OPINION:The more cost-effective solutions of private firms must be sought in future public service obligation tendering, writes GERRY MULLINS
LAST WEEK the National Transport Authority presented Minister for Transport Leo Varadkar with its recommendation for the tendering of Ireland’s subsidised bus services.
The State is under pressure from the EU to tender out all its public service obligation (PSO) services by 2019. These are the bus services that have a social need, but are deemed to be financially unviable. Almost all Dublin Bus’s network, and most of Bus Éireann’s, is PSO. The combined subsidy is about €110 million per year.
We won’t know for some weeks what the NTA has recommended, but it is safe to say that the plan could contain the most important development of Ireland’s public transport system since the 1930s. Leo Varadkar must sign off on the new plan in November if the State is to commence tendering by the 2014 deadline.
The advantages of tendering out PSO services should seem obvious. Competing private companies drive each other’s prices down, while well-crafted and well-policed service-level agreements ensure standards are upheld.
Clearly, the exchequer and the travelling public would benefit from such arrangements, while private bus companies, such as those the Coach Tourism and Transport Council represents, would relish opportunities to create new business in markets from which they have always been excluded.
Estimates of how much the State will save by PSO tendering vary. The school transport value-for-money review published by the Department of Education last year estimated that private contractors’ costs averaged 21 per cent less than equivalent Bus Éireann costs. That would suggest a saving of about €23 million per year, without deterioration in services.
This estimate is supported by a 2008 OECD report that tracked the effects of privatisation on the efficiency of public transport systems around the world. Adelaide reduced its public transport costs by 38 per cent, Amsterdam by 10-16 per cent, Copenhagen by 24 per cent; the Helsinki region by 26-34 per cent; Perth by 20 per cent; Sweden by 10-15 per cent; and London by 18 per cent.
The scale of the savings depends on the restrictions placed on the tendered services. In Ireland much will depend on whether the successful tendering companies are forced to take on existing CIÉ staff, and if they will be allowed full access to CIÉ stations and depots.
Given the potential for savings without deterioration in services, one wonders why the Government needs pressure from Europe to go to the market. But such a question overlooks the array of interests that will oppose any change in transport policy.
CIÉ management, along with its union bedfellows, will oppose any change from the status quo. Dublin Bus and Bus Éireann will look at Aer Lingus and see what can happen to a State company when it is exposed to the open market. Some painful change would have to take place if the companies were to survive.
Fortunately for them, they have always enjoyed the protection of the Department of Transport, which for many decades earned the reputation as CIÉ’s Kildare Street office. It is difficult to foresee that department suddenly adopting a pro-private sector stance unless strong pressure is applied by its Minister and the NTA.
And where lies the NTA? It was established in 2009 by then minister Noel Dempsey as “an independent transport authority” (presumably he didn’t see his own department as independent). However, private bus companies have seen little evidence of change.
It is interesting to note that, when the NTA was established, it was strongly opposed by the then CIÉ chairman John Lynch, but welcomed by the private bus companies. Nowadays the CIÉ people seem quite happy with the NTA, while private bus companies grow increasingly concerned.
We are excluded from the real-time passenger information system, and there has been a succession of decisions that seem to favour the State companies over the independent ones. It would seem unlikely that the NTA will push for the reform this country so badly needs.
So much will depend on Leo Varadkar’s appetite for reform. Private bus companies had been optimistic when he assumed office, but have been disappointed by him also.
The young deputy arrived into office sporting a brash pro-enterprise persona, and armed with a Fine Gael transport policy that favoured a new bus network “based on competitive tendering for bundles of bus routes”.
But his privatising agenda was set aside after just seven weeks in office when the Minister told Pat Kenny on RTÉ radio: “It is not a Fine Gael Government. We have a Fine Gael/Labour Coalition, and it’s fair to say Labour would take a different view on that issue, and that has to be respected.”
And respect for the Labour view is something the Minister has shown ever since. So much so, he hasn’t delivered a single item in favour of private bus and coach companies during his 19 months in office, either as Minister for Transport or as Minister for Tourism.
Meanwhile, Labour has shown no such respect for Fine Gael’s views on transport and has enjoyed a free hand to look after its stakeholders. In March a new train service opened on a previously unused track near Limerick junction in Minister of State for Public and Commuter Transport Alan Kelly’s constituency. The service costs the State €5,000 a week and serves just 10 passengers a day.
Kelly also convened a new Integrated Rural Transport Committee with the laudable aim of integrating school, health and rural transport services. But it has served only to exclude private bus companies, even though they carry the vast majority of passengers in rural areas.
Probably the greatest sign that transport is not a Fine Gael department was in July when CIÉ demanded and received a €36 million bailout. The transformation of Varadkar was complete. He signed over the money, and still refuses to specify where it is going, where it is coming from, or what measures would be put in place to prevent the need for another bailout.
But the cause isn’t hopeless for Ireland’s independent bus companies and the wider travelling public.
We do have a card to trump all the other factors: the country is broke.
Our public transport system is a legacy of two previous eras: its structure is from Ireland’s time as a banana republic, and its costs belong to the Celtic Tiger era. Neither is appropriate in the fair and efficient society we are now trying to forge.
It has to change, both completely and quickly, and tendering of public transport services presents the perfect opportunity. We shouldn’t need pressure from Europe, but it’s good to have it all the same.
Gerry Mullins is chief executive of the Coach Tourism and Transport Council, an umbrella group that represents 64 family-owned coach and bus companies