I welcome Mr. Pat Mangan, assistant secretary of the Department of Transport and Mr. John Brown and Mr. Dermot McCarthy who are principal officers. I draw their attention to the fact that members of this committee have absolute privilege but the same privilege does not apply to witnesses appearing before the committee. Members are reminded of the long-standing parliamentary practice to the effect that members should not comment on, criticise or make a charge against a person outside the House or an official by name in such a way as to make him or her identifiable. I ask Mr. Mangan to make his presentation, a copy of which was circulated to members yesterday.
Bus Licensing: Presentation.
Mr. Pat Mangan
I thank committee members for affording us the opportunity to discuss the operation of the bus licensing system. The Road Transport Act 1932 provides the legislative basis for entry to the public transport market by private bus operators. In accordance with this legislation, private operators are licensed to operate coach and bus services within the State.
Under section 24 of the Transport Act 1958, Dublin Bus and Bus Éireann are not required to hold a licence under the Road Transport Act 1932. However, where they propose to provide a service which competes with a licensed service the companies are obliged to seek the consent of the Minister under section 25 of the 1958 Act. Since 10 January 2001, both companies are required by ministerial direction to notify the Department of proposed new services or proposed changes to existing services at least four weeks prior to their introduction. The purpose of this procedure is to ensure a level playing field between Dublin Bus, Bus Éireann and private operators in the authorisation of services and also to ensure compliance with section 25 of the 1958 Act.
Licence applications under the 1932 Act are dealt with on a first come, first served basis. The details of all applications from private operators and of notifications from the State bus companies remain confidential until a decision is made. Once issued, the details of licences are in the public domain. The processing of applications and notifications involves detailed analysis to ascertain, for example, the extent of any overlap between the proposed service and existing licensed or other public transport services. This can include similar licence applications already received or prior notifications received from either Dublin Bus or Bus Éireann. However, pressing or exceptional circumstances can be taken into account in determining the order in which applications are dealt with. In some circumstances, while the preliminary work may have been completed on a particular application, a final decision cannot be made until other relevant applications or notifications received prior to it have been finalised.
The application process can be delayed where relevant information is not provided by an applicant, such as an updated road passenger transport operator's licence, current public service vehicle licences and approvals from the Garda under the Road Traffic Acts for pick-up and-or set-down points.
The Minister is required, under section 11(3)(a) of the 1932 Act, to apply a public interest test to applications for licences. He must consider whether the service proposed is in the public interest having regard to the passenger road services and other forms of passenger transport available to the public on or in the neighbourhood of the route of the proposed service.
In general, the public interest is interpreted as being best served by enhancing and facilitating an expansion of the range of public transport services available to the public, as opposed to allowing unrestricted competition for market share. Applications for bus services are generally deemed to be in the public interest if there is no existing passenger road service or other form of passenger transport available to the public or where existing public transport services are not adequate to satisfy demand, particularly by reference to their frequency and capacity.
The adequacy or inadequacy of existing services and the net benefit to the public interest of a proposed service is assessed by the Department on the basis of the best evidence available to it, including evidence submitted by the applicant in support of the licence application and information made available by other parties. These would include, for example, public authorities, employers with an interest in provision of public transport for their employees, school and college authorities in respect of services to educational institutions, official tourism bodies in regard to tour services and so on.
Section 11(3)(b) of the 1932 Act also requires the Minister to consider whether the proposed service is sufficient in regard to its frequency, daily duration and other respects to meet the requirements of the public. The Department examines applications for added value to the public in terms of the route and locations to be served, the timing of services and the days on which services are available, in order to maximise the availability, regularity and frequency of service.
In compliance with the legislation, restrictions are placed on licences from time to time in an effort to avoid direct operational conflict between operators, while at the same time ensuring the availability of a good range and spread of services to the travelling public. This can be a particular issue in a city like Dublin where there are only a limited number of routes into and through the city and where some degree of shared running is unavoidable.
Once an application has been processed, the Department advises the applicant of the outcome and generally gives the applicant a period of 21 days to signify acceptance. Following acceptance, a further period of six weeks is generally given to allow the applicant to furnish evidence of vehicle insurance cover, copies of public service vehicle licences and Garda approval for bus stops. When all documentation is to hand, the Department can then proceed to issue the relevant licence. Licensees are generally given a period of four months to introduce all the relevant services. If these provisions are not complied with, the offer of a licence or the licence itself may lapse.
The Department operates due process and fair procedure in the administration of the bus licensing system. In any case where an application is being refused, the Department advises the applicant of the reasons for such refusal and allows the applicant to make representations or comments before a proposal to refuse is confirmed. If an applicant decides to appeal a refusal, the Department will always consider such an appeal.
The Department also operates fair procedures in regard to the State bus companies. Most of their notifications do not raise any issues and are cleared quickly, generally within three to four weeks. In cases where there is a prior licensing application from a private operator, the Department will always advise the State bus company concerned of the existence but not the content of that application. It then proceeds to deal with the notification involved as soon as the prior licensing application is cleared. In practice, the number of cases where this arises is quite small.
During 2003, the staff of the Department made a sustained effort to speed up decisions on applications through a heavy overtime commitment and streamlined processing. That effort has been successful in virtually eliminating a significant backlog of applications which had arisen prior to 2003. For the current year, the Department has set itself a number of objectives. These include the continuing timely clearance of notifications from the State bus companies, decisions on applications carried from 2003 and the timely processing of applications received this year. The Department is also making arrangements for the renewal of annual licences as from a single date this year, namely 1 November 2004, in place of the differing renewal dates which have applied until now. It is hoped that the combined effect of these measures will be a significantly improved customer service to both the State bus companies and the private operators.
It might be useful for the committee to have some indication of the number of applications and notifications received by the Department. During the course of 2003, a total of 196 applications were received for new licences or amendments to existing licences, representing an increase of nearly 100% on 2002. The Department succeeded in dealing with nearly 75% of this number and, in parallel with this work, the Department also renewed in the region of 400 licences during 2003. During 2003, the Department also received 52 notifications from Dublin Bus, all of which were processed. A total of 101 notifications were received from Bus Éireann, all of which were duly processed with the exception of four cases which are currently in process.
Notifications from the State bus operators are generally dealt with within four weeks. The only exceptions to this rule are where there are prior licensing applications from private operators and the number of such cases has been small. There are currently in the region of 480 valid passenger licences held by private bus operators operating services in the State. These licences are in respect of bus services in the city, inter-city, commuter, local, school, college and tour sectors and are eligible to be considered for renewal on an annual basis. In addition, a limited number of authorisations have also been issued for cross-Border and cross-channel bus services in accordance with EU regulations and in agreement with the UK and Northern Ireland authorities.
Competition from private operators in the Dublin City market is negligible. In this area, the number of licensed private operators is small. Some four operators covering seven routes provide services mainly to Dublin Airport and suburban centres such as Celbridge, Lucan, Rathcoole and so on. A number of small operators in Dublin City are also involved in providing tours. A similar situation of low penetration exists in the provincial cities such as Galway, Limerick and Waterford. The growth in inter-urban and commuter travel in recent years, particularly into Dublin, has been driven by the expansion of the commuter belt to embrace the counties surrounding Dublin which has created a corresponding need for significantly increased bus services. Bus Éireann has responded well to this growth by increasing its own services and by the use of sub-contracting to private bus operators. The Department has also issued licences to private operators for commuter services into Dublin from places like Castleblaney, Tullamore, Carlow and so on.
A small number of licences has also been issued in respect of inter-urban services including long-distance services such as Galway to Dublin, Waterford to Dublin and so on. Licences have also been issued for dedicated college services around the country serving Carlow, Maynooth, Galway and so on. A number of smaller private operators around the country operate in niche markets for local services or weekend travel to major cities and private operators also provide local services in towns such as Dundalk, Athlone, Carlow, Newbridge and Naas. Notwithstanding the foregoing, Bus Éireann remains by far the dominant player outside Dublin and Dublin Bus continues to retain its pivotal position as a near monopoly provider of bus services in Dublin City.
The Government programme contains a commitment to replace the Road Transport Act 1932 with modern legislation. It is the Minister's intention to proceed with legislation on public transport reform in 2004, thereby fulfilling the commitment in the Government programme. In the meantime, the Department will continue to improve the administration of the 1932 Act in so far as resources permit. However, it is important to note that there is widespread agreement that the Act no longer provides a satisfactory basis for market regulation and needs to be replaced with modern legislation.
I thank the delegation for coming before the committee and providing us with some information on the licensing procedure.
Will Mr. Mangan elaborate on what happens when an operator does not provide a service? He states that a licence may lapse after four months. What is the procedure in that regard - does it lapse automatically after four months? There has been some concern that operators have been issued with licences and do not take them up, thereby restricting others from providing a service into a community. Is there a charge for the issuing of a licence? For example, if an operator seeks a licence on one of the more profitable inter-city routes, which is a cash cow, does the State get anything back?
What is the average number of approvals issued per month and the average timescale for dealing with requests from private operators? When the Department considers a licence, does it consider the frequency and quality of the service? For example, a private operator in Cavan seemed to provide a less frequent service than one provided by Bus Éireann. There is a great deal of frustration in Tyrrelstown in Dublin at the delay in processing applications where the State company was prepared to provide a service.
I thank the members of the delegation for coming before the committee and making this presentation.
The presentation does not answer the questions I have in respect of the licensing system in the Department. Mr. Mangan has told us about the number, the backlog and the legislative basis for the licensing system but we would like to know more about how the system works in the current era of transparency. As an outsider with a certain interest in this area, it seems the licensing system is a black hole. When I have made inquiries about new services which are needed in the Dublin area or on the Bus Éireann network, one discovers that one of the public bus companies has applied to run a new service that everyone agrees is needed and yet, when the application is made to the Department for approval, it seems to vanish into a black hole and nothing more is heard about it in spite of frequent letters. Invariably, the companies are told out of the blue that a private operator is about to start operating a service in the area. One cannot blame people for being suspicious about how the system works because the public companies will carry out the market research to see whether there is a demand for the service. Often those requests from Dublin Bus, in particular, would arise out of a local campaign for a new service in a new housing estate. Public representatives are involved and market research is carried out to see how many people would use a service into town, for example, from a new housing estate. At this stage, Dublin Bus will state that it will run the service if the demand exists but that it needs to get approval from the Department. The company applies to the Department for approval and then hears nothing. This can go on for months on end. We would like to know how the system works.
Does the Department log all its applications whether they are for approval, in the case of public companies, or licences in the case of private companies? Can Mr. Mangan tell us the dates on which the applications were made so that we can check? Is the system subject to the Freedom of Information Act? It is sometimes so hard to get information by way of parliamentary question I have been tempted to make an FOI request. There seems to be little transparency in the way the system operates. It is not acceptable in the current day and age that there is such mystique about how the system works. We need to put things on a proper footing so that everybody knows the basis on which decisions are made to award licences. Licences can be valuable commodities and we have a right to know the basis on which these valuable commodities are awarded.
I would also like to know about the criteria used. No reference was made to this in the group's presentation. What is the basis for deciding whether Bus Éireann or Joe Bloggs gets a licence? Does the Department look into the operator's safety record? Does it find out whether it has tax clearance and whether it is a full-time operator? I have come across a number of cases in which the person who applies for the licence is not actually a bus operator. It might be someone living in Portlaoise and working in a factory in Dublin who happens to have a bus on which he can carry people in the morning as he drives to his job. That is not a bus operator; it is a guy doing a nixer to raise money. Is that the kind of service we want or should promote? Can the Department stand over the service in terms of quality control, insurance, qualifications for driving a bus and so on? Are these checked out?
I want to ask about cross-subsidisation. Deputy Naughten raised the issue of the value of a licence. Many of the licences issued are very valuable. The public companies use the profits from profitable routes to subsidise the non-profitable routes. That is the strongest argument in favour of transport companies being public. Private operators do not seek licences to run non-profitable routes. They want to run profitable routes. In a properly regulated system, they should be charged for that licence. Otherwise it does not make sense to the taxpayer, because if a public company were operating a profitable route, its profits would go back into the other routes that are not profitable and would enhance the overall service. Why does the Department not charge for the licences?
Some time ago I raised with the Minister a problem in Cavan. Bus Éireann was given approval under the NDP to operate a new morning peak service from Cavan to Dublin, with buses at 6 a.m. and 7 a.m. Then, out of the blue, it was told that a private operator had been given a licence and would operate a service at 6.30 a.m. That did not suit anybody. The new services being run by Bus Éireann were very successful. They were running at the times at which people wanted them. What was the Department's rationale for doing this? Surely it makes a mockery of the whole system if, when Bus Éireann has been given proper approval under the national development plan, it is told to withdraw its service in favour of a private operator. Why did this happen?
When we were in London and we spoke to representatives of Transport for London, they were clear about criteria for awarding licences and what was expected from operators, including an improvement in service. There was a great deal of transparency involved. We were all very impressed with the organisation and the information we were given about the companies running buses - where and how they were run, how they were allowed to expand their services and how they lost routes because they did not meet certain standards. There does not seem to be the same openness and transparency in our system. Perhaps Mr. Mangan could comment on this.
I will deal with some of the issues and then ask Mr. Brown, who is the head of the licensing division, to pick up on some of the details so that we may cover everything.
The problem of companies holding on to licences and not operating services has been of concern to us. Substantial efforts have been made over the last year by Mr. Brown and his team to clear out licences that were not operational because of concerns about the possibility of their being used to block other operators. Substantial progress has been made in this area because we recognised there was a problem.
Charges are determined by the 1932 Act. At the moment charges for licences are very small, only a few euro. Mr. Brown will give the details. We hope to introduce new regulatory legislation during the current year to ensure the charges that apply to licences reflect the cost of providing the service, which the current charge does not. We are advised that we cannot use the licensing regime as a revenue earner. We are entitled to charge for the licence to cover the costs associated with the administration of the licensing system, including in the area of enforcement, but not to recoup the value attached to the licence.
Did the Department obtain legal advice in this area?
Yes, that is our advice. We cannot use charges under the licensing system to recoup value.
Is that recent advice?
Yes. In the matter of the problem in Cavan, the long and short of it is that Bus Éireann was in breach of section 25 of the 1958 Act in that it was operating a service in competition with a private operator that was not the subject of consent from the Minister for Transport. It had not applied for consent. Subsequent to that direction being issued, on foot of complaints made by the private operator, Bus Éireann applied for and was given consent to resume one of the two services it had been ordered to cease. At the moment it has an application before us for consent to resume the other service. We are currently considering this. The fundamental issue, however, is that no application had ever been made by Bus Éireann for consent to operate in competition with the private licensed service, which is required under the 1958 Act. We administer the law as we find it.
Even though the service was provided under the national development plan?
Yes. Under the NDP, Bus Éireann was given approval for funding and so on, but it never made the relevant application under the 1958 Act. This is not a pedantic point; it is a very important issue. There is a specific provision in law, enacted by the Oireachtas. All we were doing, on foot of a complaint, was enforcing that law. If we had not done this we would have been subject to criticism from the other side that we were ignoring the law of the land as enacted by the Oireachtas.
Mr. Brown will comment on the specifics of the Tyrellstown issue. Generally, most of the notifications received from Bus Éireann and Dublin Bus are cleared very quickly, within some three or four weeks. Occasionally there may be a prior licensing application - I stress the word "prior". Mr. Brown will fill members in on the details of how the system works and so on, but all applications are logged and if there is a prior licensing application at the time the notification comes in from Dublin Bus or Bus Éireann, we are obliged to consider that application first and then make a decision on the notification. Occasionally, this unfortunately results in some delay. However, we are trying to reduce the amount of time taken to turn around licence applications and notifications because we were concerned that delays were building up. There was a significant backlog.
In fairness to Mr. Brown and his team, much work, including significant overtime, has been dedicated in the past year to clearing the backlog so that we would be in a position to deal with current licensing applications quickly. When I came into the area in 1995 there were three part-time staff dealing with licensing applications and there are now about ten full-time staff. We have put in extra resources, recognising the importance of providing a better service to the State bus companies and private operators.
The system is subject to FOI. Once a decision is taken the papers are available to anyone who wants to see them. People can see the processes gone through and the procedures used. In the matter of the criteria for awarding licences, there are guidelines. The ultimate criteria are the statutory criteria laid down in section 11 of the 1932 Act. We are bound by those and by legal advice in terms of how we operate them. There are guidelines on our website about the process, although these are currently under review. That process is taking longer than we expected as we needed to go through various issues with the Attorney General's office. We intend to publish those guidelines when we have legal clearance. They will provide a better indication of criteria to operators and to the public.
I will ask Mr. Brown to give some more detail later on how applications are considered. Regarding safety records, tax clearance and so on, there are a number of parallel processes to which bus operators are also subject. For example, under EU law, all bus operators must hold a road transport operator's licence, and must satisfy requirements for professional competence, financial standing and professional capacity. One of the requirements is that operators hold a current tax clearance certificate before getting a road transport operator's licence. The latter is administered by our road haulage division, which also issues the equivalent licence to haulage operators. That is the licence required for access to the profession. Once someone holds it, he or she is presumed to be of good repute, with financial standing and the professional competence to operate the service. Operators must also hold a PSV licence, which is administered by the Garda, and fulfil the requirements for that. When we issue a licence, we check that operators possess the relevant licence, either a PSV licence or the RTPOL, as it is called. That is how we check issues not related to those of access to the markets.
Deputy Shortall also raised the question of cross-subsidisation, whereby profitable routes subsidise non-profitable ones. As the law stands, that factor cannot be taken into account in licensing a bus service. Having asked about this specifically in another context, we have clear legal advice that we cannot take such factors into account. The issues we can take into account are set out in section 11 of the Act and relate principally to services being provided on or in the vicinity of the route in question. However, that does not allow us to refuse a licence on the basis for example that it will impact on the financial position of one of the CIE companies. We cannot currently take that factor into account.
I take the point the chairman made relating to Transport for London, which operates a system very different from ours. It operates largely under a franchising system. It contracts for services, specifies in the contracts what it wants, and then has the use of the contracts to enable it to determine whether services are being provided in accordance with the criteria set down. The Minister's proposals to reform the public service transport market would see us moving similarly towards a tendering process, and towards contracting, both in the case of services we contract from the CIE companies or services tendered. That would move us towards a situation whereby very precise criteria would be set down for the services being procured. I distinguish between services being procured, where there is a financial transaction involved, and services that are being licensed, with people simply providing services on a commercial basis without access to funding. Under the new legislation being introduced, we would propose to introduce a new regulatory regime which would involve not only the contractual process but also a licensing process, with clear and modern criteria.
The problem is that we are operating under legislation written in 1932. That is for a different era and has proved difficult to administer. We have made it very clear that it needs to be replaced with modern legislation which meets the requirements of today's public transport customer and operator, and the citizen as taxpayer, and which will provide us with the tools of quality control and the means to adequately enforce the law. For example, the maximum penalty under the 1932 Act is a fine of £50. We do not have the other regulatory tools we need in a modern licensing regime and much of our current effort is being put into preparing legislation to replace the 1932 Act and the 1958 legislation. I will ask Mr. Brown to address some of the specifics of the licensing regime and its operation.
Mr. John Brown
Mr. Mangan has covered many of the points raised. I will deal with Tyrellstown. We were aware last year that certain areas of Blanchardstown and Tyrellstown were not adequately served by bus services. We had a particular difficulty in that case. I took over the licensing area in May of last year, at a time when we had on hand an application from an operator for a number of routes impacting on the general area in question. In accordance with normal procedures, we were obliged to clear that first. That prior application for a number of routes was dealt with immediately in last May and June, and immediately after that, all of the services Dublin Bus had applied for were duly approved by the Department. Currently, there are no outstanding notifications from Dublin Bus left unapproved by the Department. As I said, there was a particular difficulty in that case due to the existence of a prior application but such a case is relatively rare. We treated it urgently because we were aware that particularly in Tyrellstown there were times during the week, especially at weekends, when adequate services were not available. We moved quickly, and that situation has been fully dealt with. Dublin Bus was given all the necessary approvals last summer to proceed with the introduction of the appropriate services.
My colleague has spoken about Cavan, so I do not need to go back over that, except to say that we are looking at that situation afresh. We have recently told Bus Éireann we would deal with the situation quickly. We log all applications from the day of receipt, and can account for every application and notification from the day of receipt right through to the decision, including the processing at the various stages. We have a system in place to deal with that, and everything is fully logged.
Does that include public companies?
Yes. It includes both private and public companies. Equal treatment is applied to both. My colleague has covered what happens when companies fail to introduce a service after being awarded a licence. I will expand a little on that. Licences are issued and are valid for 12 months. People are encouraged to introduce all the agreed services within four months. Problems can arise if buses have to be acquired or there may be a lead-in time and we may be advised of delays. We consider such situations. There have been parliamentary questions about the non-introduction of services, questions which we have answered over the past year. We advise people that their licences may be at risk and may not be renewed. The failure to introduce a service is one of the grounds on which a Minister can refuse the renewal of a licence.
There is a Department division, although not a large one, which carries out monitoring on the ground. We visit various parts of the country from time to time and have carried out several monitoring exercises over the past year. We will do so again this year. During the monitoring exercise we check whether people are providing services. In some cases we have discovered that people have not implemented the service for which they have a licence. In such cases we write to these people and draw their attention to the situation, asking them to rectify it. If they do not do so, they may not have their licences renewed.
How long do they have to rectify the situation?
Normally, a week or two. We give them a very short period of time. In some cases people might apply for a change in the time allowed, and we would consider that, but we would not give them a lot of time. The Act states that services should be operated efficiently. It intentionally leans in the direction of the customer. The intent and spirit of the Act are that once an application is made, it is treated as bona fide and processed in good faith, and a licence is awarded in good faith in the clear expectation that the services authorised under the licence will be introduced with the minimum of delay in the interests of the travelling public.
I hope that deals with this situation and answer the Deputy's question. I can return to the matter if she needs further clarification.
The statement made by my colleague covers the criteria aspect. These criteria are set out in section 11(3) of the Act. We are required to apply a public interest test, to look at the services available on a particular route. It is a route-specific system. We have to look at other bus services on a route, as well as taking rail and air services into account. In terms of the processing, we would look at the services available on a route and try to get value added from the processing. We look at the frequency proposed, the times - whether weekend, morning, evening, mid-week and so on - the nature of the service, i.e. whether it is serving the commuter market or the weekend market, and so on. All these criteria comprise the public interest test. We then check that the applicant has the organisation and equipment at his or her disposal to mount the service. It is something of a chicken and egg situation, because for a new applicant to set up a service is expensive, particularly considering the cost of coaches. An applicant will sometimes look for a decision in principle, and when that is given will then proceed to commit the necessary expenditure. The issue of resources is looked at, and if a decision is given, the applicant must have the resources. If not, and the applicant fails to introduce the service, such a non-introduction is one of the clear grounds for the non-renewal of a licence.
The average number of monthly approvals varies, as does the timescale involved. Last year we received approximately 200 applications from private operators in addition to just under 200 notifications from the State bus companies. The time taken to approve an application from an operator varies, depending on its nature. A simple application can be cleared quite quickly. If it is more complex, or if there are prior applications, then it can take longer.
Could the witness give us an idea of what a short or long time might be?
If an application were straightforward, we could clear it in a week or two. Other cases might take a month or two, or a few months, particularly if there were a number of applications on a particular route, a situation which we have encountered. We have had situations with three or four applicants in respect of a particular route or sectors thereof. That involves more complex examination of the application.
Is it always a case of first come, first served?
Yes, although if there were a number of applicants for a particular route, we would try to streamline the process. While it would be first come, first served, we would then consider them all together.
The timescale can vary from a very short period to one of a few weeks or a month or so, or could be a little longer with very complex cases. I could not give an absolute figure for each month, but on average there would be 15 to 20 applications monthly. That is subject to checking, but it is roughly the figure we are talking about.
My colleague has already covered in detail the items we take into account before a licence is issued, such as the question of public service vehicle licences, a road passenger transport operator's licence under EU regulations, and copies of insurance certificates. We look in advance for letters from the Garda giving approval for the relevant bus stops, and must have such letters before issuing a licence. We look for information on the accessibility status of the buses, whether they cater for the disabled, for example. In general, this is the sort of information we seek, and once we have it, we usually issue the licence.
I hope I have covered most of the points. My colleague has already covered the Cavan-Dublin situation. I am happy to answer further questions.
The witness said that applications are dealt with on a first come, first served basis. For the sake of argument, let us say that Shortall Buses are introducing a service from Ballymun to St. Stephen's Green, and propose to run a service every 20 minutes from 8 a.m. to 8 p.m. A month later, while the original application is being processed, another operator proposes a similar service running every 15 minutes, with a fully accessible vehicle for the disabled, which Shortall Buses is not providing. In such a case, who gets the licence? Does the first applicant get it, or does it go the second, the one offering a better quality service than the first?
I would like clarification on the ambiguous matter of when a licence or an approval lapses. I have listened carefully to what Mr. Brown said, namely that after four months a licence may lapse. Have any licences lapsed after four months? He said that when a licence comes up for renewal, it may not be renewed. Is it the case, or should it be, that unless someone has a good reason for not introducing a service after four months - and there may be instances of having to wait on vehicles to arrive - the licence should be withdrawn? Is it the case that if a person has not provided the service within 12 months, it must be withdrawn? People are being impeded from coming into the system. Mr. Brown might elaborate on this matter. There is a perception that operators are taking out licences merely to reduce competition within a particular area. It is time this aspect was tightened up.
Regarding the public interest test, under section 11(3) of the 1932 Act a service may not be deemed in the public interest if, for example, there is another form of passenger transport available, a rail or flight service, or whatever. For example, there are subsidised flights between Knock Airport and Dublin. Would that be a factor if an operator were to offer a bus service direct from Knock Airport to Dublin Airport? We should be trying to encourage competition. Anyone looking at the rail service and the Bus Éireann service around the country can see that the arrival of competition served to improve those services.
There is a significant number of cash cow routes. We have seen one privately operated route sold to an international consortium for a substantial sum of money. The State got no benefit from that even though State licences were involved. What will happen to those licences when the new legislation on the franchising of routes is introduced? Will the operators who maintain the current level of service, who meet all the criteria under the 1932 Act, automatically get the licences for those new inter-city services, or will they have to pay a premium? Will everything be done in a void under the new legislation once the 1932 Act is superseded or will existing licences be maintained at the current renewal charges?
Under the Act, a licence is issued and is valid for 12 months. As I said, when a licence is first issued, we encourage operators to introduce the services within four months. If they do not do so we ask them why and draw their attention to the risk that the licence will not be renewed if the service is not introduced. That is very clear.
How often has that been done?
I cannot say from memory, but in the past year we have done it on several occasions.
No licences will last longer than four months.
: No, let me be clear. It has not lapsed after four months, but we have written to people quite clearly. I have written to operators saying that they have not introduced a service and that they should bear in mind the relevant section of the Road Transport Act 1932. If they apply for renewal, they stand to be refused. The danger to which the Deputy referred——
At what point would Mr. Brown communicate with them again?
We would do so if we did not get a satisfactory answer. I have had occasion to write to two operators. The Deputy spoke about people applying and getting licences to impede other operators. We had written to people in that situation to say very clearly that, if they do not operate a service and someone else applies for one along the same route, we will not take their licence into account. In practice, that has happened. Where people have not introduced a service, and someone else has come along and applied for a licence for that same route, we have granted a licence. We have refused to take into account a licence in respect of which no service was introduced. We do not allow the——
They do not impede them.
Absolutely. I can say categorically that we do not allow operators who failed to introduce a service to impede another operator from getting a licence to introduce a similar service. I have written to people about that, and we have granted licences to other operators for routes where an existing licence was held by another operator but the service had not been introduced. That has happened. We do not allow people to obtain a licence and not introduce a service, thus impeding the introduction or arrival of another operator on that route. The interests of the public are taken fully into account and we have granted licences in such cases where services were not introduced. I did that in the last few weeks.
If a licence is issued, three or four months elapse, Mr. Brown issues his notice to the operator, and another operator applies, at which time the original operator decides to put a bus on that route, what happens?
If the person does not introduce the service, once we have an application and take a decision on it, we stand by that decision, and the second operator is allowed to enter the service. There is no backtracking on that; that is very clear. We are very much aware of the danger to which the Deputy adverted, the question of operators applying for licences to impede others. We monitor the situation very carefully and act in practice to prevent that occurring. In the past few weeks, I have dealt with some cases where we have granted licences to other operators - second applicants - in such situations. We are therefore well aware of that danger and have acted to cover it. That is on the record. Once the licences are issued, it is easy to check that since they are in the public domain.
The Deputy raised the question of two applications, one from an operator proposing to provide a service on an hourly basis, with another operator applying subsequently to provide a service over the same route more frequently. In that case we would certainly apply the "first come, first served" rule, but under the Act we are obliged to consider whether a proposed service is sufficient in frequency of service, daily duration of service and other respects to meet the requirements of the travelling public. If we had not made a decision on the first application, we would certainly take into account the second. If we felt that the second applicant would provide a better service, we would have to have regard for section 11(3)(b) of the Road Transport Act 1932 and be obliged to consider and act accordingly. I hope that that answers the Deputy’s question.
The phrase "consider and act accordingly" would suggest giving the licence in such circumstances to the second operator.
The Act's intent is such that we would have to do so. It is clear that, where an operator provides a better service or proposes to do so, we could not ignore that. As I said, section 11(3)(b) of the Road Transport Act 1932 seems to be, in letter and in spirit, fairly clear on that point. I have not had occasion to deal with that, but I hope that what I have said answers the Deputy’s question.
There was also Knock, and the final point was about what happens after the Road Transport Act 1932 is superceded.
Perhaps I might deal with Knock Airport first. As I said, we are obliged under the Act to take into account all forms of transport available on a route, and that would include air services, whether subsidised or not. We are required under the Act to examine whether demand is being met on the route. However, the existence of a subsidised air service would not of itself lead us to refuse an applicant. There being a subsidised air service on a route into Dublin from a region of the country would not automatically be a ground for refusing an application from a private operator. Regarding the licences issued over the last few years, it is a fact that there are subsidised services from various parts of the country from the regional airports under a public service obligation regime. There are also licensed bus services from those regions. The existence of a subsidised air service has not been used as a ground to refuse an application from a private operator to introduce a bus service.
Perhaps I might pick up on the last question that Deputy Naughten asked. It was to do with the future shape of the legislation and what would happen to the existing licences at that stage. We have not made any definitive decisions on that as yet. We will have to deal with the issue in the legislation. There are various mechanisms. In some cases, existing licence-holders are regarded as having grandfather rights. In other cases, they have been phased out. For example, freight licences were phased out over a period as part of the liberalisation process. What type of regulatory regime is put in place in the different markets is also a factor. The Minister has outlined his proposals regarding Dublin but has not yet said how he intends to regulate the rest of the market. Regarding the overall point, the fact that someone might continue to hold a licence certainly does not preclude our charging him or her the economic cost of processing and enforcing that licensing regime. For example, even if a person who holds a licence were entitled to hold it when the new law came into force, it would not mean that he or she would be charged the current figure for renewal. Under the new legislation, we charge the full economic cost of administering the licensing and enforcing the regime.
On the Knock issue, there are significant examples of our licensing competing operators on routes where there is evidence that the market will sustain them. Galway, where there are three operators on the route, is one example. The first person in will not necessarily have the exclusive right to a route. Another operator may well be licensed too if the market situation justifies that.
I am surprised by Mr. Mangan's comment regarding new legislation intending to ensure that the full economic cost of administering the licence is covered. We are asking about something entirely different from the administrative cost; it is the value of the licence itself. Mr. Mangan makes it quite clear that the legislative basis for the licensing system is outdated and restrictive regarding what can be done. That one is not enabled under the legislation to charge for the licences means that there is a substantial cost to the taxpayer. It strikes me as strange that, in the past year when we were speaking to the Minister for Transport, Deputy Brennan, about his proposals for opening up the Dublin bus market, he had no proposals for regulation. It was only after discussing the issue at this committee that he referred to his intention of setting up a new regulatory body before opening up the Dublin market. Has Mr. Mangan been working on the preparation of the legislation for regulation? Does he consider that to be a priority piece of legislation for his Department and when does he expect it to be published? The Minister does not seem to consider it to be a priority.
I also have questions about the situation in west Dublin, to which Mr. Mangan referred already on foot of a question from Deputy Naughten. For a number of years, there has been a clear demand for additional bus services in the expanding estates of west Dublin but, when Dublin Bus applied to operate new services in those estates, it was invariably refused on the basis that no new licences would be issued until the market was opened up. Dublin Bus has certainly said to us that the system of approvals was being put on hold until such time as the market was deregulated. Is Mr. Mangan saying that the Department has changed that policy and that Dublin Bus will be allowed to operate new services? The public has often criticised Dublin Bus for its inability to operate new services when the reason that it could not operate them was that it had not been allowed to do so. What is happening to the applications for new services that the Department gets? What were the success rates last year for applications from the private sector and applications from the public sector? How many licences did the Department revoke in 2003?
On deregulation and dealing with Dublin Bus, has the Department examined examples of best practice in other places, such as London? What kind of system would the Department prefer? There are various kinds of systems that can be operated in various different ways.
On the value of the licences, I take the point that Deputy Shortall made and understand the distinction between the financial and economic cost of providing the licence and the value of the licence itself. My understanding is that we have legal advice that there are limitations to what we can do on that, but we will take advice on it as the legislation progresses. If the State creates a value, the question is how that value can be recouped.
Did Mr. Mangan say "if the State creates a value"?
Mr. Mangan has worked in the Department for several years. I presume that he is experienced and knows how the system works. Does he accept that there is a definite economic value in many licences?
It depends on the way that the market operates.
The legislation does not allow us to charge that value. Does that not constitute a loss to the taxpayer as well as undermine the public transport companies, and is it not therefore also a priority for Mr. Mangan to ensure that is covered in the new legislation?
Operators that get licences are operating in a commercial market and may or may not be profitable. Some are, but others are not. That needs to be taken into account as well, and it is a difficult judgment to make in advance. Not all services have continued to operate. Some are profitable, some are more profitable than others, and some are not profitable at all. That is a judgment call. All that I can say at the moment is that we will consider that when we prepare the legislation. All that I am saying for starters is that we recognise that we can charge the full cost of administering the licensing and enforcement system. I am not a lawyer, so I need to take legal advice on whether we can go further.
Nobody expects Mr. Mangan to be a lawyer, but he is experienced in transport. As the assistant secretary in charge of public transport, particularly public transport, I would have expected him to be familiar with the licensing and regulation systems in every other country or at least the common ones in other European countries.
Much money may be made out of operating transport systems. Many people are waiting in the wings to get a share of the action in Ireland and they are likely to be facilitated by the current Minister, Deputy Brennan. I ask Mr. Mangan, as the senior official in the Department, for his view on how we should deal with the value of bus licences that his Department issues now and will issue in future and what his legislative proposals are for dealing with that and ensuring that the taxpayer does not lose out.
Do taxi drivers have to pay for a licence?
Yes. Everybody has to pay for a licence. The question is what costs are covered under the licensing system. It is not an area on which I can give a definitive answer. All I can say is that my experience suggests that licensing systems in other countries are not used to recoup value, but I am only offering a comment in passing at this stage. We need to assess that further, value the licences properly and find out whether the issue can be addressed in legislation. The difficulty is also to what extent we become involved in trying to devise a system that determines in advance whether a licence has great value or lesser value. That is particularly tricky to do before the services come into operation.
Does Mr. Mangan accept that, with nearly every licence that the Department awards to a private operator, it deprives the public company of the opportunity of providing the service? If such a route is profitable, it means that the profit that is made from that route goes into some private operator's pocket rather than being used by a public company to subsidise the non-profitable routes and therefore enhance the services. There is therefore a net loss to the taxpayer.
There are two issues. One is the licence and where the value is set. A private operator does not have a State operator's benefits in that the State operator has the bus provided to it whereas the private operator must fund the bus itself.
Leaving that aside, there is the issue of grandfather rights, which Mr. Mangan raised. When I hear about that, it sends a shiver down my spine because of previous experience. Is it not imperative that Mr. Mangan should know the legal footing regarding those grandfather rights and whether a charge can be imposed on the income that will be generated from those routes when licences are issued? If, under the current regime, we were to issue licences for which we could not charge subsequently under the new regime, it would give rise to concern that there would be a huge incentive for operators to get in before the shutters come down. I understand that there are private operators in Dublin that are not making money. They are loss-making operations, but many of the inter-city routes, which were sold to international concerns for significant prices, are making significant money. It is clear that they are generating an income over and above the cost of the equipment and the running of the service. Some of that money could be brought back into the system to help to fund the provision of public services in other areas that are not financially viable. That is a kernel issue, which the Minister has raised on numerous occasions and is the reason we would opt for franchising of routes. However, if grandfather rights exist and we are establishing them daily, that will have a significant impact on the possibility of franchising under any new regime.
The starting point will be the regulatory regime that is imposed by the market. For example, the Minister's proposals for Dublin are for tendering. In those circumstances, profitable and non-profitable routes would be put out to tender in packages, so cross-subsidisation would be dealt with in the package of routes that was put out to tender. If a regime involved licensing, it would depend on the type of licensing regime that was implemented. For example, if we opt for a liberal licensing regime, we are likely to have fairly intense competition for routes, which will again influence the profitability or otherwise of a route. The first choices that must be made are on the regulatory regimes that are to be introduced in different markets.
It is important to point out that the bus market is not homogeneous. The Dublin market is very different from the long-distance, inter-urban market, which in turn is very different from that in provincial cities, which is different again from the stage carriage market. That will be the first issue to be decided.
The second issue is the question of the extent to which the State can recoup the added value. We must consider that as we prepare the legislation and I do not have a definitive answer in respect of it at this point. Our intention is to recover the costs of the licensing process. Whether we can go further, I do not know at present. We need to examine that and also to investigate regulatory regimes in other sectors and the experiences in those. We can then make a judgment as to what regulatory regime to put in place.
As regards existing licensees, I see no problem with charging licences whatever rate is decided for licences in the new legislation, once it comes into place. I am not saying that those licensees will or will not have rights. That is an issue at which we are looking at present. Various ways have been used in the past to deal with this. In some instances, the right to licences has been phased out. That was certainly the case in the 1986 legislation in respect of road haulage. At that stage, existing licensees had their licences phased out over a period up to the full liberalisation of the market, and that may well be the approach that is taken in this area. We are working through that with our lawyers at present and it will be dealt with in the legislation.
Deputy Shortall inquired about the opening up of the Dublin market and the issue of regulation. The Minister's statement of November 2002 to the public transport partnership forum made it clear that an independent body would be established to procure public transport services, regulate public transport and allocate capital and current funding for public transport purposes. His proposals have always envisaged an independent procurement and regulatory body. He indicated more recently that he favours a national body to allocate funds for public transport, whether directly in contract with the CIE companies or through competitive tendering, and to regulate the market in terms of issuing licences and enforce the rules.
The Minister has made it clear that the regulatory body needs to be up and running before the new regulatory and procurement arrangements can be put in place. The legislation on which we are working is designed to give effect to the body and to put in place the new regulatory and procurement regime for the entire public transport market nationally. The Minister indicated that the legislation is a priority for him and he wants to see it enacted during 2004. He has made clear to us his feelings in this regard and we are working hard to prepare the legislation as quickly as possible.
As regards Dublin Bus being refused because the market was being opened up, that is simply not the case. It has never been the case. As Mr. Brown said, all of Dublin Bus's notifications to us have been approved. A small number were delayed because of prior licensing applications. However, we have no policy, explicit or implicit, to refuse Dublin Bus permission to operate services in accordance with the provisions of the direction because we are opening up the market. That has never been the case, nor will it ever be. Mr. Brown may have figures in terms of success rates, etc.
To develop the final point made by my colleague, I would go further and refer to new residential developments. My colleagues and I have had meetings with Fingal County Council to check the developments in the pipeline and in progress. Where there is mature housing and where services are needed, we have made it clear that we would deal with those applications as a priority. We have not withheld approval to introduce services in any of the cases in question. It would be quite improper to do so.
In terms of the success rate, in the case of private operators we received 196 applications last year. Up to 31 December, we had cleared 57 of these. We have, therefore, carried 57 over into the new year. In the case of the bus companies, we received a total of 153 notifications. From memory, the figure at the end of the year for the number carried over was 11.
What is the success rate?
All of those were dealt with.
All the approvals were granted. Is Mr. Brown stating that they were all successful?
Yes. In some cases we had to defer some until we dealt with prior applications. However, they were all approved.
So 153 was successful last year.
A total of 153 was received and at the end of the year we had cleared all but 11 of these.
I am interested in the distinction between their being cleared and approved.
It is the same thing.
We do not refuse. I just want to be clear about the notification system.
What about applications for licences?
I do not have the actual figure for the refusal of licences. It would have been a small number for private operators. Out of the 196, 57 were held over at the end of the year. The number of refusals would have been quite small.
Would they be refused on safety grounds or grounds of competence?
Under the criteria in the Act, if we felt that demand was already being satisfactorily met on the route by existing operators, we would inform the applicant that we had considered the route, that we thought demand was being met, that we did not see a basis for granting their application but that they were free to make representations to us. That is the way the system operates.
So approximately 130 licences would have been issued.
Let us be clear. I referred to 196 applications last year. That total figure means applications for new licences or amendments to existing licences. They are completely new applications or amendments to existing licences that are in the market.
Would it be possible to provide a detailed breakdown——
——on both sides in respect of State operators and private operators?
We would be happy to do so.
Will Mr. Brown inform us now, or at a later stage, about the number that have been revoked?
I was going to deal with that. In the past year we have not revoked any licences. However, in cases where we have carried out monitoring and discovered that people are not actually operating their licences, we have been in communication with those operators and drawn their attention to the provisions of the Act. In certain instances, such operators have informed us that they are not operating, that they are not interested, that the licence is not live and that, if someone else is seeking to operate on the route his or her application should be considered. We have done this. However, we have not specifically revoked any licences in the past 12 months.
What about the previous year?
I do not know about the previous year. I have only been working in this area for the past seven or eight months. I cannot comment on the previous year.
I want to return to the licences that are being issued at present. We are stuck in no man's land, which is a difficult position for the Department to find itself. However, it is 16 months since the Minister made his initial announcement regarding competition in Dublin. We have passed 1 January 2004, the date on which 25% of the Dublin market was to be opened up to private operators. Between the original announcement and the target date of 1 January, warning bells must have rung in the Department. Licences were being issued where there was a question mark over what type of rights would exist following the opening up of the market. Questions must have arisen as to whether such licences could be revoked or whether a contribution could be levied from those operators out of the moneys accruing to them. Surely the Department realised in the past 16 months that the Exchequer will have to foot the bill and that we should be trying to recoup money from some of the operators that are making significant profits. I am sure that the legal position has been checked and that the Minister has been advised accordingly.
I accept that it is difficult for the Department because the Minister keeps shifting the goal posts. However, surely the warning bells have rung and something has been done to see what rights these operators may enjoy following the introduction of a new regime.
What is likely to happen under the new regime when the Minister franchises 25% of the main routes to a private operator and 75% are operated by Dublin Bus? There will be two main operators but all the other minor operators will, presumably, remain in the market. Has Mr. Mangan clear proposals on how that situation will be regularised? People will be given valuable licences but no mechanism has been put in place for charging them. Given that the Minister expects to have legislation enacted within the current year, has Mr. Mangan applied his mind to this question? It is now the middle of March. Can Mr. Mangan clarify that position?
When I last spoke, I forgot to answer a question the Chairman asked, namely, whether the Department had looked at other models. We have done so. Much work has been done in the Department, and independent work has been done for the public transport partnership forum which looks at other models. That information has been very valuable to us in our preparatory work.
Is it available to the committee?
Yes. The work originally done by the Department looking at various competitive models is in the public domain and is available to the committee. We can make it available to the committee. I think it is still on our website. There is also the NERA report, which was commissioned by the public transport partnership forum.
Deputy Shortall asked what is likely to happen after franchising. A range of issues must be decided. First, in a franchising market virtually all services will be procured by the public transport regulatory body. If there is a role for licensing, it is only at the margins and only for wholly commercial services. We have not taken a definitive decision on that. In a procured market where public subvention is being provided, it would be done on the basis of the regulatory body identifying the services needed and procuring those through contract, either directly with the State operator or through a tender competition. There is no role for a mainstream licensing system in parallel with that.
Does that mean the existing private operators will lose their licences?
I am coming to that. In Dublin there are only seven licensed routes at present. We are addressing that issue with our legal advisers. We have not reached a decision with regard to how we are going to deal with the existing licence holders. A range of mechanisms has been used in the past. We will address the issue in the legislation. I cannot say precisely how we will address it but it will be addressed.
What about the national market?
The national market will be determined primarily by the regulatory regime. For example, in a procured market, licensing is only at the margins or does not exist at all, whereas in a liberalised market, existing licence holders can simply turn over their licences and there is no problem. Again, it depends on the regulatory model used in the market in question. The Minister has not made an announcement regarding how the market outside the greater Dublin area is to be regulated and procured. The Steer Davies Gleave study, which is another part of the parcel, looked at the market outside the greater Dublin area. There has been a consultation process on that. It will be determined in due course and an announcement made. That will be a primary influence on future progress.
We sought advice on whether or not we could freeze the licence process while the new regulatory process was being put in place. The clear advice was that we could not. We cannot suspend the existing law while the new law is being devised. We must continue to process licence applications in accordance with existing law for as long as the process takes. The Minister has made it clear, publicly and within the Department, that he regards that as a priority. This has taken some time. We are in detailed discussions with the trade unions. That is also an important part of the process of developing the regulatory proposals and it is important that it be given the time necessary to see it through.
One of the principal licensees, Aircoach, is held up as the way forward for public transport into the future. Aircoach has a licence to operate the airport route. The company has a large number of coaches which, I gather, are leased. To the best of my knowledge, the company is not yet profitable. Nevertheless, that company is reported to have been sold recently for €15 million. If the existing business is not yet profitable and the company does not own the coaches, where does the €15 million valuation of the company come from, if not from the licences? Can Mr. Mangan explain that? Is it in the public interest that a Department of State would facilitate private operators to make substantial profits at the expense of the taxpayer? Does Mr. Mangan intend focusing his attention on this area in the future? I am taken aback to hear that this area does not appear to have been given priority by the Department in the current climate.
I cannot comment on the Aircoach matter. A commercial transaction has been made and we have no information about it or knowledge of it.
The Department licensed the company.
The Department licensed it, yes.
So what does Mr. Mangan know about the company?
The company that exists has changed ownership. The company itself has not changed. There has been a change of ownership, which is perfectly legitimate. We have licensed the company. It holds a road transport operator's licence which is issued by our Department. This means it is fit to operate in the market and meets the Department's requirements. The company has met the criteria with regard to its ability to operate, whether in terms of financial standing or competence. A commercial transaction arises when one company decides to buy another. It is perfectly entitled to do that.
Can Mr. Mangan explain the value of the company?
I have no knowledge of it. I do not wish to make any comment on it because I do not have any information which would allow me to comment.
It runs a good service.
Yes, it runs a good service. I was wondering why the company was valued at €15 million. As we are discussing the licensing of bus services I would like Mr. Mangan's opinion on that. It does not make sense to me.
It is a commercial transaction as far as I am concerned. I do not have any opinion on it, good, bad or indifferent. People make their own commercial judgments and some company has done so. That is it.
Companies generally do not pay money for nothing. Is this not an indication that those licences have a value and there should be some financial return to the taxpayer for issuing those licences? Does Mr. Mangan not regard this as a priority in the new legislation given that existing legislation is so out of date.
I have no knowledge of the terms of the transaction made. Like members, I hear rumours and reports but I am not in a position to comment any further. It would be inappropriate for me to comment on a commercial transaction.
As regards the value of State premises, a company prepared to risk its money is entitled to a return and a profit from the market. That fact must also be taken into consideration. The State's job is to ensure that services are operated to an appropriate standard and, where services are not being operated commercially, it must provide them through its public service obligations. People are entitled to choose to provide commercial services and risk their own money in doing so. We are a market economy and people are entitled to make commercial choices. If they make a profit from doing so, good for them. If they make a loss, the State is not obliged to pick up that loss.
They are buying a foothold in the Dublin market.
I do not necessarily believe they are buying a foothold in the Dublin market because the Minister's proposals in that regard relate to franchising, not licensing. Currently, they have two licences. I do not consider that to be a foothold in the Dublin market. Ultimately, contracts will be issued on the basis of certain criteria such as quality and quantity of services and it will be up to the operators to bid for those services and for the regulatory body to determine to whom it is appropriate to award contracts. Nobody has a guarantee, good, bad or indifferent, in terms of who will win contracts when they are put out to tender.
Is Mr. Mangan suggesting the Aircoach licences will cease to exist when 25% of the market is franchised?
No, I am not. I am saying current licences represent a small proportion of the total public transport market in Dublin.
They represent the lucrative end of it.
I thank Mr. Mangan, Mr. Browne and Ms McCarthy for attending today.