range of measures to address the problems, we have stressed that significant progress needs to be made in the development of a realistic, sustainable and robust business plan by CIE to deal with the current economic realities, cost reductions with the CIE group and employee support for same, the sale of non-core assets and the securing of new credit facilities. These avenues are being explored. The additional funding for this year only provides a short breathing space to CIE. It is essential that management and staff in the CIE companies use this time productively to discuss and implement proposals to cut costs that can help address the serious financial position in which the CIE group finds itself. In view of the difficult financial situation of CIE and the need to finalise its business planning for 2013, it is imperative that these discussions result in a positive outcome in the next few weeks.

CIE is progressing the preparation of a revised five-year business plan with aggressive targets that will support the reporting of trading improvements in 2013. It is intended that the business plan will address the underlying financial challenges facing CIE in order that its public transport services can be provided efficiently and cost effectively during the plan's period.

The goal for public transport is to provide safe, accessible and integrated services that contribute to sustainable, economic and regional development in an efficient manner. Despite the economic problems and the reduced sums available for capital and current expenditure, the Government will continue to prioritise the role of public transport. In summary, additional PSO funds in 2012 are being provided to CIE from within the Department's Vote, by way of this proposed Supplementary Estimate. So far €16 million of the €36 million earmarked has been paid. It is envisaged that the balance will be paid to the National Transport Authority shortly. The allocation of PSO subvention under the PSO direct award contracts is a matter for the National Transport Authority under the National Transport Authority's contractual arrangements with the CIE subsidiaries. It is up to CIE management and the workforce to ensure the future success of the organisation. The additional €4 million to be given to CIE will equate to the dividend in respect of the Aer Lingus shareholding that has been paid to the Exchequer.

The other area within the Department that requires additional funding is the sports programme. A further €300,000 in current expenditure savings is to be reallocated to subhead D6, National Sports Campus. The National Sports Campus Development Authority requirement for additional funding arises from unforeseen events, mainly a failure of a combined heat and power, CHP, unit that gave rise to increased energy bills at the National Aquatic Centre and a tragedy at the centre that led to a temporary closure and revenue loss.

The savings within the Department's Vote have arisen in the following areas: land transport €18.2 million, under the National Transport Authority administration, the Medical Bureau of Road Safety, smarter travel and carbon reduction and public transport investment programme; maritime transport and safety €6.7 million, under the Irish Coast Guard and grants for improvements for harbours; sports and recreational services €6.4 million, made up of the National Sports Campus and grants for sporting bodies and €1 million from the tourism product development fund.

I will briefly outline the subhead savings under each of the programmes. Under land transport, the programme savings have arisen in a number of subheads - subhead B.4 - Medical Bureau of Road Safety €500,000. Savings have arisen in two of the bureau's programmes - the drug analysis programme and the alcohol breath roadside screening programme. Savings have also arisen in laboratory equipment and buildings and utilities. Subhead B9, National Transport Authority, €1 million, the savings arise as the authority will utilise an identical amount from its own resources specifically the surplus transferred from the former commission for taxi regulation on 1 January 2011 to fund some of its administration costs. Subhead B6, smarter travel and carbon reduction, €6.2 million, savings arise as a result of the cancellation of three proposed new programmes, namely, regional transport and information hubs, a local authority eco-driving pilot project and area based personalised travel planning. Under subhead B8, public transport investment programme, there are savings of €10.5 million. The savings were made in public transport projects of €430,000 due to minor adjustments being made to a wide variety of projects. Public transport safety and development had savings of €2.1 million due to development of new stations at Crusheen and Oranmore on the Western Rail Corridor being delayed due to planning issues. Savings of €7.9 million occurred in public transport infrastructure, National Transport Authority, due to the delay in the granting of the railway order for Luas and further savings arising over a number of projects such as bus rapid transit, Dublin bike extension scheme and the Kildare route project.

Under maritime, transport and safety, the savings have arisen in the following subheads - C3.1, Irish transport, under Irish Coast Guard €5.3 million in search and rescue helicopter contracts. A milestone payment of €5.3 million, due to be paid when the second helicopter base is approved as operational with S92 helicopters was originally planned to be paid in 2012 but will not be paid until August 2013. Under subhead C3.7, maritime safety and maritime regulation, grants for improvement of harbours, there is a saving of €1.4 million. Savings arose because Wicklow County Council could not proceed with planned dredging works at Arklow harbour in 2012 as a dumping at sea licence was not received from the Environmental Protection Agency.

Under sports and recreational services, the sports programme savings have arisen in the following subheads: subhead D3, grants for sporting bodies, a saving of €3.2 million. Savings arose as a result of slower than expected drawdown of previously allocated sports capital programme grants. As payment of sports capital programme allocations is demand led, it is impossible to accurately predict the exact timing of drawdowns. External factors beyond the control of the Department, such as the weather, can adversely affect the drawdown rate. Under subhead D6, National Sports Campus, there is a saving of €1.5 million. The savings arose due to delays in progressing certain works in 2012 due to difficulties arising in the tender process. Under tourism services, tourism programme savings arose under subhead E7, tourism product development, of €1 million. The level of funds required to service tourism product development in 2012 is expected to be €1 million less than that budgeted for 2012, due to a slower than anticipated level of drawdown of the current grant funding.

I commend the Supplementary Estimate to the House.