Charlie McConalogue (Donegal North East, Fianna Fail) | Oireachtas source

Fianna Fáil is committed to a sustainable and efficient public transport system. We support this Bill in the context of CIE having a clear and viable plan for the company's future. We are deeply concerned, however, about the reduction in services being provided by CIE and we are not convinced of the Minister's commitment to public transport.

The context of the Bill is to increase CIE's borrowing requirement to €300 million. I advise the Minister, Deputy Varadkar, that it would be useful to talk to the Minister for Education and Skills, Deputy Quinn, about identifying sources of cash because I noted on Wednesday that in the education budget - as spokesperson it is my area of interest - €38 million of that Minister's €90 million in savings came from cash reserves in both the vocational education committees and the higher education authorities. That is a total of 42% of his overall budget findings for this year. After six years of budgetary adjustments, the Minister, Deputy Quinn, magically has been able to find cash reserves. It might be no harm, therefore, for the Minister, Deputy Varadkar, to talk to him to see if he can work a similar trick in regard to CIE. It is a very useful skill to have.

This Bill changes the limits on the amount of money Córas lompair Éireann is allowed to borrow for day-to-day operations as opposed to investment. The limit will increase from approximately €107 million to €300 million, with CIE being able to charge any borrowings of the group to property held by it or its subsidiaries. In effect, CIE will be able to mortgage its property. It also streamlines CIE borrowing powers into a single enabling provision for all forms of borrowing undertaken by CIE for non-capital purposes.

The hope and intention behind this Bill is that the increase will enable CIE better manage its own day-to-day financing needs and those of its subsidiary companies. The borrowing limit currently in force was set 25 years ago in 1987 and therefore it is probably time to revise it. The Bill removes the possible State guarantee of certain CIE borrowings. EU state aid rules restrict the issuing of such debt guarantees to commercial semi-State bodies.

There is no doubt that CIE is in serious financial difficulties. Revenues at the group fell by 0.6 per cent last year to €707 million, according to its 2011 annual report published last month. It should be noted that the accounts were more than four months late.

As the Minister is aware, CIE received more than €500 million in State funding last year for a variety of areas yet it lost €6 million. The group is again expected to record losses out to 2015. CIE auditors PricewaterhouseCoopers state that these circumstances give rise to uncertainty for the business and challenge the CIE group's ability to continue trading as a going concern.

The group exceeded its available borrowing facilities during 2012, and the excess to date has been met by advance payments of the public service obligation. Without any mitigating measures, it is expected that the group will again exceed its existing borrowing facilities in 2013. Coupled with this, the existing group bank borrowing facilities of €107 million are due to expire on various dates between January and October 2013. At 31 December 2011 the group had bank and leasing debt outstanding of €77.8 million. The maximum debt facilities currently available to the group amount to €121 million, including leasing facilities of €14 million.

This has created uncertainty in regard to the ability of CIE to continue to fund itself and in regard to the absence of measures such as increased public service obligation payments or additional borrowings. The Bill allows CIE to address the latter concern. Three major factors have impacted on the financial position of the CIE group. The public service obligation and other current Exchequer payments have reduced by €41.4 million since 2008, with further reductions proposed each year in the period 2012-14. Increased unemployment and reduced leisure and business activity have seen passenger journeys reduce by 17.5% since 2008, with a fall of €81 million in revenue. Passenger journey numbers have fallen by 45 million since 2008, from 235 million to 190 million journeys. CIE fuel costs have increased by €22 million in the past three years.

Annual operating costs for 2011 have been cut by €174 million since 2008 as CIE tries to take action to reduce costs. The size of the workforce has been reduced by 1,450, on average, during the same period. A series of initiatives, ranging from service reviews to contract renegotiations, will yield ongoing operational savings. According to The Irish Timesof 15 November, a spokesman for CIE confirmed it is progressing a number of options for asset disposals to help fund finance for the business. It expected to confirm significant developments by the year end. The spokesperson said Iarnród Éireann reached agreement with staff in the summer and is now working on generating further efficiencies in the business. Dublin Bus and Bus Éireann are in advanced talks with staff at the Labour Relations Commission. Voluntary severance has been offered, primarily at Iarnród Éireann. In 2012, 77 staff have left and more than 100 others are expected to leave before the year end. This will bring staff numbers to below 4,000.

The restructuring of the CIE group of companies also involves costs that are a significant factor in the group's losses. Redundancy payments and other restructuring costs amounted to €113 million over the three years 2008-10. Management's current projections indicate the group will incur further deficits in the period 2012, 2013 and 2014, with a return to profitability expected in 2015 and 2016. The resultant cash deficits will result in a requirement for renewed facilities, other funding and measures including cost reduction and. the realisation of assets.

According to the Sunday Business Postlast month, Irish Rail is close to securing a deal with a private sector buyer to sell land holdings in Spencer Dock in Dublin. According to the report, the deal is so close to being finalised that management at Irish Rail authorised the restarting of a crucial voluntary severance scheme that had ground to a halt because it could not be funded. The cost of the scheme, which is likely to be up to €18 million, will now be funded through the proceeds of the Spencer Dock property deal. The Sunday Business Postalso outlined that the day-to-day cash crisis at Irish Rail became so acute over the past two weeks that the National Transport Authority, was forced to provide an extra €16 million to the firm to allow it to pay day-to-day expenses and that a well informed source said there are very serious issues with funding and that Irish Rail is looking at a funding hole of €40 million over a three-year period. Some suppliers have been refusing to do business with the company because of its inability to pay its bills. This is what the public transport provider is facing. Real differences have emerged between how the parties in government approach the future of our public transport services. The parties are well known to having differing approaches to the role of the State in public transport. I question whether the Minister of State has a watching brief for the Labour Party.

The Minister, Deputy Varadkar, made an intriguing speech last month and I wonder about the views of the Minister of State on it. The Minister referred to the Programme for Government commitment which calls for "the need to rebalance transport policy to favour public transport" and states: "We will therefore establish a Cabinet sub-committee on Infrastructure to explore the benefits to the public transport passenger of more diverse bus service provision". The Minister referred to how the National Transport Authority carried out a public and a market consultation on the post 2014 public service obligation bus market and this was recently discussed at the Cabinet sub-committee. The Minister said there were divergent views on the matter when it was discussed at Government and went on to put the case in favour of more diverse bus service provision. The Minister believes there are real benefits arising from moving from direct provision by public companies of subsidised bus services to competitive tendering. I wonder whether the Minister of State and the Labour Party agree.

Increasing fares is not the answer to the crisis facing CIE and an overhaul of the company's transport policy is needed. An overhaul of CIE's strategy and vision is also needed. The package CIE offers is not attractive to customers and this needs to change. The attempts by the company to address their problems are only papering over the cracks. CIE's long-term viability is under real threat and a comprehensive review of its policy is required to ensure its long-term survival. The company must restructure to make it attractive to customers again. If this involves an increase in the subvention from the Government in the short term, this should be accommodated. CIE has found itself in a vicious cycle of increasing fares and falling passenger numbers. It is essential to protect the public service aspect of the company. The Government needs to facilitate a new service plan for CIE and this must be done urgently to secure the company's future. However, as a public transport company, the Government must ensure it meets its policy platform of having an integrated network and providing public transport to the citizens of the State.

There is significant difference between the fiduciary duties of CIE's directors and the role of the Minister. It is not good enough to say it is up to the board of the company to resolve the issues. The board might not be in a position to do so. It must get its accounts in order as the directors' fiduciary duties require them to balance the books and meet the company's financial commitments. However, the Minister has a different role in that he must ensure we have a public transport network that is fit for purpose. We are concerned the Minister is taking a hands-off approach. The programme for Government recognises "the need to rebalance transport policy to favour public transport". We are not convinced the Minister has taken this commitment to heart.

We need a viable public transport network when we are trying to reduce the number of private cars on the road and assist the economic recovery. In the current economic environment, passenger numbers are dropping and the answer is not to dismantle services because the customers we lose will never be regained. The Government needs to ensure CIE maintains its critical mass of service. A fully operational public transport system is fundamental to any working economy. The company needs to be fit for purpose by providing a comprehensive rural service that has already been affected by recent budget cuts.

During the debate in the Seanad, my colleague, Senator Mooney, made comments I wish to endorse on the positive role of the unions. He paid tribute to the workforce and the unions and the commendable restraint they have shown in difficult times. There have been major job losses and significant changes in work practices in a company that has traditionally been deemed to be inflexible in the context of management and trade union relations. They deserve credit for how they reacted to it.

We support the Bill, with the caveats I outlined earlier, and I commend it to the House.

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