Mr. Seamus McCarthy:

Vote 32 provides for expenditure in respect of transport, tourism and sport. In 2011, the Department incurred expenditure totalling €2.3 billion. Of this, €2.1 billion was spent on transport, with the remainder going to cover tourism, sport and the Department's administration expenses. The functions in relation to tourism and sport transferred to Vote 32 from the former Vote for the Department of Tourism, Culture and Sport during 2011. The majority of the Department's expenditure is ultimately through other State agencies. In 2011, the Department paid €1.3 billion to the National Roads Authority. A further €503 million was paid from the Vote to the National Transport Authority. The National Transport Authority's 2011 accounts were considered by the committee two weeks ago. They show that the authority paid €395 million to the CIE group of companies for capital investment and payments under public service obligation agreements. In 2011, €146 million was also paid directly from the Vote to CIE in regard to capital expenditure, mainly aimed at improving railway safety.

The financial statements of the National Roads Authority are also before the committee today. The primary function of the authority is to secure a safe and efficient network of national, regional and local roads. In practice, this function is largely discharged through the relevant local authorities. In 2011, the authority had income totalling just under €1.38 billion, and it incurred expenditure of approximately €1.39 billion.

The authority provides funding to local authorities for road construction and maintenance. Funding for major multi-annual projects is agreed with the local authorities each year based on amounts committed and expected costs. Smaller construction and improvement and maintenance projects are funded on the basis of proposals from local authorities, together with the results of an examination of the condition of the road network, which is conducted annually. In 2011, the authority incurred total expenditure of €865 million in regard to road construction and improvement. Some €806 million, or 93% of this, was paid to local authorities. Expenditure levels in 2011 decreased by approximately a quarter by comparison with 2010. Expenditure of €161 million was incurred in respect of road maintenance and management, with €139 million, or 86%, being paid to local authorities.

The Government decided in June 2012 to manage the National Roads Authority and the Railway Procurement Agency to form a new entity incorporating the functions of both bodies and taking on some new functions. The Accounting Officer and chief executive will be able to provide an update in that regard. From previous meetings, members will recall that chapter 6 focuses on the Exchequer's financial commitments arising from public-private partnerships, PPPs.

In the case of the National Roads Authority, expenditure up to the end of 2011 on ten PPP projects totalled just under €1.3 billion. The outstanding commitment arising from those projects was almost €1.7 billion.

The chapter draws attention to a dispute in 2011 between the National Roads Authority and the PPP, public private partnerships, company concerning the N6-Galway-Ballinalsoe project. A mediated settlement was agreed in August 2011. Under this settlement, the authority agreed to pay an additional €16 million to the company and the company undertook to complete specified works. Most of the additional payment was made in 2011.

One of the key features of PPP projects is the allocation of project risks between the public and private sector partners, including sharing of risks where appropriate. The chapter highlights the outturn on risk-sharing regarding certain road projects. In the case of two PPPs, the M3-Clonee-Kells motorway and the Limerick tunnel, the NRA is now making payments to the PPP company because actual traffic levels on these routes are below a threshold set out in the contract. When the projects were approved, it was expected such payments would not arise because traffic levels were expected to be significantly higher. In 2011, the NRA paid €5.2 million under these arrangements. The chapter demonstrates that even if actual traffic volumes grow by an average of 2.5% each year, the NRA will make traffic–guarantee payments until 2025 in the case of Clonee-Kells and for the whole duration of the Limerick tunnel contract which runs until 2041.

Risk-sharing has also resulted in payments being received by the NRA. In 2011, it received just over €1 million from revenue-sharing provisions in other tolled PPP projects and just under €1 million from insurance risk-sharing provisions. As outturns are different from those projected when the PPP deals closed, post-implementation reviews of the value for money actually achieved are important in identifying lessons that can be learned for future projects. Such reviews are particularly necessary where there are additional project costs relative to what was originally projected. Three further road PPP projects have been in development for several years and the Galway city bypass was added as part of the July 2012 PPP-based stimulus package. The status of these projects in July 2012 is set out in the chapter.

The other chapter for consideration at today’s meeting, chapter 26, reviews the systems in place for the collection for motor tax and for the monitoring and deterring of motor tax evasion. An average of €1 billion a year is collected in motor tax. Several bodies play a role in the collection, administration and enforcement of motor tax. The Department of Transport, Tourism and Sport has responsibility for the maintenance of the register of vehicles which facilitates the collection of motor tax. It also has responsibility for the collection of online motor tax. The other main players are the Department of the Environment, Community and Local Government which has responsibility for motor tax policy, local authorities which collect motor tax locally and the Garda Síochána which enforces the requirement to display a motor tax disc.

I understand the committee will examine the Department of the Environment, Community and Local Government and the Garda at later dates regarding the issues which arose in the chapter. Accordingly, I will confine my remarks this morning to the matters more closely related to the role of the Department of Transport, Tourism and Sport.

There are no formal systems in place to measure and track the extent of motor tax evasion. It is, therefore, difficult, to assess the overall effectiveness of the collection system. Analysis of traffic on the M50 on four days during 2010 and 2011 indicated an evasion rate of 5%. If that applied nationally, it would equate to under collection of motor tax of around €50 million a year. It is vital the Department’s register of vehicles is kept up to date and that non-payment of due tax is identified promptly and followed up. Analysis of the register identified some 2.6 million registered vehicles which were not taxed. Of these, 170,000 have never been taxed and 800,000 have not been taxed in over ten years. It is likely that many of these vehicles are no longer in use and, therefore, their categorisation on the system as current registered vehicles potentially distorts that analysis of evasion rates and impedes follow-up of vehicles that are untaxed. The chapter recommends there should be a more robust system for dealing with situations where vehicles are declared by owners to be off-the-road and thus exempt from tax. The Departments have indicated that there will be a legislative response to that recommendation.

If fixed-charge penalties for non-display of a valid disc are to be an effective deterrent, they must result in motor tax arrears being paid and payment kept up to date. However, one in five vehicle owners issued with fixed-charge notices between 2008 and 2011 had not paid motor tax by April 2012. Of those who had paid, at least one in four had declared the vehicle to be off-the-road for the period during which they were fined. Furthermore, around 40% of those detected not displaying a current tax disc had not paid the fixed-charge penalty. This indicates that the system for the imposition of fixed-charge notices is not changing behaviour in a significant number of cases. The integrity of the off-the-road declaration system is also undermined. For this reason, the chapter recommends the need for the review of the effectiveness of fixed-charge notices as a deterrent to the non-payment of motor tax.