CIE: The going is great and the coming back is on the taxpayer

THE RECENTLY announced £33.5 million loss by CIE in 1976 hardly surrprised taxpayers long used to heavy loss making by the company. The loss costs every man, woman and child in the country £11 a year and the cost to the taxpayer is £1 a week. '  By Sean D. Barrett

Last year's losses bring the total since the establishment of CIE in 1945 to almost £150 million.

The establishment of CIE was itself a continuation of a transport policy designed in the 1930s to make life easier for the railways, then privately owned, and to make life harder for the very competitive road transport firms, then also privately owned. This rigging of the - market, even before eIE ever cost the taxpayer a penny, removed the imporrtant competitive element from the public transport scene and left the consumer worse off.

The first important point about the CIE deficit is that itrepresents the tip of the iceberg of what an outdated transsport policy costs the public transport user and the taxpayer. The National Prices Commission warned an unresponssive government in February 1975 that "there is considerable distortion in the Irish transport system· and if present policies are continued, this distortion is likely to increase. The alternative is a radical reappraisal of public policy. "

A measure of this distortion can be seen in the case of travel between Dublin arid Cork. The rail passenger is subsidised to the tune of 55 per cent by the exxchequer. An adaptation of the advertising slogan might read: the going is great and the coming-back is on the taxpayer.

The rail passenger who wants to travel on one of the days when the attractive special offers apply will J1ave to pay almost £19 return for a standard class ticket from Dublin to Cork. Travel clubs, to get around the law against competition

in public transport, can offer a fare of £4 without any subsidy. In this case the taxpayer, who already pays heavily to support the most under-used rail service in Europe, has his travel costs increased five-fold by the very policy he has been taxed to maintain. A further irony is that many of those who have found the loophole in transport law to introduce the element of competition and lower fares are the civil servants who operate the policy of restricting competition.

At least until the national economic plans are formulated and other options in transport examined, a brake should be imposed on the grandiose ways in which CIE would like to spend the nation's resources.

The second point to be made about the cm deficit is that its rate of growth exceeds limits which are acceptable in view of the need to curb the growth of. public expenditure. The National Ecoonomic and Social Council has warned that the attainment of full employment will require a massive investment proogramme which will entail reduced rates of growth of both public and private spending on current consumption. The CIE deficit is increasing at a rate which, if emulated by other public expenditures, make the attainment of full employment in the next decade impossible.

The Minister for Transport and Power stated in a radio interview on February 6 last, embarrassingly recorded by the Prices Commission, that "£30m. is as much as the taxpayer can afford to pay at the moment". The deficit had at that time already passed £33m.

When a company with CIE's investment record proposes to spend £38m on a rail service with total revenue of less than £800,000 per year, further calls on the taxpayer are threatened.

Another indication of the speed at which the CIE deficit is increasing can be illustrated by reference to the McKinsey Report. Despite heavy critiicism by the Prices Commission and economists such as the present author, CIE has been a staunch supporter of McKinsey on railways. The McKinsey work formed the basis for the Rail Development Plan, "the phased impleementation" of which was continued during 1966, according to the Chairman of CIE in his annual report. McKinsey's own estimates were that their proposals would reduce the railway deficit in 1975-76 from £6.5m. to £4.2m. at 1971 prices. Prices doubled between 1971 and 1976, so the losses then would have been £13m. without the McKinsey prooposals and were to be cut to £8.4m. by their implementation. The actual deficit on rail last year was £24m.,.almost twice as much as McKinsey had forecast and that was in spite of a partial implemenntation of their proposals. Nor will the implementation of the remainder of the proposals curb the deficit. The CIE Annual Report for 1975 says that the aim of the Board now is "to contain the annual deficit in real terms, taking the 1975 level of deficit as a base".

Given that the investment plans will not bring any relief to the taxpayer, despite the hopes held out for these plans by CIE and McKinsey, one must look to new ways of transport planning and look again at the plans currently emerging from CIE. The translation of the McKinsey Report into the Rail Deevelopment Plan and into its phased implementation was a closed process with the public allowed in merely for public relations purposes. There is no evidence that alternatives such as road development, independent truck and coach operations, separate and specific payments to transport operators for their social benefits, and charging vehicles their social costs, were ever considered. The National Prices Commission addvocated these measures early in 1975 but in February last could report no evidence of progress in their assessment.

In February Peter Barry, then Minister for Transport and Power, said that £30m. was as much as the taxpayer could afford to pay as subsidy to CIE. At the time CIE's deficit was already £33m.

Unless some new thinking on transsport policy does take place the likelihood is that the CIE deficit will escalate further at an increased pace. The current Annual Report says that CIE is at present engaged in studies on a Dublin Transporttation Centre, the Dublin Rapid Rail System, and a National Rail Study. The projects examined by the Prices Com-

miSSIOn in February last would cost £75m. in the next eight years, electriification of the railway from Bray to Howth would cost £38m. and the Dublin Rapid Rail System would cost almost £20Om. According to its annual report CIE is already lobbying for the electriification project to be sanctioned. When a company with CIE's investment record proposes to spend £38m. on a rail service with total revenue of less than £800,000 per year, further calls on the taxpayer are threatened. The McKinsey study of the alleged "social benefits" from this line as a reason for investment has little to recommend it. The Economists Advisory Group found that it "suffers from a number of minor defects and from six major ones".

The resistance to economic planning by the last government is well illustrated by the present sorry state of transport planning. The Economic and Social Council has pointed out the dangers to . employment in the vital, unsheltered sector of the economy if the public sector does not plan its spending with the full-employment target paramount. The promise of a draft economic plan later this year, with a full plan later, is vital to our increasing labour force. At least until these national plans are formulated and other options in transsport examined, a brake should be immposed on the grandiose ways in which CIE would like to spend the nation's resources.

Sean D. Barrett is a lecturer in Economics in Trinity College, Dublin.