Liz O'Donnell
Ceist:16 Ms O'Donnell asked the Minister for Transport, Energy and Communications his policy regarding State involvement in the road haulage business; and if he will make a statement on the matter. [8145/96]
Ceisteanna—Questions. Oral Answers. - State Involvement in Haulage.
Iarnród Éireann's road freight division operates less than 2 per cent of the overall national licensed road haulage fleet. I have been assured by CIE that it competes in an open market on a stand-alone, fully commercial basis without the benefit of Exchequer subvention. It is Government policy that it should continue to operate on a commercial basis.
One of the objectives of the public service contracts regime, which I intend to introduce next year in place of the current CIE subvention arrangements, is to provide for a greater degree of transparency in the State's financial relationship with CIE. An important element of the new arrangements will be the ring-fencing of CIE's commercial activities, including the road freight division as well as other areas such as catering, Rosslare Harbour and Bus Éireann's Expressway services. These activities, which are not subvented, and are not intended to be subvented, will function as stand-alone, separate cost, revenue and profit centres.
Will the Minister elaborate on his intention in regard to the ring-fencing to which he referred in his reply? What is the intent of the ring-fencing? Is he excluding these activities from State subsidy or has he some other meaning?
I am assured there is no cross-subsidisation. I know the Deputy is concerned that in some way the State subvention to CIE gives an unfair advantage to the transport section of CIE.
I am seeking information about the Minister's policy.
To address that concern, which is unfounded, I propose to provide public service contracts which will replace the existing lump sum subvention to the general group from 1997 onwards. Those contracts will cover a five year period and they will clearly set out the services CIE will provide and the amount the State in turn will pay to support socially necessary non-commercial services. We will also specify the quantity and quality of services to be provided. We will include in that contract performance targets for the quantity and quality of services to be provided and allow for performance measurement, the result of which will be published. When those contracts are in place, users of public transport will be able to see, for the first time, the service standards that have been set for CIE and how it performs against those standards which will have been set in advance. CIE management and staff are seeking a clear mandate from the Government and that will be included as part of these contracts. Taxpayers will be able to see the way their taxes are being used to support socially necessary transport services. My Department is currently in discussion with CIE, the Department of Finance and all concerned in the company on the details of these contracts. While there are some complex issues to be addressed, it will be some months before all the details are finalised. There is a strong commitment on both sides to the basic concepts and a significant measure of agreement in principle on most of the main objectives that should be achieved during the discussions
I am grateful to the Minister for the elaboration on his earlier reply. I will study carefully the content of his replies. I am most interested in the initiative he has announced and I am sure further questions will be asked about it. Can I take it from what the Minister said that he hopes to have these new arrangements in place in four or five months?
Discussions are ongoing. Significant progress has been made to date because of the level of agreement reached and the general acceptance in CIE that this is necessary for the future. I am aware that some sections of the road haulage industry are expressing concern about CIE's involvement in that industry. It is important that there is no evidence to suggest that Iarnród Éireann is abusing its position in the road freight market. As I indicated earlier, Iarnród Éireann's road haulage fleet accounts for less than 2 per cent of the total national licensed fleet, while its overall market share is estimated to be a maximum of 5 per cent. It is therefore difficult to accept that CIE has anything approaching a dominant position, let alone a monopoly, in the road freight sector.
I accept that CIE as a whole is in receipt of an annual Exchequer subvention in the region of £110 million per year but that goes to other sections of the company. Hauliers in the private sector might be concerned that some of these Exchequer funds are used to shore up CIE's road freight business but the Exchequer subvention paid to CIE is strictly applied in accordance with European Union regulations. I have been assured that no part of these funds is being used to support the road haulage element of CIE's operation. CIE realises that the survival of this activity will depend on the extent to which it makes a real contribution to the group's overall financial performance. In other words, the road freight division of Iarnród Éireann must operate successfully on a fully commercial basis without subsidisation from within the group or elsewhere.
Bus Éireann and Iarnród Éireann road haulage divisions often share the same location and on occasions when they are on the same site, buildings and perhaps garage mechanics may be jointly in use. How can the Minister be confident there is not a carry-over from one enterprise to the other under the group heading?
That concern has been conveyed through the road hauliers association. The national subvention to CIE is subject to strict European Union guidelines and I have been assured by the company that those guidelines are correctly enforced, in other words there is no cross-subsidisation of this particular activity. It is a commercial operation. It has been successful in the past and it is currently making approximately £630,000 profit per year. It is envisaged that in 1995 that profit will increase to approximately £700,000. It is a successful stand-alone commercial operation which commands only 5 per cent of the business. For that reason I am happy to support the activity and I understand from CIE it is expected to continue to trade profitably into the future.
I take it there are no villas in Marbella in the background.