Mr. Seán Ó Foghlú:

School transport costs continuously increased throughout the past decade. This arose particularly because of the requirement to provide a seat for every child with a place on a bus, which was an appropriate decision taken on safety grounds arising from the Kentstown crash. Other factors also impacted to increase costs. The Department has been endeavouring to reduce expenditure on school transport over the past five years, and we have put in place arrangements to bring about reductions in expenditure. A value-for-money review on school transport was carried out, which fundamentally examined all aspects the scheme. Arising from this the Government made a number of decisions to change some very inefficient rules of the school transport scheme, in particular the closed school rule for primary schools which in limited cases resulted in people being entitled to school transport to a school which was not their nearest school. The catchment boundary rule meant we required boundary commissions to change a boundary between post-primary areas. These rules have been changed so that transport for new starters is to their nearest school. We have also pushed for efficiencies in expenditure on tendering for services. We have pushed Bus Éireann on costs and this has reduced expenditure on school transport.

As part of the review we considered whether we should have school transport, and if so who should organise and provide it. We worked through the various issues in the value for money report, which has been published. We considered a number of possibilities on how to go forward and found we should have a central management body to organise the service, and that this body should be Bus Éireann. We also found that we should continue the existing arrangement we have with Bus Éireann, which would outsource a high proportion of service delivery while provide a certain limited amount of service itself. This was consistent with the policy approach which had led to increased outsourcing by Bus Éireann of the provision of vehicles and transport generally over a period of time.

Of the funding we provide directly to Bus Éireann at present, approximately 65% is used to pay private contractors to provide services. This is an increase from almost 50% ten years ago and outsourcing by Bus Éireann has generally increased. The key service Bus Éireann provides for us is its national transport management expertise throughout the regions, with regard to route mapping and tendering for services. This is the key relationship we have with Bus Éireann and it underpins the arrangement we have.

We pay Bus Éireann on the basis of service delivery and the arrangement does not allow for profit to be taken by Bus Éireann. It is useful to consider what is meant by a layman's understanding of the word "profit". In a private company, "profit" means something the shareholders can take out and use themselves as a return on their capital or something which can be re-invested. This does not happen in a public company, where there is also the risk of cross-subsidisation of other activities. We fund Bus Éireann on a cost recovery basis and it has assured us it does not subsidise its other services from the money we pay it for school transport and nor does it take out money. It has assured us it does not make a profit in any of the understood meanings of the word. The belief that a profit may be made by Bus Éireann may arise from the arrangement we have with it, whereby we pay it a management and administration charge which was traditionally 13% but which has been reduced in recent years and which is not directly assigned for direct costs in its published accounts. When we engage with Bus Éireann on what this 13% - which has been reduced - is spent on, we are told it is spent on a range of items, including direct costs, indirect support and regional costs and property associated costs. The is also the issue of the portion of contributions to other areas, such as capital investment in IT or general capital investment for garage equipment, which relates to the school transport service. Deputy Donohoe raised this issue in the context of the court case.