I move: "That the Bill be now read a Second Time."
The purpose of the Bill is to extend CIE's long-term borrowing powers for capital purposes and also to increase the limit on the board's temporary borrowing powers.
Before dealing with the Bill itself I propose to review briefly the position of CIE in recent years. As Deputies are aware, there has been a serious deterioration in CIE's financial position since 1969 when the amount of the board's statutory grant was fixed at £2.65 million per annum. The board's losses have increased from over £3 million in 1969-70 to over £8 million in 1972-73 and there will be a further substantial increase in the current financial year. The increased losses have been incurred mainly on the railway but the position has been aggravated by a decline into a loss-making situation of hitherto profitable road services. Increases in rates and fares sought by the board in 1972 were postponed for almost a year pending completion of an investigation by the National Prices Commission and this, of course, has contributed significantly to the losses.
The investigations carried out by McKinsey & Co. in 1971 showed that CIE's increasing losses were due mainly to inflation and to growing competition from private transport. The consultants carried out a broad cost/benefit analysis of railway operations and found that even when given credit for all the social benefits which it could be deemed to render to the community, the railway still incurred substantial losses and, leaving aside transitional costs, could be replaced more economically by an all road system. However, the inclusion of unavoidable transitional costs, mainly costs of redundancy, altered the position and the consultants found that, from a community standpoint, the best course of action was to retain the railway but to selectively modify and develop it so as to bring social costs and benefits more closely into line.
CIE, on the basis of the general recommendations of the consultants, have been developing specific plans for the rationalisation of mainline railway operations and improvements in operating practices which will involve, inter alia, increased capital investment in modernising terminals, rolling stock, track and signalling. These plans are at present under examination and I hope to secure the early approval of the Government for CIE to proceed on the lines proposed. Because the costs of the railway consist so largely of labour costs any financial improvement will involve some redundancy but it is envisaged that this can largely be met by natural wastage. The whole plan will in any case be discussed by CIE with the trade unions.
By the use of imaginative marketing and promotional campaigns CIE have achieved a considerable increase in the number of passengers travelling by rail. Almost 12 million were carried in 1972-73 which represents an increase of 8 per cent over 1971-72, which itself had shown an increase of 6½ per cent over the previous year. The introduction of the new air-conditioned super trains which brought a new standard of passenger comfort, speed and convenience was also a contributory factor. Dublin suburban commuter rail traffic also continued to expand in 1972-73 showing a growth of 7½ per cent on the previous year. New push/pull train units were introduced to improve these services. tons was marginally higher in 1972-73 than in the previous year. The liner train concept was further developed and the demand for unit load container conveyance and for further extensions of pallets continued to grow.
There was also an expansion in CIE's road services. Dublin city buses carried 210 million passengers in 1972-73, an increase of 9.5 million on the previous year. Sixty-two million passengers were carried on the board's provincial long distance and city bus services, excluding special school services, in 1972-73, an increase of two million over the previous year. A major bus passenger survey has recently been carried out by CIE and Rail freight tonnage at 3.65 million the information obtained will form the basis of a new overall provincial bus policy plan which is being formulated. In the road freight section the total tonnage carried in 1972-73 was 5.7 million tons which was 2 per cent higher than in the previous year. CIE's shipping and air freight services, which are conducted through Irish Ferryways and Aerlod Teoranta, showed larger turnover and increased profitability in spite of the severe competition in sea and air freight.
Unfortunately, as I have already indicated, these improvements have not been sufficient to counteract the prevailing economic forces and the board's deficits still continue to grow. The railway deficit in 1972-73 was £7.695 million, an increase of £980,000 on the deficit in 1971-72. Notwithstanding the increase in the number of passengers carried, a loss of £360,000 was incurred on the Dublin city bus services compared with a profit of £185,000 in 1971-72. The provincial bus services showed a decline in profits from £550,000 in 1971-72 to £319,000 in 1972-73. Road freight services, however, showed a small profit of £22,000 compared with a loss of £134,000 in 1971-72.
The existing blanket type subvention paid to CIE will no longer be appropriate under EEC regulations and proposals for a new subvention structure to meet EEC requirements are at present nearing completion.
The immediate need for the present Bill is to enable CIE to take up a loan of £4 million which has been approved by the European Investment Bank for a term of 20 years at a proposed rate of interest of 8¾ per cent. At present CIE's long-term capital borrowing powers are confined to borrowing from the Minister for Finance and it is necessary, therefore, to extend these powers so as to enable the board to take up the proposed loan from the EIB and also to avail of any other sources of finance which might be found attractive. It is expected, however, that the Exchequer will still remain the main source of loan finance for CIE's capital expenditure. Borrowing from sources other than the Exchequer will be subject to my prior consent and the approval of the Minister for Finance, who will be empowered to guarantee such borrowings.
The EIB loan is related to the board's railway investment programme and will contribute in particular to improvements in passenger train services, wagon load freight services, terminal facilities and the signalling system. These improvements will enable the provision of faster and more frequent passenger trains with modern carriages and the concentration of freight traffic on fully fitted block trains. We would hope that these measures will lead to a significant increase in traffic by rail. By granting the loan of £4 million, the European Investment Bank is helping the railway to remain an essential part of Ireland's transport system and to play its part in the progress of the Irish economy.
The limit on the board's capital borrowing powers and on Exchequer capital advances to CIE was increased from £6 million to £17 million under the Transport Act, 1969. The £17 million provision is now almost exhausted and it is proposed to extend the limit to £55 million, that is, an increase of £38 million. This sum, together with the board's depreciation provisions, will be available to meet future capital expenditure by the board. It will enable the board to continue with their policy of modernising their services and improving standards. In addition to the proposals already mentioned for modernising mainline railway operations, CIE are also preparing plans for the improvement of the Dublin rail commuter services. As Deputies are aware, the Government recently approved in principle of the development of these services to play the maximum role possible in helping to relieve the city's present congestion problems.
Provision is also being made in the Bill for an increase from £2 million to £5 million in CIE's temporary borrowing powers. The existing limit of £2 million was fixed in 1958 and is now an inadequate safeguard against possible short-term cash difficulties. This has been evident in recent years when Supplementary Estimates have had to be introduced at short notice to ensure that the board would have sufficient cash to meet their current requirements.
The contract for the European Investment Bank loan cannot be concluded pending the enactment of legislation, as provided for in this Bill, to extend the scope of CIE's borrowing powers. The next meeting of the Board of the European Investment Bank will take place on 19th February and, to avoid the possibility of the interest rate on the proposed loan being increased, the intention is that, provided the Bill has been enacted, the contract will be concluded by that date.
I would, therefore, greatly appreciate it if the House would agree to give a quick passage to the Bill. There will be an opportunity for a further discussion on CIE on the occasion of the debate on my Department's Estimates.
I commend the Bill to the House.
