I welcome Mr. Gerry Mullins, chief executive officer of the Coach Tourism and Transport Council of Ireland, to discus tendering for public service obligation bus contracts. I draw attention to the fact that, by virtue of 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the joint committee. However, if they are directed by it to cease giving evidence on a particular matter and continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against a Member of either House, a person outside the Houses or an official by name or in such a way as to make him or her identifiable. Opening statements made to the committee and the proceedings of the meeting will be published on the committee's website. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official by name or in such a way as to make him or her identifiable.
Public Service Obligation Bus Contracts: Discussion
Mr. Gerry Mullins
I thank the Chairman for inviting us to come before the joint committee. We are very pleased to be here and it is the first time the organisation has appeared before an Oireachtas committee. With me are Mr. J. J. Kavanagh, managing director of J. J. Kavanagh and Sons, which has operations in London and runs a service from Urlingford to Kilkenny which is older than the State as it started in 1919; Mr. John Halfpenny, managing director of Halfpenny Travel in Dundalk which runs another long running bus service, from Blackrock to Dundalk, which started in 1920; and Mr. Noel Matthews, director of Matthew Coach Hire Limited which runs commuter services from Dundalk to Dublin.
The Coach Tourism and Transport Council, CTTC, advocates for full, open and fair tendering for all public service obligation bus services. We call for the tendering to take place on a phased basis over the five year period from 2014 to 2019. Routes should be tendered for on single contracts and in small bundles to ensure maximum participation by transport companies in the tendering process. The success of this new system will depend on well designed and judiciously enforced service level agreements. This is in contrast to the current situation which is best described by the Competition Authority in a document submitted to the National Transport Authority, NTA, last year. It stated:
Where there is a lack of competition, businesses are not incentivised to attract customers. For example, Dublin Bus and Bus Éireann are the sole service providers of PSO services. There are not sufficient incentives or external pressures on Dublin Bus and Bus Éireann to deliver high quality PSO services in an efficient way. As a result, the consumer suffers higher prices, less choice and lower quality, and the public finances pay higher subsidies than are needed.
We echo these comments and hope the committee will help us overturn this situation.
It is beyond argument that savings will be made by tendering for public service obligation routes. The only question is how much can be made in savings. The current PSO subsidy to Dublin Bus and Bus Éireann is approximately €110 million a year. Calculating the percentage that would be saved is difficult, but we have used the recent value for money review of school transport to benchmark the savings that could be made. The value for money review estimated that private operators were 21% cheaper or more efficient than Bus Éireann. A 21% saving on PSO services suggests savings to the State of €23 million a year without a deterioration in services. This is backed up by Privatisation and Regulation of Urban Transit Systems, a study published in 2008 by the OECD which tracked the effects of privatisation on the efficiency of public transport systems throughout the world. All reports consistently state savings are made - costs were reduced by 38% in Adelaide; by 34% in Copenhagen; by 40% in Greece; by 26% to 34% in Helsinki; by 18% according to one report and by 10.5% according to another in London; by 30% in Spain; by 8% to 15% nationwide, by 13.4% in local bus services in Sweden; and by 33% in Perth.
Therefore, when we say we would save about 21%, or about €23 million, for the State on PSO services, the percentage seems to be in line with international examples taken from an OECD report.
What do private operators provide? They provide improved local services. We have to meet service level agreements, which are weak. The National Transport Authority has very little control over the PSO services being provided. Therefore, if the incumbents want to cut out a bus stop or an entire route, there is very little that can be done to incentivise or force them to reverse that decision. If the new system was introduced and implemented in the way we would like it to be, it would begin with very tight service level agreements that would be well policed afterwards. Therefore, it would lead to improved local services. There would be no hikes in fares as they would be set by the National Transport Authority, not by the bus companies. We reckon the savings to the State would be over €20 million per year. I would say €20 million to €30 million is a good ball park figure, based on international examples. There would be an increase in the number of local jobs as contracts boost the prospects of the local bus companies. In particular, the savings of between €20 million and €30 million per year about which we are talking should be ring-fenced and ploughed into the public transport system.
The capacity of private operators to absorb the PSO route network is often questioned. There are 1,934 private operators in Ireland. This is the most recent figure from the Department of Transport this year. The private fleet is three times larger than the two CIE bus companies combined, according to a Deloitte report published in 2009. At the time, there were 8,500 large public service vehicles in Ireland, of which 1,200 were registered to Dublin Bus and 700 to Bus Éireann. Therefore, 6,600 vehicles were in the private fleet. The private bus companies combined are by far the largest group of transport operators in the State.
Sometimes when we raise our heads and make comments about the benefits we could bring to the public transport system, we are met with various comments that, at best, are unhelpful and often quite insulting. "Cherry pickers" is a term often used. I am not sure it was ever applicable, but there is no opportunity to engage in cherry-picking, particularly under the Public Transport Regulation Act 2009. What we are proposing is competition for subsidised services, not profitable services. Are we looking to be monopolists? The answer is no. We are calling for tendering for small bundles of routes on fixed-terms contracts. We think contracts should be for a minimum of five years and a maximum of ten. Nobody should ever own a route or be able to enforce monopolistic practices. Might there be room for "cowboys"? The answer is no. This is one of the most regulated sectors in the country, rightly so.
In order to put a vehicle on the road, we must first obey the service level agreements with the National Transport Authority. Safety is enforced by An Garda Síochána, as it is through the PSV system, the Road Safety Authority, the Department of the Environment, Community and Local Government and the operators themselves. No operator ever wants to have any kind of safety issue. Bus transportation, regardless of whether it is provided by State or private companies, is a very safe form of travel and I expect it to remain so, regardless of the outcome of this process. We are often told it did not work in Great Britain. There is a small degree of truth in this, but the system in London seems to work very well and there is very little criticism. Ridership rates are up and costs are down. The system in the rest of the United Kingdom, in which there was full deregulation, got off to a very bumpy start. It became a case of survival of the fittest where large companies swallowed up small companies and there was competition on routes rather than for routes. In other words, buses were racing each other to get to the next bus stop, which raised safety issues. We are not calling for such a system. At no stage have we called for deregulation; rather we are calling for proper regulation.
There are a few roadblocks, by which I mean unforeseen difficulties. We could end up with full open tendering for which we have called and at the same time, there could be snags in the system that would prevent this from happening properly. One could involve the transfer of undertakings. We say successful tendering companies should not be forced to take on existing CIE staff. The chances are that we will want to take on existing CIE staff who are very experienced and well trained drivers and administrators. If this process turns out the way we want it to, we will have a huge number of vacancies that will need to be filled. We, therefore, expect to take on CIE staff, but we do not want to be forced into doing so. We need access to stations and depots currently in the hands of CIE. Places such as Busáras, Colbert Station in Limerick and MacBride Station in Drogheda are State property and our buses should be able to use these stations as part of an integrated public network. The main point is that these are State-owned properties and they should be treated in the same way as Dublin Airport which is open to every airline.
On ridership rates on routes, when this process goes ahead, private operators will be tendering against Dublin Bus or Bus Éireann for routes on which they already run services. Therefore, they have the best knowledge of ridership levels, such as at peak and off-peak times. That information has to be placed in the public domain; otherwise we cannot have a fair, open and transparent tendering system.
I am sorry that Senator Seán D. Barrett has just left because I wanted him to be here when I gave the next piece of information which I shamelessly stole from one of his reports. He looked at the effects of deregulation on other industries. Again, just to be clear, we are not calling for deregulation, the word that is often used; rather, we are calling for restructuring. In the taxi industry before 2000 there were 4,218 taxis on the road and 22 million taxi trips in Dublin. If one fast forwards eight years, one finds that there are over 21,000 taxis on the road and twice the number of taxi trips in Dublin. The significance is that every time one hops into a taxi, most of the time at least, one finds that the taxi driver will complain about how the industry is not as profitable as it used to be. That is probably true, but the reality is that when one has 17,000 extra taxis on the road, there are at least 17,000 extra jobs for people supporting their families and paying off mortgages. There is twice as much business, as consumers are happier to get into taxis because there are more of them. The point is that in the restructuring of any industry such as this, the incumbent or occupier of the business does not want to see change. I am sure the committee will hear arguments later from people who do not want to see change. However, these arguments usually come from people who have had it too good for too long. Before 2000 taxi drivers had had it too good for too long. The taxi drivers who entered the industry after that date have to work harder to make the same amount of money, but if one looks at the wider benefit, the good to society, more people are employed, fares are lower and more people are enjoying the business. That is what would happen in the case of public transport services.
I have just explained that I am stealing from one of Senator Sean D. Barrett's reports.
He heard Mr. Mullins's call.
Mr. Gerry Mullins
In respect of airlines, we are all familiar with the example of Ryanair. Before 1984 we had one airline in this country and there were two million passengers per year. By 2009 there were four airlines and 80 million passengers per year. Would anybody seriously want to go back to the days before the arrival of Ryanair? The answer is no. Some people who worked in Aer Lingus would like to do so and I am sure they endured great pain, but the good to wider society and the welfare of the people on this island and living in other jurisdictions was enhanced immeasurably.
Similarly, in the road haulage sector in 1969 there were 1,094 trucks on the road, while in 2007 there were over 27,000. Again, one is talking about thousands of extra jobs, a much more efficient society and lower costs. That is what we will bring to the public transport system if the PSO tendering process goes the way we hope it will. It is not just the CTTC which is calling for it. We are in good company. Fine Gael's transport policy before the last general election-----
Mr. Mullins might be very disappointed on that one.
We will leave that matter to be discussed in another forum.
Mr. Gerry Mullins
The very first line of that transport policy is very clear: "The Fine Gael model for a new bus network will be based on competitive tendering for bundles of bus routes". That is exactly what we are calling for.
The Competition Authority made clear to the National Transport Authority last year that greater competition for public transport services should be introduced, including that all public bus transport service providers should have equal opportunity to compete to provide the subsidised PSO services when the current contracts with Dublin Bus and Bus Éireann expire and that any proposed new public transport services should be subject to open competition. We could not have put it any better ourselves. The National Recovery Plan 2012-2014 states that the Government will ensure greater competition for public transport routes following establishment of the National Transport Authority and that this will have further positive effects on competitiveness.
The final part of our presentation is based on a map which may be a little difficult for Members to read. If Members wish, I could forward another copy with larger print at a later stage. The map, which is not quite complete, shows the network of public transport services provided by private companies in this country. It does not show city services in Dundalk provided by John Halpenny or in Waterford by J.J. Kavanagh & Sons but does show many of the larger services, which as Members will note cover vast areas of the country. It is important to remember that all of these services from Kilmore Quay in Wexford to Dingle, which is on the tip of Europe, to Crolly in Donegal are provided at no cost to the State. The opposite is the case in that the State collects revenue, PRSI and various other taxes from the excellent services provided by our members. It is important the services provided are excellent. It is the key to success. A person operating a service in the unsubsidised arena who is providing an unsatisfactory service will go out of business. The provision of an excellent service is key.
I thank Mr. Mullins for his detailed explanation of the position of the Coach Tourism and Transport Council of Ireland. I will now open the meeting up to questions from members. As I stated earlier, as we have a great deal of business to deal with, I would welcome straightforward questions rather than statements.
I thank Mr. Mullins, who is a regular visitor to Leinster House, for his presentation. He keeps us well informed on the issues pertaining to his sector. Mr. Mullins's presentation was good in that it seeks to address some of the issues of concern.
On London Bus, I was part of a transport committee in 2004 which visited London Bus, at which time we were told that while there were service level agreements in place, the quality of the service diminished over time, with operators, having undercut each other to the extent that they were not able to deliver the service, having to effectively tear up their contracts. The cost to the national Government of taking control of the service again was enormous because of the deterioration in services. Are there any lessons to be learned from that which would allow service providers here ensure they are in a better position?
Mr. Mullins spoke of the benefits to the State. I am not opposed to what is being proposed but would like to tease it out with him. Mr. Mullins referred to significant savings and set out the experience in a number of other jurisdictions. However, additional costs will have to be borne by the State in managing the smaller bundles. Currently this is done by way of direct contract with one company, in respect of where there are also inherent failures. If we are to have multiple bundles the National Transport Authority will have to take on greater costs. In my opinion, there will be cost transfer rather than cost savings. Has Mr. Mullins undertaken any analysis of the costs in this regard?
On the transfer of undertakings, this is a real issue. I am not a labour law expert. However, it would be worth while taking a greater look at this issue in terms of costs and so on. If the new providers do not take on former CIE staff, this cost will have to be borne by Bus Éireann or Dublin Bus or the State, in terms of redundancies. While there are significant potential savings to be made, Mr. Mullins did not outline the additional costs likely to be borne by the State. I would welcome any further insight on that issue.
I welcome the delegation. On membership, it was stated that there are 1,900 private bus operators. How many of them are represented by the Coach Tourism and Transport Council of Ireland? Why are all private operators not members of the organisation?
Mr. Mullins appeared to be suggesting this problem could be sorted out in one fell swoop through the opening up of public tendering. In this regard he mentioned savings of €23 million, better services, local jobs and no safety concerns. What is the downside? What in his view would Bus Éireann see as the downside to this? Mr. Mullins stated there would be no cherry-picking of routes. Can he guarantee that if the market were opened up there would be services in outer rural areas such as Belmullet, Connemara and so on?
An issue has arisen in recent weeks with Bus Éireann in terms of its reducing the number of stops on its Expressway routes. The reason given by it for this is competition with private operators who are taking direct routes. For example, they are not stopping in, say, Carracastle in County Mayo. How would Mr. Mullins operate that service? We are being told by Bus Éireann of issues arising for it in respect of competition with private operators which are operating direct services, with no stops, to, say, Galway to Dublin and so on. Mr. Mullins has stated that his members will provide a better service. Someone must be wrong.
I thank the delegation for their presentations. Those involved in this industry face many challenges. Mr. Mullins stated that where jobs were lost as a result of members of his organisation taking over routes, consideration would be given to employment of the people concerned. This is an issue of major concern. There is concern that major companies in the Coach Tourism and Transport Council of Ireland would monopolise the industry, in terms of their taking on the more profitable routes rather than providing services to small rural villages. On the public service obligation contracts, does Mr. Mullins anticipate the council looking for a share of the fund in order to subsidise provision of services on unprofitable but essential routes? Without the subsidy, some isolated rural areas would have no service.
I welcome the delegation. My questions are along similar themes. I acknowledge the right of the delegations to make as strong a case as possible for their services. I come from County Leitrim. Deputy O'Mahony referred to Carracastle. Bus Éireann has decided that its Expressway service from Sligo to Dublin will no longer pick up passengers in a number of villages in County Leitrim. Its stated reason for this is that it does not have a public service subsidy and competition with private operators. The private operators are operating a service from Sligo to Dublin and could not care less about Dromod, Roosky or anywhere else. What confidence is there that, given what is being sought here, private operators will satisfy and address the needs of rural Ireland? I refer Mr. Mullins to the map provided.
There is a swathe of the country, including the midlands and the north west, where there does not appear to be anything at all. Nevertheless, there are private services between Galway and Dublin and Sligo and Dublin. These are competing unfairly. Does the delegation not see it as unfair that there is criticism of Bus Éireann, which is doing its best even without a public service subsidy to maintain services and whose representatives are willing to meet with local communities to address the issues as best they can? It seems like Bus Éireann has its left hand tied behind its back because it must also deal with competitors which could not care less about small villages and towns along the way. It seems like these businesses seek to cherry-pick profitable routes between large centres.
How will the witnesses address the issue of rural services and provide a comprehensive service to isolated rural people - such as those under the rural transport programme - without subsidies? That is the theme of my question.
I welcome the delegation. I agree that by and large, where there has been deregulation or an opening to competition, the process has worked for society as a whole. It is nevertheless unpopular with incumbents.
There was a quote this morning from the 2008 OECD report, which I have not seen or read. There was mention of eight or ten cities in Scandinavia and countries in Europe. I am sure the OECD report goes into much greater detail of where the process has worked, although the report may not detail locations where the process has not worked. Perhaps we could get a greater summary from the witnesses in that regard. I would like to see a more complete mention of the report on the record if we are to use it as a basis for any conclusions.
What guarantees can be given, if there is a public service order tender, that we would not be replacing one monopoly with an oligopoly, or that we would replace one or two family-owned businesses with smaller vehicles that can provide efficient services in remote areas with some of the larger players in the market? It may not happen in the two, three or five years within the contract but it could be that in ten or 15 years, there will be half a dozen major operators in the country. I would like to be assured that we can avoid that position.
With regard to the OECD report, I will request the clerk to send that around to members.
Perhaps we could have a summary. It is not that I want to see the entire report but we need a more complete picture.
We will arrange to have it circulated.
I welcome the delegation of private operators. What percentage of the school transport routes would have a service? There has been a review and restructuring which has led to a reduction in such routes over the past 12 months in particular. If the private operators had a larger share of that market, would they provide a more competitive service at a reduced cost, which may enable the Department of Education and Skills to fulfil the old school routes? Currently there is a process to join up catchment areas, with overlapping, and where there had been a good service, many schoolchildren now seem to be losing out. This poses many problems for families in rural Ireland.
I agree with Senator Mooney that the map tells a story, as there seems to be complete neglect of the north west and west of the country. The private operators are looking to co-operate with Bus Éireann with regard to depots and State-owned properties. Would they be able to provide the necessary structures to deliver a service across the country? How much integration is there with Tourism Ireland and Fáilte Ireland in promoting the country? There is a role for everybody in the transport industry to become involved in bringing more people into the country. A significant number of beds are lying idle in hotels and guest houses and there is a role for the private operators here to get into the global market. Perhaps in addition to transporting people around the country, they could look to bring people into the country as well in co-operation with tourist bodies.
Mr. Gerry Mullins
Do we have enough time to answer all the questions?
Yes.
Mr. Gerry Mullins
Deputy Dooley started by asking about London and J.J. Kavanagh operates a service there.
Mr. J.J. Kavanagh
We have operated in London for the past 18 months and it is a buoyant market. There is significant scope for development and much encouragement given by authorities in London. We have received funding from Hertfordshire County Council to expand and develop our services to a greater extent over there, including costs and capital expenditure. There is a proactive mood in London with regard to public transport. I suggest that public transport in London is growing and the model used is very effective and has more than adequate controls. For example, there is currently development of a prototype bus for launch in London, and that has been instigated by Transport for London. It is like the older red buses that had a platform instead of a back door. The cost of operation in London relative to the market size is quite small, and the market is working. Deputy Dooley was there eight years ago and there has been remarkable change since then.
We are here to discuss public service obligation, PSO, routes. The network is defined and we are talking about being allowed to tender for these routes. This is separate to commercial routes, which are licensed by the National Transport Authority. Bus Éireann and Dublin Bus have authorisations, along with ourselves, to provide services, and they are determined by demand. We seek those services.
For all the shortcomings in the map, one can consider the south east, where there is a comprehensive network of services operating at no current cost to the Exchequer. Many of the services provided in rural Ireland today come through private operators at no cost to the Exchequer, and many of the services operated by Bus Éireann in rural Ireland occur one day a week. To say there is a comprehensive PSO network operating in rural Ireland is wrong, and the comprehensive service is operated by private companies. If the private operator was allowed to tender, the service network would be enhanced dramatically and there would be an increase in activity.
In response to Deputy Fleming, tourism is the keystone of our industry. We provide over 90% of public transport for tourists visiting Ireland today. That is a fact and is agreed by Fáilte Ireland. We work closely with Fáilte Ireland and we are members of the Irish Tourist Industry Confederation, ITIC. We attend trade shows and we have actively promoted Ireland. Coach tourism has been proven to be the most successful way of getting tourists to the regions in Ireland. We have invested heavily in that sector. Twenty or 30 years ago we provided perhaps 10% of the transport; we now provide over 90% of the network. We have invested in this and we have proven it can be done.
On the issue of school transport, the school transport network is contracted to Bus Éireann, which in turn subcontracts it. The private operators provide 85% of the contract. We are not the people who determine where the bus goes. That is done by contract with Bus Éireann on behalf of the Department of Education and Skills.
Mr. Mullins need not go over the same area that Mr. Kavanagh has covered.
Mr. Gerry Mullins
On the next question Deputy Dooley asked, I am sorry he is no longer present because I need some clarification on it. He suggested that if there are very small bundles, they might become a burden on the State. I am not sure what he meant.
As he is not here, you can move on to the next question.
Mr. Gerry Mullins
On the transfer of undertakings and CIE staff, one of the members asked about the downside. There is an issue here. If things go the way we expect, a great deal more work will be done by the private sector and less work will be done by the State companies. Inevitably, those companies will contract. What will happen with the staff? First, it is written in the legislation that this would happen over a five year period starting in 2014. We are two years away from that so we are looking at a seven year timeline. Over that period there will be natural attrition of the Bus Éireann and Dublin Bus ranks. Second, those companies are introducing cost saving measures. There will be people who simply wish to transfer across, as there will be more job opportunities on our side, and there will be lay-offs. However, one cannot hold up the progress that public transport must make in this country simply because there will be a cost to Bus Éireann or Dublin Bus in laying off staff. There will also be benefits to the two companies. We expect to end up inevitably buying vehicles from them, so cash will be going in the opposite direction. In addition, we will be hiring staff if everything goes the way we plan.
I will move to Deputy O'Mahony's questions. First, I wish to express my gratitude to him. When we were here a few weeks ago, it looked as if we would not be invited to appear before the committee. Deputy O'Mahony explained that he would look into it, after which we were invited. We are grateful for that.
The Deputy asked about membership of our organisation. We have 65 companies, all family owned. There are 1,900 operators in the country, but a very large proportion of this sector consists of one and two vehicle companies. Our organisation was formed as a coach tourism trade group and one had to have at least two coaches. Traditionally, the slightly larger companies were members of our group and the minibus drivers and smaller companies may have joined other organisations. It is safe to say that even though they are not our members, we are speaking largely on their behalf. The combined fleet of the Coach Tourism and Transport Council, CTTC, is more than 1,000 vehicles. We employ approximately 2,000 people directly and several thousand indirectly. Therefore, even though we are a small number of the 1,900 we are quite a large proportion.
The Deputy asked about the downside. It is a little like the Aer Lingus and Ryanair situation. Aer Lingus suffered when the system changed. There is no doubt it went through a great deal of pain. However, it has come out the far side as a very strong, lean, efficient and dynamic company. It was not like that before the airline industry was restructured. Undoubtedly, the company and its staff went through pain. Bus Éireann and Dublin Bus will have to go through a similar process, and that is the downside. However, we cannot let that downside stop the progress this country must make in terms of public transport. PSO services are too expensive. We are proposing to reduce the cost by €20 million per year. That is a win for the Exchequer and the taxpayer. We are proposing that we provide the services. We are very good at it and we have proven that year in, year out over the decades, despite the best efforts of the Government to stop us in all sorts of ways, unfairly in most cases. We are offering as good a public transport service, if not better, and we are offering to do it at a lower cost. They are two wins. There will be a downside from the point of view of Bus Éireann, which the committee will hear about later, but we cannot let that relatively small group of people stop the progress this country needs to make. There is also the capital investment issue whereby the State has invested very heavily in vehicles. All our vehicles are self-financed.
The Deputy asked about Belmullet and Senator Mooney asked about Roosky and various other places. I will ask Noel Matthews to discuss that with regard to some services being inter-urban and others stopping at small villages along the way.
Mr. Noel Matthews
We were asked about competition and why we only compete on the expressways and not on the PSOs and serving small towns. The reason is that they are PSOs and are direct award contracts. In doing that, 78% of the private fleet was discarded. We could not compete. The only place on which the private operator could compete was on the expressways and by establishing new routes. What we would intend to do with PSOs is turn them commercially, with the help of the National Transport Authority. We believe they do not meet the needs of their target market. They are running at the wrong times and they are really old services. Times have changed and towns have grown. The PSOs do not suit the needs. If we were successful in getting a PSO contract, we would like to work with the NTA to revisit the times, perhaps, and the route and integrate it with others. I do not believe there should be school buses, rural transport buses, express buses and so forth. They are all buses. One bus can do the lot. We should integrate PSOs, school transport, express services and rural transport and maximise vehicle and driver utilisation. It can all be pulled together which would, ultimately, make it very commercially viable, therefore writing off the PSO on that route.
Mr. Gerry Mullins
If I can interrupt, there are two types of service from Dundalk to Dublin. One is the express and the other visits various towns along the way. That might be a solution to the question members asked.
Mr. Noel Matthews
It is, but it does not take in every town because that is currently a PSO route. If we went in there, we would integrate the lot of them and people in the local towns would not suffer. They are suffering at present because it is not profitable to run a bus at 9 a.m., and it is generally too late to get people to the workplace. The times and routes must be revisited and all of it must be integrated. It will then become profitable for everyone and then one can talk about competing on an even playing field. The private sector could not compete. How could we compete with PSOs? They are heavily subsidised. It is all about integration. The entire transport system must be remodelled, integrating rural, schools and express transport.
Mr. Gerry Mullins
To take up the point made by Senator Mooney, what he described is two distinct markets. There are people in Sligo who want to get to Dublin quickly and efficiently. They want to get there in a couple of hours. If they can do that, they will abandon their cars and take the express service. There are people in Roosky and other small towns who want to travel between those towns. In Ireland, the inter-urban routes are often quite profitable. They are commercial routes. Galway to Dublin is a very profitable route at present. Cork to Dublin is probably less so, but it is still profitable. I do not know about the Sligo to Dublin route.
I imagine there is a market that would allow those services to be commercial. Those should be PSO, they should be moved off and people like those beside me and Bus Éireann should be able to compete for them. We should issue two or three licences to two or three different companies and let them compete on services. If they are separated by time, the consumer will go to the provider who gives the best service.
That is a commercial service. There are also small services between various towns in an area that, because of the population, will never be commercial services. They serve a social need and most developed countries identify the social need for transport between areas of low population. That is why they get a subsidy, the PSO. They are two different markets and while they can feed off each other, we have traditionally been excluded from providing services in the areas being described by committee members. We are not allowed to do it; it is a ridiculous situation. Most of the buses in this country are not allowed by law to provide the very service committee members are seeking. Only one company, Expressway, is allowed to do it. It might have its reasons for stopping or not stopping but it is convenient for the company to blame us. In the new situation it will not have the choice. It will compete for a service, the NTA will issue a licence that says the company must stop in Roosky eight times a day and if the company does not do that, it will lose its licence. If the people beside me win such a licence and the right to stop in Roosky, and do not do it, the licence will be revoked and I will not defend them. That is the beauty of the new system. The State, through the NTA, will have supreme control over the public transport system. At the moment, however, it does not. The Department of Transport, Tourism and Sport has no control over it. Politicians receive submissions from people asking why transport services are not stopping in their town but the politicians have no control. In the new situation, it will cost less, operate better and finally the State will have control over the public transport system.
Will a private monopoly replace a public monopoly or will we have an oligopoly, as Deputy Harrington asked? If we look at the list of members of the Coach Tourism and Transport Council of Ireland - Halpenny Travel, JJ Kavanagh and Sons, Matthews Coach Hire, Mike Hynan Coaches, J O'Callaghan and Sons, John McGinley Coaches, Joe Lawlor Coaches, Joe Moroney Coaches, Kane Coaches and Kenneally Coaches - all of our members are family-owned companies. They are small to medium-sized enterprises and often second, third or even fourth generation family businesses. The last thing we want to see is the situation the Deputy describes, where two or three companies swallow up the smaller companies. It would be entirely against my mandate as the head of this organisation to create the situation the Deputy described. We want to see a network of our members and other companies that are not members, other family organisations and other family companies. There is a bus company in every town in Ireland and all of those companies should have the right to compete to provide public transport services in their towns and counties. That is why we are here today.
How can I guarantee there will not be a private monopoly? It is a question that must be referred to the National Transport Authority later on. It is up to the NTA to enforce the measures provided for in the 2009 legislation to ensure there is no monopoly. Most industries have anti-monopoly legislation and we outlined earlier on in our presentation the comments of the Competition Authority. The two provisions we asked for in the presentation are the best ways to start to prevent a monopoly takeover. There should be tendering for small bundles of routes. If there are only tenders for large bundles of routes, for example, if all of Dublin Bus's services north of the Liffey were tendered out in one bundle, no one in our organisation would compete for it. Two or three large organisations from England, Germany, Spain and possibly the United States would be able to compete for it. If a small number of companies submit tenders for any products, the chances are there will not be a good price. A large number of companies tendering for a service will give a very good price. From the NTA's point of view, the more companies tendering for these contracts, the better.
I need some clarification of Deputy Dooley's second question. It related to the small bundles of routes and if they would end up being a burden on the State.
The smaller bundles of routes will be managed in isolation and could be handled by three, four or five different companies. There will be regulatory issues surrounding the costs of checking fleets and other associated costs, and the State must carry out those. At present it only has to do that for one company, Bus Éireann. If there is a multiplicity of smaller bundles, there will be a multiplicity of operators and work to be done to ensure all buses are up to the standard. Are there additional potential costs?
I must acknowledge the services being provided by Halpenny Travel and Matthews Coach Hire from Dundalk to Dublin. They have provided excellent services for many years. I could not let the opportunity pass without acknowledging the work both companies do.
A sum of €36 million extra was found for CIE while the Dáil and Seanad were in recess during the summer. What were the consequences of that and what can we do about it next year? The companies must compete against companies with capital grants. What is that worth per bus? By how much could operating costs be reduced if the companies had the same capital grant?
I apologise for coming into the meeting late. I thank the council for its presentation. In the system being rolled out at the moment, the incentive exists for non-stop intercity routes while forgetting everywhere in the middle. On the small bundles proposal, is that not similar to what happened in Britain? Was that a success? There are serious question marks over its operation in Britain. Would it not make more sense on routes such as Dublin-Galway or Dublin-Sligo that each operator that provides a service would have a social responsibility built in? On the Ballina-Dublin route, one operator would have to stop in Carracastle and provide a service twice a day while another operator would have to provide a service in Elphin twice a day. The same goes for the Roosky and Dromad issue. It would bring a mix into the commercial operation but would not undermine the commercial viability of those operations and it would not leave communities completely isolated, as is happening at the moment. The current system is purely driven by profits from non-stop services from one city to another, which has been a disaster in Britain.
Mr. Mullins said there is room in the PSO contracts for the State to run services in these small areas on a subsidised basis.
Is it intended to seek funding under the PSO contract to work those routes and perhaps offer a service at some stage on that basis?
I wish to make an observation on the map. We have discussed the absence of routes in the west and north west. Is that related to the membership of the Coach Tourism and Transport Council of Ireland? I was surprised to learn there were 65 members out of 1,900 operators. It seems a small percentage of those in the industry are members. Are there members from the areas which are blank on the map?
Mr. Gerry Mullins
I will take the questions in order. I will ask Mr. John Halpenny to explain the town service he runs in Dundalk, which is unsubsidised, as this will help to answer the questions.
Mr. John Halpenny
We run a town service seven days a week between Dundalk and Blackrock which has been in operation since 1920. We receive no subsidy. Some of the routes are quiet and others are busy but we have never looked for money from the State and have operated this service since 1920.
Mr. Gerry Mullins
Deputy Dooley asked about safety standards and whether more inspections will be required to cover the bundles of smaller companies. Perhaps Mr. Kavanagh would answer that question.
Mr. J.J. Kavanagh
There is an array of measures. When one buys a coach, one must have it licensed by the PSV office. It must undergo a roadworthiness test every year. All the necessary safety inspections must be carried out. One must have a paper trail of all the safety inspections. These are monitored regularly by the RSA. There will be no additional cost to the State. All these functions are in place at present.
When the NTA was being established, we requested that a complete audit be done of all public services being offered in the State. We could see the shortcomings and deficiencies in the market at the time, and where new services could be developed and evolve.
I will now comment on PSO routes. We wish to be allowed to tender for PSO routes. At present one company takes all. We suggest that if we were allowed to tender, we would be able to enhance and improve the service being offered. It would be administered by the NTA and would result in an enhanced service for the public.
Deputy Naughten referred to intercity services. As Mr. Mullins stated there is a significant difference between inter-urban and local service routes. It is like comparing apples with oranges. At present the intercity routes are commercial routes operated by every company. Some rural services operated by the State company are PSO routes. Those operated by the private operators are commercial routes because there is no subsidy available to them. Throughout Ireland, every service operated in every provincial town and city by the State company is a PSO whereas every service provided by a private operator is a commercial route, at no cost to the State. In Waterford city, some 25 to 30 buses are operated by the State company, each one of them provided and paid for by the State at a cost of €200,000 per unit, which approximates to €5 million. We, J.J. Kavanagh and Sons, and Suirway Bus & Coach Services operate services in the city at no cost to the State. We buy our own vehicles. Members should embrace the Coach Tourism and Transport Council of Ireland, CTTC. We have a proven track record of providing transport services. We provide 90% of the transport for incoming tourists and 85% of the school transport service. We can deliver and save the State money.
Senator Sean D. Barrett asked about capital investment. The State capital investment has distorted competition in the market. The number of vehicles that have been provided by the State for the CIE companies in the past ten years is phenomenal. There are 85 coaches waiting in Wrights to be delivered to Dublin Bus at a cost of €300,000 per unit. The private operators have never received or requested a grant from the State, yet we have the most modern up-to-date fleet. Ireland has one of the most modern fleets in Europe. The investment incurred by private operators in the past ten years in particular has been phenomenal. We have the safest fleet in the marketplace at no cost to the Exchequer.
Mr. Gerry Mullins
I will do a quick round-up of some of the questions we have not addressed. Deputy Fleming asked about school transport and whether our members could private a better service at lower cost. The answer is "yes", although school transport is largely outside the topic we are dealing with today.
Has the CTTC made a submission to the Department of Education and Skills that would justify the contract being put out to tender? Some of the routes have been revised.
Mr. Gerry Mullins
I think everything is on hold because of a court case. The judge is due to deliver his verdict on 30 October 2012. That will determine whether Bus Éireann holds on to its contract or if it will go to tender. To a certain extent, it is not on the agenda today. I would be delighted to have the opportunity to appear before the committee again to discuss it at great length.
Deputy Naughten raised the issue of social responsibility and suggested that for every express route, one should have responsibility to operate local services. The answer is "yes", but it is an issue for the NTA. As I stated earlier when responding to Senator Mooney, there are two markets and it is unfair on the people in the small town if the express bus goes by and they are not served. It is also unfair on the person who has a long distance to travel if they are made travel to every small town. They are two different markets. It is up to the NTA to decide how to license them. We are happy to provide either service. We would like to provide both services. The NTA, as the referee of the games, must address that.
The question is-----
Deputy, we want to finish this section. We have people waiting and I have allowed the discussion to drag on longer that I should have.
Mr. Gerry Mullins
Senator Sean D. Barrett asked what if the €36 million was not paid. We felt very strongly that it should not have been offered in the first place. We raised the issue with the Chairman of the Committee of Public Accounts, who took it up with the Comptroller and Auditor General. I understand they influenced the decision to take it back. We felt very strongly that it should not have been made in the first place and we are glad to see the decision has been reversed. That is slightly off the agenda.
I see the Chairman is about to blow the whistle.
If there are questions that Mr. Mullins has not answered, will he respond to them in correspondence to the committee secretariat. I thank the witnesses for appearing before us. Given their viewpoint, it was well worthwhile for the committee to hear them. We will certainly have more interaction.
I welcome the officials from Bus Éireann who are here to brief the committee on changes that were made to bus routes recently. I welcome Mr. Martin Nolan, who is the chief executive of Bus Éireann; Mr. Rory Leahy, who is the north-west regional manager; Ms Miriam Flynn, who is the south-west regional manager; Mr. Joe Fitzgerald, who is the south regional manager; Mr. Joe Kenny, who is the east regional manager; and Mr. Gerry Gannon, who is the manager of Bus Éireann's school transport section. I will take it for granted that they understand the rules governing defamation and privacy rights. I do not need to read the exact item. After Mr. Nolan has made his presentation, I will invite the members of the committee to ask questions.
Mr. Martin Nolan
It is a while since we have been here. We spoke at the Joint Committee on Transport in 2008 and 2009. Most of what we predicted at that stage has come to pass. We have done most of what we promised to do. In 2008, we were worried about the effect the motorways would have on towns and villages. We said we would stick with the towns and villages for as long as we could, while acknowledging that we were likely to have problems on commercial routes in the future.
In 2009, we spoke about the efficiencies we would introduce at Bus Éireann to ensure the State got a better return. We also went through the Deloitte value for money report that was drawn up for the then Department of Transport. The report had come to the conclusion that Bus Éireann was as efficient and effective as its European peers even though it received one of the lowest subventions in Europe. The OECD report that was mentioned earlier spoke about the savings that could be achieved in cities with many millions of residents. Bus Éireann's subvention has been reduced by 25%. Those savings are in the system. The pain has been taken. There are more savings in the system.
The role of the National Transport Authority in the direct award contract is possibly misunderstood. The authority is heavily involved in everything Bus Éireann does with regard to the public service obligation contract. We work together on a daily basis. We have met all of the authority's targets. I will speak later about our high customer satisfaction rating. We have achieved the efficiencies and effectiveness measures that are required for the Exchequer. I will go through them later in the meeting.
The map of Ireland that is being shown to the committee depicts the approximately 350 public service obligation and intercity routes we provide. We also have approximately 6,000 school bus routes, which cover every corner of this country. We serve thousands of towns and villages. I could not possibly have all the information on each of them. That is why I have brought my regional managers with me. I hope that between us, we can answer most questions about what goes on around the country. No other organisation in this country can match Bus Éireann's road transport reach. AA Roadwatch and all the radio stations contact Bus Éireann every morning to ask us about traffic conditions. That aspect of our role came to the fore during the bad weather of recent years. Bus Éireann knows how the roads of this country work.
As a transport management company, Bus Éireann plans all of its routes. I have mentioned our extensive reach. We have inspectors in every locality. We know the schools, the towns and our customers. We are able to bring our local knowledge to bear on a national basis. Our motto is "think local - act national". Bus Éireann has 2,500 staff in 17 locations throughout the country. We have 90 people based in Tralee and 70 people based in Stranorlar, to give two examples. We have smaller numbers of people in many other villages and towns throughout the country.
Bus Éireann has a complex and sophisticated network. It facilitates 78 million passenger journeys every year. It has a turnover of just over €280 million. We have 2,500 employees of our own, as I have mentioned. There are more than 8,000 people in our system as a whole, when aspects of our business like bus hire and school transport are considered. Some 25% of our maintenance is outsourced. The livelihoods of 6,000 people who are not employees of Bus Éireann depend on the company.
We have fixed overheads, in the form of depots, at every one of our locations. Those facilities are shared between the company's three products - Expressway, school transport and public services. Like any three-legged stool, Bus Éireann has to ensure it does not lose a leg so it does not keel over. If that were to happen, the cost of the fixed overheads would fall back on the State. We try to avoid that.
As we predicted when we last appeared before an Oireachtas committee, the opening of the motorways, the sanctioning of new licences and the deterioration in the economy led to a decrease in our revenues and passenger numbers, although they have since stabilised. There has been a slight growth in some provincial cities in more recent times. The 25% decrease in our subvention that I mentioned will be followed by further decreases in the next couple of years. We have always washed our face financially. We made a small profit last year, we will make a small loss this year and we will be back into profit next year. The decrease of €28 million in our operational costs is more than the decrease in our revenue.
The image being shown to the committee at the moment depicts the increase in the cost of fuel, which has affected Bus Éireann and every other transport operator in the country. Our fuel costs have increased from €15.7 million some years ago to €35.9 million this year. That includes the loss of the fuel duty rebate in 2008.
We provide vital social links for communities, many of them at no cost to the State. We employ more than 1,400 contractors throughout the country. Most of them are small contractors with fewer than five vehicles. We contribute in excess of €55 million in Exchequer taxes and excise duties that are returned to the State. We must make sure that return to the Exchequer is maintained in any new regime.
The next slide relates to efficiency and effectiveness. As I have mentioned the Deloitte report, I will not go through it. We are as efficient and as effective as our European peers because we did not receive an extra subvention during the 2000s. When we had to make extra payments under the national pay deals - we did not pay them all - we demanded productivity measures to ensure our finances were right. There has been a 25% reduction in our subvention since then. We have reduced our cost base by over 10%. The National Transport Authority said in a recent report that Bus Éireann's productivity has increased by over 11% in recent years. That is in addition to the savings that have arisen from the reduction of more than 12% in staff numbers in recent years. There has been no major reduction in service levels over that time.
We are working on further efficiency measures. On their own, they will not return us to the position where we need to be. We have to make some changes on our Expressway routes. Some of them have gone through and others will go through in the coming months.
Bus Éireann is the biggest customer of private operators in this country. We pay more than €114 million to such operators every year. I have mentioned that we work with 1,400 private operators on the school transport scheme and that 25% of maintenance is outsourced. We have some joint products. On the Dublin-Cork route, for example, we are in business with GoBus to bring 15 services between the two cities every day.
The commercial Expressway services provided three benefits to the State. First, they paid for overheads at many depots around the country at no cost to the State, as I have said. Second, they went into towns and villages at no cost to the State.
Many towns and villages only had these commercial services passing through. Third, it provided services which, in turn, were converted to PSO services for the State.
In the case of commercial services, not one cent of State funding is involved. As a result, we have had to withdraw services from many towns and villages. However, that was done as a last resort and it was a sad day for the company. It went against our DNA, but if we had not taken these measures, worse measures would have had to have been taken on these routes. It is a highly competitive market which is regulated by the NTA. Customer demand is for shorter journey times and limited stop services. We have stayed in towns and villages as much as possible, whereas our competitors have moved to serve the bigger population centres. In the intermediate points it is difficult to make a commercial return, hence we have had to make a number of changes, but we have invested in these services. Members may have seen our new higher capacity vehicles, most of which have a Wi-Fi service.
The Minister explained in the House some weeks ago that the Expressway service had lost passengers and revenue because customers had opted for private providers which operated a faster service by bypassing smaller population centres. In order to gain competitiveness and reach a break-even position, Bus Éireann had to redesign its Expressway services, which meant following the routes most passengers want to use. Because the services are commercial, advance consultation is difficult to provide for. If we start to consult beforehand, someone else may receive the licence. In many cases, where we have withdrawn from towns, there is a rail or public transport alternative. In some places we have had a difficulty in providing an alternative service, but we are working with the NTA on this issue. There are benefits attached to the bigger population centres, such as reduced journey times, access to Dublin Airport and an enhanced level of service for many towns and villages. As the Coach Tourism and Transport Council representative said, it has been involved in the same business. It was the first service to opt out on the Dublin to Cork and Galway to Cork routes and all of the towns and villages in question are no longer served by private operators. We serve most of these town and villages.
On the issue of State-funded services and contracts, we work closely with the National Transport Authority. We do nothing on these services without permission from the authority. We design the networks and deliver efficiency measures together. We provide services on 300 routes to villages, towns and cities outside Dublin. We are the largest provider of local and rural transport services. We provide commuter services in the greater Dublin area and city services in Cork, Galway, Limerick and Waterford. This year a large number of networks are being redesigned. The Galway network has been completed and passenger numbers are growing. Many services in Cork have been changed and passenger numbers are also growing. The Limerick network was completed in recent weeks and we hope to report progress in the next few months on passenger numbers.
We have met all of our performance targets and the contract will be up for renewal in 2014. We have a track record of meeting our targets and have improved services with a significantly reduced subvention. International experience demonstrates tendering can lead to increased costs for the State, as well as a reduction in services, increased fares and a reduced level of competition. Therefore, any proposed change must be carefully examined. The subvention for the provision of bus services in London is just under €1 billion. The UK Competition Commission is trying to reintroduce competition after the market was deregulated. The big five private operators in the United Kingdom have much higher profit margins than their smaller rivals. Sweden has abandoned the tendering process as costs exceeded those incurred using the previous approach. Therefore, everything that glitters is not gold. The system needs careful analysis, especially when one is trying to serve a small island economy.
The school transport service is administered by Bus Éireann on behalf of the Department of Education and Skills. It does not have a contract. We transport 113,000 children to and from school every day safely, under guidelines from the Department. All reports indicate it is a significant and complex scheme and that we are the only operator in the country capable of providing it. Some 85% has been subcontracted out to private operators, while 100% of the planning is undertaken by Bus Éireann. We tell people where they need to be at a particular time and the guidelines to be followed. We have people at all locations monitoring the service.
Under the heading of customer improvements and innovation, in conjunction with the National Transport Authority, some of our PSO vehicles have a Wi-Fi service, as do Expressway services. Real time signs are being erected in the provincial cities in conjunction with the authority. The smartcard system will come on stream in the eastern part of the country in the coming months. We have a very successful BeClub online loyalty scheme in place in which more than 25,000 people are involved. The real-time arrival application has gone live. Recently we trialled compressed natural gas vehicles in Cork with great success and will shortly bring the matter to the authority and the Government.
The 2009 Deloitte report stated the company was efficient and effective. We have become much more efficient since, despite a 25% cut in State funding. The value for money report for 2011 states Bus Éireann is the only provider in the country capable of providing school transport services. The changes to Expressway services were critical to ensuring its survival and in protecting jobs. The third quarter customer survey indicates a customer satisfaction rating of more than 90%, while 96% of customers say they would recommend us to a friend. We are a dependable provider of safe and quality public transport services, as signified during the bad weather when we maintained 95% of our services throughout the country.
I thank Mr. Nolan. I will move on to questions, which can be grouped.
I thank Mr. Nolan for his presentation and welcome Mr. Fitzgerald, Mr. Leahy and Ms Flynn. The presentation sets out clearly what the company does, some of which is probably lost on the public on occasion. However, we are not here to talk about the company but to discuss whether it is better for the National Transport Authority to proceed with the direct award system or to go down the road of selective tendering for certain bundles of routes. Previous speakers have outlined where they believe considerable cost savings can be made. We would like to hear the particular views of the representatives on the issue.
A couple of issues arose during the previous presentation. I do not know whether the representatives had an opportunity to hear it. Mr. Mullins asked, in the event that a decision was made to opt for selective tendering, if there would be a requirement in respect of the transfer of undertakings for the CTTC to hire people from CIE. If it were to be successful in that regard, what would be the cost of having to dispense with the services of some of the drivers in question? Would it be seen as a significant cost and, if so, can Mr. Nolan quantify it? In the event that a decision is taken to go down the route of selective tendering, does he envisage an impact on the network as a result of the reassigning of certain bundles of routes?
Will the NTA have to bear additional costs to manage the route? Bus Éireann has control of the entire route now, so this is clearly within its remit. Will Bus Éireann continue to provide that service to new entrants to the market or does it expect that the administration and management of the more dislocated network will be a role for the NTA? Are there any other cost implications for Bus Éireann that will ultimately be cost implications for the State?
I thank Mr. Nolan for his presentation and thank the officials who have attended for it. Like Deputy Dooley, I am very interested in hearing Bus Éireann's reaction to what has been said by the private coach operators. They say they would provide the PSO services cheaper and better. If we take what they said at face value, they can do this better, but I presume Bus Éireann has the opposite opinion. I would like the representatives of Bus Éireann to be as direct as the private operators were in giving their side.
The changes with regard to Expressway routes have been an issue in recent weeks and I acknowledge Bus Éireann's engagement on that. Perhaps I can be parochial here, as I am sure other members will be also. Mr. Nolan mentioned in his presentation that some changes have been implemented and others are on the way. Are those changes on the way more of the same? Mr. Nolan said in another part of his presentation that he cannot engage with communities for reasons of commercial sensitivity and that it is difficult to engage with communities in advance. We have had the same issue with regard to post offices. We are here to serve our communities but it is important that where communities are not making sufficient use of a service, they are given the opportunity either to make more use of the service or lose it.
The issue in the case of Carracastle in County Mayo was that the changed bus route was a longer route, but there were no extra pick-up points. Therefore, the contention that there would be extra passengers on the Expressway route did not apply. It is very difficult to convince communities this would make any sort of saving for Bus Éireann. Rather, it would increase costs. I acknowledge the fact Bus Éireann has reversed some of the decisions it made there and that it has replaced some of the services with local PSO routes. It is important that any changes the company makes should stand up and achieve what it says they will. I would appreciate this being addressed in the response.
In some discussions I have had with Mr. Nolan, he mentioned at some stage that Expressway services go into Dublin Airport and that Bus Éireann is charged for access to Dublin Airport for those routes. Is it the situation that one semi-State company is paying another semi-State body? Does this charge apply to Dublin Airport alone or must the company pay for access to other airports also? This situation does not add up for the ordinary punter and they would not be aware of it. The Expressway services to Dublin Airport are very successful and widely used.
I thank Mr. Nolan for his presentation. He made the point that Bus Éireann was engaged in trying to provide local services where it had decided to stop picking up passengers on a number of routes on the Expressway service. We raised this issue with the private operators earlier. A number of Bus Éireann regional managers are present here, but this issue would be quite specific to what has been happening on the N4. In a response I received on this via the Minister's office, I was informed that there is a move towards local consultation with regard to providing a rural service. How involved will Bus Éireann be in this? The rural transport link is provided with an annual amount of money, approximately €11 million, and it is operated through the partnerships that provide rural transport. How does Bus Éireann envisage addressing transport in those areas it will now leave, where there are passengers who will be left without a service? This question relates to Expressway.
Mr. Leahy, the regional manager for the north west, suggested a compromise of having one service going up and one service returning, but the local reaction to that was that it would go too early in the morning, at 7.30 a.m. They suggest it should be later in the day. Has there been any advance in regard to that? In another part of Leitrim where a service has been withdrawn, this is directly affecting Ballinamore and Mohill. Is this as a result of the withdrawal of the Swanlinbar-Bawnboy service? The withdrawal of service is leaving an entire geographical area of south Leitrim without any transport service whatsoever. I do not want to take up the time of the meeting by going into the detail of the inconvenience this is causing, but wish to refer to a letter given to Mr. Padraig Griffin, secretary of the Ballinamore area community council, from an old age pensioner of 80 years of age who had to get a lift. She said she left home at 9 a.m. and did not get home until 4 p.m. and had to rely on people to pick her up and on taxis. To a large extent, it is the vulnerable and the elderly who will suffer as a result of the changes being made. How can Bus Éireann, while remaining efficient, deliver the service people feel they should get but are not getting now?
I welcome the delegation. As a result of the changes in the closed school rule and the changes to the catchment boundary areas, there have been significant consequences for families and communities. Pupils are travelling to different parishes as a result of these changes. For example, there could be four children from one family going on one bus to a school and another child from the same family travelling on another bus to the nearer school, which might be in a different parish, as a result of these logistical changes. I compliment Bus Éireann staff on how they have dealt with this because it has been difficult. They have dealt with the matter in a helpful and professional manner.
In the context of the value for money report 2011, what savings, if any, have been made as a result of the changes to the closed school rule and the catchment boundaries? I appreciate Mr. Nolan may not be able to give a specific answer on that today, but I would appreciate it if he could come back to me on that. How many students avail of free school transport nationally? Again, Mr. Nolan may not have that information, but I would appreciate it when he can provide it.
My next question relates to a specific route, Rathmullan to Letterkenny. The bus leaves Rathmullan at 8 a.m. - it is a Lough Swilly Bus service - but it does not return to Rathmullan. Has Bus Éireann looked at this particular route or does it look at weaknesses in such areas? The local community feels quite aggrieved by the fact that the bus leaves at 8 a.m. for Letterkenny, but only returns as far as Ramelton, not Rathmullan. I look forward to a response on this.
I appreciate being allowed participate in this committee as I am not a member of it. Senator Mooney referred to working and collaborating with other bus transport operators, be they rural service providers or private operators.
I know there is a drive in County Donegal through the Donegal transport committee to have a one-stop shop information sharing exercise. How involved is Bus Éireann in this exercise? Does Mr. Nolan value the possibility of having a one-stop website where all information is provided, not just information on Bus Éireann, but also where private and rural transport operators can publish their schedules in order that the public can go to one website and see all routes? Has Bus Éireann had an input into that?
I will not be present to hear the response but I look forward to reading it. I apologise for having to leave but I must go to another meeting.
I ask members to refrain from asking questions on specific areas. The regional managers are present and members can speak to them individually after the meeting. We could get bogged down on specific points.
With respect, Chairman, the delegation members said they operate locally but act nationally. We also operate locally and think nationally.
As Chairman, I need to run the meeting properly.
I thank the delegation for its presentation. Are there opportunities for Bus Éireann to expand its services? I know that compared with other EU countries, we provide one of the lowest rates of subvention to public transport. If the subvention continues to be reduced we will not be able to provide the routes. We must look to new areas. Will there be further job losses arising from the streamlining? Are the vehicles up to the proper standard?
The Coach Tourism and Transport Council of Ireland, CTTC, the previous group which made a presentation, stated that its buses are at a very high standard. Are the Bus Éireann vehicles of very high standard? Are the buses relatively new? In the past I know Bus Éireann had a lot of older buses.
In regard to school transport, the need to provide a service that is directed at the community with children was highlighted. Is it envisaged there will be further reductions in the school routes? I do not believe a State service should be driven to balance the books at the expense of a service to people. Does Mr. Nolan see further problems arising in terms of school routes?
I welcome the delegation from Bus Éireann. I wish to raise questions on the Expressway routes. County Kerry, a peripheral county in the south-west corner of the country is reliant on tourism. Bus Éireann is a core service and provides access to the county. The patients in County Kerry are transferred to the regional hospitals in Limerick and Cork. There is a great deal of concern and people are worried about the routes from Killarney, Tralee, Limerick and Cork. Due to our geographic location, I request that Bus Éireann would maintain the existing Expressway routes.
To what extent is Bus Éireann operating in the tourism sector? In particular, I believe there is a role for promoting the country internationally and in conjunction with Fáilte Ireland and Tourism Ireland. Should Bus Éireann be widening its scope and branching out to offset against losses on internal routes? Is there a role for Bus Éireann to work with hotels to the benefit of both? What is the percentage of passengers who are eligible for free travel?
We have been told by CTTC that it provides 85% of the school transport service. It appears that Bus Éireann administers the school transport scheme. Would it be a saving if the private operaters were the sole providers of school transport?
I thank the delegation for its presentation. I have three questions on school transport. During the course of his presentation, Mr. Nolan was keen to stress that Bus Éireann does not have a contract in respect of the provision of school transport. Will he explain the relationship with the Department of Education and Skills? Is there an annual service agreement each year? I am conscious the issue is before the courts, so he may be restricted in what he can say. He also mentioned that he engages with 1,400 local private operators that operate the school bus transport service. Is that not evidence that private operators can step into the breach, especially in rural areas and provide services to rural dwellers? Deputy Fleming referred to the fact that 85% of the vehicles providing school transport are privately operated. Are isolated sets of accounts prepared for each of the entities that Bus Éireann operates? In respect of school transport, is an annual account for the provision of school transport prepared and will Mr. Nolan share some of the details, particularly the profitability, if a profit does arise?
I apologise for being late. I thank the delegates for their presentation.
The Bus Éireann brand is trusted and provides a very strong service in both rural and urban area. The staff and vehicles are excellent. The school transport section is unique.
Does Bus Éireann support or agree with the tendering of the PSO contracts? Will Mr. Nolan elaborate on the reasons for his answers? Does he have a view on how the contracted would be bundled for tender? I think this goes to the nub of the debate.
I apologise in advance but I must leave before the end of the meeting. I wish to address the following questions to Mr. Nolan. In his address he stated that he is restricted in the level of consultation that can take place because of commercial sensitivities. Is there not an agreed protocol between Bus Éireann and the National Transport Authority, NTA, regarding local consultation where services are being reduced or withdrawn? Is it not the case that if adequate notice is given to communities, it allows them to consider alternatives, such as the rural transport initiative or the encouragement of a private operator to take up some of the service? Mr. Nolan is correct when he states that in some cases there are alternatives, and probably the best example is Dromad in County Leitrim, where there is a rail service. What will happen to other communities such as Elphin and Roosky, where no other transport services are available and where the complete withdrawal of services from those communities has a devastating impact on them?
May I revert to the contribution of the Coach Tourism and Transport Council of Ireland?
The commercial operators make the case that there are two types of service. Bus Éireann has made the same case. There is a commercial service and a public service obligation, PSO, service. Why must there be a black and white situation? Can we not have a commercial service between, say, Sligo and Dublin, with each operator that is licensed on the route obliged to stop at one social responsibility town or community on the route? Bus Éireann might stop in Dromod and Rooskey and another operator might stop in another village along the route. This would not impact on a customer who is travelling from Sligo, because the bus would be stopping in selected villages only, and not in every village along the way. It would not reduce competitiveness because each operator would take a share of the public obligation burden. It would, however, improve connectivity along the route and facilitate other operators of non-commercial services to link up with the main route rather than forcing those non-commercial services to go to much larger towns to connect with the network, if they are lucky enough to be able to do that.
Mr. Nolan makes the point that it is hard to make a commercial case for stops at intermediate points. The route through Dromod and Rooskey is shorter than using the bypass. To service Elphin involves only an extra 2 km. I do not see the commercial savings, in fuel for example, by bypassing these communities along the route. Would it not be fairer for everyone to share the burden, rather than have one operator withdraw the only service, leaving everyone without one?
Mr. Nolan says he has achieved a reduction of 15% in operational costs between 2009 and 2011. That is a significant reduction. Does he envisage further reductions in operational costs? Could he explain how he achieved the 15% reduction and how he hopes to achieve further reductions?
Mr. Martin Nolan
Deputy Dooley asked about cost savings and the comments by the Coach Tourism and Transport Council, CTTC. I was a little confused by those comments. On the one hand, the CTTC said Bus Éireann had good staff and that if they were to run the operation they would need some of our staff to do so. On the other hand, it said it did not want TUPE. This left me partially happy and partially not.
If the network itself is split up among a number of operators someone must bring it back together. In Copenhagen, for example, €28 million was spent on regulation. The cost of the job we do must be met somehow.
If Bus Éireann does not have work for its 2,500 staff they will become redundant and cost money that Bus Éireann does not have.
CTTC says it can provide a better service. We have worked with the National Transport Authority, NTA, and put our submissions to the authority, explaining our track record in public transport since the 1930s and in schools transport since the 1960s. Our performance stands by itself and the NTA and the Department recognise that.
I will ask my colleague, Mr. Rory Leahy, to talk about Carracastle, the N4, Ballinamore and Rathmullan.
Mr. Rory Leahy
There is not a huge difference between the length of the main road route and the route through Carracastle. The issue is one of trying to present an attractive service. The route is losing money and radical surgery had to be applied to this and other routes. We are trying to look at the route on a commercial basis. Where usage of the service was small we have had to make some uncomfortable decisions, as Mr. Martin Nolan said.
We are engaging with local communities in all the locations concerned. We are trying to establish where solutions can be found, principally through the PSO network in conjunction with the NTA. We will continue to do that. We have done this in Carracastle, Dromod and Roosky. I was in Carrick-on-Shannon yesterday, meeting local councillors and in Elphin on Friday last, meeting Deputy Naughten and other concerned people. I was also in Bawnboy yesterday in relation to changes on route 30. We are engaging with people and trying to find solutions to these problems. They are stemming from the losses we are incurring on some of our express routes. Express routes cannot make a loss for our operation.
The area of Donegal referred to by Deputy McHugh is a part of the country where Bus Éireann does not operate. The Londonderry and Lough Swilly Railway Company is a local independent bus operator in County Donegal that provide a level of service that is licensed by the NTA. Bus Éireann has no direct involvement with Rathmullan or with the services in that locality. If we were asked to have some involvement we could look at that.
Senator Mooney mentioned Roosky and Dromod. We are engaged locally on that issue. We have a daily express service via Dromod and Roosky on route 23. There has been some comment on the suitability of the timings and we are looking at that.
The issue of services to and from Ballinamore and Mohill stems from the withdrawal, last year, of an Ulsterbus service from Derry through Enniskillen to Longford. Bus Éireann had nothing to do with that service. Its withdrawal has left Ballinamore with a much reduced public transport service. We are aware of the issues and the NTA is also aware of them. If we can improve matters within the bounds of the existing public service contract we will try to do so.
Mr. Martin Nolan
Deputy O'Mahony asked about charges into Dublin Airport. Bus Éireann and all bus operators are charged into Dublin Airport. I think we are in competition with the airport car parks. The airport derives revenue from bus services and they go out to tender every so often. We are charged there.
Does that apply to other airports or just Dublin Airport?
Mr. Joe Fitzgerald
It does not apply in Shannon or Cork. The arrangement in Cork is that Bus Éireann is allowed in and the charge is zero.
Mr. Martin Nolan
We are part of the National Integrated Rural Transport Committee, NIRTC, run by the NTA. We will be involved in pilots in 2013.
Deputy McHugh asked about schools transport. There have been large savings on schools transport which have been passed back to the Department of Education and Skills and used, in the main, to provide additional schools transport services for children with special needs.
How much was the saving?
Mr. Martin Nolan
It was over €30 million.
Bus Éireann's part of that scheme is €150 million, of which over €100 million goes to private operators. One third of the cost is used on special needs. A large bus normally costs €3.50 per head, a minibus costs €8.50 per head and a taxi for a child with special needs costs €100 per head.
Deputy Ellis asked about expansion. We can do a number of things without much additional cost. Bus services must be frequent and reliable.
We need more priority measures, particularly when the economy is a little depressed and it is better to implement them before the economy grows.
On the question of technology, I refer to our work with the NTA on real time passenger information, AVL systems - it is very important to know when a bus is coming - and smart cards. We try to be as efficient as possible with regard to the management of staff numbers. Most employees who leave are those who retire. Our policy is to ensure as many of the front-facing staff as possible are retained while trying to reduce the number of back-office staff. On the question about vehicle standards, the RSA referred to Bus Éireann as being one of its gold partners. We work very closely with the RSA. An independent UK company checks out 7% of all vehicles, both our own buses and those privately operated buses. This is paid for by Bus Éireann. This year saw a reduction of 11 vehicles out of approximately 4,000.
In answer to the question about tourism, our sister company, CIE Tours, is the flagship for CIE in the tourism sector. We have noted an increase in tourist numbers using our services in particular along the west coast. Ireland is becoming competitive again and Bus Éireann is in the market to cater for tourists travelling in Ireland. Free travel makes up just over 20% of our revenue.
I refer to the switchover in school transport of 85%. The reason Bus Éireann keeps a fleet is to ensure that the quality and standard is maintained. Industrial unrest has occurred in the company on three occasions in the past 15 years in cases where cartels of private operators had tried to hold the company to ransom. That is the reason for the strategic fleet which used to be 700 vehicles but is now under 500 vehicles. During a recession it is right for us to reduce our involvement in school transport it but it was not too long ago when nobody wanted to drive school buses or wanted to provide vehicles and the price was going up. Therefore, there is a need to keep that strategic fleet. A court case is pending and matters are sub judice. The company appeared before the Committee of Public Accounts last year. An explanation of the school transport accounts is available on the Oireachtas website. It includes correspondence from the Secretary General of the Department of Education and Skills at the time, Brigid McManus, and all the information is contained on the websites of Bus Éireann and the Department of Education and Skills. The accounts are independently audited and every part of Bus Éireann is independently audited. We have very strong corporate governance and we have employed numerous consultants over the past 30 to 40 years. Our records are available for anyone to see.
There are two parts to the issue of bundling. Customers have a variety of options such as road and rail transport and it is hoped they will not vote with their feet. While passengers in towns and villages have to be picked up, if the customer does not stay with us then the whole service will go.
Mr. Rory Leahy
Deputy McHugh mentioned two issues, local transport and the working groups. A number of working groups are operative in counties around the country. As it happens, we had a meeting in County Donegal last week which was attended by the company, rural transport providers, the HSE and other HSE-sponsored providers. The providers are working together to come up with solutions to particular issues. On the question about information, the NTA website contains information on local transport including Bus Éireann services, rural transport services and most licensed operators.
Mr. Martin Nolan
Ms Miriam Flynn will answer the questions about County Kerry.
Ms Miriam Flynn
I refer to our services operating between Kerry and Limerick and Kerry and Cork. As these fall within the remit of commercial services, they will be subject to some minor changes. However, we are very conscious of the requirement for additional services during the tourism season and this is taken into account in any timetable alterations. We have also looked at additional demand at peak times such as Fridays and Sundays in particular. The new services between Kerry and Limerick will serve the University of Limerick in the mornings and evenings and this should offer an additional incentive for people to travel along that corridor. They also serve locations such as the Mid-West Regional Hospital. The Deputy has highlighted the importance of access to these facilities. We envisage up to eleven services a day between Tralee and Cork. These services will all serve Cork University Hospital and UCC, en route to Cork and in both directions. This should improve the overall connectivity for people willing to travel from Kerry to Cork.
Bus Éireann is very conscious of the importance of tourism to the country. Mr. Nolan has highlighted the fact that there has been some increase in tourist numbers. The Bus Éireann name is a great attraction in tourism promotion. We offer people the opportunity to travel from Dingle up to Donegal, for example, on one discounted ticket. This is very important for the promotion of Ireland and the connectivity offered by the Bus Éireann network.
Will the interim stops in the smaller towns be retained on the Kerry to Limerick and Kerry to Cork routes?
Ms Miriam Flynn
Yes, Deputy. There will be no change to the routes as they currently operate.
Very good.
I invite Mr. Nolan to make a concluding statement.
Mr. Martin Nolan
Senator Brennan asked how the reduction in costs was achieved. It was achieved by hard work on the part of the vehicles, the people and also by smarter thinking. A number of services have very small passenger numbers. We get much more out of our vehicles these days. Technology allows a smarter monitoring of the network.
A question was asked about tendering. Our submission to the NTA requested a proper cost-benefit analysis. As we said earlier, all that glitters is not gold, with reference to other countries such as Sweden and the UK. Our track record needs to be taken into account. We need to be very confident that if this work is given to another party that it can do it. I believe our track record shows that we are well capable of doing it. We transport 113,000 children on school transport services provided under the school transport scheme, of whom 50,000 enjoy free school transport.
If I may pick up on a point made by Senator Mooney about the expressway routes, Mr. Nolan referred to low usage. However, I refer to recent timetabling changes and I ask that Bus Éireann be sensitive to the needs of users as regards changes in timetabling. A question was asked about free transport and Mr. Nolan said there is a 20% usage. Many people think this scheme is being abused. It is an excellent scheme and it must be preserved. However, there are allegations of people using bus passes that are no longer valid, no longer alive, so to speak. Has Bus Éireann any evidence of such practices? Could regulation of the scheme be improved in order to keep it for the people who deserve it?
Mr. Martin Nolan
There is some abuse of the free travel scheme. This will be eradicated when the public services card is introduced. A great deal of work is being done by the NTA and the Department of Social Protection in this regard.
The main problem in the context of intermediate points is to try to ensure that the stopping points provided appeal to the majority of one's customers. This consideration will always drive matters in respect of stopping points.
I thank Mr. Nolan and his team for their excellent presentation.
Mr. Martin Nolan
If possible, I would like to make a concluding remark.
That is fine.
Mr. Martin Nolan
The company has been in existence for 25 years. In terms of passenger numbers, we are very confident about the future. I do not believe any other company has recent experience in the area of public transport that matches ours. I also do not believe that anyone else can match the commitment shown by our staff throughout the country. I thank members for their time and courtesy.
I thank Mr. Nolan for the information he has provided. I hope it will assist us in our deliberations on public transport.
We are joined by representatives from the National Transport Authority, NTA, who are here to brief the committee on the authority's role in respect of the bus routes operated by Bus Éireann and private operators and on the public service obligation tendering process. I welcome Mr. Gerry Murphy, CEO of the NTA, and Ms Anne Graham, director of public transport services. Our guests are aware of the position in respect of witnesses' testimony, so there is no need for me to reacquaint them with the rules in that regard. I call Mr. Murphy and ask him to make his presentation.
Mr. Gerry Murphy
I do not propose to adhere rigidly to the text of the opening statement that was circulated to members. The committee has had a busy time and members may wish to move quickly to the question and answer session. In the interests of clarity, however, I will highlight some of the important points.
The NTA was established in December 2009. It is the national body with responsibility for public transport - bus, rail and light rail - throughout the State. We operate in five ways: first, we have a contract with Irish Rail in respect of the provision of rail services; second, we have assigned to the Railway Procurement Agency, RPA, the management of Luas light rail services in Dublin; third, commercial bus services - such as those provided by Bus Éireann, by means of its expressway service, Matthews Coach Hire Limited, J. J. Kavanagh & Sons and Aircoach - are licensed by the authority and are not the subject of State subsidy; fourth, we have contracted Dublin Bus and Bus Éireann to provide bus services throughout the State in respect of which there are public service obligations and which are the subject of State subsidy; and, fifth, we manage the rural transport programme - for which we assumed responsibility in the past six months - throughout the country. Many of the services relating to the rural transport programme are demand-responsive in nature and routes can be varied to meet people's requirements. These services are also the subject of State subsidy. For clarity, there are five sets of services throughout the State.
The contracts we have with Dublin Bus and Bus Éireann are extremely strong in nature and they confer on the NTA a number of weighty powers. We possess, for example, similar powers to Transport for London in the context of managing the bus sector. The contracts to which I refer contain strong performance requirements. I recommend that members visit our website in order to see these contracts and information relating to quarterly performance reports and to targets that have been met. It should be noted that 10% of the subsidy is reliant on the companies meeting their performance targets. We can alter and amend the contracts unilaterally in order that the public might be better served. All changes to these contracts are subject to approval by the authority.
I will deal now with what might happen in respect of these contracts after 2014. The contracts to which I refer are direct award contracts. The latter are allowed for under European law. Essentially, certain State operators can be directly awarded contracts to run services which attract State subsidy. We are considering whether, post-2014, we should continue with the existing contracts in full with Dublin Bus and Bus Éireann, whether we should open them up completely to tendering or whether we should open up some aspects of them to tendering and leave the residual aspects with those two companies. As part of this exercise, during the summer we engaged in a public consultation process. We published our consultation documents and sought the views of members of the public in respect of what we should do with the contracts post-2014 and with regard to whether new opportunities could be delivered by means of competitive tendering. This week we are going to publish those views in conjunction with our summary report. In parallel to this, we carried out a market consultation. As part of this, we advertised in the Official Journal of the European Union in order to elicit from international and domestic operators their interest in tendering, the forms of contracts they would require and their views on the allocation of risk in such contracts. The information we receive will assist us in determining what we should do.
During an earlier session, reference was made to TUPE. The latter relates to people's employment rights when a business or part thereof is taken over by another employer following a merger or transfer. TUPE is a statutory requirement. If there were to be competitive tendering and if this were to result in job losses in any of the State operators, the employees affected would be entitled to jobs with the private operators. Such operators, if they won contracts as a result of competitive tendering, would be obliged to offer jobs to employees such as those to whom I refer. The representatives from the Coach Tourism and Transport Council of Ireland, CTTC, indicated earlier that they are not so keen on the TUPE aspects. However, our market consultation indicates that international operators have no issue with these and are well used to operating within the parameters set down throughout Europe in this regard.
One of the key issues which emerged during the public consultation process is that people want integrated quality services. Whatever we do as an authority - in other words whether we open up a portion or the whole market - members of the public want integrated timetables and information and they like Leap cards and real-time information displays. One of the functions of the National Transport Authority is to manage all of these aspects centrally. We have operators within those arrangements and these would all be protected, regardless of whether there was a full direct award or whether, as a result of competitive tendering, some other operators entered the market. That is the position with regard to State contracts.
The second major strand in the context of bus provision is on the commercial side. We assumed responsibility for that function in 2010 and one of our first tasks was to prepare guidelines on how we intended to manage it. We produced comprehensive guidelines which had not previously existed. These were welcomed by the Competition Authority as providing a clear and level playing field for everyone. They apply in respect of Bus Éireann Expressway services and to the private operators who have entered the market. We introduced new timelines for our decision making in order to support the commercial responses. I am happy to say that we have maintained the standards relating to fast decision making in the context of assisting operators to arrive at commercial responses in order that they can get their vehicles out on the road to serve customers.
I would like to go into some detail with regard to the benefits of the commercial licensing arrangement and the constraints or limits relating to it. This goes to the heart of the issue of the withdrawal of commercial services from particular areas. There are strong benefits to the commercial licensing arrangement. It ensures that there are satisfactorily insured and qualified bus operators are providing public transport services. It also ensures that these operators are tax compliant. It must be noted that the commercial licensing system does not undermine the State services we are subsidising.
It does not undermine the services that exist for social need that we are subsidising. It does not take the strongly profitable routes out of that bag of services.
The other aspect of licensing is that it prevents unproductive on-the-road competition where one could have operators with competing and conflicting timetables not serving the customer, causing public order problems and could allow for predatory practices where someone could come in and undermine a successful operator who is providing services to the public and has long been doing so.
Last, it provides a tool to manage all the operators in the integrated ticketing-passenger information journey planner. There is nothing to prevent a licensed operator coming to us seeking to amend their licence. We would consider it just as if we were granting a licence, in terms of whether it would cause problems with the State subsidised service or another operator and if it is in the general public good. There is no provision in the Act for us to refuse an amendment where it does not conflict with either existing operators or with the PSO service. That goes to the heart of why we approve amendments that withdraw services. They are a commercial response and, provided there is no regulatory issue associated with them, we cannot constrain the commercial response to remove services because otherwise the operators might pull all the services. They have made a determination demand and then they determine that they might need to cease stopping in places. We cannot prevent them from doing so.
If a commercial operator starts to pull out of a town – it is not only Bus Éireann Expressway, but two other private operators have pulled out of multi-stop routes - we are then faced with the situation of how we fill the public transport gap. The problem is exacerbated at a time when there is falling public subsidy available for services. If additional subsidy moneys were available we could easily reconstruct a network of replacement State-subsidised services to deal with all the issues raised by members today and resolve them. The current circumstances make the task very difficult and sometimes impossible. What we are trying to do is examine whether we can reconfigure the State-subsidised services in those areas to include the stopping points without impacting on the cost of those operations because if there is a negative impact then more subsidies are required. Having taken over the rural transport programme it gives us an opportunity to examine whether it can fill in some of the gaps and improve connectivity to the major express services.
We recently advertised for a replacement service from Urlingford to Portlaoise via Durrow and Abbeyleix. We are in discussion with the winning tenderer. We have a number of tools that we can use. I would prefer that there was a pot of money available that we could then deploy and subsidise replacement services but that is not available at the moment so we have to be as clever and smart as we can with existing subsidised services.
On the rural transport service, my colleague, Ms Ann Graham, chairs the national integrating committee which looks at integrating HSE services with the Bus Éireann scheduled service and the rural transport services. The committee is also examining the opportunities on the school transport side in terms of the availability of excess capacity on return journeys. She is actively examining the issue with all of the partners. Throughout the country all the rural transport groups have set up working groups and they are actively involved in that area. To support that we have begun a review of all the public transport services in various regions. We have to move around on a regional basis because we do not have the capacity to do the entire State in one go. We did it in the south-east region and we are reopening the review to consider rural transport. We are doing the Border, midland and west region and we are looking at the south and mid-west regions at the moment. It is a time-consuming exercise. It would be nice to do such an exercise very quickly in response to some of the service challenges we face, and some of the lost services for rural towns, but we must get it right. We must work within the subsidies and try to reconfigure services and their integration so that we can do more with the same pot of money and increase the service coverage.
I tried to précis the points. I thank the committee for the opportunity to speak.
I welcome Ms Graham and Mr. Murphy and thank them for their presentation. This morning we have had the benefit of hearing observations by the transport sector, both private and public. The focus of the National Transport Authority, NTA, is on the consumer and the State. To that extent we have heard claims by both sides, some of them contradictory. The first one, the transfer of undertaking, has been addressed, which I welcome.
The private sector claims that it can provide the service more cheaply. Could Mr. Murphy give us an insight on the matter from his experience and from information from other jurisdictions? While the service might be provided more cheaply by one side than another, will additional costs have to be borne by the State?
I asked questions previously on the potential for the disjointing of the network. That is a concern that gets raised with us. Bus Éireann probably put that forward clearly enough. Could Mr. Murphy elaborate on the issue? Is it possible to retain the complex and sophisticated existing network with bundles of the service privatised? In such a scenario, would the NTA manage the network or would it be expected that the existing network operator would have the role?
Do private contractors have to take on staff at the same rate? Is it an undue burden that they have to carry in the event that they are in a position to provide better value and from their perspective a better service?
I thank Mr. Murphy for the presentation he made. The contracts are due for renewal in 2014. The big fear is that Bus Éireann would be privatised. I am not clear on the EU directive. Is it telling us that we must go to tender and follow the directive to the letter or could we adopt a different attitude? I seek clarity on the issue.
How much does the NTA scrutinise public and private contracts? In the context of a tender for different routes does the NTA have a role in scrutinising the contracts that come in and what does it involve?
When the National Transport Authority was set up I understood that part of its remit was to safeguard the national interest in terms of public transport and that it would have a biased role to protect the State’s stake in the system. It seems to follow a different line in terms of European directives. The NTA should have been set up to protect our interests in public transport. I would welcome an opinion from Mr. Murphy on whether he views the NTA’s role in a similar way to that which I have outlined.
Mr. Murphy mentioned an involvement between rural transport services and school transport. What liaison has taken place between Bus Éireann and private operators?
Is there room for rural transport services to get involved in that? Also, what is the percentage of private operators in the provision of rural bus services? What percentage of the vehicles do the rural bus companies own? Has the service been rolled out at this stage to every corner of the country or are there gaps in the provision of this rural transport service?
I welcome Mr. Murphy and Ms Graham. I will focus on the commercial bus licensing aspect. Mr. Murphy said that he is actively examining the reconfiguration of nearby public service obligation, PSO, services. He referred also to having advertised for a replacement service. As I explained earlier, it is obvious from the experience in my part of the country, County Leitrim, that there are large swathes of the county - and the same could apply to across the west and the Midlands - where there is now a withdrawal of services by Bus Éireann, particularly Expressway services, on which it does not get a subsidy and must compete with the private operators. It was subsidising what was effectively a commercially run service, and now the chickens have come home to roost. It cannot compete effectively and the reality is that it is now starting to withdraw from smaller towns and villages.
Mr. Murphy said he is now considering integration under the rural transport scheme. I believe the annual subsidy is about €11 million nationally, which has been reduced, and there is some suggestion of further cuts. Based on the map provided by the commercial operators earlier, in the midlands and the north west it does not seem to have any involvement in the provision of commercial services. Will Mr. Murphy now have to consider a tendering process for those services that are being withdrawn by Bus Éireann? What will be the future for small communities across the more dispersed areas of the country? This does not apply just to my area; it is across the country, because there is a gradual shift to the east coast. What is Mr. Murphy's policy in that regard? It is not fair, as one individual pointed out, to treat one part of the country differently from another part and to deprive the elderly, the infirm and those who cannot run a motor car of basic public transport. That is the challenge facing Mr. Murphy, who is charged with overall transport policy in the country. How does he intend to address that? Will he consider, for example, opening up those parts of the country and putting the service out to the private operators who say they can run them? At the same time, I suggest that the people using the existing services in the main have free travel passes. The challenge for Mr. Murphy is commercial viability, and I am curious to hear his reaction to that.
At a meeting with a delegation from Roscommon last week a question was asked about the withdrawal of services from Ballina to Dublin. It sounded like a fairly extreme question but the answer justified asking it. The question was as follows: if Bus Éireann decided to remove every stop between, say, Ballina and Dublin, could anything be done about it? I understand from listening to the witnesses that there is nothing they could do about that. What role do they play here if they cannot do anything about it? What is their purpose?
Regarding rural transport, which I know has been covered in several questions put by members, the witnesses say there is a review taking place. What is the timeframe for that? Will it involve the Health Service Executive with regard to transport to and from day care centres? That is something that needs to be developed and urgently reformed and if that is not done, the subsidy will not remain and we will not have a service. There is an urgency in reviewing that. I ask Mr. Murphy to answer the questions and deal with that point also.
Mr. Gerry Murphy
I thank the Chairman. On the issue of value for money in tendering, which was raised by Deputy Dooley, there has been a definite growth in competitive tendering throughout Europe, and there is competitive tendering in Australia and New Zealand. Various studies and reports have been done on the cost savings. Generally, the literature indicates that there have been cost savings from competitive tendering, but the literature will vary. It does not always come up with a figure of 20% to 30%. It very much depends on the starting base; in other words, if there was a very inefficient internal operator, significant savings of 20%, 30% or even 40% might be realised in some areas of New Zealand. However, in some other jurisdictions savings of only 5% were achieved. That material is what we are currently examining.
There is definitely an ancillary cost to the State if it moves from one internal operator to a number of operators. The rule of thumb is that if savings of 20% to 30% are achieved, 5% of savings lost could be due to centralised control. There is an issue associated with that.
Public bus services can be smartly supervised these days because of technology. With reports generated automatically from vehicle location information, we can quite easily run software routines to audit these. The tools for supervision are much more sophisticated now.
We would not end up with a disjointed network. People have cited London. London is unique compared to other cities because individual routes are tendered out as packages. A team of 15 people manages this across the entire network, and they have a rolling cycle of tendering. The end product for the consumer is the same: the red London bus with real-time information, integrated fares etc. That is what would happen if there were competitive tendering here. There is no way we would wish to create a disjointed network because it would not serve the consumer well. Staff must be taken on at the same rates and with the same terms and conditions under Transfer of Undertakings (Protection of Employment), TUPE, requirements. I believe that captures most of the Deputy's points.
To answer Deputy Ellis, the EU directives are mandatory for Ireland and they are further embodied in Irish law in the Dublin Transportation Authority Act, which states that where the authority proposes to enter into direct award contracts subsequent to the first ones - which applies to the 2014 contracts - it may do so only where it is satisfied that the continued adequacy of the public bus services can only be guaranteed in the general economic interest by entering into such contracts. That is why I said this is a careful process for us. We must satisfy EU law and Irish law. In that context we have to ask if the general economic interest is served by direct award contracts, and if it is not served, what is the proportion that would be served.
All the commercial licences we receive - which are not contracts - are scrutinised. We create the equivalent of a planning file in a local authority in which we have the submission from the operator. We assess the impacts, write a report, and then offer. The operator can appeal the offer; we then appoint a different officer to decide on the appeal. All of those files are compiled for each licence application in the State.
I agree with the Deputy on the point about safeguarding the national interest. The national overall public transport interest is our function. We apply an even ground between the State operator and the private operators on the licensing side; on occasions we have been accused by both parties of over-favouring the other party.
I will hand over to Ms Ann Graham, who will deal with Deputy Fleming's question on school transport services and the percentage of private operators of rural bus services.
Ms Ann Graham
With regard to school transport services, it was indicated earlier that a very high percentage of bus services are provided by private operators. A very high percentage of rural transport services are also provided by private operators. I do not have the exact percentage but I will get that information for the Deputy. Some of those services are provided by rural transport groups which own their own vehicles. I will get the breakdown of those figures for the Deputy after the meeting.
On the question of whether the rural transport service has been rolled out to every corner of the country, the service is certainly much more extensive than it was ten years ago but it could be more extensive. The limiting factor is a budgetary one. One would like to roll out many more services because there is no doubt that there are gaps in some parts of the country.
Mr. Gerry Murphy
Senator Mooney asked how we can respond to the real challenge of protecting small communities. The real challenge in this regard is the financial one. In 2008, some €308 million was allocated for the subsidisation of public transport services in the State. The figure is now €242 million. Therefore, there has been a drop of €66 million. There is to be another drop in subvention, in the order of 12%, in the next two years. This is why I contend that if we had the necessary moneys available, we would have the tools to remedy the problems. We do not have the moneys available, however.
We chose to tender the Durrow-Abbeyleix route but we had no subsidy available. In looking at quality and the service response, we made a decision simply on the basis of the fares that could be collected. The only moneys that were to be received were to be collected fares. We chose to go to tender because we felt it might be possible to find an operator that could exist on the fare box that was collected for a limited number of services. However, that could not be replicated in many of the areas talked about today. We could tender based on the same principle but we do not believe there is any point because the patronage would be so small that a service would not be justified. That is why we are faced with trying to reconfigure the services. I do not have an immediate short-term solution for the committee. We just have to work through the matter and try to reconfigure allied services effectively.
Deputy Flanagan asked about the meeting with us and what we could do if Bus Éireann decided to move every stop on its licensed services. The answer is that we could do nothing. On the question about the function we perform, I draw the Deputy's attention to my opening statement. The commercial bus licensing system is not to resolve these issues. One tool for doing so is State-subsidised services embodied in contracts. The licensing system can only do so much - it can only regulate the commercial responses for the services that are commercial.
Ms Graham will refer to the rural transport timeline.
Ms Ann Graham
In regard to the HSE services, in particular, many of the rural transport services already serve health centres and day-care centres. Our committee has been examining where we can deliver more rural transport services and achieve more integration of health service provision with rural transport provision. Considerable work has already been done, particularly in the north west. We want to determine how we can replicate the model across the country.
We propose a number of model areas into which we want to move immediately. We want to work with the rural transport service providers and the HSE at local level to identify where further integration can be achieved. We want to proceed in this regard as soon as possible to deliver better and more integrated services in rural areas.
Has any consideration been given to the UK system of having request stops, as distinct from compulsory stops? I am sure it comes within the delegates' mandate.
Mr. Gerry Murphy
Yes. We would have no objection to that. A request-stop system is operated by a number of operators.
CIE, including Bus Éireann, is not operating the system.
Mr. Gerry Murphy
Bus Éireann operates in certain areas where there are no fixed bus stops. There are stopping points that are almost request-stop points. If a passenger wants to get on at such a point, the driver will pick him or her up. On other routes, the bus will stop at the official stop. There are informal stops throughout the country.
I thank Mr. Murphy and Ms Graham for attending. This morning's exercise was well worthwhile given all the information we received from all sectors. I thank the members for their interest.