The purpose of this Bill is to provide for further capital advances to CIE and for payment to the board of non-repayable grants in respect of the amount by which the board's subvention was inadequate during the five year period ended 31st March, 1969. I propose, with the permission of the Cathaoirleach, to take with the Bill the motion on the Order Paper in relation to the Transport Act, 1964 (Section 6) Order, 1969, the purpose of which is to increase the amount of the annual grant paid to CIE.
The Transport Act, 1964, provided for payment to CIE, from 1st April, 1964 of the annual grant of £2 million, with the aid of which the board were required to break even, taking one year with another. The Act provided that the amount of the subvention might be varied in the financial year commencing on 1st April, 1969, and in every fifth subsequent financial year, by order made by me with the concurrence of the Minister for Finance and subject to prior approval of each House of the Oireachtas. The Act also made provision for payment to the board by the Exchequer of capital advances not exceeding in the aggregate £6 million. It was estimated that this sum would, in addition to the moneys available from the board's depreciation provisions and other internal resources, be sufficient to meet CIE's capital requirements for the five year period ended 31st March, 1969.
The 1964 Act was based on the Government decision, announced by my predecessor during the course of his Second Stage speech on the Transport Bill, 1964, to continue to preserve the railway system subject to such further concentration and reorganisation as might be found practicable and desirable. The Government recognised that CIE could never become a viable organisation so long as the board were required to provide a widespread rail system. It was, however, accepted that while a complete changeover to road transport could possibly yield a public transport system which would carry on without operating losses, the enormous capital required and the very heavy staff redundancy would be such as to outweigh the advantages. The Government also took into account the fact that the railway represents a vast national investment and offers advantages not alone for tourist and peak traffics, but particularly for certain bulk freight traffics.
The annual subvention of £2 million was intended to be a realistic assessment of the minimum subsidy with which CIE could get by on the basis of effective management and increased efficiency and productivity. The object was to set a difficult but not discouraging target and to provide an incentive to efficiency and economy. In the event, CIE's total losses during the five year period exceeded the board's total subvention of £10 million in that period by only £542,460. In the context of the board's scale of operations — their turnover in 1968-69 exceeded £31 million — and of the growing difficulties which beset public transport everywhere, this is a very slight divergence from the target set five years ago. During the five year period there has been a sharp growth in productivity in CIE and improvement in management throughout the enterprise.
Before dealing with the Bill itself and with the order, I propose to review briefly the results of the various sectors of CIE during the past five years. Except for 1968-69, CIE's net losses have been steadily growing, having increased from £1.475 million in 1964-65 to £2.48 million in 1967-68, before dropping to £1.961 million in 1968-69. An increase in revenue, due to increased fares and rates and additional business, partly offset by an increase in expenditure, was responsible for the reduction of £519,000 in the board's net deficit for 1968-69 compared with the previous year.
The excess of £542,460 during the five year period can be attributed mainly to increases in labour and other costs. CIE are a labour intensive industry and labour costs account for about 65 per cent of the board's total operating expenditure. During the past five years, CIE's total operating costs increased by 44 per cent. During the same period the additional annual cost of wage and salary increases, reductions in working hours and other improvements in conditions of service for CIE employees represented an increase of approximately 54 per cent on the level of the board's labour costs in 1963. Some of the additional costs incurred during the five year period were offset by additional business secured by the board totalling more than £6½ million and by an increase of about 13 per cent in productivity; the balance had to be met as far as possible by increases in fares and rates.
Excluding financial charges which, by arrangement with CIE were allocated for the first time to the various working accounts in the board's accounts for 1968-69, losses on railway working rose from £1.229 million in 1964-65 to £2.143 million in 1968-69. Rising costs absorbed not only increases in fares and rates but also economies and increased productivity achieved by the board. During the five year period rail passenger traffic was well maintained. In an effort to increase this traffic, CIE have introduced a wide range of concessionary fares, faster trains and an intensive campaign to attract more commuters to the suburban rail services. Rail freight tonnage increased by 34 per cent; the increase was due largely to the growth in bulk traffic, such as cement, oil and minerals, which more than trebled over the period.
Special container terminal installations have been provided at Cork, Limerick and Dublin for use in connection with new fast liner train services for container loads introduced this year between Dublin and Cork, Dublin and Limerick and Dublin and Waterford.
Since 1964, 126 miles of railway line have been closed by CIE, reducing the railway at 31st March, 1969 to 1,333 miles of first track. In addition 69 stations and halts were closed. New railway extensions or sidings have been provided at Silvermines and Foynes to handle new minerals traffic, at Arklow for fertilisers and at Oranmore for oil products. Another extension railway is at present being provided at Ballina-courty, County Waterford, to serve the new factory which is being established there for the processing of dolomite into magnesite. The average length of haul of rail freight traffic increased from 88.6 miles in 1964-65 to 101.3 miles in 1968-69, thus reflecting the value of the railway for long distance haulage, particularly of bulk traffics. It is also of interest that the average length of passenger journey by rail increased from 35.8 miles in 1964-65 to 37.1 miles in 1968-69.
There has been a significant improvement in the operating surpluses on the board's road passenger services taken as a whole, although the Dublin city services are now less remunerative than in former years, the operating surplus on these services having fallen from £389,000 in 1964-65 to £264,000 in 1967-68 before improving to £354,000 in 1968-69. This is due not only to the impact of increased costs but also to a steady decline in the number of passengers using the Dublin city services. An adverse factor is the ever increasing problem of traffic congestion, now estimated to cost CIE £250,000 per annum.
On the other hand, the operating surplus on the board's provincial road passenger services, including tours and private hire, increased from £271,000 in 1964-65 to £941,000 in 1968-69. During the same period the total number of passengers carried on these services increased from 60.5 million to 78.4 million; a large part of this increase is attributable to the operation by CIE of the free schools transport scheme and to the increase in the board's coach tour operations. Revenue from coach tour business increased from £218,000 in 1963-64 to £730,000 in 1968-69 and CIE's target is to achieve a 20 per cent annual increase in this business.
Despite a decrease in the total tonnage carried by the board's road freight services in the five year period, the operating surplus on road freight working increased from £45,000 in 1964-65 to £227,000 in 1968-69, the impact of rising costs having been offset by increases in rates and by economies in operation. I understand from CIE that the increased profitability on road freight working can be largely attributed to a reorganisation carried out by the board in 1965 of their road freight organisation.
The CIE hotels and catering services continue to be profitable, the operating surplus having increased from £145,000 in 1964-65 to £234,000 in 1968-69. There has been an increase in the operating losses on canals and vessels — from £58,000 in 1964-65 to £100,000 in 1968-69. At the request of my predecessor, CIE chartered a second vessel, the Galway Bay, to help in coping with peak tourist traffic between Galway and the Aran Islands during the summer months of this year and I am glad to be able to tell you that this traffic increased from 14,795 passengers in 1968 to 18,511 in 1969.
Total capital expenditure by CIE during the five year period amounted to £17.785 million, of which £10.94 million was met from the board's depreciation provisions and other internal resources and £6 million by way of capital advances under section 4 (1) of the Transport Act, 1964. There was a balance of £844,664 which was met by temporary borrowing. The £6 million provision in the 1964 Act would have been adequate for the five year period were it not for the necessity for CIE to provide additional buses for the free school transport scheme in the two years 1967-68 and 1968-69; in consequence, the £6 million provision was inadequate to the extent of £844,664. In addition to the board's normal capital programme, CIE, at the request of my predecessor, incurred capital expenditure amounting to £237,596 up to 31st March, 1969, on the provision of car ferry facilities at Rosslare Harbour.
Nothing has happened since 1964 which would suggest that any change is necessary in the Government decision taken at that time to preserve the railway system subject to such further concentration and reorganisation as might prove practicable and desirable. CIE are satisfied that, for the present at any rate, the railway has been pruned to the optimum size and that further concentration would not reduce losses. The problem of the viability of the railway is common to all European countries and has been faced more realistically here than in most other countries. There is no ready solution but it is quite clear that the railway can never be operated without State assistance. The problem is to contain losses to the minimum consistent with securing the most economic and efficient overall transport system within the national economy.
The railway plays an important role in the social and economic life of the country and will continue to do so. Railway operations will be aimed at providing high standards of passenger travel and, by exploiting its advantages for speed, safety and comfort, CIE will aim at expanding rail passenger traffic. More express passenger services will be introduced between major provincial centres and Dublin. CIE will continue their campaign to attract more commuters to the suburban rail services with a view to ensuring that these services will be utilised as effectively as possible and to provide the maximum contribution to the relief of traffic congestion in Dublin city. The board will continue to improve the layout and decor of stations and will provide car parks at stations where necessary and feasible.
On the rail freight side, the board will equip themselves to take full advantage of the recent development of container traffic. Railheads will be developed to take advantage of the economies of unit loads and groupage facilities. In this connection, the board, in conjunction with some of their major customers, the fertiliser manufacturers, have tackled the problem arising from the need to equate all-the-year-round production to seasonal consumption. Large, mechanically equipped storage areas are being provided at railway stations adjacent to major areas of seasonal fertiliser demand. The fertilisers will be moved in bulk into these storage areas and will then be delivered to local consumers as required. To keep pace with the growth in container traffic, more liner trains will be provided; the board's ultimate plan is to provide a national network of liner trains.
The board propose to expand road freight traffic in specialised operational fields and standards of equipment and of service will be improved. CIE's principal aims with the road passenger services will be to improve standards of comfort and service. Every effort will be made by the board to improve the Dublin city bus services which are at present operating in very difficult conditions, which have affected not only the cost but also the quality of the services. Many new buses of the most modern type will replace buses which are at present over age. The board will continue to use modern devices such as closed circuit television and short-wave radio to try to keep the buses moving in difficult traffic conditions. More express and limited-stop bus services will be provided throughout the country. Special efforts will be made to expand coach tour operations, at the moment about 75 per cent of CIE's coach tour business comes from North America and with a view to increasing this business, the board have established sales offices in New York and Los Angeles and propose to open another office in Chicago.
The Bill provides for further Exchequer capital advances of £11 million to CIE, of which £1.08 million is already due to the board in respect of the amount by which the £6 million provision in the 1964 Act was inadequate during the five year period ended 31st March, 1969. This sum comprises £844,664 in respect of the excess of capital expenditure — caused by the school bus programme — over funds available, plus £237,596 in respect of the provision of car ferry facilities at Rosslare Harbour. The balance of the £11 million (i.e. £9.92 million), together with the board's depreciation provisions, will be available to meet future capital expenditure by the board. CIE's capital expenditure will be related mainly to the replacement of road and rail vehicles, the provision of school buses, the modernisation and improvement of equipment and premises and the improvement of staff amenities.
The Bill also provides for payment to CIE of non-repayable grants not exceeding in the aggregate £642,460 in respect of the amount by which the board's subvention was inadequate during the five year period ended 31st March, 1969. This sum is made up of £542,460 in respect of the amount by which the board's total deficits during the period exceeded the total subvention paid by the Exchequer and £100,000 in respect of provision made by the board in 1964-65 and 1965-66 for redemption of its 2½ per cent and 3 per cent Transport Stocks, which was shown separately in the board's accounts but was not taken into account in arriving at the net deficits for those years.
The draft order provides for an annual grant of £2,650,000 for CIE commencing 1969-70 which, in accordance with the terms of Section 6 (2) of the Transport Act, 1964, may be varied, if necessary, in the financial year commencing 1st April, 1974. This represents an increase of £650,000 in the board's existing annual grant. The new grant has been determined in the light of estimates of the board's revenue deficits for the five year period 1969-70 to 1973-74.
I should mention that these estimates exclude the profits of Ostlanna Iompair Éireann, the CIE hotels subsidiary, as these profits are retained by the company to help to finance their capital expenditure. The cost of the free transport scheme for school children is settled directly between CIE and the Department of Education and is defrayed from that Department's Vote. Similarly, the cost of free travel for old age pensioners is borne by the Department of Social Welfare and for Old IRA men by the Department of Defence.
I am satisfied that the formula adopted in the 1964 Act has worked well and has provided the board with a useful incentive to efficiency and economy. As in 1964, the annual grant has been fixed at a level which should provide the board, management and staff of CIE with a difficult but realistic target, the achievement of which will call for continued effort and initiative. I have every confidence that these will be achieved.
I commend the Bill and the draft order to the House.