Dáil Éireann debate -
Thursday, 11 May 2000

Vol. 519 No. 1

Adjournment Debate. - Free Travel Scheme.

Mr. Dukes

A bus company which provides services in rural areas approached me about a difficulty it has with the Department of Social, Community and Family Affairs. This company is part of a very reputable group which provides rural and inter-urban services not provided by Bus Éireann and is the only supplier of public transport in many areas.

The company operates a number of licensed routes, including three in County Kildare – one between Clane, Sallins and Naas, a Naas town service, Kilcullen to Newbridge and Roscrea to Limerick. Because these are licensed services the company is empowered to operate the free travel scheme on the same basis as Bus Éireann – it makes a claim on the Department for the cost of providing free transport. On these routes, and in many other parts of the country, people would not have effective access to free travel without the services of this and similar companies.

Last year, in discussions with the Department, the company quoted a figure for this service but the Department demurred. In response, the company offered and implemented a 10% discount on the original level of charges quoted. The company submitted its invoices and the Department paid out the money. However, last month the Department informed the bus company that instead of looking for a discount of 10% it was now looking for a discount of 40%. As far as I can find out, no rationale, justification or reason was given for this development. The Department simply stated that it wished to reduce the price and asked the company to adjust its invoices accordingly.

The tone of the Department's communication was on a take it or leave it basis. If the company did not like the reduction the Department stated, "Otherwise you may wish to consider your participation in the free travel scheme for the above routes". In other words, the Department decided it was going to reduce the price paid to the company and, if the company did not like the figure, its participation in the scheme would be over. This is a fairly crude way of doing business. It is bad enough to treat a company in this manner but it is worse when one considers the effects on that company's passengers.

The company has four not inconsiderable routes regarding which, unless something happens, the Department is saying there will no longer be a free travel service for people entitled to that service. This is not a proper way to go about this business and it is no way to treat this company.

In addition, although this is not the burden of my remarks, the company has been told that it must change to using low sulphur fuel which is not readily available from fuel importers. However, surprise surprise, Bus Éireann has its own arrangements for importing low sulphur fuel for use in its buses. I am not normally of a nasty, mean or suspicious turn of mind, but that is no coincidence. The Department is operating a very arbitrary approach to pricing accompanied by another arbitrary approach to the use of low sulphur fuel which, surprise surprise, might have the effect of making competition more difficult for those competing with Bus Éireann.

The Minister of State should direct the Department to reopen discussions with this company on a more reasonable basis. For all I know, this could be happening to other companies and other people's free travel could be in danger.

Minister of State at the Department of Public Enterprise (Mr. Jacob)

I thank the Deputy for raising this important matter. The Department of Social, Community and Family Affairs has responsibility for the operation of the free travel scheme which enables elderly people generally, and other eligible disabled clients, to travel free of charge on public transport services provided by participating transport operators throughout the country.

Currently, there are 76 private operators in the scheme in addition to the CIE group. The operators are recompensed by the Department, normally on a monthly basis, for the free travel passengers they carry. In the case of new private operator participants, initially the level of recompense is determined by monitoring the numbers of free travel passengers carried on the relevant services over a period, and payment is based, in effect, on fares lost as a result. The Department normally negotiates a discount in payment to reflect the additional revenue that the scheme generates for participating operators, utilising spare seating capacity at comparatively lower marginal cost for the operators concerned.

Increasingly, the Department is moving to fixed contracts with participating transport operators. Where passenger volume trends are comparatively stable, as they are with most operator services, then such fixed contract payment arrangements give cash-flow certainty to the operators and allow for improved budget management by the Department.

In the case of the private operator referred to by Deputy Dukes, the company concerned is one of a related group of three participating operator companies in the south east. The group of companies received £246,000 in aggregate from the Department in 1999 for the free travel services they provided on 15 approved routes. In 1999, the group management sought increases in payment rates from the Department, reflecting both increased operating costs and expansion of free travel services.

In the course of the negotiations on this application, the Department offered a fixed contract in respect of each of the three companies concerned. The net effect of the fixed contracts offered was to raise payment rates to the operator by over £20,000 per year from 2000 to 2002, inclusive. The aggregate payment offered to the group over this period would amount to over £800,000, about £60,000 or 8% more than payment to the group would have been had it remained at 1999 rates.

The Department considered this a reasonable offer taking account of all the circumstances. This has largely been accepted by the operator group management concerned as it has agreed to the components of the Department's offer relating to two of the three companies involved. In the case of the third company, operating comparatively new routes, the management accepted the payment rates offered by the Department for Waterford city services but claimed that the fixed payment rates offered on the other specific routes referred to by Deputy Dukes did not adequately reflect the ongoing growth in take-up by free travel passengers. The Department responded to this by offering to review payment on those routes after a further six months, that is, at the end of June 2000. While no commitment was made by the Department to adjust payment rates on those routes after that further period, it would be prepared to do so if the company's monthly returns in this interim period so justified.

The returns submitted subsequently by the company concerned have shown increased free travel passenger volumes on these routes. Subject to normal verification procedures, the Department is prepared to adjust payment on these routes to reflect the average volumes carried in the period to end June 2000 and to fix them at that rate for the remainder of the contract period. The Department will be in contact directly with the company management concerned in this regard.

The Department refutes the proposition that the payment to this group of companies was cut in any way. The opposite is the case as there is a significant aggregate increase in payments being made to the operator companies concerned. The services provided on these routes are well run and have operated satisfactorily as far as the Department and its clients are concerned and the Department has no wish to jeopardise this service to its clients in the south east. In general, however, there is an onus on the Department to pay realistic amounts to operators for the services they provide, as in this case, but payments under the scheme are not a subsidy to operators.

The viability of particular routes is a matter for the operators. All participating operators in the free travel scheme carry fare paying passengers as well and have scope to increase the fares charged to fare paying passengers if the payment rates provided by the Department do not, in the operators' view, fully cover increases in running costs. It is also relevant to note that the State effectively provides a subsidy for public transport operators, including the companies concerned, through the fuel duty rebate.

In conclusion, the Department will be in touch again with the company management concerned and urges it to accept what is a realistic and significant aggregate increase in payment for the range of services it provides for free travel clients.