A Review of the Regulatory Environment for Bus Transport in Ireland

January 31, 2006

News

31/01/2006

 

A Review of the Regulatory Environment for Bus Transport in Ireland

By Dr. Anne Ribault-O’Reilly, The Competition Authority.

Special Article in the Quarterly Economic Commentary, Winter 2005.



Regulatory reform of the Irish bus transport sector has been on and off the political agenda since the 1980s. In an article for the ESRI’s Quarterly Economic Commentary, Dr. Anne Ribault-O’Reilly concludes that reform is crucial to keep up with future demand as buses remain the main player in public transport.



According to Dr. Ribault-O’Reilly it is unclear whether regulatory reform of the bus transport sector is still on the Government agenda despite numerous reports and statements including:

 

 

  • In 1995, the pros and cons of liberalisation of the bus transport market were discussed in a Green Paper on Transport Policy.
  • In 2000, the Department of Public Enterprise published a proposal for a New Institutional and Regulatory Framework for Public Transport.
  • In November 2002, the Minister for Transport, Seamus Brennan T.D. developed a detailed plan to implement the 2000 proposal: the regulatory and operational functions in public transport were to be separated, franchising was to be introduced in the Greater Dublin Area and the provision of bus services outside the Greater Dublin Area was to be fully liberalised.

Beyond the operational subsidy received from public funds (over €300m between 1998 & 2003) Bus Éireann and Dublin Bus have obtained significant additional Government funding including:



(a) Fuel rebates worth close to €44 million in 2001 (private operators have been able to avail of such rebates since 2001);



(b) Funding to compensate for transporting passengers with free travel passes;



(c) Funding for the School Transport Scheme which has been administered by Bus Éireann on behalf of the Department of Education and Science since 1967 (worth around €110 million to Bus Éireann in 2003).



(d) CIE’s bus subsidiaries have received significant financial support from the National Development Plan 2000-2006 to replace or increase their fleets and finance infrastructure development (€346.8 million to Dublin Bus and €196.9 million to Bus Éireann).



Dr. Ribault-O’Reilly points out the current system of regulating the bus sector in Ireland is inefficient on a number of levels

 

 

  • Bus Éireann and Dublin Bus have limited incentives to minimise the losses on rural and urban services;
  • State funding to Bus Éireann and Dublin Bus is not directly linked to loss-making routes. As a consequence cross-subsidisation occurs increasing demand on loss-making routes (as expected) but lowering demand on profitable routes. By contrast, competition for Exchequer funding would have no impact on profitable routes and would ensure that non-profitable routes are produced for the least amount of subsidies.
  • Bus Éireann and Dublin Bus may be foregoing more worthwhile investment and innovation to subsidise loss-making routes.

To avoid these inefficiencies Dr. Ribault-O’Reilly proposes the following changes to the current regulatory regime:



(a) The Department of Transport’s role as an employer and the shareholder of the quasi-monopolist bus companies may conflict with its objectives as the policy-maker and regulator. To liberalise the market these functions need to be separated.



(b) Any bus operator that satisfies minimum quality requirements should be allowed on inter-city routes.



(c) Public funds for socially desirable services – whether they are rural, urban or school services – should be allocated following a competition for exclusive temporary contracts based on specified routes (or bundle of routes) and quality requirements. Such a competition should take the form of simultaneous tendering to allow both operators and consumers to benefit from the economies of scale and scope that can be generated by running a network rather than independent routes.



(d) When specifying the quality requirements that bus operators will have to comply with, the Department of Transport should pay particular attention to minimum safety requirements, disclosure of information to passengers and the need to facilitate, and sometimes foster, integration between transport infrastructure.