Before asking the House to accept the principle of this measure I propose to outline in a few words the sequence of events which led to its introduction. Shortly after taking up office, I was informed by the then chairman of Córas Iompair Éireann that the company had incurred a loss of over £800,000 in 1947 and that he then estimated that the loss for 1948 would be £1,250,000—in fact this estimate proved to be somewhat too low as the deficit actually incurred on the year's working was £1,400,000.
The measures which the company considered necessary to remedy the position included:—
(1) Dismissal of 2,500 men by reductions in maintenance;
(2) closing down of branch lines, involving further disemployment, possibly amounting to 1,000 men;
(3) increasing fares to road and rail passengers and raising freight charges on road and rail;
(4) Restriction on privately operated road transport.
These proposals were so drastic that they could not be accepted by any Minister without the fullest investigation.
At the same time, capital commitments totalling no less than £17,250,000 had been entered into or were about to be incurred by the company. It did not appear to me that the programme planned was necessary, nor was it shown to my satisfaction that if it were carried out the concern would be put on a self-supporting basis.
The Government, having considered the matter, came to the conclusion that the affairs of the company should be fully investigated, and, as Senators are aware, the Government succeeded in securing the services of Sir James Milne, an acknowledged authority on transport administration for the task which, with the collaboration of a team which included experts in all branches of transport, he completed with commendable despatch. The task which Sir James undertook was that of examining and reviewing the position of rail, road and canal transport, and of reporting on the steps it might be necessary or desirable to take to secure:—
(a) the greatest measure of co-ordination of rail, road and canal transport;
(b) the restoration of the financial position of the public transport companies; and
(c) the most efficient and economical transport system.
I do not propose to take up the time of the House by outlining in detail the recommendations of Sir James Milne's Report which was made public in December, 1948. In order, however, that Senators may be enabled to appreciate fully the issues involved, and the reasons underlying the approach to the problem, embodied in this measure, it is necessary that I should give briefly an account of some of the main conclusions arrived at by Sir James and his colleagues.
The experts considered that the services provided by Córas Iompair Éireann are the backbone of the present public services and that those services form the natural foundation for future development. They felt that it was wrong in principle that the affairs of such a large undertaking should devolve almost entirely on the shoulders of one individual, the Chairman; they recommended that two additional Government nominees should be appointed and that the board as a whole should be made responsible for the administration of the company's affairs, reserving only to the Government directors the right to veto capital expenditure. The functions and operations of the various departments in the company were examined in detail, and many recommendations for improvements in organisation were made. The report was severely critical of the policy of the Board of Córas Iompair Éireann and the control it exercised, particularly in the matter of capital expenditure, and the findings confirmed the doubts present in the minds of the Minister for Finance and myself as regards the wisdom or necessity of undertaking the projected capital developments.
The proposal to proceed with the erection of a central bus station at Store Street will provide Senators with an illustration of the policy and procedure which were so unfavourably commented on in the report. The need for a central bus station is unquestioned, but the central bus station at Store Street would occupy only the ground floor of the building. Above it have been erected five storeys of new offices for the staff of the company. The cost of the bus station might be anything from £100,000 to £150,000, but the cost of this new building now in progress (including the new offices for the company) is estimated at £850,000; and with furnishings, fittings, etc. the final cost may be nearer to the £1,000,000 mark. I feel that the offices at present occupied by the company's staffs, and, indeed, I am so advised, are reasonably adequate and satisfactory for their purpose. The decision of the company to provide these new offices involved the company in a million pounds of capital which, even if it were available, could be better spent on the provision of better carriages and wagons on the railway system and to put more omnibuses on the streets.
Other capital projects condemned in the report included the proposed introduction of diesel-electric locomotives, the plan for elaborate and costly chassis maintenance and body-building shops at Broadstone, the Inchicore chassis factory, the proposal for a spring shop at Inchicore, and the plan for reconstruction of Limerick Junction Station. A project of which Sir James Milne was not aware was the proposal to build a six-storey luxury hotel at Glengarriff. Land had been acquired and tenders for building invited. The lowest tender for the shell of the building was £507,000 and this was accepted by the company. It was estimated that the hotel, when completed, would cost approximately £1,000,000. The board, however, decided before the Milne investigation, to abandon the project, but not before an expenditure of £35,000 had been incurred.
The condemenation of this huge programme for capital expenditure created the gravest doubts in the minds of the Government as to the feasibility of permitting the board, as then constituted. to continue to control the company's activities, and consequently it was decided to change the Government's representative on the board. This was done on the 18th February, 1949, and the retiring chairman was compensated in accordance with the terms of a contract he had made with the company.
At the same time it was announced that the Government proposed to introduce legislation to provide for:—
(1) The acquisition of the public transport systems other than the Great Northern Railway Company;
(2) the appointment by the Government of a transport board;
(3) the provision of compensation for stockholders, and
(4) the making of arrangements to ensure that dismissals of staff on grounds of redundancy would not take place.
The present Bill, Sir, is to give effect to this decision, and the main purpose of the Bill is to bring under public ownership the undertakings of Córas Iompair Éireann and the Grand Canal Company for the control of which a new board to be called Córas Iompair Éireann will be set up.
The amalgamation of Córas Iompair Éireann and the Grand Canal Company constitutes a further step in the process of unification which began with the amalgamations effected by the Railways Act, 1924. This measure is the logical outcome of the developments in transport in this country since the foundation of the State. When the Transport Act, 1944, was introduced, its sponsors claimed that it would lead to economical and efficient transport services. It is now generally accepted that the combination of private ownership and semi-State control has not achieved these results. The division of ownership and effectual control could be satisfactory neither to the nominal owners of the undertaking nor to the Government whose responsibility it was to ensure that the public interest was served.
Transport is a vital public service, of concern to every individual in the State and intimately affecting every phase of the economic life of the country. We all know that the task of providing a national transport system in this country under modern conditions has proved to be beyond the scope of private enterprise and also that the compromise between State ownership and private enterprise has not been successful. It is the Government's duty to ensure that such an important service is carried on as effectively and as efficiently as possible. We have come to the conclusion that the discharge of that duty demands State ownership of public transport. That conclusion has already been reached in many other countries. We have the example of countries such as France, Switzerland, Sweden, Denmark and Belgium. In Britain also a solution of the transport problem is being sought through the medium of a Government appointed Transport Commission.
Of the company's created capital, some £13,000,000 debenture stock is guaranteed by the Government as to principal and interest, while the common stock amounts to £3,500,000. For the protection of its interests in the company, the previous Government gave to the chairman in the 1944 Act special powers, but, as will have been seen, the results have not been satisfactory. Sir James Milne has recommended that two additional Government representatives should be added to the board and that the only additional power given to Government directors should be a veto on capital expenditure. This would still leave the Government representatives in a minority on the board, despite the preponderance of Government participation in the finances of the undertaking. This position would not be a satisfactory one from the point of view of the taxpayer or the Government.
The Bill provides for the establishment of a board consisting of not less than three nor more than seven members, including the chairman. The members of the board will be appointed by the Government. It is proposed that appointments will be for a period not exceeding five years, but that members will be eligible for reappointment. The terms and conditions of office and the remuneration of members will be fixed by the Government.
It is the view of the Government that a small board is most likely to yield the best prospects of efficient organisation. For this reason they have decided on a maximum of seven—the same number as the Electricity Supply Board. The overriding powers of the chairman under the 1944 Act are abolished. A member of the board may be removed from office on stated grounds. In such cases, the Bill requires that a statement shall be laid before each House of the Oireachtas giving the grounds for removal. It is proposed that the members of the board may not also be members of either House of the Oireachtas. The superannuation provisions for the board are similar to those for the members of the Electricity Supply Board, but provision is made to enable the present chairman, if he is appointed chairman of the new board, to reckon his service with the State and with local authorities for pension purposes, as is provided for in the case of a civil servant transferring to a local authority.
The Government have decided that the existing name Córas Iompair Éireann should be retained. The fact that Córas Iompair Éireann denotes the Irish transport system is only now becoming fully appreciated abroad. The name has not been in use for very long and a change would tend to create confusion. There is the further consideration that a change would involve considerable expenditure in printing, altering signs and names on vehicles, and in many other ways. In all the circumstances and having considered various alternatives, the Government decided that they would not be justified in making a change. For convenience, the existing company is referred to as Córas Iompair Éireann (1945) throughout the Bill.
The duties of the new board are set out in Section 15 of the Bill as follows:—
"To provide or secure or promote the provision of an efficient, economical, convenient and properly integrated system of public transport for passengers and merchandise by rail, road and water, with due regard to safety of operation, the encouragement of national economic development and the maintenance of reasonable conditions of employment for its employees...and for that purpose to improve in such manner as it considers necessary transport facilities so as to provide for the needs of the public, agriculture, commerce and industry."
The board will also have the duty of conducting its undertaking so that as soon as possible, and taking one year with another, its revenue will be sufficient to meet outgoings.
It will be the aim of the board to provide the highest degree of service at the lowest charges compatible with meeting costs. There is, as many Senators know, a good deal of loose talk about "cheap transport" and a tendency to ignore the fact that transport charges must depend, to a great degree, on the extent to which the services are supported and to the cost of providing them. Fixed expenses constitute a large proportion of railway costs and a fall in the traffic means a rise in the average unit of cost for the conveyance of the remainder. I anticipate that the new board will find many ways of achieving economies. We know that there is scope for achieving a greater degree of technical standardisation, and for the introduction of more efficient methods. Duplicate services can be eliminated; and there are good prospects for the development of touring services, for which there is a popular demand, not only by our own people but by tourists, with consequential intake of foreign currency. These measures can only mature slowly and they will call for the greatest organising, managerial and technical skill, for the whole-hearted co-operation of the staff, and for the active encouragement and goodwill of the public.
The powers of the board are contained in Section 13. These have been set out in detail and at some length, as we are anxious that the board will not be impeded in their operations by legal or technical difficulties. The powers given to the board are wide, as they are bound to be, having regard to the extent of the tasks they are called upon to undertake. In the present transitional period, and particularly having regard to the negotiations concerning the future of the cross-Border companies, it is difficult to foresee all contingencies. For this reason a special provision is included under which additional powers may be conferred on the board by ministerial Order. Such Order would require to be confirmed by resolution of each House of the Oireachtas.
I now come to the terms of compensation proposed for shareholders and stockholders of the acquired companies. As the House is aware, these were announced last May. It is proposed that compensation shall be effected by the issue of transport stock which will be guaranteed by the State as to principal and interest. Transport stock will be a gilt-edged investment, combining security of capital with an assured income. The Government gave the fullest consideration to the question of compensation and at their request dealings in transport stock of the companies concerned were suspended to avoid possible speculation. In settling the terms of exchange, the Government had regard to the claims of the stockholders on the one hand and to the rights of the community on the other. It is not surprising, I think, that the proposals in the Bill have been criticised in some quarters as being too niggardly and in others as being over-generous.
The capital of Córas Iompair Éireann comprises approximately £13,000,000 guaranteed debenture stock and £3,500,000 common stock. The debenture stock will be exchanged for the same nominal amount of guaranteed transport stock at the same rates of interest and redeemable in the same periods as the debenture stock for which it is substituted. The details are set out in the White Paper which was circulated to Senators last October. The debenture holders will, therefore, be in exactly the same position as regards capital security and income as they are at present. In dealing with the debenture stock, the Government is doing no more and no less than honouring the guarantees given to the debenture holders under existing legislation. In addition, the new board will be liable under Section 23 (4) (a) to repay the advance of £2,464,000 made to Córas Iompair Éireann (1945) for capital purposes under the Supplementary Estimate taken on the 30th November last. It is proposed that the common stock of Córas Iompair Éireann will be converted on the basis of £80 of 3 per cent. guaranteed transport stock for every £100 of common stock. The common stockholders will thus receive a guaranteed income equivalent to about 2½ per cent. on their present holdings at their nominal value and they will have the assurance of being able to redeem their holdings of transport stock in full in 1975-85. This rate of compensation is based on the average of the highest and lowest of the stock exchange quotations in each month in the three years 1945-1947.
The capital of the Grand Canal Company comprises £36,000 of 3 per cent. irredeemable debenture stock; £332,950 of 3 per cent. non-cumulative preference shares and £332,950 ordinary shares. The Bill proposes to convert all these holdings, totalling £702,500 into 3 per cent. guaranteed transport stock on a £1 for £1 basis. As far as the debenture stock is concerned, no one will, I think, question the Government's decision. Debenture stock is in a class apart from share capital. It is really a loan, and the holders of debenture stock are creditors with a first charge on all the assets of the undertaking. Conversion at par merely preserves the existing loan at its nominal value. The interest on this debenture stock has always been paid in full by the Grand Canal Company.
As there are very few dealings in Grand Canal Company shares, the stock exchange quotations could not be regarded as a reasonable basis of acquisition. We found that the general level of market quotations for the three years 1945-47 was actually higher for the ordinary than for the preference shares.
The dividend of 3 per cent. on the preference shares has been paid each year since before 1922 up to and including 1948, while the dividend on the ordinary shares has averaged almost 3 per cent. over the ten years to 31st December, 1948. The company is in a relatively sound financial position. In addition to its canal, it owns valuable property. Apart altogether from revenue from the carrying trade, the company derives a substantial income from rents. The company contended that even if they discontinued transport services they could earn dividends as a property-holding concern. The fact remains that the Grand Canal Company is a solvent undertaking with an excellent dividend record extending over many years. To offer the preference and ordinary shareholders of that concern compensation at less than par would, in my view, be unreasonable. I do not believe, on the other hand, that the shareholders have any ground for complaint. Their income will be assured and their capital position fully protected.
The Bill provides that the existing statutory controls on charging powers will not apply to the board. Control of railway charging powers by the State or by State-appointed tribunals dates from the last century. When railway systems began to expand, about 100 years ago, it was deemed necessary to impose restraints in regard to rates and fares. These were designed to secure fair play for all transport users and to ensure that the interests of the community were not prejudiced by excessive charging designed to produce exorbitant profits. In this connection, it must be remembered that at that time railways enjoyed an effective monopoly in the transport field. Conditions to-day are different. The large-scale development of road transport has destroyed forever the monopoly position of railway undertakings and has turned profits into losses. The case for these restrictive controls is, therefore, no longer so strong as it was formerly.
Prior to 1922 maximum railway charges in this country were fixed by the British Board of Trade and confirmed by statute. Legislation was enacted during the first world war empowering the appropriate Ministry to authorise from time to time increases in railway charges. That position remained until the passage of the Railways Act, 1924. The Railways Tribunal 1924, established the Railway Tribunal whose functions included the settlement of rates and charges—both maxima and minima—and the hearing of applications for alteration of rates. The Railway Tribunal was abolished by the Transport Act, 1944, which invested the Minister for Industry and Commerce with power to fix maximum rates and charges. This power was never exercised in regard to road merchandise rates. Railway companies were free to vary their charges within the statutory maxima approved by the Minister under the Act. It is the view of this complex matter in the hands direct and business-like course is to leave this complex matter in the hands of the members of the board who, with the detailed knowledge that will be available to them and the technical advice that they can command, will be the best qualified to determine the level of charges from time to time. My belief is that a State-owned corporation of the kind we propose in this Bill, charged with the duty of providing an essential public service, should be invested with the greatest possible degree of autonomy, both commercial and financial, to enable it to carry on its business economically and successfully and without interference in its day-to-day management. It will be the board's duty to fix its rates and charges equitably over the various classes of traffics. It will have to direct its energies towards a solution of that most complex of all charging problems, the determination of the relationship between rail and road rates so as to attract towards each form of transport the maximum volume of traffic of the kind for which the form is best suited and equipped.
In that way only can the full benefits of a policy of co-ordination be attained. The powers of the board in regard to charges will be conditioned and governed by factors which, in my view, are a much more potent deterrent to excessive charging than any ministerial controls such as have existed in the past. In the first place, there will be the powerful influence of public opinion to which a State board will naturally give full attention; in the second place, there is the competition from licensed hauliers and from traders carrying their own goods which will also provide an effective independent check on the charging policies of the new undertaking. Thirdly, there is the sensitivity of traffics to alterations in rates. In transport operations as in other activities the point is quickly reached at which increased charges result in loss of business which can rarely, if ever, be recaptured. Finally, there is the legislative provision which will still remain which requires the undertaking to afford all reasonable facilities for traffic, and prohibits any particular class of traffic. This does not preclude the company from quoting special rates where there is a substantial new traffic and in fact they have cooperated in this way with a number of our new industries.
The question of branch railway lines constitutes one of the most thorny of all transport problems in this country, and the difficulties are accentuated by the intense controversy which the mere mention of the problem invariably provokes. On this occasion I trust that this House, with the experience of transport developments over the last 25 years, will approach the problem dispassionately and consider whether the course proposed in the Bill is not the best in all the circumstances.
First, let us consider what has been the position in the past. Before the passage of the Railways Act, 1933, railway companies were perfectly free to close down branch lines except in those cases in which the legislation under which a particular line had been constructed provided otherwise. Between 1922 and 1933 services were discontinued in whole or in part on nine branch lines, of which eight belonged to the Great Southern Railways Company. The Acts under which these lines were constructed did not require that they should be kept open for traffic, and the company, accordingly, exercised its rights to close them down. The Railways Act, 1933, provided that no line could be closed down except under the authority of an Order made by the Minister for Industry and Commerce, alternative road services to be provided, and any staff displaced to be compensated. Fourteen such Orders were made by my predecessor in office between 1933 and 1945, of which eight relate to lines now owned by Córas Iompair Éireann. In 1944 an Emergency Powers Order was made which authorised the temporary discontinuance of rail services in view of the fuel scarcity then prevailing. This Order will cease to have any application after the enactment of the Bill which is now before the Seanad. Services on many branch lines were suspended at varying periods during the emergency and, in the spring of 1947, during the acute fuel crisis, services on many branch lines were temporarily discontinued. The services on a number of lines were subsequently restored but there are still a good many lines which are only open for live-stock fairs or for heavy seasonal traffic. That, then, is the general position in regard to branch lines up to the present.
The only departure from existing legislation now proposed is that the responsibility for making orders authorising the closing of branch lines owned by the board will not in future lie with the Minister for Industry and Commerce but will devolve on a new Transport Tribunal to be set up under the Bill. The Tribunal will consist of not less than three or more than five members including the chairman, all of whom will be appointed by the Government. The provisions in relation to the tenure of office of members of the tribunal, removal from office and remuneration are similar to those applicable to members of the board.
In my view, the proposals in the Bill represent a desirable change and a considerable improvement on the present position. It will, I think, be appreciated that a Minister must inevitably be subject to influences from which an independent tribunal of the kind proposed in the Bill will be immune. It is wholly undesirable that political considerations should affect a question which should be judged by reference only to the public interest and to the economic factors involved.
The board will be precluded from terminating services for passengers or merchandise except under an order made by the tribunal. Public notice of any proposal to close lines must be given and an opportunity afforded interested parties to submit objections to the tribunal. If no objections are made, the tribunal will be required to make the order for which the board has applied. If objections are received, the tribunal, after hearing the objectors and the board, may either refuse to make the order, or may make the order with any modifications which they consider necessary. As I have already indicated, the Emergency Powers Order under which various branch line services were temporarily discontinued will cease to have effect on the enactment of this measure. Services at present suspended under the Emergency Powers Order must either be restored or the board must bring the matter before the tribunal and go through the procedure laid down in the Bill.
The tribunal will also be empowered to release the board from its statutory obligations to keep open for traffic, any canal or part of a canal which has not been used for public navigation for at least three years. In that case, also, public notice will be required and interested parties will be afforded an opportunity of making representations to the tribunal. The remaining function of the tribunal will be to advise the Minister on any transport matter which he may refer to them.
The financial provisions relating to the board are dealt with in Part V of the Bill. The board is authorised to issue transport stock for the purpose of providing money for carrying out permanent works, for the redemption of transport stock, for the acquisition of any other transport undertaking, and for other purposes for which capital moneys are properly applicable. The aggregate stock which may be issued for any purpose of capital works and for other purposes, excluding the redemption of transport stock and the acquisition of other undertakings, is £7,000,000. This is the figure which was suggested in the Milne Report as the further capital which would be necessary for development purposes. The Bill provides for the guarantee by the State of all transport stock as to principal and interest. Issues of stock, except the substituted stock, will require the consent of the Minister for Industry and Commerce, given with the approval of the Minister for Finance. The terms and conditions as regards interest and redemption of such issues are subject to the approval of the Minister for Finance, and it is required that annual statements of stock issues shall be laid before each House of the Oireachtas. The Bill also makes provision for the establishment of a fund for the redemption of transport stock.
The board will be required to keep all proper and usual accounts, and to furnish any further accounts or information which may be required. The audited accounts and the auditor's report will be presented to the Oireachtas. The appointment of the auditor is subject to the approval of the Minister for Industry and Commerce.
The Government decision of February, 1949, regarding redundancy is implemented in Part VI. The Bill provides that the services of permanent employees, or of temporary employees with not less than three years' continuous service, shall not be dispensed with on grounds of redundancy. Any redundancy which may exist will be met through normal wastage. Some cases may arise where no suitable alternative employment can be found for redundant workers, in which case provision is made for the payment of compensation. These provisions cover the case of any employee whose office may be abolished due to the amalgamation of the companies, and also provide for compensation for worsening of conditions on certain transfers. Similiar provision is made for employees for whom no alternative employment is available or who suffer a worsening of conditions on the closing of a railway line or the termination of canal services. The existing superannuation schemes are being continued in the Bill and there is power to make new schemes or to revise existing ones. The House will, I think, appreciate that the staff provisions in the Bill are quite exceptional. I think it can safely be said that never in the reorganisation of any industry have the workers received more consideration than they are receiving under this Bill. The company, Córas Iompair Éireann is being given a new lease of life, and an opportunity of adjusting its affairs in such a way that it can be run in the future on a sound economic basis.
I feel confident that the workers, given this unprecedented measure of security, will co-operate wholeheartedly in the attainment of our common objective. The success of this nationalised undertaking is in their own interests; it also lies largely in their own hands.
I have outlined the main provisions of the Bill. The remaining provisions are, in the main, re-enactments of existing legislation which is being applied to the board. If there are any matters which Senators wish to raise on these, I suggest that they can be discussed in Committee.
I am recommending this measure to the Seanad as I recommended it to the Dáil, in the belief that it will enable an organisation to be set up which can be used to make the transport system of this country economical and efficient.
