Official Report: Minutes of Evidence
Committee for Regional Development, meeting on Wednesday, 8 July 2015
Members present for all or part of the proceedings:
Mr Trevor Clarke (Chairperson)
Mr A Cochrane-Watson
Mr John Dallat
Mr Declan McAleer
Mr D McNarry
Mr C Ó hOisín
Witnesses:
Mr Philip O'Neill, Translink
Mr David Strahan, Translink
Translink Briefing: Annual Accounts 2014-15
The Chairperson (Mr Clarke): Good morning, David and Philip. I welcome you here. It is nice to see you back, David. Many congratulations to you and your new wife.
Mr David Strahan (Translink): Thank you.
The Chairperson (Mr Clarke): We believe that you have been journeying around a good degree of the world these past few weeks. The Committee was more than happy to put the meeting back a week to allow you to attend, and to bring you back to earth after your big experience of the past couple of weeks.
Mr Strahan: I have already come back to earth, do not worry.
Mr Strahan: Thank you very much. I appreciate that.
Mr Strahan: If you do not mind, I will make a few comments. I will keep them brief, and we can then move to questions. We appreciate the opportunity to present the accounts and to talk about our service adjustments. As I said, I will be very brief and make a few high-level comments. The accounts for the past year reflect the position that Translink finds itself in. The loss before tax this year is the largest loss that the organisation has ever incurred, at £16·6 million. That largely reflects the reduction in funding that we received from the Department during the year for the provision of services.
The Committee will be aware from the previous occasions that I have been here of our three-point plan for dealing with the reduction in income that we receive. The first point was a fare increase, which took effect in February this year. The second was a restructuring of our management costs, overheads and administration costs, which I will touch on in more detail in a second or two. The third was to look at the services that we provide. It is my view that there is no single answer to the scale of the reduction in funding that we received in 2014-15 and that we will receive in 2015-16. That is why we have our three-point plan to deal with the reduction in income and to bring the organisation back into profit, we hope, within a three-year period.
We have discussed the fare increase and the £3·1 million management, overhead and administration cost in the past. We had a voluntary exit scheme open, which is now closed.
We were seeking a total in those bands — managerial, administrative and supervisory grades — of around 65 individuals to leave the organisation. I can tell the Committee today that we will achieve the number of volunteers that we have sought. Those individuals are in the process of working their notice, and, by the time I leave the organisation in September, the vast majority will either have left the organisation or will be leaving it within a very few short weeks. We will meet our target of £3·1 million and may exceed it a little bit. I am pleased about that and also that it has been achieved entirely through volunteers. It has not been a compulsory scheme; the exit scheme has been entirely voluntary.
You will notice from the accounts that we had a loss of just short of £7 million on our fuel hedges in the past year. That reflects the fall in oil prices. I can talk about that in more detail if members wish to cover it in the question-and-answer session. It reflects the movement in oil prices that we have seen. It is not a cash movement out of the organisation; it is an accounting adjustment.
I will now turn to performance. Passenger numbers have continued to grow overall, and we have seen, albeit a modest increase in the past year, a growth of 0·8%. Passenger journeys have increased to 80 million. As I said, the organisation has faced a challenging financial environment. You will see from the balance sheet that our net assets are now net liabilities, and we have moved from a position at the end of the previous year of £25 million net assets to a position this year of £44 million negative net assets or net liabilities. The largest movement there has been in our pension scheme. You will see the movement as being just over £65 million in the past year. I am a chartered accountant by background, and pensions are extremely complex. A lot of detailed calculations go in, and the way in which the loss has arisen requires a very technical explanation. It has mainly been driven by a movement in the discount rate, which has moved from 4·5% last year down to 3·3% in the year past. That has driven the large movement that we have seen in pensions in the past year.
In respect of service adjustments, we have been engaged over the last number of months in the biggest consultation exercise that Translink has ever undertaken. This has been the third part of our plan to bring the organisation back to profitability in the next number of years. We received over 5,000 responses to that consultation, and it has been a serious one. I note that there have been comments about events that we have held at 7.30 am and that people have cast aspersions on that, saying that we held it at 7.30 am so that we do not get any responses. That has not been the case. When we sat down to deal with the financial challenges that we face, I certainly did not treat any aspect of the plan lightly. I wanted a full and frank consultation, and I genuinely wanted to hear the responses of our passengers and others.
I will deal with the issue, because I know that it has attracted a lot of media comment and criticism. The event at 7.30 am was held specifically to deal with a particular service that we were proposing to adjust. We held the event at 7.30 am in order to capture the people who use that service and speak to them.
The Chairperson (Mr Clarke): I am sorry, David. We are straying into our next agenda item, so, if it is appropriate, we will take those two items together. I refer members to page 163 of the meeting pack, which deals with the consultation on service reduction, which is what David is talking about now. I should put on record that we were not necessarily to get that today, but it was only through conversations with Translink last week, when its representatives were kind enough to brief me and the Deputy Chairperson, who is unable to attend today, that consideration was given to this, which was not going to come before us until later in the year. It is on the agenda now, and David is talking about it, so I will draw members' attention to it, and we will take those two items together.
Mr Strahan: I am sorry if I have caused a difficulty. The consultation has been a serious one, and the event that was held at 7.30 am was designed to speak to the passengers who use the service. I have made sure that that is exactly what we have done during this consultation process.
We have had managers travelling on the bus and train routes that we are proposing to change the service on in order to speak to the passengers. We have received over 5,000 responses, which, without a shadow of a doubt, have changed our view on the services we are proposing to change. We have changed our proposals as a consequence of that consultation. It is right that I recognise the active participation of everyone in that consultation process and thank everyone for engaging in it. Also, the Committee was briefed on the consultation by my colleague Philip and Ciaran Rogan a number of weeks ago, and they appreciated the opportunity to do that.
In respect of the service adjustments, we have worked hard to make sure that no community that receives a public transport service will be left without a service post the adjustments being implemented. It may well mean that the stopping point for a service has moved by a street or a couple of streets, but we are not leaving entire communities without a service. It is important to recognise that. In fact, in some cases, communities will receive an enhanced service, and in respect of the adjustments that we are proposing, there will be enhancements to services, albeit a small number, for our passengers as well.
Finally, looking at the calendars of the Assembly and the Committee and my own calendar, it is likely that this will be my last appearance before the Committee. I would not say that I have enjoyed — [Laughter.]
Mr Strahan: I have appreciated every opportunity to be here. I have tried to be as open and transparent as I can. Whilst there may have been some criticism about the shortness of my tenure at Translink, I think we have put a change agenda and change programme in place that will continue post my departure. Significant strides in making the organisation more efficient, particularly at the managerial, administration and overhead level, will be delivered prior to my departure. We have made progress on other things, along with the Committee, in respect of public service contracts and other issues.
I place on record my thanks to the Committee for the scrutiny that you have afforded the organisation. We, as an organisation, must be open to that scrutiny. I wish each of you the best for the future.
— and I have to say that I have appreciated your approach. You came into post around the same time that I came onto to the Committee. I watched this Committee from the outside and the criticisms of Translink, but I watched your stewardship since you joined the organisation. Even in your briefing, you say that you may exceed £3·1 million in efficiencies. It is important that we recognise that that might never have come to fruition under the previous stewardship.
It goes without saying that there is proof of how you have changed how the organisation performs. As you said in your presentation, many posts will go in the weeks before you leave. That is a good thing because if it had not been done, many of us would have been concerned that someone else could have reversed the decision.
Going straight into the accounts, the vice-Chair and I had an opportunity to talk about the report briefly. The £8·4 million loss is widely known the press. In your introduction, you talked about fuel hedging being a contributory factor to that loss. The fuel hedging allowed for a £6·9 million loss. Does that mean that, without fuel hedging, the loss would only have been £1·5 million?
Mr Strahan: No. The loss before tax, as you can see on page 50 of the annual report, is £16·6 million. The trading loss that we have quoted — £8·4 million — excludes the fuel hedge, because that is not a trading loss. It is purely an accounting adjustment and it comes out below the line.
The £6·9 million loss in fuel hedge is included within the £16·6 million loss, but it is not included within the £8·4 million loss. The £8·4 million is the trading loss, but that does not include the fuel hedge, because it is not a cash loss. It is an accounting adjustment.
The Chairperson (Mr Clarke): I suppose that the other thing that is coming to light is that your debtor balance has increased from £56 million to £64 million. Do you think that the reduced cash balance, therefore, relates in part to the fact that the debtor balance has increased? We have talked about the cash reserves in the past and we obviously know that those are diminishing, but does the debtor increase play some part in the cash reserve?
Mr Strahan: To be honest, Chair, I would like an opportunity to review the detail of that balance in more detail, but I do not believe —
The Chairperson (Mr Clarke): Headline-wise, you are projecting a £64 million debtor balance this year. In last year's account, it was £56 million, so there is an increase.
Mr Strahan: Yes. From my previous experience, the balances on debtors are very much timing driven —
The Chairperson (Mr Clarke): Sorry, David, they are timing driven, but, given that the accounts are closed, has that contributed to an additional amount of the money from your cash reserve to balance the books basically?
Mr Strahan: Without a doubt, having greater trade debtors means that our net assets are higher than they otherwise would be.
Mr Strahan: That is right.
Mr Strahan: That is the position at the end of the year. You are right to say that, if we had collected all the trade debtors that we have, our cash balance would be higher.
The Chairperson (Mr Clarke): Without dwelling on that, I suppose that you can see why some of us would be skeptical, given that we were critical of you having such a large cash balance. Is there any reason why more effort was not made to reduce that, even at least to last year's figures or lower?
Mr Strahan: Our trade debtors and our debtor collection are always pursued. There has been no attempt to inflate trade debtors. That is not in our interests. We want to have as much cash in our organisation as possible. We do not want to have trade debtors; we do not want people owing us money. We want to collect that. There has certainly been no effort to massage the figures. I am not suggesting that that is the inference, but if that is the inference —
Mr Strahan: I appreciate that.
The Chairperson (Mr Clarke): If we look at it, your debtor:days ratio last year was 102 days and that has now increased to 117 days. That ratio is obviously playing into the fact that the debt is increasing. Whilst the Committee and others have been critical of the amount of cash reserves, in the work that your organisation has been doing to reduce that debt, if the ratio had been held at less than 102 days, and certainly less than 117 days, the £64 million would have been much less.
Mr Strahan: Yes, I appreciate that, Chair. Our cash is down by £15 million, and I think that the point that you are making is that, if we were to offset the increase in trade debtors, the net impact would be just south of £10 million. I recognise that point.
I have made it clear that, if Translink does not change what it is doing, its cash reserves will run out. Between the year that we are reviewing and the current year, Translink will lose around £30 million. We have seen the initial impact of that in our cash reserves, even if you take the net position between trade debtors. If you take the losses that we have incurred last year and those that we are forecast to incur this year — in fact, we will also incur losses the following year — and also take into account the capital investments that we self-fund — we invest in stations and in our network capital cash that is not funded by the Department — by the end of next year, Translink will be left in a position in which our self-funded capital investment will have dried up. We will not have the ability to fund station developments or new initiatives in the organisation.
The Chairperson (Mr Clarke): I appreciate that. I do not want to dwell on this any longer — hopefully, it is the last question that I am going to ask on it — but, in relation to the increase in the debtors, can you give us any indication of where they are from? Are they other public bodies or government organisations? Who are they, David?
Mr Strahan: Rather than guessing, I would appreciate the opportunity to come back to you on that, if you do not mind.
Mr Strahan: I think that there is a note — I am trying to look for it — in the accounts that will tell us how much we are owed. Note 26 tells us:
"The balance owed to the Group by the Department at the year end was £20.5m".
That compares with £39·1 million the year before. The amount owed by the Department to Translink at the end of the year is down — it is around half of what it was the previous year — so I know that that is not the reason for the increase. The increase will be made up of quite a number of smaller balances, so, if you do not mind, Chair, I would appreciate the opportunity to analyse the balances and, by all means, provide the detail to —
The Chairperson (Mr Clarke): But is any of the £64 million — I really want to get something here, David — owed by the Department of Education?
Mr Strahan: Part of it may well be, but the balance —
Mr Philip O'Neill (Translink): Our contract arrangements span over the financial year. In fairness, I would rather have the detail of it, but, in regards to the education and library boards, there is clearly big revenue.
Mr P O'Neill: That is their total budget for —
Mr P O'Neill: — the provision of home-to-school transport. We have £35 million in sessional passes. There is just short of £3 million for some other work that we do for them. Obviously, their contract runs until the end of June and resumes again in September, and there are negotiations in between about the price of sessional passes, so —
Mr P O'Neill: I do not have the bridging schedule that would tell me for sure what it would be, but we would have made some assumptions about what we would anticipate from them, and, in turn, we would have provided for that. The budget would have allowed for it. To be fair, we need to —
Mr P O'Neill: I do not want to characterise a very good customer as being a —
The Chairperson (Mr Clarke): Well, I do not think that it has many other options to go anywhere else, so do not worry, Philip, you are not going to lose it.
Mr P O'Neill: It is still a very good customer.
The Chairperson (Mr Clarke): Particularly if you are giving it that level of credit. No private organisation could sustain it. We need a bit of meat on that in relation not only to that organisation but what other ones make up that £64 million. Maybe we could even get a comparison to last year's £56 million.
Mr McNarry: David, I wish you every happiness in your calling to do the Lord's work, but I am going to have to ask you questions today about Translink's work. I am not making any comparisons whatsoever. In all sincerity, I wish you and your good lady all the best.
In your opening remarks, you majored on the reliability of the three-year plan. With all due respect, the Committee has seen three-year plans from Translink over many years. Can you tell us that the solvency of the company is not at risk?
Mr Strahan: Clearly, when you look at the balance sheet, you could probably use the term "technically insolvent" because the group does not have net assets. It has net liabilities. However, the driver of that has been a movement in the pension scheme. Next year, it could easily swing as much the other way. It is unlikely to swing much further than the way it has. In the three-point plan that we have, what concerns me most is not so much the balance sheet as the income statement. If we continue to trade at a loss, Translink will not exist.
Mr McNarry: You said that to the Committee before, and it certainly made us sit up and think. On the issue of insolvency, I have always believed that there was a contractual obligation on Translink not to trade at a loss but to break even in real terms. Has the Department made concessions allowing you, for this year, and perhaps the next two years, to trade at a loss in breach of this contractual obligation?
Mr Strahan: I am not aware of a contractual obligation to trade at a profit.
Mr McNarry: It was not always to trade at a profit. The wording is, "trade at break-even". I am quite surprised that you are not aware of it.
Mr Strahan: Nor am I aware of a contractual obligation to trade at break-even. The objective of our organisation, loosely in agreement with the Department, is to reach break-even over a three-year period. The in-year reduction in our funding this year was received so late that it was impossible for us to take cost out of the organisation quickly enough to return to break-even. That is what we are now seeking to do through our three-point plan: the fare increase, the management reductions and the service changes. I appreciate that you are sceptical of the plan, but the first two parts — the fare increase and the management reductions — will be realised by September of this year. The last part of the plan is the service adjustments, which have not been implemented yet. We are in discussions with the unions and the Department about implementation. If they are implemented, the organisation will return to break-even and to profit.
Mr McNarry: At the moment, I trust your judgement. Maybe we will meet in three years' time. Commercial units — correct me if my figures are wrong — are valued at over £1 million. What proportion of property was purchased using public money?
Mr Strahan: I would need to go back through our historic records to answer that question. I am not trying to dodge the question. I have been in the organisation for too short a period to know. I know that we have not purchased any commercial property —
Mr P O'Neill: That is the point I would make. We have not purchased any in recent years, and the investment portfolio is therefore quite dated.
Mr Strahan: Quite a bit of it was granted when Translink was set up.
Mr McNarry: I get that. For clarification, you do give values of commercial units and property. I cannot find — maybe you could point me in the right direction — any land values in your accounts. I was of the opinion that you did have some vacant land or land banks, as I would call them. Maybe you could come back to the Committee on that, or point me in the direction of where they are. Also, is there any land belonging to the company outside of Northern Ireland?
Mr P O'Neill: The only land that I am aware of — I need to check the status of it — is our depot in Stranraer, from which we operate our cross-Channel express services.
Mr P O'Neill: I believe that we own it. I would just like to double-check. My understanding is that we own it. We have had it for many, many years. It is in the port.
Mr McNarry: You are going to give me some answers on where to go, David.
Mr P O'Neill: That is the only property that I believe that we own outside the region.
Mr Strahan: On page 52 of the accounts, you will see the total figure for property, plant and equipment, which includes land, and then, in note 13 on pages 70 to 72, you will see the breakdown of that figure, including land and buildings.
Mr McNarry: I am trying to extrapolate land, not land and buildings. There is no real figure for that. It seems to me that land is quite valuable.
Mr Strahan: My apologies. The land figure is not specifically included; it is included within that total.
Mr Strahan: That total also includes buildings.
Mr McNarry: Note 24 relates to derivatives. There seems to have been a significant lift from last year to this year. Last year, the derivative instruments' current liabilities were £872,000, and, this year, they are nearly £6 million. Last year, the non-current liabilities were just over £1 million, and, this year, they are over £3 million. There seems to be substantial hikes on that. Can you explain that?
Mr Strahan: That is linked to the fuel hedges and the fact that oil prices moved. It means that the fuel hedges that we have in place are, in the terms that the market would use, "not in the money". We have to reflect, therefore, on our balance sheet the liability that that has brought about in the organisation. Essentially, that is the difference between the hedge that we bought — the price that we agreed or struck — and the current market price. That is captured as a liability.
Mr McNarry: David, I remember well, not long before your time, a senior employee of yours, Ciarán Rogan, demonstrating arrogance that I had not seen in front of a Committee before, when I asked him about fuel hedging. He said that it was good practice and saved the company money. He said that in the course of this year's Committee sessions. He said that it was good practice and that it saved the company money. It has not, and the roulette wheel got stuck on the wrong numbers. As far as I am concerned, it was gambling — a commercial practice that I am well aware of. Is the company still gambling with fuel hedging? Are there future losses on the horizon due to this fuel-hedging practice that you are engaged in? In other words, is the fuel-hedging practice going to continue?
Mr Strahan: It has, certainly in my time. We bought fuel relatively recently. If I may, I will take a moment to explain. I used to be the managing director of Phoenix Natural Gas. We hedged our gas purchases. I fully accept that, in particular years, there may be significant losses or profits. That has been the case in the past. If —
Mr McNarry: Do you accept that, as a company that is highly subsidised by public money, you are gambling?
Mr Strahan: I do not. With respect, I do not agree with that. We have recently purchased fuel for the following year. It is our view that, at the moment, oil prices are low. We will know that only in one or two years' time, God willing, but it is our view and the view of the marketplace that prices are currently low.
Mr McNarry: If you have played the market and got it so wrong, how good are you going to be next time? In other words, if you have an insight, maybe you could tell some of us how to play the market and get it right this time. The history of it is that you have cost a lot of money.
Mr Strahan: We are not in the market to try to play the market or beat the market. In my view, that is a mug's game. We are in the market to deliver a fair degree of certainty. If we did not hedge our fuel prices, we would be back at the Committee every few months seeking a fare increase or fare reduction.
Mr McNarry: I am not sure that you can say that specifically, but I take your point.
Mr Strahan: We would be subject to much greater volatility. I am not seeking views from the Committee, but I am posing a hypothetical question: would anyone in the Committee tell us today that we should not lock in fuel prices next year or the year after?
Mr McNarry: I do not want to dwell too much on this, because I know that you dealt with it in the Chairman's question. All I can say is that you might do an exercise similar to the one that some of my researchers conducted. It is not scientific by any means. Are you telling me that, if you had not played the market but had gone with it, you would still have lost £7 million?
Mr Strahan: No, the losses would have been less. That is OK for one year, but if you look at it over the last five-year period, you will see that it has been to our benefit to the tune of £1 million. I fully accept the point that, in any one year, you may well be caught out, as it appears we have been this year.
Mr McNarry: Let us hope that, with your three-year plan, somebody does not come back next year and the year after that telling us that there are still those losses. I will just move on.
The Chairperson (Mr Clarke): The point we need to remember, David, is that we need stability for the customer as well. The last thing we want is for Translink to come here and tell us that fuel is up by 4p a litre and it is going to have to have a fare increase, only to then say a few months later that it is doing well and will reduce it. That will not bring any confidence to anybody who uses public transport. I agree with the point you are making, but I think the full picture is that the net gain was £1 million over a five-year period, so I do not think the criticism is entirely fair.
Mr McNarry: Well the net gain could have been — I do not want to dwell on it. It is an argument and a point. There are many successful companies that I am aware of that do not gamble in the way that this company has gambled over fuel and that have been very profitable. I know that there are some other questions from members, but there is just one final thing that I may come back to later. Have you put any applications to the financial transactions capital (FTC) for assistance in funding the very exciting Belfast transport hub?
Mr Strahan: In a short word — because I like to be brief in answers — no. However, the project is not yet at the stage to enable us to put in an application. You are right. The Belfast transport hub is one of the most exciting things, not only for Belfast but for Northern Ireland. Financial transactions capital is in the mix of things we are looking at in order to fund it. It is very much on our radar and our agenda. The project has not yet reached a stage to enable us to apply for that, but it is on our agenda to look not only at the hub but other projects to see whether we can use it.
Mr McNarry: That is great news. Our Finance Minister said that FTC was a perfect scheme for the hub, and I hope we will follow it through. There is money there to everybody's advantage. I am always interested in slots. At what stage of the project will you be making your application?
Mr Strahan: We are working on the designs of the hub. We have a number of designs around the layouts of the hub and what will actually be on the site. Once we have worked through those and we have a preferred option, that will enable us to say how much it is going to cost and then apply for FTC. So, to come to a very specific answer; by the end of this financial year or the early part of next year, I expect us to have a reasonably clear view of the layout of the hub, what is going to be on the site, how much it is going to cost and, therefore, how we are going to fund it.
Mr McNarry: That will do me in the meantime, if I may have time to come back on a few other items.
Mr Dallat: David, like everyone else, I wish you every happiness in the future. I want to acknowledge the contribution you have made to the organisation. From the day and hour you came here, I could see the wind of change. We all keep our fingers crossed that what you have started will continue. I believe that it will. The Comptroller and Auditor General has qualified the account. That is not an ambition that any company would want. Why did he qualify?
Mr Dallat: Sorry; I will go back. You keep me right.
Mr Strahan: Our accounts are unqualified, thankfully.
Mr Dallat: OK. Sorry, apologies for that. Some 37% of your capital expenditure is categorised as "other". We know that you are a qualified accountant. Any organisation with 37% of its capital expenditure categorised as "other" would not really be very happy about it. Why is it not detailed?
Mr Strahan: There is detail on page 70 in respect of the capital expenditure and the additions that we have made during the year. It allocates it down between land and buildings, permanent way signalling and bridges, which is essentially the railway, and vehicles, plant and equipment. I must confess that I am not familiar with your 37% classified as "other". I would appreciate it if you could point me to where that is in the accounts, and I would be happy to look at it. On page 70 of the accounts, where the capital expenditure is listed, the additions to our fixed assets are analysed —
Mr Strahan: Yes, that is fine.
The Chairperson (Mr Clarke): — the members will all be familiar with the question that John has asked. It was part of a piece of research work based on the information that was provided.
Mr Strahan: That is fine. I am happy to take questions on that.
Mr Dallat: More as a suggestion for the future, it would be helpful if accounts did not have such a high percentage categorised as "other". One of the criticisms of Translink's accounts has been about trying to understand what they are about. We will leave it at that and follow it up.
The success of the railways has been phenomenal. Why are the buses not in a similar position, given that the capital expenditure on buses has been horrendous? The first thing that anybody coming to Northern Ireland is bound to notice is the freshness of the buses, which is a complete contrast to what it was 17 years ago when this Assembly took over. They were clapped done, the trains were rotting and the permanent way was dangerous. There was massive capital expenditure on all that. Why are the buses not producing the same results as the trains?
Mr Strahan: I will ask Philip to answer in detail, but before he does — I hope I am not going to undermine anything he is about to say — we need to be a smidgen careful. The growth in the railways has been so phenomenal that, when we look at the buses, we will say, "This is nowhere near". That is right; they are not near the railways. The railway investment, particularly the new trains — I know that you and the other members of the Committee have been huge supporters of that — has really taken off. That has been a huge success story, which is worth celebrating. Bus companies across the UK and, indeed, in the South, are all struggling with patronage. The buses here are following the trend in these islands. It is just that, compared with the huge success story of rail here, it looks poor. I will let Philip cover some of the operational things that we are doing in order to address that.
Mr P O'Neill: I will try to be brief. You are quite right; overall, it is a very challenging market for public transport generally, notwithstanding the fact that the rail side of the business has been hugely successful. Equally, we have to recognise that the bus business is a very wide category. We have Metro and Ulsterbus and, within Ulsterbus, for example, the Goldline service is hugely successful. The member will know that it has experienced a 7% growth this year. You will accept that even with the improvements in frequency, the refresh of timetables and the marketing and branding, there is a late market that we are continuing to tap into.
Our airport services are very successful and have grown by 2% this year. Of course, one of the areas that we believe in for the future, which is very innovative and which is making a multi-modal shift, is in park-and-ride. You will notice the number of park-and-rides that are being enhanced or, in some cases, are receiving new investment. The growth in them has been absolutely phenomenal; I think it is around 13% year-on-year.
The member is quite right; the challenge is to the rest of the network. Obviously, a very significant number of Ulsterbus passengers are scholars or pupils, which is very positive for the region in that that modal share equals safe, effective and environmentally friendly transport. If you get young people on buses early, it reduces the number of cars on the road and it is a decongestion measure. We will maybe get onto this later, but it is obvious that any network needs to be refreshed and continually reviewed and that is what we are doing currently. You will see some of the changes that we are making to the Metro service and what we are doing to offset some of the downturn, which is largely macro. The economy is definitely under pressure and we are seeing some things that have affected us.
We have therefore stepped up to the plate by taking every opportunity to support big events and to provide the service for them.
Hopefully, that gives you a wee flavour. It is quite a complex mix of businesses and products, but we are looking at every one of them to try to exploit them further.
Mr Strahan: We have reached 80 million passenger journeys, which is incredible growth, driven primarily by railways in recent years. We want to achieve 100 million passenger journeys, and a large part of that further growth will be in bus journeys, which we are targeting. We have recently developed a bus strategy in the organisation, which is linked to the things that Philip mentioned, such as park-and-ride services and the mass movement of people in and out of main towns and the city of Belfast.
Mr P O'Neill: And through investing in routes with the best potential. That is starting to come out through —
The Committee Clerk: I am going to pull you on that, David. You talk about mass investment in main towns, but what about the rural connection? Almost every one of us around the table represents a rural constituency, and there has been a drive by DRD, and, based on your last statement, by Translink as well, to concentrate on the main towns, and stuff the villages and country roads.
Mr Strahan: If you go back to —
Mr Strahan: I live in a small rural village. I made a point at the start about service adjustment, where I said that we are not leaving any community without a service. However, the reality is that, if we want to achieve 100 million passenger journeys, we need to focus on the areas with the biggest potential for growth. I am sorry, but that, in my view —
Mr Strahan: We are not. The service adjustments that we are proposing to make —
Mr P O'Neill: Maintain those linkages.
Mr Strahan: — maintain all those linkages, but further investment in park-and-rides and in additional, more frequent and more reliable services at 10-minute intervals has to be warranted. There is no point in putting on a 10-minute service between the villages of Broughshane and Ballymena, where I live, to carry no one, but there is in putting it on main thoroughfares to get people in and out of the city. That is where we will drive up passenger numbers. We are not necessarily talking about dotting all the park-and-rides on the outskirts of the city of Belfast —
Mr P O'Neill: Or at railway stations, which has traditionally been the model. We have found that, where we have built dedicated bus space at park-and-rides, it has been hugely successful, as at Tamnamore and at Dunsilly, near Ballymena. There is now a need to expand them.
The Chairperson (Mr Clarke): Except when you are asked to go further down the M2. Then, you will not expand. I remember having people out at the one at Ballygrooby roundabout, which is jam-packed, but they are not interested in investing any additional money there to —
Mr P O'Neill: I go back to the whole-system approach. There has to be a vision, because the various partners have to come together.
The Chairperson (Mr Clarke): We need to get your sunglasses off you, Philip. If you want to move large numbers, we are giving you large numbers at Ballygrooby roundabout and at other small locations where there is a successful park-and-ride. It took years to convince Translink and DRD to move the one in Templepatrick, which was bursting to capacity. Thankfully, we have since seen one opened at —
Mr P O'Neill: You will accept, Chair, that we have to work with partners to make those investments work.
The Chairperson (Mr Clarke): As long as you have started the conversation. My problem is this: it was no, no, no, because there is one five miles down the road at Dunsilly. However, you cannot tell that to the person who is catching a lift with someone who is prepared to stop at Ballygrooby. We need the ones that you have to be expanded, which is taking us further into the country. That is why I am definitely going to push you on that. There is this whole drive towards having an urbancentric transport system — that is what it sounds like — and stuffing the rural system, with DRD taking funding away from community transport systems. It is a case of, "If you live in the countryside, you do not really matter, but, if you live in the towns, we will look after you".
Mr Strahan: Without a doubt, Chair, if we had £10 million or £20 million, we would invest it in park-and-rides. It is probably fair to say that park-and-rides across our network are bursting. When a new park-and-ride service opens, within a very short time it is full. That is seen in the numbers of people on the trains.
In Northern Ireland, it has been unheard of for people to stand in trains; those who have lived in GB will know that it is a common occurrence there. We are managing a limited pot of resources. We would love to expand the park-and-ride scheme and have its facilities all over, but that is not possible in the current funding environment.
We have maintained the rural connectivity, and the future vision for the bus strategy is to create remote park-and-rides and get people from rural villages to those locations and then have the fast and reliable regular service from there into the city.
The Chairperson (Mr Clarke): I will give you an example for the record and then let John back in. You talked about connecting. Translink in Randalstown — you will know where it is on the map, David — said it would be cheaper to get people a taxi to Magherafelt in order to get them on to the express to Belfast. So, it would be cheaper to give people a taxi to Magherafelt, which is going in the wrong direction, to get the express to Belfast than connect a service to a small village that has an inadequate park-and-ride facility. That facility is bursting at the seams; but Translink and DRD were not interested in investing more money in developing it to allow for more passengers.
Mr P O'Neill: In the wider view that we have to take, there has to be joined-up approach: the conventional bus service cannot solve all those problems. You would accept that, for locations such as the one you describe, we have to bring in other partners, such as the Community Transport Association and Carshare NI. We have to look innovatively —
Mr P O'Neill: That is why we have to take a look at the whole system. It has to be a regional —
Mr P O'Neill: There could be car sharing to locations where people can connect with mainstream public transport. That is the vision. There are other modes as well.
Mr Dallat: You are OK, Chair. We all want to be local. I have to keep forgetting that we lost our train service on 31 August 1959. [Laughter.]
We have to move on. If I lived in Broughshane, I would not want a bus to Ballymena: it is a beautiful village, and I would not want to leave it.
Mr Dallat: The financial reporting manual (FReM) details public-sector financial reporting and suggests that Translink should be disclosing the pay and benefits of all members of the board, including non-executive members, within the remuneration report. Is it important that Translink complies with the reporting requirements under FReM to enhance its accountability and transparency and help demonstrate good governance? I am particularly interested in getting an answer to that question because the reporting mechanisms of Translink have tended to not be particularly clear.
You also made reference to the pension pot in your opening remarks. Is there a different pension pot for senior management and directors to the one for drivers and manual workers?
Mr Strahan: Yes, I fully believe in that transparency. Those figures are disclosed in the remuneration report on page 46 and in note 23 to the accounts on page 86, where the emoluments of all directors — executive and non-executive — are disclosed.
There is an executive pension scheme, which is a small scheme that is closed to new entrants. I am not a member of it and neither is Philip. I am not sure of the exact date of its closure, but it was closed long before I joined the organisation.
Mr Strahan: No, I would not want to be part of it. I am quite happy. I am a member of the NILGOSC scheme, as are our employees and Philip.
Hopefully, that answers your query on executive remuneration. The full disclosure of the pay and benefits of all executive and non-executive directors is given on pages 46 and 86 of the annual report.
Mr Dallat: Obviously, you have done a great deal of work planning for after you leave. With regard to our asking relevant questions about issues this morning, you will know that the Minister has announced a new board of directors from December. Am I mixing this up with NI Water?
Mr Strahan: The current position is that the new chairman of our board took up position from 1 July. He was previously on the board. All the other non-executive directors' terms expire on 31 December this year, so there is an ongoing process to appoint a suite of new non-executive directors to the board. They will take up position on 1 January next year.
Mr Dallat: With the monitoring of finances, asking relevant questions and so on, has any thought been given to the role that the board might play in scrutinising this company on a daily basis?
Mr Strahan: This will sound like a politician's answer — it is not meant to be — but their appointment is not mine to make.
Mr Strahan: I am not trying to avoid the question, but the appointment of those members is entirely a matter for the Department. I will have no input.
Mr Dallat: I have no doubt that the Minister and everybody will be aware that there is a Commissioner for Public Appointments and that the appointments will comply with best practice. That was not the question. The question was this: when these people sit down around the board table, will they be doing more than having their morning coffee? Will they actually be doing the work that we are doing this morning?
Mr Strahan: I am missing part of a board meeting to be here this morning. Our board scrutinises what we do, and it certainly challenges me, and has challenged me, on what we are doing to address our financial issues. I have no doubt that the new members of the board, whoever they will be, will continue that practice.
Mr Dallat: Are you telling me that there is no room for improvement?
Mr Strahan: In everything in life, there is room for improvement.
Mr Dallat: I want to pick up very briefly on something that you were developing, albeit in a very parochial way. The rural service will be influenced in no small way by what the Minister does in other directions, such as wiping out the community transport subsidy or taking money out of Disability Action. Where does that leave integrated transport? Park-and-ride schemes are fine for people who are able and those who can park their little cars and hop on the buses, but a lot of people in rural communities and others desperately need another means to get to main-line buses and trains. It is more than just park-and-ride schemes, is it not?
Mr Strahan: Without a doubt.
Mr P O'Neill: It is a joined-up approach. I have to be careful because I risk straying into policy areas, which are very clearly the remit of the Minister and his officials. In our changes — I know that we will come to those — we have seen opportunities, and we have always seen them. We liaise very closely with community transport. I realise the budget pressures that it faces; in fact, they are very similar to the difficulties that we are facing. However, we continue to liaise with them and to talk to them about ways in which we could collaborate to make sure that there is more of a joined-up approach or connection. It is one of those areas in which, from a policy point of view, someone has to take the leadership role and drive the agenda forward. To be fair, in the current financial climate, that is maybe hard to see beyond — you summarised it as rose-tinted glasses — but I think that you always have to be visionary. It is a small region. It is characterised by low densities of population, which make public transport quite challenging in some areas. That is why we always have to be open-minded to more innovative, collaborative approaches, and not necessarily in mainstream public transport. The mainstream provider, which, in this case, is us, has to be in a position to assist in any way it can. We stand willing and able to do that.
Mr P O'Neill: Yes, we work very closely. However, it is not just community transport; there are other initiatives out there.
Mr Strahan: There is a huge amount of engagement between us and other providers.
Mr Strahan: We see it as a joined-up public transport model. They all feed into our service. We try to coordinate our services as much as possible.
Mr Ó hOisín: David, I add my congratulations to you. I wish you well in your new position as well.
Mr Ó hOisín: Philip, I think that you said that there has been a 70% increase in the use of the Goldliners.
Mr P O'Neill: Seven per cent.
Mr Ó hOisín: Sorry; I heard you wrong. You also said that there was a 13% increase in park-and-ride. Is that correct?
Mr P O'Neill: That is correct.
Mr Ó hOisín: You know where I am going with this one: the main route in park-and-ride is the 212 route, which is —
Mr P O'Neill: The 212 route is a very strong route for us.
Mr Ó hOisín: Yes. You see a bus going on that route every 10 minutes from 5.30 am. A huge amount of people travel on that route. The 212 route is roughly 75 miles, and, for almost half of it, between Drumahoe and Maghera, which is a distance of some 33 miles, there is no park-and-ride. In fact, currently, they are using the hard shoulder in one place and the forecourt of two schools in another. When are you going to address that? It is one of the really baffling issues in park-and-ride provision. It is causing real issues in both those places; it is actually quite dangerous.
Mr P O'Neill: Your broader question is wider than just that route, but that is a very good example. At some point, we would be very happy to give the Committee an update on the bus strategy, if that is possible. That might help to give you visibility of the sort of thinking that we have. It is regional. On that specific route, we will always look for opportunity sites. We can put forward suggestions. We do not own land, but we can make recommendations. To be fair to —
Mr P O'Neill: Sometimes, things change in partners such as Transport Northern Ireland. For other partners, such as NIW, sites become available under the D1 process. We keep a very close eye to see whether a site comes up that we think that we could use. The importance of the group is that it has that ability. It does not buy very much property any more, but it could do that and enter into some arrangement —
Mr P O'Neill: I also have to caution: the big attraction and the huge success of that route is because it is direct and largely end to end. It is very fast and has very competitive journey times, so there is always a balance. The park-and-rides need to be very close; you need to be able to get in, swing out and keep moving. That is not to say that there are not opportunities. If you have sites that you think we should be looking at that we are not already talking to you about, I would be very happy for you to get in contact with me to see what we could —
Mr Ó hOisín: I identified a site, but it has now gone. It was a chance missed.
Mr P O'Neill: I know that you are talking to our area manager regularly. You will know that he is as proactive as he can be within the remit of the organisation.
Mr Ó hOisín: In the 80 million passenger journeys going up to 100 million, the 2013 report covered the passenger miles as well, but that has not been done for the last two years. Why is that?
Mr P O'Neill: It is certainly a statistic that is freely available. We would be happy to give it.
Mr Ó hOisín: I know that a lot of people have used those. I welcome also the fact that you have extended the hours, although it is not the same; you can get a 212 from Belfast at 1.00 am. The last one in Derry left at 10.00 pm, but I think that that has now been extended to 11.00 pm. There is a bit of a dichotomy there.
David, you said that no community would be left without a service, but do you not accept that the reduction in service in rural areas is sometimes as good as the removal of a service?
Mr Strahan: I do not. If there is still a service, that is a different thing from the service being withdrawn and there being no further service.
Mr Ó hOisín: We, as elected Members, were consulted as well, which I welcome. We were able to point out some of the issues, particularly the triangle one: I am thinking of Coleraine, Portstewart and Portrush, which services a lot of the university there and whatnot. A reduction there has huge implications for the students who use it. The Limavady town service would have been another one. That town is fairly spread out, and a lot older people, in particular, do not have cars. How much has the overall frequency been reduced, or proposed to be reduced?
Mr P O'Neill: I can categorise what we have done to maintain the coverage. What came out very strongly from our research and the consultation was that whilst passengers very clearly recognised that the level of the cuts was so severe that there would clearly be an impact, they stated a very clear preference to retain the connections, the network coverage and their routes, albeit that they may have to look at alternatives, which might involve going for a journey behind or a journey in front by extending out the frequency.
In an ideal world, no one wants to lose the frequency of their services, but they realised that there would be an impact, and that was where the consultation was very powerful for us. They talked to us and discussed the issue more broadly and recognised that that was the best option.
Mr Ó hOisín: Will the reduction in service or frequency result in any job loses outside those that might be covered by the voluntary redundancy scheme?
Mr P O'Neill: We have a number that we gave you that we feel that we have to achieve to effectively live within the three-point plan that David talked about. Front-line operations are clearly a key part because they are the biggest part of our business.
Since November, when the funding cuts were very strongly signalled to us, we took steps to try to mitigate or ameliorate what the final Budget settlement might be. You always hope that the Budget settlement will not be as bad, but, unfortunately, it has been, and we have withheld recruitment as far as we can. In fact, the net number of people who are involved is much reduced from what was originally envisaged.
Mr Strahan: If I may, we were able to fill the numbers entirely in the management overhead, supervisory and administrative processes that we have just run. We were well oversubscribed for that voluntary exit scheme.
They are only proposals at this stage, because we are engaged in a process with the unions and the Department on the adjustment to services going ahead or going ahead in some adjusted form. If they go ahead as proposed, it is my belief that, without a shadow of a doubt, we will be able to meet that through a voluntary scheme. The drivers have made it known to us that they want to go through a voluntary exit scheme and would welcome that. The management and supervisory scheme shows that we will be able to achieve the numbers. That was among a smaller pool of employees, and I do not believe that we will seek a huge amount more employees to leave the organisation on the operational side of the business. I think that, without a doubt, we will be able to achieve those through voluntary.
Mr McAleer: I am looking at the feedback from the consultation and some of your recommendations. It is more of a point of information. Where can we drill down into some of that information? I note that, in many of the areas, most service routes will be maintained, albeit with a reduced frequency. Where can we get the information to drill down into that? What are the next steps in the process?
Mr P O'Neill: I will take the Chair's guidance, but they are proposals. I have to make sure that people are clear. There is a parallel process running that the Minister has with one of the main unions, so the proposals are simply that at this stage. I think —
The Chairperson (Mr Clarke): Phillip, I tried to say at the start that we were not necessarily meant to have sight of the consultation because the other process was in place. When I met officials last week, I was concerned that the other process would conclude during the summer and that , whatever the outcome, it would have meant that we would not have been involved at all. We asked the Department and Translink last week if we could get sight of it this week. It is really still a bit premature in the timing.
Mr P O'Neill: I would characterise it as not the final position. I apologise because it has maybe taken longer than you would be used to to get you a paper, but we have tried to summarise it as best we can. There is a lot of detail in it. In an ideal world, it would be very welcome to be able to talk to people like you to let you see what it entails.
Where we say there is a reduction, it could be the odd journey in order to maximise the use of resources. From that point of view, that is probably the ideal way to take it forward, but, at the moment, we are giving you a sense of the shape of the proposals.
Mr McAleer: That is fair enough. I just wanted that point of information.
Mr Cochrane-Watson: Good morning. Until two weeks ago, I ran family businesses. Unlike you, I had to make a profit. I am looking at your KPIs based on turnover and profit before tax. Those are incredibly important for any business. I appreciate that turnover is down by £2·5 million and that profit before tax has decreased to £8·7 million. You have put a three-point plan into place. I fully appreciate, although it is very new to me, the £13 million reduction you were faced with, but, if I was an investor, when would I see Translink break even or make a modest profit? David used the words "break even". When will that happen?
Mr Strahan: It is forecast to happen by the year 2017-18.
Mr Strahan: In profitability, in the current year, 2015-16, we forecast a loss of around £14 million. The following year, 2016-17, we forecast a loss of around £4 million and, in the next year, 2017-18, we forecast a return to profit of £3 million. Why does it take that length of time to return to profit? It is because the service adjustments and changes we are making will take time to feed through in the real savings delivered.
Mr Strahan: Yes. In respect of the service adjustments we are making, and with people exiting the organisation, those will deliver relatively big savings, but fare increases in line with inflation will help to bring us back to profitability by 2017-18.
You are right. I have always worked in, and ran, organisations where you must deliver a profit. I believe it is exactly the same for Translink. Translink cannot continue to incur losses. That is why we are putting the plan in place. We have been hit this year with a massive in-year shock in the reduction in funding that we are receiving. If it was in GB, those services would have gone long ago because —
Mr Strahan: Yes. You cannot say to an organisation, "Here's a package of money and here's a suite of services we want you to provide" and then say "OK; we're going to cut the funding you receive by 20%, but we want you to provide the same services". That is not tenable. We are addressing it through fares and management overheads. We are trying to lessen the impact of service adjustments, but, in my view, it is impossible to return to profitability without adjusting services in some way. We are trying to minimise that through taking out inefficiency and overhead costs if we can.
Mr Cochrane-Watson: I know that you are going to make a loss of £14 million this year and have projected a loss of £4 million the following year. It is unsustainable.
Mr Strahan: Part of the loss this year is the cost of delivering the exit schemes that we are engaged in, so part of that will be a redundancy cost.
The Chairperson (Mr Clarke): For the benefit of the record, and maybe for your benefit, Adrian, the other thing is that the service reductions would possibly have been in place only for an agreement by the Minister to allow the unions to come up with an alternative proposal. Whatever Translink suggests that efficiencies might bring to the table, it is going to be pushed further back because the Minister has, quite rightly, afforded the unions an opportunity to come up with an alternative proposal. They believe that they can do it a different way, and the Minister is going to look at that. If that does not come to fruition, it will be some months longer before we get the benefit of the savings that Translink may have made from the reduction. Is that right, David?
Mr Strahan: Yes, that is right.
Mr Cochrane-Watson: I appreciate that we are talking about a 20% reduction in income. Overnight, you would cut 20% of your services, Chair. I could do that in the private sector. Nobody would complain. Customers might not like it, but you are key stakeholders, David, and I appreciate that.
Mr McNarry: I have two quick questions: one on the accounts and one on the bus reductions.
David, we are awaiting a report on the rapid-transit project, covering a project assessment review (PAR) and a revised business plan. You have the Belfast rapid-transit contract. Will the revised business plan mean a revised contract? Can you tell us what the project assessment review entails for you?
Mr Strahan: Philip has the detail. I think that I could answer most of your question, but I am concerned that I could give you a wrong steer on one or two aspects.
Mr P O'Neill: Belfast rapid transit is clearly a unique proposal. The Department has decided to review it under what we know as the "PAR" — that type of mechanism. We participated because we are a key stakeholder. It would not be right to say that we have a contract. We are operator designate at the minute, so we are awaiting the agreement for the project to go ahead. Obviously, we are working on it in conjunction with the Department.
Mr P O'Neill: No. There was no tender for the rapid-transit contract. The market testing —
Mr McNarry: Have you agreed a cost with the Department?
Mr P O'Neill: We have provided the Department with the operating costs, on the basis of the operating plan that was in its business case. The business case was done some years ago, so the Department has asked us to look at changes in travel patterns and various other things. The project assessment review will cover all of that, and I think that the objective is to give the Department and the Minister a confidence rating for the management arrangements that are in place and the efficacy of the business case.
Mr McNarry: I have a particular interest in Belfast rapid transit because of where it is starting, in Dundonald. Effectively, as far as we are concerned, after all the knowledge that we have gained and the enquiries that we have made about Belfast rapid transit, the project is going to be reviewed. It may just turn out to be an entirely different thing, at substantially increased costs.
Mr P O'Neill: I have to stress that I am not carrying out the review. I participated in it. Certainly, my understanding of the review, similar to what was done in other PARs, is that it will look at the entire project and its original aims and objectives and make sure that it gives the Minister a sense of whether the project is still on course and whether there are any necessary improvements or changes to be made. I am sure that costs will be a major factor in that. The PAR will look at costs and make sure that they are still aligned with the business case.
Mr McNarry: I am very pleased that I asked the question, and I am delighted with your answer. I can tell you that the folk out there have a high expectation of the Belfast rapid-transit project. The people who live on the Upper Newtownards Road and the Newtownards Road have put up with a lot of changes to the roads to facilitate it. I hope that there will be no significant delays. I sense that we are likely to be facing delays to the proposed or anticipated timescales that have been voiced.
Mr P O'Neill: This is just my understanding, but, as part of its assessment, the Department will look at the time frame, the time plan and the various measures that are being introduced. As you know, the project has been incremental. The bus priority measures are rapidly moving forward. In fact, as an organisation, we are benefiting from those. Hopefully, the introduction of the new bus lanes will come in front of the Committee for approval. My colleagues and I are anxiously awaiting the Committee's approval so that we can use those lanes and get the benefit of reduced journey times for customers. That is really what the process is designed to do. It is taking a critical look at the project.
Mr McNarry: In your three-year plan, have the operational costs of the rapid-transit scheme been included in any sense or are they outside the three-year period? I am thinking about your return to profitability in year 3.
Mr P O'Neill: It is a bit too early to say, because we have not been given a contract for its operation. That is part of the next stage. That will, in turn — and I am only surmising — form part of the wider public service contract that the Committee has seen.
Mr McNarry: In essence, briefly, you have not factored any costs relating to the scheme into your three-year plan and estimates for moving from loss into profitability.
Mr P O'Neill: No, because the Belfast rapid transit time frame is to be determined. We have to wait to be told what will be in the contract, and we will then factor that into our plan and arrangements. Obviously, other services run parallel to it, and we have to view those —
Mr McNarry: I understand your difficulties in doing business with the Department when such a major and significant contract, for which you cannot even plan, is hanging out there. Anyway, I really appreciate that information. It is being reported by Hansard, so I hope it will be detailed.
I take on board what you said about rural bus services and the target of rising from 80 million to 100 million passenger movements. Is the increase part of the three-year plan?
Mr P O'Neill: It is a plan over a number of years.
Mr P O'Neill: No; 2020. It is a fairly ambitious plan, but the target has been set by —
Mr McNarry: Well, you have to aim high. So, this is the legacy that you are leaving them, David: to get there by 2020. The reason why I am asking is that I need to reconcile how you can leap from 80 million to 100 million by 2020, when you are on a course of reductions in rural areas — and I sense that you will be chopping more services in rural areas. Where is the growth coming from, if you are cutting out rural areas in particular? How do you make that up? If you chop 10, how do you put 40 back?
Mr Strahan: With the service adjustments that we have proposed, we have maintained the same passenger target for next year. While we are proposing to —
Mr McNarry: Where are you getting the extras from? If you are cutting services —
Mr Strahan: There are two things. One is the growth in rail travel, which continues to drive passenger numbers forward. The point I was going to make is that the services we are proposing to adjust are those that are used less frequently, and so a smaller number of passengers is affected.
Mr McNarry: I will take you up on that. Everybody else has been talking about their constituencies, so bear with me. My constituency, like surrounding constituencies, has no link to railways — they were taken away from us 100 years ago. There is even less movement now, with reliable and frequent bus services. I cannot emphasise enough the dependency that there is on the bus service. To my community, Translink is a bus service. There are different views on it, but it is a bus service and nothing else. There is a policy of cutting out and cutting back rural services. What do I have to do to get that policy reviewed?
Mr Strahan: I am not sure I can answer that. We have had to respond to the budget cuts we have faced. I mean this genuinely: if I could save all the reduction in funding we are receiving by cutting management, I would do that. The last thing I want to do is to cut front-line services.
Mr McNarry: I understand that, and I am very sympathetic to the financial aspects you are trying to deal with.
I am dealing with the community. I am dealing with people's activities and their lives. You are wiping them out. Through the cuts you are making, you are taking away their rights and their ability to travel. I do not know how to put it any other way. How does my community lobby you? It is your policy to cut these services; it is not the Department's policy.
Mr Strahan: I will say two things. The way to avoid any impact on front-line services is to provide additional funding, either from DFP or DRD. We are told the funding we are getting, and we design a service around that funding. Back to your earlier point: the service is not being removed altogether. I accept that if someone wants to travel, they may well have to wait for the next service or use the earlier service —
Mr McNarry: You have wiped out the services in communities that are totally reliant on the bus to get to the doctor, to the hospital, to work, to do this, that and the other, and which grew up with the service.
Mr Strahan: There will still be a service.
Mr McNarry: You are asking the public to adjust their timetables to suit your timetables. What I am saying is this: my community are up in arms about this. How can they change your mind? This is a community that is totally reliant on buses.
Mr Strahan: The service is not being removed. You are right that someone needs to move their schedule to follow the bus timetable.
Mr McNarry: The hospitals, the doctors, the schools and the nurseries do not change their timetables.
Mr Strahan: To my mind, and I am open to hearing other views, the only way of avoiding impact on front-line services is to provide additional funding. I do not have the power to obtain that funding.
Mr McNarry: I am disappointed with that. I thought that a company with your strengths and your abilities would show more imagination. You are beginning to sound like the Minister in that the only way we can do this is with more money.
The Chairperson (Mr Clarke): David, we have to remember — David McNarry, that is — that we would be critical of the organisation if it continued to run at a loss. I am listening to what David Strahan is saying, and he is telling us what he has to do based on the hand he has been dealt. This is not an entirely private organisation, which would have different options open to it. We are very dependent on public money here. One of the things that strikes me, and I am critical — and I join you, David, in some of your criticisms —
Mr McNarry: Your point about public money is very relevant. The public is not getting value for that money.
The Chairperson (Mr Clarke): The public will not get value for money in rural constituencies where, sometimes, there are one or two people on a bus because of frequency. We will all shout from the rooftops about our constituents, but we have to remember value for money, and we have got 45-seater buses with two passengers on them at many times. Translink is not running a taxi service. We touched on this before — you were there. A member of this Committee was concerned about frequency because he was going to have to wait two and a half minutes longer for his bus. People will have to be flexible to a degree, but we have to live in the real world with some of this as well.
Mr McNarry: I am not talking about two and a half minutes. I am talking about disruption to people's lives, which is most unfortunate. The policy should be reviewed.
I was at a white-line protest against what is happening to my brothers in Twaddell. I saw five Metro buses coming into Stormont in the hour I was there, with two and three people on them, as you said. That is not a rural service. They were pink buses coming through. This does not apply to just the rural service. I do not think anybody disagrees, and I know that you would all be sympathetic. I am just saying that, where there is total dependency on the bus service, somebody should review this policy in some manner. I agree about the size of the buses and the number of people in them. Perhaps there might be some cooperation with community bus services, where the buses are smaller etc. It is hurting the elderly, in particular.
Mr Strahan: All I can say is that, certainly, I am in a place where I would wish not to be.
Mr Strahan: I would have wished my tenure to have been in entirely different circumstances. However, I am faced with the reality of what we are facing. I remember what I said on my first Committee appearance. I know that the Budget is happening today. I do not want to try to be a prophet, but all the commentators are saying that further cuts are coming. I do not know whether that will affect Northern Ireland; I do not know whether it will affect DRD; I do not know whether it will affect Translink. However, I know that my gut tells me that it probably will. This leads us to the debate on the type of public transport service that we want. If the funding that we receive from DRD is cut by 20%, we cannot, physically, deliver the same service. The reality is that these services do not make money. I am not saying that, because they do not make money, we should get rid of them all — because I fundamentally believe in public service — but this has to drive a debate on the level of public service that we have. A continuation of the same service cannot happen if the level of public money reduces by 20%. That is impossible.
Mr McNarry: Do you think a private company would be profitable in Northern Ireland and be able to deliver a service that is better than you are currently delivering?
Mr Strahan: I do not. I have worked all my life in the private sector, and I have no particular flag to wave for public sector, but look at what happens in GB. In GB, where services are not profitable, the local council will put them out to tender and say to all the bus companies, "Here's a service. We want this timetable delivered. How much will we pay you for it?". They all tender, but there is a public subsidy there as well. If that public subsidy is withdrawn, as is happening in GB, the service goes. We have seen that in the South. Services are being removed every day. It is in our papers, every week.
Mr McNarry: I welcome your comment on privatisation; I think that is most useful. Would it be possible for your company to give us a summary briefing as to why you feel the way you do on that issue? I would find it extremely useful to take to my constituents when we are discussing transport. I would say, "This is where we are". Privatisation is a growing subject, shall I say, so, so long as it is out there, we need to discuss it. I would find it helpful to have the benefit of your experience.
Mr Strahan: I would be happy to.
Mr Cochrane-Watson: Mr Chairman, I will pick up on David's question on privatisation. I think a private company would enter into profit in a very short time, but it would abandon, completely, the constituents that David, quite rightly, has campaigned for this morning. To be blunt about it, I am the new boy in the Committee. It seems to me that DRD has had a huge cut in its available finances, and it has been passed on to Translink. I welcome the three-point plan. I hope the service adjustments can be consulted upon. I welcome the fact that the unions and so on have an opportunity to do that as well. I hope the service adjustments will be compassionate to as many as possible. We focus very much on the rural community, but I feel, as David highlighted, that some of the more urban routes should be looked at, reviewed, timed and so on so that the pain is shared among us all. My constituency is urban and rural, like Trevor's. I am told that DRD has faced £60 million of cuts. That is passed on, by £13 million, to Translink. We are where we are.
The Chairperson (Mr Clarke): David, I will go first on this. I know you are new, Adrian. DRD got the fourth best Budget settlement of all the Departments.
The Chairperson (Mr Clarke): I appreciate that, but we all know it lost money. From the start of one Budget year to the start of the next Budget year, it lost £3 million to £4 million. The Minister has gone out to the top of Stormont and everywhere else and shouted about the £60 million. No one on the Committee, other than one member who is no longer on it, has been convinced.
Mr Cochrane-Watson: I have to accept the Minister's position. He is the Minister and he has had to pass on £13 million of cuts to Translink and many others.
The Chairperson (Mr Clarke): Yes, and he took money off other Departments to prop up NI Water, and he did other things. The reality is that the Minister has not lost the money that he has spouted he has lost.
Mr Cochrane-Watson: We can agree to differ on that today. We are here today to deal with Translink, which is a very important issue.
The Chairperson (Mr Clarke): Hansard is here today, Adrian, to report this, and, for accuracy, the Regional Development Minister did not lose £60 million from his resource budget from last year to this year. He has additional pressures, but he did not have £60 million at the start of the year. Indeed, maybe he did not tell you in the briefing before you joined the Committee, but he has bid for more —
Mr Cochrane-Watson: I did not have a briefing from the Minister before I started on this Committee.
Mr Cochrane-Watson: Chair, you are being very unfair. I have had no briefing from the Minister. That was the figure I heard quoted. I will apologise if it is not correct, but I have heard that figure. What I am saying is that it has made Translink's life very difficult.
Mr Dallat: Chairperson, the last thing I will do is get involved in this. I encourage all members, particularly new ones, to rise above party politics and play your role in the Committee as scrutineers. Our purpose today is to ask questions of Translink. I am not sure what my party's position is on that, and I do not really care —
Mr Dallat: I am getting to the question now. This is important, because I have been caught in this, which has not happened in this Committee before. We get on great.
This needs to be cleared up. Translink is in a better position than anybody else to provide a public transport service. From my point of view, that is central. My question is: will you endeavour to ensure that that happens and avoid any temptation to allow services to be cherry-picked, which would, in fact, make the plight of people in rural communities much worse and simply replicate the disaster that took place in Britain and the Republic?
Mr Strahan: I appreciate those comments. I believe passionately in public service. I have always worked in public service organisations, albeit they were private sector, but they provided a service that the public need. I think that a privatisation of transport in Northern Ireland would lead to the fragmentation of service and the withdrawal of vast areas of service from Northern Ireland. I agree that Translink is the best enabler. I think that it is better, albeit working with other partners when there is a health factor, transport provision and the voluntary and community sector. We can act as partners to bring all that together, and that includes school transport. It is much better to deal with that in one central organisation, albeit that the organisation needs to be challenged to be efficient and effective. That is what the Committee is doing to us, our board and Department. We need to be held to account. Personally, I believe that it is best delivered through an organisation like Translink.
Mr Dallat: Finally, do you agree that much has to be done and maybe something can be learned from the success of the railway renaissance? Where there are no trains, more needs to be done to encourage people to use buses. It breaks my heart to come up here three or four days a week, sitting in traffic at the City Airport, and to see one of the best railway services, probably in the world, travelling every few minutes, and yet, as you drive into Belfast, only one car in 10 has more than one person in it. Is that something that Translink has perhaps failed in, or are there people who live out in that direction who simply will not, in any circumstance, consider public transport?
Mr Strahan: I know that, in another place on another day, we discussed this issue and the issue of modal shift.
I was not here when the rail investment strategy was put together, but I have read the documents and looked at the comment made at the time. I do not think that anyone believed that we would see — correct me if I am wrong, Philip — the growth in rail that we have seen. It has been a huge success story. I honestly believe that the same is the case with our bus strategy. The bus strategy is exciting and visionary. I believe that it can deliver the growth that we have set out. It requires capital investment, but it is not all duck or no dinner. Part of it can be delivered with fewer financial resources until we reach a time when we have more capital available. You are right: there is more that we can do, and the bus strategy is designed to achieve that growth in the bus side of the business.
The Chairperson (Mr Clarke): David, I tried to bring Committee members up to speed on the unions having the conversation with the Minister and the Department. I do not want to blame just the Minister. In essence, if you could have implemented your plan, the savings would have started much sooner. Have you had any early indications of what the unions' plan looks like to try to assist you in reducing your costings?
Mr Strahan: Chair, I do not want to go into too much detail. I returned on Monday and have been dealing with an awful lot of material since. The process still has time to run. It has not ended. In any proposal that comes forward, I will be looking to see whether it delivers the savings that we need this year. We need to deliver the savings now. There is still time to run, so I would not want to jump the gun on the process that the unions have available to them.
Mr Cochrane-Watson: Chair, you mentioned the timetable. Is it going to be over the summer period?
The Chairperson (Mr Clarke): Yes, and that is why we have had the consultation today. The Minister gave an ear to the unions. That is fair enough, and no one is saying anything other than that. The difficulty with that is —
The Chairperson (Mr Clarke): Yes. The Committee Clerk can email members during the summer. We have done the consultation today because we would never have got them together. Had this not happened — had the Minister not given an ear to the unions to come up with an alternative proposal — the gap could have been closed on the £13 million that was lost. If that works, it is good, but, if it does not work, an opportunity has been lost for those savings to start sooner.
Mr Strahan: We have proceeded with the management, overhead and admin savings. The voluntary exit scheme has been opened and closed. The people who have been, if you like, successful in applying through that scheme are working their notice, and they will exit the business. That is around 65 managers, supervisors and admin staff.
Mr Strahan: Of the 65, there may well be one or two for whom it is compulsory. We carried out a process prior to the end of last year, where a number of people left the organisation, but the voluntary exit scheme that we had open, which sought 55 people, has been voluntary.
Mr Strahan: Yes. From when I joined the organisation until today, there are 65 people leaving the organisation. Fifty-five of those are leaving through the voluntary exit scheme, and we have dealt with 10 through other processes. There may well be some compulsory redundancies in those 10, but the voluntary exit scheme that we had open, which sought 55 people, has been entirely voluntary. Should the service adjustments take place, we envisage opening up a voluntary exit scheme to which people can apply, get their numbers and then say, "Yes, I now want to go". We see that being done entirely through a voluntary exit scheme.
The Chairperson (Mr Clarke): We have covered all that ground, so thank you, David and Philip. Again, I wish you all the best, David. We may see you before you go, but, if not, I certainly wish you all the best in your new role.
Mr Strahan: I appreciate that.