Timmy Dooley
Ceist:21 Deputy Timmy Dooley asked the Minister for Transport, Tourism and Sport if he is committed to protecting the State’s current shareholding in Aer Lingus; and if he will make a statement on the matter. [8717/11]
Priority Questions
Air Services
This question relates to the State's current shareholding in Aer Lingus. The McCarthy report which was published at 2 p.m. recommends that the Government dispose of its shareholding in Aer Lingus as soon as is opportune. During the coming months the Government will consider the recommendations set out in the report in the context of the ongoing budgetary challenge that we face.
The Government retained a minority stake of 25.1% in Aer Lingus in the initial public offering, IPO, of shares in the group in 2006 to protect the State's strategic aviation interests, especially access to London Heathrow services and the onward connectivity available through the company's significant slot portfolio at Heathrow Airport. In designing the investment transaction a specific mechanism was built into the company's memorandum and articles of association in advance of the IPO to protect against disposal of the Heathrow Airport slots by the company. Therefore, in considering any disposal of the State's shareholding it would be necessary to evaluate whether the protections considered necessary for London Heathrow services at the time of the IPO in 2006 were still relevant in the light of market developments since and, if they were still relevant, whether there would be any means of protecting them in a disposal. The effect of any disposal on competition in the airline market in the State would also have to be considered.
It should be noted that the review group also points out that the objective of any disposal of the State's shareholding should be the realisation of maximum value. This would also be a key consideration for the State if a disposal of its shareholding were to be considered.
I thank the Minister for the clarification. I am somewhat disappointed that Dr. McCarthy has included Aer Lingus, considering that it is of strategic interest to retain the 25% shareholding. The Minister outlined the decision taken at the time of the initial public offering of shares in Aer Lingus and, in particular, why the 25% holding was retained. Notwithstanding this and the comments the Minister made about the London Heathrow slots, the fact that we are an island nation and that effective competition in domestic air services is of vital strategic national interest, I trust the Government will give broader consideration to the issue rather than simply considering the Heathrow Airport slots in themselves. They are vital, but there is a wider necessity to maintain effective competition in the airline sector.
In the past Aer Lingus effectively had a monopoly. Without the emergence of Ryanair there would be a lesser service and higher fares. The concern is that the disposal of the State's 25% shareholding would be damaging in terms of direct connectivity to London Heathrow and the onward services provided and, more especially, the lack of effective competition from a business and tourism perspective. Whatever discussions take place at Government level or whatever considerations the Minister and his Department put together in the coming weeks in respect of this proposal, I call on him to look specifically at these two aspects, that is to say, the necessity to maintain what is a vital link and the broader issue of effective competition in the aviation sector here.
The Deputy can rest assured in that regard. As I outlined in my initial answer, we have the 25.1% stake for two reasons, first, to ensure connectivity through Heathrow Airport and retain access to the slots and, second, to ensure Aer Lingus is not taken over inappropriately by another airline. The Deputy will be aware that the European Commission ruled that Ryanair could not take over Aer Lingus. I am determined that we will still have competition and continue to have two significant airlines operating out of Ireland, not one. Any decision on the disposal of the stake must bear this in mind and retain the assurance that we will retain the slots at Heathrow Airport and that we will continue to have competition between at least two major airlines in the State.
The airline business is changing a good deal and there is consolidation in the sector. It is somewhat like the case of mobile phones. Throughout the world, even if different names are used, the companies involved are Vodafone, Telefónica and Hutchison. This is increasingly taking place in the airline industry. We have seen Air France and KLM come together as well as Lufthansa and BMI. British Airways has formed a strategic alliance also. In the longer term one will have to question where Aer Lingus will fit into this picture. Any disposal of a shareholding must include an assurance that the reasons we hold the shareholding in the first place will be assured, that there will continue to be competition among scheduled airlines in and out of Ireland and that we will not lose access to the crucial Heathrow Airport slots which give us connectivity to the rest of the world.
Public Transport
Dessie Ellis
Ceist:22 Deputy Dessie Ellis asked the Minister for Transport, Tourism and Sport the criteria being used by him to evaluate and compare proposed major transport projects under the terms of the comprehensive spending review, specifically the metro north, DART underground and Luas interconnector projects; and his views on whether his suggestion to privatise the construction of the metro north project will be a part of that evaluation. [8816/11]
This is the first time I have taken priority questions, too.
We are on a learning curve.
Yes, we are.
The National Transport Authority is responsible for the implementation of infrastructural projects and traffic management in the greater Dublin area. With regard to transport policy in the greater Dublin area, the major projects, metro north, DART underground and Luas BXD, the cross city line, were all included in Transport 21 as key elements of an integrated transport network for Dublin. All of the projects perform well in cost benefit analyses which have been published in redacted form on the NTA website and are the type of projects essential to the long-term economic well being of a capital city. However, all are costly and the new financial reality dictates that all three projects cannot proceed at the same time. The previous Government recognised this fact when, following the publication of the national recovery plan, it prioritised metro north and postponed all of the other projects beyond 2014.
Furthermore metro north and DART underground were planned as public private partnership projects. Owing to Ireland's sovereign debt situation there is uncertainty about the availability of private funds for major projects dependent on Exchequer funding. However, I emphasise that careful consideration will be given to the merits and affordability of each of these projects in the capital investment review. There will also be consideration of a fourth option, a DART extension to the airport and Swords. They will also be assessed and rated according to their contribution to economic and transport objectives, including employment potential. Notwithstanding funding difficulties, I will seek to ensure that at least one of these projects will proceed. I will examine all realistic options for delivery, including on an incremental, phased basis, if possible, with the involvement of private funding.
These are three main projects for the Dublin area and they are vital. I am glad to hear the Minister is looking at one of them but I hope we could deliver them all over a short period. Metro north, for example, was to be a public private partnership, PPP. Sinn Féin would prefer to see the State funding these projects but if that is not possible, a PPP is an option. I have attended more meetings about metro north than any other issue. Does the Minister intend to replace Transport 21? Will that be part of the review? Can I get a commitment that the State will fund whichever one of the projects is chosen?
During the election, the Minister indicated he favoured proceeding with metro north, although there were mixed messages from other Deputies. It is vital infrastructure to allow for access to our main airport and would create much employment, with about 4,000 people working on the project and ancillary employment along the route. This is a vital project. Perhaps the Minister will give an indication which project stands the greatest chance at present. This is important and should be funded by the State.
These are priority questions. There is only six minutes per question and there is only one minute and 50 seconds left.
I agree absolutely that these are important projects and I would love to see all of them going ahead so I could see my city, Dublin, looking like any other European city, with an integrated, modern transport system. These projects, however, all cost a lot of money and the reason metro north and DART underground were envisaged as PPPs is that even during the boom, no one thought it would be possible for the Exchequer to spend the billions of euro needed to pay for them. The two projects, if they are to proceed, can only do so as PPPs. If we did not have the funds for them during the boom out of taxpayers' money, we definitely do not have the money now.
It would be possible for the BXD line or a DART extension to go ahead with Exchequer funds because they are much less expensive than the other two projects but no decision has been made yet on which will be favoured by the Government. That is not a political answer; that is the truth. We must look at what is available in the capital envelope and decide which project can proceed.
The real issue with PPPs is that they are a complex and expensive system for the State to borrow money. It is the case, however, that virtually no bank or financial institution in the world is currently willing to lend the State money. That is why the PPP projects for roads are facing difficulties. Three PPP road projects were supposed to go ahead this year and we are still hoping to conclude one or two of them but that looks difficult now. That means going back to the old-fashioned system of funding infrastructure directly from the Exchequer but, as the Deputy is aware, the Exchequer does not have much money at present.
Can I ask a supplementary question?
I am sorry, we have run out of time. These questions are priority questions. Six minutes are allowed for each question, with two minutes for the Minister to answer and four minutes for supplementaries. That is why it is important Deputies when asking a supplementary question be to the point, so they can get a reply from the Minister. I am constrained by Standing Orders.
It did not seem like four minutes when I was speaking. It seemed much less.
I appreciate that but we must move on. I explain that for those Deputies who might not have experience of priority questions.
Rail Interconnector
Catherine Murphy
Ceist:23 Deputy Catherine Murphy asked the Minister for Transport, Tourism and Sport his views on whether the continuing traffic congestion problem in Dublin city and the greater Dublin area has an adverse effect on the ability of the capital to function efficiently and competitively; his further views on whether the proposed interconnector between the city’s rail systems will go a long way to addressing this problem; the central considerations he will take into account in his decision on whether to allocate funding to this project should it be given approval; when the interconnector is likely to be put into use; the estimated cost of same; and if he will make a statement on the matter. [8720/11]
It is clear that traffic congestion has reduced as a result of the economic downturn but a number of pinch points remain, especially during peak periods. I will ask the National Transport Authority, which is responsible for traffic management in the greater Dublin area, to provide an update to the Deputy on traffic management activities and proposals for Dublin.
As regards transport policy more generally, three major projects, metro north, DART underground and Luas BXD, the cross-city line, were all designed as key elements of an integrated transport network for Dublin. They would contribute to the easing of congestion by proving attractive alternative travel options to private car journeys. The new financial reality, however, is that all three projects cannot proceed at the same time. Indeed, the previous Government recognised this fact when, following the publication of the national recovery plan, it prioritised metro north and postponed the DART underground tunnel to beyond 2014.
Furthermore, metro north and the DART underground tunnel were planned as public private partnership, PPP, projects and there is currently much uncertainty about the availability of private funds for major projects dependent on Exchequer funding due to the sovereign debt situation.
The Government has announced a full review of capital investment, and full consideration will be given to the merits and affordability of each of these projects. The costs and benefits will be reviewed, as will their contribution to overall economic objectives and job creation. I hope that at least one major project will proceed but it is too early to speculate on which one. All realistic options for delivery of one project will be examined including on an incremental, phased basis.
Would the Minister of State agree that the investment in the Kildare, Maynooth, Dunboyne and the DART lines is restricted in its return because the lines are not connected? The DART underground will deliver 75 million additional passenger journeys and will open up a wider footprint into the surrounding counties outside Dublin. Does the Minister of State not agree that the greater Dublin area will drive recovery and such integration is essential if we are to reduce the congestion in the city centre? It will open the job market to more people because the transport system will be networked. Before any additional lines are added, however, it would make sense to integrate current services. I was a member of the DTI consultative panel in the early 1990s, before the boom, and this initiative was seen as essential. It has been postponed every time there is a pinch point because it is not an obvious project like the Luas. It is, however, fundamental to the delivery of an integrated system, one of the first terms used by the Minister of State in his reply.
To be straight with the Deputy, of course it is a good idea. As a concept it really works and in theory there would be huge support for it. Given the financial reality, however, we must look at prioritisation. I agree there is a restriction on return for these lines because of the lack of interconnectivity and I hope we will get there at some stage in the future. Having said that, there has been a significant amount of investment in these lines to improve them and ensure their delivery is maximised. I will forward the full range of investment across all lines to the Deputy if she wishes.
Some resignalling works in the DART underground or interconnector project that have capacity benefits themselves are being treated separately by the NTMA and are being assessed with a view to making progress on individual aspects. Provision could possibly be made for those works between now and 2014.
Public Transport
Timmy Dooley
Ceist:24 Deputy Timmy Dooley asked the Minister for Transport, Tourism and Sport if he is committed to maintaining funding levels for CIE in view of commitments in the programme for Government favouring public transport. [8718/11]
This question relates to a Government commitment to maintaining funding levels for CIE. Deputy Dooley will be aware that the fiscal legacy of the outgoing Fianna Fáil-led Government was to leave an expected deficit of €18 billion for this year. This fiscal legacy, coupled to the banking crisis, necessitated the intervention of the IMF and the EU late last year, a measure which compromised our economic sovereignty to a significant degree. In light of this legacy, while I would like to tell the House that I am committed to maintaining funding levels for CIE, to do so would involve a significant departure from reality.
During the lifetime of the previous Government the total subvention paid to the three CIE subsidiaries was reduced from a high of €308 million in 2008 to €263 million in 2011. This represents a reduction of 15%. I recall Deputy Dooley voting in favour of all of those cuts. Unfortunately, there will be a requirement to reduce this subvention once again. That is the simple, hard reality and I have conveyed it to all interested parties I met in recent weeks. Despite this economic framework, the Government will — as it has committed to do in its programme for Government — with the reduced sums available for capital and current expenditure, favour public transport over road transport.
The outgoing Fianna Fáil-led Government produced a four-year plan which envisaged further cuts in current expenditure in the Department's Vote by €30 million in 2012, €30 million in 2013 and €40 million in 2014. This will undoubtedly affect the PSO subvention significantly, particularly as it makes up over 50% of the Department's current budget. This is subject to reconsideration by the new Government under its comprehensive spending review. Unfortunately, however, working assumptions for economic growth and other budgetary variables have worsened rather than improved in the interim.
The reduction of the subvention to date and into the future has necessitated and will necessitate the design and implementation of cost-effectiveness plans. The CIE group has implemented significant cost-management measures, including the implementation of theDeloitte cost and efficiency review of Dublin Bus and Bus Éireann, which included Dublin Bus's network direct project. Irish Rail has also been successful in reducing its cost base to date.
Additional information not given on the floor of the House.
However, they will be required to go to the well of further cost savings again. A recovery in passenger numbers and further increases in fares could soften the impact of these cuts but it is difficult to see how reductions of this order will not impact on services if we continue with the business as usual approach to providing bus and rail services.
In respect of capital investment, there will be a comprehensive review of capital spending with a view to developing a new national development plan for the period 2012 to 2017. This review, which will take place against a background of the new funding realities, will examine the costs and benefits of all capital projects against a range of economic, social and environmental criteria. Key considerations for transport will include the need to prioritise funding to protect investment made to date and to maintain high safety standards.
I thank the Minister for his reply. I am aware of the significant savings that were envisaged by the previous Government. Notwithstanding that, certain political statements and commitments were made prior to the general election by the Deputy's party and by its partner in Government on the basis that they were well aware of the fiscal deficit to which he refers. I would appreciate it if the Minister would explain how the Government intends to address this matter and to meet the commitments that were made during the course of the election campaign. That, of course, is a matter for those in Government.
The programme for Government contains a clear commitment to rebalance transport policy in favour of public transport. Is the Minister committed to retaining the State subvention in a manner that will ensure there will be capacity for a favourable approach to be taken in respect of public transport? He will be aware that the National Transport Authority has expressed concern that continuing reductions in the subvention would seriously undermine public transport provision throughout the country at a time when the national policy is in favour of public transport.
Why did the Deputy's party not take action on that matter when it was in office?
The Deputy will have an opportunity to ask a question later. Perhaps he could take the matter up with members of his own parliamentary party.
Deputies should address their remarks through the Chair.
The Minister will be aware that the outlook from CIE's perspective is difficult. Perhaps he will indicate whether he has engaged in discussions with CIE in respect of the implementation of cost savings for 2011 and outline the impact such savings might have on services.
The programme for Government also states the Government supports a modern, high-speed transport system and the expansion, in range and frequency, of high-capacity commuter services. How does the Minister propose to achieve this? Does he have plans to privatise bus or rail services?
The Deputy posed a number of questions and I will answer as many as possible. The programme for Government commits us to favouring public transport over road transport in the future. That is what we will do. We will be different from the previous Government in this regard. The latter, perhaps legitimately so, favoured road transport over public transport because it decided to give priority to building the inter-urban motorways. In fairness, the inter-urban motorway system is complete and we are of the view that the priorities are now different and that public transport should be favoured over road transport. However, what we intend to do in this regard will occur in the context of a shrinking budget. We are in the midst of an economic and financial crisis and we have a budget deficit of €18 billion.
Budgets are going to shrink. Everyone knows that or at least I hope they do. Essentially, the roads budget and the public transport PSO budget will both shrink. However, the former will shrink at a faster rate than the latter. Unfortunately, that is the context within which we are operating. I accept that shrinking budgets will impact on services. I am sure that the previous Government was aware of this when it developed its plan to reduce the PSO by €100 million over three years. We can, however, mitigate against the effects of this by introducing cost savings. In fairness, the CIE companies have been very effective to date in delivering such savings without their having too adverse an impact on services. However, every year it is going to be a struggle to deliver the reduction in the PSO budget while maintaining services. As my Cabinet colleagues have stated on many previous occasions, it is about doing more for less.
I have engaged in initial consultations with the CIE companies in respect of how they will proceed in this regard. They are commercial entities and, therefore, it is they — rather than me or the Minister of State, Deputy Kelly — who are best placed to deliver the required savings. My engagement with the companies in question is ongoing.
We do not have any plans to privatise bus or train services. We are, of course, considering the contents of the McCarthy report, which proposes privatising some of the subsidiaries but not train lines or bus routes. It might be difficult to find buyers for these subsidiaries because they do not generate profits. We favour more diversity in the provision of services and that is already available in the context of the licensing of private bus services.
Departmental Investigations
Shane Ross
Ceist:25 Deputy Shane Ross asked the Minister for Transport, Tourism and Sport if he will launch a full investigation into malpractices in CIE following the Baker Tilly Report on Iarnród Éireann; his views that the CIE non-executive directors refused to attend meetings of the Joint Oireachtas Transport Committee in the 30th Dáil and if he will instruct them to do so; if he will provide a full breakdown of the expenses of CIE tours executives; and if he has satisfied himself with the use of the multimillion euro subsidy to CIE. [8845/11]
The Deputy will be aware that I have announced a number of significant changes to corporate governance structure in CIE and the CIE companies. The term of the current executive chairman of CIE, Bus Éireann, Iarnród Éireann and Dublin Bus will expire at the end of June. When his term ends, the position of the executive chairman will be abolished and four non-executive chairpersons will be appointed to the boards of the companies. This will represent a considerable change to CIE's corporate governance structure. Prior to their confirmation and formal appointment, each of the four individuals will appear before the relevant Oireachtas committee to set out their vision for the various State companies.
In addition, there will be a number of ministerial appointments of ordinary members to the boards of the various CIE companies in the coming months. Each of these board members will, when appointed, receive a letter of mandate. This letter, among other matters, will advise board members that if they are requested by an Oireachtas committee to appear before it in their capacity as board members, they will be expected to attend. This is in addition to the Government's commitment to introduce legislation and hold a referendum to allow Oireachtas committees to carry out investigations and compel witnesses to attend. It is intended that the referendum to which I refer will be held later in the year.
I am aware that concerns have been expressed with regard to matter arising from the Baker Tilly report. However, I am advised that the Secretary General of my Department indicated to the Comptroller and Auditor General in September 2010 that detailed replies were received from CIE in January and March 2010 and that these outlined the steps taken in strengthening procurement policy and practice, the extent of implement of the recommendations and the board's satisfaction with the adequacy of the controls in place. As such, and in consultation with my colleagues, I will give careful consideration to the Deputy's proposal. I will report back to the House in this regard in due course. I will also be keen to take on board the views of the incoming transport committee on this matter.
The issue of expenses of CIE Tours executives is a matter for CIE and I have asked the company to contact the Deputy directly about it. I would expect any expense claims to be reasonable and vouched or verified. I will take dim view of any evidence to contrary but I recognise the fact that executives of CIE Tours are obliged to travel overseas a great deal in order to secure business. CIE Tours does not benefit from a subvention from the State and it generates cash for CIE, which, in turn, reduces the need for Exchequer contributions.
The funding of PSO services is governed by contracts between the CIE companies and the National Transport Authority, NTA. The NTA monitors the contracted performance of the PSO operators on a quarterly basis and reports are published on its website. The NTA recently imposed even more demanding performance targets on Iarnród Éireann, Bus Éireann and Dublin Bus. These companies stand to lose up to 10% of their PSO if they do not meet these targets.
I thank the Minister for his reply, which is most helpful in some ways. In the first instance, he specifically stated that he will, in effect, compel non-executive board members to appear before Oireachtas committees. Such compulsion was noticeably lacking in the past. The Minister's predecessor supported the decision of the non-executive board to decline to appear before the then Joint Committee on Transport, which was completely unjustifiable in terms of transparency. I also welcome the Minister's decision to abolish the position of executive chairman. I do not have an objection to any individual holding such a position but rather I object to the position itself.
I welcome his decision to advertise these posts.
I am concerned about CIE. The Baker Tilly report, to which I referred in the question, found corruption in it. It found breaches of procurement regulations, as well as wrongdoing and malfeasance. However, the report was buried. Its existence was not known to the Minister until it was exposed. Because it was buried, because there is still a culture of corruption and concealment in CIE, because the report cost €500,000, which was not revealed to the Minister, and because the Minister was not even told about the content of the report until it was leaked, does this not spell out to him the fact that there is a deep sickness in the organisation which was exposed at the Oireachtas committee? It was not exposed by the auditors or revealed to the Minister. Does this not make a compelling argument for the Minister to investigate what has been happening in CIE? My information is that many of the practices exposed in the report are continuing, at Iarnród Éireann in particular, and will continue, unless the Government gets to the bottom of what has been going on in that culture.
It is important to recognise the background to the Baker Tilly Ryan Glennon report. I have not read the entire report, but it is on my reading list for next week when I will read it from start to finish. That is why I am not ruling out the possibility of appointing an inspector.
The fraud was detected by CIE which initiated the report. However, the company did not inform the Minister, as it should have done. It did not inform the Minister about the existence of the report, but it did detect the fraud and act on it. Of the 156 recommendations made in the report, 146 have been implemented by CIE. The remaining ten have not been implemented for good reasons.
I will be expecting the new chairman to do exactly what Deputy Ross suggests. When he or she is appointed, part of his or her instructions from the Government will be to look at how procurement occurs in CIE, how the company spends its money and ensure the practices followed in the past are not still continuing. That will be the job of the chairman rather than the Minister or the Government.
The Deputy alleges the practices detected in the Baker Tilly report are still widespread in CIE. I have no evidence that that is the case. If there is such evidence, I want to see it. It is not reasonable to say that if fraud was detected by the company in 2005 and 2006 and acted upon, it must still be continuing. I do not accept that view. There must be some evidence to back it up. We cannot assume that because there was fraud five years ago, which was detected by the company, there must automatically be fraud now. I do not accept that automaticity.
Why did the auditors never discover such fraud or malpractice in the past?
I do not know.
If they did not discover it in the past, they are not going to reveal it now.