Could we adjourn by agreement?
Committee On Finance. - Vote 41—Transport and Power.
It would be a matter for the Government.
I think the Minister for Transport and Power is in the House.
He is not actually here now and we cannot continue. I think we should adjourn. He will not have much time; it is only a matter of reading his opening speech and it is hardly worth while now.
I would be agreeable to move the Minister's Estimate.
Our main speakers on Transport and Power are not here.
I am agreeable but I have no instructions.
It is usual to wait for the arrival of a Minister, if it is not prolonged unduly.
We will also wait for the arrival of the main speakers from Fine Gael and Labour? Deputy Casey is in Cork.
And most of ours are in Waterford.
I take it that the Minister will speak for some time.
I move:
That a sum not exceeding £7,631,000 be granted to defray the charge which will come in course of payment during the year ending 31st March, 1967, for the Salaries and Expenses of the Office of the Minister for Transport and Power, including certain services administered by that Office, and for payment of sundry Grants-in-Aid.
The principal increases in 1966-67 are in the provisions for Salaries, Wages and Allowances £189,995 (Subhead A); Post Office Services £32,350 (B.2); Grant-in-Aid for Tourism under Tourist Traffic Acts £309,000 (Subheads F.1 and F.3); Constructional works at Airports £100,000 (G.2) and Rural Electrification £103,200 (O). Small increases in other Subheads amount to £31,350 bringing the total increases to £765,895.
The increase in the provision for salaries, wages and allowances is due to authorised salary increases and normal incremental progression. The increase in the provision for post office services is due mainly to increases in salaries and wages, offset by a reduction of £12,000 in respect of the deficit on the operation of Shannon Airport Post Office.
The principal decreases in 1966-67 are in the provisions for Córas Iompair Éireann Redundancy Compensation £44,000 (D.2); Resort Development £90,000 (F.2); Radio Equipment £211,500 (J); Grant-in-Aid for the Shannon Free Airport Development Co. Ltd. £80,000 (K.1); Shannon Free Airport Development Co. Ltd.— Housing Subsidies and Grants £25,000 (K.2) and Expenses in connection with international organisations £38,820 (M). Small decreases in other Subheads amount to £21,900 bringing the total decreases to £511,220. To this amount must be added the increase of £232,775 in Appropriations-in-Aid which is equivalent to a decrease in the net grant and brings the total decrease to £743,995.
The decrease in the provision for radio equipment is due to the fact that no major equipment falls to be paid for during the financial year as was the case in 1965-66 when a provision of £180,000 was made in the surveillance radar for Dublin Airport. Ireland's contribution to Eurocontrol has been reduced this year and this accounts mainly for the decrease in the provision for expenses in connection with international organisations.
The increase in Appropriations-in-Aid is due mainly to increased estimated receipts from the passenger service charge at airports, £125,000, increases in landing fees and communication charges at Shannon Airport, £40,000 and £24,000 respectively, and to an increase in the surplus on Dublin Airport management account, £60,000.
On the basis of actual increases and decreases as stated above, namely £765,895 increase and £743,995 decrease, the net increase in the Vote as compared with 1965-66 provision is £21,900.
The year ended 31st March, 1966, was a disappointing one for CIE and the position so far this year is discouraging. The CIE Report and Accounts for 1965-66 were circulated to Members of both Houses during the recess and Deputies will be aware that the Board's deficit in that year was £2.229 million, that is £754,000 more than the deficit in 1964-65 and £229,000 more than the Board's annual subsidy of £2 million. The greatest single factor in this increase in the Board's deficit was the net loss of £440,000 occasioned by the two-week bus dispute in June, 1965 coupled with a further net loss of £10,000 on two other strikes during the year. Other factors which contributed to the increased deficit were increases in rates of pay and improvements in conditions of service amounting to £357,000 in 1965-66; higher social insurance contributions; increased maintenance costs and increased interest charges.
If there had been no strikes the company's earnings would still have been affected adversely by Northern Ireland railway closures and by some poor periods of weather, offset by certain increases of freight traffic, more long distance passengers, the steadying effect of reduced cattle freight charges on diminishing traffic and satisfactory hotel business. There were considerable savings from operating economies while earnings from road freight, tours and bus private hire increased. To show the effect of strike losses, if there had been no strike in 1965-66 the additional revenue would have been of the order of £780,000.
As Deputies are aware, I have spoken on many occasions in recent times of the difficulties facing CIE. The Transport Act, 1964, provides for payment of an annual subsidy of £2 million to the Board up to and including the year 1968-69. The amount of the subsidy is subject to review after that date but not before it. Salary and wage increases and improvements in conditions of service granted since and including the ninth round have increased CIE salary and wages cost by £3.7 million per annum or nearly 30 per cent taking 1963/64 as the base year.
There are a number of other claims outstanding and if all these were granted in full CIE costs would rise by almost another £2 million per annum representing a total increase of 47 per cent on the Board's 1963-64 salary and wages costs. Some of these claims are liable to escalate throughout the system and, if conceded generally, would cost a further £4 million per annum bringing the total percentage increase on the base year up to 73 per cent. Increases of this magnitude are, of course, completely out of the question if public transport in this country is not to be priced out of existence. The only way that further increases in salaries and wages can be recovered is by increasing fares and rates and there is, as Deputies know, a limit to the increases that the traffic will bear.
Strikes have naturally affected CIE traffic because of the element of uncertainity. I have requested the Board to intensify its efforts to gain new traffic, to increase productivity and secure economies. The Board should be ready to cut expenditure drastically if its financial situation makes this necessary.
It would be best to be absolutely frank with regard to the position of CIE. In no circumstances will the subsidy, equivalent to 4d tax per gallon of petrol, be increased. If private enterprise was lacking, if total transport by road was inadequate, I would not hesitate to examine the position and ask the Government for more financial aid.
On the contrary, CIE is going to have to compete more fiercely with private transport in the future where annual investment has been at the £30 million level.
The frank truth is that all over Europe, even in State enterprises, capacity to pay comes into the picture. CIE can only pay wages and salaries, (a) which compare generally with those paid elsewhere in relation to national income per head, and (b) which compare with the average paid in comparable employment here. The recent decisions of the Labour Court make it clear that there is no abnormally low salary and wage structure in CIE. The total amount of money lost in wages arising from the 1963, 1965 and 1966 strikes in CIE was £685,000.
I have asked the Minister for Labour to note these facts and to note that in every recent strike the numbers of staff taking the initiative were a small proportion of those actually out on strike. Indeed cross picketing in an essential industry has effects on the public far beyond the normal.
While the Dáil was in recess, the Fine Gael Party called for a public inquiry into the management and operation of CIE. I see no need for such an inquiry. The working of public transport in the State was very thoroughly investigated by the Committee of Inquiry into Internal Transport, known as the Beddy Committee, which reported in 1957. Two other studies on transport were published by the Economic Research Institute.
A most comprehensive investigation by CIE took place in 1963, the results of which are set out in the Pacemaker Report, copies of which are in the Library of this House. The Transport Act, 1964, was drafted in the light of the information available from these reports and other studies, and that Act was accepted by this House as determining future public transport policy subject to review in 1969. The £2 million annual subvention to CIE is not a subsidy to support an inefficient enterprise; it is the amount required to keep open a railway that cannot possibly pay, having no transit traffic, no heavy ore traffic, with one of the longest tracks per 1,000 population in Europe and carrying only seven per cent of the travelling public and 17 per cent of freight. The railway is the only large sector of the system losing money. The remainder, consisting of the road freight, road passenger services and Ostlanna Iompair Éireann yield a surplus after contributing to overheads. The CIE profit is reinvested in hotel development.
The problems of CIE do not derive from deficiencies in management or organisational structure. Since 1958 the Board has carried out a most comprehensive programme of re-organisation and rehabilitation of the undertaking. But for this, I am quite satisfied that the Board's losses would be double what they are now.
Since 1958 almost every aspect of CIE administration has been investigated by management consultants with the aid of the company's executives. More than 60 major assignments have been undertaken covering such diverse activities as: management accounting; work study in workshops and freight depots; operating costing; market research; vehicle fleet sizes; production planning and control; stock control; and management reorganisation. To illustrate, by one example, the effect of such measures, I would mention that productivity per head of staff in the CIE railway system increased by about 26 per cent between 1958 and 1964. This figure is somewhat better than the average—25 per cent—for seven West European railway companies, including CIE for the same period.
The Board embarked upon an intensive selling campaign and drive for new business and since 1958 package deal contracts to the value of over £900,000 per annum have been negotiated. The system of area management introduced by the Board in 1961 has proved immensely successful.
Other measures taken by CIE to attract custom and to sell its services have been dieselisation and the provision of new road and rail vehicles. Passenger facilities at stations and staff amenities have been improved immensely by the Board.
The mechanisation of the handling of freight has helped considerably to speed up and reduce the costs of the Board's freight delivery service. 85 per cent of freight traffic is now delivered within 24 hours. There has been a marked increase in the Board's freight traffic since 1958. Total freight traffic has jumped by 54.5 per cent from 4,400,000 tons in 1958-59 to 6,800,000 tons in 1965-66. Overall, there has been a slight increase in CIE total passenger traffic, road and rail, in spite of a huge increase in private car numbers.
Recent reorganisation work should be mentioned. I encouraged CIE to engage in market research to ascertain how best the wishes of the general public may be met in the matter of the provision of bus services. CIE, having improved provincial city bus services using modern methods, are pressing on with the far more complicated problem in Dublin but they cannot beat congestion at peak hours.
The Board have now carried out origin and destination surveys on the Dublin city bus and rail passenger services, as a major task of analysis. Altogether almost 250,000 passengers were interviewed by CIE in the course of the surveys. This represents about one in three of all bus passengers in Dublin city and about 80 per cent of Dublin suburban rail passengers. The information collected is now being processed. For the purpose of analysing the information and applying the results to improve the city services, CIE have engaged Professor Schaechterle, who is traffic consultant to the Dublin Corporation.
I should add that bunching of buses continues and will progressively worsen unless drastic steps are taken by Dublin Corporation. This poses fearful financial problems. To provide 40 per cent of car owners in Leeds with a freely circulating system and adequate parking would cost £90 million. Most transport authorities believe that where there is one car to three people—the Dublin figure is seven—circulation will only be possible if most of these people take public transport.
At the moment at morning peak hours 40,000 people using 26,700 cars drive into the city, this being 34 per cent of the 120,000 total passenger movement. 51 per cent travel by bus. A far higher proportion of bus travellers sit going to work than in most European countries with higher incomes per head than this country.
The profit on the city bus services when measured against the railway loss is very small and the arguments about cross-subsidisation are not of any significance.
I have also encouraged the Board to introduce express bus services wherever possible and I am glad to be able to tell the House that this year CIE had a total of 13 such services in operation. The majority of the express bus services introduced by CIE have proved successful and the Board have under consideration the introduction of further express or limited stop services.
The road freight organisation was fundamentally altered during the year and operations are now based on 16 depots, each depot manager having full responsibility for all road freight activities at his depot. Credit for the improved results in road freight working can be largely attributed to this re-organisation.
A tribute is due to the retired Chairman, Dr. Andrews and to the staff of CIE for the reorganisation campaign. Some time ago I suggested to CIE that an independent examination of human relations in the bus service might be instituted. Later, on the initiative of CIE, a joint investigation into the management-worker relationship in the bus section of the company was undertaken by the Tavistock Institute of Human Relations. The Institute's final report was received earlier this year and is at present being studied by the trade unions and CIE.
For the huge majority of the staff, existing procedures for joint consultation operate successfully. Apart from this, I have informed the Minister for Labour, who is now responsible for industrial relations including those of State-sponsored bodies, that the negotiation procedures in CIE if subjected to any examination will show that in recent cases the Labour Court has upheld the recommendations of CIE in the majority of cases. I understand that the Board of CIE would await with confidence any examination by him of negotiation procedures.
I have suggested to the Minister for Labour that if there could be one representative organisation acting on behalf of the staff, with a system of arbitration to avoid strikes, CIE could consider regularly improving service conditions and fringe benefits over a period of a few years. This would be based on the ability of CIE customers to pay the rates and fares, on a reasonably based estimate of the CIE position in relation to the national economy and on traffic increases that might be secured if strike action were abandoned.
CIE would of course continue to follow the general pattern of basic wage increases. I have indeed asked the Chairman to consider approaching ICTU and suggesting a long term agreement along these lines at which the future financial position of CIE would be discussed. I am certain that the Board would make a fair appraisal of the CIE position up to say 1971-72 and in return for a contractual agreement covering fringe benefits and all conditions except the basic wage increase, would take an optimistic attitude since CIE would stand to gain considerable revenue once there was an assurance that no major strike would take place. I am certain that such an agreement would have the wholehearted support of the people.
Of course the rampant inflation that has taken place nullifies the benefit of wage increases but the NIEC's recommendations have not been respected any more than the perpetual warnings of the Government since 1962.
I do not want to speak further about the Fine Gael proposal because I cannot believe that the public inquiry they propose would include in its terms of reference all the inner methods of working involving human relations. I might add in conclusion that my last detailed statement on the causes of and solution for the CIE industrial dispute problem published on 31st August received no detailed or noteworthy criticism whatever from any organisation.
The provision of £238,000 for grants for harbour improvement works covers works in progress or works expected to commence shortly. Works at Galway and Wicklow are practically completed while the scope of works required at Arklow and Drogheda is at present being determined by hydraulic model investigations which are being financed by State grants. The principal current improvement scheme is at Foynes where facilities are being provided for the export of ore concentrates. A State grant of £100,000 has been made available towards financing the scheme, the total cost of which is estimated at £400,000.
The Report of the Working Group which I set up to investigate the possibility of accelerating the movement of goods through ports and which was published in August, 1965, contains many recommendations to eliminate the excessive delays which were found to occur in the clearance of goods, especially through Dublin Port. Interests concerned furnished observations on the Report and the question of the further steps necessary to implement the recommendations is being considered in the light of those observations. As a first step towards achieving a more expeditious clearance of goods, a Guidance Manual prepared under the direction of the Group for the information of importers on clearance formalities has already been put on sale. An informal interdepartmental working party, including a representative of Córas Tráchtála, is undertaking examination of the question of simplification and standardisation of consignment documentation. This is a complicated matter involving many interests and examination may be protracted.
It is my earnest hope that negotiations for increased productivity at Dublin docks will prove fruitful and that, in return for decasualisation of labour, it will be possible to lower most costs of cargo handling.
All over the European continent the larger harbours are drawing a greater share of the world sea traffic because ships are getting larger, road networks are improving and surface State transport companies now make package deals for carrying goods by rail and even by road.
The smaller harbour authorities will only survive by selling their services successfully. There will be no further capital grants for harbours of this type unless the result will be fully productive and will not divert traffic from one harbour to another. Grants have been provided for the restoration and modernisation of the great majority of the harbours east and west. Some harbours have shown increases in traffic, some traffics have stabilised and others are declining.
The construction of first-class arterial roads to the West, the reorganisation of CIE and rapid transit unit load traffic all provide heavy competition with the smaller harbours. Co-operative purchase of bulk raw materials could add to harbour traffic in the West but this is difficult to bring about.
The B & I Company was purchased in March, 1965, with effect from 1st January, 1965. The company had a loss of £87,752 in the year ended 31st December, 1965, as compared with a profit of £57,184 in 1964, despite an increase in freight rates by the previous Board in March, 1965. This increase had been effected to meet estimates of the additional costs which would arise when wage negotiations with the seamen and British dockers would be completed. In fact, the actual costs of the increases in wages turned out to be much higher than had been estimated with the result that the receipts from the increased freight rates fell substantially short of the amount required.
Whilst the company had greater productivity and better working in some areas of its operations, it was not possible to absorb the increases in costs. These increases were further aggravated by increased overheads and a decline in income from cattle exports. As Deputies are aware, the company, in these circumstances, increased its freight rates again in March of this year. On my instructions, the most sympathetic treatment possible is given to exports being carried at exceptional rates. Due, however, to the rapidly changing pattern of the cross-Channel trade from conventional to unit load transport, carryings of conventional goods in the year 1965 showed a decrease of 14 per cent as compared with 1964, with a resultant fall in earnings.
Indeed, the experience of the cross-Channel trade in recent years shows that increased freight rates do not necessarily lead to profitability. The main hope of restoring profitability and of maintaining rates at their existing level or reducing them, lies in the direction of a lowering of costs. This can only be achieved by more efficient methods of transport such as unit load services, rationalisation of services in co-operation with other operators and the more economic and efficient use of ships, equipment and stores. Scope for reducing costs lies in greater productivity in terminal operations, which constitute about 40 per cent of total costs in the trade and a solution to the problem of relating shipping capacity to traffic at peak periods.
When the company was acquired, I gave the new Board directives for their guidance on the following lines:
(1) an analysis of the cross-Channel merchandise freight market;
(2) the same examination in relation to livestock and a critical analysis of the cycles in cattle exports;
(3) an analysis of the present-day traffic and its content related to method of packing, use of unit loads, the available cargo space, the frequencies of sailings, onward road and rail services and destinations;
(4) the evaluation of efficiency and productivity in regard to all the above elements of study;
(5) the examination of the passenger traffic facilities in respect of tourists and Irish people coming on family visits;
(6) the examination of the sales organisation;
(7) those elements having been examined, the company would base its conclusions and decisions on the following general principles:
(i) the provision of the most economical, efficient service to advance the trade of the country.
(ii) the assessment of commercial viability.
(iii) the continuation and further development of the best possible communications and relations with the staff at all levels in order that growth of productivity may be fully understood and linked with conditions of employment and monetary reward.
In this connection, it must be borne in mind that the company having been a subsidiary of a large group, had been largely controlled by the parent company. In its first year the new Board addressed itself primarily to the reorganisation of the management of the company. It has now largely completed this task and has set up modern financial planning and control systems as well as a planning and development department to assess the possibilities of future growth and development. One of the company's objectives is a 48 hour or less "groupage" service between Dublin and all major points in Britain. Such a service was recently introduced by the company between Dublin and Manchester to serve the north-east of England.
At present, the company owns eight ships and operates a varying number of others, usually about six on charter. It has 1,200 employees of whom 360 are seagoing. The company's unit load services are expanding rapidly, the increase in 1965 being 50 per cent. To cater for the increased business and to gain experience for the planning of its own ships, two modern unit load vessels were recently taken on charter. The company's own conventional vessels are not, of course, suitable for the unit load trade. The company cannot possibly consider building new ships until the full implications of unit load traffic growth have been examined.
Shipping freight rates continued to improve in 1965, the average index figure being 126.5 for the year as against 112 for 1964 and 109 for 1963 (base, 1960=100). The improvement was fairly well maintained for the first four months of 1966 but since then there has been a sharp decline, the index figures for July and August being 107.8 and 108 as against 130.6 and 128.1 respectively in the corresponding months of 1965. Whilst there is a general hope that freight rates may revive in the winter months, the forecasting of the movements in rates— always hazardous in the case of shipping—is particularly so at present in view of the slower rate of growth in world trade and the various restrictive financial and other measures at present being taken throughout the world.
In the year ended 31st March, 1966, there was a marked improvement in the financial out-turn of Irish Shipping Ltd., a net profit having been made for the first time for many years, of £58,404, as against a net loss of £315,000 in the previous year. Were it not for the losses incurred in the operation of the two large tankers, now disposed of, there would have been an appreciable net profit, after providing for full depreciation of the fleet. Deputies will have seen from the Company's accounts for 1965-66, which have already been presented, that against a capital investment by the State, of £11.4 million, the Company's net assets amounted to £10.7 million, giving rise to a debit balance on profit and loss account of £0.7 million. This debit balance was due to a capital loss of £1.4 million mainly attributable to the sales of the two tankers. The total number of persons employed by the company is 760 ashore and afloat.
The long period of post-Suez depression in freight rates resulted in considerable losses but the Board has made strenuous efforts in the last two years to restore the company to profitability. Measures to improve management and operational efficiency have been taken where feasible, but such measures in themselves cannot restore profitability if vessels which are not economic and are unlikely to be, are retained. As I have mentioned on previous occasions, Irish Shipping Limited cannot be directly compared with other shipping companies which are primarily concerned with maximising profitability. Most of these companies who pay salaries and wages on a North European basis derive part of their profits from wharfage, road transport services or non-shipping activities. The primary aim of Irish Shipping Ltd. is strategic—to have enough suitable ships to service our essential needs in a national emergency. Economic viability, however, I regard as essential and our aim must be to have a fleet constituted so as to be able to operate profitably.
I indicated last year that, in order to maintain the dry cargo tonnage at a level to meet our strategic requirements and to improve the profitability of the company's operations, it was decided to acquire a dry cargo bulk carrier of 34,000 tons dead weight. Deputies were pleased, I am sure, to learn that the order for the vessel was placed, in face of worldwide competition, with the Verolme Cork Dockyard, for delivery in October, 1967.
The future profitability of the company is dependent upon the level of freight rates. It is to be hoped that the recent disimprovement in freight rates will be reversed and I am confident that, if freight rates revive, the steps which I have described will lead to a resumption of profit making of significant proportions by the company, particularly when all the uneconomic vessels have been disposed of and the new bulk carrier has been put into service.
When the present Chairman of Irish Shipping was appointed, I asked him in consultation with the Board to overhaul the whole of the company's administrative, commercial and accountancy practices. The company engaged management consultants and work study experts to review various aspects of their operations and advise on methods to effect greater efficiency. As a result of these investigations the company strengthened and reorganised its management structure and introduced new improved methods of budget control, stores management and working procedures.
Rising costs in Aer Lingus, which resulted in a reduced operating surplus, £52,000 in 1964-65, together with a slowing up in traffic growth particularly on British provincial routes, resulted in the company sustaining an operating loss of £64,000 in 1965-66, even though cross-Channel fares increased by approximately 10 per cent. The late delivery of four BAC One-Eleven aircraft, the last of which was not available for service until after the 1965 peak traffic period, retarded development of the company's Continental traffic.
The company substituted Viscounts for Friendship aircraft on the cross-Channel provincial routes in 1966 and plan to introduce jet aircraft on the London route in 1968. Two Boeing 737 aircraft have been ordered for this route for delivery in 1968 and 1969.
During 1965, Aer Lingus carried 1,052,000 passengers, an increase of about 6 per cent over the previous year. Freight carried by the company during the year amounted to almost 17,500 metric tons, an increase of about 13 per cent. During the first six months of 1966 passenger traffic increased by 14 per cent and freight traffic by 32 per cent. Aer Lingus maintained its services on all routes during the year 1965.
The company continues to operate with one of the highest load factors of European air carriers.
Our transatlantic airline, Aerlinte, continues to operate with spectacular success. During 1965, Aerlinte's passenger traffic rose by 14 per cent to 144,000, while freight increased by almost 75 per cent to 3,000 metric tons. In the first six months of 1966 passenger traffic increased by 13 per cent and freight traffic by 44 per cent. Once again, the airline had one of the highest load factors of all operators on the North Atlantic route in both directions.
A new Aerlinte service between Shannon, Montreal and Chicago was inaugurated in May, 1966. In the year ended 31st March, 1966, the company achieved an operating profit of £1,079,000 which was £103,000 lower than for 1964-65. Although revenue earned in 1965-66 increased by 18 per cent on 1964-65, expenditure went up by 23 per cent. The effect of the acquisition of Boeing aircraft between 1965 and 1967 will be to double the company's transatlantic capacity.
Some Deputies object to the use of the term "operating profit" when applied to the air companies because the cost of remunerating capital is not included in the calculation. Therefore, the position will be set out factually:
1. The operating profit of the two air companies for 1965-66 was £1,015,000. The total issued capital held by the Minister for Finance is £13,610,044. On the basis of this capital being equity a 6 per cent dividend would amount to £816,000;
2. All the capital for new aircraft, buildings and ancillaries is now being found by the companies and remunerated from profits, depreciation and other reserves. The capital expenditure committed under this head is £5.7 million.
The companies were directed to expand at the early stages at a pace which precluded remuneration of capital. I should make it clear that because of the transatlantic route being relatively a shorter haul than that of the intercontinental carriers and the British European routes being extremely short haul, it will take the whole of the resources of the air companies to expand in the years to come. I trust that the staff duly understand that there is no fat whatever in the companies' operations. That productivity is increasing steadily on the basis of number of employees per ton mile of revenue is true, but every penny will be required if the companies are to continue their splendid record of progress.
Under the Air Companies Act, 1966, Aer Rianta ceased to be a holding company for Aer Lingus and Aerlinte, and its investment in Irish and Intercontinental Hotels Ltd. was transferred to Aerlinte. These changes, which limit the functions of Aer Rianta to the management of Dublin Airport on my behalf, have resulted in the issued share capital of the company being reduced to £51,269. All of the capital, except for directors' shares, is held by the Minister for Finance.
The Shannon Free Airport Development Company's finances are provided from the Exchequer by way of (i) grant-in-aid to meet running expenses and grants to industries, (ii) grant-in-aid to meet housing subsidy and grants, (iii) share capital for the construction of factories and (iv) repayable advances for the provision of housing and community services.
The allocation of grant-in-aid to meet running expenses and grants to industries—Subhead K1—is arrived at after taking account of receipts from the company's revenue earning activities, mostly rents from factories and houses. The provision for 1966-67 is £350,000 or £80,000 less than for 1965-66, this allocation being the amount necessary to enable the company to operate at its present level of activity. Up to 31st March, 1966, the total amount paid to the company by way of grant-in-aid amounted to £2,035,000.
Grant-in-aid is also payable for housing subsidy and grants—Subhead K2. The amount of subsidy payable for each dwelling is the amount by which the economic rent exceeds the rent charged after taking into account grants equivalent to those payable under the Housing (Loans and Grants) Act, 1962. The total amount paid by way of subsidy to 31st March, 1966, was £89,000 and the provision for 1966-67 is £45,000. Housing grants equivalent to those available to private persons and public utility societies under the Housing Acts are also payable to the company. The total amount paid to 31st March, 1966, was £104,340 but only a token provision is made for 1966-67 as the grants in respect of a scheme of 125 houses at present being undertaken by the company will not become payable until 1967-68 on completion of the scheme.
The allocation for 1966-67 of share capital for factory and warehousing construction and repayable advances for housing and community services is £850,000. This compares with £1,100,000 provided in the Second Programme and £850,000 paid in 1965-66.
The total amount paid to the company by way of share capital and repayable advances to 31st March, 1966, was £6,151,000.
At 31st March, 1966, there were 16 manufacturing and 12 commercial firms operating at Shannon, employing 3,163 persons of whom 1,699 were men. Five new firms were established during 1965-66 and two firms ceased operations. 908,000 square feet of factory, warehousing and office space were completed or under construction compared with 850,000 square feet at 31st March, 1965.
Twenty-six houses were completed by the company during 1965-66, bringing the total number of dwellings completed at 31st March, 1966, to 137 flats and 318 houses. A contract for a further 125 houses was placed by the company in December, 1965. A new comprehensive school has been opened. The resident population in the housing estate at 31st March, 1966, was 1,447.
The Shannon Free Airport Development Company Ltd. (Amendment) Act, 1965, raised the statutory limits on State investment in the company to £12 million made up of £6 million share capital, £3 million repayable advances and £3 million grant-in-aid. At 31st March, 1966, the total payment to the company from the Exchequer amounted to £8.3 million. The justification for the increase in the statutory limits can best be judged by the continued progress of the company as evidenced by its achievement at the end of 1965-66, particularly as regards the increase in employment to over 3,000 persons.
I have told the Board of SFADCO that the general policy it should pursue should be as follows:—
(1) to seek industries and services likely to increase air freight at Shannon. Containerised surface transport has provided intensive competition while at the same time air freight rates are being rationalised and modified by successive decisions at IATA conferences, while aircraft ton mile costs will no doubt be reduced as the years go by.
(2) to plan ahead for a total population of 6,000 persons in the community of Shannon and to provide the necessary ancillary services to meet this need;
(3) to maintain a satisfactory proportion of male employees while recognising that employment for females is an extremely important factor in rural economics;
(4) to co-ordinate with Bord Fáilte and the carriers at Shannon in making Shannon the natural gateway for tourist traffic to the West of Ireland and to make it clear that this is permanent national policy. In saying this I should again make it clear that the local Regional Tourist Board carries a very heavy share of responsibility for the implementation of this possibility. In relation to the tourist expenditure in the area, the membership of the Board and its income are still grossly inadequate.
Bunratty Castle was opened to the public in May, 1960, and from the outset it was clear that, while it contributed substantially to the tourist influx into the area, its potential as a tourist attraction could be exploited to a much greater extent. With this in mind, I asked the Shannon Free Airport Development Company to organise mediaeval feasts and pageants at the Castle. The Mediaeval Tour, comprising a one-day scenic tour of County Clare with a mediaeval banquet at Bunrattv as its climax, was organised by the Company with the co-operation of CIE and commenced in 1963. The tour has proved to be an outstanding success in attracting tourists, most of whom are Americans. During the 1965 tourist season 32,000 people attended the Banquet and of these 14,700 took the Tour. In addition there were 34,000 visitors to the Castle during the season. The Folk Park at Bunratty has enhanced the value of the Mediaeval Tour as a major tourist attraction.
Dunguaire Castle, situated on the shore of Kinvara Bay, County Galway, was chosen as the focal point of a new tour, since the full capacity of Bunratty Castle had been reached. In July, 1965, the company was authorised to conclude an agreement with the owner of the Castle for the leasing of the Castle to allow the company to develop it as a tourist amenity. The tour, promoted by the company with the co-operation of CIE, commenced on 1st April, 1966, and includes a tour of the Galway Bay area culminating in an artistic entertainment at Dunguaire. Up to 31st May, 1966, more than 1,500 people attended the banquet of whom nearly 900 took the Galway Bay tour. The company's target for the 1967 tourist season for the Tour is 8,000 passengers.
All sectors of traffic at Dublin Airport continued to increase in 1965. Passenger traffic rose by 6 per cent to 1,344,000, while freight rose by 8 per cent to 27,200 metric tons. In the first six months of 1966 passenger traffic rose by 15 per cent and freight by 35 per cent. Services are operated to and from the airport by eight foreign operators. Horse-ferry services continued at the airport as did the activity in connection with the carriage of meat from Dublin to points on the Continent.
The continuing increase in the volume of both passenger and freight traffic at Dublin Airport has necessitated the preparation of a long term integrated development plan for the airport. The plan is sufficiently flexible to take account of changes in trends and techniques into the 1980's. It is intended, subject to the necessary finance being available, to construct, in the near future, a new cargo terminal as well as a new flight victualling and cabin service building. Two pier buildings have already been erected and are now being linked by a new building.
The total capital expenditure on Dublin Airport up to 31st March, 1966, amounted to about £4,440,000. For the year ended 31st March, 1966, total revenue at the airport was £825,000 and expenditure was £603,000, the operating surplus, therefore, being £222,000. No allowance is, however, made for depreciation and interest on capital expenditure amounting to about £379,000. The overall deficit on the airport in 1965-66 was, therefore, about £157,000.
The total number of passengers at Shannon Airport in 1965 increased by 12 per cent to 427,000. Terminal traffic has been increasing steadily for some years but the drop in transit traffic had, until 1964, been so great as to cause the total traffic to decrease each year. In 1965, terminal traffic increased by 20 per cent while transit traffic remained steady. Freight traffic at the airport amounted to 19,000 metric tons, an increase of 20 per cent over the 1964 total. Terminal freight increased by 34 per cent to 5,700 metric tons. One thousand three hundred and forty-six metric tons of this freight represented traffic to and from the Industrial Estate, an increase of 54 per cent on 1964. In the first six months of 1966, terminal passenger traffic increased by 21 per cent and transit traffic by 11 per cent, while terminal freight increased by 20 per cent, Industrial Estate freight by 34 per cent and transit freight dropped by 17 per cent.
The increase in terminal passenger traffic will necessitate considerable expansion of existing passenger handling accommodation and facilities, including the provision of a new passenger arrivals building and the reconstruction and adaptation of the existing buildings. In addition to Aerlinte, scheduled transatlantic services were operated to Shannon by five foreign air lines. A new service between Dublin and Shannon, to provide connecting services for non-Irish transatlantic operators at Shannon, commenced in April, 1966.
The Aer Lingus services between Shannon and London, Manchester and Paris continued to operate in 1966; British European Airways also operated, as in 1965, on the Shannon-London route. The turnover of the Sales and Catering Service at the airport for the year ended 31st January, 1966 amounted to £1,900,000, an increase of 15 per cent over the figure for the previous year and the highest cash figure yet recorded. This satisfactory outcome is due in part to the 12 per cent increase in Shannon passenger traffic in 1965. Sales will be affected by the new American Government restrictions on duty-free imports.
The total capital expenditure on Shannon Airport up to 31st March, 1966, amounted to about £5,930,000. For the year ended 31st March, 1966, the operating surplus was £228,000. Including depreciation and interest on capital expenditure amounting to about £520,000, there was an overall deficit of £292,000.
All sectors of traffic at Cork Airport continued to increase. The number of passengers rose in 1965 by 20 per cent to 135,000, while freight increased by 20 per cent to 1,550 metric tons. In the first six months of 1966, passenger traffic increased by 13 per cent and freight traffic by 63 per cent. The 20 per cent rate of growth since 1962, which is expected to be maintained, will necessitate additional passenger handling facilities and in addition to extensions now under way a long-term plan of development is being prepared. The total capital expenditure on Cork Airport up to 31st March, 1966 amounted to about £1,430,000. For the year ended 31st March, 1966, the overall deficit on the airport was about £213,000.
In the case of the three airports, if the accounts are relieved of air navigation services charges, in keeping with procedures in other countries including Great Britain, the overall deficit of £663,000 shown in the accounts for 1965-66 becomes an overall surplus of £220,000. Comparisons of cost per aircraft movement are difficult to make but our studies do not suggest that there is any excessive expenditure whatever.
There was some criticism of the increase in the passenger service charge at our airports from 7/6d to 10/- from 1st April, 1966. Most of the criticism was on the ground that the corresponding charge at British airports had been abolished some time ago. In fact British passengers are paying higher fares to offset increased landing charges substituted for passenger charges. The increased charge at Irish airports is still lower than the level at many other European airports.
The provision for tourism takes the form of three grants-in-aid to Bord Fáilte Éireann under Subheads F.1, F.2 and F.3 of the Vote for my Department. I am proposing that the provision under Subhead F.1 for this year should be £1,911,000. This is Bord Fáilte's main grant-in-aid and from it they are required to meet the cost of overseas publicity and advertising, including the operation of overseas offices, and a wide range of special activities such as improvement works at minor resorts and at places of historic or other special interest, the provision of amenities in angling areas, the provision of road signs, the development of special attractions of a sporting or cultural character, assistance to hotel staff training schemes, the payment of interest grants on loans raised for accommodation and resort development and promotional work in connection with festivals and international conferences.
The Tourist Traffic Act, 1961, authorised the payment to Bord Fáilte with effect from 1st April, 1961, of amounts not exceeding in the aggregate £5 million for the financing of these activities. The amount voted last year brought the total amount provided since 1st April, 1961, above the statutory limit of £5 million but the Tourist Traffic Act, 1966, removed this restrriction.
The provision under this subhead shows an increase of £64,000 over the amount voted last year. It is necessary to maintain expenditure at this level in view of the important place occupied by tourism in the national economy. Though the rate of increase in our earnings from tourism over the past few years has been at the level required for the attainment of the Second Programme target—a doubling of 1960 tourist revenue at constant money value by 1970—competition in international tourism is becoming much keener and as the base for calculation of the annual increase gets larger, it is becoming progressively more difficult to maintain this rate of increase.
The provision of £260,000 for resort development swells the total expenditure to £1.25 million since the inauguration of the scheme. The level of expenditure is now £3.25 million as a result of recent legislation. Many basic development works, such as access roads, parks and recreationary services have been completed. The accommodation grants will total £500,000 compared with £255,000 last year. The statutory limit of expenditure has been raised to £3 million by the Tourist Traffic Act 1966, £1½ million having been spent to aid private investors in adding an average of 700 registered bedrooms each year to the total stock of registered accommodation. The Bord Fáilte accommodation target has been stepped up to 2,000 rooms per year of which 1,200 are in hotels and the rest in other premises. Bord Fáilte are actively promoting more hotel investment for which 20 per cent cash grants are available.
A particular problem which has been impeding progress has been the shortage of credit. A number of promising projects have been postponed or abandoned because the promoters were unable to raise the necessary capital and this has caused me considerable concern. The problem goes beyond the present world restriction of credit since both here and in other countries, medium term loans suitable for hotels, are not being offered due to causes that are likely to persist. I am endeavouring to ensure that adequate credit will be made available for hotel expansion and that in the allocation of credit, tourism will receive the priority due to it as an export-intensive industry and as an industry giving directly or indirectly employment equivalent to 160,000 jobs.
The total provision for tourism this year, at £2.67 million, is quite substantial but is justified by the return to the economy as shown by the considerable growth which has already resulted from the increased investment of the past few years.
The total income from tourism and travel amounted to £78.2 million in 1965, an increase of £10.2 million on the 1964 figure of £68 million. The volume of tourist income is, therefore, "on target" in relation to the Second Programme for Economic Expansion and in the remaining five years of this decade an annual increase of £6.9 per cent is required if the 1970 target is to be achieved.
One of the most important aspects of the infrastructure of tourism is the adequacy of transport services. A serious deficiency in this field up to recently was the lack of drive-on car ferry services from Britain. I should like to record again the fact that as and from 1960, I accelerated the campaign to interest the executives of the Midland and Western Regional Boards of British Railways in co-operation with Bord Fáilte and CIE, using every possible means to interest them in Irish tourism, culminating with the establishment of close personal association with Dr. Beeching. At the same time, the British Railway shipping administration and the two regions came under the direction of extremely active and go-ahead personalities.
The introduction of the new ferry service to Dún Laoghaire in 1965 was a most welcome outcome of all this pressure. In addition, the vessels serving the Fishguard-Rosslare route were modified for drive-on drive-off operations and access was greatly faciliated by the construction of a new road at Rosslare. My confidence in the market for these services has been fully justified by the results. The first year of operation of the new services saw a sharp increase in the number of cars carried into Ireland. Over 46,000 were carried in by sea and air, an increase of 53 per cent over the 1964 figure. The indications are that a further expansion of car ferry capacity will be necessary in the near future. The new terminal now under construction at Dún Laoghaire has been designed to cope with an expanded service.
From 1963 onwards it was clear to me that sufficient funds should be made available to Bord Fáilte to extend the scope of their organisation in order to include marketing surveys based on the latest technical methods of ascertaining tourist motivations, tourist requirements—accommodation, pricing, duration of stay and including independent research by an agency to establish the value of Bord Fáilte services, the attitude of travel agents abroad to Irish tourism and the reaction of their clients.
At the same time, it was necessary to prepare a full statement of development requirements and finally a very detailed market appraisal of priorities in promoting the different types of holiday from the general motorist to those interested in fishing, golf, monuments, etc. These surveys are proceeding but in addition to giving Bord Fáilte a specific plan of development, they are used for regular contact with all the Irish agencies responsible for handling tourist traffic.
One of the matters to which I gave particular attention on assuming responsibility for tourism was stimulation of increased local and regional effort. Following discussions with Bord Fáilte and other tourism interests, a scheme was formulated for the establishment of eight regional tourism organisations. These new companies, which are representative of the local authorities as well as tourism and general business interests, have gone about their task in a vigorous way and now enjoy widespread support from the public and the industry. There is evidence today of an excellent spirit of self-help and local initiative in the field of tourism and this growth in local activity, spearheaded by the regional companies, is one of the most encouraging features of our present tourist structure.
The regional companies in their first year in full operation established a countrywide network of 70 tourist information offices and, by keeping in contact with hoteliers and supplementary accommodation, they were able to spread surplus bookings to premises with spare capacity. These offices dealt with 800,000 varied enquiries and found accommodation for 93,000 people in 1965. Though the operation of the tourist information offices has been the major preoccupation of the regional organisations, they are also engaged in other important activities such as the preparation of a regional guide and the collection of names for consideration by Bord Fáilte for inclusion in their lists of supplementary accommodation.
In addition, each regional organisation is engaged in compiling detailed information on the tourism resources of its area, in co-operation with Bord Fáilte and the planning authorities, as the first step in the preparation of a tourism plan. The directors of the regional organisations are to be congratulated on the whole success to date. The problem of financing Regional Tourist Boards when they have fully developed their organisation and resources arises for consideration. There is a case for transferring part or all of the resort development administration to these bodies at some later stage, grants being provided by Bord Fáilte in return for local financing.
At the present time the rates have increased to the point that any step to raise the maximum poundage rate that can be struck for tourism from the present level of 1d in the £1 for county councils and 3d in the £1 for corporations, urban district councils and town commissioners, would not be received with enthusiasm. It should be stated that an examination of the position in seven counties enjoying a significant tourist trade shows that not one of them is contributing at the maximum rate. Two of them have voted tourist contributions of 90 per cent or more of the maximum possible, but the remainder have voted smaller contributions which in the case of two of the counties amount to only 50 per cent of the permissible limit.
But I would fail in my duty if I did not state that for example in the southern region, which comprises Counties Kerry and Cork, the total tourist income for a recent year was £6 million. The total tourist contribution by all the local authorities in the area for this year is £7,316, compared with an aggregate of over £4 million collected in rates in 1965-66. The tourist income in fact is equivalent to a year and a halfs total rates. I pose the question: Is this a sufficient contribution bearing in mind that in no other tourist country would the national tourist office be expected to invest heavily in the local tourist infrastructure beyond its present commitments?
The further development of the tourist industry depends to a very great extent on the provision of additional accommodation and the promotion of traffic outside the peak season. The stage has been reached in which some hotels are operating to the limit of their capacity at the peak of the season and in which other services are working under extreme pressure during that period. The accommodation situation remains under constant review and recently I gave authority to Bord Fáilte to make grants to smaller guest houses which provide a minimum of five guest bedrooms and to assist small hoteliers by providing grants towards the cost of surveys of their premises.
There is a growing demand for inclusive charge holidays and a more widespread packaging of all types of holidays is required if Ireland is to compete with other countries in the tourist market. In an effort to encourage the provision of all-in holidays, Bord Fáilte held seminars in 11 centres this year, to explain the requirements to hoteliers, festival organisers, car renters and other tourist interests.
With a view to encouraging people to take their holidays earlier in the year, the Government have decided that with effect from 1967 the movable Whit Monday holiday will be replaced by a fixed holiday on the first Monday in June in accordance with one of the recommendations of the Commission of Inquiry into Public Holidays and Bank Holidays. As already announced, the August Bank Holiday will continue unchanged until we have an opportunity of assessing what effect the British change has on the pattern of tourist traffic to this country.
There is still a vast amount of miscellaneous activity to be fostered if tourism is to grow and flourish. The following are some examples:
1. The growth of farmhouse and guesthouse accommodation.
2. The provision of properly equipped caravan parks.
3. The use of schools for student accommodation in some areas.
4. The extension of the season by local and regional publicity found to be so successful in the case of the Killarney Co-ordinating Committee and other such bodies.
5. Far more indoor entertainment and beach facilities for young people at many seaside resorts.
6. The further development of sea angling facilities, a local angling committee plus the provision of boats.
7. The provision of Irish entertainment and the maintenance of a high standard of performance in certain rural areas.
8. Entertainment of the type given at Bunratty Castle but varying in type at various suitable centres throughout the country.
9. The signposting of local scenic roads exemplified by the Kerry Ring road.
10. The improvement of amenities and information services related to the major group of national monuments. A co-ordinating committee established by the Office of Public Works on which my Department is represented is working out a programme for this.
11. The establishment of one or more folk villages both for the sake of preserving our own heritage and to attract tourists.
12. Some constructive thinking about the standards applied to the letting of private houses in certain areas.
At the beginning of the year, Bord Fáilte estimated that there would be an income of £85 million from tourism in 1966. As a result of the seamen's strike, the Board now estimates that there will be a reduction of about five per cent in the total number of visitors this year, but this will be offset in some degree by increases in receipts of Irish transport companies. While an increase in tourist income over that for 1965 can be expected, it is unlikely that the original estimate of £85 million will be attained.
Despite the disturbance of traffic resulting from the seamen's strike this year, our progress towards the doubling of tourist income over the decade between 1960 and 1970 remains reasonably satisfactory. However, there are still a number of problems to be faced. Increased competition from other countries will make it more difficult to achieve the required rate of expansion. The increased number of tourists has increased the revenue but has also put a greater strain on our resources and shown that they are not fully adequate. The 1970 target can be achieved only by continued investment in expanding travel facilities, accommodation and recreational facilities and by the co-operation of every sector of the tourist industry in overcoming these obstacles.
I am glad to tell the House that the promotional and administrative arrangements for co-operation between Bord Fáilte and the Northern Irish Tourist Board are proceedings satisfactorily.
The demand for electricity continues to increase. During the year 1965-66 the total output at 3,546 million units was nearly 10 per cent higher than in the previous year. The rate of growth in demand for electricity reflects the progress in the economic development of the country and the improvements in the living standards of our people, but some portion of the increase was inflationary in character. The peak demand on the ESB last winter was 815 mw; the previous winter's peak was 755 mw. Generation from native sources in 1965-66 was almost 56 per cent of total output.
The Board's long term programme of generating plant is related to an average annual increase in demand of nine per cent as envisaged in the Second Programme for Economic Expansion and which compares with the European average increase rate of about seven per cent. Between now and 1970 the Board's plans provide for two new oil fired stations, each having two 60 mw units, at Great Island, County Wexford, and Tarbert, County Kerry. In 1970-71 the first of two 120 mw sets will be commissioned at the new Pigeon House "B" station and the second will be commissioned in the following year. The implementation of these plans, together with 100 mw already commissioned since 31st March, will bring the Board's total installed capacity to 1,649.5 mw by 1971-72, as compared with 1,069.5 mw at 31st March, 1966.
The Board has again had to incur substantial expenditure on the strengthening of the distribution system to meet increasing local peak loads.
There has been some slowing down in the post-development work on rural electrification due to the need to augment and strengthen the network supplying existing customers and to the need to conserve capital finance. Nevertheless, almost 10,000 new rural customers were connected during the year bringing the total to 321,000. This represents 83.5 per cent of rural premises. The amount voted this year for repayment of the subsidy advanced from the Central Fund for rural electrification is £627,700.
Progress reported; Committee to sit again.