Opinion: Bus and rail services are hamstrung by a funding system which is as ineffective as a poor puck-out in an All-Ireland final
Bus Éireann and Irish Rail have had a rough few years. Both companies faced the threat of insolvency at the end of 2016. Both companies encountered serious industrial relation problems in 2017. The financial consequence for Bus Éireann was particularly severe and it recently reported a loss of €23.7 million for 2017.
State owned enterprises have three plates that they need to keep spinning. They must ensure the provision of uneconomical but socially-necessary services. They must stay viable as commercial companies in competitive markets. They must operate within a patchwork of inadequate transport policies. Successive governments stitched this patchwork together over the last two decades.
This is a problem that goes deeper than the government refusing to put its hand in its pocket when the country is cash strapped
Could transport state-owned enterprises have made better operational decisions over the decades? Yes, of course they could. Are these companies making efforts to address this now? Yes. Witness the controversial restructuring of Bus Éireann’s work practices in 2017 which will save the company in the region of €20 million over the next year.
Could the government have made better funding policy decisions? Yes of course, it could have. Is the government attempting to address the deficiencies in funding policy now? No. The government have begun to increase the amount of funding made available. In the long term, this is about as effective as a poor puck-out in an All-Ireland final.
The government gives Bus Éireann, Dublin Bus and Irish Rail public service obligation payments to provide services to loss-making routes. Public funding for each state-owned enterprise declined after 2008. These cuts hit the two state bus companies particularly hard. Both experienced a 30.5 percent reduction in funding between 2009 and 2014. The chart shows the shortfall in public service obligation funding preceded and outlasted the crisis period. This is a problem that goes deeper than the government refusing to put its hand in its pocket when the country is cash strapped.
The current public service obligation funding system is ineffective. There are three problems with it. First, the allocation of funding under the annual budget is inefficient. Without consultation, the government instructs the National Transport Authority about the funding envelope available for public transport.
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From RTÉ Radio One's Morning Ireland, Conor Faughnan, Director of Consumer Affairs for AA Ireland, discusses Bus Éireann's call for lanes to be reserved for buses on motorways
Second, there is poor monitoring of efficiency gains or losses. The National Transport Authority cannot spot any improvement or deterioration in cost efficiency for Bus Éireann and is not given cost breakdowns per depot. Third, companies are financially penalised for not meeting service targets during periods of industrial dispute. These disputes only happen in the first place because of the company’s inability to service pay increases due to accumulated shortfalls in public service obligation funding.
Our state-owned transport enterprises are hamstrung by these funding issues. This may go somewhat towards explaining the low level of funding relative to our European neighbours. It is not possible to compare subsidy levels across countries due to a lack of information. However, data from the European Metropolitan Transport Authority shows annual funding received by Dublin Bus from 2004 to 2015 covered just 26 percent of operating costs. This is well below the European average of 40 to 60 percent.
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From RTÉ Archives, a RTÉ News' report on the arrival of a new fleet of double-deckes for Córas Iompair Éireann (CIÉ) in 1966
Under national legislation, the National Transport Authority can only make changes to service provision, such as tendering routes, if they can prove that it is in the "general economic interest" to do so. This is a process that is not adopted by other European countries and it complicates otherwise straightforward financial decisions made by the Transport Authority.
Sadly, the irresponsible policy decisions don’t stop there. In addition to public service obligation funding, these companies get funding for providing services to the elderly under the Free Travel Scheme. Funding for free travel was frozen at around €76 million between 2011 and 2016, but the number of people eligible for free travel increased by 20.4 percent during the same period. Between 2013 and 2016, funding to Bus Éireann, Dublin Bus and Irish Rail covered roughly 35, 38 and 51 percent respectively of the total cost per free travel passenger.
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From RTÉ Radio One's Liveline, a discussion around the proposal to limit free travel apsses to off-peak hours
A review of the Free Travel scheme was undertaken in 2014 by an interdepartmental group established by the Minister for Social Protection and the Minister for Transport, Tourism and Sport. It found that "the Free Travel scheme is not sustainable without ongoing additional funding, changes to eligibility, a reduction in service or the introduction of some form of charges".
The government provided more funding for state owned transport enterprises in Budget 2018, but there were no changes of policy in relation to eligibility, service levels or charges. None of our European neighbours (except for Hungary) match this. Even progressive states like Denmark don’t think they can provide full funding for people aged 66 and over. Instead, they offer discounts per journey or charge their citizens an annual fee.
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From RTÉ Archives, Feargus Ó Raghallaigh reports for RTÉ News from 1986 on the decision to split CIE into Irish Rail, Irish Bus and Dublin Bus
Other European countries implemented successful funding policies which contribute to the financial stability of their public transport systems. Why then does Ireland continue to go against the grain? It’s simple: no government wants to risk their shot at being re-elected by introducing a controversial policy change that on the surface impacts some of the most dependent (yet politically influential) groups in society.
Change is needed of course but, where to begin? Public service obligation funding made available under the Budget must be more fluid from year to year and guided by stronger economic forecasting. The government must stop with the endless cycle of commissioning external consultant reviews. This has proven to be nothing but an expensive distraction technique from which credible recommendations are largely ignored. We must look to our European neighbours and learn from their successes and failures.
No government wants to risk their shot at being re-elected by introducing a controversial policy change that impacts some of the most dependent groups in society
An Post recently made the controversial decision to close 159 rural post offices. This action is being taken to ensure the future viability of the company. The government washed their hands of any responsibility citing that it is not their place to intervene. And they are right. An Post receives no subvention from the government and is instead funded through its own resources and borrowings. The government does not have the same excuse in the case of state transport companies. The buck stops with them.
When the radical cost saving plan was put to the employees of Bus Éireann last year they were told that such a short-term sacrifice was the responsible step to secure the long-term survival of the company. Until the government is prepared to be responsible and swallow a politically bitter pill to make the necessary changes to funding policy, the future of our national public transport system will continue to be clouded with uncertainty.
The views expressed here are those of the author and do not represent or reflect the views of RTÉ
