I move:
That a supplementary sum not exceeding £11,109,000 be granted to defray the charge which will come in course of payment during the year ending on the 31st day of December, 1975, for the salaries and expenses of the Office of the Minister for Transport and Power, including certain services administered by that Office, and for payment of certain subsidies and sundry grants-in-aid.
This supplementary Estimate results from excesses of £10,480,000 on three subheads and a shortfall of £629,000 in receipts from Appropriations-in-Aid. The sum of £9,500,000 is required for increased grants to CIE. The decline of £629,000 in receipts from Appropriations-in-Aid relates mainly to receipts from airport operations. An additional sum of £230,000 is required for the acquisition of land at airports and £750,000 is required for town gas subsidy.
As announced by the Minister for Finance in his budget statement on 26th June, 1975, part of the Government's special counter-inflationary measures is a reduction, with effect from 28th July, 1975, of CIE's fares on Dublin city bus services, provincial road passenger services and Dublin and Cork commuter rail services. As I indicated in the debate on the motion on CIE's charges in the House on 13th May, 1975, the increases introduced by CIE in May, 1975, were fully justified on the basis of increases in CIE's costs. The reduction in fares which is now being made is a very exceptional measure as part of the Government's overall efforts to break the vicious inflationary spiral which is threatening the country's economy.
The Government have decided, therefore, that additional subvention should be provided for CIE in 1975 to meet the loss in revenue which will result from the fare reductions and also to avoid the necessity for further increases in CIE charges in the current year. Failing this additional assistance from the Exchequer, further large increases in charges in 1975 would have been unavoidable.
Basically, therefore, the need for the additional subvention of £9.5 million, for which provision is made in the supplementary estimate, arises from the fact that increases in CIE's costs in 1975 are not being matched by corresponding increases in CIE's charges. A further factor adding to CIE's difficulties in the present year is a decline in business due to the effect on rail and road freight carryings of reduced usage of fertilisers and limestone, reduced carrying of cement and lower volumes of sundries and general merchandise reflecting the general adverse economic trends. Rail and road passenger traffic has also been affected by the decline in economic activity. The result of this loss in business is estimated at some £900,000 on budgeted revenue for 1975.
CIE's increased costs in 1975 are running at a rate of some £20 million over corresponding costs in 1974. By far the greatest proportion of this is attributable to increased labour costs which account for about £17 million, including the balance of the 14th and 15th rounds and the first two phases of the 16th round. By contrast, additional revenue in 1975 from the rates and fares increases in July, 1974, and May, 1975, will amount to only about £9 million, after taking account of the reductions in fares to be introduced on 28th July, 1975. In these circumstances the provision of additional subvention for CIE in the current year is unavoidable if the board are to maintain their services to the public and avoid wholesale disemployment of staff.
The provision of £9.5 million in the supplementary estimate will bring the total subvention provision for the year to £86.5 million and I am hopeful that the board's requirements can be kept within this limit. This sum includes approximately £19.4 million for railway operations, £5.3 million for Dublin city bus services and £1.5 million for other road passenger services. None of the additional subvention is intended to cover activities such as CIE road freight services which are not covered by the CIE subvention structure and which must be operated on a commercial basis.
In limiting the additional subvention provision to £9.5 million I am assuming that the special reliefs provided for in the recent budget will have the desired result of containing increases in labour costs and that CIE, together with the rest of industry, will benefit accordingly. In addition, I expect CIE to pursue vigorously all practical measures to improve efficiency and to secure economies and increases in productivity. That such measures are necessary is self-evident from the size of the subvention provision for 1975, which at £26.5 million represents an increase of almost 150 per cent on the subvention of £11 million for 1973-74 and is almost eight times the subvention paid for 1969-70.
Even allowing for the special measures being taken in the current year to keep CIE's prices down, the magnitude of the present subvention is a grave cause for concern. The board's costs are now escalating at such a rate that, even if the board had unrestricted power to increase prices, the size of the increases required to meet the full additional costs on the basis of present working arrangements would be commercially impracticable. Neither does the answer lie in massive increases in the Exchequer subvention each year— the economy simply could not afford this. It is imperative, therefore, for CIE to achieve economies and the successful implementation of productivity and cost reduction schemes. Otherwise CIE's deficits in future years will reach intolerable proportions and more drastic steps will be unavoidable.
While the rapid increase in CIE deficits in recent years is a function of inflation, it is also a function of the manning structure of the undertaking. There are 20,000 people employed by CIE and, in the current year, some £65 million will be paid in wages and salaries. While this is a substantial contribution to the economy in terms of people employed and in terms of wages earned, it is clear that unless these people can be employed effectively, then the economics of CIE's operation will continue to be unbalanced and will become progressively worse. In a labour intensive industry such as CIE a critical factor in reducing costs is undoubtedly that of manning and maximum benefit must be taken from natural wastage at all levels with interchangeability of staff through the formulation of productivity and reorganisation schemes. What is at issue in these proposals is the longterm security of present employees and value for money for the consumer and taxpayer.
The actual allocation for land acquisition at the airports for 1975 is £500,000 which is the same estimate for the last nine months of 1974. £450,000 of the 1974 allocation was provided for the purpose of an anticipated award arising out of arbitration proceedings. In the event the arbitrators award was not made until February, 1975. It is now expected that the arbitration award in addition to other cases where agreement as to compensation with landowners has been reached, will require payment of £730,000 for this year. Accordingly, a supplementary estimate for the extra amount is now necessary.
The measures announced by the Minister for Finance in his Financial Statement on 26th June, 1975, also provided for a subsidy to the producers of town gas to enable them to reduce the price of town gas to the consumer by an average of 12½ per cent. As stated by the Minister for Finance, it is the Government's intention that the price of town gas should be reduced with effect from 1st July, or the earliest possible date thereafter.
As Deputies are aware, the Dáil has already approved a Financial Resolution removing value-added tax from town gas, electricity and all other fuels, with the exception of road fuels. These measures form part of the overall Government package designed to wind down inflation and stimulate economic activity.
As regard the proposed reduction in the price of town gas, my Department have had preliminary consultations with representatives of the gas undertakings and no difficulty is anticipated in giving effect to the reduction. The undertaking will, of course, require to be reimbursed for the loss of revenue. I propose that this be done by providing a new subhead in the Transport and Power Vote for the payment of an appropriate subsidy. It is estimated that expenditure on the subsidy in the current year will be of the order of £750,000 and provision for this sum is accordingly included in the supplementary estimate.
In addition to the various additional expenditures which I have referred to, the supplementary Estimate also includes provision for £629,000 to cover a shortfall in appropriations-in-aid. These appropriations-in-aid relate to the various sources of income which accrue to the Department under various headings and which provide a partial offset against the Department's expenditure subheads. The estimate of £3,002,560 was based on the best information available at the time but adverse factors affecting travel and tourism have led to deficits under a number of headings. These deficits are on subhead X.3—surplus on Aer Rianta operations—which is down by an estimated £400,000 and subhead X.7—Shanwick Communication Charges—which is down by an estimated £287,000. These deficits are offset by a surplus of £58,000 on X.4—Recoup-ment from Eurocontrol of cost of providing personnel and facilities.
I recommend the supplementary estimate to the House.