Dáil Éireann Debate, Tuesday - 30 January 2024
70. Deputy Donnchadh Ó Laoghaire asked the Minister for Rural and Community Development to discuss the provision of subsidies for the transportation of freight to the offshore islands, the maximum cost of same and the oversight mechanisms that exist. [4304/24]
Amharc ar fhreagraI put in some written questions on this. I understand Our Living Islands proposes to review the freight contracts to our offshore islands. If we are serious about ensuring they have a future, living on an island should not be significantly more expensive than it is on the mainland. That is not only the case for online purchases but also for things like building a home. We need to address that in the freight contracts.
Reliable, affordable, year-round cargo services are essential for the sustainability of our island communities. They provide support to indigenous island manufacturers and businesses sectors and contribute to the quality of life for island communities. My Department currently subsidises nine heavy cargo contracts for 17 separate offshore islands. In 2022, over 45,000 tonnes of heavy cargo were carried on these services. In addition to these dedicated heavy cargo services, four passenger ferry contracts provide a light cargo element to their service, while another two passenger services are delivered using roll-on roll-off vessels, which also allow the carriage of cargo.
Suitable operators for these services are chosen on the open market following a procurement competition. Cargo requirements vary from island to island, and so too do the tender documents. A consultation process with the island communities is central during the renewal phase of a service and tender documents are amended, if appropriate, to address service specific issues or to improve an existing service.
To ensure that cargo services remain affordable for island communities, tender documents set maximum fares that an operator can charge. Cargo items are categorised by weight, size and-or volume, and charged against the agreed capped price list that is published in the tender document. Operators must adhere to the price list for subsidised sailings.
As contracts are renewed, monitoring committees now form part of the cargo services. They meet regularly during the year and review the service. This gives all stakeholders - the island community, the operator and the Department - a forum to discuss and provide direct feedback regarding a subsidised service.
In addition, operators are required to supply service logs to the Department highlighting key performance indicators each month. The Department can then verify whether a service is delivered as agreed and will withhold subsidy payments if the terms of the agreement are not met.
From speaking to some people who live with the reality of life on the islands there are a couple of difficulties as things stand that need to be taken into account with this review, which needs to be very rigorous. First, maximum pricing and precisely what that means must be considered. The Department talks about maximum pricing and provides these tariffs. In practice that is very often treated as the price and an awful lot of people told me: "Sure, that is what the Department is telling us to charge." When I go back to the Department it says that is the maximum price, but in reality what is actually implemented is a bit different. The costs are very significant. I spoke to somebody recently who priced gravel for their home for €9 per tonne for a job a couple of years ago . By the time the actual freight was taken into account it ended up costing €41 per tonne. It has come down a bit since then but it is still very substantial.
The double VAT is significant as well. People pay VAT for something they purchase online. The courier will only bring the item as far as the pier so the person will have to pay for the carriage to the island and pay VAT on that again for the second time.
To give the Deputy some figures, the cost of heavy and light cargo contracts for 2022 was €2.2 million. It is important to remember that cargo services are procured on the open market through e-tenders and competition is open, fair and transparent. The contracts are generally of a three-year duration, sometimes a little more, but there is a clause to review on an annual basis. What we are talking about here is the longer term framework, and the island's three-year action plan does include a commitment to review the cost of transporting goods on cargo services. The Department does intend to have that completed by the end of this year and I am told it will commence that process shortly.
To give another example, some of the lists that have been given can be a bit arbitrary. Apparently, it costs €18 per tonne of gravel but €10 per tonne bag of sand even though they are precisely the same weight. There is a difference in price even though it involves the same mechanism and that surprises people.
One of the key findings on the future of the islands relates to the challenges that exist in sustaining populations on the islands in terms of housing but the cost of building houses on the islands, even when one gets past all of the planning obstacles, is very substantial. Some of this comes back to the philosophy. What is the purpose of the subsidy? The subsidy should be to offset the additional cost that exists for islanders. Our objective should be to ensure they are no worse off than people on the mainland. Is that being achieved at the minute? I am not sure.
On the funding model, I came back with a written question that there is not a public service obligation, PSO, mechanism, it is a contract for services approach. It suggests that these needs could not be met under PSO. Will the Minister of State expand on that? What is the evidence or rationale that needs could not be met under PSO?
I want to confirm that what the Department will do with the action plan is part of a bigger policy and desire to reinvigorate and keep life in the islands. The action plan has a particular focus on improving housing, water, infrastructure, health services, education services, high-speed broadband, outdoor amenities, sustainable tourism and reviewing transport costs. From speaking to officials about this, I understand that essentially the running costs of the cargo vessel are pretty much covered and then there is the cap on whatever goes on to it as well. That needs to be reviewed and the performance of some of the operators needs to be reviewed also in the context of what will start in the next couple of weeks. I do not have the detailed question the Deputy asked but we can follow up on the ins and outs of that part with the Deputy.
