Should city bus services be opened to private competition?
NO:
The joys of privatisation have received quite a battering in recent times, as the Eircom and Aer Lingus debacles testify. There are just two main questions to consider when deciding whether to privatise all or part of the Dublin bus market: will it improve services and will it bring down the cost to the taxpayer? The answer to both is no.
Congestion is the key problem facing road transport in Dublin. Last year, gridlock cost Dublin Bus more than €60 million, almost as much as the €69.8 million the company received in State subventions to meet its public service obligations. Last year, buses in Dublin were running 13 per cent slower than in 2005. Allowing private operators to enter the fray will only add to the problem.
Nor will private operators be interested in loss- making routes or in cross-subsidising them from profitable ones. Experience in London, Copenhagen and elsewhere shows that handing routes over to commercial operators sees only the profits privatised and the taxpayer picking up the tab for everything else.
Because it can avail of economies of scale, Dublin Bus minimises the cost of subsidies from the taxpayer.
Up until 2000, it had one of the smallest public subventions in the world, just 4 per cent of operating revenue. Thanks largely to congestion, it has grown each year since to reach 25 per cent by 2006. This is still comparatively low by international standards and far less than the 33 per cent in London. The key difference is that subventions in Dublin are used to provide a public service, while in cities such as Copenhagen and London they are used to subsidise profits.
In both of these cities, privatisation reduced fares in the short term, but a few dominant players quickly emerged to establish de facto cartels. At present there are just three dominant players in Copenhagen and five in London. Each of the London companies controls a catchment area as big as Dublin and competition levels are so low that more than 90 per cent of routes do not change hands when they come up for retendering. However, fares have only been contained by increasing public subsidies, now costing more than €1 billion a year in London.
Some of the costs that are driven down by private companies actually lead to new subsidies. For instance, when private bus operators in London cut wages and working conditions, there was a 15 per cent to 20 per cent reduction in the frequency of services because of difficulties recruiting and retaining drivers. To deal with the problem, the Transport for London authority had to introduce an allowance for drivers of £4 (€5.73) a day.
Other hidden costs included the building and upkeep of basic infrastructure such as garages, bus stops and security.
Hidden costs for the Irish taxpayer will range from the family income supplement for low-paid workers in private bus companies, to footing the bill for decommissioning existing staff in Dublin Bus, to establishing a regulatory framework to oversee the new, privatised marketplace. When the idea of privatising 25 per cent of the Dublin Bus market was first mooted five years ago, the cost of voluntary severance payments, including buying out the letters of comfort from pre-1986 CIÉ staff, was estimated at €100 million. The figure now would be about €120 million. If a larger proportion of the market was privatised and more redundancies were required, then the costs would rise correspondingly.
In Dublin, the cost of running a regulatory system to ensure a level playing pitch is estimated at €14 million a year. Research elsewhere shows that regulatory bodies are slow to identify and respond to changing commuter demand. They require that all the players have an opportunity to tender for new routes, leading to further delays and more administrative costs. As private operators have to make a profit, these additional costs are passed on to the travelling public. Dublin Bus ploughs its albeit modest profits back into the service.
Another consequence of fragmenting the market is the loss of an integrated transport network, as anyone using British bus and rail routes discovers when they have to make a trip that crosses boundaries between networks run by different operators. A similar situation exists in Dublin to a limited extent because there was no real attempt to integrate bus and Luas networks. While bus usage in Luas catchment areas almost halved, car usage only fell by 2 per cent.
To lure commuters out of their cars, an integrated programme of more buses, more quality bus corridors and lower fares is needed. Above all, faster journey times and reliable bus timetables are essential. At present it can take up to 45 minutes to travel from Dorset Street or Parnell Square to St Stephen's Green or Camden Street. A fragmented, privatised system of public transport with higher fares will only aggravate the gridlock.
Michael Faherty is acting general secretary of the National Bus and Rail Union
