Wednesday, 21 November 2012
Transport (Córas Iompair Éireann and Subsidiary Companies Borrowings) Bill 2012: Second Stage
I am pleased to introduce this legislation which deals with CIE's borrowing powers for non-capital purposes. Strengthening CIE's capacity to raise credit on a sustainable basis is a key element of a wider set of measures designed to place its finances in a healthier state for the future.
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, but revenue is down by over 11% from the 2008 level. The public service obligation, 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 around ¤22 million, at a time when it has had to absorb 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, with the exception of Bus Éireann which generated a small surplus in 2011. While 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 to 2011, CIE suffered a total loss of over ¤137 million after exceptional items. Clearly, this level of losses cannot be sustained and must be addressed.
Since income began to fall in 2008, there has been a succession of measures to deal with the underlying problem, including cost reductions, fare increases, service efficiencies such as the network direct programme in Dublin Bus and similar rationalisations in Bus Éireann, and measures to make public transport more attractive such as the Leap card, real time passenger information, the provision of Wi-Fi, on vehicles and trains, for example. The operating companies cost recovery programmes were commenced in 2009 in an effort to eliminate these deficits. These efforts have been undermined by continuing falls in passenger numbers, reductions in the operating subvention and increases in costs such as fuel outside the control of CIE. While progress has been made in reducing costs and headcount to date, these reductions have not been sufficient to eliminate the deficits in the operating companies.
The 2011 annual report and financial statements for CIE and those of the three subsidiary companies were laid before the Houses of the Oireachtas last week.
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 payroll 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 an impact on services. However, it will be a struggle every year to meet the reduction in the PSO budget while maintaining services.
Both the Minister, Deputy Leo Varadkar, and I have engaged in consultations with the CIE companies. We have stressed the need to respond to the PSO subvention funding challenges through further cost savings in their activities.
A recovery in passenger numbers and further increases in fares could soften the impact of PSO subvention. All concerned in my Department and in the NTA must focus on identifying key public transport priorities in our cities and across the country. In turn, the PSO service providers will have to achieve greater efficiency and cost effectiveness in the years ahead based on a realistic assessment of the scope and level of contracted services.
Each year funding is provided for socially necessary but financially unviable public transport services. Funding for such services is made available under the Vote for my Department by way of a payment to the NTA for PSO services. Subvention paid to public transport providers is relatively low compared to the norm in other European countries. In many other countries the average subsidy-fare box ratio is about 50%, whereas in Ireland fare box revenue for our bus companies is over 60%. In recent years the total subvention paid to the three CIE subsidiaries has been reduced from a high of ¤308 million in 2008 to the ¤242 million originally earmarked for 2012. On 24 July last, the Government decided to provide additional funding of ¤36 million to CIE to ensure the companies could continue to operate for the rest of 2012. This brings the total subvention for this year to ¤278 million, higher than the subvention for 2010 and the fifth highest level of subvention ever.
At this difficult time for the public finances it was not easy to find a large amount of additional funding. It involved difficult decisions to divert funding from other worthwhile and important projects and initiatives while imposing sacrifices on others. The Minister for Transport, Tourism and Sport, Deputy Varadkar, and I met 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 various 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 this regard, I am anxious that the current negotiations between management and unions at the two bus companies be concluded as soon as possible. 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 so that its public transport services can be provided efficiently and cost-effectively over the plan's period. The decisions taken so far by the Government and the financial provisions made for CIE were fundamental in creating a better operational environment for the organisation. There is, however, no room for complacency. CIE's future must be one of efficiency and effectiveness with due regard to what the Exchequer can afford to bear. The measures that have been taken and are planned are in the longer term interest of CIE and its employees. The resolution of CIE's financial position will involve increased borrowing facilities for non-capital purposes. CIE's current borrowing limit is set at ¤107 million and it has facilities in place with banks to that limit which expire during 2013. The purpose of the increased limit of ¤300 million is to give CIE maximum flexibility to ensure access to long-term working capital and short-term funding facilities. In no way is the proposed limit to be taken as an indication that CIE will be exposed to a massive increase in its debt position.
While it is expected that the debt position will increase beyond the existing facility of ¤107 million in 2013, CIE is undertaking an aggressive business planning process with the aim of returning to a break-even position and achieving a sustainable debt position in subsequent years. It will be judging carefully the range of credit facilities necessary, including both longer-term facilities and overdraft-type facilities, to enable it to effectively manage its cashflow and day-to-day working capital requirements.
Recent experience has necessitated a strengthening of financial management systems, and there is a need to ensure the corporate governance arrangements of the boards of CIE and its subsidiary companies are enhanced. A detailed review of the group's financial systems and treasury management arrangements has been undertaken and measures put in place to strengthen those areas in the holding company and subsidiaries.
The existing total borrowing limits for CIE for non-capital purposes are set out in the provisions of section 28 of the Transport Act 1950 and section 3 of the Transport Act 1987, which provide for borrowing up to limits of ¤50 million and ¤57 million, respectively. It is now proposed to amend the 1950 Act to provide for an increase in the borrowing ceiling to a level of ¤300 million and to streamline CIE borrowing powers into a single enabling provision for all forms of borrowing undertaken by CIE for non-capital purposes. Separately, section 130 of the Railway Safety Act 2005 already provides for a ceiling of ¤600 million for capital borrowing by CIE.
Section 1 substitutes a new section 28 into the Transport Act 1950. Section 1(1) allows the Minister and the Minister for Public Expenditure and Reform to give consent to CIE to raise or borrow money for non-capital purposes, while section 1(2) sets a ceiling of ¤300 million on such borrowing. Section 1(3) enables property to be used as security for borrowings.
Section 2 provides for a consequential amendment of section 20 of the Transport (Re-Organisation of Córas Iompair Éireann) Act 1986 to allow the board of CIE to lend money to the subsidiary companies and for the subsidiary companies to borrow money with the consent of the board of CIE, subject to the total ceiling for all borrowings of ¤300 million. It should be noted that the giving of security for borrowings will be subject to the requirements of section 67 of the Credit Institutions (Stabilisation) Act 2010. This requirement arises from the provisions of our EU and bilateral loan agreements and aims to ensure our lenders under these agreements are given equal priority on any secured borrowings undertaken by general government. While CIE is not included in general government borrowing, Irish Rail is. The proposed amended section 28(3) of the Transport Act 1950 and the amended section 20(3) of the Transport (Re-Organisation of Córas Iompair Éireann) Act 1986 refers to compliance with the requirements of section 67 of the Credit Institutions (Stabilisation) Act 2010 by the board and subsidiaries.
Section 3 repeals sections 30 and 31 of the Transport Act 1950, which provided for a State guarantee of temporary borrowings and the laying of particulars of guarantees before the Houses of the Oireachtas. It also repeals sections 3 and 4 of the Transport Act 1987, which also previously dealt with CIE borrowing powers and State guarantees of borrowings by CIE.
I intend to propose an amendment on Committee Stage to delete section 2 of the Transport Act 1955, which provided for an amendment of section 28 of the Transport Act 1950. This is no longer appropriate as borrowing for capital purposes is dealt with separately. 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 our economic problems and the reduced sums available for capital and current expenditure, the Government will continue to prioritise the role of public transport.
The Government recognises that continued investment in transport infrastructure will play a key role in facilitating a return to economic growth in the coming years. The Department's overall strategy is to provide for the maintenance and upgrading of the transport network and ensure the delivery of public transport services with particular regard to economic competitiveness, social needs, and sustainability and safety objectives. The Department's aim is, within available resources, to maintain the capacity, quality, safety, sustainability and integration of Ireland's public transport network and public transport services and, where possible, implement improvements.
The capital programme for the next five years is determined in Infrastructure and Capital Investment 2012-2016: Medium Term Exchequer Framework, which was published by the Government in November 2011. Under the plan, a total of ¤1,363 million will be allocated toward improving public transport infrastructure between 2012 and 2016. The programme for the funding of capital projects to 2016 is also set out in the plan. Due to the overall reduction in funding for transport infrastructure, the priority to 2016 is to protect investment made to date, extract maximum value from existing assets and maintain safety standards. The limited funding available over and above this priority will be provided only for projects that are affordable, have strong business cases, meet overall transport objectives and deliver the best return in terms of economic recovery and job creation.
Moreover, the ability to operate profitably and without the need for a subsidy would also be a key consideration for any new rail project or extension. Funding is, therefore, prioritised to ensure the maintenance of existing infrastructure and advance a small number of important projects which can add value to the existing network.
Notwithstanding the reduction in the levels of funding, CIE, in particular larnród Éireann, is still receiving a significant level of funding. A total of ¤513 million is being provided under the third railway safety programme, 2009-13. In addition to safety related works, larnród Éireann is developing ticketing and associated equipment, as well as working to make the railways more competitive and attractive to passengers. The Dublin city centre re-signalling project, at a projected cost of ¤290 million, is a central element of the upgrading of commuter rail services for the greater Dublin area and is being delivered on a phased basis. This is a key project which is aimed at unlocking the major bottleneck in the city centre and which will have positive spin-off effects for DART, commuter and intercity passengers. It will provide for further capacity enhancement by upgrading signalling to accommodate an additional five train paths per direction per hour, from 12 to 17, in the critical city centre area. Work on phase 1, Howth to East Wall, is almost complete and commissioning is expected to take place this month. Design work is continuing on the next phase, Connolly to Grand Canal Dock, and due to be completed shortly.
Funding is also being provided in the 2012 to 2016 period for the purchase of replacement buses. They include 80 new buses being funded this year by the National Transport Authority as replacement buses for Dublin Bus, representing an investment of ¤26 million in its fleet replacement programme. All vehicles are low floor, wheelchair accessible and will ensure Dublin Bus will have a fully accessible fleet by the end of 2012, which is very welcome. The new buses also have a number of attractive features, including free Wi-Fi, additional CCTV cameras and centre doors to enable passengers to board and alight more efficiently. In 2011, 60 new buses were delivered to Bus Éireann at a cost to the Exchequer of ¤19 million. Funding approval in 2012 for Bus Éireann will total ¤2.5 million for fleet refurbishment, the provision of safety improvements at Capwell depot in Cork and its bus shelter programme. Funding is also being made available by my Department to the National Transport Authority for grants to local authorities for sustainable traffic management measures such as quality bus corridors, bus stop facilities, cycling and safety measures both in the greater Dublin area and the regional cities of Cork, Galway, Limerick and Waterford.
In support of the investment in public transport infrastructure the Government has committed significant funding to improve the attractiveness of public transport, including the development of the Leap card system which was launched late in 2011, the provision of real time passenger information, RTPI, and a national journey planner. The National Transport Authority has also developed the Transport for Ireland website, Transportforlreland.ie, as a one-stop-shop for up to the minute travelling and commuting information. From one's own desk, home or smartphone it is now possible to easily access door to door journey plans, real time information on bus arrival times or details on one's Leap card such as the credit remaining and details of recent trips. I encourage all Senators to visit the website and give their opinions on it. It is an excellent site.
The development of the Leap card system which was launched in late 2011 on the services of Dublin Bus, Luas and Irish Rail DART and commuter rail services is significant. Additional functionality is being introduced on an ongoing basis and the launch of the student travel card in September has added to significant growth in the number of Leap cards issued. Bus Éireann commenced pilot operations in September on its eastern regional services in the greater Dublin area. Two private bus operators, Wexford Bus and Matthews Coaches, are running pilot projects using the Leap card. Additional private bus operators will also be integrated into the scheme in the coming months. In early 2013 annual and monthly passes will be issued on the Leap card as cardholders renew passes and additional products such as multi-journey tickets will be rolled out by Dublin Bus. The scheme continues to function well, with almost 150,000 cards issued to date and 8.5 million journeys undertaken using Leap cards. In comparison with similar schemes launched in other parts of the world, the Leap card scheme is ahead of schedule. On a previous visit to this House I asked Senators to conduct a survey of how many of them had a Leap card and was using it. I would be delighted if someone updated me in that regard.
The RTPI project is being rolled out in the greater Dublin area and the four regional cities. In the greater Dublin area the project involves the installation of up to 500 on-street information signs capable of displaying the arrival times of buses. These RTPI displays are being located at selected bus stops or interchange points in the greater Dublin area. The first phase of sign deployments is now 98% complete in Dublin and Cork, with over 411 signs in place in Dublin and 45 in Cork. Much of the preparatory civil engineering works have commenced in Limerick and Waterford and Galway City Council is in the process of appointing a contractor to install 20 displays. Bus passengers across Dublin and Cork can check actual bus arrival times using the aforementioned Transport for Ireland website, the SMS text service or the Dublin Bus or Bus Éireann smartphone applications. The provision of this information transforms public transport and encourages more people to use public transport. The real time information has been available for a number of months and we are now seeing its benefits.
The Government will maintain its policy of targeted investment in and support of public transport. This must be complemented by CIE contributing to greater financial health in its operations. The Government, in charting the future for CIE, recognises the challenges facing CIE and its workforce. Through the business planning process, measures are being planned and put in place and financial targets set to turn the situation around. These targets will be demanding but are essential to restore CIE to a sustainable financial path. It is now up to management and the workforce to ensure the future success of the organisation.
In summary, I have outlined for the House the difficulties facing CIE in recent years and touched on the efforts that must be made to enhance its financial sustainability. I reiterate the commitment of the Government to continue to invest significant scarce resources in public transport. I have explained the background to the Bill and its provisions. While recognising that there are still many challenges facing the CIE and its subsidiaries, I am confident that these can be overcome. I commend the Bill to the House.
I welcome the Minister of State and thank him for his very comprehensive outline of the Government's strategy for public transport in the context of the Bill which Fianna Fáil will be supporting, given its importance.
As the Minister of State outlined, CIE is in a very dark place. Its future, according to a recent auditor's report, is under serious threat. During the summer the Minister for Transport, Tourism and Sport announced that he would allocate a sum of ¤36 million to help the company to get over its immediate financial difficulties, but that was later withdrawn. Perhaps the Minister of State might indicate the current status of that allocation of ¤36 million. Will it be allocated to CIE? In the context of the latitude being given to CIE under the Bill, I am curious about that sum, as it seemed to be needed as a stop-gap to ensure the continued viability of the services of the company.
The main stakeholders in the transport sector appeared before the Joint Committee on Transport and Communications, of which I am a member, a number of weeks ago. While I accept that the Bill is concerned with CIE and its borrowing requirements, I am a little disappointed that the Minister of State did not make any reference to the private sector. Private sector transport services are growing and I would like to know what is the Government's policy on competitive tendering for routes. The previous Government was under pressure from the European Commission to deregulate transport services to a greater degree. I am a firm supporter of public transport and CIE. Its workforce and the unions have shown commendable restraint since 2008, when the company last made a profit. There have been major job losses and significant changes in work practices in a company that was traditionally deemed to be inflexible in the context of management and trade union relations. I commend the unions on rising to the challenge in recent years. However, there are areas of the country in which CIE is reducing services and a case could be made for private operators to tender for routes. Private operators would be more flexible in the type of transport services they could provide.
I refer to my own part of the country, which has been severely impacted by the financial troubles in CIE and Bus Éireann.
Controversy has arisen in recent weeks about the closure of bus stops along expressway routes in certain parts of the country. This has happened on the route between Ballina and Dublin and although some stops were restored on that route after lobbying, the problems on the N4 Sligo-Dublin expressway have not been resolved. Two villages along the N4, Dromod and Roosky, were bypassed in recent years. Dromod is not as badly affected as Roosky simply because it has a train station that is serviced by five trains each way between Dublin and Sligo. However, most of the people in Roosky who have used the expressway service were either pensioners or completely reliant on public transport. When Bus Éireann announced its intention to close these stops it did not refer to the fact that it was losing business. It conceded that people were using the service but it argues that it will provide greater efficiency. It appears to suggest that people in Sligo should be given priority over those in Leitrim when it claims that the service will be faster. Time measurements of the stop in Roosky indicates that little time would be saved, however. A large number of people from the area came to Dublin to lobby on this issue last week and they may have met the Minister of State.
It is important that CIE be given the borrowing rights set out in the Bill. I hope it will lead to greater stability in the company. Fianna Fáil asks the Government to develop its policy platform of an integrated network of public transport to all citizens of this State. As the Minister of State comes from a constituency that comprises a mixture of rural and urban areas, he understood perfectly what this involves. A service which he was identified as providing became controversial because certain commentators suggested it was not commercially viable but, irrespective of whether he was involved in the decision behind it, this service was essential to the continuing viability of rural Ireland.
Similar questions have been asked about the western rail corridor, which is already being attacked by Dublin economists who argue it should never have been built in light of the numbers using it. I will not name anybody. If we are to maintain regional and spatial balance, continued investment in public transport is the only way forward. The economic cycle will turn and it would be horrendous if we did not put a proper bus and rail infrastructure in place. In 1958 the Government of the day insisted that CIE had to balance its books. History is repeating itself in this regard. The result of the 1958 decision was that Todd Andrews, who was the then chairman of CIE, abolished rural Ireland literally at a stroke. He was only a tool of Government policy but he was singled out as the man who took these decisions. My town and county suffered as a result, as did every area of the country. A rail infrastructure that had been but in place from the 1840s was abolished overnight.
Several years ago a former chairman of CIE, John Lynch, outlined the sequel to this story while he was visiting my own town of Drumshanbo. In 1963, the then Government reversed the policy of making CIE pay its way because it realised that public transport is a governmental responsibility. Anybody who suggests that public transport must pay its way under all circumstances is living in cloud cuckoo land. It will never pay its way simply because it is a public service. This is why most governments in developed economies are held responsible for providing public transport services. They can, of course, exist alongside the private sector and this is why I am curious about the Minister of State's views on the future of the private sector. Are there areas in which we are slow to open routes to private competition? Bus Éireann has a monopoly on the Sligo-Dublin route, for example, which is not right given the circumstances I have outlined.
The programme for Government refers to the need to re-balance transport policy to favour public transport. Irrespective of the Minister of State's assurances, I am not convinced this commitment has been taken to heart. However, the latter part of his speech reveals the extraordinary developments that have taken place in the area of public transport over the past 15 years. I get the sense he shares my hope that, irrespective of the pressures on financial resources, the Government will continue to invest in public transport. It would be a national scandal if we repeated the mistakes of the past. In 1951, the economists of the day said the future lay in road transport and as a result the country's tramlines were abolished, only for us to bring them back 50 years later. We should not repeat the mistakes of the past. I wish the Minister of State fair wind in continuing to invest in public transport.
On behalf of Fine Gael I welcome the Minister of State to the Upper House. I have a Leap card, although it may need a top-up. The Minister of State asked whether Senators use them. All of us should carry Leap cards because they are part of a great system. In regard to the transport for Ireland website, I have seen people use smart phone applications to find out when their buses were departing.
I was surprised to find that the Bill increases the amount of money CIE is allowed to borrow to fund its day-to-day operations, as opposed to invest in other areas, until I realised that the current borrowing limit was set in 1987. The Bill will increase the borrowing limit for non-capital purposes from ¤107 million to ¤300 million and remove the possibility of a State guarantee for such borrowings, in line with EU competition rules. The main effect of this change will be to allow CIE to borrow additional funds to provide cashflow in its day-to-day operations. I presume the additional funds will be used to meet the current shortfall in its operational budget.
This is a challenging time for CIE and its subsidiaries in that they face rising fuel costs alongside reductions in Exchequer funding. A major enterprise like CIE will face difficulties when circumstances change rapidly. Smaller companies can be more flexible and have the capacity to react to changing circumstances rapidly. To use a metaphor, small companies are like speedboats whereas large State transport companies are like oil tankers. They are difficult to manoeuvre in response to changes in circumstances. Under the Minister of State, Deputy Kelly, I believe they can be moved in the right direction. They can be cumbersome in comparison to small private companies but while we must recognise the scale of the challenges faced by CIE, the company must also realise the need to change.
While the current economic difficulties mean the State cannot provide the same subventions as it did in the past, they also offer an opportunity for public transport companies to promote themselves as a less expensive and hassle free alternative to cars. In recent years, however, the number of passengers using CIE services has declined according to figures from the Department of Public Expenditure and Reform. In 2008, 43.3 million passengers used Irish Rail but this figure had declined by 13% one year later and further declined by 2% in each of the following two years to 37.4 million passengers in 2011. Similarly, the number of passengers using Dublin Bus was 143.5 million in 2008 but declined by 11% in 2009, 7% in 2012 and 2% in 2011 to 116.9 million passengers. Bus Éireann carried 48.9 million passengers in 2008 but experienced declines of 16% in 2009, 12% in 2010 and 3% in 2011.
The scale of these decreases is staggering. There was a significant drop in passengers right across CIE companies in 2009, with an overall loss of 26.3 million passengers. That would be a major loss to any company. Economic circumstances caused much of that, but it also must have to do with bus routes and services provided.
When you consider that the company has posted losses since 2008 and the management expects the losses to continue until 2014, CIE and it subsidiary companies face challenging times over the next number of years. Alarmingly, this has led the group's auditors to indicate a material uncertainty in the group's annual accounts in 2011 regarding its ability to continue as a going concern. Much of these losses are attributed to the cost of restructuring, that is, redundancy payment and other restructuring costs. These amounted to ¤113 million over the three-year period from 2008 to 2011. This restructuring reduced the number of employed by 557 and reduced payroll by ¤25.2 million. Another major effect on these losses is the cost of fuel, which has increased by 25% in three years. As the Minister outlined, CIE estimates that this costs an extra ¤22 million. This is despite a reduction in the amount of fuel used.
Public transport in Ireland can be viable but the culture must be one that looks outwards to the needs of customers and potential customers. It can be easy for large companies in receipt of State funding to get caught in a bubble and to lose focus. Mr. Michael O'Leary, the CEO of Ryanair, often states that the best companies start during a recession when the challenges to be lean and flexible are greatest. This is an opportunity the Minister has with public transport. Tough economic times can provide the impetus for much needed reforms and culture changes. There is an opportunity for our much valued public transport companies to respond to current challenges in a way that will secure their viability far in the future. No doubt the Minister of State, Deputy Kelly, and the Minister, Deputy Varadkar, are the right ones to help guide these companies towards a better future.
While on the subject of public transport, I will raise a matter with the Minister. I have a concern about the methodology used when determining the amount of free travel provided to those who qualify. I understand that two annual surveys of users take place to determine an average usage of the particular mode of transport. This is the model for public and private transportation. From the taxpayers' point of view, this is an unsatisfactory approach. It means that money is allocated based on what is, in essence, a guesstimate. Obviously, a system such as a swipe-card system would be expensive and complex; however, in the interests of transparency and prudent use of public moneys, such an approach is essential.
The aim of the Bill is to allow CIE and its subsidiaries to borrow additional funds in order to help it get over its current financial difficulties. Some degree of restructuring, such as making staff redundant, means large up-front costs with savings in the future. The additional borrowings would ease cashflow difficulties. However, interest on the additional borrowings must be paid. With proper restructuring, I hope that CIE can get back to profitability.
We have made important progress with the Leap card, thanks to the Minister of State, Deputy Kelly's, drive and determination. For many years, the project was dragging on with no end in sight under the previous Administration. We need to build on these technological advances, such as, as the Minister of State mentioned, the transport website and the smart phone apps. A spirit of reform, modernisation, transparency and prudent expenditure must pervade all aspects of policy. We must be willing to think outside the box and not accept answers when we are told something is difficult, which, I understand, can be the standard mantra within Departments. We must seize the window of opportunity that the current economic situation presents.
I would agree with Senator Mooney that CIE is a public transport company and public transport is for all the public. I would hope, when we privatise routes or put them out to tender, that companies will not be allowed to cherry-pick because rural areas need to be supported with public transport as well. I note the Minister of State will look after that.
It was great to hear Senator Mooney admit that Fianna Fáil made a mistake in 1951.
I welcome the Minister of State to the House.
What we are faced with is that CIE is simply not a competitive company, and Senator O'Neill spoke well on it. We have been bailing it out, one way or the other, since 1932. We have spent 80 years trying to control its competition. Once there were 70 bus companies in Dublin and many up and down the country. Most of them were eliminated to create this monopoly and then there was a pattern of subsidies. That all continues.
According to the CIE annual report for 2011, the subsidy was ¤542.422 million. The PSO grants amounted to ¤163 million for Irish Rail, ¤73 million for Dublin Bus and ¤43 million for Bus Éireann. Other Exchequer grants under the national development plan amounted to ¤243.660 million. A subsidy of ¤0.5 billion plus is massive. As the Minister of State said, the group still ran out of money in the middle of this year and needed ¤36 million urgently. I worry about how the Minister did not know what was happening earlier in the year. Indeed, there were concerns here in this House that the emergency requirement for money arose after the Dáil and Seanad adjourned for the vacation.
The traffic data is falling, as the Minister of State said. As a person who is with young people all the time, I can see that. Since the motorways have been built, the competing independent unsubsidised bus companies offer, as far as young people are concerned, a much better product. They introduced WiFi first. Bus Éireann is looking for money to catch up in that regard. Aircoach, Kavanagh, and Matthews, between Dublin and Dundalk, question why we need to keep subsidising CIE to the degree that we do. The Department, in the Public Transport (Regulation) Act 2009, showed a blatant bias - I would say, discrimination - against competition. They gave the entire network to one company without any competitive tendering under a direct award contract, including all of the investment grants. One in the private sector is trying to compete with Bus Éireann and it can have a double-deck bus, worth ¤400,000, free and one can still win on price. This is the kind of entrepreneurship that the economy needs. It is a kind of competitive pressure under which CIE deserves to be put.
I welcome the Minister's emphasis on it being a business. It is there to satisfy consumers. The consumers are deserting and the company must respond to that. One need only look at some of the problems in the past, for example, that the airport was served by a monopoly bus company which decided that Busáras was the centre of the world and Aircoach really showed up that model. The folklore in the Department was that one could not persuade car owners to leave their cars at home and go by bus, and the success of Aircoach proved the Department wrong. The licence was won by Mr. John O'Sullivan, who used work in CIE, and maybe there is entrepreneurship there that should be allowed out.
I note also that two senior assistant secretaries in the Department, Mr. John Lumsden and Mr. Pat Mangan, wrote about the lack of any counter-culture or devil's advocacy within the Department. It seems to be so wedded to a monopoly, so weak is it on investment appraisal. Transport 21 proposed spending of ¤34.4 billion. I was at the launch in Dublin Castle in 2005 and there was not a ha'penny worth of economics unveiled with it. It has been engineer-dominated. That world has changed and the motorway system has allowed competing bus companies to attract most of the young people.
Rail travel between Galway and Dublin has declined from 1.6 million to 1 million. There are 45 buses a day by different companies which do not require investment grants from the Department and do not require operating subsidies. The Department must look at the alternatives, particularly at a time - there was the legislation yesterday - of fiscal responsibility.
What did we get for the ¤542 million in 2011 that was given by the Department to the CIE companies? Clichés, such as this or that was a success, are no longer enough. I passed by, on the Navan Road, a 1,200 space car park at Pace, the M3 Parkway and I have never seen more than 100 cars in it. That constituted a massive investment yielding no return of any kind that I can see, and that is the tradition.
I worry about the weak capital investment appraisal tradition in the Department of Transport, Tourism and Sport. The new Department of Public Expenditure and Reform and, indeed, the Department of Finance will have to take a stricter line on that. I also worry about borrowing for non-capital purposes. We have to get some return on this. I worry about not seeking value for money for the subsidy and ruling out, in such a blanket way, the fact that necessary public transport - as other Senators have said - can be provided by anybody except the State's own company. There must be some distance between the State owning a company and regulating the market. Nonetheless, that distance is transgressed overall on the wrong side. The bias against alternative ways of providing transport in this country should not really survive for much longer, given the overall difficulties of the national finances. There are alternative people there.
The Department's dedication and devotion to Aer Lingus as a monopoly access transport provider held this country back for years. Eventually, that was changed by a revolt in parliament and fares went down while volumes went up. Where we have opened up routes like the Dublin-Galway one, where there used to be one bus per day in a monopoly situation, there are now about 45 and the fares are lower. The fares also fell on the Dublin-Cork route when it ceased to be a monopoly.
The Department must develop a focus of getting better value for the taxpayer and the consumer. If that requires radical change within CIE, then that is right. It is there to satisfy the needs of a wider public, not to lobby always for huge investment grants and subsidies, including subsidies for non-capital expenditure.
I welcome the Minister of State back to this House. I congratulate him on the work he is doing in the public transport system. I note with particular alarm a section from his speech that 2007 was the only year in the 2006-11 period in which CIE generated a surplus. He said that the total losses of ¤137 million certainly cannot be sustained and we would all agree with that. It cannot continue, so I commend the Minister of State's endeavours to deal with this financial hole in CIE's accounts. The Bill will go some way towards achieving that.
Part of the deficit is explained by lower passenger numbers, as the Minister of State said. The statistics have already been quoted by other speakers, so I will not go over them again. It is quite stark to see the 13% fall from 2008 in Irish Rail's passenger numbers and they continued to fall in 2010 and 2011. If that projection continues, I presume that trend will continue this year also. I will not go through all the numbers as they have been put on the record by previous speakers.
The improved road network has made it far easier to travel by car. The country has become even smaller due to the road network. I imagine that increased competition with private operators also has something to do with the fall in passenger numbers. As a public service, it is expected that Bus Éireann routes will serve every town and village along a route. That public service obligation sometimes hinders CIE. For example, if one is travelling from Wexford to Dublin on a private bus, there are one or two stops before one arrives in the city centre. With Bus Éireann, however, one can travel all the winding roads in and out of towns and villages. Perhaps pick-up points could be examined with a view to changing routes to make them more efficient.
There have been fantastic developments, as the Minister of State mentioned in his speech. We have seen the introduction of the Leap card, free Wi-Fi and real-time passenger information for major cities, which is welcome. Public transport in cities and other major urban centres seems to be working quite well. It is when one travels longer distances by public transport that there seems to be an issue. I am speaking about bus services. It is something that I cannot explain. Often, when I am waiting at a bus stop for a Bus Éireann service I wonder if I have missed it. There is an issue with timetabling. Are the timetables realistic? Perhaps they should be reviewed. On the last occasion, the bus was 40 minutes late, which is unacceptable for a public transport service. I spoke to people queueing for the same bus and they said: "It is always the same; that bus is always late." People can almost guess that the bus will be late and allow for that time, but why not make the timetables more realistic? That may be one of the reasons people are deciding to use alternative routes run by private operators.
I congratulate the Minister of State again on bringing forward this Bill which is welcome. Every time the Minister of State attends this House he seems to attract cross-party support for all his initiatives. That, in itself, is an endorsement.
I also welcome the Minister of State back to the Seanad. He gets quite an amount of cross-party support simply because he is doing a good job. He is dealing with a difficult, technical and problematical situation. In the past, CIE's hallmark has not been solution driven, but it must be so in future.
I travel by public transport all the time. I travel to Dublin every week by train and I use the bus networks extensively. I would like to see more of my colleagues doing the same. We cannot preach about increasing passenger numbers if we do not use public transport ourselves. Each Member of the Oireachtas should, if possible even once a month, take the train to Dublin. It is a good service by and large and it runs on time. It is rarely late and it is comfortable. There is Wi-Fi on board and the coffee is quite good.
It has improved out of all measure in the past year. I should add that one can also get the daily newspaper on the train, so things have improved. The elephant in the room, however, is that it is losing a substantial amount of money, so it has to become competitive. Some areas have improved, and well done to them, but there are significant areas where substantial improvement is required. We will start with the basics. Rail and bus stations throughout the country could have many more services available than at present. There is no reason each railway station with more than six or seven daily services should not have some form of coffee shop. There are plenty of people who would take a realistic lease to run a café in a railway station. There is no reason one should not be able to buy a newspaper at each station, as well as having other ancillary services to generate much needed revenue. Heuston and Connolly stations are classic examples, as is Kent station in Cork, of where good services are available. There is room for improvement in many others, however, which should be considered in formulating any business plan. Magazines, newspapers, confectionery and other products should be more widely available on board trains.
I understand the catering service has been contracted out. Perhaps Iarnród Éireann might consider providing this service, although I understand it had bad experiences in this regard. Ryanair is making significant money from its on-board catering facilities. One way of increasing revenue is to encourage use of the service. One wonders sometimes if the policy of having an airport in every county augurs well for rail and bus services. There are airports in counties Donegal, Sligo, Mayo, Galway, Clare, Kerry, Cork and Waterford, among others. It is unfortunate that all Governments and parties did not have a coherent focused policy on international and domestic travel. What also does not help is that it is possible to get from Galway to Dublin quicker by car than by train. Perhaps speed restrictions, where safety issues are not of concern, might be examined in the context of assisting transport services to complete journeys to Dublin quicker. The more stops one has to make the slower the service. The 5 p.m. service from Dublin to Cork only stops at Limerick Junction, Charleville and Cork, while a number of other services stop at myriad stations which, ultimately, slows down journey times. People are in a hurry and want to get places quickly. We need to respond to this need.
In terms of bus services, integrated timetables and so on were mentioned. If on a Thursday I were to take the 3.25 p.m. train service from Dublin to Ennis, I would not arrive in Ennis until 6.45 p.m., which means I would miss the bus service to Ennistymon, where I live, by ten minutes. These are issues that could and I am sure will be looked at. Perhaps there is a good reason the bus leaves ten minutes before the train arrives.
Approximately six weeks ago I decided to travel to Dublin by train which was half an hour late leaving Ennis station and travelled to Dublin via County Galway. However, when we reached Athenry, we had to be taken by bus to Athlone because the decision was taken that the Galway to Dublin train service could not wait seven minutes for the late train service from Ennis. This resulted in the additional cost of providing two buses to ferry passengers to Athlone to catch another train. I accept that there are crises and emergencies. However, decisions made at local level must be cost conscious. I telephoned Mr. Barry Kenny and told him what had happened did not make sense. The likelihood is that the Galway to Dublin train service would have made up lost time on the way to Heuston Station. Everybody, from senior management down to station masters, area supervisors and managers, must be conscious of the consequences of decisions made on the spur of the moment. While they may have the authority to make such decisions, they must be conscious that they are spending taxpayers' money.
Many of the company's management structures can be improved. Senator Sean D. Barrett is a professor of transport economics. As such, much of what he says should be taken on board. He is possibly one of the most, if not the most, eminent transport economists in the country and his views should feed into any thought process in Iarnród Éireann and CIE.
Significant advances have been made, including in the availability of WiFi on trains and buses, which is welcome. I also welcome the Leap card, which is innovative. The job of the Minister of State is not an easy one, as is the case in respect of the Minister, Deputy Leo Varadkar. However, they are two young and enthusiastic Ministers who have embraced information technology and, in turn, will drive Iarnród Éireann and CIE to ensure the service they provide is efficient and more cost effective than in the past. I wish the Minister of State well.
I thank all Senators for their contributions and welcome their support for the Bill. I seem to receive cross-party support on each occasion I come into the House, which is very much appreciated, given the difficulties we are experiencing in public transport owing to economic circumstances. We have a considerable amount of work to do. However, there has been a considerable amount of positive developments.
In response to Senator Paschal Mooney, some of the ¤36 million provided by the Government has been allocated and the remainder will be allocated in due course. On the bus market, this issue is under consideration by the Government, following which a decision will be made. Reference was made to Bus Éireann's commercial services, including Expressway and so on. This is an operational matter for the company which has difficult decisions to make. I am aware of the cases referred to, which have been raised previously with me by another Member of the House. It is a difficult scenario. The Bus Éireann brand is trusted across rural Ireland and the service is much appreciated by the many people who use it. Bus Éireann is operating in a commercial environment in competition with private operators. It must strive to be competitive and in this regard needs to bring its scheduled journey times into line with those of private operators which may not have the same overheads or commitments in servicing different towns. We cannot, on the one hand, say Bus Éireann should be more commercial and able to balance its books and, on the other, that it should be able to service this, that or other town.
It is impossible for it to do both. We must ensure the right combination is achieved, which is what it is striving to do. I encourage the company to address the issue in the best way it can, which I know Senators appreciate. There may be cases in which servicing particular towns is the correct thing to do. However, that is a matter for Bus Éireann.
I take on board the Senator's comments on rural Ireland and his honesty in relation to past decisions, which is a welcome development in this House. I am hugely passionate about the requirement and necessity for rural services throughout Ireland. It has been stated we must ensure there is no cherrypicking by private operators, with which I agree. I am closely monitoring the position.
I thank Senator Pat O'Neill for purchasing a Leap card. I will, for the third time, ask for an analysis of the number of Senators who have purchased a Leap card. Perhaps the Cathaoirleach might communicate the information to me in writing in the next couple of weeks.
This is the third time I have made that request. I would welcome the information which I first requested a number of months ago.
I welcome the comments in respect of the Leap card, Wi-Fi provision, real-time passenger information, the Transport for Ireland website, the national journey planner, etc. Even though people state that these are small-scale developments, they make a significant contribution towards encouraging people to take public transport. Collectively, these are all qualitative measures which improve one's experience on public transport. By and large, I have been obliged to deal with most of them in the Department and I am of the view that the enhancements which have been introduced in the past 18 months are fabulous. Once someone returns to public transport and begins to avail of these enhancements, he or she will come to the view that public transport is both much more comfortable and reliable. He or she will also be able to manage his or her time much better.
The Senator also inquired about free travel and the analysis contained in the double-year surveys. A working group is currently examining the position with regard to free travel. This matter comes under the remit of the Department of Social Protection but my Department does have a representative on the working group. The issue raised by the Senator is being analysed at present. The outcome of the group's work will be a matter with which the Minister for Social Protection will be obliged to deal. It is clear, however, that there is a need to analyse the position from the point of view of volume, etc., in order to ensure that the data we are receiving is accurate.
Senator Heffernan referred to the operation of timetables. This is a matter to which consideration must be given. I have asked the NTA to provide integrated timetables across the country. In view of the issues raised by a number of Senators in respect of the changes introduced by Bus Éireann in recent times - similar changes will continue to be introduced - it is imperative that we should be in a position to obtain the full picture of the services available, from an integrated point of view, throughout the State. In other words, it should not just be a case of stating that Bus Éireann offers particular services. Information on the services provided by Bus Éireann, Irish Rail and private bus operators in respect of specific areas and towns should be made available. This would illustrate for members of the public - in a complementary way - the volume of services being made available by a range of providers. I am glad the Senator raised this issue because I wanted to outline the position in clear terms.
The NTA has a responsibility to monitor the position regarding timetables and the provision of contracted services in order to ensure that private operators are providing services in accordance with their contracts. I have received a number of complaints - I have actually witnessed this myself - in respect of a number of buses parking in various towns in the midlands, the mid-west, etc., at the same time when the schedules show that they should not be there. Something has to be happening in this regard in the context of some operators - be they public or private - positioning themselves to be able to pick up passengers before their competitors. If this is the case, it means that the public is not being provided with a fully integrated service. I have challenged the NTA to investigate the position in respect of this matter. Obviously, that will be difficult but it must be done.
I appreciate the comments made by Senator Conway. Dare I say it, but there is probably no one in this House who uses public transport more than the Senator. In that context, his comments are very much appreciated. I will not become involved in the debate on the standard of coffee available on rail services throughout the country.
Perhaps I might contact CIE about the possibility of a survey being carried out. I do not know whether the company uses Nescafe, Kenco or whatever but perhaps it might choose the best one and then introduce this on all of its services.
In the context of services, there is an important point to be made in respect of the land and assets of CIE and how these might be utilised to a greater degree. CIE owns a considerable volume of land and assets which are strategically quite well placed on the edge or in the centre of our cities and major towns. The properties to which I refer are fantastic but there must be a way to examine how they might be utilised to a greater degree. Senator Conway referred to the opening of retail facilities in various train stations and I completely agree with him in that regard. This matter is going to have to be considered, particularly as it could give rise to CIE obtaining further income. In addition, it could lead to services being provided in areas in which there is not currently a wide range of services available. We will also need to consider how the land banks attaching to the train stations in question might be used more productively for various other activities. I am aware that this is already happening in certain areas.
I have good news for the House on the issue of speed. I expect some improvements in this regard on the major inter-urban networks in the coming year. This will help facilitate an improvement in passenger numbers. There is also a need to examine the position in the context of integrated timetabling in the context of connectivity. Senator Conway referred to this matter in the context of catching the bus to Ennistymon. As someone who is passionate about the little village of Ennistymon - for reasons of which the Senator is only too well aware-----
I thank Senator Barrett for his substantial contribution. There is an ongoing debate on the public service obligation, the subsidy paid to CIE and getting the balance right. The issue of the percentage of the bus market - the position with regard to the rail market is more realistic - that should be open to liberalisation and privatisation in order to impact on costs also comes into the equation. We are in the middle of a sensitive period in this regard, particularly as the position of the bus market is currently being considered by the Government. I do not, therefore, wish to comment in any great detail on this matter. I will, however, make a couple of points.
Ireland has one of the lowest public transport subsidies in Europe. That is a fact which is often forgotten. In light of the economic situation, the subsidy is going to change. As outlined earlier, we were obliged to invest a considerable amount of additional funding this year. CIE is far more dependent on fares to generate the income it requires than are its competitors in other countries. The company was obliged to cope with a perfect storm in recent years. As a result of the economic situation and the fact that many people either became unemployed or were obliged to emigrate in search of work, it lost many of its customers. It was also obliged to cope with the decrease in the subvention. The process in this regard began a number of years ago under a previous Administration. CIE has also been obliged to cope with fluctuations in fuel prices. Furthermore, the previous Administration also introduced changes to the fuel rebate and this had a net impact of over ¤20 million on the company's finances. A combination of the factors to which I refer pushed CIE into a particular position and that is why this Bill was brought forward.
In the context of liberalising the market, the experience from an international perspective is quite mixed. The initial results in some countries where this has happened - to a large, medium or small degree - show that the state can obtain some savings in certain circumstances. However, in some countries privatisation has led to monopolisation, or a variation thereof, over a number of years and this has led to an increase in the costs incurred by the state. This happens in some instances but not in others. There is no such thing as best practice in respect of these matters in Ireland. We can only learn from other countries.
An analysis would show that various countries had dealt with the matter in different ways with mixed results. We must ensure that whatever we decide for this country, we take into account the permutations involved and understand the circumstances here are different.
We had a number of reports in recent years on bus companies. To be fair to them, the Deloitte report was complimentary to them on the way they handled their affairs. In many cases, they offer a public service obligation service and demonstrate a social conscience in many of their operations. We hear figures being bandied about for costs of certain or potential private operators. I compliment some of the private operators which provide an excellent service and do not denigrate them in any way. However, in some cases, the overheads of private operators are significantly lower than those of Bus Éireann and Dublin Bus. These intangible costs are not often brought forward but must be considered in decisions taken on the merits or demerits of liberalising bus markets. A wider discussion of the liberalisation and privatisation agenda is required. Liberalisation is not the panacea that would solve all of our problems. In fact, that would not be the case.
The Government is examining public transport options to ensure better provision in rural areas in the future. I have spoken in the House previously on integrated transport services. An issue on which I did not go into detail at the time is that we must examine the integration of school and public transport services. I have been involved in considerable discussions on the issue with the Minister of State, Deputy Ciarán Cannon, in the Department of Education and Skills. Bus operators contracted by Bus Éireann do a good job. Bus Éireann also does a good job in providing school transport, but I am concerned that the issue was not examined previously. In many cases, buses travel around the country and to and from schools, which is necessary. We are supportive of this and see it as a social requirement, but they also travel make the return journey in both directions with nobody on board. If these buses were made available for public transport services, a service would be provided immediately across the country. This is an initiative that is seriously being considered by the Government. I hope to progress it in the near future with the Minister of State, Deputy Ciarán Cannon, because it is something that would be most welcome.
I thank Senators for their contributions and welcome their support for the Bill which I commend to the House.