I move : "That the Bill be now read a Second Time."
This Bill is a temporary measure to meet ClE's immediate financial difficulties and provide an opportunity for a more thorough examination of the position in relation to future years.
It provides for payment to the board in the current financial year of additional subsidy not exceeding £2.98 million, which is the amount of ClE's estimated net loss this year after account is taken of the board's annual grant of £2.65 million.
The annual grant of £2.65 million was fixed just 12 months ago. On 31st December, 1969, I made an order under section 6 of the Transport Act, 1964, increasing the grant from £2 million to £2.65 million per annum. The order had previously been approved, in draft, by both the Dáil and Seanad.
CIE have a statutory obligation to break even, taking one year with another, with the aid of the annual grant and the revised grant of £2.65 million was regarded as a realistic estimate of the minimum subsidy with which CIE could get by, during the five year period ending 31st March, 1974, on the basis of effective management and increased efficiency and productivity. The board has not succeeded in breaking even and the main reason can be summed up in one word —inflation.
The annual grant of £2.65 million was fixed on the basis of estimates of ClE's annual deficit for the five year period 1969-70 to 1973-74. These estimates did not include any provision for the 12th round increase in salaries and wages on the grounds that it was appropriate that national wage rounds and other increases in labour costs which might arise during the five year period should be recovered by way of increases in fares and rates, to the extent that they could not be met by way of economies and increased productivity. Likewise, the estimates did not include provision for additional revenue from increases in fares and rates. This, in my view, is the only reasonable approach to the fixing of ClE's annual subvention.
No one could have foreseen in December, 1969, that the 12th round settlements would be of such magnitude that they would cost CIE almost £5 million in a full year or that the overall increase in the board's labour costs would amount to an estimated £6.7 million in a full year. Other costs have also increased—charges for materials and services, financial charges, depreciation provisions, et cetera.
Apart from the effects of inflation, there are many other factors which have contributed to the substantial increase in ClE's losses. I will mention just a few. Strikes, both inside and outside CIE, cost the board about £277,000 in gross revenue in 1969-70. To date this year they have cost CIE another £430,000. Strikes in the cement and fertilising industries contributed substantially to a decline of 3 per cent in rail freight tonnage in 1969-70—over the previous five years there had been an increase of 34 per cent.
There has been a continuing decline in the number of passengers using the Dublin city services. Over 7 million fewer passengers were carried in 1969-70 than in the preceding year; compared with the year 1964-65, the number of passengers carried in 1969-70 was down by almost 28 million. The growing traffic congestion, which is, of course, a matter for my colleague, the Minister for Local Government, continues to be a major cause of disruption of Dublin bus services. It has, no doubt, contributed to the decline in passenger numbers. It has certainly contributed substantially to the reduced profitability of these services. The net profit on the Dublin city services was only £61,000 in 1969-70 on a turnover of £7.7 million and on the basis of present estimates these services show a net loss of £280,000 in 1970-71. While the board's coach tours continued to expand in 1969-70, the hoped for development was retarded due to disturbances in Northern Ireland, which were responsible for the cancellation of many bookings.
One important factor which is often overlooked is the timelag between the date of implementation of increases in salaries and wages for CIE employees and the date on which consequential increases in fares and rates are introduced. Depending on the time taken to complete negotiations, the retrospective element of salary and wage increases can be quite substantial. This was the position with the 12th round increase. In such cases, the timelag can have a significant effect on ClE's losses.
Even with the two increases in fares and rates in June and October, 1970, which will bring in additional revenue to CIE estimated at £3.5 million in the current financial year and £6.6 million in 1971-72, ClE's estimated net deficits in 1970-71 and 1971-72 will amount to £5.63 million and £4.79 million respectively. The board's annual grant will, therefore, be inadequate to the extent of £2.98 million in the current financial year and £2.14 million next year. The present Bill is an ad hoc measure to deal with ClE's financial difficulties during the current financial year.
To a certain extent, it might be said that CIE are this year the victims of circumstances and not the masters of their own destiny. Nevertheless, the Government are gravely disturbed by the board's progressively deteriorating financial position. They are particularly concerned about the growing losses on the railway. In 1964, when the Government took the major policy decision to preserve the railway system, subject to such further concentration and reorganisation as might be practicable or desirable, operating losses on the railway amounted to £905,000. In 1968-69 these losses had grown to £2.1 million; in 1969-70 they amounted to £3.1 million. Adding financial charges, the net deficit on the railway last year was £4.2 million and CIE estimate that even with the increases in fares and rates, total net losses on the railway will exceed £5.6 million this year and next year.
The growing losses on the railway are symptomatic of the inflation to which I referred earlier. The railway is more vulnerable to wage inflation than the board's other services in that salaries and wages of railway employees represent approximately 81 per cent of total railway revenue, compared with 67 per cent for Dublin city services, 61 per cent for road freight services and 54 per cent for provincial road passenger services.
Railway losses of over £5.6 million per annum cannot, however, be accepted with equanimity and I have, therefore, set up a joint committee comprising representatives of my own Department, the Department of Finance and CIE to investigate the deterioration in ClE's financial position and to identify possible corrective measures.
I have agreed that the committee should enlist the aid of consultants in their task. The first priority will be to examine the reasons for the increased losses on railway working and to determine what can be done, in the short term, to reduce these losses. A report on this aspect of the matter should be available early in the financial year 1971-72 and we will then be in a better position to decide what should be done about ClE's losses in that year.
A study in depth to establish what measures might be taken in the long term to achieve a reduction in ClE's losses will also be undertaken. Arising out of this study, which will outline the various alternatives to existing policy in relation to the railways and the implications of these alternatives in terms of Exchequer assistance for CIE, employment, reduction of services, et cetera, the Government will be better informed as to whether any change is necessary in existing policy and, if so, the various options open to them.
Since the Bill was introduced, I have been advised that section 1, as drafted, is open to the interpretation that the grants payable to CIE under the section would include any grants payable to the board under previous enactments. This, of course, is not the intention and I propose, therefore, to move an amendment to the section at the Committee Stage to clarify the position.
I should mention that the Bill must be enacted before the Christmas Recess, as otherwise CIE could run short of cash before the end of January.
I commend the Bill to the House.
